INTERNATIONAL – A US Federal judge may have done what Apple and a succession of foreign governments couldn’t do: force Qualcomm to change how it does business.
Concluding a long-running legal case, US District Judge Lucy Koh said this week that the chip company, whose products are essential building blocks for modern smartphones, broke the law by squashing competition in important corners of industry and tying sales of its chips to fees for Qualcomm’s technology patents.
The ruling strikes at the heart of Qualcomm’s unusual and controversial business model. Qualcomm makes chips that smartphones need to connect to the internet, but it makes most of its profit from licensing its technologies to makers of phones and other computing devices.
Qualcomm’s terms for licensing – which cover technology essential to the functioning of modern phones – mean the company is paid even if a smartphone maker uses non-Qualcomm chips, and Qualcomm’s fees are based on the consumer price of smartphones rather than on the cost of the parts Qualcomm makes.
Apple, rival computer chip companies and regulatory agencies in multiple countries have challenged Qualcomm’s business approach. The US Federal Trade Commission two years ago sued over the arrangement, which the FTC said gave Qualcomm the power to overcharge for its patents and unfairly reduced the appeal of products from Qualcomm’s chip competitors.