Antitrust Lawyer Blog Commentary on Current Developments

Qualcomm may face probe from Japanese. Inquiry likely to involve antitrust complaints

Wireless technology giant Qualcomm said on November 10 that the Japan Fair Trade Commission might investigate the company’s licensing and business practices. The antitrust regulatory agency notified the company that it might launch an investigation. The agency did not give a start date or disclose which company or companies filed complaints.
If Japan’s Fair Trade Commission does investigate, it is likely to involve many of the same antitrust complaints already being probed in the United States, Europe and South Korea. Qualcomm President Steve Altman said the company will cooperate in any investigation to show that its activities in Japan are lawful and foster competition.

Qualcomm is best-known for developing the code-division multiple access (“DMA”) wireless technology for cell phones. The company collects royalties and licensing fees on its patented technology from cell-phone makers and other chip makers. In addition, Qualcomm’s chips for CDMA phones dominate the market.

As non-CDMA wireless carriers upgrade to wideband CDMA technology, Qualcomm’s patents are on their way to being used in virtually every cell phone in the world.
San Diego-based analyst Michael King, with Gartner market research, said phone makers or rival chipmakers are likely behind the possible investigation by Japan’s fair trade commission.

Qualcomm declines to reveal how much its licensees pay in royalties. By most estimates, the company charges a royalty of about five percent of the sale of cell phones that use its patented technology.

Qualcomm’s patents are incorporated into the CDMA and WCDMA standards that allow cell phones to download music, surf the Internet and display video over high-speed cellular networks. Standard-setting bodies require companies that hold patents in a chosen standard to license the patents on a fair, reasonable and nondiscriminatory basis.
Qualcomm came under attack from longtime rivals – among them Irvine semiconductor company Broadcom, Finnish cell-phone maker Nokia and chip maker Texas Instruments – for what they say is overcharging for technology and stifling competition.

Last month, published reports said that the European Commission, the European Union’s arm that investigates antitrust complaints, would continue its probe of Qualcomm. That investigation began last year after six telecommunications companies – Broadcom, Ericcson, NEC, Nokia, Panasonic Mobile Communications and Texas Instruments – filed separate complaints about what they said was Qualcomm’s “anti-competitive conduct.”

Also last month, an administrative law judge for the U.S. International Trade Commission rejected a bid by Broadcom to ban the import of millions of cell phones that use Qualcomm’s chips. But the judge also ruled that Qualcomm infringed on one of Broadcom’s patents. The full commission is expected to issue a final decision February 9. Qualcomm won a legal victory in September when a federal judge dismissed an antitrust lawsuit filed by Broadcom.

In June, Texas Instruments and Broadcom filed complaints in South Korea, saying that Qualcomm was using its market dominance to demand excessiveroyalties. Two Korean companies that make software for cell phones, Nextreaming and THINmultimedia, filed similar complaints earlier this year.

For more information contact:

Nicholas Wetzler
202-589-1835
nwetzler@dbmlawgroup.com