Nokia's choice of software patents asserted against Daimler exposes pretext for refusing to license automotive suppliers

PaRR's EU antitrust reporter Khushita Vasant received information from two sources according to which a third round of mediation talks--after the first two, held in January and February, failed--might take place between Nokia and Daimler as well as many (though not all) of its suppliers of telematics control units (TCUs). Knowing how these things work, I guess the situation is now simply one in which the European Commission remains hesitant, for purely political reasons, to take action, and is playing for time, as is Nokia, whose patent portfolio is going down the tubes with every month that passes.

Commissioner Margrethe Vestager is even way tougher than her famous predecessor in office "Steelie Neelie" was when it comes to enforcement against U.S. companies, but (so far, so bad) soft as a jellyfish on Nokia. She and Nokia might just hope that the patent infringement ruling scheduled by the Munich I Regional Court for April 9, 2020 would scare Daimler into a settlement. It's hardly a coincidence that the rumored new round of mediation talks has the same target date...

Regardless of that latest disgraceful development, I was taking a closer look at Nokia's ten patents-in-suit against Daimler from the perspective of whether there is a scintilla of doubt about Nokia acting abusively by refusing to license Daimler's TCU suppliers. There is not.

As Daimler's lead counsel in the German infringement cases accurately noted last fall, cellular standard-essential patents (SEPs) cover techniques that are essentially embodied in the baseband chip. From a car maker's vantage point at the bottom of the supply chain, that's a tier 3 product, which gets incorporated into a (tier 2) network access device (NAD; one might also call this a connectivity module, which in turn resides in a TCU (tier 1). In other words, TCUs already contain a whole lot more hardware than is actually needed to exhaust the patentee's rights by licensing the upstream.

The European Commission employs an elite of public servants. There's no way the Commission's experts wouldn't have figured out during all of that time since Daimler's 2018 (!) complaint that Nokia's allegation of a TCU not actually practicing the standard is, euphemistically so as to avoid an analogy to bovine excrements, a pretext.

The Golden Rule of patent law: the name of the game is the claim. "Claim" in the sense of a patent claim, not a claim in terms of a (mis)representation.

The patent claims determine the scope of protection a patent enjoys. When looking at the claims of Nokia's patents-in-suit, and even when looking at the specifications (whose sole purpose in litigation is to help interpret the claims), it becomes clear that Nokia's patents don't cover end products such as a car (quite often, the Nokia-Daimler dispute is misleadingly referred to as a "connected vehicle" dispute, though none of Nokia's wireless SEPs have anything to do with what sets cars apart from phones).

In fact, seven (70%) out of Nokia's ten patents-in-suit against Daimler are even officially declared to be software patents (which the remaining three are as well, as I'll explain in a moment). That is so because they come with computer program claims--patent claims covering software without any hardware being required to infringe. As a former anti-software-patent campaigner, I'm particularly sensitive to this, and I believe the European Patent Office granted those claims in violation of the European Patent Convention, but they do come in handy now as they belie Nokia's anti-antitrust-enforcement narrative. You can find the claims toward the end of each patent specification, and I'll give an example of one program (in terms of software) claim per patent:

• claim 5 of EP2797239 on "a method and a telecommunication device for selecting a number of code channels and an associated spreading factor for a CDMA transmission"

• claim 15 of EP2087626 on "additional modulation information signaling for high speed downlink packet access"

• claim 15 of EP2981103 on an "allocation of preamble sequences"

• claim 7 of EP2286629 on a "method and apparatus to link modulating and coding scheme to amount of resources"

• claim 8 ("computer-readable storage medium comprising software instructions" is a computer program by any other name) of EP2145404 on a "method and apparatus for providing control chanels for broadcast and paging services"

• claim 31 of EP1929826 on an "apparatus, method and computer program product to request data rate increase based on ability to transmit at least one more selected data unit"

• claim 22 of EP2087629 on "a method of transmitting data within a telecommunications system"

The software that controls data transfers over a cellular model resides in a baseband chip. That's the mastermind of the whole operation. It determines what is sent out via the antenna, and it interprets what is received.

