How Many Times Should Qualcomm be Paid for Old Technology?

By Matt Levy
May 18, 2017

Qualcomm was once known as a major innovator, one of the prime developers of modern cellular technology. Now Qualcomm has become the Snidely Whiplash of the patent world, holding much of the telecommunications industry hostage to Qualcomm’s aging patent portfolio. Well, Qualcomm may finally be getting its just deserts. Already in trouble in Korea, Japan, Taiwan, and Europe for its anti-competitive practices, Qualcomm is now facing the Federal Trade Commission in U.S. District Court.

Recently the FTC filed a legal brief arguing against Qualcomm’s motion to dismiss the FTC’s case. Unusually, the Court also received amicus briefs opposing Qualcomm’s motion and supporting the FTC’s case moving forward. These briefs came from a diverse group of associations and companies, including ACT | The App Association, the American Antitrust Institute, Intel, and Samsung.

In the 1990’s, Qualcomm was the major developer of Code Division Multiple Access (CDMA) technology. It pushed hard to get CDMA adopted by vendors. As CDMA was largely Qualcomm’s proprietary technology, it eventually had to agree to create a standard, and it agreed to license its CDMA patents on fair, reasonable, and non-discriminatory (FRAND) terms. (A FRAND commitment means that the patent owner agrees to license to anyone and won’t take advantage of its position in setting prices.)

A large industry was built based on Qualcomm’s promises, as CDMA was widely adopted. Based on a growing body of evidence included in the FTC’s filings, as well as findings by the Korean Fair Trade Commission, it seems that Qualcomm hasn’t kept those promises. As CDMA has largely been supplanted by 3G and 4G, the once-great Qualcomm now makes the bulk of its profits by abusing its patents instead of being at the forefront of modern telecommunications innovation.

The FTC laid out Qualcomm’s predatory licensing tactics in its complaint. Instead of treating all companies the same, Qualcomm refuses to license to other chip makers so that it has a virtual monopoly on CDMA chips. And instead of licensing on FRAND terms, Qualcomm forces its customers to buy licenses they don’t need and massively overcharges them for those licenses. Qualcomm charges a percentage of the price of the entire device as the royalty, regardless of the device. In practice, this means that say, Apple pays far more for each new iPhone 7 than it pays for the iPhone 5, even though Apple licenses the exact same technology and the same chips from Qualcomm.

How does Qualcomm get away with this? Why would the market allow this? Qualcomm continues to take advantage of the fact that not all cell phone networks have been upgraded to 3G or better, meaning there are still many CDMA-only areas around the country. As a result, cell phones need to be backwards-compatible to work with CDMA networks.

In short, Qualcomm is using patents on technology that is over two decades old to extract billions of dollars from innovating companies every year. Last year alone, Qualcomm made $6 billion in profit on licensing, most of which came from Qualcomm’s CDMA patents.

Qualcomm has become like a former high school football star, using its past glories to justify its loutish behavior. Except that instead of just getting loudly drunk and boring people with old football stories, Qualcomm is ignoring its commitments and extracting billions of dollars that could otherwise be used by today’s innovators. The American Antitrust Institute echoed this point in its brief, noting that Qualcomm’s actions as charged by the FTC impair Qualcomm’s rivals by raising their costs in order to protect and enhance Qualcomm’s monopoly power.

No one denies Qualcomm’s place in telecommunications history, but Qualcomm has been paid many times over at this point. Enough is enough. Qualcomm shows no intention of acting responsibly; it is up to the FTC and the courts to bring Qualcomm in line to protect innovation and fair access to technology.

The Author

Matt Levy

Matt Levy is the former Patent Counsel at the Computer and Communications Industry Association (CCIA), where he handled legal, policy advocacy, and regulatory matters related to patents and wrote the Patent Progress blog. He is now a consultant on patent policy issues and patent litigation.

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

Discuss this

There are currently 18 Comments comments.

  1. Curious May 18, 2017 8:49 am

    How sad. The head cheerleader for “Infringers-R-Us” complains because phone companies are still using Qualcomm’s technology and they have to pay a license for that technology.

