Tuesday , January 19 2021

The FTC case against Qualcomm does not hold up to reality




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Last Tuesday morning, I was asked by FTC to hide the case against Qualcomm in San Jose, California. The court passed the day at the house. On this day the main FTC and expert witness began with Professor Karl Shapiro. Shapiro is a Professor of Economics at the Industrial Institute of Hass School of Business at the University of California, Berkeley, and previously had an anti-trust position in the Juice Department. He prepared a report on Qualcomm Market Power (monopoly) in CDMA and Premium LTE Modems. Focused on their analysis between 2006-2016. & Nbsp; He claimed that three of Klawcom's policies have given it market power (friendly, reasonable and discriminatory) for the demand of "super friend" royalty. & Nbsp; A super – France license suggests that QuellCom has made a lot of money. Those policies were: Promotional payments for "no-license-no-chips" policy, phone OEMs (especially the 2013 Apple contract), and refusal to license rival chipmakers on Standard Essentials Patents (SEP).

No-license-no-chip policy was designed to design the chips so that the new handset OEMs take appropriate patent licenses before making the phone. Without this policy, OEMs can make smartphones with Qualcomm chips, then only Quollcom refuses to pay for all the additional IPs applied to this phone. Qualcomm's only remedy will be to claim an OEM for patent infringement, a costly process that can take years in each case. & nbsp; In the meanwhile, these OEMs may continue to sell phones and profits without paying Qualcomm's IP license. As you can image, handset OEMs will often stop paying as much as possible for the required licenses. While the delay is delayed, OEMs are delayed, while EMEs have overridden terminating licensing agreements, however, Qualcomm claims that they will continue negotiating good faith until the OEM continues to sell chips, even though their license agreement Delayed & Nbsp; This will reject FTC's argument that Qualcomm uses a chip supply as leverage to extract a high royalty from the OEM. The only case to extract FTC was the delay in the supply of new sample chips to LG when the LGA had not yet signed a new WCDMA license.

In the case of the 2013 Apple contract, Apple received large promotional payments ($ 640 million) using QuolCom modems in large proportion. & Nbsp; Evidence was presented that Intel (using modes bought from Infinine) tried to win Apple again, starting with the iPad (for data-only modems) business. FTC had speculated that there was a barrier to the entry of Apple to some of Apple's (some) incentive payments to break the specialty. There was a very small amount of iPad opportunity to compensate for the loss of promotional payments. However, Intel was not capable of modifying Qualcomm Modems in Modems handsets at the time, because it lacked key features and performance and did not meet Apple's requirements. But, in 2016, when Apple launched iPhones with Intel modems, Apple sacrificed Qualcomm payouts. So this question asks: What was the biggest obstacle in the agreement? It seemed that Intel seems to be preventing investing the capital needed to develop the product to meet Apple's requirements, or at the end it does not prevent Apple from using models. The economic test for shippers was whether Intel could purchase penalties and still get profits. But the iPad design volume was too small and Intel's modem was low, so is it the real investigation of monopoly?

Professor Shapiro had suppressed the case that his analysis has found that Qualcomm enjoyed the power of monopoly from 2006 to 2016, so it failed, that the customer has had a decent expense. No, there was no real competitive solution from other vendors. In addition, Professor Shapiro's own report shows that Qualcomm's stock had declined before 2016 and continued to do it in CDMA and Premium LTE in 2017 and 2018. Apparently Quellcom's market share was not due to monopoly power, but due to lack of suitable options. & Nbsp; So he asks another question: Why did FTC take it to Qualcomm Court?

In video deposition, Merv Blaker (former Qualcomm executive) was interviewed and told about how the company had rejected "full" licenses to competitors, in particular, he recalled asking VIA and Samsung for a license. Qualcomm's policy was not to provide full license to the competitors (chip makers), because the royalties for all applicable patents had already been paid by the handset and paid by the OEM. FTC's dispute is difficult to understand, which is not a barrier to competitive chipmakers' licensing entry, when they can already use Qualcomm's technical IPs (because handsets pay OEMs royalties). How did the Intel or Mediatek help pay for royalty to Qualcomm for cellular SEP and help improve their margins?

