Qualcomm is a monopoly and has to change the way it does business, a US district court judge ruled late on May 21.
The ruling, by Judge Lucy Koh, said Qualcomm wrongfully suppressed competitors in the wireless chip market, using its dominant position to force unnecessary licensing fees. The ruling requires Qualcomm to change its business practices and renegotiate the license agreements it has with customers.
The ruling is the latest twist in a legal saga that began two years ago when the US Federal Trade Commission accused Qualcomm of operating a monopoly and forcing Apple and other customers to work with it exclusively. The FTC also accused the company of charging excessive licensing fees for its technology. As part of Koh’s ruling, Qualcomm must submit compliance and monitoring reports for the next seven years and report to the FTC annually.
FTC vs. Qualcomm: Why you should care
The trial betweenthe FTC and Qualcommended Jan. 29, but the legal wrangling seems far from over. Almost as soon as the ruling was delivered, the chipmaker said it would seek a stay, opening the door to an appeal.
“We strongly disagree with the judge’s conclusions, her interpretation of the facts and her application of the law,” Don Rosenberg, executive vice president and general counsel of Qualcomm, said in a statement Wednesday.
FTC Competition Director Bruce Hoffman said in a statement that the “decision that Qualcomm’s practices violate the antitrust laws is an important win for competition in a key segment of the economy. FTC staff will remain vigilant in pursuing unilateral conduct by technology firms that harms the competitive process.”
But to show how complicated the case is, an FTC commissioner the week after the ruling criticized her department’s win and said the “alarming” decision should be overturned.
“I am dismayed that the judge took this opportunity to create new legal obligations, undermine intellectual-property rights, and expand the application of our antitrust laws beyond U.S. borders,” Christine Wilson wrote May 28 in an op-ed in the Wall Street Journal.
“Unless it is overturned, it invites the plaintiffs’ bar to file private antitrust suits against companies that decline to share their secret sauce — whether it’s a patent, an algorithm or an actual sauce recipe — with competitors,” she added.
Apple, which played a big role in the FTC’s case, declined to comment.
Qualcomm is the world’s biggest provider of mobile chips, and it created technology that’s essential for connecting phones to cellular networks. The company derives a significant portion of its revenue from licensing those inventions to hundreds of device makers, with the fee based on the value of the phone, not the components.
The FTC targeted that business model, in part because it forced all handset makers to pay the company even if they don’t use Qualcomm chips. Why? Because Qualcomm owns patents related to the 3G, 4G and 5G networking technology, as well as other features like software. If a device connects to a cellular network, Qualcomm likely wants a licensing fee.
Below are some of the key points that were debated at the trial and how it all played out.
What does the ruling say?
Koh sided with the FTC. “Qualcomm’s licensing practices have strangled competition in the CDMA and premium LTE modem chip markets for years, and harmed rivals, OEMs, and end consumers in the process,” she wrote in her ruling.
She said Qualcomm has to comply with five remedies:
- “Qualcomm must not condition the supply of modem chips on a customer’s patent license status and Qualcomm must negotiate or renegotiate license terms with customers in good faith under conditions free from the threat of lack of access to or discriminatory provision of modem chip supply or associated technical support or access to software.
- “Qualcomm must make exhaustive SEP licenses available to modem-chip suppliers on fair, reasonable, and nondiscriminatory (“FRAND”) terms and submit, as necessary, to arbitral or judicial dispute resolution to determine such terms.
- “Qualcomm may not enter express or de facto exclusive dealing agreements for the supply of modem chips.
- “Qualcomm may not interfere with the ability of any customer to communicate with a government agency about a potential law enforcement or regulatory matter.
- “In order to ensure Qualcomm’s compliance with the above remedies, the court orders Qualcomm to submit to compliance and monitoring procedures for a period of seven years. Specifically, Qualcomm shall report to the FTC on an annual basis Qualcomm’s compliance with the above remedies ordered by the court.”
The first and second remedies are “the most onerous, requiring renegotiation of existing licenses, and mandating offering chipset licenses (which, as always, opens up the possibility of chipset-level royalties and the specter of patent exhaustion),” Bernstein analyst Stacy Rasgon noted. “In practice, we don’t know what will happen next.”
What happened with the trial?
The trial started Jan. 4 and lasted for 10 days. Closing arguments took place Jan. 29. Court sessions were held Mondays, Tuesdays and Fridays in San Jose, California, presided over by Koh, who oversaw the epic Apple vs. Samsung patent battle. There was no jury in this case, which means Koh issued her ruling in a court filing.
The verdict came about four months after the trial ended. Koh said in January that she likely wouldn’t be handing down her normal speedy decision, as she had a lot of evidence, testimony and case law to consider.
“I’m generally fairly fast,” Koh said during the last day of the trial. “[But] something of this magnitude is going to take longer” than an average case.
What did the FTC have to prove?
For the FTC to win the case, it had the burden of showing that Qualcomm had a monopoly, that it had market power and that it used that power in negotiations with handset makers to command high royalties. The FTC also had to show that Qualcomm’s conduct hurt competitors and that the anticompetitive actions were continuing or would start again in the future.
The FTC argued that Qualcomm used its power in the 3G and 4G chip market to force handset makers like Apple to sign licensing agreements with excessively high royalties. If Qualcomm isn’t stopped, the FTC said, it’ll do the same thing in the 5G market.
Qualcomm, meanwhile, argued that the FTC didn’t meet its burden in the case and that Qualcomm won business “through superior innovation and better products.”
It also said its royalty practices didn’t hurt competitors. Intel now supplies all modems for Apple’s iPhones, MediaTek is the world’s second biggest wireless chipmaker, and Samsung and Huawei have developed their own modems.
What’s Qualcomm again?
You may not know the Qualcomm name (unless you live in its hometown of San Diego and frequent Qualcomm Stadium), but the odds are pretty high you’ve used a device with its technology. Qualcomm is best known for its chips that connect phones to cellular networks, as well as its Snapdragon processors that act as the brains of mobile devices. Without a modem in your device, you wouldn’t be able to hail a Lyft to take you home or check Facebook while you’re waiting in line at a food truck.
Qualcomm is one of the key component suppliers to Samsung, OnePlus and other phone makers. The chip company previously was the primary supplier of modems for iPhones, but a patent battle with Apple has caused the tech giant to use Intel components instead.
What technology does Qualcomm make?
Along with its processors, Qualcomm invents a lot of technology that’s used in mobile devices. The company says it’s invested more than $40 billion in research and development over the past three decades, and its patent portfolio contains more than 130,000 issued patents and patent applications worldwide.
Some Qualcomm patents relate to multimedia standards, mobile operating systems, power management, Wi-Fi, Bluetooth and even airplane mode. The company is also the pioneer of CDMA, the 3G mobile network standard used by Verizon and Sprint, and it’s innovated in 4G and 5G network connectivity.
“Qualcomm’s inventions are necessary forthe entire cellular networkto function — they are not limited to technologies in modem chipsets or even cell phones,” Qualcomm said in a filing in a patent battle with Apple.
Who licenses Qualcomm’s technology?
Qualcomm licenses its technology to more than 340 companies, particularly phone vendors. It doesn’t license its patents to chipmakers, though, which is something governments and Apple have taken issue with. But Qualcomm argues that chipmakers don’t need licenses because the handset makers already cover the cost of using its technology.
Apple previously licensed Qualcomm’s technology through its manufacturers, like Foxconn, instead of having a license of its own. But in a settlement reached last month, Apple signed its first direct license.
Apple partners paid Qualcomm a licensing fee five times higher than it thought was fair,Apple operating chief Jeff Williams testified during the FTC ttrail. Apple wanted to pay $1.50 per device in royalties to Qualcomm, based on a 5 percent fee for the cost of each $30 modem connecting iPhones to mobile networks. Instead, it ended up paying $7.50 per phone, he said.
