Samsung, Intel Tell Court That Qualcomm Abused FRAND Patents To Eliminate Competition

Samsung and Intel recently filed two amicus briefs in the FTC’s antitrust case against Qualcomm, accusing Qualcomm of violating Fair, Reasonable And Non-Discriminatory (FRAND) patent terms and legally excluding competitors from the market through the use of its own baseband processor patents. Samsung also claimed that Qualcomm stopped it from selling its chips to third-party vendors. Qualcomm has previously called this allegation “false.”

Why FRAND Patents Exist

Without FRAND patents, certain standards may not exist, simply because the other members of a standards group would not agree to adhere to a given standard without all members sharing the patents with each other in a reasonable way.

Let’s consider, for example, a situation where multiple companies within a standards body each try to create a next-generation wireless technology. If one company creates a technology called LTE-X, but doesn’t want to share its technology with the rest of the members from the standards body, then that technology would likely not end up being chosen as the standard by the standards body.

If another company creates a different technology called LTE-Z but is willing to share the patents for free or for a small price, the standards body would likely go with LTE-Z as the “next-generation wireless technology.” It would then become much harder for the company behind LTE-X to promote its technology to carriers, smartphone makers, and so on, because everyone else has already agreed on a different standard.

Now, let’s consider one company has the majority of the patents on the LTE-Z technology and at first agrees to license them out to competitors for a reasonable price. Thus, LTE-Z becomes the new standard, and everyone adopts it. However, later on, this company decides that it doesn’t want to license the technology to competitors anymore, or it does do it but for a prohibitive price, effectively stopping competitors from being able to legally use it.

This is basically what Samsung and Intel are accusing Qualcomm of doing.

Qualcomm’s “Handset Tax”

According to the FTC, Qualcomm has been imposing a “handset tax” on manufacturers that disincentivizes them from seeking alternative chip suppliers. Even if the manufacturers would use another company’s chip, they’d still have to pay Qualcomm an “onerous” sum based on a percentage of a device’s retail price, according to Samsung’s amicus brief.

Intel also argued in its own brief that it wasn’t technology prowess that helped Qualcomm stay ahead, but these types of contracts it’s been imposing on manufacturers. The contracts allegedly prevented the smartphone makers from being competitive on price when buying chips from Qualcomm’s competitors.

Qualcomm has seemingly argued before that if so many of its customers were harmed by its policies, then why hasn’t anyone sued it yet? Samsung pointed out that Broadcom did sue it over abusing FRAND patents in 2006, but the two companies eventually ended up settling, instead of concluding the trial.

Samsung also noted that Qualcomm’s customers, including itself, are also disincentivized from suing Qualcomm, because they could forever lose access to its chips, too. Samsung admitted that it has been forced to buy Qualcomm’s chips, even if it believed Qualcomm was overcharging for its FRAND patents.

Samsung asserted that Qualcomm’s policies and overcharging for FRAND patents have made it all but impossible for competing modem makers to compete in the premium handset market. This includes Intel which blamed Qualcomm for being unsuccessful in the mobile market, but also Nvidia, which had to shut down its Icera modem business a few years ago because of Qualcomm’s "unlawful abuse of dominance," as the company claimed at the time.

Recently, Apple also sued Qualcomm arguing that Qualcomm is abusing its market position and charging it five times more than what all the other licensors charge it combined. In response, Qualcomm counter-sued Apple over breach of contract and for mischaracterizing the agreements between the two companies to the FTC. Qualcomm also said Apple lowered the performance of its modem in the iPhone 7 to reduce the discrepancy in performance between its chip and Intel's modem, which was available in certain iPhone 7 models.

Qualcomm's Ongoing Antitrust Issues

Over the past few years, Qualcomm has been hit with antitrust lawsuits from Japan, China, South Korea, the European Union, and recently the United States. The company continues to claim that the accusations are flawed, even after it was already forced to pay almost a billion dollar on three different occasions (in settlement with Broadcom, as well as China, and South Korea’s cases).

