NDRC issues decision in landmark case against Qualcomm and imposes record fine of RMB 6.088 billion

Following around 1.5 years of investigation and lengthy remedy-discussions, China’s National Development and Reform Commission (“NDRC”) has issued a decision against US semiconductor giant Qualcomm, imposing a record-penalty of RMB 6.088 billion (USD 975 million) and a set of remedies around the companies’ patent licencing fees.

Following the fines in the baby-formula sector in 2013 (USD 110 million) and in the automotive industry in 2014 (USD 201 million), the Qualcomm case marks a new record for the highest individual fine in China. The fine corresponds to 8% of Qualcomm’s China revenue in 2013, which is at the upper end to the fines of 4 to 8% of previous-year revenue imposed on ten Japanese auto parts and bearing makers for price fixing in autumn 2014 (further reading). This penalty is also several times higher than NDRC’s total fines for all the alleged infringements of the Chinese Anti-Monopoly Law (“AML”) imposed in 2014, which topped RMB 1.8 billion (USD 300 million).

Further, Qualcomm has agreed to a comprehensive set of remedies applying to the Chinese market. It is understood that, as a novel feature, some remedies are not part of NDRC’s decision but have been given orally as a means of avoiding possible follow-on litigation. Qualcomm agreed to stop bundling practices in relation to its standard essential patents (“SEPs”) and non-SEPs, which was considered as unjustifiable by the NDRC. Further, the company will abandon a free cross-licensing clause and lower certain royalty rates by approx. 35%.

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