(Reuters) – A U.S. appeals court on Tuesday overturned a lower court ruling against chip supplier Qualcomm Inc. in an antitrust lawsuit filed by the Federal Trade Commission.
The United States' Ninth Circuit of Appeals also filed an injunction requiring Qualcomm to change its intellectual property licensing business.
The decision was an important motivation for the San Diego-based company, the largest supplier of mobile phone chips and a key generator for wireless communication technology.
Qualcomm fought against a decision in May 2019 by U.S. District Judge Lucy Koh in San Jose, California. Judge Koh sided with the FTC, writing that Qualcomm's practice of requiring telephone manufacturers to sign a patent license agreement before selling chips "stifled competition" and harmed consumers.
However, the Court of Appeal, in a 3-0 decision written by Circuit Judge Consuelo Callahan, ruled that Qualcomm had no obligation to license its patents to competing chip vendors and that it was not anti-competitive to require telephone manufacturers to sign a licensing agreement.
"Instead, these aspects of Qualcomm's business model are 'chip vendor neutral' and do not undermine competition in the relevant antitrust markets," Judge Callahan wrote.
Qualcomm praised the decision while the FTC called it "a disappointment."
The district court's decision validates our business model and patent licensing program and underscores the enormous contributions that Qualcomm has made to the industry, "Don Rosenberg, Qualcomm's General Counsel, said in a statement.
FTC Office of the Director of Competition in a statement that the agency "will consider our options."
The case shared US antitrust regulators with the Department of Justice intervening to submit a card in support of Qualcomm.
The Department of Justice did not immediately respond to a request for comment.
Qualcomm shares rose about 4% on the news, shares have been up since early March as the company continued to show growth despite a weak smartphone market.
Qualcomm had claimed that the FTC decision, if allowed, would increase its business model by requiring it to license its technology for the first time to compete with chipmakers and recast many of its patent licensing agreements with telephone manufacturers .
Qualcomm won a pause in the enforcement of the decision while its legal appeal was played out and voluntarily changed how it structured some of its 5G technology licensing agreements. With the appealing victory and the flow of new agreements signed with customers since the case was decided, Qualcomm is largely clear to resume operations as it had been in the decades before the FTC case.
Qualcomm's business model often led to conflicts with phone manufacturers, most notably Apple Inc., which supported the FTC's goals and set up a separate antitrust lawsuit against Qualcomm.
Phone manufacturers failed after Qualcomm's insistence that manufacturers license their broad patent portfolio no matter which chips they chose.
Apple decided its goal against Qualcomm 201