Tom’s Hardware asked Qualcomm why, if these accusations are baseless, so many countries seem to be starting antitrust cases against it. The company refused to provide a direct answer to that, reiterating that its stance on these issues has not changed.

Lucian Armasu
Lucian Armasu is a Contributing Writer for Tom's Hardware US. He covers software news and the issues surrounding privacy and security.
  • InvalidError
    I wonder how many of those patents are genuinely patentable. Most of the process behind generating wireless signals and decoding them is pure math which shouldn't be patentable in the first place.
  • vern72
    Can anyone say "RAMBus"?
  • falchard
    What Qualcomm is doing is perfectly legal. The logic behind the anti-trust cases are flawed. I think the wins against Qualcomm just show national bias. Like Samsung winning in South Korea, and Apple winning in California. In the technology space, there are those who push the technology forward and get patents for their work. Companies like IBM, Microsoft, and Qualcomm. Then there are companies that license their patents to develop their hardware, like Intel, Apple, and Samsung. Going after a company like Qualcomm over a modest fee for using their patents is just a stepping stone to reducing costs for using technology developed by other companies and undermines this type of trading. If Qualcomm where to lose these cases, expect Microsoft to also be sued for the same thing. Eventually leading up to these companies keeping their technology in-house instead of letting other companies use their patents.
  • mrmez
    Is it, tho???

    BlackBerry, Apple, Samsung, Intel, Broadcom, EU, USA, Japan, S.Korea, China v. Qualcomm...
    The numbers are stacking against them for the exact same thing, are they all wrong and QC's lawyers just can't catch a break?
  • blppt
    Hrm, it appears the word "irony" does not appear in Intel's dictionary.
  • falchard
    When a company wins a case like Blackberry did against Qualcomm, everyone comes out of the woodworks to get their share.
    To put it simply Qualcomm developed such a superior technology that these companies felt they cannot compete in the marketplace using an alternative. Qualcomm asks for a cut based on the edge they provide, and these companies refuse to give them that cut yet still want to use their superior technology. The only one with a mild grievance would be Intel and competing modem makers as they make such an inferior product they cannot compete.
  • vaughn2k
    Intel finally get to taste its own medicine when they kept their technology away from nVidia for developing chipsets and IGP for Intel motherboards (March 2010)..
  • mrmez
    All comes back to FRAND, which I believe is legally binding?
    As far as I understand, QC charges Apple (for example) more for it's patents than it does other companies. Royalties also based on phone value. So buy a phone with a bigger screen or capacity, and QC gets more money.

    Furthermore the 'handset tax' charges Apple a royalty even if the phone has no QC hardware.
    Other agreements prevented Apple from using competing technology (wimax).
    All this adds up to something that is not fair or reasonable.

    If you read into the history it's pretty dirty and complicated.

    The human race is largely where it is because we've been able to work together and cooperate. FRAND is a good way of saying it's not a case of 'money over everything.'
  • InvalidError
    19695830 said:
    When a company wins a case like Blackberry did against Qualcomm, everyone comes out of the woodworks to get their share.
    When a company like BB wins a FRAND, over-reaching or anti-competitive licensing agreement dispute against a vendor like Qualcomm, everyone else stuck with such an agreement comes out of the woodworks because they don't want to continue over-paying for their similar license agreements with that same provider now that there is a court precedent saying that this vendor has been involved in unfair, unjust, unreasonable licensing. Being stuck with an inflated "Qualcomm tax" when your competitors aren't puts you at a competitive disadvantage.

    Why should Apple owe anything to Qualcomm on products that don't use any Qualcomm chips or IP-cores? When Apple picks a competitor's chip, whatever applicable royalties to Qualcomm's patents are already built into that other chip's price, there is no reason for Apple to pay twice for the same thing. Companies shouldn't be able to double-dip on patent royalties.
  • dstarr3
    With FRANDs like these, who needs hegemony!

    ...I'll show myself out.