Source: Qualcomm official WeChat

On February 25, 2025, the U.S. 9th Circuit Court of Appeals issued a ruling in a consolidated antitrust class action lawsuit against Qualcomm, affirming the district court's dismissal of plaintiffs' claims that Qualcomm's "no license, no chips" policy violated the Cartwright Act. This case stems from allegations made by the Federal Trade Commission (FTC) against Qualcomm in 2017.

The FTC had argued that Qualcomm's "no license, no chips" policy, which refuses to sell modem chips to cellular device manufacturers without a patent license, along with its exclusive dealing agreements with major device manufacturers like Apple and Samsung, violated federal and state antitrust laws, harming competition in the market for CDMA and LTE modem chips. Inspired by the FTC's lawsuit, plaintiffs representing customers filed a consolidated class action, attacking Qualcomm's business practices under the Sherman Act, the Cartwright Act (California's antitrust law), and the Unfair Competition Law.

Initially, the district court partially sided with the plaintiffs, but the outcome changed during subsequent legal proceedings. In the FTC's lawsuit against Qualcomm, the district court initially ruled in favor of the FTC and prohibited Qualcomm's relevant conduct, but the 9th Circuit Court of Appeals overturned that ruling, finding no violation of the Sherman Act. Similarly, in this class action, the 9th Circuit Court of Appeals intervened, reversing the district court's class action certification order and directing it to reconsider the validity of the plaintiffs' claims following the FTC's defeat.

After a rehearing, the district court dismissed some of the plaintiffs' claims and entered a summary judgment for Qualcomm. The plaintiffs appealed, and after a comprehensive review, the 9th Circuit Court of Appeals issued its final ruling.

The appellate court held that the district court did not err in dismissing the plaintiffs' claims under the Cartwright Act regarding Qualcomm's "no license, no chips" policy. The court noted that the Cartwright Act aligns with the Sherman Act on this issue, and Qualcomm's policy is chip-supplier neutral, without imposing anticompetitive surcharges on competitors' modem chip sales, thus not inherently anticompetitive. Moreover, the plaintiffs failed to demonstrate market foreclosure or anticompetitive effects in the tied product market to establish an illegal tying claim.

The court also rejected the plaintiffs' argument that Qualcomm abused its patents by violating fair, reasonable, and nondiscriminatory (FRAND) commitments. The court found that the cases relied upon by the plaintiffs were distinguishable and could not support their theory, and remedies for such issues should primarily be based on contract and patent law.

Regarding Qualcomm's conduct, the appellate court affirmed part of the district court's ruling. The plaintiffs failed to prove fraud, and the "no license, no chips" policy did not violate antitrust laws. Their exclusive dealing theory also failed to obtain equitable relief. However, the appellate court remanded claims related to exclusive dealing agreements seeking restitution based on unfairness theories, instructing the dismissal of that part of the claim and allowing the plaintiffs to refile without prejudice in state court.

Additionally, the appellate court upheld the district court's summary judgment for Qualcomm on the plaintiffs' exclusive dealing claims under the Cartwright Act. The plaintiffs failed to define the relevant market, prove substantial market foreclosure, or demonstrate antitrust injury from Qualcomm's agreements with Apple, relying on speculative expert reports that could not support their claims.

This ruling means Qualcomm's "no license, no chips" policy and related exclusive dealing practices continue to be recognized under U.S. law and are not considered monopolistic. For Qualcomm, this is undoubtedly another victory, helping it consolidate its position in the chip market and patent licensing domain. While this decision may have some impact on other companies' licensing strategies and competitive practices concerning products and patents, the influence is relatively limited. Few companies can sell chips while aggressively collecting patent royalties like Qualcomm; most either sell products or collect patent royalties exclusively. Companies with a similar model to Qualcomm may include Huawei.

However, Qualcomm faced investigation and penalties from China's antitrust enforcement agencies for its "no license, no chips" policy in 2015.