Judge rules Qualcomm licensing practices violate antitrust law

A federal court ruled late Tuesday night that Qualcomm’s practice of extracting licensing fees from phone companies has “strangled competition” and hurt consumers in violation of antitrust law.

Judge Lucy Koh of the U.S. District Court for the Northern District of California said that Qualcomm cannot make decisions about which companies to supply with their processing chips based on whether the customer is licensed to use Qualcomm’s patented technology. She also ordered Qualcomm to negotiate reasonable rates with its customers without threatening to cut off its supply.

{mosads}The decision is a major win for the Federal Trade Commission (FTC), which brought the suit against Qualcomm more than two years ago.

“Yesterday’s decision that Qualcomm’s practices violate the antitrust laws is an important win for competition in a key segment of the economy,” Bruce Hoffman, the head of the FTC’s Bureau of Competition, said in a statement. “FTC staff will remain vigilant in pursuing unilateral conduct by technology firms that harms the competitive process.”

The FTC had accused Qualcomm of taking advantage of its patents in order to extract higher licensing fees and essentially tax phone manufacturers for using its competitors’ products.

Koh agreed, saying that Qualcomm’s dominance as the largest supplier of mobile phone chips allowed it to extract excessive fees and suppress competition.

Qualcomm has already vowed to seek a stay and appeal Koh’s decision.

“We strongly disagree with the judge’s conclusions, her interpretation of the facts and her application of the law,” Don Rosenberg, Qualcomm’s executive vice president and general counsel, said in a statement.

Qualcomm’s shares dropped more than 10 percent after the decision, dashing the investor confidence that had surged in the weeks following a landmark settlement it had reach with Apple.

Last month, Qualcomm and Apple agreed to drop their yearslong legal battle involving dozens of lawsuits over the two companies’ supply agreements.

–Updated at 3:03 p.m.