All ten of Nokia's patents-in-suit against Daimler could also be called "protocol patents": they describe how two ends of a wireless connection communicate--what A has to tell B to cause B to do something, or vice versa. It's like I say "hello, how are you?" and you respond "fine, how are you?"

That kind of communication is, of course, implemented in software (it already has been for a very long time).

There's nothing in those Nokia's patents that has to do with superior hardware. I ran full-text searches over the patent specifications, and looked closely at the device (or "apparatus") claims to identify any references to the types of hardware components that Nokia claims aren't part of TCUs:

• Eight (80%) out of the ten patents-in-suit contain not a single occurrence of at least one the following words: antenna, microphone, loudspeaker, power.

• EP'626 refers to "antenna weights" and mentions the presence of an electrical power source (without claiming to invent anything new relating to electrical power supply). The patent covers bits (zeroes or ones) that are sent and received, and the apparatus claims don't require any specific hardware but merely refer to "means for interpreting ... bit[s]" and "means for coding." That, too, is a typical software patent.

• DE'446 (the German equivalent of EP'234) only mentions "power" in the sense of "power control" as a numerical parameter. Here, again, it's instructive to look at the apparatus claims, which as opposed to claiming specific hardware relate to a "medium access control layer configured to encapsulate packets."

• The means-plus-function structure found in EP'626 and EP'234/DE'446 is also found in the other patents. Nokia's patent attorneys obviously optimized those claims for scope, and that's why they don't claim specific hardware elements such as an antenna, but instead focus on functionality. However, as long as there isn't a need for some very specific (and inventive!) hardware, but it merely suffices that something be around to do a certain job, the baseband chip as the controller of the data transfer operation is where the claimed inventive steps are implemented.

Those ten patents are the ones Nokia's litigators--among the very, very best in the industry--selected from the company's huge portfolio because they thought they'd be their strongest weapons. We could look at dozens or even at hundreds of additional cellular SEPs owned by Nokia or other companies, and the findings would be materially consistent with this sample of ten Nokia "star" patents.

It's time to get real. There's no justification for not licensing automotive suppliers, especially not under the CJEU's Huawei v. ZTE case law.

Follow @FOSSpatents

Share with other professionals via LinkedIn:

Share|

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.

Follow @FOSSpatents

Share with other professionals via LinkedIn:

Share|

Qualcomm's reply brief in appeal of FTC antitrust win makes misleading citation in attempt to discredit customer testimony

Due to a lot of activity related to German patent reform I have a backlog containing a number of recent U.S. patent and antitrust developments to comment on. And that's what I plan to focus on over the next week or two, which will fortunately be slow on the European front.

On Monday, December 16, Qualcomm filed its reply brief in the FTC case with the Ninth Circuit (this post continues below the document):

19-12-16 Qualcomm Reply Brief by Florian Mueller on Scribd

The United States Court of Appeal for the Ninth Circuit recently scheduled oral argument in this appeal for February 13, 2020. In the post I just linked to, you can find links to numerous amicus curiae briefs supporting the FTC, and subsequently I commented on a couple of submissions from the automotive industry.

The FTC clearly got more (in qualitative and quantitative terms) support from amici than Qualcomm did. And a Korean court affirmed an antitrust ruling by the Korea Fair Trade Commission (KFTC). Qualcomm tries to focus on what has recently gone well for the chipmaker: the FTC didn't even make an attempt to defend Judge Lucy H. Koh's reasoning on chipset licensing, presenting a right-for-the-wrong-reasons theory instead.

Qualcomm seeks to leverage that fact to discredit Judge Koh's ruling as a whole, and in this context reminds the appeals court of FTC commissioner Wilson's dissent, and support for Qualcomm from the DOJ Antitrust Division (which is run by a lawyer who previously represented Qualcomm). However, all of that is meta-level: it's not about law, facts, or policy in the slightest, just about raising doubts.

