U.S. District Court Judge Lucy Koh Delivers a Stinging Rebuke to Qualcomm’s Pricing Tactics in Antitrust Action Brought by Federal Trade Commission

Qualcomm Inc. “strangled competition” in the wireless device chip market and abused its dominant industry position to extract unfair technology licensing fees from device manufacturers, United States District Court Judge Lucy Koh ruled on Tuesday in an antitrust case brought against Qualcomm by the Federal Trade Commission.

Judge Koh’s highly anticipated Order, which followed a bench trial in the Northern District of California, is a strong rebuke of Qualcomm’s anti-competitive pricing tactics, and may give a boost to the U.S. based semiconductor giant’s competitors. Qualcomm announced that it will seek an immediate stay of the judgment and will appeal to the Ninth Circuit on an expedited basis.

Substantively, the Order requires Qualcomm to renegotiate its licensing agreements without employing unfair tactics such as the so-called “no license, no chips” policy. Qualcomm is the leading supplier of chips that connect devices to wireless networks, and it also holds patents on technology essential to the functioning of wireless devices. Under the “no license, no chips” policy, Qualcomm refused to sell its chips to manufacturers – or threatened to cut off the supply of chips – unless manufacturers agreed to the company’s onerous patent-licensing terms, which forced manufacturers to pay steep royalties to Qualcomm when they used a competitor’s chips. Judge Koh found that this practice suppressed competition by imposing an “artificial surcharge on rivals’ chips.”

The Order also requires Qualcomm to offer fair, reasonable, and non-discriminatory licenses of its industry-essential patents to competitors – a practice that Qualcomm has resisted in the past.

Qualcomm must submit to monitoring for seven years to ensure compliance with the Order.

Judge Koh’s Order follows similar antitrust enforcement against Qualcomm in South Korea, China, and Europe.

While the Order is a win for the FTC, it does not necessarily guarantee increased antitrust enforcement going forward, nor additional scrutiny of Qualcomm by the Commission. This lawsuit was the final act of the Obama Administration’s outgoing FTC chair, Edith Ramirez. The Commission is now Republican-led, and the Trump Administration has championed San Diego-based Qualcomm as vital to U.S. interests in competing with China in the wireless industry.