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Judge Koh: Qualcomm’s Licensing Practices Destroyed Competition, Harmed Consumers

· June 3, 2019

This post was first published on Patent Progress by Josh Landau. Below are the introductory paragraphs from the post, the full post can can be found here

Late yesterday evening, Judge Koh issued her anxiously-awaited ruling in the FTC v. Qualcomm litigation.  The 233-page opinion extensively describes Qualcomm’s anti-competitive conduct, how it has harmed both existing and potential competitors as well as consumers, and how that conduct has ultimately harmed competition in the LTE and 5G markets.  It would normally be hard to summarize a 233-page opinion in a single blog post, but in this case, I can do it in three words:

The FTC won.

“Qualcomm’s licensing practices have strangled competition in the CDMA and premium LTE modem chip markets for years, and harmed rivals, OEMs, and end consumers in the process.”

Last year, Judge Koh issued a summary judgment ruling that signaled her skepticism of Qualcomm’s licensing practices.  In that ruling, Judge Koh found that Qualcomm was obligated to license its competitors to Qualcomm’s standard-essential patents (SEPs).

Yesterday’s ruling made that finding explicit.  In a section of the ruling that extensively describes Qualcomm’s history of refusing to license, Judge Koh found that Qualcomm’s refusal to license “has promoted rivals’ exit from the market, prevented rivals’ entry, and delayed or hampered the entry and success of other rivals.”  That history included refusing actual competitors like MediaTek and Intel as well as potential competitors like Samsung. And even when they occasionally did provide licenses, such as to VIA, the licenses contained onerous terms like only allowing VIA to sell to customers who also had licenses from Qualcomm and requiring VIA to provide Qualcomm with detailed information on their chipset sales—information that is normally considered sensitive information that no company willingly shares with its competitors.

That refusal to license has had real harms.  As Judge Koh summarized, “Qualcomm’s refusal to license has prevented rivals’ entry, impeded rivals’ ability to sell modem chips externally or at all, promoted rivals’ exit, and delayed rivals’ entry.”  And as she notes elsewhere, those harms have spread, with the result that “other SEP licensors like Nokia and Ericsson have concluded that licensing only OEMs is more lucrative, and structured their practices accordingly.”


This is a cross-post from Patent Progress, the full post can can be found here

Competition

Some, if not all of society’s most useful innovations are the byproduct of competition. In fact, although it may sound counterintuitive, innovation often flourishes when an incumbent is threatened by a new entrant because the threat of losing users to the competition drives product improvement. The Internet and the products and companies it has enabled are no exception; companies need to constantly stay on their toes, as the next startup is ready to knock them down with a better product.