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Qualcomm suffered a setback in its legal battle with the United States Federal Trade Commission on the face of a federal court ruled that the San Diego company is obligated to offer patent licenses to competitors.
The decision could have wide-ranging implications for Qualcomm's patent licensing business model – which today collects patent royalties based on smartphones – not individual components inside them.
Device level royalties have been the norm in the cellular industry for decades. In August, the FTC asked U.S. Judge District Judge Lucy Koh in San Jose to rule that Qualcomm's pledges to two U.S.
Whereas, it is possible for a license to have a license for a license, which qualifies it as a disadvantage.
Qualcomm did not answer to request for comment. It can respond when it reports tax fourth quarter financial results on Wednesday.
Koh's partial summary is a narrow ruling. It does not speak to the broader legal theory behind the FTC's ongoing antitrust lawsuits against Qualcomm, which is scheduled for trial in January.
Today, Qualcomm sells its cellular chips to smartphone makers. It also licenses its portfolio of 130,000 global patents. It sells chips and patents separately.
The company refuses to license chip competitors such as Intel and MediaTek. The licenses signed by smartphone makers cover the entire device. Therefore, no additional licenses are necessary, according to Qualcomm ..
The FTC argues that the language in which they are. Excluding Qualcomm's competitors violates promised not to discriminate.
Koh agreed. In this case, it was noted that the infringement could not be discriminated against by the author.
If Qualcomm is forced to license chip suppliers, it could trigger patent exhaustion. That means that it would not be possible to collect standard royalties based on the entire smartphone.
Apple – also seeking a level of approval with Qualcomm. In 2016, antitrust regulators in South Korea. The company is appealing.
In short filings and interviews, Qualcomm has been submitted to the Telecommunications Industry Association and the American National Standards Institute.
In addition, the company contends component licensing misinterprets how cellular technology works.
Qualcomm says its cellular inventions are not limited to a single piece of silicon such as the cellular modem. Delivering high-speed wireless broadband requires myriad chips and software working on a system not only inside smartphones but also across the broader cellular network.
That's why the mobile industry has got smartphones instead of chip collectors. A chip level licensing requirement for Qualcomm would be with the rest of the industry and the standard setting organization in Europe, which has supported device-level royalties.
For its standard essential cellular patents, Qualcomm charges 3.25 percent of the smartphone up to a $ 400 cap – or a maximum of $ 13 per phone.
Standard essential technologies enable interoperability – so a message sent from an iPhone on AT & T is an Android phone on Verizon.
In a short filing last month, Qualcomm and the FTC revealed they were in settlement talks. It is unclear how Koh's ruling might influence negotiations.
Qualcomm shares ended trading Tuesday up 16 cents at $ 63.63 on the Nasdaq exchange.
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