Saturday, August 24, 2019

Qualcomm files opening brief in Ninth Circuit appeal of FTC antitrust win; appellate hearing may slip into February

Not unexpectedly but understandably, Qualcomm just filed a 176-page opening brief with the United States Court of Appeals for the Ninth Circuit in its appeal of the Federal Trade Commission's antitrust victory in the Northern District of California--and an 11-page unopposed motion explaining why the opening brief has to be that long.

This has implications for the timeline. The most recent scheduling order, based on another unopposed Qualcomm motion, gave the FTC until October 25 for its responsive brief, and Qualcomm until November 15 for its reply brief. But in that motion Qualcomm already indicated that the FTC could also get an extension (after Qualcomm got two more weeks because the expedited schedule was too expedited even for them) should Qualcomm exceed page limits. It now turns out the FTC will even get twice as much extra time: four weeks. Qualcomm doesn't oppose it, so it's a given that the FTC will use that extra time and then file its responsive brief just before Thanksgiving--and then Qualcomm will have until mid-December for its reply brief.

When the Ninth Circuit's motions panel for August granted Qualcomm's motion to stay the enforcement of two of the FTC's antitrust remedies yesterday morning and ordered that the hearing be scheduled for January, this extension was not factored in. As a result, the appellate hearing will presumably slip into February (February 3-7 or February 10-14), if not March 2-6; at the very earliest it might take place January 21-24 (the later one of the Ninth Circuit's two January 2020 court sessions), but the January 6-10 session doesn't appear to be a practical option anymore. There are San Francisco sessions scheduled for every single one of the periods I just mentioned. The Ninth Circuit is geographically huge and holds sessions in multiple cities, of which San Francisco is the closest one to San Jose and the only one in that federal judicial district. The first Ninth Circuit session in 2020 without a San Francisco hearing will be in late March/early April, and it's unlikely that this hearing would be postponed by that much.

In order to be of service to my esteemed readers, many of whom take a strong interest in the case, I'm now going to publish the opening brief without further comment. I normally always provide some reaction, and yesterday I did so near-simultaneously with Reuters (the first news agency to publish an article on the stay that Qualcomm had obtained), but given that it's an appellate proceeding where nothing will happen between now and the FTC's responsive brief (I'd have commented today if the motion for a stay had still been pending), that it's a weekend, and that this brief is really voluminous, I'm going to take my time to digest it and will do a follow-up post on Sunday or early next week.

19-08-23 Qualcomm Opening B... by Florian Mueller on Scribd

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Friday, August 23, 2019

Ninth Circuit motions panel grants Qualcomm's motion to stay enforcement of FTC's antitrust remedies; appellate hearing to be held in January

In my most recent post on Qualcomm's motion to stay the enforcement of the FTC's antitrust remedies, I had written two things that have just been validated by the court's decision to grant Qualcomm's motion:

  • "The August [Ninth Circuit motions] panel has a Republican majority, so should that new panel be in charge now, then the DOJ's brief [which included statements by two other federal government departments] would likely be given more weight unless they see that a former Qualcomm lawyer's lobbying for his past client (and possibly also future client when he returns to private practice) doesn't make the idea of healthy competition an ideological cause."

  • "Qualcomm might internally--and reasonably--view the time that this is taking as a sign that is more likely than not to be positive, especially since I guess they feared a swift denial of their motion."

Indeed, the order relies heavily on the DOJ's input, and the time that this took was good for Qualcomm. Here's the order (this post continues below the document):

19-08-23 Ninth Circuit Orde... by Florian Mueller on Scribd

The order is based on the judges' conclusion that

  • "Qualcomm has shown, at minimum, the presence of serious questions on the merits of the district court's determination that Qualcomm has an antitrust duty to license its SEPs to rival chip suppliers" (even though the FTC had argued that it's not simply a duty-to-deal case but a question of Qualcomm's overall anticompetitive scheme),

  • Qualcomm would be harmed by the impact of the injunction entered by Judge Lucy H. Koh on its contractual relationships (though the FTC and its amici had argued that Qualcomm could solve the problem through contract terms that would apply should Qualcomm prevail on appeal), and

  • that the public interest weighed in Qualcomm's favor because of the federal government (and even the FTC) being divided.

