On Friday, the FTC opposed Qualcomm's motion to dismiss the pending antitrust litigation in the Northern District of California, and got support from several amici curiae, with Samsung stressing that it is harmed by Qualcomm in two capacities: as a device maker and as a chipset vendor.
Intel is "only" the latter, and it's very actively involved in the fight to open up the market. It filed an amicus curiae brief (PDF) and explained on its website why it decided to take this kind of action.
In my analysis of Qualcomm's response to Apple's Southern California complaint, I already noted that some of the issues raised and claims made by Qualcomm in that filing appeared to be directed at the court of public opinion more so than the court of law. The fact that Qualcomm engaged in rapid response to the FTC's opposition filing on Friday (as quoted by CNET and other media) reaffirms that impression:
"The Federal Trade Commission's latest submission to the court does nothing to cure the fundamental flaws in its complaint against Qualcomm: no coherent theory of competitive harm and no allegations of the type of conduct that the antitrust laws are designed to address," Qualcomm said. "The complaint therefore should be dismissed."
Well, an opposition to a motion to dismiss can't "cure" anything. If there were flaws to be cured (I doubt that the court will agree with Qualcomm on "fundamental" flaws, though the devil may be in the detail), the only way to cure them would be an amended complaint. So Qualcomm could have (and maybe actually had) prepared that statement even before seeing the FTC's brief because, from Qualcomm's perspective, it would have been certain to be correct no matter what the FTC might submit. It's just a bit unusual that a litigant given three weeks by the court to respond to that opposition filing issues such a statement, well ahead of the reply brief. They're in their right to speak out just like I can read court filings and comment on them quickly. Again, it's just a bit unusual at this particular procedural stage.
But, as I mentioned before, Intel also issued a statement, the strongest passage of which is this:
"Qualcomm has maintained an interlocking web of abusive patent and commercial practices that subverts competition on the merit."
This is what I described (three months ago) as two mutually-reinforcing monopolies. Intel's brief contains an entire paragraph on these dynamics:
"These anticompetitive stratagems reinforce each other: By refusing to license its competitors and by coercing its customers into exclusivity deals, Qualcomm fences other chipset manufacturers out of the market. The resulting lack of alternative supply options, in turn, makes Qualcomm’s customers increasingly more dependent on a consistent supply stream from Qualcomm. And this dependence means that a threatened disruption in chipset supply from Qualcomm has a powerful coercive effect. Rather than risk losing access to Qualcomm chipsets, Qualcomm's customers quickly acquiesce to the company’s desired terms and policies. These understandable capitulations, in turn, further entrench Qualcomm's monopoly. Because Qualcomm can expect acquiescence, it has the latitude to insist upon license terms that impose huge unjustified barriers in the path of competitors seeking to enter the market."
When I tweeted the "interlocking web of abusive [...] practices" statement from Intel's press release, another blogger said that this would also apply to Intel. I don't have an opinion on that, but tech market leaders generally aren't saints and it's not like they all readily license their direct competitors (what an understatement). However, the question of whether Intel would extend a license to AMD or whether Apple would grant one to Samsung or Samsung to you-name-them is really distinguishable from Qualcomm's refusal to license other chipset makers and from Qualcomm's extremely high royalties. Intel's brief explains something that is not new but that is true: standard-setting would be anticompetitive without a FRAND licensing commitment. This is the central part of that argument (from Intel's brief):
"Because private standard-setting associations are comprised of firms with horizontal and vertical business relations, the only way SSOs are 'permitted at all under the antitrust laws' is if 'meaningful safeguards' are put in place to 'prevent the standard-setting process from being biased by members with economic interests in stifling product competition.'"
The dual-monopoly dynamics mentioned further above are also unique to Qualcomm. I can't think of anything similar involving the complainants.
Three more observations on Intel's brief:
Section 2 of the Sherman Act distinguishes unlawful acquisition or maintenance of monopoly power from success in the marketplace "as a consequence of a superior product [or other legitimate factors]." Therefore, Qualcomm obviously takes the position that Intel's products just can't compete on the merits, while Intel emphasizes in its brief and its press release its readiness, willingness and ability to compete with Qualcomm on the merits. It argues that "[Qualcommm's] dominance arises not from Qualcomm's inherent superiority, but rather from its anticompetitive practices."
Qualcomm obviously has to argue that its products are just so great that customers are willing to pay a lot for them, and its patents are just more valuable than other companies' patents, which is a bit hard to argue in connection with newer standards such as LTE. It's becoming harder and harder for Qualcomm to persuade courts and regulators. With every finding of anticompetitive conduct somewhere in the industrialized world, with every antitrust complaint, and with every amicus brief such as the ones filed on Friday, judges and observers will be more inclined to believe that there really is an issue. Qualcomm will need to make some headway as it defends itself in multiple jurisdictions, and it needs allies. But so far it appears Qualcomm can merely deter other companies from speaking out; it can't force them to file amicus briefs in support of its positions.
Maybe Qualcomm's products are indeed superior. But is it just superiority that has created the current situation? With all that's known about Qualcomm's practices already, it's hard to imagine it was all about superiority. Of course, Judge Koh will want the FTC to prove its claims, not just to make a certain theory conceivable.
With respect to apposite case law, Intel makes an interesting point. It argues that the FTC complaint is about whether Qualcomm will be allowed to continue its practices and not really about historic conduct. It's about the "future effect" of the outcome of this case, Intel argues. Therefore, "[m]onpoly-maintenance cases [...] are [...] more informative" than cases about how someone might have obtained a monopoly earlier on (past-conduct cases).
In the final paragraph, Intel forcefully and persuasively counters Qualcomm's claim that Intel's renewed business relationship with Apple "definitively refutes" the FTC's claim of exclusionary conduct:
"But that argument gives short shrift to why Intel finally was able to supply Apple after all of these years. It is far more plausible that the many investigations across the globe deterred Qualcomm from imposing another illegal exclusive deal on Apple. [...] If Qualcomm were unconstrained by investigations like these, there is no telling what anticompetitive arrangements it would seek to impose on Apple (or other purchasers) to entrench its monopoly. Put simply, actions by courts and regulators have played a crucial role in shining a light on Qualcomm's anticompetitive behavior. Without that scrutiny, and the safeguards that suits like this one can provide, Intel never could have competed on even terms with Qualcomm in a multi-billion dollar market that impacts the lives and livelihoods of millions of people around the world."
That statement is probably also meant to make antitrust regulators feel good about their Qualcomm-related efforts. And it is plausible. I had heard from various companies over the years (going back to BlackBerry, then Research In Motion, in 2006) how unhappy they were about Qualcomm's royalty demands and business terms. I just didn't expect much to change. Then came the Korea Fair Trade Commission's ruling just between Christmas and New Year's. A few weeks later, the FTC's lawsuit in Northern California. And then Apple filed its own suit and Samsung filed that amicus curiae brief last Friday. In the litigation space, the chicken-and-egg question has a clear answer: regulatory action apparently paved the way for private-sector action. Similarly, regulatory action may also have been a key enabler, or maybe even the key enabler, of Intel's new deal with Apple.
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