Intel's Frankenstein analogy (the dissected monster is innocuous)--a funny way of encouraging the appeals court to see the forest among the trees--applies not only to Qualcomm's opening brief but also to the reply brief. The outcome of the appeal will hinge on whether the appeals court looks at the aggregate effect of a web of interrelated and mutually-reinforcing practices--or gets bogged down somewhere along the way.

This won't be my last post on this case before the appellate hearing. For now I'd just like to highlight two parts of Qualcomm's reply brief--one that I found ridiculous, and one that is misleading:

• First, the most preposterous sentence in the reply brief (page 47 based on the numbering of the document, or page 58 based on the numbering of the PDF):

  "Having the contractual protection of a license in place before selling chips legitimately protects Qualcomm from claims that the chip sale 'exhausted' Qualcomm's patents and relieved OEMs of the need to pay for those rights."

  The answer is simply that those selling products must keep exhaustion in mind and set their prices accordingly. They can't justify "No License-No Chips" this way, as it's all too obvious they could sell their chips at a price that compensates for both the circuitry and the patent license.

• With customer testimony having been a disaster for Qualcomm in the January trial, it's understandable that Qualcomm argues the appeals court shouldn't give it infinite weight. But the particular way in which Qualcomm's reply brief makes that point is misleading:

  "See United States v. AT&T Inc., 310 F. Supp. 3d 161, 211 (D.D.C. 2018) (in weighing evidence of competitive harm, 'competition authorities and courts . . . refus[e] to take the views expressed by customers at face value and insist[] that customer testimony be combined with economic evidence providing objective support for those views'), aff’d, 916 F.3d 1029 (D.C. Cir. 2019)."

  No one can blame Qualcomm for failing to state that those "customers" aren't merely customers, but most of them hold very significant cellular standard-essential patent portfolios of their own. What I do find objectionable, however, is that Qualcomm suggests the passage from "competition authorities" to "support for those views" was written by a court. In reality, the D.C. District Court merely wrote in the AT&T decision that "[c]aution is [...] necessary in evaluating the probative value of the proffered third-party competitor testimony," and then cited to a treatise (Ken Heyer, Predicting the Competitive Effects of Mergers by Listening to Customers). The relevant passage is from the treatise, not from any court's opinion. And the D.C. Circuit, when affirming the decision, didn't even talk about the probative value of customer testimony at such a general level.

  The difference between what the D.C. District Court actually wrote itself and what it merely quoted is key, as Judge Koh arguably exercised caution, while the quote from Mr. Heyer's treatise sounds like customer testimony should be afforded no weight in its own right.

Follow @FOSSpatents

Share with other professionals via LinkedIn:

Share|

Korea Fair Trade Commission defeats Qualcomm's antitrust appeal in court, but Qualcomm will appeal--and violate--further

As Reuters and other media outlets reported, the Seoul High Court upheld the record $873 million fine the Korea Fair Trade Commission (KFTC) had imposed on Qualcomm. The issues in the South Korean antitrust case are very similar to the ones in the U.S. FTC v. Qualcomm case, and the most important overlap concerns the obligation to extend exhaustive SEP licenses, on FRAND terms, to rival chipset makers.

For the South Korean competition authority, this is a major legal victory. Qualcomm has announced its intent to appeal this matter further to the Supreme Court of South Korea. But that appeal will take roughly half a decade to be resolved.

Qualcomm's problem is not to cough up the (almost) billion-dollar fine. Korea--with Samsung and LG being based there--is a strategically important market. What hurts Qualcomm much more in the short term is that this Korean decision may also serve to demonstrate to the Ninth Circuit that the U.S. FTC and Judge Lucy H. Koh reached decisions that are simply in the global antitrust mainstream. I guess the U.S. FTC will file a request for judicial notice soon--and, by the way, I believe the companies who lodged EU antitrust complaints against Nokia (Daimler, Continental, Valeo, Gemalto, BURY Technologies) should also try to leverage the Korean decision in Brussels.

