While Qualcomm's patent infringement lawsuits against Apple (and, by extension Intel) are merely a sideshow to the antitrust matters pending on three continents, let's start with a brief follow-up to yesterday's Munich judgment. The court has meanwhile, thankfully, provided a redacted copy of the decision. I've read it, and the most interesting part is that Qualcomm had submitted two expert reports in support of its claim construction, while Apple had provided only one, but the deficiencies of Qualcomm's reports were massive while Apple's expert provided instructive, helpful information. I'll publish a translation of the relevant passages soon.
Meanwhile, Judge Lucy H. Koh of the United States District Court for the Northern District of California has granted the Federal Trade Commission of the United States permission to file a reply to Nokia's recent amicus curiae brief in support of Qualcomm with respect to the FTC's motion for partial summary judgment regarding Qualcomm's obligation to extend FRAND licenses to its cellular standard-essential patents (SEPs) to rival chipset makers. In its reply brief in support of its motion (that post also contained a link to Nokia's brief), the FTC had already reserved the right to request leave to file such a reply since Nokia's brief was filed just on the eve of the FTC's reply to Qualcomm's opposition.
The FTC's reply must not be misperceived as an implicit concession that Nokia's brief contained anything that has the potential to be outcome-determinative in Qualcomm's favor. The legal question for Judge Koh to resolve is purely one of contract interpretation, and the FTC notes at the very start of its reply brief that Nokia "does not present any argument regarding the plain language of the two IPR policies that are the subject of the FTC's motion for partial summary judgment." Nokia's brief does not even present parol evidence (which would be irrelevant anyway under California law unless the whole industry had consistently taken a certain perspective on SEP licensing). Finally, Nokia's credibility is minimal in this context since Nokia itself told the European Commission in a February 13, 2006 complaint that Qualcomm breached its FRAND duty by terminating a license deal with a chipset maker (Texas Instruments).
The reason why the FTC elected to submit a reply--and which appeared significant enough to me to warrant a follow-up post--is simply that the FTC doesn't want the actual scope of its summary judgment motion to be blown out of proportion. The FTC states once again that "[its] motion [for partial summary judgment] asks the Court to interpret the plain language of Qualcomm's commitments under the IPR policies as written, pursuant to California contract law, not to determine what FRAND means in the abstract or to declare how SSOs ought to draft their IPR policies."
In the second paragraph, the FTC makes a point that is incredibly important in connection with FRAND licensing obligations (in this case and far beyond): it's one thing whether certain obligations (here, to extend licenses to chipset makers upon their request) exist, but another what the market will ultimately make of those obligations: "If Qualcomm's anticompetitive conduct is addressed and remedied, market forces will decide whether modem-chip or handset-level licensing (or some combination of the two) is most efficient."
There's a parallel here to an argument made by Huawei in its defense against (Pan)Optis Wireless in the Eastern District of Texas. In that dispute, Huawei accurately argues that a SEP holder shouldn't be able to choose one venue (here, the Eastern District) for a global FRAND rate-setting process, but in practical terms, global license agreements may very well be the most common result of free negotiations between parties. (Huawei takes the opposite position in its dispute with Samsung in the Northern District of California, but schizophrenia doesn't render its point in Texas any less well-taken.)
The FTC just wants to achieve judicial clarification that Qualcomm itself made FRAND licensing promises that also extend to rival chipset makers should they seek a license (which applies to a company like Intel). If no one made such a request, or if Qualcomm extended FRAND licenses to all device makers, then there would simply be no demand. It's a hypothetical scenario because there obviously is demand; but the bottom line is that the FTC wants to set market forces free as opposed to using an antitrust litigation in order to restrict anyone's freedom (apart from Qualcomm's freedom not extending to anticompetitive, exclusionary conduct, of course).
Again, an analogy: Huawei's opposition to a global FRAND determination in the Eastern District of Texas (a venue that has a reputation for being particularly sympathetic to patent holders, particularly non-practicing entities) doesn't mean that Huawei and (Pan)Optis might not ultimately agree on a global license. While it's always possible that parties reach a settlement in one jurisdiction (or set of jurisdictions), such as when InterDigital settled some European cases but litigation kept going in the United States or when Samsung and Apple withdrew all ex-U.S. lawsuits (but not the ones pending before Judge Koh), most negotiations will result in a global license for convenience. But it should be the result of free choice, not of undue leverage (such as from injunctive relief) or forum-shopping.
I found a couple of gems in the footnotes:
"Qualcomm has claimed that modem-chip-level licensing is efficient--at least when the licensee is Qualcomm itself. [...] If Qualcomm’s efficiency claims are valid, similar efficiencies may arise from other modem-chip suppliers licensing Qualcomm's cellular SEPs on FRAND terms."
"The FTC does not concede that construing the ATIS and TIA policies according to their plain language would create any inconsistency among relevant IPR policies."
As I explained in my commentary on the FTC's motion, it's just that the FTC would like to streamline and simplify the Northern California case by obviating the need for an interpretation of the ETSI FRAND declaration since it's governed by French law. To me it's always been clear that the FTC's position is that Qualcomm has to extend licenses to rival chipset makers even just under ETSI's rules, but when you're litigating an issue in the United States and have two FRAND declaration texts under U.S. law (ATIS and TIA) based on which you can prevail, why make an intercontinental detour that just wastes court, federal government and private party resources?
Finally, here's the FTC's brief:
Share with other professionals via LinkedIn: