The United States chip making giant Qualcomm was meted out a record $873 million fine in South Korea over issues related to unfair business practices with respect to patent licensing and modem chip sales which was again upheld on Wednesday by a court in the country. Qualcomm said that it would contest the latest court verdict.
This latest ruling was delivered by the Seoul High Court. Analysts see this verdict as a setback for the company even as it is fighting its business customers over issues related to royalties and antitrust violations all across the world. The company is also facing a case in its home country of the US brought against it by the US Federal Trade Commission.
Ruling that Qualcomm had abused its dominant market position, the appeal by the company against the penalty decision of the Korea Fair Trade Commission (KFTC) in 2016 was rejected by Judge Noh Tae-ak.
“The defendant exerted a significant influence over mobile phone manufacturers either through unfair relationships or making them depend on the defendant’s supplies of modem chipsets,” Noh said in his ruling.
Some of the remedies proposed by the KFTC were also upheld by the court which included a direction to Qualcomm to deter form business practices that discriminate against rivals who sought to use its essential mobile patent and develop competing modem chips to supply smartphone makers.
However the South Korean regulator’s claim by signing “comprehensive” licensing deals, Qualcomm had disadvantaged smartphone makers, was dismissed by the court. That will now allow Qualcomm to continue to seek a commission of the price of the phone as a licence fee.
“We disagree with the court’s decision to accept parts of the KFTC order and will immediately seek to appeal those provisions to the Korea Supreme Court,” Qualcomm Executive Vice President Don Rosenberg said in a statement.
The company was “gratified” that the court had reversed the KFTC’s direction of renegotiating the licensing terms, Qualcomm said.
There was no comment available from the regulator on whether it would appeal against the court ruling on its own appeal.
Most of the profits of Qualcomm are generated from a business segment that invents technologies and licenses them which suits the company because it is the largest company in the world that makes ships for mobile phones.
According to IBES data from Refinitiv, for its first quarter, Qualcomm beat market expectations of forecast of revenues for in that segment as it estimated revenues of between $1.3 billion and $1.5 billion for the period.
“This ruling will not really affect or weaken Qualcomm’s status in the market, because we are heading into the 5G era and Qualcomm is one of a very few companies that can manufacture 5G modem chips,” said Park Sung-soon, an analyst at Cape Investment and Securities.
“Handset makers and telecom companies will still have to heavily rely on Qualcomm’s products regardless of its supposedly unfair business practice.”
(Adapted from Reuters.com)