FTC lawsuit accuses Qualcomm of forcing Apple to buy wireless chips in exchange for better...

Posted:
in General Discussion edited January 20
The U.S. Federal Trade Commission launched a lawsuit against Qualcomm on Tuesday, accusing the company of forcing Apple into an exclusive deal to buy its baseband chips.




When Apple sought to lower the patent royalties it was paying Qualcomm, the latter firm made that conditional on Apple buying Qualcomm chips exclusively between 2011 and 2016, according to an FTC filing seen by Bloomberg. The iPhone 7 and 7 Plus still use Qualcomm chips in some configurations, while others are now based on Intel modems.

Bloomberg did not initially offer any other details on the suit.

The FTC has been investigating Qualcomm since 2014, concerned that it was abusing FRAND (fair, reasonable and nondiscriminatory) patent commitments with clients. Apple remains one of the company's more important customers, despite the iPhone 7's shift towards multiple modem suppliers.

In December Qualcomm was hit with an $853 million fine in South Korea, accused of similar abuses.

Despite being a major chip supplier -- including the Snapdragon processors in many Android phones -- Qualcomm makes most of its profits from licensing, which could mean a significant hit to its bottom line if it's forced to loosen its grip on patent deals.

Update: Qualcomm in a subsequent press release denied any wrongdoing, saying the FTC complaint is "significantly flawed." The firm claims it never withheld or threatened to withhold chip supply in its business dealings.

"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," said Don Rosenberg, executive vice president and general counsel, Qualcomm. "In our recent discussions with the FTC, it became apparent that it still lacked basic information about the industry and was instead relying on inaccurate information and presumptions. In fact, Qualcomm was still receiving requests for information from the agency that would be necessary to an informed view of the facts when it became apparent that the FTC was driving to file a complaint before the transition to the new Administration."

Comments

  • Reply 1 of 10
    Sounds like old habits did not die out. CDMA algorithm invented during WWII, but patent holder someone else....
    mdriftmeyer
  • Reply 2 of 10
    And chipmakers should be forced to indemnify chip purchasers from any patents the chipmaker infringed.
    baconstang
  • Reply 3 of 10
    jbdragonjbdragon Posts: 1,230member
    I think the bigger issue is these other company's trying to sue Apple for a license that Qualcomm already paid for in making the chip. Trying to double dip. The Qualcomm chips are better then Intel at least right now, but that'll change in time. The other problem is Intel is not making CDMA chips, they're GSM only. Apple is still forced to go to Qualcomm anyway.
  • Reply 4 of 10
    And chipmakers should be forced to indemnify chip purchasers from any patents the chipmaker infringed.
    Forced? Why could they not make it a part of their negotiations? I don't like the idea of the government intruding on every private contract made between businesses unless fraud, extortion or other illegal activities are involved.
  • Reply 5 of 10
    Well, that's a switch.
  • Reply 6 of 10
    foggyhillfoggyhill Posts: 3,233member
    jbdragon said:
    I think the bigger issue is these other company's trying to sue Apple for a license that Qualcomm already paid for in making the chip. Trying to double dip. The Qualcomm chips are better then Intel at least right now, but that'll change in time. The other problem is Intel is not making CDMA chips, they're GSM only. Apple is still forced to go to Qualcomm anyway.
    Those patents will probably expire within 5-6 years anyway and then Qualcom will really be in trouble.
  • Reply 7 of 10
    jbdragon said:
    I think the bigger issue is these other company's trying to sue Apple for a license that Qualcomm already paid for in making the chip. Trying to double dip. The Qualcomm chips are better then Intel at least right now, but that'll change in time. The other problem is Intel is not making CDMA chips, they're GSM only. Apple is still forced to go to Qualcomm anyway.
    When it comes to Intel not making CDMA processors, that relates to some of the FTC's allegations: Part of the reason Qualcomm doesn't face real competition when it comes to CDMA processors is because it takes improper actions to prevent such competition, to include (but not limited to) refusing to license standard-essential patents to would-be competitors even though it agreed to do so as part of having those patents included in CDMA standards.

    In turn, the FTC alleges, Qualcomm has used the lack of competition in CDMA processors to force phone makers to agree to a range of improper terms (to include, but not limited to, unreasonably high royalty rates) relating to other standard-essential patents. Those phone makers, according to the FTC, can't challenge Qualcomm's practices in court (and thus don't have leverage to negotiate reasonable terms) for fear that they'll be denied a supply of CDMA processors which they need to produce their phones. Ordinarily the ability to challenge holders of standard-essential patents in court is what keeps them honest, so to speak, when it comes to royalty rates and other terms. The FTC is, in essence, accusing Qualcomm of using certain improper practices - practices which it agreed not to engage in - to create and maintain a figurative gun which it can hold to the heads of phone and tablet makers such that they have little choice but to accept other improper practices and unreasonable terms from Qualcomm.
    edited January 17 loquiturloquituricoco3
  • Reply 8 of 10
    maestro64maestro64 Posts: 3,402member
    This is standard operating procedure in the Custom SEMI space, you can license the tech and pay one fee and if you license and use the chips from the supplier you pay a different fee. Just licensing is all higher cost since the supplier does not make as much as when you also buy the chip. When you combine the licensing and hardware together you have a low cost. Apple would not have been in a position to build their own baseband chip with only licensing QUALCOMM's IP. Baseband chips are very complicated and require lots of testing and certification on networks in order to be used.
    icoco3
  • Reply 9 of 10
    I just bought one, but I think I prefer the old one
  • Reply 10 of 10
    gatorguygatorguy Posts: 15,963member
    Wow, fast action on this lawsuit... /s

    This case will be tried by Judge Koh sometime in early January.
    2019!

    Qualcomm did luck out with the choice of Judge tho as she has a propensity to favor patent holders. 

    edited April 21
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