Apple gets its supply of modems for the iPhone exclusively from Qualcomm, which has now been dragged into a lawsuit by the FTC. In this blockbuster lawsuit, the FTC has accused Qualcomm of using its baseband processor patents to illegally force competitors out of the market.
Qualcomm violates FRAND commitments
Allegedly, Qualcomm didn’t agree to sell its modems to any company that refused to pay royalties to it on the phones that used modems from other suppliers. The agency refers to it as a “no-license-no-chips” policy, notes The Verge.
In its heavily redacted complaint, the FTC said that the patents Qualcomm is holding are standard-essential patents. It is a technology that is essential to the industry, and under FRAND (fair, reasonable and non-discriminatory) terms, it must be licensed to competitors.
In the complaint, the FTC alleges that Qualcomm has consistently refused to license some standard-essential patents to rival chip makers. This violates its FRAND commitments.
The FTC said in its complaint, “Qualcomm’s customers have accepted elevated royalties and other license terms that do not reflect an assessment of terms that a court or other neutral arbiter would determine to be fair and reasonable.”
In its defense, Qualcomm said that the FTC’s lawsuit is based on “flawed legal theory.”
How is Apple involved in all this?
There is a lot to do with Apple in the FTC’s complaint against Qualcomm. This is because Qualcomm spent a lot of time working and reworking its deal with the Cupertino-based giant in an attempt to remain the exclusive provider of modems for the iPhone.
The FTC says that in 2007, the chip maker tried to bribe Apple to keep it from making a WiMAX iPhone, and in return, it offered to refund part of the patent royalty payments the iPhone maker had made to Qualcomm.
“Under a 2007 agreement, Qualcomm agreed to rebate to Apple royalties that Qualcomm received from Apple’s contract manufacturers in excess of a specified per-handset cap,” FTC says in its complaint.
The payment obligations that Qualcomm presented were conditioned upon several things, of which one was that Apple would not sell or license a handset implementing the WiMAX standard. Qualcomm was against the prospective fourth-generation cellular standard which rival Intel has championed.
Though the WiMAX is dead now, it was a big deal in 2007. Sprint decided to deploy the WiMAX network in 2008, and it was making a huge bet on beating the market to 4G speeds with its help ahead of LTE. Intel could have used it to make a mark in mobile, notes The Verge.