Tags: Trump Administration | donald trump | joseph simons | jerome powell | technology

Trump Nominees Take the Helm at a Critical Time for US Tech Leadership

Trump Nominees Take the Helm at a Critical Time for US Tech Leadership

By    |   Tuesday, 07 November 2017 02:19 PM

President Trump has recently made some important nominations to fill key leadership positions in government, most notably Jerome Powell to chair the Federal Reserve and Joseph Simons to chair the U.S. Federal Trade Commission (FTC).

Once confirmed, Powell will play a key role in determining how the Fed handles interest rates in the face of a booming stocking market, low unemployment, but also as concerns about low inflation persist. Attorney Joseph Simons will also be closely watched. Simons will inherit the high-profile FTC lawsuit that it filed last year against Qualcomm. The case is well underway and critical to the future of intellectual property policy.

Why is this case so pivotal?

The FTC sued Qualcomm, alleging that the company has engaged in unlawful, exclusionary conduct, denying rival chipmakers access to its Standards Essential Patents (SEPs). Several prominent American technology manufacturers support the FTC's contentions claiming they and their customers have been harmed by Qualcomm's anti-competitive tactics.

SEPs promote collaboration which enables innovation through industry cooperation without mandates from the government. But Qualcomm’s abuses threaten to upend that system.

This industry driven, collaborate licensing system works because technology companies like Qualcomm and many others voluntarily contribute their patents to help form standards upon which mobile communications protocols, networks and interoperability are developed. Within these mobile standards are a number of SEPs, meaning that anyone “practicing” the standard – all smartphone makers – must license SEPs from the developer of those patents. This license must be offered to any innovator under fair, reasonable and nondiscriminatory, or FRAND, terms. FRAND licensing makes this system work and helps spur innovation while SEP owners are rewarded with a deluge of licensing revenue from the standard’s wide adoption.

Global competition authorities have issued a series of rulings against Qualcomm’s licensing practices highlighted by its refusal to adhere to FRAND obligations. On October 11, the Taiwan Fair Trade Commission announced a $774.14 million fine against Qualcomm – their largest fine ever. The fine involves antitrust violations including Qualcomm’s abuse of its CDMA, WCDMA and LTE SEPs to unfairly benefit its chip business.

The U.S. FTC lawsuit against Qualcomm relates to similar FRAND abuses. Predictably, Qualcomm countered that it has no such duty to aid competitors. This is nonsense.

The mobile standards in question were built within consensus-driven, industry-managed Standards Setting Organizations (SSOs). SSOs identify and protect SEPs, ensuring they aren’t used to thwart competition. To this end, SSOs determine industry standards, but do so with important strings attached. Most notably, holders of the essential patents are required to license it on FRAND terms to all comers, competitors included.

By refusing to license its patents to rival chipmakers, Qualcomm sits in the cat-bird seat, excluding some competitors completely and engaging others in a series of abusive licensing tactics to protect the company's dominant position – which harms consumers.

Qualcomm’s refusal to play by the rules could impact fifth-generation of 5G mobile standards among others. 5G will deliver incredible speeds and instant connections to enable the Internet of Things, revolutionize healthcare delivery, power smart cities, and guide autonomous vehicles.

Qualcomm's practices may be undermining American technological leadership in the world, too.

Two years ago Chinese competition officials sued Qualcomm for overcharging Chinese competitors for mobile chip licensing fees. They eventually settled after Qualcomm agreed to pay a whopping $975 million fine, and change its Chinese licensing practices. But there’s more to the story.

Recent reports have it that a cozy relationship between Qualcomm and China has emerged as a result. Turning lemons into lemonade, Qualcomm’s CEO remarked that the settlement “positions our business to take advantage of the large growth in China.” It sure has, and then some. Since the settlement the inked more than 100 licensing deals with Chinese firms, including China’s 10 largest smartphone makers, raking in billions in new revenue to the company. Chinese companies get lower rates and preferred access for Qualcomm's licenses, while American smartphone manufacturers and chipmakers get Qualcomm’s un-checked, un-FRANDLY behavior.

And this brings us back to the FTC suit. FRAND licensing of SEP technology must be preserved and licensing practices must never lock out competitors.

The FTC has the rule of law on its side to correct Qualcomm's anti-competitive behavior. In doing so, it can help the integrity of the industry's SSO process, and ensure that American technological leadership remains strong. As the Senate prepares to consider the Simons nomination it should reinforce the need for the Simons FTC to protect the flow of essential technologies.

Mike Wendy is president of Media Freedom, a 501(c)(3) non-profit organization.

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President Trump has recently made some important nominations to fill key leadership positions in government, most notably Jerome Powell to chair the Federal Reserve and Joseph Simons to chair the U.S. Federal Trade Commission.
donald trump, joseph simons, jerome powell, technology
Tuesday, 07 November 2017 02:19 PM
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