Steve Mollenkopf, CEO of Qualcomm, at the Mobile World Congress in Barcelona on Feb. 23, 2016.
Brad Quick | CNBC
Qualcomm stock rose over 4% on Tuesday after a U.S. Appeals Court overturned the Federal Trade Commission’s 2019 antitrust victory against the the world’s largest smartphone modem chipmaker.
The ruling is the end of a chapter in a saga which saw Qualcomm’s primary businesses, including its lucrative patent licensing business, under fire from regulators around the world. The FTC originally brought the case in 2017.
“We decline to ascribe antitrust liability in these dynamic and rapidly changing technology markets without clearer proof of anticompetitive effect,” wrote Consuelo M. Callahan, circuit judge for the ninth district.
“The Court of Appeals unanimous reversal, entirely vacating the District Court decision, validates our business model and patent licensing program and underscores the tremendous contributions that Qualcomm has made to the industry,” Qualcomm general counsel Don Rosenberg said in a statement.
Last year, U.S. district judge Lucy Koh sided with the U.S. FTC, which was accusing the company of using “anticompetitive tactics” to license key wireless technology and monopolize the market for modem chips. At the heart of the dispute were the fees that Qualcomm charged wireless patents necessary to make a smartphone modem and how it bundled those fees with its own chips.
Koh ruled that Qualcomm engaged in “extensive” anticompetitive behavior against smartphone makers like Apple and Samsung, including threatening to cut off chip supplies or withholding technical support.
Koh issued an injunction limiting Qualcomm’s business practices, including ordering it to renegotiate licensing agreements, which was put on hold pending appeal. The 3-0 ruling from the Court of Appeals for the Ninth District on Tuesday overturned that decision.
Apple officials, including its COO, had testified in the case, and the iPhone maker testified in its own civil trial with Qualcomm that Qualcomm’s licensing policies were anticompetitive. Apple settled its related legal battle with Qualcomm and agreed to use Qualcomm chips in its iPhones last year shortly before the FTC victory.