Thursday, April 13, 2017

Qualcomm does not want European and Korean antitrust proceedings to impact its FTC litigation

Qualcomm, which would have us believe we couldn't even play Pokémon GO if not for its wireless technologies, is fighting a global, multi-front war against regulators, industry players and consumers (who are piggybacking on the FTC case in Northern California).

On one of those fronts, BlackBerry just won an arbitration award over $815 million. Unfortunately, arbitration is opaque, so the legal basis for this is unclear, other than BlackBerry having claimed to have paid too much in license fees during an unspecified past period. The kind of wrongdoing here is totally unclear, and we also don't know what an appeals court would have decided. Still, the $815 million award, which is final and binding, has made BlackBerry's share price soar by 12%. For the Canadian company, it's a huge amount of money. For Qualcomm, it's also a very significant amount, but the bigger problem is that every independent finding of Qualcomm having overcharged someone makes it harder for Qualcomm to convince the courts of law and the court of public opinion that it's just being bullied by the likes of Apple and Samsung and that all those antitrust enforcers have all just been misled by sore losers in the marketplace and by evil companies denying Qualcomm a fair compensation for its innovations.

This concern is real. A joint case management statement filed yesterday by the FTC and Qualcomm--"joint" in terms of being a single document despite virtually zero convergence on substantive questions--in the Northern District of California shows that Qualcomm is indeed concerned about how the various parallel proceedings could influence each other.

First, the filing (this post continues below the document):

17-04-12 FTC-Qualcomm Joint Case Management Statement by Florian Mueller on Scribd

The FTC would like the European and Korean proceedings to be treated as cases that are related and relevant to the U.S. antitrust litigation:

"Outside the United States, Qualcomm is currently the subject of publicly disclosed proceedings that the FTC believes are also appropriately brought to the Court's attention as related 'proceedings pending before . . . another court or administrative body.' [...] Proceedings initiated by the European Commission and Korea Fair Trade Commission involve conduct that is similar or related to the conduct alleged in the Complaint, evidence that could overlap with evidence in this action, and potential remedies that could overlap with equitable relief that the Court may find appropriate should the FTC prove the violations alleged in the Complaint."

But Qualcomm is against this:

"Qualcomm believes the foreign regulatory proceedings identified above, which are proceeding under foreign legal regimes, are not relevant to the Court's determination of the instant matter under United States law, and that the FTC has included them in this Case Management Statement to create prejudice rather than to assist the Court in the management of this litigation and avoid 'unduly burdensome duplication of labor and expense.'"

If we were talking about whether the FTC could present international antitrust findings to a U.S. jury, the analysis of whether Qualcomm is prejudiced by something that is more confusing than probative would be different. But this here is just about whether Judge Lucy Koh should officially take notice of the foreign proceedings. A professional judge obviously will consider any differences between U.S. law and the legal frameworks of other jurisdictions.

What is Qualcomm afraid of? In a footnote it stresses that "[p]roceedings before the European Commission are ongoing" and mentions its Korean appeal. Judge Koh will also understand the non-final state of the Korean case. I can't help but conclude that Qualcomm expects bad news from those other jurisdictions. Otherwise, if Qualcomm considered it more likely than not that the EU would let it off the hook and that its Korean appeal would succeed, it would have something to gain from treating the foreign proceedings as related cases.

Before yesterday's filing I couldn't see a clear indication of Qualcomm trying to accelerate or to stall its California cases. It sought a transfer of everything to its home district, but it didn't want consolidation in NorCal. But now there are some potential indications--I'm not saying "evidence"--of stalling:

  • The FTC doesn't want to stay discovery, arguing that "prompt resolution of this enforcement action is essential to accomplish the objective of restoring competition in the affected markets." Qualcomm, however, wants the court to rule on its motion to dismiss before discovery. Qualcomm obviously has a point that the FTC is not your average plaintiff: it has been investigating Qualcomm for some time, which was like a massive discovery effort (but not exactly the same). Still, if Qualcomm wanted to get rid of the FTC case quickly, it would want to proceed to discovery right away since resource constraints can't be an issue here.

  • With respect to confidential business information, the FTC proposes "a single protective order covering this action and other actions" such as Apple's case, but Qualcomm is hesistant to agree to that. Instead, it "proposes to discuss coordination and other discovery matters with the appropriate parties in due course." It doesn't rule out a single protective order but does appear skeptical. Under other circumstances, a preference for case-specific protective orders wouldn't mean anything, but since Qualcomm initially proposed that all California cases be consolidated in one venue (the Southern District of California), I would have assumed that Qualcomm would continue to favor consolidation wherever it's an option.

With respect to remedies, Qualcomm says "[it] believes the FTC's statement of the relief sought is insufficiently detailed and that Qualcomm and the Court are entitled to a clearer understanding of the conduct sought to be enjoined and any other relief requested." While I philosophically agree with what the FTC is trying to accomplish here, I would agree with Qualcomm that the FTC's prayers for relief are less than perfectly clear. The FTC just wants the court to hold Qualcomm's conduct in violation of Section 5(a) of the FTC Act and then wants an enjoinder against that conduct but also against "similar and related conduct in the future." Other litigants have shown that prayers for relief of the specific-performance type can be stated with greater specificity. For example, with respect to FRAND licensing, the FTC could ask the court to require Qualcomm to offer FRAND licenses to specific companies (such as Intel and MediaTek or Samsung's wireless chipset business division).

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