“The whole idea of a percentage of the cost of the phone didn’t make sense to us,” Williams said. “It struck at our very core of fairness. At the time we were making something really really different.”
What did the FTC say in its suit?
The FTC’s lawsuit, filed two years ago, accused Qualcomm of maintaining a monopoly over chips for cellular phones through a “no license, no chips” policy. That policy imposed “onerous” supply and patent-licensing terms to extract high royalties from cellphone makers and weaken competitors, the commission said.
In its heavily redacted complaint, the FTC said the patents Qualcomm holds are standard-essential patents — technology that is essential to the industry and must be licensed to competitors under fair, reasonable and nondiscriminatory terms. But the complaint alleges that Qualcomm consistently refused to license some standard-essential patents to rival chipmakers, in violation of its FRAND commitments.
“Qualcomm’s customers have accepted elevated royalties and other license terms that do not reflect an assessment of terms that a court or other neutral arbiter would determine to be fair and reasonable,” the FTC said in its complaint.
What happened before the trial?
The FTC said Qualcomm’s refusal to give licenses to its rivals is part of its efforts to maintain its monopoly. Koh in November agreed and ruled that Qualcomm had to license its wireless chip patents to its chip competitors like Intel.
At that time, she granted the FTC’s motion for partial summary judgment in its suit against Qualcomm. The FTC had sought a ruling that declared “two industry agreements obligate Qualcomm to license its essential patents to competing modem chip suppliers.”
During her ruling, Koh again said that Qualcomm has to license its technology to rival chipmakers.
“Although Qualcomm claims such a remedy is inconsistent with industry practice, Qualcomm conceded to the IRS in 2012 that Qualcomm licensed modem chip suppliers only until Qualcomm decided that licensing OEMs at the handset level instead was ‘humongously more lucrative,'” Koh wrote.
How did Qualcomm respond to the initial suit?
Qualcomm said the FTC’s lawsuit was based on “flawed legal theory” and asked the court to dismiss the lawsuit before the trial began (which the court didn’t do).
“Qualcomm has never withheld or threatened to withhold chip supply in order to obtain agreement to unfair or unreasonable licensing terms,” Qualcomm said in a statement at the time of the FTC complaint. “The FTC’s allegation to the contrary — the central thesis of the complaint — is wrong.”
What impact does this have on consumers?
The FTC said Qualcomm’s practices have caused higher smartphone pricing. And at least one group of consumers agrees. Last year, a group sued Qualcomm and applied for class-action status, which Koh granted in late September.
The lawsuit could represent one of the biggest class-action lawsuits in history, with essentially 350 million cell phone owners impacted. The plaintiffs have asked for $5 billion. Qualcomm in October asked the 9th US Circuit Court of Appeals to allow it to appeal Koh’s decision.
This suit was being heard in conjunction with the FTC case. The 9th Circuit on Jan. 23 said Qualcomm can appeal Koh’s ruling that granted class-action status. Following the appeals court decision, Koh said in an order that she would stay the case pending the 9th Circuit’s decision on Qualcomm’s impending appeal.
It’s unlikely that Koh’s ruling will mean lower smartphone prices. Nearly every company has been increasing device prices over the past couple of years. Handset vendors aren’t selling as many phones, so they’re trying to make more money by increasing the price of each device sold. At the same time, new components like OLED displays and superfast connectivity chips are increasing the amount it costs to build phones.
What did the FTC argue in court?
The FTC presented its evidence against Qualcomm andrested its case Jan. 15. During the first six days of the trial, the FTC presented witnesses from companies like Apple, Samsung and Ericsson and experts from intellectual property consultancies and universities. It even called Qualcomm CEO Steve Mollenkopf. The trial has revealed the inner workings of tech’s most important business — smartphones — showing how suppliers wrestle for dominance and profit.
