FTC Targeting Qualcomm for Forcing Apple to Use its Modems [Updated]

[DVNIEL]

Can you name a company and provide evidence that you're aware of that Apple has bullied into using their products?

Sure can! I'm guessing you've never bought a book from the iTunes Store? What if I don't want to use an iPad or my computer to read that book? Kindles are way better for reading, good luck using one of those. It doesn't have to be a use this or else method, but you get so invested into their ecosystem and then take away flexibility at some point? Might as well be bullying.

 

[omihek]

What is wrong with making an exclusivity deal for a better price? Happens all the time in business. Saying "Apple was forced" is just complete BS. Did Qualcomm hold a gun to Apple's head and literally force them to use their modems? No, they just made a deal that both businesses readily agreed to. What is wrong with that?

 

[44267547]

Sure can! I'm guessing you've never bought a book from the iTunes Store? What if I don't want to use an iPad or my computer to read that book? Kindles are way better for reading, good luck using one of those. It doesn't have to be a use this or else method, but you get so invested into their ecosystem and then take away flexibility at some point? Might as well be bullying.

That's not even what I was referring to. iTunes is owned by Apple. What company can you tell me specifically Apple has bullied into using their products with a reference.

 

[thadoggfather]

I have difficulty believing Intel modems are junk. From forum posters rather than engineers. And isolated tests rather than real world use.

Mine seems fine

It's like the MLC/TLC witch hunt with 6+. Turns out TLC is better cause it got better performance. Even though durability went down it's moot in a mobile phone SSD

 

[aces99]

Apple could have went and got all their chips from Intel; Qualcomm is not the only supplier. But regardless of whose chips Apple used (Intel, MediaTek, VIA, whatever) they must have licensed Qualcomm's standard essential patent portfolio.

So even if Apple would of bought all their chips from Intel they would of still had to buy Qualcomm a license fee for their standard patent? Intel doesn't have their own standard or license fee for their own chips they make? If not then I see where there is a problem and what you are referring to.

 

[oneMadRssn]

So even if Apple would of bought all their chips from Intel they would of still had to buy Qualcomm a license fee for their standard patent? Intel doesn't have their own standard or license fee for their own chips they make? If not then I see where there is a problem and what you are referring to.

Intel (and other chip suppliers) tried to buy a license to ensure all their customers would be licensed, but Qualcomm refused them. This refusal was counter to what Qualcomm agreed to under FRAND, but Qualcomm figured they can get more money by licensing the manufacturers (Apple, Samsung, LG, HTC, Google, etc.), and then turning this licensing deal around to leverage out competitors like Intel. Thus, yes, even if Apple bought all their chips from Intel they would still have to get a license from Qualcomm.

 

[Carnegie]

The dissenting Commissioner says that Qualcomm has never charged more, and thus the complaint that they "could" is moot.

https://www.ftc.gov/system/files/do...ualcomm_mko_dissenting_statement_17-1-17a.pdf



Right, it partly depends on the organization. The ETSI FRAND terms are simply these:

View attachment 684313
Pricing is not addressed, but it's interesting that cross licensing can be required.



Exactly, and the accepted practice for the past few decades has been that ETSI members either cross license like heck (which is something Apple hates to do), and/or they charge royalties by the price of the phone (something else that Apple hates with a passion).

Which is why this whole thing smacks of Apple. Not that it's not possibly a good idea to change the status quo. Just that Apple always wants special treatment.

I obviously don't know which of the commissioners are correct when it comes to what the evidence does or doesn't show. That's part of why I haven't weighed in on whether the FTC's allegations are fair or correct.

That said, that dissent doesn't, I think, inspire confidence in Commissioner Ohlhausen's position. I say that for several reasons, to include: (1) It doesn't address some of the important allegations made in the FTC complaint - it doesn't bother to refute them (i.e. directly allege that they aren't supported by the evidence) or explain why they don't support the complaint's arguments (it refers to some of them but glosses over them with refuting them, just pretending for some reason that they don't matter); (2) It suggests that this isn't a disagreement (between the dissenting commissioner and the other two) on what the facts are but rather on the legal theory based on those (presumably agreed about) facts - and based on reading the dissent and the complaint I don't think that's correct; (3) it misrepresents some of what the complaint does or doesn't allege or suggest; and (4) It buries in a footnote a nugget from the complaint which refutes the very claim (made in the dissent) which that nugget is a footnote to. The dissent claims that there is no suggestion that Qualcomm charges higher royalties to phone makers that use competitor's processors, but the footnote alludes to allegations made in the complaint that suggest, in effect, just that. The dissent seems to try to use legal formalism to dismiss the substantive importance of that allegation, pretending that it doesn't refute what the dissent claims when it very much does. To be clear, I'm not referring to a disagreement between the dissent and the complaint as to what the facts are or what the evidence shows. I'm referring to the dissent being disingenuous about what the complaint says and suggests. The dissent says that the complaint doesn't even bother to suggest certain facts which are important to its legal theory, but that isn't correct - it very much does suggest those facts.

