Class Certified in Qualcomm Chipset Antitrust Action

SAN JOSE, Calif. (CN) – A federal judge late Thursday certified a class of consumers suing tech giant Qualcomm on claims they paid more for smartphones because the company jacked up the price of chipsets, a key component in cellular communications.

Plaintiffs Sarah Key, Andrew Westley, Terese Russell, and Carra Abernathy make claims that run parallel to those made by the Federal Trade Commission, which has also sued the chip manufacturer in federal court.

The claims in both cases amount to three assertions: Qualcomm refuses to license its standard essential patents to competing modem chip manufacturers; it both threatens and incentivizes cellular device manufacturers like Apple and Google to exclusively use its product; and abuses its leverage to get royalties that are above market rate, according to the lawsuits.

Qualcomm manufacturers chips that are used in advanced cellular technology, allowing smartphones to communicate with cellular networks. In some instances, Qualcomm boasts an 80 percent market share of a specific chip. Since the chips are foundational pieces of technology in the cellular market they are protected by standard essential patents.

On the one hand, Qualcomm benefits by owning the patent for technology that is fundamental to the operation of a widely used tool. But the rules on standard essential patents also require Qualcomm to issue the chips to anyone willing to pay the agreed-upon royalties.

The plaintiffs say Qualcomm abuses its market-share power and has driven up the cost of smartphones in general, harming them specifically and consumers in general.

In a 66-page order issued late Thursday, however, she found the plaintiffs have presented enough evidence that Qualcomm’s practices affected whole swathes of consumers to warrant class certification.

“Plaintiffs have shown that common issues will predominate with respect to the element of impact, as to both direct purchasers and indirect purchasers. In particular, plaintiffs’ theory and methodology of demonstrating pass-through to consumers on a common basis withstands scrutiny,” Koh wrote.

She also noted Qualcomm’s attacks on the plaintiffs’ theories and expert, but said those are issues “to be decided on the merits, not at class certification.”

Nearly a year ago, U.S. District Judge Lucy Koh agreed to dismiss Sherman Act antitrust claims “to the extent those claims seek damages.” But while Qualcomm argued the class should not be allowed to seek damages under the California version of that law, Koh noted the California law doesn’t have the same prohibition on indirect purchasers seeking damages in antitrust suits.

Koh acknowledged Qualcomm’s concerns with a class of up to 250 million members but said plaintiffs have claims administrators lined up that promise reaching a minimum of 70 percent of potential class members.

Finally, Koh agreed to certify a separate class for injunctive relief.

“Based on plaintiffs’ allegations and offer of proof, a single injunction barring Qualcomm’s anticompetitive conduct would offer forward-looking relief to every member of the class,” she wrote.

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