Wednesday , October 5 2022

Qualcomm did not have all the power of negotiation of the license, the executive witness



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Samsung has long used Qualcomm chips on their devices.

Angela Lang / CNET

Qualcomm does not have full force when it comes to negotiating license agreements, a company executive said on Friday. On the other hand, mobile phone manufacturers have options to reach the terms that they consider most favorable, he said.

Fabian Gonell, senior vice president of the licensing strategy and legal adviser to the Qualcomm licensing business, said during a trial that Samsung, Sony Mobile and others have reached agreements with Qualcomm that differ from their standard agreements. He noted that Qualcomm did not stop supplying chips while discussing license agreements and added that there was no part of the Qualcomm license agreements that were not negotiable.

"We had a disposition that had to do with the fulfillment of the exports [that was] considered untouchable, "said Gonell." But at some point, someone wanted to play it, and it was tactile. "

The testimony of Gonell Friday is revealed on Qualcomm's licensing practices. He tried to counteract Apple statements and others who considered that they had no choice but to accept the license terms they did not like because they did not lose access to the Qualcomm chips.


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It took Samsung and Qualcomm two years to sign a new license agreement, said Gonell.

"Everything was unusual," said Gonell. "It was an incredibly personalized deal. Almost everything was a problem. Samsung is very sophisticated. They are very hard negotiators."

What ended Samsung was paying Qualcomm a license fee in advance "an order of magnitude greater" than the average, said Gonell. Samsung transferred patents to Qualcomm and obtained a cross-license from its patent portfolio. The type of "risk sharing" rights was variable and was based on the performance of Samsung phones, he said.

In the case of Sony Mobile, the two ended up accepting a type of royalty lower than the typical Qualcomm rate, said Gonell.

Qualcomm has been battling the Federal Trade Commission in a justice room in San José, California, since January 4. Tuesday afternoon, the FTC wrapped up his case against the company and since then Qualcomm has been presenting its defense.

The FTC has accused Qualcomm of operating a monopoly on wireless chips, forcing clients such as Apple to work with Qualcomm exclusively and charge excess licensing fees for their technology in part by exercising their "unlicensed, chips ". But Qualcomm says that the demand of the FTC is based on the "faulty legal theory". He also said that customers chose their chips because they are the best and they have never stopped offering processors to customers, even when they fight against licenses.

No license, no listings

The "license, without cardholder policy" is the heart of the FTC case against Qualcomm. Qualcomm sells processors that connect phones with cellular networks, but also licenses their broad portfolio as a group. For a set fee, based on the final sale price of the device, usually a telephone, the manufacturer manages to use all of Qualcomm's technology. They are the manufacturers of phones that pay the license fee, not the xipmakers.

To access the Qualcomm chips, which are widely considered in the advantage of wireless innovation, a telephone manufacturer must first sign a patent licensor agreement with Qualcomm. Qualcomm has been a leader in the 4G LTE, and is ahead of rivals in the 5G market beginning. High-end phones, such as those of Samsung, tend to use their modems. But the FTC argues that such a requirement hurts competition and cementing the monopoly power of Qualcomm.

Apple's chief operating officer, Jeff Williams on Monday they testify that his company felt that he had to sign contracts for amounts he considered too high: a royalty of $ 7.50 per iPhone to maintain access to Qualcomm chips.

"We were looking at an increase of more than one billion dollars in the year on licenses, so we had a weapon at the top," said Williams as he explained why Apple signed another license agreement in 2013, all and be unhappy with the terms. He added that Apple wanted to use Qualcomm chips for its newest devices, but Qualcomm refused to sell processors for the iPhone.

Other companies such as Huawei and Lenovo made similar comments during their testimony. But Gonell said yesterday that Qualcomm has never cut the supply of chips to companies during contract negotiations and used the example of Samsung and Sony to show that companies can push different terms in their agreements.

He noted that Oppo and Vivo stopped paying Qualcomm for more than one year due to a license dispute, while Huawei also cut their payments. Apple, through its contract manufacturers, has not paid the Qualcomm license technology in more than two years. But Qualcomm continued sending all the tokens, Gonell said.

"If there is a licensee who discusses the terms of his license, we will continue offering listings if they want it," he said.

Battle license

The FTC, helped by Intel's and iPhone's Intel processor maker Apple, filed suit against Qualcomm two years ago. The U.S. states that Qualcomm has a monopoly on modem cards and hurt competition trying to maintain its power. Qualcomm, "excessive" rights fees, prevented rivals from entering the market, increased the cost of phones and, in turn, hurt consumers, who faced higher telephony prices, said the FTC.

The FTC in the trial has called business witnesses such as apple, Samsung, Intel and Huawei and convened experts to bear witness to the alleged damage that Qualcomm license practices have caused to the mobile industry. The process has revealed the internal functioning of the most important business of technology, smartphones, which show how providers fight for the domain and profit.

When granting a license to a telephone manufacturer, Qualcomm charges an initial fee and then collects the copyright rights according to the sale price of the device, Gonell Sunday said. When Qualcomm first licensed its CDMA technology, it acquired a royalty of 5 percent on the phones. This rate was reduced when 4G LTE came out, and China set a new lower rate in November 2017, 3.25 percent, which Qualcomm came out later through its licensing base. This movement also limited the value of mobile phones, of which its royalty is based, to $ 400, even if a device is sold to triple this.

Gonell said on Friday that the Qualcomm limit for a full portfolio license is $ 20 per device and $ 13 for only the essential Qualcomm patents.

Qualcomm has argued that its wide portfolio of patents and innovations justify its tariffs. CEO Steve Mollenkopf, who took the stand a week ago, defended company license practices, saying that the way in which your business sells smartphone manufacturers' chips is the best for all those involved and it is the easiest way to license technology .

Gonell reiterated these comments, pointing out that cell phone license technology has been a common practice in the industry. He said that the license of all the technology of Qualcomm to the xipmakers would not make sense, something that Qualcomm has argued since the beginning of the case.

The FTC has said that Qualcomm's refusal to issue licenses to its rivals is part of its efforts to maintain its monopoly. Judge Lucy Koh agreed in November and assured that Qualcomm should license its wireless chip patents to its chip competitors such as Intel.

"We're talking about mobile fundamentals. Standards are written in a way that describes the user's team," Gonell said on Sunday. "If you are licensing the modem chip level, you will also have to make some license at the device level."

He noted that this practice "will make the license much more annoying and more ineffective."

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