Judge Lucy Koh of Federal District Court in San Jose, California, just ruled that Qualcomm — the industry leader in wireless modem chips — violated antitrust laws to dominate the market. The ruling could shake up the smartphone industry as companies race to create 5G wireless networks.
The New York Times reports that the ruling was concerning a lawsuit by the Federal Trade Commission, which sued Qualcomm in 2017 for allegedly overcharging for patents. Koh ruled that the chipmaker abused its position at the top of the semiconductor industry to keep competition down and charge licensing fees that were far too high.
“Qualcomm’s licensing practices have strangled competition in the…chip markets for years, and harmed rivals, [original equipment manufacturers], and end consumers in the process,” Koh noted as she ruled against the company.
In particular, Fox Business reports that Koh’s ruling focused on the issues with Qualcomm’s practice of taking royalties on each smartphone that utilized its technology, as well as the way it allegedly abused its position to pressure equipment manufacturers (OEMs) into signing patent licensing agreements.
“In some cases, Qualcomm has even cut off OEMs’ chip supply, although the threat of cutting off chip supply has been more than sufficient to coerce OEMs into signing Qualcomm’s patent license agreements and avoiding the devastating loss of chip supply.”
Koh ordered Qualcomm to create new licensing agreements and be monitored by the trade commission for seven years.
But Qualcomm isn’t taking the ruling laying down — the company disagrees with Koh’s “conclusions, her interpretation of the facts and her application of the law,” and is seeking an appeal at the United States Court of Appeals for the Ninth Circuit.
Before the ruling, Apple suggested issues with Qualcomm’s royalty rates. The Cupertino, California, firm accused the company of marking up prices from their actual value, and the trade commission supported this accusation, claiming that phone makers were unable to negotiate with Qualcomm for lower rates because the company would threaten to cut off shipments of chips that it owned exclusively. And during a January trial, the executives from handset companies such as Motorola, Sony, and Lenovo testified about Qualcomm’s use of such tactics to earn them higher royalties.
The ruling comes shortly after President Donald Trump added Huawei, one of the telecommunications giants that relied on chips from Qualcomm to a trade blacklist to prevent them from doing business with U.S. companies. Not long after the president’s decision, Google cut ties with the Chinese tech giant, as The Inquisitr reported.