U.S. antitrust agency sues Qualcomm over patent licensing

(Reuters) — The U.S. Federal Trade Commission filed a lawsuit against Qualcomm Inc on Tuesday, accusing the company of using “anticompetitive” tactics to maintain its monopoly on a key semiconductor used in mobile phones.

The FTC, which works with the Justice Department to enforce antitrust law, said that San Diego-based Qualcomm used its dominant position as a supplier of certain phone chips to impose “onerous” supply and licensing terms on cellphone manufacturers and to weaken competitors.

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Qualcomm said in a statement that it would “vigorously contest” the complaint and denied FTC allegations that it threatened to withhold chips in order to collect unreasonable licensing fees.

Qualcomm shares fell 4 percent to $64.19 on Tuesday.

The complaint is likely the agency’s last major action under current Democratic Chairwoman Edith Ramirez, who will step down Feb. 10, and comes just days before U.S. President-elect Donald Trump takes office on Friday.

Trump is expected to name Republican Commissioner Maureen Ohlhausen as acting FTC chairwoman and will fill three vacancies that will reshape the agency.

Ramirez and fellow Democrat Terrell McSweeny voted to approve the complaint but Ohlhausen dissented, saying that the lawsuit was based on a “flawed legal theory … that lacks economic and evidentiary support.”

In its complaint, the FTC said the patents that Qualcomm sought to license are standard essential patents, which means that the industry uses them widely and they are supposed to be licensed on fair, reasonable and non-discriminatory terms.

The FTC complaint also accused Qualcomm of refusing to license some standard essential patents to rival chipmakers, and of entering into an exclusive deal with Apple Inc.

“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,” the FTC said in its complaint.

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The FTC asked the U.S. District Court for the Northern District of California in San Jose to order Qualcomm to end these practices.

For its part, Qualcomm accused the FTC of a last-minute dash to court.

“This is an extremely disappointing decision to rush to file a complaint on the eve of Chairwoman Ramirez’s departure and the transition to a new administration,” Don Rosenberg, Qualcomm general counsel, said in a statement. “We look forward to defending our business in federal court, where we are confident we will prevail.”

The company has faced a series of antitrust rulings and investigations from regulators across the globe.

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South Korea’s antitrust regulator fined Qualcomm Inc 1.03 trillion won ($854 million) in December for what it called unfair practices in patent licensing, a decision the U.S. chipmaker said it will challenge in court.

In February 2015, Qualcomm paid a $975 million fine in China following a 14-month probe, while the European Union in December 2015 accused it of abusing its market power to thwart rivals.

(Reporting by Diane Bartz; Editing by Soyoung Kim and Alan Crosby)