FTC and apple sued Qualcomm FTC sets its sights on Qualcomm, but as Trump takes over making anything stick will be another matter
Jan., 17, 2017 by Richard LIoyd
After an investigation lasting more than two years, the Federal Trade Commission filed a complaint against Qualcomm on Tuesday over what it alleges are the chipmaker’s anti-competitive practices in the supply of its baseband processors and the licensing of its patent portfolio. The lawsuit, which was filed in the Northern District of California, is the latest example of Qualcomm’s licensing practices being placed under the microscope by regulators around the world.
The FTC’s case is framed around three main points: first, that Qualcomm adopted a ‘no licence, no chips’ policy, whereby it refused to sell its chips to those companies that declined to take a licence to its patent portfolio; second, that the tech giant refused to license its competitors; and, finally, that Qualcomm put in place a deal with Apple in which the iPhone maker was precluded from sourcing baseband processors from competitors from 2011 to 2016.
Together they amount to a damning set of allegations, but the FTC’s announcement also revealed that the Commission was split on whether to bring a case. The three commissioners (two seats remain vacant following departures last year) voted 2-1 to initiate the suit, with Commissioner Ohlhausen, the lone Republican in the triumvirate, dissenting and issuing an unusual and strongly worded statement.
In it she criticised the enforcement action for being: “Based on a flawed legal theory (including a standalone Section 5 count) that lacks economic and evidentiary support, that was brought on the eve of a new presidential administration, and that, by its mere issuance, will undermine US intellectual property rights in Asia and worldwide.”
In a statement Qualcomm also came out fighting with general counsel Don Rosenberg commenting: “This is an extremely disappointing decision to rush to file a complaint on the eve of Chairwoman Ramirez’s departure and the transition to a new Administration, which reflects a sharp break from FTC practice.”
The cases against Qualcomm are perhaps the highest profile spats in a much broader debate in the licensing industry: just exactly what constitutes a reasonable royalty, particularly where standard essential patents (SEPs) are concerned? That issue has become more complicated as the licensing industry has grown, the returns have got bigger and new entrants have moved into what had been relatively cosy markets.
To that end, the wider patent community may welcome a court case that will closely analyse Qualcomm’s FRAND policies and might answer some of the big questions that licensors and licensees routinely disagree about. It was telling, however, that the FTC did not use the term ‘unreasonable’ in its case, preferring instead ‘elevated’ when referring to Qualcomm’s rates. Of course there’s nothing in FRAND to say that a licensor can’t charge at the top of the market for its IP, it just asks that the set rate is ‘fair and reasonable’.
Commissioner Ohlhausen highlighted this point in her dissent, claiming that the FTC’s complaint “dances around that essential element”. Its failure to address it head on, Ohlhausen insisted, reflected the lack of evidence in the Commission’s case. “What I have been presented with is simply a possibility theorem,” she asserted in a comment that would sound familiar to all those who rage against claims of widespread patent hold-up and royalty stacking in the licensing world.
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And with two spots on the commission vacant and a third due to open up when the Chairwoman, Edith Ramirez steps down in February, the FTC is about to undergo a significant overhaul. No party can hold more than three of the commissioner seats but with President Trump claiming the White House, the FTC should soon have a Republican majority. According to several FTC observers, there’s also a good chance that Commissioner Ohlhausen will take over as chairwoman and we already know how she feels about the case.
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https://www.iam-media.com/blog/Detail.aspx?g=5accb666-1461-4bd0-90fb-205ab04defba
-Also see
Apple sues Qualcomm for roughly $1 billion over royalties
ttp://www.cnbc.com/2017/01/20/apple-sues-qualcomm-for-1-billion.html