Qualcomm has received its biggest ticket to date in China

Absrtact: Qualcomm has received its biggest ticket to date in China as a frequent visitor to the National Antitrust Agency's list of investigations. February 10, the National Development and Reform Commission to Qualcomm companies abuse of market dominance of the exclusion, restriction of competition in the Monopoly Act to make

Qualcomm has received its biggest ticket to date in China as a frequent visitor to the National Antitrust Agency's list of investigations.

February 10, the National Development and Reform Commission on Qualcomm companies to abuse the dominant position of the market dominance of the exclusion, the monopoly of competition to deal with the law, ordered Qualcomm to stop the relevant violations, the 2013 China's market sales of 8% of the fine, the total of 6.088 billion yuan.

Boots landed, Qualcomm said it would not seek any further legal proceedings to defend and raise its median income for fiscal 2015. Qualcomm's president, Derrick Aboli, said, "It is a pleasure [for the NDRC's treatment] to eliminate the uncertainty of our business in China".

According to the Handset China Alliance, for Qualcomm, in addition to the short-term financial impact of the 6.088 billion-yuan penalty, the NDRC's penalty will cost them less than 2.3 billion dollars a year in the Chinese market for patent licensing.

Chinese handset makers such as Huawei and ZTE have expressed "welcome" to the NDRC's decision. However, specific to each handset manufacturer, Qualcomm's "less" can bring much benefit, still need to be carefully dismantled.

The difference rate is only a good gesture

High-pass design of a sophisticated, interlocking patent licensing model, in order to obtain a huge profit for it has long been questioned around the world, frequently by the Japanese, South Korea, the European Union and other fair trade institutions to investigate.

South Korea's Fair Trade Commission ruled in July 2009 that it fined $208 million for a high pass and demanded that it correct a number of previous irregularities.

By comparison, China's national Development and Reform Commission is not only imposing a hefty fine of $6.088 billion on Qualcomm, but also ordering Qualcomm to stop a series of violations.

In addition to the NDRC's final approval of the Qualcomm package, in contrast, Qualcomm, in its news to the 21st century economic reporter, also highlighted another corrective action, which was presented as a "key clause", That is: for the use of branded equipment sold in China, Qualcomm 3G and 4G of the necessary Chinese patent license, Qualcomm will be 3G equipment (including 3g/4g multimode equipment) charge a 5% license fee, including 3 die LTE-TDD 4G equipment such as the implementation of CDMA or WCDMA will be charged 3.5% License fee.

Qualcomm President Derrick Aboli further explained that for 3G devices, including 3G and 4G multimode equipment, the licensing rate for Qualcomm offers is 5%; for 4G equipment, including three-mode equipment currently running on the China Mobile network, Qualcomm offers an offer rate of 3.5%.

However, the actual impact of this differential rate clause on China's current communications market is limited.

This is because: first, China's three major operators are operating at the same time 2G, 3G, 4G Network, three of generations of network of hybrid networks generally require that the handset terminal should also be to meet the different requirements of the multi-mode terminal. For example, China Unicom General requirements Four model, China Mobile for five models, China Telecom is required six or seven modules. As a result, it does not have much practical significance to reduce the patent licensing rate from 5% to 3.5% only for 4G devices.

Second, China Mobile in the early 4G operation, in order to reduce the threshold of the mobile phone terminal, did propose a three-model 4G mobile phone demand, but in order to meet the needs of international roaming, since then the mobile phone into the standard of storage standards to five models. At present, the number of 4G three modular devices that can enjoy Qualcomm's 3.5% licensing rate has been getting smaller.

It is clear that Qualcomm in the distinction between 3G, 4G equipment based on a high-profile proposal to lower the rate of practice, is "cop-out", to a large extent, can be understood as a good gesture.

In fact, for more than a year at the National Development and Reform Commission's survey of Qualcomm's implementation, Qualcomm has repeatedly released good signals. Last July 3, for example, Qualcomm announced that China's largest chip generation plant, SMIC, is making part of its 骁丽-phone chip in China. Last July 24, Qualcomm in Beijing announced a total of up to 150 million dollars in investment pledges to support the various stages of Chinese start-ups.

"Free Reverse license" mystery

The third of the five rectification measures disclosed by the NDRC involves free reverse licensing. This is an important part of the Qualcomm Patent licensing business model.

Prior to this, Qualcomm requested licensee to give it a free reverse license for the patents held, to refuse to deduct the patent value of the reverse license in the license fee or to provide other consideration. In the current rectification measures, Qualcomm ended this practice, said "do not require Chinese licensee to the patent for free reverse license."

This means that Chinese companies with certain patent reserves, such as Huawei and ZTE, can also obtain a corresponding patent income from Qualcomm, or partial deductions, in the case of cross licensing with Qualcomm.

"In reverse, we will negotiate with each licensee separately." "If Qualcomm wants to seek a reverse license from the licensee, we will negotiate with them in good faith and give them a fair price," said Derrick Aboli, Qualcomm's president.

ZTE Terminal A middle-level said that the free reverse authorization has been a high Qualcomm patent model is an important component, "before the Overlord meal, is now a price tag." ”

In addition to allowing Chinese manufacturers ' patent values to be cashed in at Qualcomm, the Qualcomm's end to the previous free-flip license could theoretically give them an opportunity to gain patent value from other rivals.

In the more than a year of the NDRC's investigation into Qualcomm, the Chinese mobile phone industry has a patent war between handset makers. This is because: in the past Qualcomm on the basis of free reverse license to China's licensed manufacturers of the patent value has been cleared, thus forming a huge patent pool, manufacturers have difficulty with their own patents to claim patent rights.

Yanhui, Secretary-General of the China Federation of Mobile phones, said the NDRC's decision to pass through the patent war between the mainland mobile phone manufacturers, the long-term view of the patent war is inevitable. The result is an improvement in China's innovation environment, which pushes handset manufacturers to invest in research and development and seek innovative benefits.

In the Chinese handset manufacturer inside, this kind of patent war barrier's demolition, then obviously is advantageous in those patent layout deeper enterprise, but is not advantageous to those patent accumulation not many start-up enterprises.

In fact, Huawei said in response to the NDRC's decision to penalize Qualcomm, "this will help improve the protection of intellectual property rights in the telecommunications industry, create a level playing field of innovation, and greatly promote the initiative of domestic enterprises to develop and innovate." ”

ZTE also said the decision will have a positive effect on the benign development of intellectual property in China's market and the creation of a fair and competitive environment.

However, it should be pointed out that because the decision was made by China's antitrust authorities, the effectiveness of its rectification measures is limited to the licensee in China and the equipment sold in the Chinese market. Sales of Chinese handset makers in overseas markets do not belong to this list.

For Qualcomm, the decision by China's antitrust authorities to impose a ripple effect on other markets around the world is another important question in determining its proprietary business model.

In fact, the European Commission and the Korea Fair Trade Commission have launched a new round of antitrust investigations against Qualcomm in August 2014 respectively. In September 2014, the Federal Trade Commission also formally launched antitrust investigations into Qualcomm.