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Korea's Antitrust Agency Hits Qualcomm with Record $865 Million Fine for Excessive Licensing Fees to Phone Makers

1af X88 cover Korea FTC against Qualcom


Korea's antitrust agency imposed a record US$865 million fine on Qualcomm, accusing the U.S. chipmaker of monopolistic behavior and abusing its leading status in the market, the Fair Trade Commission said Wednesday. The agency accused Qualcomm of coercing mobile phone makers, including South Korea's Samsung Electronics and LG Electronics as well as Apple of U.S., to pay excessive licensing fees under unfair conditions set by the company. The FTC said that Samsung, LG, Apple, Intel, MediaTek, China's Huawei Technologies, and Ericsson of Sweden, participated in its investigation of Qualcomm.


The FTC said that Qualcomm rejected or set limitations for providing its standard essential patents to rival modem chipset makers, such as Intel of the U.S. and Taiwan's MediaTek. The patents are critical for the production and sale of chipsets.


"It is the first time that the FTC corrects Qualcomm's unfair business model," said the agency in a statement. "We want to implement fair competition in the mobile telecommunication industry by changing it to [an] open ecosystem in which any participant can enjoy incentives from its innovations."


This latest censure follows similar action from China taken against the San Diego-based chipmaker. In February 2015, China's National Development and Reform Commission levied a fine of 6 billion yuan ($975 million) on Qualcomm for charging excessive royalties for its third- and fourth-generation telecommunication technology patents.


Qualcomm enjoys a monopoly in the licensing and modem chipset markets in the mobile telecommunication industry, according to the FTC. It owns the largest number of standard essential patents in the second-, third- and fourth-generation technologies in the industry. The South Korean market accounted for 16% of Qualcomm's total revenues last year, which reached $25.1 billion, the agency said.


Don Rosenberg, executive vice president and general counsel at Qualcomm stated that "We are pleased that our appeal will be to the Seoul High Court, which is known to rigorously analyze evidence and apply sound antitrust principles."


On December 21, Patently Apple posted a report titled "Apple Files a Major Antitrust Case against Acacia Research Corporation Pointing to a Conspiracy with Nokia Corporation." Apple see's Nokia and their silent partners for the same kind of antitrust behaving in gouging smartphone OEM beyond FRAND licencing. In their filing with the court Apple stated the following:


"Apple Inc. ("Apple") brings this action to remedy a continuing anticompetitive scheme. Acacia Research Corporation and its subsidiaries (collectively, "Acacia") and Conversant Intellectual Property Management Inc. ("Conversant") and its subsidiaries (collectively, "Conversant") have respectively colluded with Nokia Corporation (itself and through its affiliates Nokia Solutions and Networks Oy and Nokia Technologies Oy (collectively "Nokia")) to obtain from Nokia thousands of patents as part of a plan to extract and extort exorbitant revenues unfairly and anticompetitively from Apple and other innovative suppliers of cell phones, and ultimately from the consumers of those products.


This conduct is all the more pernicious because it unfairly and anticompetitively evades binding commitments that Nokia made to license declared standard essential patents ("SEPs") on fair, reasonable, and non-discriminatory ("FRAND") terms. Nokia positioned itself to claim that its patents cover technologies included in telecommunications standards by repeatedly assuring standard-setting organizations that it would license its patents fairly. Yet Acacia and Conversant are now conspiring with Nokia in a scheme to diffuse and abuse such patents and, as the PAEs and Nokia fully intended, monetize those false promises by extracting exorbitant non-FRAND royalties in ways Nokia could not."


At some point in time it would be great to see the US or other Antitrust agencies around the world take up this same fight against Nokia as they are now with Qualcomm. The EU Commission threatened Nokia back in 2013 that they would open an antitrust case against Nokia if they acted as patent trolls as they now have with Apple and yet have failed to take a stand against this European company. How convenient.


The good news in this is that if China and Korea have found Qualcomm guilty of charging excessive licensing fees to smartphone makers then perhaps Nokia will be be next in line. 


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