Qualcomm Settles Investor Lawsuit for $75 Million Over Misleading Statements on Chip Sales and Licensing Practices
Gio FarleyQualcomm Inc., a leading chip maker based in San Diego, has accepted to pay $75 million in a class action case that involves investor litigations over what they deem as misleading statements and engage in questionable business practices which have been the subject of controversy in the past several years.
Qualcomm, the company which gives Snapdragon processors and modem chips for many mobile companies, is suffering from legal scrutiny over the "No License No Chips" strategy. This rather risky practice makes it mandatory for manufacturers to license Qualcomm's patents before buying its chips. Also, using royalty SKUs for determining royalties based on the retail price of the end-products that incorporate Qualcomm chips instead of volume and the actual price of the chips, has angered many device makers.
The case against Qualcomm being a non-jury trial occurred in 2019 before the Federal Trade Commission (FTC), and the presiding Judge was Lucy Koh. According to the FTC, Qualcomm's practices of licensing policies and schemes were unreasonably restrictive. First, the ultimate decision of Judge Koh was adverse to Qualcomm and might signify the fundamental change of its business plans. However, in 2020, it was reversed by The Ninth Circuit Court of Appeals in California stating that the actions of Qualcomm did not violate the provision of anti-competition.
Read Also: Snapdragon 8 Gen 4 Expected To Drive Up Smartphone Prices In 2025
The $75 million settlement is the result of a class action lawsuit filed by investors who said that Qualcomm's stock price had been artificially inflated due to the company's false representations. The investors claimed that Qualcomm had failed to license its standard essential patents (SEPs) to other companies and had misrepresented the independence of its chip sales and licensing businesses.
According to the court document, Qualcomm made false and deceptive claims that caused its stock price to soar. This stock price then fell when many enforcement actions were announced and Apple filed a lawsuit. The case's lead plaintiffs were happy with the settlement, considering it a good outcome considering the high stakes in the legal proceedings.
"Lead Plaintiffs further alleged that the price of Qualcomm's common stock was artificially inflated as a result of Defendants' allegedly false and misleading misstatements and omissions, declining upon the announcements of certain enforcement actions and a lawsuit brought by Apple," the court filing noted.
The U.S. District Judge Jinsook Ohta has not yet approved the all-cash settlement. San Diego serves as the district court for the Southern District of California. On June 26, lawyers from both sides will get together to complete the settlement hearing.
The settlement news has had a positive impact on Qualcomm's stock, which rose by $4.87 (2.19%) to $227.09 in mid-afternoon NASDAQ trading. This outcome provides a degree of closure for investors while spotlighting Qualcomm's complex legal and business landscape.
Qualcomm's situation exemplifies the intricate balance tech companies must maintain between aggressive business practices and regulatory compliance. As the industry continues to evolve, Qualcomm's settlement serves as a reminder of the potential repercussions of crossing legal boundaries.
Related Article: Qualcomm Unveils Snapdragon 6s Gen 3: A New Era For Mid-Range Smartphone Processors
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