Qualcomm has been facing legal battles since the last two years. Regulatory bodies such as the FTC have filed lawsuits against the company. Qualcomm has been targeted by South Korea, Taiwan, China, and the European Union over anti-competitive patent licensing. Separately, the company has been battling Applewith respect to a wide range of intellectual property issues. Now, a federal court has ruled that Qualcomm must license its modem patents to other chip makers, a decision which has the potential to have many ramifications in the market.
The ruling was with respect to the FTC lawsuit against Qualcomm, which was filed in early 2017. The crux of the lawsuit was related to the issue of whether Qualcomm was using anti-competitive practices to maintain a monopoly over smartphone modems. That wasn’t judged upon in this ruling. However, the court did role upon whether Qualcomm has to license standard essential patents to competitors. The company does have to do that.
Qualcomm agreed to two separate policies that said it would offer select patents on a non-discriminatory basis. These patents are essential to wireless standards, and are only accepted into the standards because of Qualcomm’s agreement to license to other chip makers. The court stated that it was unambiguous that Qualcomm was wrong in this issue.
The court wrote that if Qualcomm was allowed to keep its standard essential patents to itself, it would enable the company to “achieve a monopoly in the modem chip market and limit competing implementations of those components.” This hints that the US-based chip maker is, indeed, in the danger zone of being held guilty for using anti-competitive practices.
The effect of the ruling is that Qualcomm will now have to license patents necessary for building a smartphone modem to competing companies like Intel. The difference will be that until now, Qualcomm has only offered those licenses to companies that directly manufacture smartphones, and it only offered those modems when it was directly selling chips to these companies.
Intel, therefore, has had to work around Qualcomm’s patents to sell its own modems. Giants like Apple and Samsung have largely relied on Qualcomm’s chips in their phones. This is the reason why Samsung sells Snapdragon versions of its flagship phones in the US. Most phones sold in the US market feature Qualcomm modems to ensure compatibility with the legacy CDMA standard. (Recent developments include Apple switching to Intel’s modems in the newer iPhones. Samsung, meanwhile, uses its own Exynos modem for the international variants of its flagship phones.)
One potential effect of this ruling is that it can enable other companies’ modems to be more competitive than they are today. Intel is one of Qualcomm’s most high-profile competitors, but the company traditionally has been a step or two behind when it comes to cutting-edge wireless technology. On the other hand, Samsung’s Exynos modems have traditionally matched or even bettered the Qualcomm modems in terms of specifications in recent Samsung flagship phones.
Another related issue was the issue of how much Qualcomm can charge for these essential patents. In its lawsuit, the FTC has also accused Qualcomm of charging excessively high fees for its patents, a claim mirrored by Apple. This comes despite the fact that the agreements require the company to impose “reasonable” fees. The courts are yet to issue a ruling on this matter.