Facts

The Federal Trade Commission filed suit against Qualcomm Inc. in relation to Qualcomm's role as a supplier of baseband processors, semiconductor devices that enable cellular communications in cellphones and other products, along with Qualcomm's business practices.

PLAINTIFF'S CONTENTIONS: The FTC alleged Qualcomm unlawfully maintained a monopoly in baseband processors and engaged in exclusionary conduct that taxed competitors' baseband processor sales, reduced competitors' ability and incentive to innovate, and raised prices for consumers to purchase cell phones and tablets. Specifically, the FTC alleged Qualcomm withholds baseband processors unless a customer accepts a license to standard-essential patents on terms preferred by Qualcomm, including higher royalties that the customer must pay when using competitors' processors, in a no license-no chips scheme. Further, the FTC alleged Qualcomm refused to license its standard-essential cellular patents to competitors, violating its fair, reasonable, and non-discriminatory commitment terms, and that Qualcomm engaged in exclusive dealing arrangements with Apple Inc. As such, the FTC claimed Qualcomm's practices violated Section 5(a) of the FTC Act and Sections 1 and 2 of the Sherman Act.

DEFENDANT'S CONTENTIONS: Qualcomm denied the allegations that its business practices were unlawful.

Result

The court held Qualcomm's no license-no chips scheme violated federal antitrust laws. Specifically, the court stated Qualcomm's licensing practices stifled competition in chip markets, harmed rivals, equipment manufacturers, and ultimately caused higher prices for consumers, so the licensing scheme was an unreasonable restraint of trade. The court issued a permanent injunction, ordering Qualcomm to no longer require customers to license its cellular standard-essential patents as a condition before customers could purchase chips. Further, Qualcomm was enjoined from licensing its standard-essential patents solely to end manufacturers and refusing to license its patents to competitor chip-makers.