Again, I'm not at this time prepared to argue that the allegations made by the FTC complaint are true. I simply can't know whether they are or not. But if they are, then Qualcomm will lose (and should lose) this case or be forced to settle. And that dissent isn't very convincing as it doesn't deal forthrightly with those allegations. I would add, btw, that there is also a bit of slight of hand used with regard to one assertion in the complaint - the dissent is, I think, correct on that point. But the arguments in the complaint hold up even with that bit of slight of hand acknowledged - again, if the allegations which are made are true.
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I see and agree that if they are doing that it is wrong and shouldn't be allowed. But one question I do have is at the time of these events could Apple have went and got all their chips from Intel or was Qualcomm the only supplier that could supply Apple with the amount they needed?

There are a bunch of pieces to the allegations made by the FTC, so I don't want to get lost in all of them and how they fit together. But as part of the answer to your query I would say this: No, Apple (and other phone makers) couldn't have done that, and - based on the FTC's allegations - that's a big piece of the puzzle.

The CDMA processors which Apple and other premium handset makers need (not for all of their phones, but for those that are to work on CDMA networks) aren't made by anyone else. The FTC alleges that that is in part because of improper practices used by Qualcomm, including - but not limited to - refusing to license standard-essential patents to its would-be competitors for CDMA processors. So Intel can't build those kind of processors (CDMA multi-mode) in part because Qualcomm, in violation of its agreements, in effect won't let them. In turn, Qualcomm uses its monopoly power in that space to force phone makers to agree to non-FRAND terms for those and other licenses and (as suggested by the FTC) scares them into not challenging those improper terms by refusing to supply them with the processors they need (and which Qualcomm has an effective monopoly on) if they don't agree to its licensing terms.

The FTC claims that these are not standard industry practices - indeed, that Qualcomm is unique in its licensing demands - and in violation of FRAND terms.

 

[grkm3]

good I hope they get there asses rocked.this is the reason the USA gets a snapdragon galaxy phone with Qualcomm CDMA modem and the rest of the world gets the better exynos.its because Qualcomm won't let the Shannon modem in the exynos soc to use CDMA tech and forces Samsung to buy snapdragon socs for its us phones.the weird thing now is Samsung has the upper hand because they are now making those snapdragons for Qualcomm.

Samsung did not need to buy snapdragon 820 chips.they were forced to because they needed CDMA for us phones.

 

[kdarling]

The CDMA processors which Apple and other premium handset makers need (not for all of their phones, but for those that are to work on CDMA networks) aren't made by anyone else.

On the contrary, what's happened is that most companies have stopped making/using standalone broadband processors, and instead now only make chipsets with that part integrated them into their application processor.

For example, Samsung, MediaTek, Huawei, and Via Technologies all make CDMA capable chipsets. They need them for the US and China markets.

But the CDMA processor section is now incorporated into a CPU design that also includes GSM, WCDMA, SCTDMA, LTE, etc.

So Intel can't build those kind of processors (CDMA multi-mode) in part because Qualcomm, in violation of its agreements, in effect won't let them.

As noted above, Qualcomm certainly does allow it.

As for Intel, they bought into Via Telecom in 2015 explicitly to get access to its CDMA patent licenses. So reportedly Intel could (and might yet) build CDMA into one of its coming modems. They're just starting out slowly with the basics.

The rest of your speculation is based on the above false presumptions.

The FTC claims that these are not standard industry practices - indeed, that Qualcomm is unique in its licensing demands - and in violation of FRAND terms.

I think what's confusing is that there can be a difference between patents for making chips, and patents for using those chips for CDMA (or any other protocol).

As noted above, several companies are making CDMA capable chipsets. Also, Qualcomm has licenses with close to two hundred companies for the code to USE those chips in actual CDMA situations. But NOT EVERYONE wants to use the CDMA capabilities. (Or the GSM capabilities, if you're Sprint or Verizon.)