The order says the appellate hearing should be scheduled for January 2020. A different panel of judges may be in charge then--we'll see. This motions panel, however, was easily swayed by the DoJ's Statement of Interest (two of the judges were appointed by Republican presidents, one of them by President Trump) and seems rather sympathetic to Qualcomm's position, as is evidenced by the following sentence:

"Whether the district court's order and injunction represent a trailblazing application of the antitrust laws, or instead an improper excursion beyond the outer limits of the Sherman Act, is a matter for another day."

That means they don't view the district court's decision as being in the antitrust mainstream, the sole question from the vantage point of those circuit judges being whether it's about novel theories that might be affirmed nonetheless or just squarely outside the boundaries of antitrust law.

Even if the same three judges were to evaluate the merits of the case, affirmance would be possible, but it would be an uphill battle for the FTC. With a different panel, however, and extensive briefing on the merits, anything is still possible. At this procedural stage, a panel with a Republican majority simply didn't want to turn a deaf ear to a Republican government's input urging the appeals court to stay the enforcement of remedies and warning of grave consequences even for national security.

Qualcomm's opening brief is due today. Qualcomm had first requested and obtained an expedited appeal, but then it was too tight a schedule even for their purposes, so they asked for an extension, which they got.

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Thursday, August 22, 2019

Judge Koh schedules Continental v. Avanci et al. FRAND trial for October 2021, denies defendants' motion to stay discovery

Yesterday Judge Lucy H. Koh of the United States District Court for the Northern District of California held an initial case management conference in Continental v. Avanci et al.--for details on the issues in the case, please click on the links to earlier posts that you find in this article--and subsequently issued the following case management order (this post continues below the document):

19-08-21 Case Management Or... by Florian Mueller on Scribd

The 10-day bench trial (reminiscent of FTC v. Qualcomm) will kick off on October 15, 2021.

The next case management conference will take place on December 18, 2019, and I'll probably be in the area and may stop by out of curiosity (which wasn't possible yesterday).

Also, the defendants' (i.e., Avanci, Nokia, and privateers that Nokia once fed with patents; and meanwhile, Sharp has also been properly served) motion to stay discovery was denied. While their forthcoming motion to dismiss and already-pending venue transfer motion have yet to be adjudicated, it's possible that Avanci's related arguments at least haven't overwhelmed Judge Koh, which may be the reason she doesn't see a point in staying discovery.

The just-mentioned motion to transfer the case from San Jose to Dallas is already the second attempt to avoid Judge Koh's jurisdiction over the case. In June, Law.com's Scott Graham reported on the denial of a venue-internal transfer motion: the Northern District of California has several divisions; Judge Koh is based in San Jose; and Avanci wanted to at least get the case moved out of that place (with San Francisco being their preferred alternative), even before it was formally assigned to Judge Koh (at the time it was still pending with Magistrate Judge Nathaniel Cousins, which already made it likely that it would be assigned to Judge Koh). As Scott Graham mentioned, Nokia's testimony in FTC v. Qualcomm didn't appear credible to Judge Koh (for undestandable reasons as Nokia itself once complained over Qualcomm's practices, at a time when Nokia was still in the mobile handset business).

The order doesn't say anything about the further process regarding Continental's fully-briefed motion for an antisuit injunction. In my opinion, that motion is neither totally meritless nor a slam dunk.

Juve Patent thankfully credited my blog for publishing the case numbers and patent-in-suits of five German Sharp v. Daimler patent infringement cases (Sharp is another Avanci member). That article also says a first hearing in one of the Nokia v. Daimler patent infringement cases will be held in Munich in October, and the first Nokia v. Daimler trial is scheduled for December in Mannheim. When Continental and Avanci briefed Judge Koh ahead of yesterday's case management hearing, Continental listed those German patent infringement actions against Daimler as related cases, while Avanci and its co-defendants deny that there is a link.