    In short, Qualcomm is using patents on technology that is over two decades old to extract billions of dollars from innovating companies every year.
    The ire of you and your infringing buddies should be directed at the NETWORKS. If they upgraded all of their services from CDMA to 3G and 4G, there wouldn’t be this issue.

    Patents have a term that is 20 years from filing. As such, there is going to be some “almost” two decade old technology that could be subject to existing problems. The 20 years of patent coverage is part of the TRIPS agreement, which the U.S. agreed signed onto in 1995. As such EVERYBODY knew that these patents would be in effect for 20 years. This should not have surprised anybody.

    Ultimately, there is a really easy way not to pay a license to Qualcomm — don’t use their technology.

    Article I, Section 8, Clause 8, of the United States Constitution grants Congress the power “To promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries.” Qualcomm is exercising their exclusive right to their technology for the limited time of 20 years. I’m sorry infringer lobby — that’s just the way it is.

    BTW — I have absolutely zero relationship with Qualcomm.

  2. Night Writer May 18, 2017 8:50 am

    What is this? An advertisement for litigation work?

    1) Qualcomm continues to spend large amounts on research (much more than Google relatively).

    2) The only thing that you are arguing that has any merit is that Qualcomm is abusing their patents by not licencing to chip manufacturers and/or not under FRAND for CDMA patents. OK. Maybe this has merit.

    3) Qualcomm continues to be at forefront of technology in 3G and 4G technology.

    4) So, because they are old patents they shouldn’t be asserted? What a bunch of nonsense.

    5) Your writing is always good for a good belly laugh (and cry when I realize most of Capital Hill believes people like you.)

  3. Night Writer May 18, 2017 8:53 am

    @1 Curious

    It is good to read this guy’s writing so we see what Google gets for their money. Basically, this guy has no regard for fair play–just misrepresent whatever you want and drag anyone through the mud that asserts a patent.

    I still bet that Levy could not sit down and write an essay about how patents are used in modern tech companies. He appears to be completely ignorant of reality or is being paid to lie.

  4. Night Writer May 18, 2017 8:58 am

    You have to wonder how much he is getting paid for writing this kind of stuff and by whom.

  5. Valuationguy May 18, 2017 9:19 am

    Matt,
    Obvious PR attempt….no real attempt to evaluate the contributions Qualcomm makes to CURRENT standards (i.e 4G iterations) which may or may not justify their royalties.

    Repeating allegations loudly enough does have an effect on politically driven investigations however so you are certainly earning your consulting pay.

    The bigger question is why Gene agreed to provide a soapbox for Matt.

  6. Bemused May 18, 2017 9:20 am

    Matt, I don’t agree with much (well, actually any) of your positions on patent litigation, patent “reform”, etc. But I will give you props for having the cojones to post on this blog (and props to Gene for allowing authors with a different perspective to post on here).

    Now, I’m reasonably sure that some Qualcomm folks read this blog and who might have a somewhat different perspective on Matt’s take on their company’s licensing practices…

  7. Anon May 18, 2017 9:30 am

    This (generously) tripe is not even a good PR attempt.

    Matt,

    I suggest that you self edit and remove all emotion-laden buzzwords and legal mischaracterizations from your article. Forget the click bait and try to tell a meaningful story in relation to the ongoing efforts against Qualcomm. There may be smoke with the actions against Qualcomm, but there is no fire in the worn out and plainly emotion-button-pushing words you have thrown together.

    In other words, start from scratch.

    This article is not in a forum of patent-illiterate lemmings.

    You insult us with such claptrap and more so, you insult yourself.

  8. Night Writer May 18, 2017 10:07 am

    Is Qualcomm beating you up with patents?

    Is it too expensive to upgrade your network to get rid of CDMA?

    Better Call Matt!

    I’ll take Qualcomm to the FTC!

    Better Call Matt!

    I’ll show Qualcomm what they can do with those old crippled patents!

    Better Call Matt!

  9. Judge Rich's Ghost May 18, 2017 10:12 am

    Two points. First, Levy was recently hired by Wiley Rein, but he’s not listed on the WR website now. Is he still at Wiley Rein? (It’s important to understand an author’s affiliations.)