Think of it like the difference between licensing the ability to make an Intel CPU chip, versus also licensing an OS to use on that CPU. You don't usually pay the chipset maker for the OS. Likewise, you might want to buy a modem chipset that can do LTE, but you don't need the CDMA or GSM sections and therefore don't want to pay for those licenses for no reason.

That's why phone makers usually have to buy the specific usage licenses separately from Qualcomm. You can get the chipset from several places, but you only have to pay Qualcomm for any particular IP you use along with that chipset.

Qualcomm likes to keep it separate partly because it makes it easier for them to account for its IP users. It makes more sense than asking chipset makers to collect specific royalties from each of its chipset buyers (assuming chip makers would even want to take on that responsibility).

 

[rGiskard]

No problem here folks, Trump will put an end to such government meddling in free markets. If a company builds a monopoly then obviously they make the greatest products in the history of the world and deserve to keep that monopoly in perpetuity.

 

[Carnegie]

On the contrary, what's happened is that most companies have stopped making/using standalone broadband processors, and instead now only make chipsets with that part integrated them into their application processor.

For example, Samsung, MediaTek, Huawei, and Via Technologies all make CDMA capable chipsets. They need them for the US and China markets.

But the CDMA processor section is now incorporated into a CPU design that also includes GSM, WCDMA, SCTDMA, LTE, etc.



As noted above, Qualcomm certainly does allow it.

As for Intel, they bought into Via Telecom in 2015 explicitly to get access to its CDMA patent licenses. So reportedly Intel could (and might yet) build CDMA into one of its coming modems. They're just starting out slowly with the basics.

The rest of your speculation is based on the above false presumptions.



I think what's confusing is that there can be a difference between patents for making chips, and patents for using those chips for CDMA (or any other protocol).

As noted above, several companies are making CDMA capable chipsets. Also, Qualcomm has licenses with close to two hundred companies for the code to USE those chips in actual CDMA situations. But NOT EVERYONE wants to use the CDMA capabilities. (Or the GSM capabilities, if you're Sprint or Verizon.)

Think of it like the difference between licensing the ability to make an Intel CPU chip, versus also licensing an OS to use on that CPU. You don't usually pay the chipset maker for the OS. Likewise, you might want to buy a modem chipset that can do LTE, but you don't need the CDMA or GSM sections and therefore don't want to pay for those licenses for no reason.

That's why phone makers usually have to buy the specific usage licenses separately from Qualcomm. You can get the chipset from several places, but you only have to pay Qualcomm for any particular IP you use along with that chipset.

Qualcomm likes to keep it separate partly because it makes it easier for them to account for its IP users. It makes more sense than asking chipset makers to collect specific royalties from each of its chipset buyers (assuming chip makers would even want to take on that responsibility).

I wasn't suggesting (that the FTC claims) that no one else makes CDMA processors, rather that no one else makes the CDMA multi mode processors which Apple and others need for their premium phones (at least, no one that could sell them to, e.g., Apple).

As I've indicated several times, I'm not speaking to the accuracy of that and other claims. But that is what the FTC claims. And if the allegations that it makes are true, then it's on the right side of the legal argument.

Also, what you refer to as my speculation was, again, not my speculation. I was explaining what the FTC is alleging and suggesting.

The FTC alleges, among other things, that Qualcomm has consistently refused to license SEPs to competitors (and, of course, these allegations relate to things that have happened in the past, not what happens going forward). You seem to be claiming otherwise. Fair enough. But the FTC is clear in saying that it refuses to, and I've been trying to explain to others what the FTC is claiming that the situation is.

As for the difference you refer to in your last section, I understand that and I understand why it often works that way. But that doesn't change the reality that Qualcomm has an obligation to license SEPs to its competitors - competitors that would use those patented methods to, e.g., build various components that they might then sale to phone makers - regardless of whether it is willing to and often does license those same SEPs directly to those phone makers. If it refuses to do so, as the FTC claims, that is in violation of FRAND terms. Further, Qualcomm can not require a phone maker to get a separate license from Qualcomm for the IP incorporated in components that the phone maker buys from Qualcomm's competitors. That is what the FTC claims is unique about Qualcomm's licensing practices. Perhaps you are aware that others do the same thing; again, I can't speak to that. The FTC claims that they don't.

 

[Carnegie]

I read Korea's Fair Trade Commission's release last night. It makes meaningfully all of the same allegations that the FTC complaint does, along with some additional ones, but in a somewhat more detail way.

