28 June 2017
Reporter: Barney Dixon

Qualcomm denied motion to dismiss FTC case

Qualcomm has been denied a motion to dismiss the US Federal Trade Commission’s (FTC) complaint over its licensing of standard-essential patents.

The FTC has accused the semiconductor company of acting in bad faith and using anti-competitive tactics in relation to key patents used in cell phones and other consumer products.

Qualcomm filed a motion to dismiss the case on multiple grounds, including that the FTC’s complaint fails to adequately allege that the royalties charged were above rates deemed to be fair, reasonable and non-discriminatory (FRAND).

Judge Lucy Koh of the US District Court for the Northern District of California denied Qualcomm’s motion to dismiss on 26 June.

The FTC filed its complaint in January, alleging that Qualcomm engaged in “exclusionary conduct that taxes its competitors’ baseband processor sales, reduces competitors’ ability and incentive to innovate and raises prices paid by consumers for cell phones and tablets”.

“Qualcomm withholds its baseband processors unless a customer accepts a licence to standard-essential patents on terms preferred by Qualcomm, including elevated royalties that the customer must pay when using competitors’ processors,” the FTC alleged.

According to the FTC, while Qualcomm was withholding these standard-essential patents, it was entering into exclusive dealing arrangements with Apple.

Apple has since sued Qualcomm for nearly $1 billion, arguing that the semiconductor company “unfairly insisted on charging royalties for technologies they have nothing to do with”.

The App Association, which represents more than 5,000 app makers including Apple, eBay, Facebook and Microsoft, welcomed the decision to deny Qualcomm’s motion to dismiss the litigation, describing it as “an important step for the tech community, particularly small businesses that depend on open standards”.

It said in a statement: “Standards provide the crucial foundation for the technologies we use daily and innovations yet to come. We strongly believe that developers, creators, and manufacturers should be able to rely on FRAND access to standard-essential patents when voluntary FRAND commitments are made.”

“Regardless of the outcome, we hope a merit-based decision by the Ninth Circuit will provide needed clarity on the meaning and scope of a voluntary FRAND promise.”

In April, the association wrote to the White House to raise awareness of Qualcomm’s alleged abuse, asking the new administration to ensure an “impartial and substantive determination” in the litigation.

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