Qualcomm settles with Taiwan's competition authority; will pay $93 million, withdraw appeal

10 August 2018 9:15am

10 August 2018. By Xu Yuan and Leah Nylen

Qualcomm has reached a settlement to resolve an antitrust complaint by Taiwan’s competition authority, the US chipmaker said late Thursday, and will pay NT$2.73 billion, or about $93 million.

Under the terms of the settlement with the Taiwan Fair Trade Commission, or TFTC, Qualcomm pledged to engage in fair and good-faith license negotiations for it patents essential to industry cellular standards. The company also agreed to withdraw an appeal challenging a cease-and-desist order and a fine of NT$23.4 billion ($773 million) imposed by the TFTC last year.

Qualcomm said the settlement doesn’t require specific financial terms nor does it require the company to license its standard-essential patents, or SEPs, on a component level. If licensing terms can’t be reached, Qualcomm and the prospective licensee would proceed with a dispute resolution mechanism. The company will also make biannual reports on its licensing to the TFTC for the next five years.

The company promised to undertake several investments in Taiwan over the next five years, including the development of a Taiwanese center for operations and semiconductor manufacturing.

“We are pleased to have reached a mutually beneficial resolution with the TFTC that puts the litigation behind us,” Alex Rogers, the president of Qualcomm’s patent licensing business, said. “We are happy to reaffirm our commitment to licensing our valuable intellectual property under principles of fairness and good faith.”

In a statement released today, the TFTC said it believes Qualcomm’s investment plan will generate overall economic and public benefits and boost the development of Taiwan’s semiconductor industry, mobile communications sector and 5G technology.

This is the first time the regulator has reached a settlement during the course of litigation based on the public interest.

Taiwan’s antitrust authority first opened an investigation into Qualcomm in February 2015, after the company agreed to pay a fine of 6.088 billion yuan ($975 million) to one of China’s competition regulators to resolve antitrust concerns.

In October, the TFTC found that Qualcomm’s patent-licensing practices related to baseband chips for the CDMA, WCDMA and LTE standards violate the country's competition law. The TFTC said it interviewed at least 20 domestic and foreign cellphone makers, chip suppliers and others in the communications equipment industry as part of its probe.

The $773 million fine was the largest ever imposed by Taiwan’s competition authority. Qualcomm appealed to the Taiwan Intellectual Property Court, which held its first hearing in the case in March. The reduced $93 million fine that was announced today has effectively already been paid to the TFTC, because Qualcomm had previously arranged with the regulator to pay the original fine in monthly installments.

The record-breaking fine was imposed after intense internal debate at the TFTC, with some commissioners arguing that the case should be settled without a fine. Three of the TFTC’s seven commissioners disagreed with the penalty and published dissenting opinions.

The penalty also drew concern from local industry and other Taiwanese agencies who worried Qualcomm might seek to reduce its investments in Taiwan.

Taiwan's Ministry of Economic Affairs pointedly said that the ruling failed to take into account Qualcomm's contribution to the industry at large and future cooperation opportunities, and that the decision could have an impact on foreign investment in Taiwan in the future.

Qualcomm remains in a dispute with four major Taiwanese smartphone manufacturers — Foxconn, Pegatron, Wistron, and Compal Electronics — who the chipmaker says are withholding patent licensing fees at the behest of Apple. The company sued the Taiwanese companies in US federal court last year. It is also locked in a bitter antitrust-patent fight with Apple in the US, Germany and China.

Qualcomm has also come under antitrust scrutiny by competition authorities in South Korea, the US and the European Union.

Global Privacy in 2018