In short the Korean FTC alleges: That Qualcomm refuses to license SEPs to competitors such as Intel in violation of its FRAND commitments. That Qualcomm imposes unilateral and unfair (and non-FRAND) licensing terms on phone makers. That it doesn't allow for proper value evaluation of the SEPs to be licensed, that it forces phone makers to cross license their own patents without compensation while it demands artificially high compensation for its own, that it requires would-be licenses to license a comprehensive portfolio of patents rather than just the ones it might need. That it uses its market dominance (and in the CDMA multimode processor area, its market monopoly) to force phone makers to agree to its unilateral and unfair terms. That it uses the threat of cutting off phone makers' supplies of the processors they need to build their phones (and which, in some cases, they can't get anywhere else) to force them to agree to its improper licensing terms. That it effectively forces phone makers to pay higher royalties if they buy processors from Qualcomm's competitors. That it has sold processors below cost in order squeeze out competitors - by suggestion, that it incorporates part of what should be the cost of the processors it sells into the cost of the licenses that it forces phone makers to pay for and which they would have to pay (Qualcomm) for even if they bought processors from Qualcomm's competitors. The Korean FTC makes quite a few other sub-allegations, but I won't get lost in them - others can read its release for themselves if they wish to. But refusing to properly license to its competitors is a key for Qualcomm in having the leverage it has, and which the Korean FTC alleges it wields improperly, over the phone makers.

In general the Korean FTC alleges that Qualcomm uses the fact that it has so many patents essential to industry agreed upon standards to create leverage over the industry (which is fine), but then refuses to abide by the commitments it made (which allowed its patents to become essential to those standards) so that it can extort the industry (which is not fine). In general the Korean FTC alleges that Qualcomm has created a self-reinforcing cycle where it uses improper means to establish market dominance (and in some areas market monopoly) and then uses that market dominance, and more improper means, to demand unfair terms which help to drive out competition and increase its market dominance such that it is better positioned to use improper means to demand unfair terms.

Are the Korean FTC and the US FTC both mistaken about the tactics Qualcomm has used? I don't know. I suspect it won't be too long before we here from European regulators on this matter, though I suppose it could take them a while to complete their investigations.

 

[Carnegie]

Apple is reportedly now suing Qualcomm for $1 billion. Apple is apparently claiming that Qualcomm is withholding payments that it owes Apple (as agreed upon rebates for licensing royalties) in retaliation for Apple cooperating with the Korean investigation into Qualcomm's licensing and allegedly monopolistic practices.

I haven't found the complaint itself yet to see what exactly Apple is claiming. I suspect it will be available (or easy to find) soon.

 

[patrickbarnes]

People whose time is running out to serve in high-level positions in government do a lot of things to try to make their mark or further their agenda. It wouldn't surprise me to hear within a few weeks that the FTC is no longer pursuing this case. The "chief" I was referring to was the head of the FTC, not Barack Obama.

I never said President Obama was "omnipotent". While he does have a lot of specific powers as the President (as the pardons and commutations he authorized yesterday demonstrate), he wasn't the one who brought this case against Qualcomm. I know that. However, the head of the FTC (who Obama appointed and who is soon to be out of that job) is most certainly involved with this case.

https://www.macrumors.com/2017/01/20/apple-qualcomm-1-billion-lawsuit/

Lol. I love when I'm right.

Ah well, he's still coming for your guns. And FEMA camps are definitely happening.

Honestly, this was so obvious I just don't... eh. Whatever.

 

[Carnegie]

Apple is reportedly now suing Qualcomm in China, asking for more than $100 million in damages.

 

[Carnegie]

According to reports, Judge Koh has denied Qualcomm's motion to dismiss the FTC's suit. That was to be expected.

I haven't read the ruling yet. If it contains anything noteworthy, I may update this post.

 

[kdarling]

Apple is reportedly now suing Qualcomm in China, asking for more than $100 million in damages.

A few weeks after Apple filed their lawsuit, Qualcomm settled with the Chinese NDRC (National Development and Reform Commission) for phones made by Chinese companies.

The new Chinese government enforced Qualcomm 3G+4G royalty rate for their own phone makers is now 5% of a portion of the device price. The portion is 65% of net sales.

Multiply those together and the effective rate is 3.25% of the net sales price. (Price before tax and commissions.)

