Qualcomm Licensing Practices Under Fire

Carl Weinschenk
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The Institute of Electrical and Electronics Engineers (IEEE) is considering a proposal that would change the rules around licensing fees. It’s difficult to say whether the initiative, which is backed by Intel and Microsoft, is a legitimate effort to rein in a player that has gone too far – Qualcomm – or simply a competitive shot against a powerful rival.

BusinessWeek says a vote may come tomorrow. The measure would limit the ability of patent holders to use the courts to uphold their patent rights. On one hand, there are charges that Qualcomm is being exploitive. On the other is the possibility that the licensees are trying to rein it in for competitive reasons.

The truth, of course, likely is somewhere in the middle. It is clear that Qualcomm drives a hard bargain and that Intel has a motive to slow it down, and is quite possibly hoping that the IEEE does something that it couldn’t do in the marketplace:

Qualcomm’s licensing fees have helped it invest in advances that have made its chips dominant in the majority of the world’s top-selling mobile phones. Intel, after more than a decade of investing, has failed to parlay its dominance in personal computer processors into a foothold in the faster growing market for phones.

Licensing is not a sideline for Qualcomm. It is a core element of its business plan: The BusinessWeek story reports that the company has collected $30.5 billion during the past five years in fees for rights to use its wireless patents.

Its practices have raised hackles around the world. Last month, the chipmaker said that the Federal Trade Commission is investigating the company. The Sacramento Business Journal, which based its story on reporting by The Wall Street Journal, noted that Qualcomm “has rankled” other governments and that South Korea fined it about $209 million in 2009.

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Bloomberg News elaborated on a similar situation in China, where Qualcomm acknowledges that it is having “difficult discussions” with the government:

Some Chinese handset makers aren’t paying Qualcomm amid an antitrust investigation into the San Diego-based company’s business practices. They’re also selling cheaper devices, lowering the average selling price and reducing the licensing fees that Qualcomm receives.

The bottom line is that Qualcomm is on the defensive in several venues. Whether the complaints are legitimate or Qualcomm simply is a tough negotiator with valuable patents in its portfolio is a complex question that will only be answered by experts. What is certain is that a lot is at stake for the firm, the companies that use its products and, ultimately, consumers.

Carl Weinschenk covers telecom for IT Business Edge. He writes about wireless technology, disaster recovery/business continuity, cellular services, the Internet of Things, machine-to-machine communications and other emerging technologies and platforms. He also covers net neutrality and related regulatory issues. Weinschenk has written about the phone companies, cable operators and related companies for decades and is senior editor of Broadband Technology Report. He can be reached at cweinsch@optonline.net and via twitter at @DailyMusicBrk.

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