EU considers Qualcomm as next Microsoft?

As predicted, the European Commission has wasted no time in going after another American firm using the anti-monopoly precedent established with Microsoft. This week, the target is Qualcomm. Still on deck are Intel, Rambus and Google.

The EC investigation of Qualcomm is following up on a request 23 months ago by Qualcomm’s two main chip rivals — TI and Broadcom — as well as European handset (and chip) makers Nokia and Ericsson, as well as Panasonic (Matsushita) of Japan. The investigation could take as much as two years, although the EC was careful to say the action “does not imply that the commission has conclusive proof of an infringement.”

The main issue is not that Qualcomm is blocking other firms from using its technology, but the price that it charges. Specifically, Qualcomm charges the same royalty (about 4-5%) for both major flavors of 3G mobile phones — cdma2000 and WCDMA. Its accusers — including the leaders of the WCDMA camp — argue that Qualcomm should charge less for WCDMA because they successfully added lots of other IP to the WCDMA standard and thus Qualcomm’s share is proportionately less. The WSJ [registration required] quoted these rivals as saying that the fee should be less than 2%.

The case may end up focusing on that most vaguely defined standardization concept, Reasonable and Non Discriminatory licensing terms, aka RAND aka FRAND (Fair, Reasonable and Non Discriminatory). Anyone who studies (or participates in) standardization knows that the term has been left deliberately vague as a way to win agreement among various parties. Rather than come up with a more specific ex ante definition to provide predictability for all concerned — something ETSI has notably shied from doing — key ETSI members want the chief EU regulator to impose an ex post definition based on its own judgment.

There are key differences between US and European law that make this action unlikely to succeed in the US. One is the (current) policy favoring patent holders in the US; the second is that US monopoly law requires demonstrating harm to consumers, while EU law considers harm to competitors to be an important issue. There is also the issue that the EC seems to be choosing unpopular defendants first — Qualcomm being the only company more hated than Microsoft in the European ICT industry — presumably to set a precedent. Once the precedents are established, they could be applied to other, less controversial firms (which today would still include Google).

Qualcomm faces other legal challenges, including its expired patent license with Nokia and its ongoing legal fights with Broadcom. Qualcomm hired a new general counsel Friday — Donald Rosenberg, formerly of Apple, and before that a 30-year IBM veteran. He certainly has his hands full.

Technorati Tags: 3G, antitrust, EU, Microsoft, standardization