The United States Court of Appeals for the Ninth Circuit will hear FTC v. Qualcomm on February 13, 2020. In the post I just linked to, I listed my posts on most of the amicus curiae briefs filed in support of the FTC, and subsequently I also blogged about an automotive-industry brief.

Competition enforcement is not meant to serve a revenue-generation purpose. Fines are meant to deter anticompetitive behavior. So the real measure here is what the KFTC is going to do now. If they continue to refrain from actually enforcing the corrective order requiring Qualcomm to license rival chipset makers, with pressure from the U.S. government being considered the primary reason for this failure to enforce, then they're not going to restore fair competition. Qualcomm will then just continue to refuse to license its rivals, and nothing will change in the marketplace.

A Korean source tells me that the Korean public may be too focused on the fine as a major victory for the government while failing to see the importance of actually enforcing the corrective order. And the large companies who originally complained to the KFTC have settled with Qualcomm in the meantime (or, as in Intel's case, have exited the market). Huawei and MediaTek could have complained, but Korean observers believe they aren't interested in that particular jurisdiction to the extent they'd take action there. So, all in all, the KFTC may be reluctant to allocate the resources to an enforcement effort that would be required.

Realistically, I wouldn't expect a Korean enforcement action to begin in the months ahead. However, I'm a bit more optimistic that something might happen in case the Ninth Circuit affirms Judge Koh's decision on chipset-level licensing (even if on the right-for-the-wrong-reasons basis espoused by the FTC and various amici). In that case, the U.S. government would be in a fundamentally weaker position to tell Korea not to enforce a decision upheld not only by a Korean court but also ordered by one U.S. court and affirmed by one of the most important courts of appeal.

Theoretically, Korean antitrust enforcement should be independent--and effective. But in practical terms, it appears that U.S. influence over this is strong, unless some modem chip makers complain actively and vocally in Korea over Qualcomm's continued non-compliance with the KFTC's corrective order.

Follow @FOSSpatents

Share with other professionals via LinkedIn:

Share|

40 law and economics professors supporting FTC against Qualcomm's appeal contradict themselves just two pages apart

Last week, the Federal Trade Commission (FTC) filed its answering brief (prior coverage and commentary: 1, 2, 3) to Qualcomm's Ninth Circuit appeal of the agency's antitrust victory in the Northern District of California. This week, amicus curiae briefs in support of the FTC are due, with industry sources expecting a dozen or more submissions, and Professor Jorge Contreras (University of Utah) was first to file (this post continues below the document):

19-11-26 Jorge Contreras Acb by Florian Mueller on Scribd

Professor Contreras is not only a lawyer but also understands technology very well. He's cited all the time, including by some other amicus briefs that have meanwhile been filed in the same case. The first part of Professor Contreras's brief discusses what is also my #1 priority here: chipset-level licensing. After explaining the history of FRAND, which starts with competition law, and other legal aspects, Professor Contreras says that baseband chips are "highly complex" and "embody the principle technical features of the standard." That is, by the way, consistent with what Qualcomm's German outside counsel (then defending Daimler against Nokia) told the Munich I Regional Court last month. In the related footnote (#6), Professor Contreras notes:

"Moreover, it is not clear that a smartphone implements the entirety of the relevant standards either, as Qualcomm seems to argue, given that some functionality described in those standards is implemented in base stations and other central facilities."