The FTC accused Qualcomm of operating a monopoly in wireless chips, forcing customers like Apple to work with Qualcomm exclusively and charging “excessive” licensing fees for its technology, in part by wielding its “no license, no chips” policy. Qualcomm’s practices prevented rivals from entering the market, drove up the cost of phones and in turn hurt consumers, who faced higher handset prices, the FTC said.
What did the FTC’s experts say?
Carl Shapiro, a professor of economics at the University of California, Berkeley, took the stand Jan. 15 to analyze the impact of the no license, no chips policy and Qualcomm’s royalty rates on handset makers, chip rivals and consumers. He concluded that Qualcomm had monopoly power over CDMA modem chips and over premium LTE modem chips through 2016.
“It’s my view they harmed competition in those two markets,” he said.
He testified that Qualcomm is using its market power and its monopoly power over chips to extract an “unusually high amount” for royalties for patents. That raises the cost for rivals, weakens them as competitors and fortifies Qualcomm’s monopoly power, Shapiro said.
Losing access to Qualcomm’s modems would impose costs on handset makers, including not being able to supply to consumers, he said. “That’s a very heavy hammer that Qualcomm is bringing down, at least as a threat, in those negotiations,” Shapiro said.
Michael J. Lasinski, CEO of IP consulting firm 284 Partners, testified on Jan. 14 that Qualcomm’s licensing fees are “far too high to be consistent with their FRAND operations.” Standard essential patents must be licensed in a fair, reasonable, and non-discriminatory manner.
An Ericsson licensing executive, Christina Petersson, said in video testimony that a fair royalty rate for multimode LTE should be 6 percent to 8 percent per device. Lasinski said he determined it should be 6 percent because there’s a lot more going into a phone than when Ericsson came up with its rate.
What did Qualcomm’s experts say?
Qualcommcalled three economics expertsto contradict Shapiro’s testimony. Aviv Nevo, a University of Pennsylvania economics and marketing professor,called into question Shapiro’s use of theoryto determine the damage allegedly caused by Qualcomm’s licensing practices. Instead, Nevo said he examined the “real-world” agreements Qualcomm had with companies to determine the rates weren’t excessive.
Nevo testified that the FTC’s theory that Qualcomm uses its power in the chip market to charge excessive royalty rates “is just not born out of actual market data.” He noted “there’s no support for the theory in the data.” Nevo also testified that the mobile industry is strong and that Qualcomm had legitimate business reasons for its licensing policies.
Edward Snyder, dean of the Yale School of Management and a professor of economics and management, criticized Shapiro’s methodology and said the problems Qualcomm’s rivals had were due to choices they made that had nothing to do with Qualcomm. And Tasneem Chipty, a specialist in competition policy and antitrust economics from consultancy Matrix Economics, attacked Shapiro’s definition of the market and of market power.
“Shapiro has overstated Qualcomm’s market power,” Chipty said. She said there’s no “evidence of consistent and unconstrained market power of the type” that would hurt competition or “coerce OEMs [handset makers] into onerous business terms that would rob them of billions of dollars.”
What other people testified for the FTC?
The witnesses called by the FTC have included executives from some of the biggest names in tech: Apple, Samsung, Huawei, Lenovo and various others. Many, including Ira Blumberg, vice president of intellectual property at Lenovo, have testified that they feared Qualcomm would stop supplying chips if they failed to sign the license agreement or tried to challenge its legal terms.
Challenging Qualcomm is “not a viable option because we don’t know whether Qualcomm would follow through on their threat to cut off supply,” Blumberg said in video testimony played for the court. “We can’t take that risk.”
What does Apple have to do with this?
The FTC complaint specifically related to how Qualcomm dealt with Apple, one of the world’s biggest handset makers.
