A United States appeals court recently reversed an antitrust ruling against chip supplier Qualcomm, Inc. according to multiple news reports. The U.S. Ninth Circuit Court of Appeals also vacated an injunction that would have required the company to change its intellectual property licensing practices.
Qualcomm, the largest mobile phone chip provider and a key wireless communications technology generator, was fighting the decision U.S. District Judge Lucy Koh made in May 2019 in San Jose. Koh agreed with the Federal Trade Commission (FTC), which initiated the antitrust lawsuit. Koh wrote that Qualcomm’s practice of requiring phone makers sign a patent license agreement before selling chips to them, “strangled competition” and harmed consumers.
The appeals court came to a 3-0 ruling, however. It said that Qualcomm had no duty to license its patents to competing chip suppliers and it was not anticompetitive to make phone makes sign a license agreement.
“Instead, these aspects of Qualcomm’s business model are ‘chip-supplier neutral’ and do not undermine competition in the relevant antitrust markets,” Circuit Judge Consuelo Callahan wrote.
The FTC called the appeals court’s decision, “disappointing.”
“The Court of Appeals unanimous reversal, entirely vacating the District Court decision, validates our business model and patent licensing program and underscores the tremendous contributions that Qualcomm has made to the industry,” Qualcomm general counsel Don Rosenberg said in statement.
FTC Bureau of Competition director Ian Conner said that the agency “will be considering our options.”
Those options include requesting a rehearing of the case with the full court participating, or possibly seeking a Supreme Court review. The FTC’s is somewhat handcuffed strategically however because the commission is divided over the lawsuit. Meanwhile, the U.S. Department of Justice also has antitrust authority and recently noted it was in favor of Qualcomm.
In its appeal, Qualcomm argued that the FTC’s decision would have upended its business model if was allowed to stand. It would have been the first time Qualcomm would be required to license its technology to rival chipmakers and redo a majority of its patent licensing deals with phone makers.
Enforcement of Koh’s decision was paused while the appeal played out in court. During that time, Qualcomm changed how it structured some of its licensing deals for 5G technology. Between the appeals victory and the new agreements signed with customers since the Court of Appeals’ decision, Qualcomm is in position to restart conducting business in the same manner that had been for decades.
What does this ruling mean for CRE?
Not much except for the continuation of the status quo for the introduction of new products for proptech, connectivity, IoT etc. Had this ruling been upheld the pricing for Qualcomm chips may have come down as they might have had to lower prices and create a new pricing methodology. The good news is that the innovation and new products should continue to roll off the production line insuring that the American people will have terrific products and services to manage our communications. Hey, in a Covid-19 world we need to be thankful for what we get.