A Korea-based source has just drawn my attention to an article (in Korean, but I received a translation) by Kyungsin Park, Professor of Law, Korea University Law School. Professor Park accuses the Korea Fair Trade Commission (KFTC) of a failure to act forcefully in "the legal case of the century," i.e., the Qualcomm case. As I reported in March, Qualcomm could face criminal charges in Korea over its refusal to license chipset makers, but so far--and more than eight months later, it's apparently still the situation--the KFTC hasn't referred this contempt matter to the Prosecutor General's office.
Meanwhile, Qualcomm is--according to the article--spending hundreds of millions of dollars on the appeal. What Professor Park explains based on publicly available data is that it's not primarily about the 900 million dollars of fines the KFTC imposed in its late-2016 decision. The professor says it's just about 1% of Qualcomm's Korean revenues over the last 25 years, or 2% of what "Qualcomm generated through its illegal activities in South Korea." Instead, he writes, it's about the KFTC's corrective orders, which are about Qualcomm's business model.
The article talks about how Samsung ceased to complain about Qualcomm's practices after its new (early 2018) deal. Well, during the course of those Qualcomm antitrust investigations in multiple jurisdictions, Samsung was far from the only company to sign a new chipset purchasing and patent licensing agreement. Apple settled during opening statements at the April 2019 trial in San Diego--as did Korea's LG Electronics a few months later. There's no basis for pointing fingers at those companies: they're in the smartphone business, not in the antitrust enforcement business. But I do agree with the professor that Korea's competition authority (and, needless to say, the courts) have a responsibility here. (As for the companies that settled their formal or informal disputes with Qualcomm, there's plenty of testimony from the time before those deals were struck, and that testimony is still useful, as it was in the U.S. FTC v. Qualcomm case--where Samsung also filed a great amicus curiae brief.)
Professor Park argues--in other words--that South Korea's economy simply can't afford Qualcomm's sky-high patent royalties: LG Electronics, he says, has been incurring losses for 20 fiscal quarters in a row, and some Korean phone makers like Sewon Telecom, Telson, VK, Pantech, Curitel, and SKY, are no longer in business. Most mobile phone makers in the world have single-digit profit margins except for Apple and Samsung (but even Samsung isn't comfortably in the double digits, he claims).
All of that is interesting, but one claim really surprised me:
"Qualcomm is eexrting political and diplomatic pressure to influence the outcome of the appeal currently pending in the Seoul High Court. The #1 subject of the bilateral negotiations of the U.S.-South Korea Free Trade Agreement that resumed in July 2019 after a seven-year hiatus was the KFTC's investigation of Qualcomm's practices. The U.S. delegation alleges that Qualcomm was denied due process though it is guaranteed under the US-Korea FTA."
I don't know what happened in that investigation, but just like Professor Park it also strikes me that the findings in Korea were simply consistent with what other jurisdictions--particularly Judge Lucy H. Koh of the United States District Court for the Northern District of California--also found.
But there's one thing I just don't understand: assuming that the claim of Qualcomm's antitrust woes being the #1 priority for the U.S. in trade talks with South Korea is true, how can Qualcomm possibly influence the U.S. Administration to such an unbelievable extent?
It obviously makes sense for any U.S. government, regardless of the party or people in power, to ensure that its companies are treated fairly abroad. There have been cases of hyperaggressive antitrust enforcement against some U.S. companies in different places at different times. But in this case, Apple and Intel--both larger than Qualcomm--were actually among the complainants, or at least respondents to questions from the KFTC whose answers played a key role in the decision against Qualcomm.
If the Seoul High Court upholds the most important one of the KFTC's decisions--that Qualcomm needs to extend exhaustive SEP licenses to rival chipset makers--, it will simply be in the mainstream of global antitrust law:
Judge Koh identified such an obligation first on the basis of contract law (Qualcomm's FRAND declarations), then on a duty-to-deal basis (the FTC is now pursuing an antitrust theory that relies on the contract-related finding as opposed to a contractless duty to deal).
Five automotive companies (Daimler, Continental, Valeo, Gemalto, and BURY Technologies) lodged antitrust complaints with the European Commission's Directorate-General for Competition (DG COMP) against Nokia, and they're all about component-level SEP licensing. Just today the new European Commission was confirmed by the European Parliament (with a two-thirds majority), so I guess we will very soon see a decision to investigate those complaints.
Huawei is suing Nokia in a German court (Dusseldorf Regional Court), on the basis of EU antitrust law, to secure component-level SEP licenses. It's almost a given that Huawei will prevail, given that Presiding Judge Dr. Thomas Kuehnen of the Dusseldorf appeals court outlined the related legal theory in an article. Also, the Court of Justice of the EU made it reasonably clear in its Huawei v. ZTE ruling that EU antitrust law gives every implementer of a standard the right to a FRAND license.
In light of the global trend toward enforceable component-level licensing obligations, I hope Korea's courts and the KFTC won't make decisions that would disadvantage their local smartphone makers and other electronics companies compared to those based in other jurisdictions.
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