FTC antitrust victory on Qualcomm questioned by appeals court

(Reuters) – The U.S. government’s antitrust victory over chip supplier Qualcomm Inc drew tough questions for the Federal Trade Commision from a panel of three appellate judges in San Francisco on Thursday.

FILE PHOTO: A Qualcomm sign is pictured at Mobile World Congress (MWC) in Shanghai, China June 28, 2019. REUTERS/Aly Song/File Photo

The U.S. 9th Circuit Court of Appeals heard oral arguments in a closely watched case the regulator brought against Qualcomm in early 2017.

San Diego, California-based Qualcomm supplies modem chips that connect phones and other devices to wireless data networks, but patent licensing drives most of its profits.

The company is fighting a May 2019 decision by U.S. District Judge Lucy Koh. That judge sided with antitrust regulators, writing that Qualcomm’s practice of requiring phone makers to sign a patent license agreement before selling them chips “strangled competition” and harmed consumers.

The panel of judges probed the FTC on how Qualcomm may have violated antitrust laws, even if the company did use its dominant position in the chip market to gain higher patent royalties.

“Anticompetitive behavior is prohibited under the Sherman Act. Hyper-competitive behavior is not. This case asks us to draw the line between the two,” Judge Stephen Joseph Murphy III said.

The FTC argued Qualcomm applied an excessive “surcharge” to phone makers, charging them too high a price for patent licenses because the phone makers had to sign the deals to get Qualcomm’s chips.

“Doesn’t the Supreme Court say that patent holders have the right to price their patents? What would be anticompetitive about that?” Judge

Keep reading this article on Reuters Business.

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