U.S. Appeals Court Postpones Antitrust Ruling Against Qualcomm -- Update
August 23 2019 - 12:11PM
Dow Jones News
By Brent Kendall and Asa Fitch
A federal appeals court on Friday halted for now a ruling that
found Qualcomm Inc. committed an array of antitrust violations, a
boost for the chip maker that allows it to maintain its business
practices for the near future.
The ruling is a setback for the Federal Trade Commission, which
had sued the company.
The San Francisco-based Ninth U.S. Circuit Court of Appeals
granted a request by Qualcomm to stay a decision by U.S. District
Judge Lucy Koh that ordered major changes to how the company
licenses its technology.
Judge Koh's ruling, issued in May, found the company leveraged
its dominance in smartphone chips to force device manufacturers to
pay unreasonably high royalty rates for Qualcomm's intellectual
property.
Qualcomm argued its business practices were legitimate and
perfectly lawful and said a stay was necessary because Judge Koh's
ruling would impose harms on the company that couldn't be undone
later on.
Qualcomm couldn't immediately be reached for comment.
Friday's court action isn't a final word on the merits of
Qualcomm's appeal, though it suggests the company faces at least a
fair prospect of winning.
The submission of written legal papers will continue through
mid-November, with oral arguments at the Ninth Circuit to follow
soon after. A ruling could take several more months -- or
longer.
Friday's stay by the appeals court means Qualcomm won't have to
change its practices while the litigation is ongoing.
The case dates back to January 2017, when antitrust officials at
the FTC sued Qualcomm in the waning days of the Obama
administration. The case has produced an unusual split between two
federal antitrust agencies, with the Justice Department stepping
into the case to support Qualcomm.
The FTC argued that staying Judge Koh's ruling would allow
Qualcomm to perpetuate anticompetitive actions that have spurred
higher prices and created roadblocks to innovation. The Justice
Department said the judge's ruling could deal a blow to Qualcomm's
position as a leader in 5G wireless technology, potentially to the
detriment of national security.
As Qualcomm faced FTC scrutiny, Apple Inc. in 2017 also sued the
chip maker on similar grounds, alleging it charged above-market
rates for licenses to its patents. The Apple-Qualcomm legal battle
grew to encompass cases in China, Germany and other far-flung
locales. The companies in April reached a global settlement of
their differences.
That deal wiped out a large amount of uncertainty hanging over
the company, but a final decision against Qualcomm in the FTC case
could still shake the company to its core.
Judge Koh's ruling required the company to renegotiate its
licensing deals with phonemakers and offer chip-making competitors
the option to use its intellectual property at reasonable
rates.
Playing by those rules would likely make less lucrative a
licensing business that accounts for almost two-thirds of
Qualcomm's earnings before taxes as of its fiscal third quarter. In
court testimony, Qualcomm executives have warned that some
licensees were already threatening to hold back payments as the
court battle dragged on.
Write to Brent Kendall at brent.kendall@wsj.com and Asa Fitch at
asa.fitch@wsj.com
(END) Dow Jones Newswires
August 23, 2019 11:56 ET (15:56 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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