Qualcomm Takes Hit in FTC Case, Must License Modem Patents to Competitors

Qualcomm has licensed its tech to rivals before but has never shared its essential patents.

The preliminary ruling by Judge Lucy Koh in the US District Court for the Northern District of California said that Qualcomm must license some patents involved in making so-called modem chips, which help smartphones connect to wireless data networks, to rival chip firms.

Without this agreement in place there would be no standard, as the other companies wouldn't want to use the technology for which one of their competitors could charge exorbitant royalties and thus be forced to offer noncompetitive products to consumers.

The commission argued that Qualcomm had voluntarily committed to the FRAND (free and non-discriminatory) licensing requirements of the Telecommunications Industry Association (TIA) and the Alliance for Telecommunications Industry Solutions (ATUS), and those agreements required it to offer licences to competitors where patents covered standards-essential technology. This would potentially eliminate the possibility of Qualcomm achieving monopoly in the chip maker market. In its lawsuit, FTC accused Qualcomm of overcharging customers, such as Apple, for its patents. Both of which have had to rely on Qualcomm's modem chips whenever they manufactured their phones. Apple is also suing Qualcomm over the same issue.

Opening up the patent is also a source of good news to companies like Apple and Samsung. A good analogy would be if a vehicle manufacturer, let's say Ford, held patents for the engine's cylinders and pistons, forcing competitors to either use engines without cylinders and pistons (such do exist, but have many drawbacks) or pay Ford fees so high that their product isn't competitive anymore, making it cheaper to just buy engines from Ford, the de facto monopolist on the market (in this example).

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