The Federal Trade Commission (FTC) launched a legal case against Qualcomm in 2017, and US District Judge Lucy Koh has just issued a scathing ruling against the dominant chipmaker. Koh's 233-page ruling details how Qualcomm illegally used its leverage in the market to stifle competition and impose unfair fees. As a result, Qualcomm's stock price has taken a nosedive.

Qualcomm owns several key pieces of technology that are essential to the functionality of modems in today's phones. Even if your phone has a modem produced by someone else, Qualcomm probably made some money on it in the form of licensing fees. The court said that Qualcomm overcharged for license fees, basing them on the full consumer cost of smartphones rather than the cost of parts. Qualcomm also allegedly threatened OEMs with disruption of chip supplies unless they agreed to its patent licensing terms. The court discounted testimony by Qualcomm executives, citing written correspondence that directly contradicted them.

Judge Koh has ordered Qualcomm to make several changes to its business model. It has to renegotiate license terms with customers in good faith and may not tie chip supply to patent licensing. It also has to make licenses available under fair, reasonable, and non-discriminatory (FRAND) terms to other entities. Qualcomm is also barred from entering into any exclusive agreements for the supply of modem chips (ex. the Apple deal), and it can't discourage customers from contacting the government about regulatory matters. Judge Koh has ordered Qualcomm to submit to seven years of compliance monitoring to ensure it abides by the ruling.

Qualcomm has, of course, professed its innocence. It claims its business model is perfectly normal and it will seek a stay on the ruling until it can appeal.