Baseband processors are used in mobile phones and other consumer products, and manage mobile communications.
In a media release, the FTC alleged that Qualcomm had used its dominant position as a supplier of certain baseband processors "to impose onerous and anti-competitive supply and licensing terms on mobile phone manufacturers and to weaken competitors".
Some Qualcomm patents define portions of industry standards that are used for mobile connectivity. In such cases, in exchange for having their patented technologies included in the standard, the owners usually agree to license these patents on fair, reasonable, and non-discriminatory, or "FRAND", terms.
The FTC's lawsuit alleges that Qualcomm:
- Maintains a "no licence, no chips" policy under which it will supply its baseband processors only on the condition that mobile phone manufacturers agree to Qualcomm’s preferred licence terms;
- Refuses to license standard-essential patents to competitors; and
- Extracted exclusivity from Apple in exchange for reduced patent royalties.
"The FTC is seeking a court order to undo and prevent Qualcomm’s unfair methods of competition in violation of the FTC Act," the release said.
"The FTC has asked the court to order Qualcomm to cease its anti-competitive conduct and take actions to restore competitive conditions."
Reacting to the FTC action, Qualcomm said it believed the complaint was based "on a flawed legal theory, a lack of economic support and significant misconceptions about the mobile technology industry".
"The complaint seeks to advance the interests and bargaining power of companies that have generated billions in profit from sales of products made possible by the fundamental 3G and 4G cellular technology developed by innovators like Qualcomm," the company claimed.
"The portrayal of facts offered by the FTC as the basis for the agency’s case is significantly flawed. In particular, Qualcomm has never withheld or threatened to withhold chip supply in order to obtain agreement to unfair or unreasonable licensing terms. The FTC's allegation to the contrary — the central thesis of the complaint — is wrong."