European Commission has decided to investigate Qualcomm

On 1 October 2007 the European Commission decided to open a formal investigation into the US Chipset Manufacturer Qualcomm Incorporated following complaints alleging that it had abused its dominant position in the WCDMA (Wideband Code Division Multiple Access) licensing market contrary to Article 82 EC Treaty.

The complaints from both mobile phone manufacturers and other chipset manufacturers allege that Qualcomm’s licensing terms and conditions are not Fair, Reasonable and Non-Discriminatory (FRAND) in accordance with its FRAND commitments.

Qualcomm holds intellectual property rights in the CDMA and WCDMA standards for mobile telephones. The WCDMA standard forms part of the Third Generation (3G) standard for European Mobile Phone Technology. Anyone wishing to manufacture mobile phone technology that is compliant with the established standard must have a licence from Qualcomm.

The alleged infringement concerns the terms under which Qualcomm licenses its patents essential to the WCDMA standard. A FRAND commitment is a commitment to offer intellectual property such as patents to licensees on fair, reasonable and non-discriminatory terms and conditions. The idea is that essential patent holders should not be able to exploit the market position they enjoy by virtue of having technology based on their patent incorporated into the industry standard.

The Commission will be investigating whether Qualcomm has abused its dominant position by:

(i) imposing licensing terms and royalty charges that are
disproportionate and discriminatory; and

(ii) charging royalties that could lead to final customers paying higher handset prices and inhibit 3G standard development.

The outcome of this investigation will be very interesting for essential IP holders particularly in light of the recent judgment of the European Court of First Instance in Microsoft.

The Commission’s press release on this matter is available here.