Qualcomm CEO defends chip licensing business in the FTC trial

  Qualcomm and the FTC face the US District Court in San Jose.

Qualcomm and the FTC face the US District Court in San Jose, California.

Stephen Shankland / CNET

The Federal Trade Commission believes that the phone is held back by Qualcomm's business practices. But Qualcomm's CEO Steve Mollenkopf says the way his company sells chips to smartphone manufacturers is best for everyone involved.

Qualcomm's "no license, no chips" policy is the heart of the FTCs case against Qualcomm which lawyers argue before Judge Lucy Koh in the US District Court in San Jose this month. Mollenkopf was among witnesses who testified on Friday.

Under the policy, companies must license Qualcomm's patents before it will sell them chips. Qualcomm customers, like Apple, don't like one.

Mollenkopf says that the exercise is simply the best way to get things done for the whole industry, not just for his company. That's because Qualcomm's patent licenses cover much more technology a phone can use than just the company's modem switches, which allow phones to talk to cellular networks.

"We only sell to companies with licenses because not every IP [intellectual property] is covered in the chip. What we want to do is make sure [phone makers] is covered," said Mollenkopf. He pointed to the security framework used when connecting the phones to a network as an example. "It's not reproduced in the piece, it's not in the phones, but it's in all these things," said Mollenkopf. "There is a huge amount of iP we generate that makes the system work."

FTC, supported by modem chip rival Intel and iPhone maker Apple, filed a suit two years ago claiming that Qualcomm has a monopoly on modem chips and damaged competition by trying to maintain its power. The experiment has revealed the inner workings of tech's most important business, smartphones, which show how vendors break for dominance and profit.

Apple's 2011 and 2013 deals to buy Qualcomm's modem tags are important examples. Prior to the 2011 agreement, Apple approached Qualcomm for the opportunity to exclusively supply Qualcomm's modem badges in the iPhone as opposed to a $ 1 billion incentive payment, Mollenkopf tested. An incentive payment was made even if the amount was not disclosed.

Tony Blevins, Apple's Vice President of Purchasing, gave a completely different view of the Apple Qualcomm partnership in previous testimonies on Friday.

"As we source components, we usually try to get at least two sources and probably no more than six," he says. "We believe competition and market forces are very important to us to achieve the best possible influence. With exclusivity, there would be no competition. "

Blevins said Qualcomm is anything but unique by requiring a customer to license their patents before buying their products. Another chipmaker tried to do it once, but a call from Blevins to his CEO changed this approach, Blevins said.

However, Mollenkopf defended the company's practice, yet Qualcomm believes throwing its technology licensing business out of its chip sales business in 2015, an idea that Mollenkop, recently appointed CEO

"Licensing allows us to invest early in technology. It generates a lot of IP, says Mollenkopf. The company uses revenues for research and development in new technology, he added.

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