Qualcomm Granted Stay in Japan FTC Case

Qualcomm says it has been granted a stay to a cease-and-desist order issued in September 2009 by the Japan Fair Trade Commission.

The stay will remain in effect throughout a hearing on the merits of the commission’s order, which may continue for several years. Qualcomm says it may appeal to the Japanese courts against any potential decision resulting from the multi-year hearing.

The Japan Fair Trade Commission alleges that Qualcomm forced Japanese licensees to accept cross-license provisions without compensation and to accept a provision under which the Japanese licensees agreed not to assert their essential patents against other licensees that had agreed to a similar provision.

The commission’s cease and desist order would have forced Qualcomm to cut these provisions from its agreements with Japanese licensees.

Qualcomm denies it forced its Japanese licensees to enter into agreements. In a September statement, Qualcomm Executive Vice President and General Counsel Donald Rosenberg said that the provisions were common in technology licensing agreements and were the subject of “extensive arms-length negotiations with sophisticated parties.”

“These provisions promote ‘patent peace,’ and reduce transaction costs and licensing fees. In addition to Qualcomm, many other industry members throughout the world, including handset and infrastructure manufacturers as well as wireless operators, have relied on these provisions in business planning,” he said. “If Qualcomm were to eliminate these provisions, there is a risk that some Japanese licensees may attempt to assert their previously licensed patents against Qualcomm, its customers and its licensees.”

Qualcomm’s spat with the Japan Fair Trade Commission added on to its legal woes in Korea, where the Korea Fair Trade Commission ordered it to pay a $200 million fine over allegations that Qualcomm abused its near-monopoly on CDMA chip technology. Qualcomm said it will appeal the decision to Korean courts.

South Korea is home to two of Qualcomm’s top customers, Samsung and LG Electronics. Samsung is the world’s second-largest handset vendor with a market share of 21.3 percent, according to a recent report from Strategy Analytics. LG Electronics is the world’s third-largest vendor with a market share of 10.5 percent.