Afterwards, Qualcomm called its first two witnesses: the company's co-founder Dr. Irwin Jacobs and Senior Vice President of 4G and 5G Engineering Durga Maladi Jacobs gave a detailed history of the company and its original mission. Qualcomm also said about the dangers of CDMA (Code Division Multiple Access) business – which took the digital 2G technology to create – many ideas are too complex and expensive that will never work for consumer markets. CDMA Excellence on CDMA Cadre Frequency Distribution Multiple Access (FDMA) and Time Division Multiple Access (TDMA) was initially adopted by numerous carriers, despite the initial limited number of CDMA modems chip suppliers (Qualcomm). With CDMA, more subscribers can be supported in the same bandwidth. & Nbsp; With 3G, the development of CDMA has become a basis for all networks globally, as the widely used European standard, WCDMA (Wideband-CDMA), was built on CDMA.

Qualcomm CEO Irwin Jacobs stands against patent wall of Quoccom headquarters in San Diego, California on Wednesday, April 11, 2001. Photographer: Dennis Porey. Bloomberg News.Blomberg News

Irwin's cross-examination focused on a specific case where Qualcomm is believed that LG's development chips were stopped for a while, while still negotiating patent licenses for the new 3G WCDMA standard. This issue was finally resolved, and Qualcomm had never prevented commercial chips from LG. & Nbsp; There was also a degression for the FTC, for example WCDMA Chips, which included CDMA and premium LTE modems for the FDC case.

Durga Maladi, SVP & amp; At Qualcomm 4G / 5GM, there are 400 US patents on its name; And in his testimony, he emphasized that the company is not only in the market, but also in the standards and the holistic end-to-end system is developed from the perspective of the solutions.

Based on today's testimony, I do not think there is an attractive case in FTC. Especially when Mediatack entered the CDMA market and there was a significant reduction in Qualcomm's market share while migrating to Apple Intel modems. While Qualcomm had the first advantage in the market with new technologies, Intel, MediaTek, Samsung and HySilikon were frequently reduced by competitors.

I will attend future court dates because my schedule allows me to see how the case is available. And remember, the burden of the evidence is on FTC that damages consumers by making Qualcomm competition competitive (by high prices).

Kevin Cruywell

Principal Analyst, TRIRS Research

Twitter: @Crewwell

Author and members of the TRIRS Research Staff do not have equity positions in any company specified. TIRIAS tracks and advises research companies in electronics ecosystem from semiconductors to systems and sensors to the cloud.

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Last Tuesday morning, I was asked by FTC to hide the case against Qualcomm in San Jose, California. The court passed the day at the house. Key FTC Expert witness started with Professor Karl Shapiro. Shapiro is a Professor of Economics at the Industrial Institute of Hass School of Business at the University of California, Berkeley, and previously had anti-trust positions in the Juice Department. He prepared a report on Qualcomm Market Power (monopoly) in CDMA and Premium LTE Modems. Their analysis focused on the time between 2006-2016. He claimed that three of Klawcom's policies have given it market power (friendly, reasonable and discriminatory) for the demand of "super friend" royalty. Super-France licenses indicate that QuellCom has made a lot of money. Those policies were: Promotional payments for "no-license-no-chips" policy, phone OEMs (especially the 2013 Apple contract), and refusal to license rival chipmakers on Standard Essentials Patents (SEP).

No-license-no-chip policy was designed to design the chips so that the new handset OEMs take appropriate patent licenses before making the phone. Without this policy, OEMs can make smartphones with Qualcomm chips, then only Quollcom refuses to pay for all the additional IPs applied to this phone. Qualcomm's only remedy will be to claim an OEM for patent infringement, a costly process that can take years in each case. Meanwhile, these OEMs may continue to sell phones and profits without paying Qualcomm's IP license. As you can image, handset OEMs will often stop paying as much as possible for the required licenses. OEMs sometimes occur when delayed, while OEMs re-link the licenses ending again, however, Qualcomm claims that it will continue to sell chips to OEMs as long as they continue to negotiate good faith, even though their license agreement Expires. This will reject FTC's argument that Qualcomm uses a chip supply as leverage to extract a high royalty from the OEM. The only case to extract FTC was the delay in the supply of new sample chips to LG when the LGA had not yet signed a new WCDMA license.

In the case of Apple's contract of 2013, Apple received a major incentive payment (~ $ 640 million) if it used to be exclusive of Quollcom modem. Evidence was presented that attempts to win Apple's business again, starting with Intel (using modem purchased from Infinon) for the iPad (data only for modems). FTC had speculated that there was a barrier to the entry of Apple to some of Apple's (some) incentive payments to break the specialty. There was a very small amount of iPad opportunity to compensate for the loss of promotional payments. However, Intel was not capable of modifying Qualcomm Modems in Modems handsets at the time, because it lacked key features and performance and did not meet Apple's requirements. But, when Apple launched the iPhone with Intel modems, Qualcomm paid sacrifices in 2016. So this question asks: What was the biggest obstacle in the agreement? It seemed that Intel seems to be preventing investing the capital needed to develop the product to meet Apple's requirements, or at the end it does not prevent Apple from using models. The economic test for shippers was whether Intel could purchase penalties and still get profits. But the iPad design volume was too small and Intel's modem was low, so is it the real investigation of monopoly?