The Cupertino, California, giant makes its own application processor — the brains of the iPhone — but it relies on third-party chips for network connectivity. From the iPhone 4S in 2011 to the iPhone 6S and 6S Plus in 2015, the sole supplier for those chips was Qualcomm. The following year, Apple started using Intel modems in some models of the iPhone 7 and 7 Plus, but it still used Qualcomm in versions for Verizon and Sprint. Apple’s latest phones now use only Intel 4G chips.
The FTC said that Qualcomm forced Apple to pay licensing fees for its technology in exchange for using its chips in iPhones.
“Qualcomm recognized that any competitor that won Apple’s business would become stronger, and used exclusivity to prevent Apple from working with and improving the effectiveness of Qualcomm’s competitors,” the FTC said in a statement.
Qualcomm “uses its monopoly power to make [handset manufacturers] pay a royalty overcharge — a tax — when buying modem chips from its competitors,” the FTC said in a court filing. “Qualcomm further hampers those competitors by denying them the licenses it promised would be available on FRAND terms during standard-setting. And Qualcomm foreclosed its competitors from selling to a uniquely important customer, Apple, for half a decade using exclusive contracts.”
The company took a blow when Koh ruled it couldn’t cite Apple’s growing relationship with Intel as evidence in the FTC case that it hasn’t operated a monopoly.
What happened in Apple’s fight with Qualcomm?
Apple filed a lawsuit against Qualcomm three days after the FTC’s complaint, saying the wireless chipmaker didn’t give fair licensing terms for its processor technology.
The iPhone maker argued it should pay a fee based only on the value of Qualcomm’s connectivity chips, not the entire device. It says Qualcomm is “effectively taxing Apple’s innovation” and that Apple “shouldn’t have to pay them for technology breakthroughs they have nothing to do with.” Qualcomm, meanwhile, said the iPhone wouldn’t exist without its technology.
While Apple was one of Qualcomm’s fiercest critics, the two settled their disputes in April.
The two sides announced the surprise agreement through a joint press release on April 16 at the same time lawyers presented opening arguments in their trial in a San Diego courthouse. Apple and its contract manufacturers had given their statements, andQualcomm’s head lawyer had nearly finished his remarkswhen the courtroom buzzed with the unexpected news.
The CEOs of both companies — Apple’s Tim Cook and Qualcomm’s Steve Mollenkopf — had been expected to testify. As recently as January, Cook said the iPhone maker wasn’t in talks with Qualcomm.
As part of the agreement, Apple will make a payment to Qualcomm for an undisclosed sum. The licensing pact, taking effect April 1, 2019, will last for six years and includes a two-year extension option. Apple and Qualcomm also signed a multiyear chipset supply agreement, which means Qualcomm modems could soon make their way back into iPhones.
Does that mean we get a 5G iPhone this year?
The agreement between Apple and Qualcomm settled all litigation between the companies worldwide. Apple also signed a multiyear chipset supply agreement with Qualcomm, gaining access once again to the company’s high-end modems. That includes Qualcomm’s 5G chips.
After years of work on 5G networks, hyped as the life-changing foundation for augmented reality, telemedicine and other tech trends, the super-fast wireless technology is being rolled out. Carriers are turning on their networks, and virtually every major Android handset maker has touted plans to launch a 5G device this year. Apple hasn’t.
The company had been working with Intel on 5G chips, but the chipmaker had problems developing the product. A few hours after Apple and Qualcomm announced their settlement Tuesday, Intel said it’s exiting the 5G smartphone modem business. Intel’s struggle with 5G is likely what brought Apple to the bargaining table with Qualcomm.
Even though Apple and Qualcomm are working together again, iPhones won’t immediately roll out with 5G. At the earliest, Apple may be able to introduce a 5G device in 2020. Itsimply got started too late to release anything this year.
How will Koh’s ruling impact the Apple-Qualcomm settlement?
It’s unclear what effect the ruling will have on Qualcomm’s recent settlement with Apple, but it’s likely that deal took into account a ruling in favor of the FTC. Ultimately, the case could take years to resolve as it works its way through the appeals process.