    Second, the post lacks any connection to the controlling law. Levy complains that Qualcomm is getting paid for old technology. What does that mean? Pharmaceutical companies routinely get paid for technologies that they developed years ago. Levy also asserts that “Qualcomm has been paid many times over at this point.” What does that mean? Where in Title 15 or 35 does it say that being “paid many times over” is a legal basis to diminish a property right?

  10. Independent Inventor May 18, 2017 12:06 pm

    Denigrating patents because they’re “old” in the IP realm … is akin to denigrating people in the human realm because they’re “old.”

    Both are abhorrent.

  11. H2H May 18, 2017 1:42 pm

    Help me understand:

    Does Q have to license to a competitor if Q licenses the competitor’s customers? Would it be against FRAND to require a royalty from every party in the supply chain?

    Is there something inherently wrong with bundling SEPs with non-SEPS as long as there is an option to license the SEPs separately? Presumably Q has a lot of patents that are not SEPs, but, on a case-by-case basis would be applicable to a specific licensee. Wouldn’t a licensee want all of the patents in Q’s portfolio relevant to the licensed products SEP and non-SEP?

  12. Valuationguy May 18, 2017 3:20 pm

    H2H,
    By the currently accepted (by the courts) definition of FRAND, Qualcomm is ‘nominally’ required to offer a license to EVERYONE who wants one….even Apple and even if all of Apple’s suppliers have a license already.

    This is a fight over the RATE….not necessarily SEP v non-SEP standard patents. Apple is trying to position it as a SEP v non-SEP because then it makes Qualcomm’s rates/offers for SEP only patent to be too high. Because the court system has moved the goalposts from what FRAND and SEP v non-SEP meant when QUALCOMM made its initial FRAND committments….Apple is trying to take advantage of the unsteady state of the law to get a much lower rate.

  13. H2H May 18, 2017 5:50 pm

    @Valuationguy – that’s a great explanation. Thanks.

  14. Ternary May 18, 2017 11:54 pm

    “…the once-great Qualcomm now makes the bulk of its profits by abusing its patents instead of being at the forefront of modern telecommunications innovation.” The teachings by the anti-patent crowd in a nutshell: you are allowed to invent and to patent but not to enforce your patents.

    The article ends with “…it is up to the FTC and the courts to bring Qualcomm in line to protect innovation …” And how do the courts protect innovation? By invalidating patents in any which way they can. And that is exactly what infringers, who do not invent or innovate in CDMA because it is old technology as proclaimed by Matt, want and are looking for.

    Not much luck with IPRs against Qualcomm it seems. So try the courts and the FTC.

  15. Night Writer May 19, 2017 6:43 am

    @14 Ternary. Matt is a tool. Pretty clear that his ethics are about at the level of a used car salesman. He is the kind of lowlife that gets bought by Google and the like to burn down the patent system.

    What a lowlife.

  16. NPE guy May 19, 2017 12:00 pm

    If you do a quick survey of the analyses published on LTE patents, the successor to 3G, you’ll find that most find Qualcomm to be the top patent owner for LTE Standard-Essential Patents (SEPs). If you want to do a little more homework, you can easily also find that Qualcomm is consistently in the top-5 contributor to 3GPP standards.

    How does Apple compare? It’s not even on the radar screen. The only LTE SEPs it hold appear to be coming from Nortel through their Rockstar deal.

    Let’s be real. Qualcomm is far from being perfect, but they’re still heavily investing in developing wireless technologies and participating in standard-setting organizations. Some other companies simply don’t and whine about having to pay for an small fraction of the total R&D budget that goes into developing these wireless standards by the companies who actually made the effort.

  17. respoding May 19, 2017 3:45 pm

    To answer the question posed in the title . . .

    Qualcomm should get paid for its “old” technology as often as someone else wants to use it until the patent expires.

    Qualcomm probably spent money on other failed research ventures. They don’t just need to make money to cover the research for the patents they have, but for the failed attempts that led them to the patents they have.

  18. Poesito May 19, 2017 11:26 pm

    Love to see Big Q get that injunction. They’d have to change the Apple logo to show two big bites.