Qualcomm’s woes continue in Asia, with two adverse decisions in two of the largest Asian technology markets. Within the space of a week, a $208 million fine was imposed in Korea for abusive licensing practices, and the Japanese authority forced the revision of lucrative cross-licensing arrangements. All these practices relate to CDMA mobile phone technology markets, on which Qualcomm enjoys a significant market position.

  • The KFTC announced on 23 July its decision to impose a fine of ?260 billion ($208 million) on Qualcomm for abusing its “near-monopoly position” on the Korean CDMA chip market (in 2008, it held 99.4 per cent of the market). According to the KFTC, which had been investigating the case for more than three years, Qualcomm abused its dominant position by imposing higher royalties on mobile phone manufacturers who use its rivals’ products and by offering rebates to Korean mobile phone makers who agreed to purchase a majority of their chips from Qualcomm.
  • On 27 July the Japan Fair Trade Commission (JFTC) sent a draft ruling to Qualcomm alleging that the company's licensing policy was abusive towards manufacturers of semiconductor integrated circuits used in third generation mobile phones. The JFTC sent a formal cease and desist order to Qualcomm on 2 October.

Background

Qualcomm’s CDMA technology is required for the production of third generation mobile phones. Qualcomm made almost 70 per cent of its profit last year from licensing its wireless technology to phone makers, manufacturers of network equipment and wireless service providers. However, its licensing practices have been the subject of antitrust challenge in a number of jurisdictions and, whilst it has resolved legal fights with Nokia and Broadcom, investigations are on-going in Europe and Asia.

In Japan, according to press reports, Qualcomm had requested free access to the patents held by the major mobile phone manufacturers, including NEC, Mitsubishi Electric and Panasonic, in return for the grant of licenses to use its CDMA technology. According to the JFTC, Qualcomm forced its licensees to enter into these IP cross-licensing obligations without compensation and required them to refrain from asserting their IP rights against Qualcomm, its customers and competing licensees. This policy allegedly discouraged the mobile phone manufacturers from engaging in research and development in the area of wireless telecommunications technologies and in turn reinforced Qualcomm's dominance in this market. In response, Qualcomm has said that not all Japanese contracts contained the cross-licensing clause, and denied forcing Japanese customers to hand over patent rights for free.

What next?

Qualcomm has announced its intention to appeal the fine in Korea, and has already lodged an appeal against the JFTC cease and desist order.