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Saturday, August 17, 2019

Hot summer for Ninth Circuit motions panel: Qualcomm's motion to stay enforcement of FTC remedies still pending after more than 3 weeks

Imagine you're a judge on the United States Court of Appeals for the Ninth Circuit, and from time to time you serve on the Motions Panel that changes every month. Motions to stay the enforcement of injunctions are the most critical ones to resolve, short of anything related to executions, but there aren't any pending in the Ninth Circuit.

Most motions, including those motions to stay enforcement, involve relatively narrow issues. But from time to time, a "monster" motion comes along. That's what happened when Qualcomm, understandably though I mostly disagree with them on substance, sought a stay of the enforcement of the injunction the FTC had obtained from Judge Lucy H. Koh of the United States District Court for the Northern District of California.

Just the findings of fact and conclusion of law underlying the order span 233 pages. But there's also been a significant volume of briefing on the motion. Assistant Attorney General Makan Delrahim, a longstanding Qualcomm friend who represented Qualcomm while in private practice, heads the Antitrust Division of the Department of Justice, and his subordinates made a filing in support of Qualcomm that was also backed by a couple of other Administration officials. The FTC's solid but somewhat lackluster opposition to Qualcomm's motion was supported by industry body ACT | The App Association and by chipmaker MediaTek, whose filing showed a Qualcomm-internal presentation depicting competitors' exits from the cellular baseband chipset market with tombstones.

The national security arguments made by Qualcomm and its usual allies are bogus claims from different perspectives. Not only are products, not patents, relevant to security and is Qualcomm far too profitable that a requirement to extend patent licenses on fair, reasonable and non-discriminatory terms could threaten the innovative capacity of a company that spent far more on stock buybacks in recent years than on research and development, but Qualcomm's national-security argument also comes down to them saying that the elimination of competition (by means that the district court found illegal) has now made them, as the sole survivor, absolutely critical to U.S. national security. Meanwhile, Apple has acquired Intel's mobile chipset division, ensuring that there still is at least one major U.S. company investing in R&D in this field.

But let's again try to look at this from the vantage point of a judge on the Ninth Circuit motions panel. You get hundreds and hundreds of pages to review, which point to lots of external documents, such as other decisions. That's why, after Qualcomm was granted expedited appellate proceedings, they found even they, with their vast resources and their intimate knowledge of the issues, needed more time. You see a submission by the federal government that urges you to grant the motion lest the world descend into chaos.

It's not easy to brush aside those concerns by giving the motion short shrift. Judge Koh denied Qualcomm's original motion to stay enforcement quickly, but the original ruling had taken even her (as famous as she is for working smart and hard) well over three months after the January trial. I still remember the laughter in her courtroom when she said: "Sadly, this opinion's gonna take some time." It did, but the result was well worth it.

It's now been more than three weeks since briefing was completed, and some knowledgeable people had actually expected a decision to come down in July.

I'm not sure about how the Ninth Circuit organizes this internally, but I presume that the July motions panel (with a Democratic majority) is still in charge, given that the motion was fully briefed before the end of July and the judges on the motions panel are, according to the appeals court's website, "assigned to consider ready substantive motions matters," and this one was ready with almost a week left in July. The August panel has a Republican majority, so should that new panel be in charge now, then the DOJ's brief would likely be given more weight unless they see that a former Qualcomm lawyer's lobbying for his past client (and possibly also future client when he returns to private practice) doesn't make the idea of healthy competition an ideological cause.

The decision will be interesting, but whatever the outcome may be, let's not overrate it. An appeals court may well stay enforcement, especially for the duration of an expedited appeal, but nevertheless affirm, in whole or in large parts, when the focus is entirely on the merits, or it may deny a stay but identify serious issues later on.