Professor Shapiro had suppressed the case that his analysis has found that Qualcomm enjoyed the power of monopoly from 2006 to 2016, so it failed, that the customer has had a decent expense. No, there was no real competitive solution from other vendors. In addition, Professor Shapiro's own report shows that Qualcomm's stock had declined before 2016 and continued to do it in CDMA and Premium LTE in 2017 and 2018. Clearly Quowcom's market share was not due to monopoly power, but due to lack of adequate options. So he asks another question: Why did FTC take the case of Quellcom?

વિડિઓ ડિપોઝિશનમાં, માર્વ બ્લેકર (ભૂતપૂર્વ ક્યુઅલકોમ એક્ઝિક્યુટિવ) ની મુલાકાત લેવામાં આવી હતી અને તેણે કંપનીને સ્પર્ધકોને "સંપૂર્ણ" લાઇસન્સ કેવી રીતે નકારી કાઢ્યું તે અંગે જણાવ્યું હતું, ખાસ કરીને, તેમણે વીઆઇએ અને સેમસંગને લાઇસેંસ માટે પૂછતા યાદ કર્યા હતા. ક્યુઅલકોમની નીતિ સ્પર્ધકો (ચિપ ઉત્પાદકો) ને સંપૂર્ણ લાઇસન્સ પૂરું પાડવાની હતી નહીં, કારણ કે તમામ લાગુ પેટન્ટ માટે રોયલ્ટી પહેલેથી જ હેન્ડસેટ OEM દ્વારા ચૂકવવામાં આવી હતી અને ચૂકવણી કરવામાં આવી હતી. એફટીસીની તકરારને સમજવું મુશ્કેલ છે, જે સ્પર્ધાત્મક ચિપમેકર્સનું લાઇસન્સિંગ એન્ટ્રીમાં અવરોધ નથી, જ્યારે તેઓ પહેલેથી જ ક્વોલકોમના તકનીકી આઇપીને મફતમાં ઉપયોગ કરી શકે છે (કારણ કે હેન્ડસેટ OEMs રોયલ્ટી ચૂકવે છે). સેલ્યુલર એસઇપી માટે ક્યુઅલકોમને રોયલ્ટી ચૂકવવાથી કેવી રીતે ઇન્ટેલ અથવા મેડિએટકે તેમની કિંમત ઘટાડવા અને તેમના માર્જિનમાં સુધારો કરવામાં મદદ કરી?

પછીથી, ક્વાલકોમે તેના પ્રથમ બે સાક્ષીઓને બોલાવ્યા: કંપનીના સહ સ્થાપક ડો ઇરવીન જેકોબ્સ અને 4 જી અને 5 જી એન્જિનિયરિંગના વરિષ્ઠ વાઇસ પ્રેસિડેન્ટ દુર્ગા મલાડી. જેકોબ્સે કંપની અને તેના મૂળ મિશનનો વિગતવાર ઇતિહાસ આપ્યો. ક્યુઅલકોમ એ સીડીએમએ (કોડ ડિવિઝન મલ્ટીપલ એક્સેસ) બિઝનેસ – જે ડિજિટલ 2 જી તકનીક બનાવવા માટે લીધો તે જોખમો વિશે પણ તેમણે જણાવ્યું હતું કે ઘણા વિચારો ખૂબ જટિલ અને ખર્ચાળ છે જે ગ્રાહક બજારો માટે ક્યારેય કામ કરશે. સીડીએમએ (CMA) ના આવર્તન વિભાગના બહુવિધ વપરાશ (એફડીએમએ) અને ટાઇમ ડિવિઝન મલ્ટીપલ એક્સેસ (ટીડીએમએ) પર સીડીએમએની શ્રેષ્ઠતા સીડીએમએ મોડેમ્સના ચિપ સપ્લાયર્સ (ક્યુઅલકોમ) ની પ્રારંભિક મર્યાદિત સંખ્યા હોવા છતાં અસંખ્ય કેરિયર્સ દ્વારા તેનો સ્વીકાર કરવામાં આવી હતી. સીડીએમએ સાથે, વધુ સબ્સ્ક્રાઇબર્સને સમાન બેન્ડવિડ્થમાં સપોર્ટ કરી શકાય છે. 3 જી સાથે, સીડીએમએના વિકાસ વૈશ્વિક ધોરણે તમામ નેટવર્કો માટેનો આધાર બની ગયો છે, કેમ કે વ્યાપકપણે ઉપયોગમાં લેવાયેલા યુરોપિયન સ્ટાન્ડર્ડ, ડબ્લ્યુસીડીએમએ (વાઇડબેન્ડ-સીડીએમએ), સીડીએમએ પર બાંધવામાં આવ્યું હતું.

