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Feb. 11, 2010

Qualcomm says that the Japan Fair Trade Commission has given it a reprieve. The company has been granted a stay to a cease-and-desist order issued in September of last year by the Japan FTC.

The FTC in Japan alleges that Qualcomm forced Japanese licensees to accept cross-license provisions without financial 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, in clear violation of the FTC in that country.

The stay to the cease-and-desist order will remain in effect throughout a hearing on the merits of the commission's order, which may continue for several years.

For its part, Qualcomm continues to say that it will appeal to the Japanese courts against any potential decision resulting from the multi-year hearing.

The issue has been dragging on for many months now.

The Japan FTC's cease-and-desist order would have forced Qualcomm to remove these provisions from its original agreements with Japanese licensees.

But Qualcomm has always denied in the past and continues to deny that it forced its Japanese licensees to enter into agreements in the first place. In a September 2009 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."

Qualcomm's issues 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 technology.

Qualcomm said it will appeal the decision to Korean courts, and will vehemently defend itself.

"These provisions promote patent peace, and reduce transaction costs and licensing fees. In addition to Qualcomm, many other industry members throughout the globe, including wireless handset and infrastructure manufacturers as well as wireless carriers, have relied on these provisions in business planning," Rosenberg added.

"If Qualcomm were to eliminate these provisions, there is a substantial risk that some Japanese licensees may attempt to assert their previously licensed patents against Qualcomm, its customers and its licensees, and for these and other reasons, we cannot and we will not risk that," said Rosenberg.

South Korea is home to two of Qualcomm's top customers, Samsung and LG Electronics. Samsung is the world's second-largest handset maker with a market share of about 21.4 percent, according to a recent report from Strategy Analytics.

LG Electronics is the world's 3rd-largest handset maker with a market share of about 10.4 percent.

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Source: Qualcomm.