In Ironic Twist, Intel Accuses Qualcomm Of Anti-Competitive Tactics

Intel recently filed an amicus brief in the Federal Trade Commission’s antitrust lawsuit against Qualcomm, in which it accused Qualcomm of violating FRAND patents. The company has now released another statement to the U.S. International Trade Commission, again accusing Qualcomm of abusing its market position and not licensing the “standard-essential” patents at a fair rate, as required by law.

Reduced Competition

Intel argued in its statement that because of Qualcomm’s abuse of FRAND patents, Intel has remained the only premium LTE  modem competitor to Qualcomm in the market. Apple has recently started using Intel LTE modems in some of its iPhones, too, which quickly prompted Qualcomm to call out Apple for limiting the speed of its own baseband processors in order to reduce the performance gap between Qualcomm and Intel’s modems (in Intel’s favor).

Qualcomm recently asked the ITC to ban the iPhones with an Intel modem in them and for them to be replaced with iPhones that only have the Qualcomm chip inside. Intel seems furious about this action, and it’s not holding out in its statement, claiming Qualcomm is simply trying to eliminate the only real competition it has left:

This twisted use of the Commission’s process is just the latest in a long line of anticompetitive strategies that Qualcomm has used to quash incipient and potential competitors and avoid competition on the merits. And although those strategies have sometimes been subtle or complex, Qualcomm’s latest complaint could not be more blatant in its anticompetitive aims.

We do know that Nvidia also tried to enter the premium LTE modem market with the Icera acquisition, but Nvidia ended up selling that division shortly, while accusing Qualcomm of similar patent abuses in its own lawsuit against the company.

MediaTek has been gaining on Qualcomm and Samsung lately in both application processor performance and baseband modem support for the latest LTE categories, but that modem still seems quite far from Qualcomm’s best. It’s not clear whether that’s because MediaTek doesn’t have as much expertise, or whether it’s Qualcomm’s patent abuse at fault again, or both.

Qualcomm’s Anti-Competitive Practices (According To Intel)

Intel accused Qualcomm of using a “no license, no chips” policy, through which it allegedly coerces device makers into paying Qualcomm “exorbitant royalty rates” for every device they sell, on top of the price they pay for the modems. If the OEMs refuse to pay the license or try to take Qualcomm to court, Qualcomm would then disrupt the supply of its modems to those OEMs. Intel said that Qualcomm then uses this leverage against its customers to ask for higher licensing prices.

Qualcomm’s second anti-competitive practice, according to Intel, is to refuse to license FRAND patents to competitors. When it agreed to include its patents in the FRAND category (in order for the industry to agree to using that particular technology in the first place), Qualcomm committed to offering those patents to everyone who asks, for a fair price. However, Intel said that Qualcomm hasn’t kept that promise, which makes it impossible for companies such as Intel to offer fully-licensed LTE modems.

A third anti-competitive practice includes Qualcomm offering a discount on its “exorbitant” royalty rates to companies such as Apple, but only if they agree to enter exclusivity agreements. Intel claimed that this tactic has hurt its sales and margin, and caused it to miss earlier contracts with Apple. It wasn’t until Apple refused to enter an exclusive agreement with Qualcomm that Intel was able to gain Apple as a customer.

If what Intel said above was true, then ending the exclusive agreement with Qualcomm may have resulted in much higher royalty fees for Apple, which would explain why Apple is now seeking a $1 billion refund from Qualcomm.

Intel reminded the ITC that Qualcomm is also facing or has already faced either investigations or fines from the Korea Fair Trade Commission, Japan Fair Trade Commission, China’s National Development and Reform Commission, and the European Commission, as well as the Taiwan Fair Trade Commission.

Harming Public Interest

Intel concluded the statement to the ITC by saying that Qualcomm is not merely seeking to “ban infringing products,” but to completely ban Intel modems from the U.S, due to how aggressively it goes after competitors with its patents. Essentially, Intel is saying that there would be no way not to infringe on Qualcomm’s patents, which would lead to a permanent ban of its modems in the United States.

Intel argued that by eliminating the only major competitor Qualcomm has left in the U.S. in the baseband market, the public interest would be harmed. Intel also believes that if the ITC bans Apple’s Intel-based iPhones from the market, it would also send a strong signal to other companies about the risks of defying Qualcomm.

Intel Should Know What’s Anti-Competitive

All of these written attacks coming from Intel’s statement are quite interesting, considering Intel itself has also been accused and fined over similar tactics in the past against AMD.

Let’s go over a few of the EU’s findings in its previous investigation:

Intel gave rebates to computer manufacturer A from December 2002 to December 2005 conditional on this manufacturer purchasing exclusively Intel CPUsIntel gave rebates to computer manufacturer B from November 2002 to May 2005 conditional on this manufacturer purchasing no less than 95% of its CPU needs for its business desktop computers from Intel (the remaining 5% that computer manufacturer B could purchase from rival chip maker AMD was then subject to further restrictive conditions set out below)Intel gave rebates to computer manufacturer C from October 2002 to November 2005 conditional on this manufacturer purchasing no less than 80% of its CPU needs for its desktop and notebook computers from IntelIntel gave rebates to computer manufacturer D in 2007 conditional on this manufacturer purchasing its CPU needs for its notebook computers exclusively from Intel.

Then, there is also this nugget of information:

Intel also interfered directly in the relations between computer manufacturers and AMD. Intel awarded computer manufacturers payments - unrelated to any particular purchases from Intel - on condition that these computer manufacturers postponed or cancelled the launch of specific AMD-based products and/or put restrictions on the distribution of specific AMD-based products. The Commission found that these payments had the potential effect of preventing products for which there was a consumer demand from coming to the market.

We also know that Intel had been subsidizing its Atom mobile processors for a long time with its proceeds from the more profitable PC market -- an advantage that other mobile chip makers couldn’t claim. In fact, it has for a long time been the primary reason why many thought Intel would be successful in the mobile market, because they thought Intel could throw its weight and profits around until it would end-up dominating this market, too.

However, Intel must have miscalculated, as by the time it exited the mobile application processor market, its mobile division was losing about $1 billion per quarter.

Poor Messenger, Solid Message?

Intel’s history of using the same kind of anti-competitive tactics as Qualcomm seems to be employing now does make Intel a rather poor messenger for these allegations. However, Qualcomm’s tactics may have gotten to a whole new level, if they have prompted so many antitrust agencies from around the world to investigate, sue, and fine it. Intel also has some experience with some of these tactics, so it knows exactly why they are so effective at harming competitors.

It will be interesting to see how it all plays out. Right now, Qualcomm seems to be already fighting in retreat, as it seeks to settle the matters out of court. If successful, this could prove less costly for the company in the end. Qualcomm may also be seeking to prevent the courts from establishing precedents against certain anti-competitive tactics that Qualcomm may want to keep using in the future.