The time that it's taking them to decide can't be reliably interpreted. The only safe assumption is that they are kind of overwhelmed. It might mean that they're working on a rationale that will enable them to grant the motion without taking such a strong position that would suggest the merits panel could decide only one way. It could also mean that they've concluded the motion should be denied, but in light of governmental brouhaha about the end of the world being nigh, the appeals court wants to write up a thorough denial. Qualcomm might internally--and reasonably--view the time that this is taking as a sign that is more likely than not to be positive, especially since I guess they feared a swift denial of their motion. Contrary to Qualcomm's representations, it's not like anything dramatic would happen to Qualcomm's business in the very short term, given that any license (re)negotiations would take a lot longer at any rate.

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Thursday, August 15, 2019

Avanci patent pool outlines how it seeks to duck Continental's U.S. antitrust action going for its throat

Continental, the Avanci patent pool, and the Avanci members named as co-defendants (mostly Nokia and patent assertion entities that hold formerly Nokia-owned patents) yesterday filed a joint case management statement with Judge Lucy H. Koh's court in the Northern District of California (this post continues below the document):

19-08-15 Joint Case Managem... by Florian Mueller on Scribd

The next important date in this case is August 21. That's when Judge Koh will hold the case management conference (in preparation of which the above statement was filed), and it's also the deadline (no coincidence, obviously) for the parties to file a briefing schedule for a consolidated motion to dismiss by all defendants. The motion to dismiss will be accompanied, simultaneously or near-simultaneously, by a motion to stay discovery. Surprise, surprise: Continental will oppose those motions.

While Continental accurately notes that the defendants put a whole lot of substantive stuff into this case management statement, I'm actually glad they did, as this gives all of us a better idea of the issues that Avanci and its co-defendants will put front and center.

This litigation has barely begun, and there already are some questions on the table for Judge Koh to resolve. The defendants would like to escape her jurisdiction by means of a transfer to the Northern District of Texas, and Continental's motion for an antisuit injunction has been fully briefed (in other posts I discussed Nokia's German anti-antisuit injunction and Continental's reply brief, which mentions five German Sharp v. Daimler patent infringement cases).

A transfer from San Jose to Dallas would help Avanci avoid unfavorable (to SEP abusers) case law in the Northern District of California, but ideally they want to get rid of this U.S. antitrust case altogether. That's why they're preparing the aforementioned motion to dismiss. Yesterday's joint case management statement provides an outline of the key theories underlying the forthcoming motion.

Some of those theories are about personal jurisdiction, disputing that various parties have sufficient close ties with the United States in general and the Northern District of California in particular to be sued there. Similarly, Avanci notes that it doesn't hold any patents itself--only its members do. Relatively speaking, the case for dismissal may be strongest with respect to the Optis entities. Defendants argue that "[b]ased on the information Continental provided, both parties agreed that there was nothing to negotiate because Continental stated that it was using CDMA2000, which is not part of the Optis Entities’ mapped holdings." Other than that, I'm unconvinced of those jurisdictional arguments, at least for now.

What needs to be analyzed on the basis of further briefing by both sides is the defendants' assertion that "[t]he Court lacks subject matter jurisdiction over this action under Article III of the Constitution because Continental has not alleged that it has suffered or will suffer an imminent and non-hypothetical injury-in-fact caused by Defendants' alleged conduct." Here, Avanci and its co-defendants argue that they aren't seeking royalties from Continental--only from its customers, "which hypothetically might assert a claim for indemnification against Continental," but that hasn't actually happened yet.

In other disputes, the refusal to honor an obligation to extend a SEP license on FRAND terms was deemed a sufficient basis for a complaint with an Article III court. In this case, there can be no doubt that Continental is economically affected (and would be even if without an obligation to indemnify customers) by SEP holders collecting royalties on cars that come with Continental's telematics control units. Given that Judge Koh is well aware of such commercial dynamics, the hurdle that Avanci and its co-defendants are talking about appears surmountable. What I certainly find weak is that they claim Continental voluntarily entered into an indemnity obligation: it's simply a business reality that this is expected of component suppliers in many cases, especially in the automotive industry.

