Qualcomm won’t be obliged to license key patents to its competitors – for now – after it won a stay at the Ninth Circuit.
The appeals court was asked by the chipmaker to put the brakes on a number of enforced changes made after Qualcomm lost a high-profile court case brought by the Federal Trade Commission (FTC).
Key among them was the requirement that Qualcomm license several “critical patents” to its competitors – something that the FTC successfully argued was being used by the company to maintain a stranglehold on the market.
Qualcomm is desperate to prevent that from happening and argued that forcing it to do so could have much larger implications on the mobile market, particularly with respect to the rollout of next-generation 5G networks, since it would be forced to renegotiate existing agreements.
Notably, three US government agencies – Defense, Energy and Justice – came to Qualcomm’s aid and agreed it would be disruptive to the market, especially if the verdict changed after its appeal. The level of disagreement within the US government appears to have been the deciding factor by the Ninth Court in granting the stay, with the judges noting [PDF] the “stark disagreement” between the Justice Department and FTC. Defense and Energy said that the injunction could threaten national security, and the DOJ suggested that it could end up “harming rather than benefiting consumers.”
The appeals court also noted that there were “serious questions on the merits of the district court’s determination that Qualcomm has an antitrust duty to license its SEPs to rival chip suppliers.”
The company also successfully won a stay on its controversial "no license, no chips" approach – where it forces companies to license its patents before they can buy its chips. That business strategy was the focus of some eyebrow-raising testimony in court, particularly with respect to the deal concocted between Apple and Qualcomm where the chipmaker paid Apple $1bn upfront and in return Apple agreed to screw rival technology from Intel.
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“Whether the district court’s order and injunction represent a trailblazing application of the antitrust laws, or instead an improper excursion beyond the outer limits of the Sherman Act, is a matter for another day,” the court decided. “For now, weighing all relevant factors, we conclude that the requested stay is warranted.”
The judges did not stay everything however: Qualcomm will still be prevented from drawing up exclusive supply contracts – where companies are only allowed to buy Qualcomm chips. And a range of other smaller constraints on the company will also still hold until the full appeal is heard.
Qualcomm did not endear much sympathy from the judge who originally heard the case, or the wider public, when it argued that what looked like abusive market behavior was just the result of its being so great.
The FTC was, unsurprisingly, not excited about the decision, saying that it was “disappointed” by the decision but said it looked forward to defending its victory in the appeals court. It is due to start in January 2020. ®