This is the second part of today's little trilogy of FRAND posts. Like the previous one, it deals with some Qualcomm antitrust litigation pending in the U.S. and involves third-party submissions (amicus curiae briefs).
Yesterday evening, the FTC filed its opposition to Qualcomm's motion to stay the enforcement of antitrust remedies pending its Ninth Circuit appeal. Qualcomm had unsuccessfully moved to shorten time. The FTC's opposition brief argues that the delay requested by Qualcomm "would adversely affect competition at a critical time, just as the cellular industry is transitioning to 5G technology" (this post continues below the document):
19-06-11 FTC Opposition to ... by on Scribd
The legal standard for an enforcement stay has four prongs. Two of them merge into one when the government (as in this case) is the opposing party, as the government itself can't be harmed, so the harm to third parties (consumers or other vendors) and the public interest are then essentially the same type of concern. The other factors are whether the moving party has made a strong showing that it is likely to succeed on the merits and irreparable harm to the moving party.
Obviously, Judge Koh is not going to agree with Qualcomm that the appeal is likely to succeed. That question will become more relevant when Qualcomm takes this motion to the Ninth Circuit after Judge Koh denies the motion in whole or in part.
As for irreparable injury to Qualcomm, the FTC points out that Qualcomm doesn't even attempt to make such a showing with respect to certain provisions such as a prohibition to impose antitrust-related "gag order" (that term doesn't appear in the FTC's filing) clauses on other parties. And to the extent Qualcomm claims there would be irreparable harm, the FTC naturally disagrees. With respect to license agreements Qualcomm would have to negotiate now (absent the stay it seeks) with third parties, the FTC notes that "Qualcomm and its counsel are entirely capable of negotiating (i) short-term or 'interim' licenses and (ii) contractual provisions that would mitigate or eliminate any long-term adverse consequences to Qualcomm of a license agreement concluded during the pendency of its appeal."
I've had some discussions recently, such as with a journalist just yesterday, on whether Qualcomm would be irreparably harmed by having to renegotiate existing agreements. What I've been telling people is that there certainly would be contractual ways to address any such concerns. For an example, a "condition subsequent" could result in the rescission of a new agreement in the event Qualcomm prevails on appeal, and in that case any previously-existing agreements could enter into force and effect again, even retroactively so as to enable Qualcomm to be made whole. Where there's a will, there's a contractual way.
The point that the FTC makes about the viability of short-term interim agreements is an important one. Based on what Qualcomm tells investors, it currently has an interim agreement in place with Huawei--and an amicus curiae brief filed yesterday in support of the FTC's opposition to Qualcomm's motion for an enforcement stay shows that there also is a provisional agreement in place between Qualcomm and LG, which will expire at the end of this month (this post continues below the document):
19-06-11 LG Amicus Brief IS... by on Scribd
LG tells the court about the status of its relationship with Qualcomm and outlines its concerns that an enforcement stay would enable Qualcomm to gain leverage over LG by using some of the very tactics Judge Koh held to be anticompetitive. In December, LG (re)joined the Korean antitrust case against Qualcomm. What makes its amicus brief in Northern California interesting from a cross-jurisdictional perspective is that Qualcomm is at risk of sanctions, even under Korean criminal law, for failing to comply with a KFTC antitrust order (Qualcomm wanted its enforcement to be stayed, but the Korean court said no). Once Judge Koh's order gets enforced in the U.S., there is an increased likelihood of the Korea Fair Trade Commission putting pressure on Qualcomm to comply with the Korean decision as well.
In addition to LG, ACT | The App Association, an industry body with corporate members of different sizes, also supports the FTC against Qualcomm's motion for a stay (this post continues below the document):
19-06-11 ACT Amicus Brief I... by on Scribd
ACT frequently partners with other industry associations to promote FRAND licensing principles. Yesterday's amicus brief notes that ACT, "together with another leading industry association [= the Fair Standards Alliance], [ACT] recently co-sponsored a CEN-CENELEC Workshop bringing together more than fifty small and large industry companies to document Core Principles and Approaches for SEP Licensing, particularly for 5G applications and industries." In a footnote, ACT links to the result of that European effort, the CEN-CENELEC Workshop Agreement 2 ("CWA2"), a document describing "Core Principles and Approaches for Licensing of Standard-Essential Patents." My next post (the third and final one of today's FRAND trilogy) will discuss CWA2.
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