Qualcomm must offer to license its standard-essential patents (SEPs) to competitors, according to a recently reported partial summary judgment granted in favor of the Federal Trade Commission (FTC) by U.S. District Judge Lucy Koh. The ruling is based on two industry agreements put forward by the FTC as well as arguments that the San Diego-based company’s decision to keep patents that are essential to widely-adopted mobile networking standards to itself are harmful to the overall industry. Namely, the allegation centered around the fact that mobile manufacturers and others in the space are dependent on Qualcomm for mobile networking chip technology and that there simply isn’t any other company to turn to due to the withholding of its SEPs. In summary, the agreements require that SEPs are made available to ‘all applicants’ under reasonable and non-discriminatory conditions as necessary to ensure that industry-wide standards can be met.
Background: However, this ruling is also only part of a larger ongoing case filed by the FTC back in 2017. There are a total of three allegations in the suit, including the now all but settled dispute over Qualcomm’s SEPs with regard to rival companies. Both of those are squarely centered around Qualcomm licensing practices as well. For starters, the FTC asserts that the company is forcing its customers to accept a license to all of its SEPs in order to buy its modem chips. That’s accompanied by allegations that the practice is tied in with further royalties that are well above what they should be. Finally, the FTC is seeking to address the chip manufacturer’s ties with Apple via exclusivity deals that it says are counter to a competitive industry market in addition to earning the company additional royalties.
As mentioned above, each of those claims is also closely tied to Qualcomm’s past licensing practices stretching back for several years now. Among other claims that have been made against the chipmaker, one of the more common complaints has also centered around its requirement that royalties equate to a portion of a given smartphone or other device’s total cost. That’s as opposed to simply licensing its patents or selling its chips at a set price as others in the industry tend to do. Although the company has repeatedly promised to ensure that its practices align with industry agreements and enable robust competition, it has also simultaneously defended its licensing deals.
Impact: In essence, the ruling means that Qualcomm will need to offer to license its patents to any company in the mobile modem industry to the extent that the patents are necessary for interoperability and the standards set by the industry. Moreover, it needs to ensure that those licensing deals are fair and unbiased in light of the fact that some of the tech companies applying to use the SEPs are going to be long-time rivals such as Intel. Meanwhile, the case is set to move forward to a trial in 2019 and this summary judgment was granted in spite of a recent motion from both the FTC and Qualcomm to delay the ruling. The two entities had hoped to reach a settlement during that delay but the court dismissed that outright prior to the new judgment, in an apparent attempt to settle the matter more resolutely.