Qualcomm faces antitrust probe in South Korea

The company says its licensing practices are being questioned

Qualcomm confirmed Tuesday it is under antitrust investigation in South Korea in connection with its licensing practices.

The company said it had recently received the Korea Fair Trade Commission's staff-generated case examiner’s report (ER), which commences a process that allows Qualcomm to defend itself.

The issues in the investigation include the allegation that the company's practice of licensing patents only at the device level and requiring that its chip customers be licensed to its intellectual property violate South Korean competition law.

"The ER alleges, among other things, that we do not properly negotiate aspects of our licenses," Qualcomm said in a statement. The investigation by the South Korean authorities was first reported in February, but the company did not confirm at the time.

Qualcomm has faced investigations about its business and licensing practices in the U.S. and in the European Commission. It said in February it had settled with China's National Development and Reform Commission in connection with the agency's investigation of Qualcomm under the country's anti-monopoly law.

Besides agreeing to pay a fine of about US$975 million to the NDRC, Qualcomm said it would 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."

Qualcomm would also offer licenses to its current 3G and 4G essential Chinese patents separately from licenses to its other patents, and present a patent list during negotiations. Under the deal, the company also agreed to calculate royalty fees on 65 percent of the net selling price of the device.

The company on Tuesday defended device-level licensing as an industry norm worldwide and said its patent licensing practices were "lawful and pro-competitive." It said the ER proposes remedies including changes to certain business practices and monetary penalties.

Samsung Electronics, LG and Pantech are key Qualcomm customers in South Korea. The KFTC  in 2009 ordered Qualcomm to pay $208 million for allegedly charging discriminatory royalties and offering conditional rebates in connection with its CDMA technology, which were largely aimed to get mobile handset makers to meet more of their demand with Qualcomm chips.

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