Saturday, April 8, 2023

Qualcomm moves for summary judgment against ruins of class action that piggybacked on FTC lawsuit -- Judge Corley mentioned possibility of new class action over exclusive dealing

Class-action lawyers tend to be persistent even when they're losing. They hope until the end that they may get paid. But some large companies--and Qualcomm appears to be one of them--are unwilling to settle for nuisance value. They just defeat them.

Coincidentally, Judge Jacqueline Scott Corley of the United States District Court for the Northern District of California presently has two ultra-flimsy class actions piggybacking on FTC lawsuits before her: the one against Qualcomm I'm discussing here, and one over Microsoft-ActivisionBlizzard, which I tweeted about this morning.

In January, Judge Corley further narrowed the scope of the Qualcomm action. It's now down to an exclusive-dealing claim (the Qualcomm-Apple agreement that allegedly kept Intel out of the high-end baseband chipset market), and even that one can only be pursued under California state law, not federal law. The class-action lawyers hoped to get access now to Qualcomm's 2019 settlement agreement with Apple--which they haven't seen because discovery closed in 2018--but that's after the class period. Judge Corley held a hearing on February 23, 2023, where she said she was "not inclined to reopen discovery."

In my commentary on the last order to dismiss certain claims, I already said that the remainder of the case "will hardly survive summary judgment." Actually, if it was up to Qualcomm's lawyers, it wouldn't even have reached the point of a summary judgment: they'd have preferred to defeat the remainder of the case through a motion for judgment on the pleadings. But Judge Corley didn't like that notion, given that the usual purpose of judgment on the pleadings is to obviate the need for discovery--and here, discovery closed years ago ("the record is full"). It's more efficient for the court this way, given that if a judgment on the pleadings was successfully appealed as premature (for failure to consider anything in the record), the case would be remanded and she'd then have to adjudicate a motion for summary judgment.

Yesterday (Friday), Qualcomm filed its motion for summary judgment:

In Re Qualcomm Antitrust Litigation (case no. 3:17-md-2773-JSC, N.D. Cal.): Defendant Qualcomm Incorporated's Motion for Summary Judgment (Redacted)

Talking about different types of pretrial motions, large parts of that motion look at first sight like a Daubert motion for taking aim at law professor Elhauge's expert testimony--and quite extensively so. But the argument is not about his testimony being unreliable. It's about relevance to the questions to be decided. The expert testimony was optimized for the original theory, which was that Qualcomm abusively raised standard-essential patent (SEP) royalties to supra-FRAND levels, while the class-action lawyers are now trying to keep the case alive by arguing that Qualcomm's exclusive deal with Apple shut Intel out of the market and thereby made chipsets more expensive. As Qualcomm describes it, the class-action lawyers have "flipp[ed] from arguing that Qualcomm was undercutting competitors on chip prices to arguing that Qualcomm was overcharging OEMs." Here's my favorite sentence from that document:

"In short, there are gaping voids where one would expect evidence of causation to be."

The problem is even more fundamental than shifting from "undercutting" to "overcharging": until the case got destroyed for the largest part, the class-action lawyers insisted on a holistic perspective and the alleged interdependencies and mutually reinforcing effects of Qualcomm's various practices--all of that for the ultimate goal of arguing that the combination of multiple intertwined aspects of Qualcomm's conduct made SEP licenses more expensive. Qualcomm says in its motion for summary judgment that they can't pursue exclusive dealing as a standalone claim now that it's all that's left in the case (and again, for the avoidance of doubt: even that one is already dead under federal law).

At the February 23 hearing, Judge Corley already discussed this problem with the class-action lawyers:

"Well, why not file a new lawsuit? I mean, you had a theory, as I understand it. It was all intertwined. It was all intertwined and it was based, in part, on the FRAND theory, which the Ninth Circuit rejected. Okay. I mean, that’s just what happened. But that -- you could have pursued -- and maybe you’ll tell me and you’re going to say that the evidence is there to support the claim, so maybe you did. You could have pursued a separate exclusive dealing theory that was not dependent upon the FRAND, but maybe you chose not to. Okay. That was just a strategic choice."

There are four named smartphone customers in the current class. The class-action lawyers could just find some others (on whom the decisions in the present case will not be binding) and bring a new complaint, as Judge Corley also explained at the hearing.

In that case they would also get to look at more recent documents, potentially including the 2019 Qualcomm-Apple contracts.

For now, the class-action lawyers don't want to give up on whatever little is left of their original case. But I guess Qualcomm's motion will succeed. Will they choose to file a new lawsuit to pursue a standalone exclusive-dealing claim? I doubt it. They know that the FTC--despite support from Apple (the two had a mutual interest agreement in place)--failed to prove that Intel was ready to compete with Qualcomm at the relevant time (and in 2019 Intel even left that market, sold the chipset business to Apple, and Apple still can't make its own baseband processors for the iPhone). A follow-on class action with a standalone exclusive-dealing claim would be doomed to fail as well.