EU Launches Qualcomm Investigation Without Objections Statement

While the European Commission is refraining for now from issuing a formal Statement of Objections to US-based networking technology provider Qualcomm, it did say this morning it will take action prompted by five of its competitors -- including long-time opponent Broadcom -- in investigating whether the firm applies unfair licensing terms to these and other companies.

"This initiation of proceedings does not imply that the Commission has proof of an infringement," reads an EC statement issued this morning. "It only signifies that the Commission will conduct an in-depth investigation of the case as a matter of priority."

The case at hand is essentially the same one being tried in US courts. Back in August 2006, a complaint against Qualcomm brought by Broadcom concerning unfair licensing practices for WCDMA technology, was dismissed on the grounds that US law grants a patent holder a legal monopoly over the technology it created.

Last month, however, a three-judge appeals panel overturned that dismissal, opening once again the entire issue of whether patent holders deserve carte blanche in determining licensing fees over their own technology.

In other words, if an inventor creates a market, what is that inventor's duty to ensuring competition in that market? Must it be an equal player, and if so, what is the incentive for future invention?

Both EU and US law call for patent holders to hold fast to a principle represented by the acronym FRAND - Fair, Reasonable, And Non-Discriminatory terms - when licensing their intellectual property to others. So in neither territory are an inventor's rights to dominion over the market he creates absolute.

When a patented technology becomes a standard, as has WCDMA, a patent holder's duty to the market becomes even more strict. "The economic principle underlying FRAND commitments," states this morning's EC statement, "is that essential patent holders should not be able to exploit the extra power they have gained as a result of having technology based on their patent incorporated in the standard."

The complaint from Broadcom, along with Nokia, Panasonic, NEC, and TI, alleges that high licensing costs are inevitably passed on to customers.

What's unusual about the steps the EC took this morning is that it has not produced a Statement of Objections, as it did in the Intel case and the Microsoft antitrust affair as well. This morning's statement cites European code which enables it to launch an investigation while attempting to gather evidence, before making any statement as to its preliminary conclusions about the subject of that evidence. In short, the EC doesn't need to make an indictment before opening an official investigation.

This fact, though, led to another proclamation of victory by Qualcomm, which touted the fact this morning that the EC didn't have enough information yet with which to make an objection.

Attacking the heart of the case against it while trying to hold some semblance of its IP dominion, Qualcomm President Steve Altman stated, "We will continue to explain the undisputed fact that Qualcomm greatly contributed to the development and commercialization of WCDMA technology and has abided by its obligations to [the European Telecommunications Standards Institute] and other standards setting organizations, including its commitments to offer licenses to its essential patents on fair, reasonable and non-discriminatory (FRAND) terms. Qualcomm's business model of extensively licensing our innovations has opened WCDMA to new players - driving competition, growth and further innovation. As a direct consequence, European consumers are benefiting from greater competition, rapidly declining WCDMA handset prices and more handset choices and features."

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