Aug 11 (Reuters) - A U.S. appeals court on Tuesday reversed
a lower court ruling against chip supplier Qualcomm Inc in an
antitrust lawsuit brought by the Federal Trade Commission.
The U.S. Ninth Circuit Court of Appeals also vacated an
injunction that would have required Qualcomm to change its
intellectual property licensing practices.
The decision was a major vindication for the San Diego-based
company, the largest supplier of chips for mobile phones and a
key generator of wireless communications technology.
Qualcomm was fighting a May 2019 decision by U.S. District
Judge Lucy Koh in San Jose, California. Koh sided with the FTC,
writing that Qualcomms practice of requiring phone makers to
sign a patent license agreement before selling them chips
strangled competition and harmed consumers.
But the appeals court, in a 3-0 ruling written by Circuit
Judge Consuelo Callahan, ruled that Qualcomm had no duty to
license its patents to rival chip suppliers and that it was not
anticompetitive to require phone makers to sign a license
"Instead, these aspects of Qualcomms business model are
'chip-supplier neutral' and do not undermine competition in the
relevant antitrust markets," Callahan wrote.
Qualcomm praised the decision while the FTC called it
The Court of Appeals unanimous reversal, entirely vacating
the District Court decision, validates our business model and
patent licensing program and underscores the tremendous
contributions that Qualcomm has made to the industry," Don
Rosenberg, Qualcomm's general counsel, said in statement.
The FTC's Bureau of Competition director, Ian Conner, said
in a statement, that the agency "will be considering our
The case divided U.S. antitrust regulators with the Justice
Department intervening to file a brief in support of Qualcomm.
The Justice Department did not immediately respond to
requests for comment.
Qualcomm shares rose about 4% on the news. The shares have
been up from March lows as the company continued to show growth
despite a sluggish smart phone market.
Qualcomm had argued that the FTC decision, if allowed to
stand, would upend its business model by requiring it for the
first time to license its technology to rival chipmakers and
rework many of its patent licensing deals with phone makers.
Qualcomm won a pause in enforcement of the decision while
its legal appeal played out and voluntarily changed how it
structured some of its licensing deals for 5G technology. With
the appeals victory and raft of new agreements signed with
customers since the case was decided, Qualcomm is largely clear
to resume conducting business as it had for decades before the
Qualcomm's business model often prompted conflict with phone
makers, most notably Apple Inc, which supported the
FTC's case and mounted a separate antitrust lawsuit against
The phone makers bristled at Qualcomm's insistence that
manufacturers license its broad patent portfolio regardless of
whose chips they chose.
Apple settled its case against Qualcomm in 2018 and signed a
license deal and chip supply agreement. Other major phone makers
such as Samsung Electronics Co Ltd and Huawei
Technologies Co Ltd have also settled disputes with the
chip supplier and signed license deals since the FTC case was
(Reporting by Stephen Nellis in San Francisco and Jan Wolfe in
Washington; Editing by David Gregorio and Leslie Adler)