SAN JOSE, Calif. – The Korea Fair Trade Commission (KFTC) fined Qualcomm 1.03 trillion won (nearly US$1 billion), charging unfair patent licensing practices. Qualcomm said it will appeal what it called “an unprecedented and insupportable decision relating to licensing practices that have been in existence in Korea and worldwide for decades.”
The fine is the largest ever levied by the South Korean agency, the KTFC said in an English-language summary of the decision it provided to EE Times. It charged Qualcomm unfairly used its patents against both customers and competitors.
Specifically, Qualcomm “coerced mobile phone makers to sign unfair license agreements by linking the chipset supply with patent license contracts, using its market position as a leveraging tool,” the KTFC wrote. In addition, the company “only offered portfolio licenses to mobile phone makers and forced unilaterally-decided licensing terms…[including] making them provide patents for free.”
The KTFC also charged Qualcomm “refused or restricted the licensing” of patents essential to standards for making chips “despite the request by rival modem chip makers.” Standards bodies routinely require participants to license patents that pertain to their standards on a fair, reasonable and non-discriminatory basis.
The KFTC began its investigation in 2014 after receiving complaints from unspecified companies. Apple, Intel, Mediatek and Huawei participated in the investigation, a KTFC spokesman said in a media briefing, according to a Reuters report. The KTFC said it also invited Nvidia and Ericsson to participate in the investigation.
The fine and an order to take corrective actions is not expected to be released for four to six months, Qualcomm said in a response to the decision on its Web site. The order would require Qualcomm to renegotiate licenses with competitors and customers, Reuters said.
“Qualcomm will file for an immediate stay of the corrective order and appeal the KFTC’s decision to the Seoul High Court,” the company said in a statement. It “will also appeal the amount of the fine and the method used to calculate it,” it said.
The company will be required to pay the fine within 60 days after a written order is issued, Qualcomm said. However the amount may be reduced or refunded as part of the appeals process, it added.
The company argued the fine and ruling “disregard the economic realities” of a large and growing mobile market. The fine is out of proportion because “the royalties received by Qualcomm for sales of handsets into Korea accounted for less than three percent of total Qualcomm licensing revenue during Qualcomm’s fiscal 2016,” it said.
Qualcomm said it will oppose any moves to apply the decision in Korea to other countries. It also claimed KTFC investigators repeatedly denied it “access to the case files and the right to cross examine witnesses.”
The KTFC informed Qualcomm of its decision in November 2015, it said. Since then it has held seven hearings with the chip vendor. It plans to post details of the decision soon on its English language Web site.
The KTFC fined Qualcomm about US$208 million (260 billion won) and imposed corrective orders in July 2009 after an investigation into its practices in CDMA patents. At the time, KTFC claimed the company “excluded its competitors” and charged handset makers “discriminatively high royalties for using non-Qualcomm modem chips.”
In February 2015, Qualcomm paid $975 million as part of a settlement over patent disputes in China. The deal also cut royalty rates Qualcomm was charging in China.
Regulators in other jurisdictions, including the United States and Taiwan, are also investigating Qualcomm, the Reuters report said.
Qualcomm made as much as a third of its revenues on patent licensing in 2016.
— Rick Merritt, Silicon Valley Bureau Chief, EE Times