Qualcomm shares fell 11% in pre-market trading in New York after U.S. District Judge Lucy Koh sided with the Federal Trade Commission case accusing the company of anti-competitive practices.
Judge Koh, in San Jose, found Qualcomm also charged high royalties for its patents, and that its key role in manufacturing modem chips for smartphones using 5G made it likely that its behavior would continue.
The decision, made public on Tuesday night and first reported by The Wall Street Journal, said the company’s licensing practices violated antitrust law.
Qualcomm’s licensing business, which provides the majority of corporate profits, funds an industry-leading research and design effort that has made its chips the central technology in shifts between generations of mobile phone technology. Any separation or change to that could hurt its competitiveness. Qualcomm currently has the most advanced 5G modems in the market and almost all phones launched or planned for the new services are using them.
Judge Koh said Qualcomm must be subject to monitoring for the next 7 years to make sure it follows guidelines to ensure fair competition.
Qualcomm tried to resolve the FTC’s claims starting months before the case went to trial. But Bloomberg News reported that the company hit a wall with U.S. officials in February, failing to win over a majority of the FTC and its top officials despite extensive negotiations.