By Brent Kendall 

A federal appeals court on Tuesday threw out a trial judge's antitrust judgment against Qualcomm Inc., ruling the federal government hadn't shown the chip maker engaged in illegal monopolization.

The San Francisco-based Ninth U.S. Circuit Court of Appeals ruled the Federal Trade Commission hadn't shown that Qualcomm's core business practices related to its cellphone chips and patents were anticompetitive.

The appeals court, in a unanimous three-judge ruling, said San Diego-based Qualcomm might have "acted with sharp elbows" but the company's tactics were hypercompetitive, not anticompetitive.

The case dates back to the final days of the Obama administration, when the FTC sued Qualcomm and challenged a central company practice the commission described as "no license, no chips."

The FTC said Qualcomm enjoyed monopolies in two types of modem chips and adopted a framework in which phone makers couldn't purchase those chips for their devices unless they also paid to license Qualcomm patents covering a range of its intellectual property. That structure made it difficult for phone makers to challenge Qualcomm's royalty rates, and the arrangement also meant those manufacturers were paying Qualcomm royalties even if they used a competitor's chips in their phones.

Qualcomm said it achieved its market position lawfully, developing and investing in breakthrough technologies, an argument accepted by the appeals court. The company argued its licensing practices were well-grounded because every cellphone invariably uses its patented innovations.

Tuesday's ruling tossed out a decision issued last year by U.S. District Judge Lucy Koh in San Jose, Calif., who ordered Qualcomm to change its business practices after concluding the chip designer improperly leveraged its dominance to keep tight reins on the industry.

Qualcomm has been able to maintain business as usual during the litigation because the Ninth Circuit previously put Judge Koh's ruling on hold while it considered the company's appeal.

The case has unfolded amid unusual circumstances. FTC leadership changed after President Trump took office, but the commission's current chairman, Joseph Simons, is recused in the case and the other four commissioners, two Republicans and two Democrats, have been deadlocked, leaving a potential legal settlement with the company out of reach.

Adding to the drama, the Justice Department, which shares antitrust enforcement authority with the FTC, last year waded into the litigation -- in support of Qualcomm.

Write to Brent Kendall at brent.kendall@wsj.com

 

(END) Dow Jones Newswires

August 11, 2020 13:13 ET (17:13 GMT)

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