A string of attacks may eventually force Qualcomm to redefine its famous patent licensing model, one which has helped to shape the economics of the mobile device industry in the 3G and 4G eras. This week, the latest blow came when a South Korean court rejected the US chip giant’s request to reverse an antitrust ruling made in December. Meanwhile, Apple is challenging the very basis of Qualcomm’s lucrative licensing business and the US Federal Trade Commission (FTC) has joined the line of international agencies probing for possible anti-competitive activity.
Amid all this turmoil, Derek Aberle, Qualcomm’s president and the man most closely associated with the company’s licensing business, is to leave the firm at the end of this year, after 17 years. Aberle has played a critical role in his company’s history, heading up the Qualcomm Technology Licensing (QTL) arm, the source of much of the firm’s profits, and working with former president Steve Altmann to architect the unique approach to patents monetization.
Aberle has been on the executive team since 2008 and has been prominent in recent negotiations – notably those which agreed a settlement of patent issues in China – and in recent legal battles, such as the one with Apple and its manufacturers. After Aberle leaves, the current head of QTL, Alex Rogers, will report directly to CEO Steve Mollenkopf. It is not clear whether another president will be appointed – if not, Qualcomm may be leaving itself the flexibility to restructure or even, as some shareholders have demanded, to hive off QTL altogether and so avoid accusations of anti-competitive tying together of patent rights and chip sales.
“Under his talented leadership, the QTL division has significantly grown in both revenues and profits, established its 4G licensing program and enabled significant competition across the industry,” Mollenkopf said in his statement.
His final months in harness will be busy ones, dealing with Apple and with the investigations in the US and Taiwan, plus the ongoing disputes with South Korea’s Fair Trade Commission (FTC). In December, the FTC filed Qualcomm KRW1.03 trillion ($912m) for unfair business practices in licensing and modem sales.
It also ordered the chip vendor to negotiate patent licences “in good faith” with rival silicon vendors, and renegotiate chip supply deals with phonemakers if requested to do so. That would directly affect relationships with Korea’s handset makers, notably the world’s largest Samsung, and LG. It would also set precedents for device suppliers elsewhere and add fuel to Apple’s fire.
No surprise, then, that Qualcomm is fighting against the Korean rulings. It filed two lawsuits with the Seoul High Court, one calling for the FTC’s decision to be nullified, and the other seeking the suspension of the corrective order, until a ruling on the first is made. However, the court has rejected the suspension request, saying it did not believe the FTC corrective order would risk “irreparable damage” to Qualcomm, a spokeswoman told Reuters. The court has not yet ruled on the first suit.