Which? Claims the UK Population Could be Owed £480 Million by Qualcomm
10-03-2021 | By Robin Mitchell
Recently, Qualcomm’s licensing and royalties practices have come under fire by multiple industry sectors and businesses as being unfair. Now, Which? in the UK has determined that Qualcomm has not only breached anti-trust rules, but the UK population could be jointly owed £480 million.
Why has Qualcomm come under fire regarding its practices?
While the name Qualcomm may be famous to those involved with electronics, those outside of electronics would rarely come across the company. But thanks to the increasing use of wireless technologies and the development of high-performance SoCs, Qualcomm is starting to get exposure to the consumer market as customers to learn the importance of Qualcomm devices and how those devices affect their products' performance.
Not all exposure is good, and Qualcomm has discovered this as the automotive industry moves to integrate mobile technologies into their vehicles. As many automotive companies began to integrate mobile tech into their vehicles, they quickly noticed that royalties were due to Qualcomm for using their patents and licensing rights.
Since the dawn of cellular communication, the electronics industry has paid such royalties (which Qualcomm has contributed to the development of). Still, the automotive industry made no attempts to hide its feelings. In fact, the royalties' nature was deemed so unfair that a lawsuit was filed, and the FTC investigated Qualcomm for breaching antitrust laws.
Is Qualcomm’s “royalties-model” practice antitrust?
Qualcomm was investigated for violation of antitrust, was found guilty, but an appeal saw the decision overturned. According to the courts that overturned the ruling, Qualcomm was using a highly-competitive model for generating income and is not acting as a monopoly. Legally speaking, Qualcomm has been cleared of breaching antitrust laws, but when examined closer, it can be seen why Qualcomm’s license practice is unfair and costly for consumers.
Under normal circumstances, if a designer wants to develop a Wi-Fi product, all they need to do is purchase a Wi-Fi chip from a supplier, put it into their device, and then sell it. The Wi-Fi standards are developed by IEEE who get funding from licensing standards and logos (such as Wi-Fi certified). Still, no money is made when a manufacturer develops a Wi-Fi SoC and sells that device to either one or a million customers.
However, when cellular technologies are developed (such as 4G and 5G), Qualcomm has repeatedly been able to direct those involved with mobile communication standards to use technologies whose patents are held by Qualcomm. As a result, anyone involved with mobile technologies' development will undoubtedly breach one of Qualcomm’s patent rights.
To make matters worse, since Qualcomm holds many patents used in mobile technology, they can decide who can and cannot make modem ICs. Qualcomm’s mobile technologies market share usually sees designers only having one company they can use; Qualcomm. From this privileged position, Qualcomm then tells its customers that if they do not purchase a license (of which has been stated to be too expensive), the company refuses to sell chips thereby locking the customer out of the mobile technologies industry.
Which? Report Could Bring More Trouble for Qualcomm
Qualcomm could overturn the result in the US, but the continual complaints from the automotive industry have brought its practices to light, and Qualcomm may be in for another rough ride in the UK.
A recent report in the UK by Which? has caught wind of the situation and have made a clear statement declaring that Qualcomm’s activities do indeed breach antitrust laws. As such, Which? determined that from 2015 till today, customers have been overcharged on their handsets due to the licensing costs shifted to the end-user. The estimated total that Qualcomm has taken illegally is approximately £480 million, or £17 per person.
Since individual people cannot realistically sue a company, Which? is considering to act in the interest of the public to bring Qualcomm before a UK court to settle the matter, for this to be done, special permission will need to be granted by the Competition Appeal Tribunal, but a settlement between Qualcomm and Which? can be done before the case is heard in court.
After analysing the announcement by Which? it seems that their decision is a result of Qualcomm demanding money for licenses as well as royalties.
Generally speaking, the use of licenses is fair and allows companies (such as Qualcomm) to generate revenue due to their IP development. A license model is useful for businesses that have healthy revenue streams that are established.
Royalties are also a fair business model which allow anyone to design and develop a device, and each device pays a royalty as a result of IP development. A royalty model can be useful for businesses who lack revenue streams (such as startups) who cannot afford licenses, but instead, pay on each device sold.
But charging for a license, a royalty, and the cost of the device plus profit on the device is clearly too much. Customers ask why pay royalties if they are already paying a license, and why pay a license if Qualcomm gets a share of the final value of the product. Furthermore, why are there no alternative devices in the market? If a customer refuses the licence, then Qualcomm won’t supply them with any devices, so what option does an engineer have?
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