Netspark's Blog

Jan 31 2019

Things get ugly for Qualcomm

The fight “Qualcomm vs. Apple” goes to the next round.
As FTC yesterday stated, the evidence against Qualcomm
is overwhelming yet hasty conclusions are not to be made!
The case to be fully analyzed will definitely take some time!

However if FTC is ruling against Qualcomm, it could mean a very bad fiscal year for Qualcomm in general!

It argued that the chipmaker used unfair practices to stifle competition and benefit from an effective monopoly of chips needed by Apple and other smartphone makers.

The WSJ states:

In closing arguments before a packed courtroom in San Jose, FTC lawyer Jennifer Milici recapped what she called strong evidence that Qualcomm’s no-license, no-chips policy allegedly elevated royalty rates, and alleged refusal to provide licenses to chip-making rivals constituted a pattern of anticompetitive behavior.
“The evidence is overwhelming that Qualcomm engaged in exclusionary conduct, and the effects of Qualcomm’s conduct, when considered together, are anticompetitive,” she said.

Qualcomm however argued that the FTC hadn’t proved any harm against it’s competitors, and that without doing so, its case must fail.

Robert Van Nest, a lawyer representing Qualcomm, countered that the FTC hadn’t met its burden of proof because it couldn’t prove that the company actually harmed competition. The FTC had argued that Qualcomm’s market dominance led other chip makers to give up in their efforts to develop rival technologies, but Qualcomm said it succeeded on its own merits and others failed because of their own mistakes. “They have to show actual harm,” Mr. Van Nest said. “They haven’t done it.”

The case dependent on whether Qualcomm’s ownership of key voice and data patents allowed the company to impose unfair terms on customers like Apple or Samsung using Qualcomm’s technology in a wide variety of their portfolio.

In its evidence against Qualcomm, Apple argued the chipmaker imposed two unfair terms. First, charging a patent license fee even when a customer bought Qualcomm’s own chips, a practice the iPhone maker called ‘double-dipping.’ Second, charging a percentage of the total cost of the phone, rather than a flat fee per chip. And in our humble opinion this is exactly where we see Apple in the green as charging Apple more than Samsung for example as the total cost for an iPhone is higher as for a Galaxy S7. Ths would mean advantage for Samsung albeit both have to pay twice.

Qualcomm, in turn, argues that Apple was free to accept or reject these terms. Apple went with Intel modems in the iPhone XS, and XR, but would still have been paying a license fee to Qualcomm as part of the cost of these chips although no technology by Qualcomm was used any more.

With the evidence presented, it still is too fast to find a final verdict in this never-ending story and Lucy Koh might ask both parties about their view on things according to the lawsuit. As Lucy Koh has already ruled once for Apple, it will take more time here.

Judge Koh, who has said it would take a significant amount of time to decide on the FTC case, already has dealt Qualcomm one setback, ruling in November that the company must license some of its essential patents to rival chip suppliers. The decision was viewed as a game changer by analysts, who said it meant Qualcomm in the future would have to assess fees on the $15 to $20 cost of a modem chip rather than on up to $400 of the price of an iPhone.

In all this, the verdict on this case will decide the whole story. So let’s see how it’ll end!

January 31, 2019 Netspark - 1599 posts - Member since: May 9th, 2011 No Comments »

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