Wednesday, June 12, 2019

On DOJ's behalf, former Qualcomm lawyers file amicus brief in support of Qualcomm and point to paper co-authored by Qualcomm lobbyist: Ninth Circuit appeal of consumer class certification

This is the first part of today's little trilogy of FRAND-related posts.

In early May, the Antitrust Division of the DOJ, under Qualcomm's former outside counsel and now-Assistant Attorney General Makan Delrahim, filed an amicus brief with the United States District Court for the Northern District of California more than three months after the FTC v. Qualcomm trial (!), seeking to dissuade--to no avail, as we know by now--Judge Lucy H. Koh from ordering injunctive remedies against the chipset maker that generates two thirds of its profits from patent licensing, not product sales. The FTC sharply disagreed with this attempt by a government department to influence the outcome of an antitrust case brought by an independent government agency, and Judge Koh, in her late-May ruling, gave the DOJ's initiative short shrift.

The Antitrust Division of the DOJ, which has so far been disproportionately more active filing amicus briefs than actually enforcing the antitrust laws (though Mr. Delrahim is now apparently taking aim at Apple and Google). And on Monday, the AAAG (Antitrust AAG), did it again. The latest filing supports Qualcomm's Ninth Circuit appeal of Judge Koh's certification of a 250-million-consumer class seeking an average of $20 per U.S. smartphone purchaser from Qualcomm on the grounds of supra-FRAND patent license fees ultimately having been passed on to consumes (this post continues below the document):

19-06-10 Amicus Brief by US... by on Scribd

This latest DOJ amicus brief is at least timely (filed one week after Qualcomm's opening brief in accordance with applicable rules); it is a joint filing by the DOJ with the states of Texas, Ohio and Louisiana; and while the consumer class action got consolidated with the FTC case, a reversal of class certification wouldn't weaken the FTC's case in any way, so I was going to say that at least the DOJ is not antagonizing a federal government agency again. But... unfortunately there's footnote 7, and that footnote is so insane that it makes the early-May request for a hearing on remedies appear reasonable by comparision:

"7 Caution is particularly appropriate with respect to this case because the interaction of antitrust law and patent rights in cases like this one is in flux. Although claims of the sort in this case are grounded in certain scholarly literature, see Fiona M. Scott Morton & Carl Shapiro, Strategic Patent Acquisitions, [...] (2014), such claims and theories of liability remain controversial, and more recent scholars have questioned their viability, see Douglas H. Ginsburg, Koren W. Wong-Ervin & Joshua D. Wright, The Troubling Use of Antitrust to Regulate FRAND Licensing, [...] (2015); Assistant Attorney General Makan Delrahim Delivers Keynote Address at University of Pennsylvania Law School: The 'New Madison' Approach to Antitrust and Intellectual Property Law (Mar. 16, 2018),"

First, FRAND abuse is not just a subject of academic debate as the term "grounded in certain scholarly literature" suggests. There's FRAND case law in the U.S., especially in the Ninth Circuit. Decisions, not just writings.

But the unbelievable absurdity here is something else. AAG Delrahim was outside counsel for Qualcomm for many years (which may be the reason for which he didn't formally sign last month's filing with Judge Koh's court); as I already pointed out last month, his deputy Andrew Finch joined him from a law firm that has also done a lot of high-profile work for Qualcomm. So the two first signatories of the filing are former Qualcomm lawyers who behave as if they were still were. That would be a credibility issue, but what is really an insanity here is that they seek to support their claim of FRAND antitrust laws being "in flux" by pointing to "scholars" taking that position--and then they point to a paper co-authored by Qualcomm lobbyist Koren W. Wong-Ervin (whom I already mentioned last fall) and a speech by Mr. Delrahim (again, a former Qualcomm lawyer) himself.

Mrs. Wong-Ervin is just one of three authors of that paper; but the fact that someone who shortly thereafter was hired to become a Qualcomm lobbyist was involved taints that paper in this Qualcomm-specific context.

So they ignore U.S. case law on standard-essential patent (SEP) abuse by portraying it as just a subject of academic debate, and then they suggest there's a more recent countercurrent, but they base that claim on a paper co-authored by a Qualcomm lobbyist and a speech by Qualcomm's best friend in the U.S. government (and the first signatory of the amicus brief in question), Mr. Delrahim.

The DOJ can do better than that. I really do have the greatest respect for the department and have supported the DOJ's positions on various occasions (once even in the "travel ban" context), but--sorry to say so--no matter how hard I try, I can't have respect for such idiocies as footnote 7.

Other than that footnote, that amicus brief is reasonable, even though reasonable people can disagree with it. The key antitrust issue here is this: Illinois Brick doesn't give indirect purchasers (here, the consumers bought phones, but the makers of those devices paid patent royalties to Qualcomm) standing to seek damages under federal antitrust laws; but many states have, as some say, "repealed" (or one might also say "worked around") Illinois Brick by allowing such claims under state competition laws. California is one of those "repealer" states, while the states that joined the DOJ in this week's filing (Louisiana, Ohio, and Texas) are among the states that declined to do so. The biggest question in this appeal is whether Judge Koh correctly held that states like the three I just mentioned have no interest in precluding their citizens from seeking compensation from a California company (here, Qualcomm) under California state law, given that many or even most of them presumably purchased their phones in their home states, not California.

The U.S. Chamber of Commerce has also filed a brief in support of Qualcomm's appeal of the class certification decision, as has the Washington Legal Foundation.

While I think Judge Koh's class certification decision should be upheld, I wouldn't deny that Qualcomm and its amici reasonably dispute that California law should benefit non-Californian smartphone purchasers. The federal government as well as some "non-repealer" states can legitimately raise a federalist issue here, whether or not one ultimately agrees with them. But footnote 7 is just too much. It shows that the DOJ's Antitrust Division, under AAG Delrahim, is simply in the tank for Qualcomm. "Qualcomm, right or wrong, our former client"--that appears to be the attitude. And it led those Qualcomm allies to claim that "scholars" disagree on how to handle the complicated intersection of patent rights and antitrust laws only because Qualcomm and its allies, unsurprisingly, have a certain position.

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