Chip-making giant Qualcomm is using unfair and anti-competitive practices to force cellphone companies to use its processors, according to a complaint filed yesterday in U.S. District Court in the Northern District of California by the Federal Trade Commission (FTC).
Among the FTC’s allegations is that Qualcomm forced Apple into an exclusive arrangement to use its baseband processors to prevent competitors from boosting sales through Apple’s strong position in the global smartphone market. In return, Qualcomm cut the amount Apple had to pay in patent royalties, according to the FTC.
The FTC voted 2-1 to file the lawsuit, with Commissioner Maureen Ohlhausen dissenting. Ohlhausen said the decision to file the complaint was based on “a flawed legal theory.” Qualcomm yesterday expressed the same opinion, noting in a statement that it has “never withheld or threatened to withhold chip supply in order to obtain agreement to unfair or unreasonable licensing terms.”
FTC: Qualcomm Forced Apple into Exclusive Arrangement
The FTC’s complaint centers on Qualcomm’s patents for modem chip technologies that make it possible for mobile phones to connect with cellular networks. Those technologies were incorporated into telecom industry standards, making them essential for 3G and 4G communications.
In exchange for becoming part of such standards, Qualcomm committed to licensing those patented technologies to other companies on “FRAND” (fair, reasonable and non-discriminatory) terms, the FTC noted. However, Qualcomm instead “consistently refused to license its cellular standard-essential patents to its competitors,” violating its FRAND commitments, according to the FTC’s complaint.
When Apple sought to reduce its royalty payments, Qualcomm “conditioned partial relief on Apple’s exclusive use of Qualcomm baseband processors from 2011 to 2016,” according to the FTC. “Qualcomm’s exclusive supply arrangement with Apple denied other baseband processor suppliers the benefits of working with a particularly important cell phone manufacturer and hampered their development into effective…