Qualcomm asks appeals court to pause antitrust ruling's impact

[July 09, 2019]  By Stephen Nellis

(Reuters) - Qualcomm Inc on Monday asked a U.S. appeals court to pause an antitrust ruling that could drastically alter its business model while it tries to overturn the ruling.

A sign on the Qualcomm campus is seen in San Diego, California, U.S. November 6, 2017. REUTERS/Mike Blake/File Photo

The filing with the 9th U.S. Circuit Court of Appeals came after U.S. District Judge Lucy Koh last week declined to put on hold her own ruling in a case brought by the U.S. Federal Trade Commission against the San Diego company, which is the largest supplier of modem chips that connect smartphones to wireless data networks.

Koh ruled that Qualcomm had engaged in anticompetitive patent-licensing practices to keep a monopoly on the mobile chip market. Koh ordered Qualcomm to license its technology to rival chipmakers, which include firms like Taiwan's MediaTek Inc. Qualcomm has been fighting to have the ruling put on hold while it pursues an appeal, which could take more than year.

The San Diego, California company has argued that letting the ruling stand could upend its talks with phone makers over chips for 5G, the next generation of wireless data networks.

"Qualcomm will be unable to revert back to its current license agreements, undo this web of new agreements, reverse any exhaustion of its patent rights, or recover all the revenue lost or transaction costs incurred" if it ultimately wins its appeal but the judgment remains in force during the process, the company wrote.

Qualcomm also challenged Koh's ruling that Qualcomm's patent fees are a "surcharge" on other chip suppliers, effectively raising their prices and making them less able to compete with Qualcomm. Qualcomm charges phone makers the patent fees whether or not they buy Qualcomm chips because the patents cover fundamental aspects of cellular technology that go beyond its own modems.

Koh ruled that phone makers likely take into account the total cost of the bundle of license fees plus the chips, which makes Qualcomm's overall package less expensive than its rivals, violating competition laws. Qualcomm rejected that theory in its filing Monday.

"There is, moreover, no reason that (smartphone) OEMs would regard the royalties they pay Qualcomm as attributable to the prices the OEMs pay for rivals’ chips - any more than they are attributable to the price the OEMs pay for other components such as batteries or screens," the company wrote in its filing.

(Reporting by Stephen Nellis in San Francisco; Editing by Stephen Coates)

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