Qualcomm Inc. has successfully appealed a 2019 court ruling that ordered the company to renegotiate its lucrative chip deals with mobile device makers and sent its stock price plunging more than 10% at the time.

The ruling was overturned earlier today by the Ninth Circuit Court of Appeals in a unanimous 3-0 decision.

The legal saga began in 2017 with the U.S. Federal Trade Commission filed a lawsuit against Qualcomm over its business practices. San Diego-based Qualcomm is the biggest maker of modem chips for handsets, counting Apple Inc. and many of the biggest Android handset manufacturers among its customers. The FTC accused the company of abusing its dominant market position to extract unreasonably high fees from customers.

The FTC secured a victory in May 2019 when the Northern California Distinct Court ruled that Qualcomm charged more than it should have for its technology and violated competition law in the process. The ruling also ordered the company to renegotiate its chip supply contacts with customers such as Apple. It’s that decision the Ninth Circuit Court of Appeals overturned today.

“We decline to ascribe antitrust liability in these dynamic and rapidly changing technology markets without clearer proof of anticompetitive effect,” the three-judge panel wrote in the decision today.

One of the main points of contention in the case was the structure of Qualcomm Inc.’s chip supply contracts with customers. The company not only sells the chips themselves but also requires buyers to license patents that it owns to certain foundation wireless networking technologies. The FTC argued that the bundling of these two items amounted to an unfair tax on buyers. 

The Ninth Circuit Court of Appeals’ decision today is a major win for Qualcomm, which generates billions of dollars annually from patent licenses. The company disclosed in February that its patent licensing arm generated sales of $1.4 billion during its first fiscal quarter, a 38% increase over the same period 12 months prior. 

That jump was partially the result of a legal settlement with Apple, which like the FTC had also filed suit over Qualcomm’s bundling of its chip technology and patents. The settlement ended the litigation and Apple signed a deal to buy several years’ worth of modem chips.

Shares of Qualcomm closed 2.3% higher today after earlier rising more than 4% on news of the appeal. 

Photo: Qualcomm