Judge Koh Delivers Qualcomm Brutal Defeat Despite Apple’s Proven Manipulation

“Why would the FTC continue to persecute Qualcomm given the revelations in the Apple/Qualcomm litigation that demonstrate that Qualcomm did not seek an unreasonably high licensing rate?”

https://depositphotos.com/237135394/stock-photo-netizen-looks-logos-chipmaker-qualcomm.htmlIn a 233-page Order issued yesterday, Judge Lucy Koh of the United States Federal District Court for the Northern District of California handed Qualcomm a stinging defeat in the case brought by the Federal Trade Commission (FTC) alleging that Qualcomm engaged in unlawful licensing practices.

Judge Koh’s Order granted the following injunctive relief:

Qualcomm must not condition the supply of modem chips on a customer’s patent license status and Qualcomm must negotiate or renegotiate license terms with customers in good faith under conditions free from the threat of lack of access to or discriminatory provision of modem chip supply or associated technical support or access to software…

Qualcomm must make exhaustive SEP licenses available to modem-chip suppliers on fair, reasonable, and non-discriminatory (“FRAND”) terms and to submit, as necessary, to arbitral or judicial dispute resolution to determine such terms…

Qualcomm may not enter express or de facto exclusive dealing agreements for the supply of modem chips…

Qualcomm may not interfere with the ability of any customer to communicate with a government agency about a potential law enforcement or regulatory matter…

In order to ensure Qualcomm’s compliance with the above remedies, the Court orders Qualcomm to submit to compliance and monitoring procedures for a period of seven (7) years. Specifically, Qualcomm shall report to the FTC on an annual basis Qualcomm’s compliance with the above remedies ordered by the Court.

“We strongly disagree with the judge’s conclusions, her interpretation of the facts and her application of the law,” said Don Rosenberg, Executive Vice President and General Counsel of Qualcomm in reference to the ruling. He added that Qualcomm will “immediately seek a stay of the district court’s judgment and an expedited appeal to the U.S. Court of Appeals for the 9th Circuit.”

What Happened to the Apple-Qualcomm Peace? 

It was just three weeks ago that Apple and Qualcomm entered into a peace treaty. The revelations about Apple’s coordinated efforts to manipulate the licensing market by shrewdly challenging inferior patents to beat down prices should have led to the FTC dropping its pursuit of Qualcomm.

It is no secret that Apple has urged regulators all over the world to chase Qualcomm for alleged anticompetitive licensing practices, but it has now come out in federal court proceedings that Apple just didn’t like the rate it agreed to pay Qualcomm and decided to manipulate the marketplace and then use that manipulation to pull the wool over the eyes of regulators, including the FTC, in an attempt to leverage a better deal with Qualcomm.

Apple succeeded in achieving peace with Qualcomm, although the company has been badly beaten by Apple in near collusion with regulators all over the world. So why would the FTC continue to persecute Qualcomm given the revelations in the Apple/Qualcomm litigation that demonstrate that Qualcomm did not seek an unreasonably high licensing rate?

Indeed, the facts that came out in the Apple/Qualcomm litigation demonstrate clearly, through Apple memoranda, that Apple believed Qualcomm’s patent portfolio to be more valuable than others in the space and engaged in a coordinated effort to challenge those weaker portfolios to beat down the license rates of those inferior portfolios. They then refused to negotiate with Qualcomm, which in and of itself, should have prevented any entitlement to claim rights to FRAND (fair, reasonable and non-discriminatory) rates.

All the while, Apple was hoping to dupe decision makers into actually believing the licensing rates for the patents they knew were inferior were relevant when determining the licensing rate for Qualcomm’s significantly higher quality patent portfolio. Sadly, it seems as if it worked. Judge Koh bought it, and so did the FTC.

Several weeks ago the Wall Street Journal Editorial Board aptly put it like this:

“The question now is why the FTC wants to shoot the wounded after the war is over. Beyond reducing Qualcomm’s royalties—thus giving Huawei a competitive edge—regulators are setting a bad precedent of using antitrust law to intervene in contract disputes. This would create uncertainty and hamper 5G investment.”