It typically takes the 9th Circuit about two to three years to issue rulings in antitrust cases, said Ankur Kapoor, an antitrust partner at Constantine Cannon. It’s likely the court will fast-track the case, which means it could have a decision in about a year, he said.
“For tech antitrust, this is the biggest decision since the Microsoft case,” Kapoor said.
In the meantime, the 9th Circuit probably will grant Qualcomm an emergency stay of the injunction that forces it to change its practices. For Qualcomm’s appeal, it’ll have to focus on the legal basis of the ruling.
“The only chance for Qualcomm to overturn this on appeal is on a pure question of law, a pure legal issue,” he added. “The big one is whether or not violation of FRAND obligations can constitute an antitrust violation or if it’s just a breach of contract.”
What did other tech companies say about the initial suit?
The FTC trial was a rare time Apple and Samsung have agreed. The two companies, along with Intel, Lenovo and various others, sided with the FTC, and executives from those companies testified on the government’s behalf.
Samsung in May 2017 filed an amicus brief that supported the FTC’s suit. It’s one of Qualcomm’s biggest customers, but it also competes with the company when it comes to mobile chips.
“In both capacities, Samsung has directly experienced, and been directly harmed by, the exclusionary conduct alleged in the FTC’s complaint,” Samsung said in its court filing. “Given its position, Samsung is uniquely situated to assist the court in understanding the important antitrust principles at stake in this case.”
Samsung said in its filing that Qualcomm agreed to fairly license its technology if standards bodies adopt tech that required the use of Qualcomm patents. But the South Korean company said Qualcomm hasn’t kept its side of the bargain. Instead of licensing its standard essential patents to rival chipmakers, it only gives licenses to handset manufacturers.
Intel also filed an amicus brief in support of the FTC’s case against Qualcomm.
“Although Qualcomm has driven nearly all of its competitors out of the premium LTE chipset market, Intel has not thrown in the towel,” it said in a court filing.
How does Qualcomm’s licensing business work?
Some companies license patents on an individual basis; Qualcomm licenses all its patents as a group. For a set fee — based on the selling price of the end device, typically a phone — the manufacturer gets to use all of Qualcomm’s technology.
It’s been the norm in the mobile industry for patent holders to base their licensing fees on the total value of a handset, so Qualcomm isn’t alone there. Ericsson, Huawei, Nokia, Samsung and ZTE also charge licensing fees based on the entire device.
Dirk Weiler, head of standards policy at Nokia, testified for Qualcomm that it has long been industry standard to license technology to handset makers, not chipmakers. Along with his role at Nokia, Weiler also serves as chairman of the European Telecommunications Standards Institute. The nonprofit standards body’s Intellectual Property Rights Policy requires companies to give licenses for equipment.
“What is my understanding of the industry practice is in the case of the cellular business, this means these companies license, for example, the handset and not any subpart of the handset,” Weiler said.
Part of the dispute between Apple and Qualcomm is that Apple believes its licensing fee should be based on the Qualcomm chip used in the device, not the entire phone.
“They do some really great work around standards-essential patents, but it’s one small part of what an iPhone is,” Apple CEO Tim Cook said in May 2018. “It has nothing do with the display or the Touch ID or a gazillion other innovations that Apple has done. And so we don’t think that’s right, and so we’re taking a principled stand on it.”
What does licensing have to do with the FTC case?
Key to the FTC’s argument is Qualcomm’s so-called “no license, no chips” policy. To get access to Qualcomm’s chips, which are broadly considered to be on the bleeding edge of wireless innovation, a phone maker first has to sign a patent licensing contract with Qualcomm. Qualcomm has long been the leader in 4G LTE, and it’s ahead of rivals in the nascent 5G market. The highest-end phones, like those from Samsung, have tended to use its modems.
