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FTC v. Qualcomm: Court Requires Licensing of SEPs to Competitors

A recent decision in the FTC v. Qualcomm Inc. case by U.S. district judge Lucy Koh calls into question the practice among some SEP holders of providing patent licenses only to downstream purchasers of products and refusing to provide licenses to direct competitors.

In June 2017, the Federal Trade Commission (“FTC”) sued Qualcomm in the Northern District of California, alleging violations of Section 5 of the FTC Act in the provision of baseband processors and modem chips used in cellular telecommunications and similar devices. The FTC argued that Qualcomm’s refusal to sell modem chips to cellular device manufacturers unless they took a license to Qualcomm SEPs, combined with its refusal to license its SEPs to competing modem chip manufacturers prevented other modem chip suppliers from entering the baseband processor market, cementing Qualcomm’s monopoly over the market.

The FTC further pointed out that Qualcomm was a member in SSOs, including Telecommunications Industry Association (TIA) and Alliance for Telecommunications Industry Solutions (ATIS), which require members disclose and license SEPs on fair, reasonable, and non-discriminatory (“FRAND”) terms. The FTC further claimed that the policies of these SSOs, which required members to license SEPs to “all applicants,” were contradictory to Qualcomm’s business practices.

In August, the FTC moved for partial summary judgement on whether Qualcomm’s membership in these SSOs necessitated licensing competing modem chip suppliers on FRAND terms, citing that no language in the policies of TIA or ATIS limited Qualcomm to a certain product or partner.  The court granted the FTC’s motion that Qualcomm needed to license its SEPs to competitor chip manufacturers, reasoning that the TIA an ATIS IPR policies intended to encourage competition and prevent a monopoly of the market.

The court’s decision to grant the FTC’s motion for partial summary judgment may raise scrutiny on the licensing practices of SEP holders, especially those dominant in the market. The ruling also illustrates the complicated relationship between SSOs, SEPs, and the market for modem chips.

Note this article is summary from the original. For a more in-depth look at the ruling, please visit here.