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You are correct, they did deny a license to upstream modem makers.
They do imply that they do not need to.
The FTC did rule this was not correct.
Qualcomm didn't just imply it didn't need to, it argued at length that it didn't need to (and still claims that it doesn't need to). And that's despite it having, according to Judge Koh, made arguments which were substantively to the contrary in another case.
And, yes, the US FTC thinks Qualcomm is required to as does this court and, e.g., the KFTC. If I recall correctly, Judge Koh indicated in her decision on this matter that Qualcomm couldn't identify a single court decision which found that it didn't. And just to be clear, the recent decision out of the Eastern District of Texas in HTC v [Ericsson] didn't find to the contrary. (We can discuss that case in greater depth if you wish to.)
The point that you miss is that the license also includes software and DSP algorithms that run on the chip.
You cannot exhaust patents for IP that is software algorithms that run on the chip and are not included in the hardware.
Also the license includes aspects that are not necessarily in the modem and relate to device function.
You can argue double dipping. Okay.
To solve this they just raise the price of the modem and now you can no longer determine the cost of the license.
Then people will claim that the license cost is being hidden and Qualcomm is still charging too much.
They is a circular and specious argument.
I don't miss that point. To the contrary, I alluded to that reality. I said that the license fee (which Qualcomm charges) covers other IP. There is, no doubt, some IP that it seeks to license which isn't substantially embodied in the modems it sells. Rights to such IP aren't exhausted when it sells modems. (And, as a side point, IP rights in some non-patent IP isn't necessarily exhausted when you sell items incorporating it.) But the patents which are substantially embodied in the modems it sells are exhausted when it sells them.
You are right, but you do not have the right to use the configuration software or algorithms that run on the device.
So you would need to develop your own software to run on the baseband.
That aside I refer back to the argument above. If they roll the cost into the chip and charge more people all be screaming of excessive SEP/FRAND fees because they can't tell where the hardware cost stops and the license begins. I argue that for accounting it is necessarily separate.
Or your modem supplier could develop the software needed.
The issue is, for SEPs, Qualcomm has to license them to competing modem suppliers. So device makers, when they buy from other modem suppliers, don't need to pay Qualcomm to license those SEPs. They can, of course, do so if that's how the parties choose to do things. But modem suppliers that want to license the necessary SEPs are supposed to be able to do so, leaving their modem customers not needing to.
For other IP, Qualcomm can offer to license it as it sees fit (with some limitations, of course). Parties can freely negotiate how valuable it is and what they are willing to pay or take for it. But it isn't needed to implement standards, so its value has to stand on its own.
See argument above.
If the cost of the modem increases and the license fee goes away, would you or the FTC be happy?
I don' think the FTC would, on the whole, be happy. The FTC alleges (as do a number of other regulatory bodies and numerous industry participants) that Qualcomm does other improper things. It would like those things to stop as it thinks they violate U.S. law. (We can get into those things if you'd like.)
But, I think the FTC would be happier with what you suggest than with what Qualcomm does now. One of the problems that the FTC sees is that Qualcomm sometimes effectively hides the costs of modems in its license fees. That's where the rebates come in. In reality, they are off the (otherwise unacceptable to some parties) license fees, but Qualcomm wants to structure them as being off modem purchases. In this way Qualcomm can effectively collect higher license fees when licensees buy modems from its competitors than from itself. It wouldn't make business sense for Qualcomm to sell the modems as cheap as it supposedly is (taking into account the rebates), but it can do so because it's overcharging for the license fees. That's classic anticompetitive conduct. Through it, Qualcomm is effectively raising the cost of buying modems from its competitors. (This conduct works hand-in-hand, as so much of what Qualcomm is accused of, with its refusal to license SEPs to competing modem suppliers.) Our laws, right or wrong, don't allow those kinds of business tactics - for the purpose of harming competition - if one has monopoly power in a relevant market.
So they aren't charging more than the fees advertised, they are charging some customers that sign exclusive deals, less by offering rebates. SO is you argument that the rebates shouldn't be offered to anyone and that everyone must pay the same price? They aren't increasing the price when you buy from a competitor, they are reducing the price when you only use their product. Exclusivity agreements are done all the time.
Verizon pays Samsung for an exclusive device.
AT&T paid Samsung for the S whatever active, rugged phone.
Heck, even AT&T paid Apple not to have a phone on any other carrier.
The courts have held that exclusive agreements are legit.
So Qualcomm offering a rebate to those that only use Qualcomm seems like something that falls well within the law since other have/are/continue to doing it.
See above for why the rebates, as Qualcomm structures them, are an antitrust problem. Rebates off the license fees wouldn't necessarily be a problem.
That said, the exclusivity deals are another aspect of Qualcomm's anticompetitive behavior - and that's the case regardless of who suggested exclusivity. It is Qualcomm, allegedly, with the monopoly power in relevant markets and Qualcomm who would be making such an agreement for anticompetitive purposes rather than proper (under our laws) business purposes. Apple, e.g., wouldn't be doing it in order to prevent competition in the modem market, it would be doing it because it needed to in order to get effective license costs down from what it and many others consider an improper level.
Licensees don't really want rebates, they want what they would consider reasonable license fees. Qualcomm desires to offer those lower license fees in the form of rebates against modems for the reason I describe above. And, at least in Apple's case, Qualcomm sought to extract something more in return for those more reasonable license fees. Qualcomm had the leverage to impose such terms, according to the FTC and other regulatory bodies, because of another aspect of its illegal behavior. That would be its effective monopoly when it came to certain kinds of modems and its threat to cut off supply of those modems (which couldn't be sourced elsewhere) if customers didn't agree to license terms which they otherwise wouldn't have been willing to agree to. That's more classic antitrust behavior.
Exclusivity deals aren't, in themselves, violations of U.S. laws. Whether they are depends on other factors. When it comes to Qualcomm, it's a matter (allegedly, but according to lots of industry participants and as found by numerous regulatory bodies) of Qualcomm employing a number of tactics which work together in an illegal scheme to restrain competition. It's also accused of violating (and has been found to have violated) its contractual obligations. But that, in itself, isn't the point of the FTC suit, though it helped Qualcomm do the illegal things it is alleged to have done.
