Carmakers urge FTC to fight Qualcomm ruling

Carmakers urge FTC to fight Qualcomm ruling

An employee talks about 5G at Qualcomm's booth at Mobile World Congress 2019 in Barcelona

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A group of automakers and technology companies is urging US regulators to take further action against chip maker Qualcomm over its sales practices.

Tesla, Ford, Honda, Daimler, Intel, and MediaTek have asked the Federal Trade Commission (FTC) to fight a recent court ruling in Qualcomm’s favor.

Qualcomm has the practice of requiring customers to sign patent licensing agreements before selling their chips.

Such practices have drawn accusations that the company is stifling competition.

Qualcomm, the world’s largest maker of cell phone chips, disputed these claims. The BBC reached out to the company for comment on the letter from the automakers.

In January 2017, the FTC filed a lawsuit against Qualcomm in the federal district court, accusing it of using “anti-competitive tactics” to maintain a monopoly in the supply of semiconductors for cell phones and other products.

The FTC said at the time that Qualcomm’s “anti-competitive conduct” led to the abandonment of the WiMax standard for 4G, while LTE was adopted by the global mobile industry.

The US trade regulator pointed out that Qualcomm’s practices had hurt both “competition and consumers” and meant that cell phone makers like Apple had to pay higher prices for Qualcomm chips.

In May 2019, a U.S. district judge sided with the FTC and ruled that Qualcomm should have changed its patent licensing practices, but earlier this month, a Ninth Circuit Court of Appeals jury canceled the decision.

“If allowed, the jury’s decision could destabilize the standards ecosystem by encouraging the abuse of market power gained through collaborative standards setting,” the group of automakers and technology companies wrote in its letter.

Apple also sued Qualcomm in January 2017 and accused it of overcharging for its technology, and Qualcomm counter-sued, arguing that Apple stole its trade secrets, among other things. Eventually, both companies settled all lawsuits in April 2019.

The problem of patents

According to Glyn Moody, a journalist specializing in technology policy, the auto industry is bothered by Qualcomm’s patent practices because “cars are essentially becoming computers on wheels,” as the industry continues to develop more advanced connected cars.

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A car showcasing 5G intelligence exhibited by Qualcomm at Mobile World Congress in 2019

In the future, it is hoped that connected cars will use 5G processors to connect them to the internet. Carmakers have seen this battle over 4G and are concerned that it will solidify the company’s position as the battle for dominance over 5G technology advances.

“This is a completely different world than that [carmakers] they are used to it, so they suddenly find themselves facing computer standards and patents which is a big deal for them as they don’t have any. So if they have to start licensing this stuff, it’s going to get expensive for them, “Moody told the BBC.

A patent is a license that gives the owner the exclusive right to produce an invention and the exclusive right to exclude others from the production, use or sale of that invention.

“The basic principle of patents is that you have an idea and people only pay you because you have an idea,” he explained.

“The patent issue is a last resort strategy: when you don’t know what to do, you basically say that people owe you money for patents even if you’re not doing much for it.”

Stanford Law School Professor Mark Lemley is director of the Stanford Program in Law, Science and Technology. For several years he has been following Qualcomm’s various court cases.

“Qualcomm committed to licensing its chips on reasonable, non-discriminatory terms, because they wanted their chips to be included in industry standards, and so they created a framework to avoid doing so,” he said.

“I think they are actually violating the antitrust laws.”

‘Patents are bad for innovation’

Professor Lemley believes the Ninth Circuit Court of Appeals misunderstood “the definition of antitrust law” in overturning the ruling against Qualcomm.

“It is said, for example, that it can ignore most of the district court’s findings because those findings show harm to downstream customers and the antitrust law only affects competitors,” he explained.

“This is exactly the opposite: for decades the antitrust law has stated that we are not intent on protecting competitors, but on protecting the competitive process and protecting consumers.”

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Qualcomm’s rival Intel has conducted 5G connection tests with several automakers and telecom technology companies around the world

The FTC can appeal the decision, but if automakers and tech companies wish to sue Qualcomm, they should avoid the Ninth Circuit courts that cover the west coast of the United States, as “the courts within that circuit. they would feel bound by that decision. “

“If they fail to get the FTC to act, they will still have the opportunity to argue that this is wrong and shouldn’t be followed up in other cases, but it gets more difficult.”

Mr. Moody, who writes for Techdirt, a popular blog on the legal challenges of technology, points out that patents are indeed bad for innovation.

“If you want to grow the connected car market, what you really want are open standards without patent constraints, so you can have as many companies as possible participating in the market. [to] drive innovation and reduce costs “.

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