Qualcomm Shares off 9% on South Korean Licensing Probe

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Qualcomm has confirmed the latest probe into its patent licensing practices, this time in South Korea. This action was first reported in February, but was not made official.

The company said the staff of the country’s antitrust agency has alleged that the company has violated anticompetition laws there, recommending that the company be fined and required to modify a few business practices.

Qualcomm’s hard year continued this week when executives with the chip company admitted that it was being investigated by South Korean regulators for its licensing practices in that country. Qualcomm said in a statement “the allegations and conclusions contained in the ER are not supported by the facts and are a serious misapplication of law”. The report also suggests potential remedies for the alleged infractions, including modification to the business and monetary penalties.

Qualcomm defended device-level licensing, saying that was the industry norm, and insisted its practices were “lawful and pro-competitive”.

Korea is home to Samsung Electronics and LG Electronics, the nation’s biggest consumer electronics makers and among Qualcomm’s top three customers.

Qualcomm charges handset makers royalties based on a percentage of the price of their handsets.

Qualcomm would also offer licenses to its current 3G and 4G essential Chinese patents separately from licenses to its other patents, and present a patent list during negotiations. The KFTC in 2009 ordered Qualcomm to pay $208 million for allegedly charging discriminatory royalties and offering conditional rebates in connection with its CDMA technology, which were largely aimed to get mobile handset makers to meet more of their demand with Qualcomm chips. In the same year, Japan’s FTC applied a “cease and desist” order, forcing Qualcomm to revise its licensing deals with Japanese phonemakers. The U.S. company’s most recent quarterly results suggest that it is still struggling to retrieve all of the money it claims it is owed, though signing new licensing deals with major manufacturers TCL and ZTE is a positive sign.