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Qualcomm's CEO defends chip licensing business in the FTC trial

  Qualcomm and the FTC face the US District Court in San Jose.

Qualcomm and FTC are facing US District Court in San Jose, California.

Stephen Shankland / CNET

The Federal Trade Commission believes that your phone is held back by Qualcomm's business practices. But Qualcomm's CEO Steve Mollenkopf says his company sells chips to smartphone manufacturers is best for everyone involved.

Qualcomm's "No License, No Chips" policy is at the heart of FTC's case against Qualcomm which lawyers argue before Judge Lucy Koh in the US District Court in San Jose this month. Mollenkopf was among the witnesses who testified on Friday.

Under the policy, companies must license Qualcomm's patent before it will sell them chips. Qualcomm customers, like Apple, don't like that type.

Mollenkopf says that practice is simply the best way to get things done for the whole industry, not just for his company. That's because Qualcomm's patent licenses cover much more technology a phone can use than just found in its corporate modem chips, allowing phones to talk to cellular networks.

"We only sell to licensed companies because not all IP [intellectual property] are covered in the chip. What we want to do is make sure [phone makers] is covered," said Mollenkopf. He pointed to the security framework used when phones connect to a network as an example. "It's not embodied in the chip, it's not in the phones, but it's in all these things," said Mollenkopf. "There is a huge amount of iP we generate that makes the system work."

The FTC, with the help of modem chip rivals Intel and iPhone maker Apple, left a suit two years ago and claimed that Qualcomm has a monopoly on modem chips and damaged competition by trying to maintain its power. The trial has revealed the inner functions of tech's most important business, smartphones, which show how vendors wrestle for dominance and profit.

Apple's 2011 and 2013 agreement to buy Qualcomm's modem chips are important examples. For example, before the 2011 agreement, Apple contacted Qualcomm for the opportunity to exclusively supply Qualcomm's iPhone modem cards in exchange for a $ 1 billion incentive payment, Mollenkopf tested. An incentive payment was made even though the amount has not been disclosed.

Tony Blevins, Apple's Vice President of Procurement, offered a completely different view of the Apple Qualcomm partnership in previous testimonies on Friday.

"As we source components, we usually strive to get at least two sources and probably no more than six," he says. "We believe that competition and market forces are very important to us to achieve the best leverage. With exclusivity there would be no competition. "

Blevins said Qualcomm is all but unique for a customer to license their patents before purchasing his products. Another chipmaker tried to do it once, but a call from Blevins until then. The CEO changed that approach, Blevins said.

But Mollenkopf still defended his company's practice, and Qualcomm also considered that the company released its technology licensing business from its chip-selling company in 2015, an idea that Mollenkop, recently appointed CEO, was arguing. "The license allows us to invest in technology early. It generates a lot of IP, says Mollenkopf. The company uses the revenues for research and development to new technology, he added.

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