Yesterday, Qualcomm issued a press release announcing resolution of the investigation under China’s Anti-Monopoly Law by China’s National Development and Reform Commission (“NDRC”) of Qualcomm’s licensing practice for standard essential patents. In addition to Qualcomm paying a $975 million fine, the China’s NDRC approved Qualcomm’s proposed rectification plan, summarized as follows:
- Qualcomm will offer licenses to its current 3G and 4G essential Chinese patents separately from licenses to its other patents and it will provide patent lists during the negotiation process. If Qualcomm seeks a cross license from a Chinese licensee as part of such offer, it will negotiate with the licensee in good faith and provide fair consideration for such rights.
- For licenses of Qualcomm’s 3G and 4G essential Chinese patents for branded devices sold for use in China, Qualcomm will charge royalties of 5% for 3G devices (including multimode 3G/4G devices) and 3.5% for 4G devices (including 3-mode LTE-TDD devices) that do not implement CDMA or WCDMA, in each cae using a royalty base of 65% of the net selling price of the device.
- Qualcomm will give its existing licensees an opportunity to elect to take the new terms for sales of branded devices for use in China as of January 1, 2015.
- Qualcomm will not condition the sale of baseband chips on the chip customer signing a license agreement with terms that the NDRC found to be unreasonable or on the chip customer not challenging unreasonable terms in its license agreement. However, this does not require Qualcomm to sell chips to any entity that is not a Qualcomm licensee, and does not apply to a chip customer that refuses to report its sales of licensed devices as required by its patent license agreement.
Qualcomm also gave a presentation to investors with further explanation of the agreement reached, including the following:
- Qualcomm will not pursue further legal proceedings contesting the NDRC’s findings that Qualcomm violated China’s Anti-Monopoly Law
- Requires no licensing changes outside China with limited exceptions
- Allows Qualcomm’s licensing business to fully participate in growing China opportunity
- Qualcomm does not believe that other competition agencies will interpret their laws to reach conclusions similar to China’s NDRC