EU, Korea to collaborate on Qualcomm probe

The competition authorities of Korea and the EU will share the results of their investigations and join forces in their strategies.

The issue is whether Qualcomm abused the Standard Essential Patent and FRAND systems by licensing its SEPs on unfair terms. Korea has already decided that it did abuse SEP and FRAND regulations.

China recently fined Qualcomm $1 billion and secured a 35% reduction in its royalty rates. The EC and Korea will doubtless demand similar terms.

As of March 31st, Qualcomm had cash and marketable securities worth $30 billion so it can afford a few more fines.

However its practice of charging 5%+ on the value of a handset looks likely to change. There is pressure from the IEEE and others to have royalties charged on the value of the technology contributed, not on the value of the handset, and the ICs could account for only a tenth of the value of a handset.

Such a change would hit Qualcomm hard as 75% of its $5 billion annual profits, and 35% of its $26 billion annual revenues come from royalties.

Qualcomm is also under threat from a move by operators to move quickly to 4G and to drop 3G where Qualcomm is patent-rich.