Tuesday, November 6, 2018

Qualcomm must license patents to rival chipset makers: Judge Koh grants FTC's partial summary judgment motion


Judge Lucy H. Koh of the United States District Court for the Northern District of California has just granted the Federal Trade Commission's motion for partial summary judgment against Qualcomm regarding the latter's self-imposed obligation to license, on FRAND (fair, reasonable and non-discriminatory) terms, its cellular standard-essential patents (SEPs) to rival chipset makers such as Intel (this post continues below the document):

18-11-06 Order Granting Par... by on Scribd

The motion was strongly supported by the rest of the industry, apart from Nokia and Ericsson (companies that actually used to take the same position against Qualcomm many years back).

As the FTC clarified in response to Nokia's filing, the motion was specific to FRAND licensing promises Qualcomm made to two U.S. standard-development organizations--the Telecommunications Industry Association (TIA) and the Alliance for Telecommunications Industry Solutions (ATIS)--as opposed to arguing that all FRAND licensing promises must be construed as benefiting rival chipset makers. In this FTC v. Qualcomm antitrust case pending in Northern California, the FTC also took the position that Qualcomm had the same obligation under the ETSI (European Telecommunications Standards Institute) FRAND declaration, but the FTC sought (successfully, as we know now) to simplify and streamline the case by obviating the need for interpreting a document under French law when the relevant obligation, as Judge Koh has agreed, already exists under FRAND declarations Qualcomm made under U.S. law.

This is the outcome I had predicted. I've said all along that the FTC had a very strong case, with this particular motion for partial summary judgment having represented a sweet spot in terms of focusing on an issue that the court can resolve ahead of trial while tackling one of the most problematic aspects of Qualcomm's (and, to be fair, not only Qualcomm's) conduct.

Nothing made the importance of this motion clearer than a procedural motion brought by the FTC and Qualcomm asking the court to go forward with all other aspects of the case except this one, which the parties didn't want to have adjudicated before November 14. Fortunately, Judge Koh denied that administrative motion right away. In a subsequent post on FTC officials who are against this case I wrote that the likelihood of the motion being granted had increased.

Judge Koh has now made a decision that will presumably result in some other companies, such as Intel, telling Qualcomm again that they want a FRAND license to its cellular SEPs. I guess those renewed requests will happen rather shortly.

What's hard to analyze from the outside is the impact of this on settlement talks between the FTC and Qualcomm. Just a few days ago the Capitol Forum (a subscription service) broke the news that FTC chairman Joseph J. Simons is recused from the matter. This successful motion is, in its own right, a major accomplishment by the FTC's litigators. Qualcomm will definitely want to avoid the January antitrust trial, but the FTC is on the winning track.

Today's order also strengthens the position of consumer plaintiffs in their class action against Qualcomm (in which they're seeking $5 billion in damages, which would have to be paid out to up to 250 million consumers). The fact of the matter is that Qualcomm consistently refused to extend a SEP license to rival chipset makers, but the market would definitely have been more competitive if Qualcomm had complied with the obligation it actually had (according to Judge Koh).

I wanted to publish the decision immediately, and I'll read it carefully tomorrow and may do a follow-up post then.

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