Yesterday, the 9th Circuit Court of Appeals denied the FTC’s request to rehear its case against Qualcomm which leaves intact the Appeals Court ruling that found Qualcomm not guilty on all counts of anti-competitive behavior.
As you would expect, Qualcomm was elated. “The fact that not one judge on the Ninth Circuit thought it necessary to consider the merits of the FTC’s petition or to even ask for a response from Qualcomm validates the strength and clarity of the panel’s thorough analysis and conclusions. We thank the court for its time and efforts,” said Don Rosenberg, executive vice president and general counsel of Qualcomm.
While I wasn’t surprised at this ruling in the slightest as sound minds did ultimately prevail, I was surprised that it got this far and shouldn’t have even begun.
The case against Qualcomm started as a clown show in 2017. I believe the suit was filed under questionable circumstances and timing, with a “midnight filing” right after a resigning chairwoman, under the nose of a new administration, with only three of five commissioners at the post, a non-unanimous decision with a firm dissenting opinion from the interim chair.
During the trial, Huawei looked like the star witness, a big issue, and whoever planned wasn’t exactly watching the news. Apple, whom I believe started this entire mess in 2014, “allegedly ‘plotted’ to hurt Qualcomm years before it sued the company.” We also know that Apple and Samsung had a “common interest” agreement to work closely with FTC. Intel even said in emails that Qualcomm modems were the best. Apple proved that modem competition did exist by moving all of its modems to Intel. One day into the “ODM” trial, the day after Apple was exposed to its 2014 plan on Qualcomm, Apple settled the case. Incredible timing, right?
As I said when the FTC was overturned the ruling the first time, the Ninth Circuit Court of Appeals was clear on its verdict:
- Qualcomm should not have to directly license its modem competitors like Huawei, Samsung, Intel (at the time), Unisoc (Spreadtrum), or MediaTek. Qualcomm does and continues to license OEMs, ODMs, and CMs. The court said that if the customers do not like the essential IP’s price, they should bring it up in contract court to show how it is not fair, reasonable, and non-discriminatory (FRAND).
- Qualcomm’s “no license, no chips” policy is OK, as well, as it does not impact rival modem maker’s opportunities. The court went so far as to say that Qualcomm’s business model is “chip-supplier neutral.”
- Qualcomm’s special deal with Apple had no impact on hurting competition, and the court noted that Apple terminated the contracts. After that, Apple went to Intel. Wait, I thought there was no competition? (sarcasm added.)
The court said that Qualcomm was an aggressive competitor but not anti-competitive: “Anti-competitive behavior is illegal under federal antitrust law. Hypercompetitive behavior is not. Qualcomm has exercised market dominance in the 3G and 4G cellular modem chip markets for many years, and its business practices have played a powerful and disruptive role in those markets, as well as in the broader cellular services and technology markets. The company has asserted its economic muscle ‘with vigor, imagination, devotion, and ingenuity.’ Topco Assocs., 405 US at 610. It has also ‘acted with sharp elbows—as businesses often do.’ Tension Envelope Corp. v. JBM Envelope Co., 876 F.3d 1112, 1122 (8th Cir. 2017). Our job is not to condone or punish Qualcomm for its success, but rather to assess whether the FTC has met its burden under the rule of reason to show that Qualcomm’s practices have crossed the line to ‘conduct which unfairly tends to destroy competition itself.’ Spectrum Sports, 506 US at 458. We conclude that the FTC has not met its burden.”
This ruling doesn’t 100% conclude this case as the FTC has one last chance if it wants to take this to the Supreme Court. Given the continual smackdowns at the Court of Appeals and the lack of evidence, I cannot imagine anyone trying to bring this up again. The FTC has 150 days to go at it again, and then we can all call it a day. The FTC would appear to have its hands full right now with Apple, Facebook, Amazon, and Google, which is another reason the commission needs just to let go.
Yesterday was a good ruling for inventors and their intellectual property.
Note: Moor Insights & Strategy writers and editors may have contributed to this article.