Wednesday, September 12, 2018

Qualcomm facing additional preliminary antitrust investigations in the EU over German iPhone lawsuits targeting Intel chips: MLex

MLex, the leading source of insight on regulatory risk (and by now a Bloomberg subsidiary), yesterday reported that the European Commission's Directorate-General for Competition (DG COMP) has asked Qualcomm questions about an antitrust complaint Apple had filed earlier this year and that I believe hasn't previously been reported on by anyone. According to Matthew Newman, one of the best-connected EU reporters (among other things, he was spokesman for a commissioner), the complaint relates to Qualcomm's patent enforcement against Apple in Germany (trials will take place in Mannheim and Munich over the next few months, with one in each city scheduled for next week) targeting iPhones that incorporate Intel baseband chips.

In January, the EU's competition authority slammed Qualcomm with a $1.2 billion fine for its exclusionary conduct in the years 2011-2016 when Apple was contractually precluded from sourcing baseband chipsets from Qualcomm's competitors such as Intel. As Commissioner Vestager explained at the time, Qualcomm had "taken measures to avoid competition on the merits" in its quest for total market dominance.

The way I understand the new MLex report, the Apple complaint that the EU is now investigating on a preliminary basis alleges that Qualcomm is pursuing the same monopolization objective just by different means: in this case, through the enforcement of patents against Intel-based iPhones in Germany. In the EU's largest economy, injunctive relief is available as a legal remedy, i.e., without the kind of equitable analysis U.S. courts perform under eBay, though even German courts can deny injunctive relief, or stay entire cases, over antitrust considerations, under the ancient Roman dolo agit doctrine, according to which no one can claim something he has an obligation to return immediately. For standard-essential patents, German courts must and do follow the Huawei v. ZTE ruling by the Court of Justice of the EU. However, the German Qualcomm v. Apple cases, unlike Huawei v. ZTE, do not involve FRAND-pledged standard-essential patents.

I would put it this way: in order to originally keep, now force Intel out of the wireless baseband chipset market, Qualcomm has first used a carrot--giving Apple a better deal in exchange for exclusive arrangements--and then, after Apple refused the carrot and started buying chips from Intel anyway, a stick: patent infringement lawsuits.

Over the carrot, Qualcomm has already been fined (a decision that it is appealing in court). In July, the Commission sent Qualcomm a supplementary Statement of Objections (SO) on predatory pricing. And now the question is whether the ongoing preliminary investigations relating to the stick will result in formal investigations, which in turn could lead to yet another SO and, potentially, another fine.

Such escalation would not be unprecedented. Google knows what it's like when you start being investigated over one issue (vertical search engines), then over the next one (Android, with a record fine), and when there are stakeholders who are prepared continue to bring new complaints unless certain kinds of behavior come to an end.

It has worked out for me in logistical terms to be able to attend next week's Qualcomm v. Apple trials in Germany. I still have some things to do in Germany and will therefore be able to report on what's going on there. A patent family Qualcomm is asserting in Munich raises a broader concern over the scope of software patents in Germany that sends a shiver down the spine of a former anti-software-patent campaigner, but the antitrust implications of cases specifically targeting Intel-powered iPhones (given that Intel is the only major competitor, thanks to its iPhone deal with Apple, that Qualcomm is facing at the moment) are even more important in the global scheme of things.

Share with other professionals via LinkedIn: