Judge denies Qualcomm, FTC request for more time to reach a settlement in antitrust lawsuit

A federal judge has denied a request from Qualcomm and the U.S. Federal Trade Commission to delay a key ruling in an anti-monopoly lawsuit so the two sides can work on a potential settlement.

The FTC and Qualcomm filed a joint motion on Monday seeking 30 days before San Jose U.S. District Judge Lucy Koh makes a ruling on whether Qualcomm must license its standard essential patents to rival chipmakers.

Both sides said the delay would “facilitate the parties’ ongoing discussions concerning the potential settlement of this litigation,” according to court records.

Koh denied the request within minutes without explanation, according to court filings. A hearing on whether Qualcomm is obligated to license rival chipmakers was scheduled for Thursday, Oct. 18, but Koh announced last week that she would make a ruling without taking oral arguments.

It is unclear when Koh will release a decision. Qualcomm declined to comment.

In January 2017, the FTC sued Qualcomm for violating U.S. monopoly laws – joining regulators in China, South Korea and Taiwan to challenge Qualcomm’s patent licensing business model.

The lawsuit contends that Qualcomm has concocted a “no license, no chips” scheme that forces smartphone makers to overpay for licensing Qualcomm’s core cellular patents.

Phone makers acquiesce to high license fees because they need Qualcomm’s market leading cellular modems, according to the FTC. Apple has made similar claims in a separate, ongoing legal fight.

Qualcomm, which argues that cellular connectivity breathes life into smartphones, licenses its standard essential patents to smartphone makers at a rate of 3.25 percent of the wholesale price of the phone — up to a $400 cap.

That translates to a maximum standard essential patent royalty of $13 per phone.

While Qualcomm licenses its technology to smartphone makers, it does not license patents to rival chipmakers. The FTC contends Qualcomm is legally bound to license cellular modem competitors under its commitments to U.S. cellular standard setting organizations.

The FTC has asked Judge Koh to make a partial summary judgment in the lawsuit based on this argument, which could shift Qualcomm’s cellular patent licensing from the entire phone to individual components inside it.

Qualcomm counters that its patented cellular technology – which enables more data to move faster over airwaves – applies to myriad components inside a smartphone and network infrastructure, not just the cellular modem.

In addition, the cellular industry has licensed patents at the device level for three decades. According to Qualcomm, no major holder of cellular standard essential patents licenses at the component level.

Qualcomm also says the FTC is distorting the language in its agreements with standard setting organizations about who it is required to license. Three years ago, Chinese regulators examined Qualcomm’s patent licensing business. While China fined the company $975 million for anti-trust violations, it allowed Qualcomm’s business model of collecting royalties based on the price of the smartphone to remain intact.

While several lawsuits with Apple rage on, Qualcomm has been working to stabilize its troubled patent licensing business in other pending litigation.

Earlier this year, Samsung reached a new patent licensing/business agreement with Qualcomm to ease concerns over potential patent lawsuits. Shortly afterward, Samsung withdrew its objections to Qualcomm’s legal appeal of an $854 million fine and component-level licensing requirements imposed by South Korean regulators.

Qualcomm also recently settled with regulators in Taiwan, who reduced a $770 million fine to $93 million and affirmed device-level patent licensing.

The trial in the FTC lawsuit against Qualcomm is scheduled for Jan. 4. Qualcomm’s shares gained 3 percent Tuesday to close at $66.12 on the Nasdaq exchange.