ક્યુઅલકોમ સીઇઓ ઇરવીન જેકોબ્સ બુધવાર, 11 એપ્રિલ, 2001 ના રોજ કેલિફોર્નિયાના સાન ડિએગોમાં ક્વૉલકોમના મુખ્ય મથકની પેટન્ટ દિવાલની સામે ઊભી છે. ફોટોગ્રાફર: ડેનિસ પોરોય. બ્લૂમબર્ગ ન્યૂઝ.બ્લોમબર્ગ ન્યૂઝ

ઇરવીનની ક્રોસ પરીક્ષા ચોક્કસ કેસ પર ધ્યાન કેન્દ્રિત કરતી હતી જ્યાં ક્યુઅલકોમ માનવામાં આવે છે કે એલજીથી વિકાસ ચીપ્સને એક સમય માટે અટકાવી દેવામાં આવ્યા હતા જ્યારે તેઓ હજી પણ નવા 3 જી ડબ્લ્યુસીડીએમએ સ્ટાન્ડર્ડ માટે પેટન્ટ લાઇસન્સની વાટાઘાટો કરી રહ્યા હતા. આ મુદ્દો આખરે ઉકેલવામાં આવ્યો હતો, અને ક્યુઅલકોમએ ક્યારેય એલજીથી વ્યાપારી ચિપ્સને અટકાવ્યો ન હતો. આ એફટીસી માટે પણ ડિગ્રેસન હતું, ઉદાહરણ તરીકે ડબ્લ્યુસીડીએમએ ચિપ્સ સામેલ છે, જે સીડીએમએ અને પ્રિમીયમ એલટીઇ મોડેમ્સનો સમાવેશ કરતી એફટીસીના કેસની બહાર છે.

ક્યુઅલકોમમાં 4 જી / 5 જીના દુર્ગા મલાડી, એસવીપી અને જીએમ, તેના નામ પર 400 અમેરિકી પેટન્ટ છે; અને તેની જુબાનીમાં તેમણે ભાર મૂક્યો હતો કે કંપની માત્ર બજારમાં નહીં, પરંતુ ધોરણોમાં પણ અગ્રણી છે અને સાકલ્યવાદી અંત-થી-અંત સિસ્ટમ સોલ્યુશન્સના પરિપ્રેક્ષ્યથી વિકસિત થાય છે.

આજની જુબાનીના આધારે, મને નથી લાગતું કે એફટીસીમાં એક આકર્ષક કેસ છે. ખાસ કરીને જ્યારે મેડિયાટેક સીડીએમએ માર્કેટમાં પ્રવેશ્યો હતો અને એપલ ઇન્ટેલ મોડેમ્સમાં સ્થળાંતર કરતી વખતે ક્વોલકોમના માર્કેટ શેરમાં નોંધપાત્ર ઘટાડો થયો હતો. ક્વાલકોમને નવી તકનીકીઓ સાથે બજારમાં પહેલી વાર ફાયદો થયો હતો તે સમયે ઇન્ટેલ, મીડિયાટેક, સેમસંગ અને હાયસિલીકોન જેવા સ્પર્ધકો દ્વારા વારંવાર ઘટાડો થયો હતો.

હું ભાવિ અદાલત તારીખોમાં હાજરી આપીશ કેમ કે મારું શેડ્યૂલ કેસ કેવી રીતે મળે છે તે જોવાની પરવાનગી આપે છે. અને યાદ રાખો, પુરાવાના બોજ એ એફટીસી પર છે કે ક્વૉલકોમ સ્પર્ધાને અડગ બનાવીને ગ્રાહકોને નુકસાન પહોંચાડે છે (ઉચ્ચ ભાવો દ્વારા).

કેવિન ક્રુવેલ

પ્રિન્સિપાલ એનાલિસ્ટ, ટીઆરઆઇઆરએએસ સંશોધન

ટ્વિટર: @ ક્રુવેલ

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