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Judge denies Qualcomm's bid to delay contract renegotiations



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Qualcomm, based in San Diego, Calif., Is one of the world's largest mobile chip makers.


Shara Tibken / CNET
                                                

Qualcomm has to renegotiate licensing agreements with handset makers before its appeal is heard, judge ruled Wednesday, dealing with the chipmaker in the antitrust case that could upend its entire business model.

The company, which released an antitrust case and was found to be a monopoly in wireless chips, had asked US District Court Judge Lucy to grant a reprieve in carrying out remedies she ordered. The remedies included renegotiating licensing agreements previously reached with handset makers like LG and submitting to the Federal Trade Commission. Qualcomm wanted the injections to be put on hold while the case made its way through the appeals process.

Instead, Koh, filed Wednesday in the court of Northern District, said she denied Qualcomm's motion for a pending appeal after reviewing the motion, amicus briefs filed an opposition to Qualcomm by LG and others, arguments and evidence from the trial and other documents relevant to the case.

Qualcomm on Wednesday said it will immediately ask the Ninth Circuit Court of Appeals for a stay.


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Two years ago, the FTC accused Qualcomm of operating a monopoly in wireless chips. The FTC said Qualcomm forced customers like Apple to work exclusively with it and charged "excessive" licensing fees for its technology, part of wielding a "no license, no chips" policy. Qualcomm's practices prevented rivals from entering the market, drove up the cost of phones and in turn hurt consumers, who faced higher handset prices, the FTC said.

Qualcomm argued the FTC's lawsuit was based on "flawed legal theory" and that customers choose its chips because they're the best. It also argued that competition is fierce in the mobile chip market and that Qualcomm never stopped providing processors to customers, even when they've been arguing about licenses.

The companies faced off in an 11-day trial in January. In May, Koh ruled in the FTC's favor, saying Qualcomm was a monopoly that illegally hurt competitors in the wireless chip market. The ruling, which came four months after the trial ended said Qualcomm must change how it does business and renegotiate license deals with its customers. To keep the company accountable, Qualcomm must submit compliance and monitoring reports for the next seven years and report to the FTC on an annual basis.

"Qualcomm's licensing practices have strangled competition in the CDMA and premium LTE modem chip markets for years , and harmed rivals, OEMs, and end users in the process, "Koh wrote in her ruling in May.

The ruling came as a surprise to Qualcomm and others in the mobile market. For Qualcomm, the verdict is called into question the company's entire business model. While it sells processors that connect devices to mobile networks, it also generates a significant percentage of its revenue from licensing. If it can't collect royalties based on the value of a handset – which it had done in the past – it will generate less money and may have to rethink its model entirely. Even though it is appealing the ruling, it is likely that will try to alter their contracts.

Koh, in her ruling, said Qualcomm can't force a customer to sign a license before it will supply it with chips. It must be negotiated or licensed with customers in good faith under conditions free of the threat of access to or discriminatory commission of modem chip or associated technical support or access to software. "Following the ruling, Qualcomm sought The Court of Appeal has a stay of the district court and has expedited appeal to the Court of Appeals. Koh 's decision Wednesday leaves the case in the appeals court' s hands.

While probably not having renegotiated its new agreement with Apple – the two settled their long – running licensing and patent disputes during opening arguments in May trial – will have to offer other customers the chance to change their terms.

"This should not come as a surprise to Qualcomm given the hard line Judge Koh took in the first place, "Creative Strategies analyst Carolina Milanesi tweeted Wednesday . "Anything else would have appeared as a weakening of its position following criticism on a lack of appreciation for the ramifications here decision will have."
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