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FTC-DC1

The Federal Trade Commission has filed suit against Qualcomm, alleging that the company exploited its position as the ascendant provider of baseband radios for LTE devices. In its cursory, the FTC argues that Qualcomm used its position to extort college royalties from smartphone manufacturers. The FTC asserts that Qualcomm enforces a "No license, no fries," policy in which information technology will not sell parts to a cell phone manufacturer unless the manufacturer agrees to its patent and licensing terms. The terms of these licenses plainly include substantially elevated license rates on chips manufactured past Qualcomm competitors, which amounts to an unfair revenue enhancement to whatever company that wants to build a smartphone with a non-Qualcomm processor.

Qualcomm is as well under investigation for refusing to license standards-essential patents to its competitors. It has long been recognized in patent law that organizations can benefit from creating a standard implementation for a technology or capability that everyone can take reward of. 2G, 3G, HSDPA+, 4G, LTE — all of these technologies are implemented according to specific standards. When companies contribute IP to the formation of a standard, they are typically required to obey what are known equally Fair, Reasonable, and Nondiscriminatory rules (FRAND):

Fair – terms are not anticompetitive and would non be considered unlawful if imposed past a dominant house in its relative market.

Reasonable – the licensing rate for the patents themselves will not issue in dramatic cost increases or brand the industry uncompetitive. The licensing rate would not exist unreasonable if all firms were charged the aforementioned charge per unit.

Nondiscriminatory: Licensees are treated equally. Rates are allowed to vary based on external factors like lodge volume, length of contract, or the creditworthiness of the licensee. Whatever the variations are, notwithstanding, all licensees must exist treated as.

FRAND agreements are typically voluntary between the standards body and the patent holder, but the contracts are legally binding. If Qualcomm is indeed refusing to license standards-essential patents to competing baseband suppliers, it would explain both why the company shot to a near-complete lock on the LTE market following that technology'south introduction, as well as shedding some light on why nearly all of the other LTE providers gave upwardly and went domicile. As of mid-2016, reports suggested Qualcomm had a l% market place share (that's really down significantly from where information technology used to exist), with the remaining market place divided between Samsung, Intel, MediaTek, and Spreadtrum. Samsung and MediaTek were 37% of the remaining l% in the first half of 2016, only that may have begun to modify since some percent of iPhones also rely on an Intel broadband bit. Note that this information is worldwide, non US-specific.

LTE market share

Prototype by StrategyAnalytics

The FTC also alleges that Qualcomm signed an exclusivity bargain with Apple from 2011 – 2016 in which Apple tree agreed to merely use Qualcomm baseband chips and Qualcomm gave the company a lower licensing charge per unit as a result. This complaint against the visitor is just the latest in a string of like findings. South Korea fined Qualcomm $854 meg for its licensing practices, while People's republic of china fined information technology $954 million after its own antitrust probe. The European union investigation is ongoing as well.

Evidently our ability to evaluate this complaint is limited, since there are sections redacted and nosotros haven't seen whatsoever of the evidence on which the complaint is based. Nosotros cannot, for case, draw any conclusions on Qualcomm's licensing rates or its offers of exclusivity, and since we're talking about patent standards, those terms affair. One puzzling aspect to the FTC's filing is that it seeks to depict differentiation betwixt the high-end LTE market in the United States and the general market for LTE in lower-cease smartphones. The complaint specifically alleges that Qualcomm faces limited contest for premium LTE processors (definitely truthful, as evidenced by the overwhelming number of smartphones that use Qualcomm radios). It does not make a general complaint most the rest of the LTE market, though information technology does state that Qualcomm'south royalty rates and non-FRAND licensing terms employ to the general market place for baseband, rather than the premium LTE space.

Qualcomm has issued its own dissenting argument, arguing that the FTC'southward case is significantly flawed. "This is an extremely disappointing decision to rush to file a complaint on the eve of Chairwoman Ramirez's difference and the transition to a new Assistants, which reflects a sharp break from FTC practice," said Don Rosenberg, Qualcomm'south executive vice president and general counsel.

The timing of this declaration is interesting, said Anshel Sag, an analyst with Moor Insights & Strategy, every bit information technology comes within the terminal week of the current administration equally their FTC appointees set to pace down. "It will be very interesting to see how the Trump administration and their appointees handle this bombshell of a complaint," he said. "I believe that the Trump assistants may end up being much less heavy-handed with how they approach this complaint than the Obama assistants would have been."