Monday, January 20, 2020

One year after trial loss against FTC, Qualcomm approaching Ninth Circuit hearing on far stronger basis: scope of reversal hard to predict

On February 13, the United States Court of Appeals for the Ninth Circuit will hold the appellate hearing in FTC v. Qualcomm. Apart from a misleading citation that I criticized, and a few other weak spots, Qualcomm's reply brief, which I have read more than once, was very powerful. All in all, Qualcomm's lawyers have done far better work than the FTC's appellate team--and than most of the FTC's amici, though some amicus briefs (especially the ones submitted by Intel and MediaTek) were very persuasive.

Qualcomm has made so much headway on appeal that I'm sure at least parts of the district court's ruling will be reversed, if not by the Ninth Circuit, then by the Supreme Court.

In the meantime, the Ninth Circuit has heard Qualcomm's appeal of Judge Lucy H. Koh's certification of a consumer class. The most likely outcome, based on what the circuit judges said, is that the class action will go forward, but limited to customers based in California and, possibly, other states with similar antitrust laws governing indirect-purchaser claims. However, the consumer case is based on the FTC's claims against Qualcomm, so if Qualcomm defeated the FTC's case on the merits, the consumers wouldn't be entitled to anything regardless of class certification.

With respect to Qualcomm's appeal of the FTC ruling, the Ninth Circuit granted, as expected, an unopposed motion by the United States Department of Justice last week, allowing the DOJ to deliver, on behalf of the United States of America, five minutes of oral argument in support of Qualcomm.

Even before the hearing starts, Judge Koh's reasoning for an antitrust duty to extend exhaustive licenses to rival chipset makers is already dead in the water: the FTC distanced itself from that rationale, betting on a right-for-the-wrong-reasons approach instead. Even prior to the FTC formally giving up on that part, I had acknowledged that Qualcomm had credibly claimed never to have intended to grant exhaustive chipset-level licenses.

This is an important landmark case, so I will spend some time in the weeks ahead re-reading the key documents and researching some of the theories in order to develop an opinion ahead of the hearing on what the outcome will be. Wholesale affirmance is very hard to imagine; the question is the scope of a reversal and/or vacatur.

A year ago at this time, the bench trial was in full swing, and I saw Qualcomm on the losing track from the start. That prediction turned out right (as did my later prediction that a Ninth Circuit motions panel with a conservative majority would grant a stay of the injunction). But trials and appellate proceedings are different types of ball games. Google won two district court decisions against Oracle in different years, but they were reversed by the Federal Circuit, and now the two key issues are before the Supreme Court. Google's winning trial team was led by Robert van Nest of Keker, van Nest & Peters--Qualcomm's lead trial counsel a year ago. It would be an irony of fate if it worked out just the opposite way this time, with him having lost the trial and his client now, possibly, prevailing on appeal.

To be clear, it's not that I've given up on the FTC's case as a whole. What I do have to say in all fairness is that in January 2020, Qualcomm is in way better shape than it was in January 2019. They will most likely prevail on appeal at least in part. There are various legal questions involved, and it remains to be seen how much it will hurt the FTC that it practically lost its economic expert. But to what extent Qualcomm will likely succeed is a question I'm going to research and think about more thoroughly in the weeks ahead. At least I want to be in a position to deduce from the circuit judges' questions and comments where the case is headed.

Some Qualcomm fans and/or employees trolled me on Twitter during the trial. They misunderstood me. I'm not against Qualcomm, and even if I would like some of its business practices to change, it would be intellectually dishonest not to make a distinction between one's policy goals and the applicable law. The United States is called the Land of the Free, which is why the antitrust laws are applied cautiously. The Supreme Court has historically drawn the line where judicial overreach would result in overregulation. But before we get to the Supreme Court, the Ninth Circuit will speak. San Francisco, February 13, 2020.

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