Antitrust Correction for Qualcomm’s SEPs Package Licensing and Its Flexibility in China

Abstract

China’s National Development and Reform Commission (NDRC) issued its first antitrust administrative sanction decision relating to SEP licensing in 2015, finding that Qualcomm had abused its dominant position in the CDMA, WCDMA and LTE wireless communication standard-essential patents (SEPs) licensing market and baseband chip sale market by: (a) charging unfairly excessive royalties, (b) unreasonably bundling SEPs licensing with non-SEPs, and (c) making the sale of baseband chips conditional upon the buyer signing a patent license agreement with a patent no-challenge clause and other unfair clauses. As a result, Qualcomm was ordered to cease its abusive acts and was fined RMB 6.088 billion (approx. USD 975 million), the severest ever imposed by the NDRC or any other Chinese Anti-Monopoly Enforcement Authorities (AMEAs) under its Anti-Monopoly Law (AML). This article provides a structured description of the NDRC’s findings, explores the NDRC’s two-step approach of “the rebuttable assumed dominance” for SEPs and its flexible antitrust approach to correct Qualcomm’s SEPs package licensing practice, and lastly comments on the commercial and industrial significance of this decision in China and beyond.