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China's NDRC accepts Qualcomm's rectification plan

Posted: 10 Feb 2015 ?? ?Print Version ?Bookmark and Share

Keywords:rectification plan? Anti-Monopoly Law? 3G? 4G?

Qualcomm Incorporated has reached a resolution with China's National Development and Reform Commission (NDRC) regarding the NDRC's investigation of Qualcomm under China's Anti-Monopoly Law (AML). (See: Patent war looms as China concludes Q'comm antitrust probe.)

The NDRC has issued an Administrative Sanction Decision finding that Qualcomm has violated the AML. Qualcomm will not pursue further legal proceedings contesting the NDRC's findings. It has agreed to implement a rectification plan that modifies certain parts of its business practices in China and that fully satisfies the requirements of the NDRC's order.

Although Qualcomm is disappointed with the results of the investigation, it is pleased that the NDRC has reviewed and approved the company's rectification plan. The following are its key terms:

  • Qualcomm will offer licences to its current 3G and 4G essential Chinese patents separately from licences to its other patents and it will provide patent lists during the negotiation process. If Qualcomm seeks a cross license from a Chinese licencee as part of such offer, it will negotiate with the licencee in good faith and provide fair consideration for such rights.
  • For licences of Qualcomm's 3G and 4G essential Chinese patents for branded devices sold for use in China, Qualcomm will charge royalties of 5 per cent for 3G devices (including multi-mode 3G/4G devices) and 3.5 per cent for 4G devices (including 3-mode LTE-TDD devices) that do not implement CDMA or WCDMA, in each case using a royalty base of 65 per cent of the net selling price of the device.
  • Qualcomm will give its existing licencees an opportunity to elect to take the new terms for sales of branded devices for use in China as of January 1, 2015.
  • Qualcomm will not condition the sale of base band chips on the chip customer signing a licence agreement with terms that the NDRC found to be unreasonable or on the chip customer not challenging unreasonable terms in its licence agreement. However, this does not require Qualcomm to sell chips to any entity that is not a Qualcomm licencee, and does not apply to a chip customer that refuses to report its sales of licensed devices as required by its patent licence agreement.

In addition, the NDRC imposed a fine on the company of 6.088 billion Chinese Yuan Renminbi (approximately $975 million at current exchange rates), which Qualcomm will not contest. Qualcomm will pay the fine on a timely basis as required by the NDRC. (Also see: China's antitrust issues threaten U.S. semicon industry.)

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