Wednesday, March 27, 2013

Qualcomm asks appeals court to reject categorical rule against injunctive relief in FRAND context

Qualcomm's amicus curiae brief filed with the Federal Circuit in the appeal of Judge Posner's Apple v. Motorola FRAND ruling has become publicly available. Yesterday I published and commented on Intel's amicus brief in support of Judge Posner and Apple. Qualcomm asks the Federal Circuit to reverse certain parts of Judge Posner's FRAND ruling and, while noting that "both parties to this appeal are commercial partners and customers of Qualcomm", effectively (and unsurprisingly) sides with Google.

Here's Qualcomm's amicus brief (this post continues below the document):

13-03-20 Qualcomm Amicus Brief in Support of Reversal of Posner FRAND Ruling

Unlike a submission to the ITC that was replete with Apple-bashing and subsequently withdrawn, Qualcomm's amicus curiae brief steers clear of alienating Apple while disagreeing respectfully on certain key issues.

Qualcomm's amicus brief is not laden with rhetoric like a policy paper but instead focuses completely on what Qualcomm hopes are the legal concerns the Federal Circuit will be most receptive to. Qualcomm's business interests are clear: the brief mentions that it "has the most widely licensed 3G and 4G portfolios in the wireless industry; it now has more than 225 3G licensees and more than 40 4G licensees". Qualcomm makes some public interest arguments about the importance of protecting intellectual property, but it probably knows that it's preaching to the converted when telling the Federal Circuit about the importance of IP to innovation, and focuses on making an argument that characterizes Judge Posner's decision to deny injunctive relief as inconsistent with Supreme Court and Federal Circuit precedent.

All in all, Qualcomm's position on injunctions is very similar to Google's, and the combination of Google's opening brief and Qualcomm's amicus brief shows in my opinion the two key injunction-related issues that Apple and its amici will have to address at the appellate hearing:

  • The Supreme Court's 2006 eBay v. MercExchange decision opposed "expansive principles suggesting that injunctive relief could not issue in a broad swath of cases" and held that "traditional equitable principles do not permit such broad classifications". Here, Google and Qualcomm argue that Judge Posner's ruling does preclude injunctive relief for a "broad swath of cases": all cases involving FRAND-pledged standard-essential patents (SEPs).

    The "broad swath" argument is a key one -- not only in the FRAND context but also in connection with the "causal nexus" requirement Apple is fighting against.

    I believe that equitable principles don't stand in the way of broad classifications if patent holders themselves act in ways (such as by participating in standard-setting after making a FRAND pledge) that limit their IP enforcement, and also if the pursuit of injunctive relief is abusive under competition law (even the process of standard-setting itself raises antitrust issues unless FRAND promises are made and mean something, so as to ensure that the bottom-line effect of standardization is procompetitive). That said, Apple and its amici will have to make a very strong case for a broad and bright-line rule. The persuasive challenge is steep.

  • Google and Qualcomm want the case-by-case equitable analysis to focus on the details of the FRAND licensing promise made. They propose that the availability of injunctive relief depend on contract interpretation, and they advocate this because they know that the FRAND declarations required by standard-setting organizations (SSOs) such as ETSI are far from perfectly-crafted crystal-clear contracts. Also, they often involve questions of governing law, such as whether FRAND pledges made to ETSI should be construed under French law (in my observation, most courts have so far agreed that this is the case).

    The chief economists of the Federal Trade Commission and the European Commission, in a paper they coauthored with a former United States Department of Justice official, said "many existing SSO policies are not strong or clear enough to achieve the above goals ["to ensure that [SEP] market power is constrained so that consumers can benefit as much as possible from standard-setting activity, and so that SEP owners cannot discourage innovation by engaging in hold-up"] reliably or efficiently". Qualcomm and Google don't want the rules to work reliably and efficiently, but Apple and its amici will have to explain why it's necessary to have legal certainty with respect to SEP-based injunctive relief regardless of whether or not the relevant FRAND pledges have loopholes. There are vast numbers of SEPs out there that are subject to FRAND pledges that are vague and soft if one applies traditional principles of contract interpretation. Even if all SSOs adopted better FRAND declarations now, they couldn't go back in time and modify the promises that were made to standards that are relevant today and will be relevant for the next 20 years.

Qualcomm argues that "hold-up" (extortion of supra-FRAND royalties at the threat of injunctive relief) is not an established phenomenon. I've actually seen behavior by certain SEP holders that I believe amounts to hold-up, but Qualcomm obviously denies this and even argues that "the contrary effect is more likely; the elimination of any possibility for injunctive relief would only serve to empower recalcitrant licensees, [...] and threaten innovation".

Finally, Qualcomm opposes the next-best-alternative test, or incremental-value test, advocated by Cisco, HP, Walmart and others, as well as by Intel in the brief I discussed yesterday. Qualcomm says that the Federal Circuit has previously considered this test to be "flawed", and it believes that the Federal Circuit should simply decline to address this question because it's not a contested issue in this appeal and Judge Posner's decision didn't mention that test.

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