United States: No Lack Of Irony As FTC Brings FRAND Licensing Enforcement Against Qualcomm Four Days After Declining To Address FRAND Licensing Requirements In Its Revised IP Licensing Guidelines

On January 17, 2017, the Federal Trade Commission (FTC) filed suit against Qualcomm in the U.S. District Court for the Northern District of California for allegedly monopolizing the market for CDMA and LTE baseband processor technologies. The suit alleges that Qualcomm utilized anticompetitive licensing tactics to both extract excessive royalties from OEMs for its standard-essential patents (SEPs) and to weaken its competitors by refusing to license its patents on fair, reasonable, and non-discriminatory (FRAND) terms. It also alleges that Qualcomm thwarted the growth of its competitors by entering into an exclusive agreement with Apple that provided discounted royalty rates in exchange for exclusivity and an agreement not to challenge Qualcomm's licensing terms as violating its FRAND commitment.

The suit, ironically, comes just four days after the FTC and the Antitrust Division of the Department of Justice (DOJ) issued their revised Antitrust Guidelines for the Licensing of Intellectual Property, in which they declined to adopt guidelines relating to precisely this sort of conduct. For example, the American Antitrust Institute had lobbied for the agencies to include, in the revision, a statement that refusal to license SEPs on FRAND terms could amount to unlawful monopolization or unfair and deceptive conduct. The revised Guidelines did not, however, address the issue. Instead, there remains a smattering of business review letters, statements, and enforcement actions (now including the Qualcomm case) that were not incorporated into the Guidelines notwithstanding calls to do so, for example, from noted economists, Farrell and Shapiro.

It also comes just three days prior to the inauguration of Donald Trump, and shortly before the departure of Obama appointee and current FTC Chairwoman, Edith Ramirez. Notably, issuance of the complaint was authorized by a 2-to-1 vote of the Commission (therefore hinging on the vote of Ramirez), with a written dissent by Commissioner Maureen Ohlhausen.

In the Qualcomm complaint, the FTC alleges that Qualcomm possesses "monopoly and market power" in the markets for baseband processors complying with the CDMA and LTE standards. It allegedly abuses that market power in three ways:

First, by conditioning OEM access to its baseband processors on their agreement to its "no license, no chips" terms, which allegedly acts as a "tax" that raises OEM's cost of constructing and selling handsets and that includes payment of royalties to Qualcomm on sales of handsets that incorporate a competing baseband processor;

Second, by refusing to license SEPs to competitors (either at all or on FRAND terms), including Intel and Samsung, Qualcomm maintained its monopoly on baseband processors and effectively "taxed" its competitors' sales to OEMs;

Third, by "extracting" exclusivity from Apple in exchange for partial royalty relief, Qualcomm, in effect, penalized Apple for using any baseband processor supplied by Qualcomm's competitors. In doing so, Qualcomm excluded its competitors from selling to a uniquely important OEM, thereby weakening their ability to market their products to other OEMs.

The harms that the complaint alleges have arisen from this conduct include the raising of prices charged to OEMs and, consequently, to end-users; the weakening of demand for baseband processors overall due to higher acquisition costs; the exiting from the market of certain of Qualcomm's competitors; increased margin pressure on the remaining competitors; and the suppression of innovation in mobile technologies.

FTC staff will, undoubtedly, characterize its complaint against Qualcomm as the mere application of traditional antitrust principles to conduct that just happens to involve intellectual property licensing. If that were the case, then it should have been uncontroversial to include a discussion of these types of practices in the revised Guidelines as suggested by commenters.

But, notwithstanding the revised Guidelines' silence on the issue, the Qualcomm case shows once again that the FTC does in fact see SEPs as a special-case application of Section 5 of the FTC act. Tellingly, the complaint describes (at para. 49) the FTC's view of the problem:

Standard-setting participants often hold patents covering technologies that are incorporated into a standard. Once a standard incorporating proprietary technology is adopted, the potential exists for opportunistic patent holders to insist on patent licensing terms that capture not just the value of the underlying technology, but also the value of standardization itself. To address this "hold-up" risk, SSOs often require patent holders to disclose their patents and commit to license standard-essential patents ("SEPs") on fair, reasonable, and non-discriminatory ("FRAND") terms. Absent such requirements, a patent holder might be able to parlay the standardization of its technology into a monopoly in standard-compliant products.

This further confirms the current FTC's view that, by operation of the antitrust laws and the FTC Act, a patent holder surrenders its right to exclude — the very essence of the patent right itself — if it agrees to contribute its technology to a standard. We have discussed the various expressions of that view in prior articles here and here. Many in the field believe that this is a substantive interpretation of the law that requires more, and more public discussion and analysis prior to its application to rights holders in the everyday practice of their trade, particularly given the lack of evidence that "patent holdup" is a significant or pervasive problem.

It was this very lack of evidence of anticompetitive effects in the Qualcomm case that led Commissioner Ohlhausen to issue a written dissent decrying the lack of facts or economic analysis to show that Qualcomm's licensing practices led to the alleged anticompetitive harms in the marketplace. Her dissent recognizes the right of SEP holders to monetize their investments, stating that "reasonable royalties are not an exclusionary tax, even if paid by competitors." But she does not dispute — at least not expressly — the complaint's underlying premise that the holder of an SEP gives up its right to exclude others when it contributes its patent to the standard.

Assuming that the Trump FTC continues to prosecute the Qualcomm case — which is far from a certainty — resolution of the case will provide key guidance on the appropriate treatment of SEPs under the antitrust laws and the FTC Act.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Michael T. Renaud
Robert G. Kidwell
Robert J. Moore
In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.