The Strategist

Qualcomm gets record fine in South Korea

12/28/2016 - 14:49

American manufacturer of mobile processors Qualcomm has been fined more than $ 850 million for breach of antitrust laws. The company has been criticized worldwide for its business of licensing patents, reports The Wall Street Journal.

Kārlis Dambrāns
Kārlis Dambrāns
On Wednesday, December 28, Korea Fair Trade Commission (KFTC) announced that Qualcomm illegally restricted access to their patents for other chipmakers. Company forced the mobile phone manufacturers to enter into dishonest license agreements, and threatened to cut off supplies of important chips in case Qualcomm’s demands are rejected.

The company has used its position in the mobile chips market as a negotiations tool with smartphone manufacturers, forcing them to accept unfair terms of cooperation, said Secretary General of the KFTC Shin Young-son.

KFTC fined Qualcomm 1.03 trillion won (853 million dollars), which is the biggest pecuniary punishment for a single company in history of the South Korean antitrust regulator.

The Commission stated: «Qualcomm, a holder of standard essential patents, as well as a monopoly supplier of chipsets controlling them from production to sales, broke its agreement to license patents on fair reasonable and nondiscriminatory terms, known as FRAND».

Qualcomm denies the allegations and claims that the company does not restrict sales of other suppliers of chips. The practice of devices licensing is normal for all industries, said Qualcomm’s General Counsel Don Rosenberg.

According to him, KFTC’s decision to impose a fine on Qualcomm is "unprecedented and unjustified", and the company will appeal to the Seoul High Court. In a statement, Qualcomm said that the company has been practicing licensing in South Korea and around the world for decades, and it is unclear why the regulator has not raised this issue before.

Now, Korea Fair Trade Commission requires that Qualcomm chip manufacturers open access to its key patents, cease to impose unfair terms in contracts and open access to separate licensing of fundamental patents. 

In the past fiscal year, Qualcomm has received $ 25 billion in revenue, a third of which came from the business of licensing patents. In 2015, the company agreed to settle claims of the Chinese competition authority, paid a fine of 975 million dollars and made changes in their scheme of working with partners.