In a somewhat related context, the defendants note that Avanci, Nokia, and those patent assertion entities wielding former Nokia patents would have been willing to grant licenses to Continental. However, the complaint doesn't say that they weren't going to do business on even the most prohibitive terms. Instead, the complaint is about Continental's desire for exhaustive licenses on FRAND terms, and notes that Avanci's pool license of $15 per car is supra-FRAND, given that this is roughly the price point of a baseband chip, and even the telematics control units in question sell at approximately $100 per unit. The royalty base is going to be outcome-determinative.

Unless Avanci and its members somehow manage to get rid of this case, be it by means of a dismissal or by coercion (based on leverage over Continental's customers, such as Daimler, as a result of injunctions that German courts grant far more readily than their U.S. counterparts), this dispute will shed a lot of light--and possibly some very harsh light--on Avanci's business model and the intentions of its contributors. In a nonjudgmental sense, this case is about a conspiracy theory. An alleged conspiracy to leverage FRAND-pledged SEPs in un-FRAND-ly ways, for the benefit of Avanci and its contributors.

This is Avanci's rosy depiction of its business model and raison d'ĂȘtre:

"The Avanci platform was created in response to product developers' need for an open and efficient way to access the licenses needed for the latest wireless technology. Prior to the creation of the Avanci platform, it was difficult for product developers to know what technology rights they might need, and how to get them, from the many different owners of SEPs. An Avanci platform license covers the entire SEP portfolio of the patent owners who participate in the platform, plus the SEPs of new patent owners who subsequently choose to participate."

The first sentence of that paragraph is a ridiculous example of fake altruism. Those patent holders pursue only one goal: to monetize their portfolios as aggressively and profitably as possible. They don't give a damn about what "product developers" need or want. Whether Avanci comes down to an anticompetitive and collusive scheme will have to be proven. But that's what Continental alleges, and as of now the theory doesn't appear entirely implausible.

The second sentence doesn't make much more sense. There still is a lot of uncertainty about what SEPs are truly essential and valid, and Avanci doesn't change that. Nor does Avanci cover all SEPs that its licensees need. Avanci's members collectively command a fairly high percentage of all cellular SEPs, but it's not like anyone would have legal certainty and peace of mind after taking an Avanci license.

I've heard different numbers as to the coverage provided by Avanci versus patents that belong to other entities. I may share some of that information on another occasion.

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Saturday, August 10, 2019

Foxconn-owned Sharp is suing Daimler over five patents in two German courts: concerted action by contributors to Avanci pool?

Through a filing with Judge Lucy H. Koh's court in the Northern District of California, I've become aware of the following patent infringement complaints (presumably but not necessarily involving one or more requests for injunctive relief) filed by Foxconn subsidiary Sharp Corporation against Daimler in Germany:

  • Mannheim Regional Court (Second Civil Chamber under Presiding Judge Dr. Holger Kircher):

    • EP2154903 on a "mobile communication system, base station device, and mobile station device" (case no. 2 O 46/19; complaint filed on 12 April 2019)

    • EP2129181 on a "mobile communication system, base station apparatus and mobile station apparatus" (case no. 2 O 87/19; complainted filed on 5 June 2019)

  • Munich I Regional Court (Twenty-First Civil Chamber under Presiding Judge Tobias Pichlmaier):

    • EP2854324 on a "communication system and mobile station apparatus" (case no. 21 O 8609/19; complaint filed on 25 June 2019)

    • EP2312896 on a "base station device, mobile station device and corresponding communication methods using carrier aggregation" (case no. 21 O 9918/19; complaint filed on 27 June 2019)

  • Munich I Regional Court (Seventh Civil Chamber under Presiding Judge Dr. Matthias Zigann)

    • EP2667676 on a "base station device, mobile station device, and uplink synchronization requesting method" (case no. 7 O 8818/19; complaint filed on 28 June 2019)

The sequence of those filings may be attributable to the following dynamics:

  • Sharp filed the first lawsuit in Mannheim in mid April just to demonstrate to Daimler that they were serious about forcing Daimler to license their patents through the Avanci pool.

