U.S. antitrust agency sues Qualcomm over patent licensing

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By Diane Bartz | WASHINGTON

WASHINGTON The U.S. Federal Trade Commission
filed a lawsuit against Qualcomm Inc on Tuesday,
accusing the company of using “anticompetitive” tactics to
maintain its monopoly on a key semiconductor used in mobile
phones.

The FTC, which works with the Justice Department to enforce
antitrust law, said that San Diego-based Qualcomm used its
dominant position as a supplier of certain phone chips to impose “onerous” supply and licensing terms on cellphone manufacturers
and to weaken competitors.

Qualcomm said in a statement that it would “vigorously
contest” the complaint and denied FTC allegations that it
threatened to withhold chips in order to collect unreasonable
licensing fees.

Qualcomm shares fell 4 percent to $64.19 on Tuesday.

The complaint is likely the agency’s last major action under
current Democratic Chairwoman Edith Ramirez, who will step down
Feb. 10, and comes just days before U.S. President-elect Donald
Trump takes office on Friday.

Trump is expected to name Republican Commissioner Maureen
Ohlhausen as acting FTC chairwoman and will fill three vacancies
that will reshape the agency.

Ramirez and fellow Democrat Terrell McSweeny voted to
approve the complaint but Ohlhausen dissented, saying that the
lawsuit was based on a “flawed legal theory … that lacks
economic and evidentiary support.”

In its complaint, the FTC said the patents that Qualcomm
sought to license are standard essential patents, which means
that the industry uses them widely and they are supposed to be
licensed on fair, reasonable and non-discriminatory terms.

The FTC complaint also accused Qualcomm of refusing to
license some standard essential patents to rival chipmakers, and
of entering into an exclusive deal with Apple Inc.

“Qualcomm’s customers have accepted elevated royalties and
other license terms that do not reflect an assessment of terms
that a court or other neutral arbiter would determine to be fair
and reasonable,” the FTC said in its complaint.

The FTC asked the U.S. District Court for the Northern
District of California in San Jose to order Qualcomm to end
these practices.

For its part, Qualcomm accused the FTC of a last-minute dash
to court.

“This is an extremely disappointing decision to rush to file
a complaint on the eve of Chairwoman Ramirez’s departure and the
transition to a new administration,” Don Rosenberg, Qualcomm
general counsel, said in a statement. “We look forward to
defending our business in federal court, where we are confident
we will prevail.”

The company has faced a series of antitrust rulings and
investigations from regulators across the globe.

South Korea’s antitrust regulator fined Qualcomm Inc 1.03
trillion won ($854 million) in December for what it called
unfair practices in patent licensing, a decision the U.S.
chipmaker said it will challenge in court.

In February 2015, Qualcomm paid a $975 million fine in China
following a 14-month probe, while the European Union in December
2015 accused it of abusing its market power to thwart rivals.



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