Qualcomm Takes Hit in FTC Case, Must License Modem Patents to Competitors

(Image credit: Qualcomm)

A U.S. federal court has ruled in a lawsuit filed by the U.S. Federal Trade Commission (FTC), which monitors acts of commerce, against Qualcomm over its alleged anti-competitive practices and abuse of FRAND patents. The ruling means Qualcomm must license its modem patents to competitors.

The Purpose of FRAND Patents

The court’s ruling should not be surprising, considering what FRAND patents mean. FRAND stands for fair, reasonable and non-discriminatory, and these terms are agreed upon by industry players whenever there are multiple competing technologies fighting to define a new standard.

Each industry player may have a preferred technology that they’re developing and can also have multiple patents for that technology. However, for a standard to be defined, one of those technologies needs to be chosen.

The issue is that the companies that haven’t been working on the technology that is proposed to be used as standard and don’t have any patents for it could object to adopting it as a standard. As a resolution, the company or companies developing the technology to be used as standard agree to license these patents to competitors under FRAND terms.

Without this agreement in place there would be no standard, as the other companies wouldn’t want to use the technology for which one of their competitors could charge exorbitant royalties and thus be forced to offer noncompetitive products to consumers.

Qualcomm Went Off-Course With its Licensing

When the LTE technology was chosen as a standard for “4G” wireless communications, Qualcomm was one of the primary developers and agreed to share its patents with other companies under FRAND terms. However, since then, as Qualcomm has gained a near-monopoly in the market through its integrated CPU+modem systems-on-chip (SoCs), it has also started increasing its licensing fees to both customers and competitors.

Besides the U.S. FTC, multiple antitrust agencies, including from South Korea, Taiwan, China and the European Union, as well as some companies, such as Apple, Samsung and Intel, have accused Qualcomm of violating the FRAND agreement.

The federal court agreed with the FTC's claims that Qualcomm has been violating FRAND terms and must start offering modem patents to competitors. It noted that if Qualcomm were allowed to keep its modem patents to itself, it would enable the company “to achieve a monopoly in the modem chip market and limit competing implementations of those components.”

The court has yet to rule if the company also has to offer these patents for reasonable prices, as the FRAND terms require. In its lawsuit, FTC accused Qualcomm of overcharging customers, such as Apple, for its patents. Apple is also suing Qualcomm over the same issue.

The current ruling should allow more companies to build high-performance wireless modems and increase competition, all of which should benefit the consumer in the end. And the ruling's impact should be even more positive for shoppers if the court eventually rules that Qualcomm should charge reasonable rates for those modem patents.

Lucian Armasu
Lucian Armasu is a Contributing Writer for Tom's Hardware US. He covers software news and the issues surrounding privacy and security.
  • ITFT
    So you develop something big and popular and then must give it pretty much for free to greedy companies like Apple so they can sell their iPhones which cost a fortune and make even more cash? While Qualcomm is struggling to make any profits at all and just finished it's financial year with a loss of nearly 5$ bln... what a joke.
  • avatar28
    Qualcomm had the option to not submit their patent for use in the standard. The thing about standards is that they are, well, standard so everyone who wants to make something compatible has to license all the patents that make it up. FRAND requirements are used to keep the cost reasonable. A company could not include their patents but then they might just be able to license it to a handful of companies for whatever thousands or millions that company is willing to pay. On the other hand, if you get your patent into the standard you might only get, say, $0.50-1.00 per device but you're getting it for tens of millions of devices so you end up making a lot more money in the long run.

    Qualcomm agreed to the FRAND terms to get their patent included and now that they have a virtual monopoly on the technology they are trying to renege.
  • bit_user
    21467917 said:
    So you develop something big and popular and then must give it pretty much for free
    I think it's more like: if you want your tech to be used in a communication standard, then you have to agree to sell it on fair and reasonable terms. You can't just decide, once everyone is locked into using it, that you want to use it as leverage to force-feed licensees your other products or to charge extortionate prices for it.

    It's not as if they weren't an active participant, in all of this. Qualcomm put forth their tech for use in current standards, knowing full well the expectations that came along with it. The picture you paint is as though they're an innocent victim.