Interesting number, that. You see, Foxconn and others made a deal years ago to give Qualcomm about 3.25% royalties on the factory boxed device price, which for an iPhone starts around $230... instead of its net sales price, which is closer to $600.

Imagine Apple arguing to a Chinese court that it should only pay 1/3 of the effective rate of China's own own native companies.

Imagine a Chinese judge ruling that Apple was paying too little, and that its rates to Qualcomm should triple.

 

[Carnegie]

A few weeks after Apple filed their lawsuit, Qualcomm settled with the Chinese NDRC (National Development and Reform Commission) for phones made by Chinese companies.

The new Chinese government enforced Qualcomm 3G+4G royalty rate for their own phone makers is now 5% of a portion of the device price. The portion is 65% of net sales.

Multiply those together and the effective rate is 3.25% of the net sales price. (Price before tax and commissions.)

Interesting number, that. You see, Foxconn and others made a deal years ago to give Qualcomm about 3.25% royalties on the factory boxed device price, which for an iPhone starts around $230... instead of its net sales price, which is closer to $600.

Imagine Apple arguing to a Chinese court that it should only pay 1/3 of the effective rate of China's own own native companies.

Imagine a Chinese judge ruling that Apple was paying too little, and that its rates to Qualcomm should triple.

The 5% rate applies to 3G devices and 4G devices which implement CDMA or WCDMA. The rate for 4G devices which don't is 3.5% (so, 3.5% x 65%, or 2.275%). That's not a huge deal of course, just trying to be thorough. Also, that isn't for devices made by Chinese companies, it's for devices sold for use in China. And that's 65% of the wholesale price.

(China is of course free to agree to whatever terms it wants in such situations. That doesn't, however, alter the state of common law in the United States. And in the United States, when parties dispute the appropriate royalties for patents, the principles which courts are to apply are pretty clear on this royalty base issue.)

That said, China found that Qualcomm charged excessive royalties based on other improper practices which it engaged in - not just based on Qualcomm basing royalties on the full wholesale price of devices (which it's now agreed not to do). Some of those other improper practices are the same ones that Apple, and others, accuse Qualcomm of. In other words, China's NDRC has already found that Qualcomm does a number of the things which Apple accuses it of and that those things are improper. Qualcomm decided not to contest those findings. It agreed to stop the practices in question.

Further, China's NDRC found that Qualcomm engaged in other anticompetitive conduct, beyond charging excessive royalties. For instance, the NDRC found that Qualcomm required others to agree to unreasonable licensing terms or else it would not supply them with baseband chips. That's something else that Apple is accusing Qualcomm of. Qualcomm decided not to contest that finding either and agreed to stop engaging in that practice going forward.

So I'd say that Apple is on pretty solid ground when it comes to the accusations it's made against Qualcomm in China. The royalty base issue is but one of many aspects of the wrongdoing which Qualcomm has been accused of - by numerous regulatory bodies, Intel, Samsung, NVIDIA, Apple, and others.

 

[LordVic]

Everyone wants to be a monopoly themselves but wants to be supplied by non-monopoly supply chains. Live by the sword, die by the sword.

I couldn't think of this spat between Apple and Qualcomm any better way.

it really is now sounding like two companies behaving in anti-competitive behaviours (both do in many ways), and calling eachother out for it.

so Apple. Qualcomm... Go at it? I guess this one time, if the Lawyers win? we all win?
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Sure can! I'm guessing you've never bought a book from the iTunes Store? What if I don't want to use an iPad or my computer to read that book? Kindles are way better for reading, good luck using one of those. It doesn't have to be a use this or else method, but you get so invested into their ecosystem and then take away flexibility at some point? Might as well be bullying.

I am so confused as to the relevance of this anecdote.

Kindle is an ecosystem platform that has Apps and the ability to purchase books tha span cross platform. They have iOS, Android, and web apps, and all content automatically sync's to it's apps.

Apple doesn't in any way force you to purchase books exclusively on their store. Knowing the limitations of what devices you can read Apple's iBooks on, why would you buy the book there expecting it to be on your kindle.

There's no eco-system lock-in here. You were free to choose any book store and read on your iPad, iPhone or Kindle, Kobo or eReader of your choice (as there are numerous book stores you can buy ePub's from and still read on any device you own).

 

[JackRipper]

By using these practices, they were able to spend more on r and

I didn't know apple licensed its tech.
When did this happen.

True Type Fonts, FireWire, Thunderbolt (partnership with Intel), Lightning connectors...

Edit: Probably more that are escaping me at the moment