Friday, May 3, 2019

DOJ urges Judge Koh to order additional briefing and hold hearing on remedies in FTC v. Qualcomm if liability is established

Yesterday evening the United States Department of Justice filed a statement in Federal Trade Commission v. Qualcomm that is reflective of some internal division within the federal government with respect to standard-essential patent (SEP) enforcement and of a certain network of Qualcomm-aligned government officials (in this case, a former partner of a law firm that represented Qualcomm in connection with the two most important potential transactions in its history). It's a bit strange when government officials take their disagreements to court, even if only in the form of filing a statement of interest that I'll talk about in a moment.

While I guess I'm the most staunchly pro-Trump IP and tech policy blogger and frequently defend, especially on social media, the President's and his Administration's unorthodox approach to problems that multiple Democratic and Republican predecessors failed to address effectively by conventional means, there are some undeniable problems concerning the federal government's approach to IP and antitrust issues. I particularly disagree with efforts by USPTO Director Andrei Iancu to weaken the highly important Patent Trial and Appeal Board (PTAB) and to draw the wrong conclusions from the Supreme Court's Alice opinion, and with pretty much everything that Assistant Attorney General Makan Delrahim says about SEP enforcement, especially a completely absurd threat against standard-setting organizations that merely seek to promote patent peace and to give FRAND meaning.

Without going into too much detail on this here and now, I'd like to draw attention to an open letter addressed on April 22, 2019 to Secretary of Commerce Wilbur Ross and USPTO Director Andrei Iancu regarding calls by some organizations that the USPTO should withdraw from the 2013 "Policy Statement on Remedies for [SEPs] Subject to Voluntary F/RAND Commitments" that was originally supported by the USPTO, the DOJ, and the FTC, though the DOJ withdrew last December (a decision made by AAG Delrahim, an anti-FRAND extremist). The statement explains why and how SEP injunctions can result in patentee overcompensation that is bad for innovation, and its signatories include industry organizations like ACT | The App Association, the Computer & Communications Industry Association (CCIA), the Software & Information Industry Association (SIIA), the Fair Standards Alliance, and the Alliance of Automobile Manufacturers as well as companies including, but not limited to, Apple, AT&T, Cisco, Ford, HP, Intel, Samsung, and Verizon. Footnote 4 of that letter quotes U.S. Attorney General William Barr's 2010 testimony on potential overleveraging of patents through injunctive relief:

"[O]nce an industry has made massive investments itself in a technology covered by the patent, then the amount that the industry would be willing to pay to avoid shutting down completely are all the switching costs to retrofit its business to avoid the infringement. It no longer bears any relationship to the economic value of the patent that's being asserted.… And the amount that a company caught in that position is willing to pay, again, is grossly excessive and ends up hurting innovation …."

So yesterday AAG Delrahim's folks made a filing with the United States District Court for the Northern District of California in FTC v. Qualcomm, urging Judge Koh not to order remedies prior to further remedy-focused briefing and a hearing (this post continues below the document):

19-05-02 DOJ Statement in F... by on Scribd

It's more than a bit strange to see one government agency file a position in the name of the United States when there actually is another government agency that is party to the proceedings--and especially when the one that is the plaintiff (here, the FTC) is seeking certain remedies, including an obligation on Qualcomm to renegotiate all patent license agreements, that another agency (here, the DOJ) opposes. As most of you may remember, I attended the January FTC v. Qualcomm trial in San Jose, and I remember how Qualcomm's lead counsel, Keker van Nest's Bob van Nest, referred to the FTC as "the Government." Now the DOJ is basically saying: "No, the FTC is not the Government--we are." And it's not even necessarily the DOJ as a whole, given that AG William Barr appears to be quite aware of the issues created by SEP overleveraging as his aforementioned 2010 testimony indicated. It comes down to Mr. Delrahim and the people reporting to him.

There are Qualcomm-aligned individuals in different government agencies. Last fall I did some research on certain key players at the FTC that revealed a certain proximity to Qualcomm. As for the DOJ's Antitrust Division, even Wikipedia mentions that Mr. Delrahim used to represent Qualcomm . He's behaving as if this had never changed. Yesterday's statement was filed by his Principal Deputy Assistant Attorney General, Andrew C. Finch, who according to his LinkedIn profile was a partner at Paul, Weiss, Rifkind, Wharton & Garrison LLP, and he was with that firm for almost twelve years before being appointed Acting AAG for the Antitrust Division (for a period of six months) and then, after Mr. Delrahim's appointment to that role, became Principal Deputy AAG. Paul Weiss is a great firm, but it also happens to be the very firm that represented Qualcomm in connection with two M&A transactions that failed to materialize and would have been the two biggest and most important ones in the company's history: Broadcom's failed takeover bid (Paul Weiss helped Qualcomm fend off that hostile bid with the help of a presidential veto) and Qualcomm's attempted takeover of NXP.

Just yesterday I also mentioned the fact that we're all waiting for Judge Lucy H. Koh's ruling in FTC v. Qualcomm, and I'm sure that whatever the outcome will be, she'll give her best for all the world to see. The DOJ statement, which also comes at a rather unusual time (more than three months after the trial), suggests that Qualcomm still isn't in a position to settle the FTC case, so after the recent agreement with Apple, this is now Qualcomm's biggest problem on the litigation front and an opportunity for certain people who (or, at a minimum whose firms) worked for Qualcomm in the past to try to influence the course of events.

If Judge Koh orders additional briefing and a hearing on remedy, I'm sure she'll have good reasons to do so. But I don't think she needs advice from the DOJ or anyone else. She can manage her case very well without some Qualcomm-aligned people telling her what to do, or what not to do. Unfortunately some people at the DOJ don't seem to think so, even though other federal judges (such as Judge James L. Robart of the Western District of Washington and Judge Gonzalo P. Curiel of the Southern District of California) have recently commented very favorably on Judge Koh's work.

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