At least one other amicus brief I've downloaded by now makes that point as well, and it's too important for a mere footnote. Those monetization-focused SEP holders who refuse to license component makers--Qualcomm, Nokia, Ericsson, and various trolls (though there's only a floating border between former handset makers and trolls)--come up with arbitrary and shifting-sand-style positions on what hardware components are needed in order to implement a standard. For an example, in its German infringement actions against Daimler, Nokia argues that only an end product--in that case, a car--implements a standard, but car makers purchase telematics control units (TCUs) that, in turn, come with connectivity modules (often called network access devices, or NADs), and the NADs actually are like a complete phone, just without a screen, and cars add absolutely nothing that is required to practice the standard.

Even if the debate is about chipsets used in smartphones (as in FTC v. Qualcomm), the phone is an arbitrary choice: as the footnote quoted above notes, only the combination of an entire network (with all its base stations) and the end-user devices would implement the standard if one followed Qualcomm's (or Nokia's or Ericsson's) logic. As a result, no company other than a Huawei or Samsung (which make base stations as well as end user devices) would be entitled to a cellular SEP license--or maybe telcos that operate networks and resell phones could obtain a license, too. Such a nonsensical result would be an invalid outcome that would make it impossible to give any remotely reasonable interpretation to FRAND licensing pledges.

The second part of Professor Contreras's amicus brief explains that Qualcomm's reference to its own past license agreements as a point of reference for determining reasonable (the "R" in "FRAND") royalties is "circular logic." Here, Professor Contreras cites to a publication by Professor Thomas Cotter (University of Minnesota and author of the highly recommended Comparative Patent Remedies blog): Reasonable Royalties, in Patent Remedies and Complex Products: Toward a Global Consensus.

In the third and final part, Professor Contreras takes aim at Qualcomm's "national security" argument. He provides examples of comparable companies that are doing well without Qualcomm-like misconduct:

"[B]ased on publicly-reported 2018 financial information, Intel achieved a profit margin of approximately 62% on net revenue of $70.8 billion, and Broadcom achieved a profit margin of approximately 52% on net revenue of $20.8 billion. [...] Qualcomm, by comparison, reported a profit margin of 55% on revenue of $22.7 billion."

Related to this--and also very interesting--is the comparison of R&D investments:

"In 2018, Intel invested $13.5 billion in R&D (19% of revenue) and Broadcom invested $3.7 billion in R&D (18% of revenue). [...] Qualcomm, by comparison, invested $5.6 billion in R&D (25% of revenue)."

The brief also shows that "Qualcomm is not the global leader in 5G standards or technology development, nor does the U.S. lead in this technology sector." Pointing to an IAM article by IPLytics founder Tim Pohlmann, a table is shown according to which Qualcomm is just #7 in the world in terms of 5G patent families held (with Intel, the only other U.S. company among the top 10, following closely, and those patents were acquired by Apple this summer).

Whatever the reason may be, Professor Contreras filed a separate brief from the one submitted by 40 (precisely twice as many as their colleagues who supported Qualcomm in August) law and economics professors (this post continues below the document):

19-11-27 Law & Econ Pro... by Florian Mueller on Scribd

The passage of the "40 profs" brief I like best is the one that explains the economic dynamics resulting from Qualcomm charging a patent royalty separately from selling its chipsets and making it harder for others to compete with them in the chipset business.

In connection with Qualcomm's "No License-No Chips" policy, the 40 professors address the Supreme Court's linkLine decision which said that a margin squeeze is not enough to prove an antitrust violation: instead you either need to show a duty to deal at the wholesale level or exclusionary conduct (predatory pricing) at the retail level. The FTC's explanations as to why linkLine is inapposite here are very strong, though it obviously doesn't hurt if amici address the same (critical) question, too.

Unfortunately, the O'Melveny & Myers and Hausfeld lawyers who represent the 40 professors made a mistake that the signatories--many of whom I know (a few of them I've even met) and respect, but all of whom are presumably extremely busy--didn't notice...