The FTC has argued the no license, no chips policy gives Qualcomm too much leverage in negotiations and prevents competitors from entering the wireless chip market. Huawei, Intel, Lenovo and others testified during the trial that Qualcomm required them to sign licenses before being able to buy the company’s chips.
And Apple, which has been fighting Qualcomm in patent and licensing lawsuits around the globe, sent two executives to testify on behalf of the FTC. Apple, arguably the most powerful company in technology, said itfelt it had no optionswhen it came to negotiating over Qualcomm’s licensing fees.
“We were staring at an increase of over $1 billion per year in licensing, so we had a gun to our head,” Apple’s Williams said as he explained why Apple signed another licensing agreement in 2013, despite being unhappy with the terms.
Apple wanted to use Qualcomm’s 4G LTE processors in its 2018 iPhones, but the chipmaker wouldn’t sell to it, Williams said. Qualcomm did continue providing Apple with chips for its older iPhones, including the iPhone 7 and 7 Plus, but it wouldn’t give Apple chips for last year’s iPhone XS, XS Max and XR, Williams said. Qualcomm, for its part, has testified that it wants to keep supplying chips to iPhones and has been trying to win back business at Apple.
What did Qualcomm say in court about its licensing practices?
Mollenkopf, Qualcomm’s CEO, said on the stand that as of spring 2018, the company still was trying to win a contract supplying chips for iPhones, but that it hadn’t “had any new business” from Apple since its previous contracts expired. Because of the trial’s evidence date limitations, he wasn’t allowed to discuss the current state of Qualcomm’s business with Apple.
Mollenkopf also testified that Qualcomm’s practices of offering a license before selling chips to companies is simply the best way to get things done for the whole industry, not just for his company. That’s because Qualcomm’s patent licenses cover lots more technology a phone might use than simply what’s in his company’s modem chips, which let phones talk to mobile networks.
“We only sell to companies with a license because not all the IP [intellectual property] is covered in the chip. What we want to do is make sure the [phone makers] are covered,” Mollenkopf said. He pointed to the security framework used when phones connect to a network as an example. “It’s not embodied in the chip, it’s not in the phones, but it’s in all these things,” Mollenkopf said. “There’s a tremendous amount of IP we generate that makes the system work.”
What did witnesses say on Qualcomm’s behalf?
Qualcomm called company executives, representatives from handset makers and chip rivals, and economics experts to dispute the FTC’s allegations in the case. The company sought to show that competition is healthy in the mobile chip market and that Qualcomm hasn’t hampered the industry.
The company has argued that its broad patent portfolio and innovations justify its fees. And Qualcomm representatives and executives from some of its customers testified that Qualcomm has never cut off chip supply during contract negotiations. Some of those executives have said in live testimony and video depositions presented by Qualcomm that its rivals didn’t have the technology required for their devices.
Matthias Sauer, an Apple executive and a witness called by Qualcomm, testified that Intel’s modems didn’t meet the technical standards required for the company’s iPhones in 2014. Though Intel also couldn’t meet Apple’s chip requirements for the iPad, it would’ve used them anyway, he said, had Qualcomm not offered incentives to stay with its chips. His remarks echoed comments from colleague Tony Blevins early in the trial.
Qualcomm, meanwhile, has said it had legitimate business reasons for having strict contracts with Apple, including how expensive it is to design modems specifically for Apple.
Fabian Gonell, senior vice president of licensing strategy and legal counsel for Qualcomm’s licensing business, said that Qualcomm doesn’t have all the power when it comes to negotiating licensing contracts. Instead, handset makers have options to reach terms they view as more favorable, he said.
Originally published Jan. 4, 6 a.m. PT.
Updates Jan. 7: Adds info on Huawei and Lenovo testimony; Jan. 17:Includes info on FTC’s case and witnesses through Jan. 15; Jan. 23:Adds info on consumer lawsuit; Feb. 7:Includes info on the trial’s end; May 22: Adds judge’s ruling and info about it;May 28:Adds FTC op-ed information.
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