Qualcomm Hit With Record $865M Fine in Korea

South Korea's top trade regulator says the company's patent licensing practices were unfair to both smartphone makers and rival modem chipset makers.
Matthew HellerDecember 29, 2016
Qualcomm Hit With Record $865M Fine in Korea

South Korea’s top trade regulator has fined Qualcomm a record 1.03 trillion won ($865 million) after finding the company’s patent licensing practices violated competition laws.

The Korea Fair Trade Commission (KFTC) said Qualcomm’s patent licensing was unfair both to mobile phone makers and rival modem chipset makers. The fine is the largest ever levied by the commission against a corporation.

“Qualcomm has refused to license competing chipset companies while coercing unilateral license terms on handset companies in order to strengthen its monopolistic power in the patent license market and the chipset market,” the commission said in a news release.

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Qualcomm supplies smartphone chips to LG Electronics and Samsung, but makes most of it money by licensing its vast portfolio of wireless patents on key cellular technology. The company said the KFTC’s decision was “unprecedented and insupportable” and it would appeal once the commission issues a written order.

“Qualcomm strongly believes that the Korea Fair Trade Commission findings are inconsistent with the facts, disregard the economic realities of the marketplace and misapply fundamental tenets of competition law,” Don Rosenberg, the company’s general counsel, said.

According to the commission, Qualcomm has restricted competition by forcing smartphone makers that buy its chips to also license its patents and by refusing to license, or limiting licensing, of its standard essential patents related to modem chips to rival chipmakers such as Intel, Samsung, and MediaTek.

“Qualcomm’s actions limit overall competition,” KFTC Secretary General Shin Young-son told a media briefing, adding that the decision was not about protecting domestic companies such as Samsung and LG.

Qualcomm said its patent royalties collected on smartphones sold in South Korea amounted to less than $230 million for its 2016 fiscal year.

The decision “marks the latest antitrust setback for Qualcomm’s most profitable business of licensing wireless patents to the mobile industry, at a time when the business is facing headwinds from a cooling smartphone market,” Reuters said.

In 2009, the KFTC fined Qualcomm 273 billion won in 2009 for abusing its dominant position in CDMA modem chips.

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