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EC takes aim at Qualcomm

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The European Commission has launched an anti-trust investigation into chip maker Qualcomm. It is the third chip or memory competition case launched by the commission since July and follows a recent commission competition court victory over Microsoft.

A competition law expert has said that the case highlights how confident the Commission now is on anti-trust matters in the wake of the Microsoft judgment last month, and said that national competition authorities would follow its lead.

The case concerns accusations first made against Qualcomm by rival chip makers in 2005, when Nokia and others made a formal complaint to the Commission. The complaint alleges that Qualcomm abused the fact that its technology was chosen for use in the technical standard used for third generation (3G) mobile phone technology.

"Essential patent holders should not be able to exploit the extra power they have gained as a result of having technology based on their patent incorporated in the standard," said a statement from the European Commission.

The investigation will focus on the issue of whether the licensing terms and royalties imposed by Qualcomm are, as alleged by the complainants, not "fair, reasonable and non-discriminatory," it said. "In a context of standardisation, a finding of exploitative practices by Qualcomm in the WCDMA licensing market contrary to Article 82 of the EC Treaty may depend on whether the licensing terms imposed by Qualcomm are in breach of its free, reasonable and non-discriminatory commitment."

The commission said it would conduct an in-depth investigation as a matter of priority and that there was no fixed timetable under which it must operate.

In August, the commission accused memory maker Rambus of abusing its dominant market position and conducting a "patent ambush".

In July, it issued formal charges against chip giant Intel after a six-year investigation into anti-competitive practices allegedly carried out by the firm. It said that the company had an "overall anti-competitive strategy".

Competition law expert Guy Lougher of Pinsent Masons, the law firm behind OUT-LAW.COM, said tthe flurry of activity indicated a change of priorities at the commission.

"It is interesting because there has been flimsy commission activity in relation to intellectual property licensing, it is a policy area the commission has been more reluctant to get involved in than cases of pricing and exclusionary issues," he said. "On the back of the Microsoft case the Commission is becoming more aggressive and interested in these areas. The Microsoft case has encouraged the Commission to take a harder stance."

Lougher said these cases could have a knock-on effect at a national level as well as a European one.

"Patent policy and standard setting is a very important area, and it is important to have accessible standards," he said. "I think this is an area we will see more activity from the commission on, and that will mean there will be more activity by competition authorities taking their lead from the commission."

"The commission tends to be a trend setter and authorities have mirrored the commission. If it is actively engaged with the inter-relationship between rules on abuse and intellectual property protection then we will see national competition authorities take more of an interest," he said.

The Microsoft case which Lougher said has given the commission new antitrust confidence related to a 2004 commission anti-trust ruling against the software giant for freezing out competitors using its 95 per cent control of the operating system market.

The European Court of First Instance ruled last month that the Commission judgment was correct. Microsoft may appeal.

Copyright © 2007, OUT-LAW.com

OUT-LAW.COM is part of international law firm Pinsent Masons.

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