  • When Daimler didn't bow, they brought another one in early June (same venue: Mannheim). It may have been assigned to the same chamber by coincidence, but more likely Sharp just amended the complaint, in which case German courts automatically sever any new patents-in-suit, but keep the case in the same chamber.

  • The three Munich filing in late June were presumably made to have a high likelihood of getting at least one case assigned to either of the two Munich panels hearing patent infringement cases. Historically, the 7th Civil Chamber used to be considered faster and more patentee-friendly than the 21st, but that may change now.

I haven't been able to find any other report on those Sharp v. Daimler cases prior to this blog post. Others have, however, reported on complaints brought by Broadcom and Nokia.

Like Nokia's German patent infringement suits against Daimler, those Sharp cases involve, at least in part, cars that come with a telematics control unit (TCU) supplied by Continental, which alleges that "Sharp's lawsuits are evidence of the immediate, substantial threat that Avanci will encourage or direct its members to engage in a concerted litigation campaign in an effort to force Continental’s OEM customers to take a non-FRAND license through Avanci." The allegation I just quoted is made in Continental's reply in support of its motion for a U.S. antisuit injunction against Nokia (this post continues below the document):

19-08-09 Continental Reply ... by Florian Mueller on Scribd

Some high-level observations on the reply brief:

  • Just like the original motion, it's strong on policy and economic reasoning, but suffers from some deficiencies. The document looks like a lot of effort has gone into it, as they are under significant pressure. However, at this stage Continental's lawyers can try to explain away some facts but can't change them anymore.

  • They keep pursuing the U.S. antisuit injunction, arguing that Nokia hasn't properly served its Munich anti-antisuit-injunction injunction under the Hague Convention. Consistently with that position, they haven't even objected to the Munich injunction yet, but they have announced their intent to do so once they believe the Hague Convention has been complied with.

  • Continental's lawyers want Judge Koh to gloss over their suboptimal structure. While it's true that the question of functional identity between the parties in the enjoining U.S. case and the enjoined foreign action shouldn't be looked at it in exceedingly formalistic terms, Continental simply could have made it a whole lot easier for Judge Koh. It's true, but besides the point, that Daimler wasn't in a position to serve a third-party notice under German law on Continental U.S. for lack of direct liability. But then Continental simply should have made sure that an entity with a closer connection with those German infringement cases would have been another plaintiff in the U.S. case (and, consequently, one of two or more movants seeking the antisuit injunction against Nokia).

  • With respect to the functionality identity of parties, Continental concedes that the proposed application of the customer suit exception (which usually governs motions to transfer cases within the U.S.) should be applied in the context of a cross-border antisuit injunction "is a case of first impression." I'm sympathetic to Continental's position on the customer suit exception, and as Continental notes, Nokia can't "point to any case wherein application of the customer suit exception doctrine was rejected in the context of a motion for anti-suit injunction." But, again, you make your bed and you lie in it. I still believe it was a major and potentially (though I hope it won't be) fatal for the motion that they didn't make a better choice as to the legal entities behind the U.S. antisuit motion. It would be great if Judge Koh granted the motion anyway, but Continental's lawyers have no one to blame but themselves in case she concludes otherwise.

  • As a matter of policy and industry practice, Continental is right that SEP licenses, also including the ones granted by Avanci, typically cover an entire corporate group. Therefore, Continental U.S. and the legal entities implicated in the German infringement proceedings are in the same boat: the whole purpose of the U.S. case (before they even brought an antisuit injunction motion) was to secure a license on FRAND terms that would benefit the entire Continental group.

