At this stage, the Northern District of California is a standard-essential patent (SEP) litigation hotbed. The previous post was about Huawei's shrinking case against Samsung, but there are some extremely interesting developments in a consumer class lawsuit against Qualcomm, related to FTC v. Qualcomm. Late last month, the consumer plaintiffs brought a motion to bar Qualcomm from enforcing a potential U.S. import ban against certain (in practical terms, Intel-powered) iPhones. Qualcomm filed its opposition brief on July 12 (this post continues below the document):
Qualcomm's legal arguments against the motion involve timing (the same consumer plaintiffs had filed a public interest statement with the ITC a long time ago, thus they knew about the ITC case, but waited until recently to thwart Qualcomm's pursuit of an exclusion order, i.e., U.S. import ban), standing (whether those consumers are harmed or not), the preliminary injunction factors, whether an ITC case involving non-SEPs has a bearing on an antitrust case involving SEPs, the ability of a district court (under the All Writs Act) to prevent an ITC plaintiff from enforcing an exclusion order, and the Noerr-Pennington doctrine, according to which litigation does not constitute an antitrust violation in its own right. In similar contexts in recent years, U.S. courts have consistently not deemed the enforcement of injunctions to be covered by Noerr-Pennington. The difference between SEPs and non-SEPs is also at issue (but hasn't been addressed yet by a court of law) in Qualcomm's German cases against Apple, but the heart of the issue is not a FRAND licensing commitment and the related rights of third-party beneficiaries: it's all about forcing competitors like Intel out of a market.
Qualcomm's timing-related arguments appear potentially more interesting to me than the other points it makes, but Qualcomm does contradict itself in that context. Qualcomm says:
"Here, any possible injury to Plaintiffs depends upon an attenuated chain of events transpiring. The exclusion order must issue, the presidential review period must pass, the investigation must result in actual exclusion of the accused iPhones, and the exclusion order must leave Apple with no reasonable opportunity to 'design around' the patents at issue. Such an attenuated 'chain of inferences' cannot confer standing."
Apart from the fact that everything on that list is precisely what Qualcomm is pursuing (it naturally wants to prevail, it would seek to dissuade the Trump Administration from a veto, and it seeks leverage from patents that it hopes cannot be designed around, at least not without incurring a prohibitive cost), Qualcomm itself blames those consumers in the timing context for not having brought their motion for a preliminary antisuit injunction a year ago--but consumers argue that there was a possibility at the time of Qualcomm's case not making any headway, and only now that the ITC staff has lately recommended (at the ITC hearing) to hold Apple in violation of one Qualcomm patent, there was a clear and present danger of anticompetitive effects and, therefore, consumers believe their motion was warranted.
From an industry point of view, the consumers' reply brief contains some very interesting quotes from the aforementioned ITC hearing, showing that even Qualcomm's own expert witnesses had no way of denying that Intel's efforts to compete with Qualcomm in the mobile baseband chipset market are good for innovation and choice (this post continues below the document):
The most interesting passages of the reply brief are about the question of whether the fact that Intel is at least trying hard to compete with Qualcomm in the mobile baseband chipset market benefits consumers. At the recent ITC hearing, ITC staff lawyer Lisa Murray said:
"If Intel is taken out of the 5G race, this would slow the pace of U.S. innovation."
That assessment, which is actually just common sense, will serve as a silver bullet in the further proceedings.
But even Qualcomm's own expert witnesses in the ITC proceedings felt forced to concede that Intel's competing baseband chipsets make an important difference:
One Qualcomm expert conceded that the Intel-based iPhone "is the only top-tier phone that currently uses a competing company's chip."
A Qualcomm expert also agreed that the "two premium chipset providers based right here in the U.S. are Qualcomm and Intel" and that "every top-echelon smartphone that could potentially serve as a consumer substitute for iPhones blocked from the U.S. uses Qualcomm’s modem chip, with the exception of some Samsung phones that use chips built in-house."
And here comes the most impressive passage from the expert witness testimony:
"Q. In fact, you agree that having Intel as a competitor in that market is good for competition; correct? A. I do agree. Q. Having Intel as a competitor in that premium chipset market is good for quality of chipsets; correct? A. Generally competition is good, yeah. Q. And competition from Intel in particular is good; correct? A. Yes. Q. It's good for pricing; correct? A. Yes. Q. It's good for innovation; correct? A. Yes. Q. Good for innovation as we move into 5G; right? A. Yes. Q. Which is an absolutely critical market for the country as a whole; correct? A. Certainly for Qualcomm, yeah. We believe it is, yeah. Q. And it's good to have Qualcomm in that market; right? A. Yeah, that's right. Q. And it's good to have Intel there too? A. Yes. Q. It's good for the public? A. I agree. Q. Good for the public interest? A. I agree."
"Good for the public interest" to have not only Qualcomm but also Intel in that market--quite an important concession.
One last quote:
"Two companies competing in this premium baseband chipset market in the U.S. is better than one monopolist for the public interest; correct? A. Well, as a general proposition, yes."
Unlike Samsung, Intel supplies other companies with its baseband chipsets and would like to sell to as many customers as possible, with Apple being its key reference customer. The consumers' reply brief notes that "only the AT&T Samsung Galaxy S6 devices contain an Exynos System-on-a-Chip" (Exynos is Samsung's mobile chipset brand), while "[t]he Verizon and Sprint Samsung devices contain Qualcomm chips."
In light of all of that, it's not hard to see why Qualcomm would like to force Intel out of the market as soon as possible. But what follows from the above admissions by Qualcomm's own expert witnesses is that this would be bad for innovation and harm consumers in two respects (less innovation and higher prices).
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