Seoul Court upholds W1tr penalty for Qualcomm

The Seoul High Court ruled on Wednesday in favor of the nation’s antitrust watchdog in a legal battle with US chipmaker Qualcomm over a record penalty of 1 trillion won ($837 million). 

“The court dismissed Qualcomm’s requests and partially sided with the Fair Trade Commission,” said the FTC in a statement on the day.

The “partial” decision is due to the court deeming that some corrective actions taken against Qualcomm were illegal, although the imposition of the penalties was lawful, the FTC said.

In the ruling, the court acknowledged Qualcomm’s abuse of its market dominance by arbitrarily rejecting and limiting licenses and not providing chips without licenses for handset makers -- which are clients for smartphones but competitors for chips. But the court still did not recognize that Qualcomm forced its clients -- handset makers -- to buy all licenses even if they want either standard-essential patents or nonstandard-essential patents. 

Hours later, Qualcomm released a statement, saying, “We disagree with the court’s decision to accept parts of the Fair Trade Commission’s order and will immediately seek to appeal those provisions to the Korea Supreme Court.”

It went on to say that, “But we are gratified that the court rejected the commission’s finding that our licensing terms are not fair, reasonable and non-discriminatory and reversed the commission’s remedial order to renegotiate those licenses.”

The legal battle between the US firm and the FTC dates back to December 2016 when the competition authority found Qualcomm guilty of monopolistic practices, imposing penalties of over 1 trillion won and ordering the company to carry out renegotiations with its clients over patent use.

In response, the chipmaker filed an appeal to the Seoul High Court in February 2017.

The “trial of the century” was participated in by Apple, Samsung Electronics, LG Electronics, Intel and Huawei to support the FTC, although Apple, Samsung and LG decided not to get involved in the case after negotiating with Qualcomm.

One of the key points was whether Qualcomm -- which has around 25,000 standard-essential patents in mobile communications -- violated FRAND terms, unfairly hindering business activities of other companies.

FRAND -- fair, reasonable and nondiscriminatory -- is a standard set by the European Telecommunications Standards Institute to make patent holders provide patent licenses under fair and rational conditions as a foundation for new ideas.

Qualcomm’s worldwide modem chipset revenue and patent royalties are approximately $22.5 billion annually. The Korean market accounts for roughly 20 percent of its global sales, although that varies slightly from year to year, according to the FTC.

The historic trial between the US tech giant and the Korea’s FTC involved more than 50 lawyers from seven major law firms. Similar investigations and legal battles between Qualcomm and antitrust regulators over the unfair business practices are ongoing in other nations, including the US, European Union, China and Taiwan.

This was not the first legal battle between the FTC and Qualcomm. In 2009, the US chipmaker was fined 260 billion won by the antitrust regulator for deterring competition through discriminatory charges.

Earlier this year, the FTC reduced that penalty to 220 billion won, after the Korean Supreme Court overturned one of several lower court rulings against the US tech firm.

By Shin Ji-hye (shinjh@heraldcorp.com)