Last week, Judge Lucy Koh issued a ruling in favor of the Federal Trade Commission (FTC) and against Qualcomm in a decision that could dramatically change the way Qualcomm sells its chips. The manufacturers have declared several Qualcomm business practices during the trial without a jury, including the chip manufacturer’s “no license, no chip” policy. The company has also been criticized for having based the prices of royalties on the total retail price of a phone and for not having licensed its standard essential patents (SEPs) on a fair, reasonable and non-discriminatory basis. These are patents that manufacturers must license to ensure that their products meet technical standards.
Today, CNBC reports that Qualcomm is asking Judge Koh to stay behind to enforce her decision, in other words, to issue a “stay” so that he can appeal her decision. The company claims that Koh’s decision is wrong because it excluded evidence dating back to March 2018. This means that Apple’s exclusive use of Intel modem chips for the iPhone 2018 models was not part of the tests; Qualcomm states that this test would have shown that it did not completely control the market. The company also notes that the FTC’s criticism of the method used to collect copyright was unique in the history of antitrust law.
Qualcomm complains that Koh’s ruling will force it to return to work on the license agreements he has with phone manufacturers and that he will need to improve its operations, that if it is forced to make all these changes, he will not be able to restore them if he wins the appeal. Even the most severe Qualcomm critics can see where a “stay” seems to be necessary for this situation. The company claims that its superior quality chips, not the company’s business practices, led to Qualcomm’s dominance in the industry.
Qualcomm will appeal to Koh’s decision whether or not to obtain a “stay”
As noted by Qualcomm, Judge Koh’s decision will force Qualcomm to renegotiate agreements with phone manufacturers, possibly it includes the agreement it recently signed with Apple. Although the terms of the deal were not disclosed, Apple paid Qualcomm up to $4.5 billion and received a six-year license agreement and a multi-year chip deal.
Qualcomm says that if Judge Koh refuses to grant it a “stay”, the company will request one from the United States court of appeal. Regardless of whether Judge Koh’s decision is temporarily frozen, the chip maker claims it will appeal the decision. An appeal could take more than a year to get through the legal system.
In January 2017, the FTC sued Qualcomm for anti-competitive behavior and the trial began last January. Several employees of phone manufacturers took a stand, including Apple’s supply chain executive, Tony Blevins. The executive said that Apple began looking for additional sources of modem chips in 2013 after Apple and Qualcomm failed to reach an agreement on licensing fees.
Apple’s chief executive, Tim Cook, was reported to be livid after discovering that Apple’s royalty payments to the chip maker were more than all the other royalty costs he paid to other suppliers. But Apple struggled to find a reliable source of 5G modem chips, especially when it seemed that Intel would not deliver its 5G modem chip in time to be used in iPhone 2020s. Apple was so desperate that it finally accepted the deal with Qualcomm, which could now be examined in light of Judge Koh’s ruling.
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