A US appeals court handed Qualcomm a victory on Tuesday, reversing an earlier ruling against the chipmaker in a case brought by antitrust regulators.
The decision from the 9th Circuit Court of Appeals scuppered an earlier win for the Federal Trade Commission before a lower court, which found that Qualcomm commanded “unreasonably high royalty rates” for its intellectual property and ordered it to renegotiate licensing deals.
“Anti-competitive behaviour is illegal under federal antitrust law. Hypercompetitive behaviour is not,” a three-judge panel wrote in the decision.
Qualcomm shares were 3.5 per cent higher in late-afternoon trading in New York.
The FTC — whose case had been supported by Apple, Samsung and other companies — had accused Qualcomm of overcharging for access to its patents. The crux of this issue was Qualcomm’s practise of earning revenue both from patent royalties as well as chips.
The appeals court said in Tuesday’s ruling that Qualcomm’s “no license, no chips” policy “did not impose an anti-competitive surcharge on rivals’ modem chip sales”, nor did it undermine competition.
It also dismissed a related concern that Qualcomm was being anti-competitive by licensing exclusively to companies like Samsung whose products contain Qualcomm chips, and not to other chipmakers.
The appeals court said this policy “is not unique” — rivals Nokia and Ericsson have something similar in place.
Ian Conner, director of the FTC’s bureau of competition, said in a statement that the ruling was “disappointing” and that the regulator was weighing its options.
The FTC’s case against Qualcomm put it at unusual loggerheads with other government antitrust regulators at the US Department of Justice.
The US Department of Justice took Qualcomm’s side, arguing that US national security was at stake, with a loss for Qualcomm potentially undermining its leadership in 5G technology — a top priority for the Trump administration.
FTC lawyers argued that the DoJ’s position amounts to giving Qualcomm immunity from “any financial consequences for violating the antitrust laws”.
Last year, Apple and Qualcomm brokered a deal to resolve a range of high-profile intellectual property and contract disputes around the world, which had turned into one of the costliest and longest-running disputes in the tech world. The broad settlement gave the chipmaker a $4.7bn revenue boost.
Since mid-March, Qualcomm shares have risen more than 80 per cent to a record high, valuing it at $125bn.
The court decision comes two weeks after Qualcomm resolved a long-running dispute over patent licences with Huawei, the world’s largest smartphone maker. “We are now entering a period in which we have multiyear licence agreements with every major handset [maker],” Steve Mollenkopf, Qualcomm’s chief executive, told analysts at the time.