Friday, December 14, 2018

Judge Koh rejects Qualcomm's bid to introduce new evidence related to Intel's success with Apple, Qualcomm's new 5G agreements

We're now only three weeks away from the Federal Trade Commission v. Qualcomm antitrust trial in the Northern District of California, and Judge Lucy H. Koh has again asserted her authority and demonstrated her unrelenting focus on the facts that really matter. On Thursday, she flatly rejected an 11th-hour attempt by Qualcomm to delay or derail the FTC's push for injunctive relief (the FTC is seeking to "redress and prevent recurrence of Qualcomm's conduct") by introducing evidence more recent than March 30, 2018, and at the end of her sharp ruling told Qualcomm one more time that "[t]he January 2019 trial will address both liability and remedy" (this post continues below the document):

18-12-13 Order Denying Qualcomm's Request Re. Post-discovery Events by Florian Mueller on Scribd

In late October, Qualcomm brought a motion to introduce evidence related to post-discovery (i.e., post-March 30) events that the wireless chipset maker believes weigh against the FTC's pursuit of an injunction:

  • Intel's growing business with Apple (a design win related to the entire range of next-generation iPhones, though Intel, as the ruling notes, already had a chipset supply deal in place with Apple well before the discovery cutoff date) and

  • some 5G patent license agreements Qualcomm has concluded more recently, arguing that since it doesn't make any 5G chips (yet), it can't leverage a chipset monopoly ("no license-no chips" policy) in connection with 5G. This part did not refer to Qualcomm's "new deal" with Samsung (which it may have to renegotiate anyway), which was concluded earlier this year, well ahead of the discovery cutoff date.

In formal legal terms (FRE 403), Judge Koh concluded that allowing Qualcomm to take and present further evidence would unfairly prejudice the FTC, and that such prejudice would be outweighed by the alleged probative value of anything Qualcomm would inject into the case. In her efforts to balance different considerations, the judge wasn't persuaded by precedents Qualcomm pointed to, especially not by other cases in which several years had passed between a discovery cutoff date and a trial. She also points to the fact that she actually did allow various out-of-time depositions because of witnesses's travel and for similar reasons. And she notes that there will always be something that happens post-discovery, so no case can ever go to trial (at least not to one that would be fair to the opposing party) unless courts exercise their discretion at some point to close the door. And in this case, the deluge of motions that Judge Koh faced (her ruling doesn't say "deluge," but contains an impressive list) between the cutoff date and the trial doesn't suggest that the period between the cutoff date and the trial was longer than what the court really needed. While I've sometimes had different opinions, especially on economic issues and the (in)validity of patents-in-suit, I can say from my vantage point as a litigation watcher that I'm not aware of any U.S. judge who would be more efficient than her.

The key factor here is that the FTC is entitled to injunctive relief if there is a risk of Qualcomm's (mis)conduct recurring--regardless of whether, as Qualcomm argues, anything may have recently changed about its market power. Judge Koh points to case law that makes this principle crystal clear. If Qualcomm had wanted a different outcome, it would have had to show that its conduct had changed, and even a change of conduct wouldn't necessarily have meant that there was no more risk of recurrence.

As Judge Koh recalls, Qualcomm's desire to avoid a decision on injunctive relief after the January 2019 trial is old news. Qualcomm originally sought to bifurcate the trial (one trial on liability followed by a separate one on remedies).

The fact that Intel's deal with Apple is not new per se (though the scope of that partnership may have expanded lately) diminishes the probative value of anything that Intel and Apple may have done together, or may have decided to do together, since late March. As for the 5G part, Judge Koh doesn't mention Qualcomm's deal with Samsung, but the fact that this modification of an agreement with the world's largest smartphone maker (at least by some measure) occurred prior to the cutoff date also suggests that whatever other deals were struck in the second or third quarter of 2018 won't present a fundamentally new situation. And it could be that Judge Koh already sees a certain likelihood of Qualcomm being ordered to renegotiate patent license agreements at the end of this. In that case, the probative value of such contracts might be zero.

This latest order is not the first major pretrial ruling that doesn't bode well for Qualcomm's defensive efforts:

The exclusion of evidence relating to post-cutoff date events is the latest in a string of significant decisions made and positions taken before the upcoming trial.

Assuming that Qualcomm loses the trial (and I can't imagine it would get away unscathed), it will then have to set priorities for an appeal, and I guess--though this is now a second-degree hypothetical as it already presupposes a certain outcome of the trial--Qualcomm is fairly likely to tell the appeals court that it lost only because some relevant post-discovery events weren't considered and to request a reversal or at least a retrial. But Judge Koh obviously considered this scenario and structured her ruling accordingly.

There most probably won't be any spectacular developments in the U.S. Qualcomm cases between now and the end of the year. Maybe we'll hear something more about the software patent enforcmeent dispute in China (to be fair to Qualcomm, when Apple enforces its own patents, it doesn't easily accept that a workaround is indeed a workaround). And I'm extremely interested in what the Munich I Regional Court will decided next Thursday (December 20). "Cutoff" for evidence also plays a role there, but it's different in three major respects: a different jurisdiction, where the constitutional right to be heard quite often weighs in favor of reopening the record; it's a patent infringement, not antitrust, case; and what Qorvo credibly explained to me suggests that Qualcomm originally led the court and Apple to believe that the schematics of the accused chipset would be discussed with the court-appointed expert at trial, but then made an about-face and opted for evidentiary minimalism, which is why in that case I believe the plaintiff would not be unfairly prejudiced by taking a bit more time to put facts on the table that, based on the ITC decision (first an Administrative Law Judge cleared Qorvo of infringement, then the six-member Commission threw out Qualcomm's petition to review that finding), have the potential to be outcome-determinative in the defendants' favor.

Share with other professionals via LinkedIn: