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Court decision means Qualcomm can continue its controversial business practice for now



Back in May, Judge Lucy Koh ruled against chipmaker Qualcomm and in favor of the Federal Trade Commission in a non-jury trial. Koh's ruling demanded that Qualcomm change the way it sells chips to phone manufacturers and renegotiate the contracts with them. The trial was heard over a ten-day period in January, and Judge Koh heard from Apple and other companies about Qualcomm's business practices. These include the outfit's "No license, no chips" policy, royalties calculated using the retail price of a phone, and Qualcomm's refusal to license standard patents to competitors. These are patents that manufacturers need to license so that their products can meet technical standards. Because of this, SEP royalties are believed to be fair, reasonable and non-discriminatory (FRANCE).
Qualcomm quickly appealed the decision and asked Judge Koh to freeze his ruling (a stay, in legal terms) until Qualcomm has exhausted his legal alternatives. The company says it does not want to renegotiate all the contracts it has with the manufacturers just to win on appeal, forcing it to revert to the previous terms. Judge Koh said no, so Qualcomm turned to the Ninth United States Court of Appeal, which granted the stay Friday.

It may take a year for the trial to end

According to the Wall Street Journal, the appeals court issued a seven-page order granting the stay, noting that Qualcomm "at least has shown the presence of serious questions" about Judge Kohs decision. In addition, the court also ordered oral arguments on the appeal to begin in January 2020.

As you might expect, the FTC was not happy with the ruling. Bruce Hoffman, director of the FTC's competition agency, said: "We respect the decision and look forward to defending the district court's decision on merits." Hoffman notes that some restrictions placed on Qualcomm are still in effect. There are some monitoring requirements that still need to be followed, and Qualcomm is not allowed to interfere or prevent customers from talking to the government about antitrust matters that apply to the company. But Qualcomm is still a big win since it doesn't have to change business practices for as long as it takes before the lawsuit comes to a close. It can take as long as a year.

The Appeal Court also said that it granted the stay because the government is divided on the judge's original ruling. While the FTC argued that issuing a stay would allow Qualcomm to continue its competitive actions, the Justice Department said the ruling against Qualcomm could be a threat to national security since it could prevent Qualcomm from being a global leader in 5G. The court wrote in the decision "This case is unique, as the government itself is divided on the appropriateness of the verdict and its impact on the public interest."

It's been a weird year for Qualcomm. In April, just when a multi-billion lawsuit between Apple and Qualcomm was coming to an end, the two companies settled a lawsuit, and both companies brought lawsuits they had filed against each other. Apple paid Qualcomm an estimated $ 4.5 billion, and Qualcomm gave Apple a six-year license (with a two-year option) and a multi-year chip supply agreement. Settlement news drove investors into Qualcomm's shares, sending them from $ 57.18 the day before the settlement to a high of $ 89.29 just two and a half weeks later. But when Judge Koh's ruling was announced, the stock fell to $ 65.37. Despite news of the stay, Qualcomm's shares closed 4.7% to $ 73.52 on Friday during the escalation of the US-China trade war.


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