  • Continental's reply brief says "Nokia's contention that 'under no circumstances will Daimler be 'forced' (in the German proceedings) to accept a license proposal on anything other than truly FRAND terms' is highly disingenuous." That is hyperbole. The two SEP antisuit injunctions in the Ninth Circuit that Continental points to are Microsoft v. Motorola and Huawei v. Samsung (where Samsung, the defendant, was the successful movant). The latter case was more recent, but about Chinese patent injunctions. The former case is older, and the case law in Germany regarding SEP injunctions subsequently changed fundamentally when the Court of Justice of the EU's Huawei v. ZTE ruling did away with Germany's misguided application of the Federal Court of Justice of Germany's Orange Book doctrine. In that Microsoft case, which I watched closely (both the U.S. FRAND case and the German infringement proceedings, where I attended the trial as well as the announcement of the decision), there was a far greater discrepancy between U.S. and German SEP injunction case law. It's true that Judge William H. Orrick defined the potentially-frustrated U.S. policy rather broadly in Huawei v. Samsung, but that was a FRAND determination case that Huawei itself had chosen to bring in the U.S.--and it's unclear how the Federal Circuit would have ruled as the parties settled before an appellate opinion came down.

  • They downplay--actually, deny--the relevance of timing, but comment on it anyway. In that context it strikes me as odd that Continental would point to the timing of an EU antitrust (DG COMP) complaint: that is simply not a substitute for bringing an action in the U.S. at an earlier point in time.

  • In another timing context, they still argue that Nokia sought an extension of time in the U.S. only to seek a German anti-antisuit-injunction injunction (though there are different lawyers working on the cases in those jurisdictions), and that Nokia overstated the urgency of that matter to the Munich court, with Continental saying a decision by Judge Koh ahead of the August 9 reply brief "would be virtually unheard-of in connection with a fully-noticed motion in the U.S.," though "virtually unheard-of" does not mean "procedurally impossible," but more importantly, I already explained in a previous post that Continental could have waived the optional reply brief, just like they now sort of waive the right to a hearing (Judge Koh might have taken this here under advisement anyway, which is one of her strategies for high efficiency), or they could have filed it very shortly after Nokia's opposition brief (the pace at which Continental's lawyers have moved so far suggests they always need a lot of time for anything, but again, procedurally it would have been possible).

  • The part of Continental's reply brief that I completely disagree with is where they claim it doesn't matter that Nokia's German lawsuits also involve Daimler cars that don't come with Continental components. Here's a key passage:

    "Although it is true that Continental is not Daimler’s only supplier, the purpose of Continental’s lawsuit is to confirm that suppliers like it are entitled to a license, and set the FRAND terms and conditions for such a license. It would be perverse, to say the least, if Nokia could avoid an anti-suit injunction in a lawsuit brought by a component supplier willing to take a license on FRAND terms, and thereby perpetuate its illegal strategy of only licensing OEMs rather than component suppliers, by relying on the existence of other component suppliers which Nokia also refuses to license!"

    Sorry, guys, but your explanation mark and rhetoric fail to convince me. It's your damn job to either seek an injunction that isn't overbroad (by limiting it to Daimler cars that come with Continental TCUs) or to persuade other suppliers to join you in this case. But just because your case may also have a bearing on--or may even be the next best thing to direct applicability to--the legal interests of some other entities doesn't mean you can behave like a class-action plaintiff... which is why there are special rules for class actions.

    The court can obviously tailor the requested injunction more narrowly, and should Continental prevail, I think that's more likely than not to happen. And if it were up to Avanci and Nokia, the court to decide wouldn't even be Judge Koh's court.

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Saturday, August 3, 2019

Update on Qualcomm's two Ninth Circuit antitrust appeals: delays in FTC case due to complexity; consumer class responds to certification appeal

Two Qualcomm antitrust appeals are pending with the United States Court of Appeals for the Ninth Circuit, awaiting three key decisions:

  • Earlier this year, the Ninth Circuit allowed Qualcomm an interlocutory appeal of the certification of a consumer class seeking $5 bilion in damages (an average of approximately $20 for an estimated 250 million consumers who purchased a smartphone in the U.S. during the relevant period) from Qualcomm on the heels of the FTC v. Qualcomm antitrust case. Judge Lucy H. Koh of the United States District Court for the Northern District of California had certified the class, but stayed the case when the Ninth Circuit allowed the interlocutory appeal. Meanwhile, Qualcomm received support in the form of an amicus brief from its long-standing friends at the Department of Justice in this context, too. Further below I'll publish the consumers' answering brief.

  • The strategically more important one is the appeal of the FTC's antitrust victory:

    • In the shortest term, Qualcomm is seeking a stay of the enforcement of the FTC's injunctive relief (antitrust remedies). The motion for a stay has been fully briefed, and most likely we'll see a decision in a matter of days. There's a bit of anxiety on Wall Street after Qualcomm missed estimates. In this climate it's possible that the QCOM stock price will be significantly affected by the ruling on the motion for an enforcement stay, though in my opinion the question of whether or not the stay is granted is unimportant compared to the future ruling on the merits.

    • The Ninth Circuit granted Qualcomm's motion to expedite the merits appeal. On that basis, we'd have seen the opening brief next Friday, and briefing would have been complete well ahead of the end of October. However, Qualcomm's lawyers realized that the case is so complex that they (and, quite likely, the FTC) will need a bit more time than anticipated. With the FTC's consent, Qualcomm has now asked for two more weeks (i.e., until August 23) for its opening brief. Normally, the TC's answering brief would then be due October 25 (and Qualcomm's reply brief on November 15), but should Qualcomm's opening brief be substantially in excess of the defalut word-count limitation, then the FTC would also get an extra two weeks, which Qualcomm would not oppose. Here's the consent motion (this post continues below the document):

19-07-30 Unopposed QCOM Mot... by Florian Mueller on Scribd

The extension is needed not only by Qualcomm but also by persons and entities who will submit amicus curiae briefs in support of Qualcomm's appeal.

The Ninth Circuit will schedule a hearing as soon as possible after briefing is complete. For various practical reasons, it appears highly unlikely at this stage that the hearing would still be held this year. The question is probably just exactly when in the first quarter of 2020 it will take place.

In the appeal relating to the consumer class certification, the schedule also had to be extended (by a total of two months). Yesterday (Friday, August 2), the consumers' attorneys made several filings:

19-08-02 Consumer Class Ans... by Florian Mueller on Scribd

At this point I can only share some general observations regarding the appellate argument. Not only am I more interested in the FTC case but I'm also a lot more familiar with IP and unilateral-conduct issues than with class certifications.

I noticed that the consumers' attorneys place particular emphasis on why California law (which allows such class actions) should apply even though the vast majority of the consumers falling under the class definition made their purchases in other states, many of them in states that don't have similarly permissive rules. Apart from Qualcomm's legal domicile, the consumer class stresses the impact of Qualcomm's dealings with Apple and Intel, two California companies.

The recently-adjudicated Apple v. Pepper Supreme Court appeal (which also involved the admissibility of a class action, as opposed to the underlying App Store-related merits, which have yet to be litigated) is mentioned in footnote 11:

"The DOJ is joined by Louisiana, Ohio, Texas, Alaska, Missouri, and Oklahoma. Several of these states took a contrary position just months ago in Apple v. Pepper, advocating in favor of the repeal of Illinois Brick and the virtues of indirect purchaser suits. See Br. for Texas, Iowa, and 29 Other States as Amici Curiae in Support of Respondents, Apple Inc. v. Pepper, 139 S. Ct. 1514, No. 17-1204."

Another key amicus curiae here is the Chamber of Commerce, which (according to the consumers' brief) "argues that applying California law violates the Due Process, Full Faith and Credit, and Dormant Commerce Clauses." Similarly, the DOJ "suggests that 'federalism' prevents California from applying its antitrust laws extraterritorially." Those are constitutional arguments, and the consumers' attorneys say that no new issues can be raised on appeal, so any such constitionality arguments have--they say--been waived by not raising them earlier.

The consumers' lawyers present different theories based on which Judge Koh's class-certification decision could be upheld, but I'd have to conduct more research to form an opinion on how strong those theories are.

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