On Wednesday, December 28, 2016, the Korea Fair Trade Commission’s (KFTC) Anti-Monopoly Bureau issued a decision imposing sanctions against Qualcomm Incorporated (Qualcomm) in the amount of 1.03 trillion Korean Won (approximately $865 million USD) for alleged violations of Korean competition laws.
After conducting a comprehensive investigation that spanned for more than a year and issuing its examination report to Qualcomm on November 13, 2015, the KFTC found that Qualcomm, as a Standard Essential Patent (SEP) holder, breached its Fair Reasonable and Non-Discriminatory (FRAND) commitments when engaging in licensing agreements with certain companies. KFTC’s investigation included both domestic and foreign information and communications technology (ICT) companies when performing its investigation to eliminate bias, and the agency listed Apple, Intel, Nvidia, MediaTek, Huawei, and Ericsson as having provided information to the KFTC in response to its requests.
KFTC’s corrective order states that Qualcomm:
- refused or restricted the licensing of mobile communication SEPs essential in manufacturing and selling mobile baseband chipsets used in cellphones;
- coerced mobile phone makers to sign what it describes as “unfair license agreements” when linking the chipset supply with its patent license contracts; and
- only offered portfolio licenses to mobile phone makers that forced unilateral licensing terms without a fair compensation calculation process (specifically, that these comprehensive licenses did not distinguish patents (1) between SEPs and other patents or (2) by wireless standard generation [2G vs. 3G vs. 4G]); additionally, within this particular allegation, KFTC alleges that Qualcomm engaged in coercing mobile phone makers “to accept unfair agreements such as making them provide patents for free.”
Qualcomm has announced that it plans to file an immediate stay of the corrective order and to appeal the KFTC’s decision to the Seoul High Court. Current Korean law requires Qualcomm to pay the fine within 60 days of the issuance of the written order, barring any possible adjustment or refund it obtains as part of its appeal.
We often blog here about various jurisdictions that have taken meaningful steps to ensure that FRAND promises are kept. This development in South Korea, a highly developed and advanced economy, is significant.
All Things FRAND is committed to ensuring a balance between patent licensor and licensee that FRAND commitments safeguard. And while FRAND promises are important, they are meaningless – and undermine innovation, particularly for small businesses – when ignored during subsequent licensing negotiations. The App Association welcomes decisions (such as this one from the KFTC) that provide helpful guidance in this regard generally that will further the growing global precedent upholding the purpose and meaning of FRAND obligations.