In Case You Missed It: Qualcomm's Legal Issues Explained, IBM Is Surging

Qualcomm Inc. (QCOM - Get Report) lost more than 4% Wednesday after a short-seller pointed out the chip makers huge legal risk. 

Hedge fund Kerissdale Capital disclosed it's shorting Qualcomm because a loss in a lawsuit brought against it by the Federal Trade Commission could mean 60% downside for the stock

The FTC sued Qualcomm for violated FRAND {fair, reasonable, and non-discriminatory} rules, which states that companies that become members of the rule structure must license their products to competitors. Each product type that supplies the world of devices like smartphones is patented, so anti-competitive behavior has to be removed. The FRAND rules are written by several global organizations, including the International Telecommunications Union, a part of the United Nations. 

The U.S. could rule in favor of the FTC and against Qualcomm, which would mean a huge hit to Qualcomm's revenues, and therefore earnings. 

Meanwhile, International Business Machines Corp. (IBM - Get Report) shares were up as much as 10% after the company beat on earnings and guidance expectations Tuesday afternoon. But IBM has big spending plans, raising questions about its future free cash flow, writes RealMoney's Kevin Curran.