In this case, the rodent breeders in question are Qualcomm, who has been requiring companies to both buy their (protected by patent) chips, AND to pay licensing fees on those same patents.

I do not understand how patent exhaustion would not prevent this.

It appears that federal judge Lucy Koh has a similar view, and found Qualcomm is guilty of serious anti-trust violations, and issued an injunction preventing them from getting two bites at the Apple:^*

Qualcomm abused its monopoly on critical chip patents for decades, a US federal judge in California said on Wednesday in a decision with radical implications for the cellphone market.

In a 233-page opinion [PDF] Judge Lucy Koh came down heavily on the chip designer, saying it had violated antitrust laws and “strangled competition” by insisting that companies license its patents at unreasonable prices before being allowed to purchase its chips. Qualcomm chips are an essential component in modern mobile phones.

Koh also issued a permanent injunction that orders Qualcomm to sell its chips to companies without requiring them to license its patents. She also ordered that the company be monitored by federal regulators for seven years.

………

Qualcomm has said it will appeal the decision and seek an immediate stay on the injunction. “We strongly disagree with the judge’s conclusions, her interpretation of the facts and her application of the law,” the company said in a statement. The impact of the decision on Qualcomm’s bottom line was reflected in an instant 12 per cent drop in its share price.

………

“Qualcomm’s licensing practices have strangled competition in the CDMA and premium LTE modem chip markets for years, and harmed rivals, OEMs and end consumers in the process,” Judge Koh wrote. “Qualcomm’s licensing practices are an unreasonable restraint of trade.”

Explaining her decision to grant a permanent injunction, she argued “it makes little sense for the court, having found that Qualcomm’s patent licenses are the product of anti-competitive conduct, to leave those licenses in place.” The Snapdragon system-on-chip designer was charging “unreasonably high royalty rates,” Koh said.

………

At the core of the case is that fact that Qualcomm possesses a number of “standard essential” patents on chips that are critical for mobile phones to function. It then used that position to force companies to license its patents – demanding many times a fair market rate – before being allowed to buy its chips.

Experts highlighted the fact that Qualcomm would also only license its patents at the device level, as opposed at the component or chip level – which forced companies to pay it more and gave it greater control of the market.

Here’s hoping that this holds up on appeal.

^*Pun intended.