September 24, 2020

Qualcomm didn’t abuse chip patents to squeeze phone makers, appeals court rules

It was supposedly playing rough, but staying within the law.

Qualcomm Snapdragon 865 in hand front

  • An appeals court has overturned a judgment that Qualcomm was anti-competitive by abusing chip patents.
  • Qualcomm was playing rough but stayed within the law, according to the court.
  • It’s a blow to the FTC.

Qualcomm didn’t violate antitrust laws by making phone brands license patents in order to buy chips, according to a federal appeals court.

The Wall Street Journal reports that the Ninth US Circuit Court of Appeals has overturned a verdict against Qualcomm, arguing that the FTC hadn’t shown that the chip giant’s behavior was anticompetitive. The company was using “sharp elbows,� the court said, but it wasn’t breaking the law.

The FTC found the ruling “disappointing� and said it was “considering [its] options,� but didn’t hint at what those options might be. A settlement isn’t likely as the commission is deadlocked.

Officials had accused Qualcomm of abusing the license system to force companies to accept its patent royalty rates — if they didn’t agree to the existing terms, they wouldn’t be customers. The terms also left some companies paying Qualcomm royalties even if they weren’t using the relevant chips. Apple, for example, balked at Qualcomm’s licensing terms for years until the two sides reached a deal in 2019.

Read more: Apple, Qualcomm settlement killed Intel’s 5G modem plans

Qualcomm, meanwhile, maintained that it had achieved its position legally and that virtually every cell phone used its patents, whether or not its chips were inside.

The company isn’t escaping from regulatory scrutiny unscathed, at least outside of the US. The European Union, South Korea, and Taiwan have all slapped Qualcomm with penalties. It’s still a key victory for the company if the ruling holds, however. If there’s a concern, it’s that the win might be fleeting as companies look for and make alternatives. Qualcomm might still rake in licensing money, but it could lose crucial business in the long term.

As for you, the phone buyer? For the most part, this will continue business as usual. You might see fewer phones using Qualcomm modems in the years ahead, though, and we wouldn’t rule out some Android vendors dropping Snapdragons as well.