Thursday, July 4, 2019

Judge Koh (not unexpectedly) denies Qualcomm's motion to stay enforcement of FTC antitrust remedies

Yesterday, on the eve of the Fourth of July, Judge Lucy H. Koh of the United States District Court for the Northern District of California ruled on Qualcomm's May 28 motion to stay the enforcement of the Federal Trade Commission's antitrust remedies as well as on a motion by the FTC to strike material that Qualcomm sought to inject into the NorCal record from its settled SoCal litigation with Apple (this post continues below the document):

19-07-03 Order Denying Qual... by on Scribd

Like in that Bruce Springsteen song, "Just say goodbye it's Independence Day." Goodbye to the Northern District, I mean. Now there's nothing left to do in San Jose, and on to the Ninth Circuit.

The only thing that surprised me in this context was when someone told me on Twitter Qualcomm's stock was down 3% after hours on this news. At least the investors who talk to me, individually or on group calls, perfectly knew that this was the most likely outcome, especially since Qualcomm for the most part would have required Judge Koh to contradict her own ruling (a true opus magnum), at least implicitly. It wasn't 100% unthinkable that maybe some irreparable-harm argument might have gotten some traction, but I couldn't really find a totally pressing reason for a stay, for the reasons I explained in previous posts.

What's going to be different now before the Ninth Circuit is that there will be a panel of new judges. Judge Koh is still sitting on the district court, but only because Donald Trump's 2016 victory derailed her already fairly advanced nomination process. Frankly, it might even have been good for her in the short term because she then got this historic FTC case just a couple of months later. On the Ninth Circuit, she most likely wouldn't have had a similar opportunity, and she doesn't seem to care about titles or salaries as much as about doing high-quality meaningful work. But I really do wish her the best for being promoted as soon as possible at this stage. With so much partisan divide it may be difficult, and I totally agree with those Republicans who would like to bring more political balance to the Ninth Circuit (which has already happened under this President to some extent), but Judge Koh is so obviously a perfect choice for the next Ninth Circuit nomination and certainly not the kind of ideological judge because of whom Rush Limbaugh calls the Ninth Circuit the "Ninth Circus." She would be a great consensus candidate, and that would be a politically smart move for Republicans (not with a view to California, which they obviously won't carry anytime soon, but from a broader perspective). But that's a separate story, though it is related to this process at this procedural juncture.

The order doesn't specifically discuss the parties' (or the amici's) arguments. The decision is what it is.

As a secondary item, Judge Koh granted an FTC motion I hadn't previously reported on. The FTC moved to strike Qualcomm's opening slides from the Apple v. Qualcomm antitrust and FRAND trial in San Diego. While Qualcomm's lead counsel in that case, Evan "Fire!" Chesler, was delivering his opening statement and showing those slides to the jury, the settlement was already a done deal. In fact, the settlement was already announced on Apple's websites when he still had about 20 minutes left for that opening statement.

Antitrust AAG Delrahim's folks also tried to leverage that material in a footnote of their filing asking Judge Koh to hold a separate hearing on remedies. They're obviously Qualcomm's best friends in DC--they and FTC commissioner Christine Wilson, I mean.

So what is that about? It's all about diverting attention away from the real issues surrounding Qualcomm's business practices by trying to blame it all on a huge conspiracy between Apple and the FTC. Those opening slides contain statements that, if taken out of context, may be understood by many people to believe Apple was basically just an evil empire trying to squeeze a highly innovative supplier and licensor. So there were some Apple internal documents about a strategy designed to "hurt" Qualcomm and to "devalue SEPs." Like I said, if taken out of context, one may interpretin a certain way. Some important context was, however, given in January. Qualcomm treated Apple in such a way that Apple, in the aftermath of a "watershed moment" as an Apple executive described it, determined it had to fact because otherwise it was going to be at Qualcomm's mercy and Qualcomm was going to shamelessly exploit that leverage. (The question now is again to what extent Apple was at Qualcomm's mercy with a view to 5G modems that it had to settle despite having brought some fairly strong claims against Qualcomm's conduct.)

Procedurally, the problem there is that neither the FTC nor Apple ever got to react to that material, at least not in the FTC case. No discovery, no cross-examinations, nothing. That's why the FTC moved to strike those opening slides. The material quoted in them was available to Qualcomm long before, and if they had wanted, they could have discussed any of that in January (when the FTC trial took place).

As for the term "devalue SEPs," it's something that I've been accused of contributing to by a formerly significant smartphone maker in a private conversation outside the Mannheim court. The way I see it, "devalue" can have a nonjudgmental meaning and a slanted one. The nonjudgmental one is to bring a price down, and if you do that because the original price is outrageous, then there's nothing objectionable or reproachable about it. Of course, there is that common connotation that it's about bringing the price of something down below its fair value. That's the way Qualcomm would obviously like to interpret that quote from some Apple-internal document. But they apparently preferred to do so without testimony on what was really meant and why and how.

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