Meaningless Rhetoric

There is no doubt that the FTC’s pursuit of Qualcomm at the behest of Apple has given Huawei a competitive advantage, which is hard to understand for those who have followed the U.S.-China trade negotiations. While Huawei is poised to be banned from the U.S. marketplace by the Trump Administration, the company has found itself exempt from the blacklist for 90 days, according to reports from the Wall Street Journal. The timing of this ban and subsequent exemption suggests it has more to do with politics and negotiation tactics between the United States and China, with the Trump Administration attempting to give negotiators more time to reach a deal while a deadline hangs over Huawei’s head. Meanwhile, Qualcomm continues to be beaten and bruised and Huawei pays no price, and likely never will be excluded from the U.S. marketplace. It would seem the Trump Administration’s rhetoric on China and Huawei is meaningless.

Whatever the case may be, the Wall Street Journal Editorial Board is right, but didn’t go far enough. The continued FTC pursuit of Qualcomm was worse than shooting the wounded after the war is over. It was more like executing the prisoners of war after a peace treaty has been signed.

The FTC should have done the right thing and admitted they had no case after the Apple/Qualcomm peace was achieved. That would have been the appropriate move for a prosecutor who is concerned with achieving justice.

Image Source: Deposit Photos
Photo by Imaginechina-Editorial
ID: 237135394


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Join the Discussion

5 comments so far.

  • [Avatar for LazyCubicleMonkey]
    June 2, 2019 11:39 am

    Based on what I’m reading, Qualcomm forced monopolistic licences on *all* cellular companies, even on phones that would not have Qualcomm chips, and the royalty rates were based on whole phones, not just the Qualcomm bits,with punishment or using non-Qualcomm chips. If that’s not anti-competitive monopolistic practices, what is?

    Here’s the summary of the 233-page decision that I’m going by: https://arstechnica.com/tech-policy/2019/05/how-qualcomm-shook-down-the-cell-phone-industry-for-almost-20-years/

    Which part is innaccurate? Legal based on the facts?

  • [Avatar for TESIA THOMAS]
    May 24, 2019 12:57 pm

    Why do attorneys have to be credentialed now when they just manipulate the law for their buddies?
    The regulations aren’t working if we have presidents that can sway entire circuits and corps that can sway federal bodies.

    Where’s the principle in the law? We need good-faith attorneys.

    And those that defend Koh… well, like every trite attorney website says, “Past performance is not an indicator of future results.”
    What is…and now what was…

  • [Avatar for Valuationguy]
    May 23, 2019 10:20 am

    While your points are valid….you are leaving out a major part of the equation here: Judge Koh herself.

    Judge Koh had her hand on the scale of this trial at all times and she is squarely in the pocket of the efficient infringement group of activist judges and academics who owe the large corporate interests in Silicon Valley (i.e. Google/Apple/etc). She was probably the worst single judge that the case could have pulled (randomly?) …and her decision (which I believe is likely to be overturned in major part once Qualcomm’s attorneys pick it apart) reflects it.

    The case was already submitted to Judge Koh well before the Qualcomm-Apple settlement (it’s my position that Qualcomm would NEVER have settled Apple’s liabilities in the all the other cases if it weren’t for Koh well-advertised biases which telegraphed a decision against it in the FTC case despite all the evidence)….thus any dropping of the case was dependent on Koh agreeing to drop the case….something that many observers like myself thought was unlikely.

    I expect that most if not all of Koh’s decision will be eviscerated by the newly reconstituted (via recent Trump appointments) Ninth Circuit. The appellate court is likely going to recognize the heavy thumb that Koh was using against all the evidence Qualcomm presented (under seal…but which became public immediately once the OTHER Apple trial started…forcing Apple to settle before even more damaging evidence was revealed) and rule that she violated her judiciary discretion.

  • [Avatar for Jim]
    May 22, 2019 10:43 pm

    This case was never about Apple. Apple was the largest company, and happened to be American. Apple alleged nothing that all other QC competitors over the years hadn’t been for many years. Even Nokia and Ericsson, though on QCOM’s side, had reversed course for obvious reasons and their testimony was no help to QCOM. The information you’re citing about Apple’s thoughts about QCOM weren’t cited by QCOM in the FTC case, though they had the info. People trying to make hay over what QCOM didn’t wish to use in court is revealing.

  • [Avatar for Bemused]
    May 22, 2019 03:39 pm

    When a behemoth like Qualcomm falls victim to the politicization of the judiciary and government administrative agencies, what hope do small, independent inventors have that they will ever get justice in the court system/PTO?