Now Qualcomm Is Under EC's Microscope

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A few weeks after handing Microsoft (Nasdaq: MSFT) its hat and showing it out the door marked "antitrust violator," the European Commission is now turning its attention to its antitrust complaint against Qualcomm (Nasdaq: QCOM). The San Diego wireless technology developer is accused of abusing its position in the market and manipulating competitors through its intellectual property licensing practices.

The complaint was filed against Qualcomm by six technology giants: Nokia (NYSE: NOK), Broadcom (Nasdaq: BRCM), NEC, Texas Instruments (NYSE: TXN), Matsushita, and Ericsson (Nasdaq: ERIC) back in 2005. Specifically, the companies are airing arguments that Qualcomm does not license its technology on a fair, reasonable, and non-discriminatory (FRAND) basis.

While the in-depth investigation is a matter of top priority, the Commission noted that it could take two years to complete. The long time frame is not surprising given the complexity of the case and difficulty in proving the accusations true. Certainly, a fair licensing rate for Qualcomm's contributions to various technologies will be difficult -- if not impossible -- to pin down.

The six companies also contend that Qualcomm uses its intellectual property prowess to keep other companies out of the market for chipsets that go into wireless devices. The complaint accuses Qualcomm of giving more favorable terms to its chipset customers, while making it more costly for other companies to win the business.

Qualcomm's task in front of the European Commission will be to show that its practices actually encourage innovation and competition rather than stifle it. The company has a solid point in that the six complainants all hold significant or dominant positions in the wireless market, making it hard for them to prove that their businesses have been damaged or "stifled" by Qualcomm.

With its new General Counsel Donald Rosenberg just brought in from Apple (Nasdaq: AAPL), Qualcomm wants to get beyond recent legal defeats here in the U.S. at the hands of Broadcom and settle the score. Its victory in the complaint will go a long way in helping settle a myriad of other lawsuits and licensing disputes, so I expect Qualcomm will put its best and brightest on the front line with the Commission.

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