Korea's antitrust regulator fines Qualcomm USD 850 million

Korea's antitrust regulator slapped Qualcomm on Wednesday with a record fine of more than 1 trillion won (850 million dollars), and also ordered the world's largest mobile chip company to take corrective measures and offer patent rights to rival chip companies. It is the first case Qualcomm was ordered corrective measures for patent abuse in the world.

The Fair Trade Commission said Wednesday it imposed 1.03 trillion won in penalty and a corrective order to Qualcomm saying it abused its market dominant position in the global communication chipset and licensing market. This is the largest-ever fine in the world. The previous record fine to be ever imposed was 668.9 billion won on six liquid petroleum gas suppliers for price fixing activity in April 2010.

Qualcomm secures standard essential patent that is vital in manufacturing mobile devices. The Fair Trade Commission ruled that Qualcomm monopolized patent rights by violating the FRAND commitments that requires companies to offer licensing based on fair, reasonable and non-discriminatory conditions.

Qualcomm, in order to strengthen its dominant position, refused licensing to other chipset makers. It threatened mobile phone makers of suspending chipset supply while signing patent contracts that profits only itself.

Qualcomm's patent abuse made rival chipset makers fall behind in the market. Nine among 11 chipset makers have disappeared since 2008. Korean mobile phone makers including Samsung Electronics and LG Electronics, which are dependent upon Qualcomm's chipsets, had to pay royalties worth 1.27 billion dollars annually to Qualcomm.

"By making Qualcomm abide by the FRAND commitment, the competition system that had been tilted towards chipset market will recover," said Lee Sang-seung, economics professor at Seoul National University. "Korean mobile phone makers will not be able to negotiate patents with Qualcomm in a more equal footing."

Min-Woo Park minwoo@donga.com