The brief first argues (on page 14 based on the numbering at the bottom of each page; or page 20 of the PDF) that Qualcomm can't engage in a price squeeze affecting chipset manufacturers because it doesn't license or assert patents against them:

"As to form, the input here is the license to Qualcomm’s SEPs, and the non-integrated competitors are the rival chipset manufacturers. Because Qualcomm refuses to license chipset manufacturers, it is not squeezing them with a higher license fee."

But then, only two pages later, comes footnote #14, which flatly contradicts that formalistic approach:

"Qualcomm argues that the [No License-No Chips] policy is not anticompetitive because the cost is not levied directly on the competing chipset makers. [...] But as demonstrated by the Microsoft "per processor" royalty cases, there is no requirement that a monopolist impose costs directly on its competitor. [...] What is significant is that the monopolist imposes a charge on the transaction involving the competitor." (emphasis added)

One mistake doesn't devalue an entire (otherwise very strong) amicus brief. I agree with the 40 professors that the FTC's win should be affirmed; I largely agree with their reasoning. And again, the professors themselves presumably just lacked the time to identify the flaw highlighted above before they signed. It changes nothing about my respect for all of them. While I do want Qualcomm to be required to license rival chipset makers and to stop its "No License-No Chips" policy, there are cases where Qualcomm is right and/or Qualcomm's adversaries are wrong. I commented favorably on parts of Qualcomm's motion to dismiss (2007), I criticized the methodology used by one of the FTC's experts, and I pointed out months ago that it isn't easy to "shoehorn" Qualcomm's refusal to license rival chipset makers into the Aspen Skiing pattern. Now I believe the professors' footnote #14 is right (yes, the focus should be on the economic effect of a charge as opposed to just form), but then Qualcomm, too, is entitled to the benefit of that approach in the linkLine context.

No matter how hard I try to find an element that reasonably sets one context apart from the other (the wider context is actually the same: No License-No Chips), I can't find one. Either one wants to argue that indirectly-imposed costs count, or one doesn't.

Expect more posts on FTC v. Qualcomm amicus briefs in the days ahead.

Follow @FOSSpatents

Share with other professionals via LinkedIn:

Share|

Law professor claims top priority for U.S. in trade negotiations with South Korea was Qualcomm antitrust case

A Korea-based source has just drawn my attention to an article (in Korean, but I received a translation) by Kyungsin Park, Professor of Law, Korea University Law School. Professor Park accuses the Korea Fair Trade Commission (KFTC) of a failure to act forcefully in "the legal case of the century," i.e., the Qualcomm case. As I reported in March, Qualcomm could face criminal charges in Korea over its refusal to license chipset makers, but so far--and more than eight months later, it's apparently still the situation--the KFTC hasn't referred this contempt matter to the Prosecutor General's office.

Meanwhile, Qualcomm is--according to the article--spending hundreds of millions of dollars on the appeal. What Professor Park explains based on publicly available data is that it's not primarily about the 900 million dollars of fines the KFTC imposed in its late-2016 decision. The professor says it's just about 1% of Qualcomm's Korean revenues over the last 25 years, or 2% of what "Qualcomm generated through its illegal activities in South Korea." Instead, he writes, it's about the KFTC's corrective orders, which are about Qualcomm's business model.

The article talks about how Samsung ceased to complain about Qualcomm's practices after its new (early 2018) deal. Well, during the course of those Qualcomm antitrust investigations in multiple jurisdictions, Samsung was far from the only company to sign a new chipset purchasing and patent licensing agreement. Apple settled during opening statements at the April 2019 trial in San Diego--as did Korea's LG Electronics a few months later. There's no basis for pointing fingers at those companies: they're in the smartphone business, not in the antitrust enforcement business. But I do agree with the professor that Korea's competition authority (and, needless to say, the courts) have a responsibility here. (As for the companies that settled their formal or informal disputes with Qualcomm, there's plenty of testimony from the time before those deals were struck, and that testimony is still useful, as it was in the U.S. FTC v. Qualcomm case--where Samsung also filed a great amicus curiae brief.)

Professor Park argues--in other words--that South Korea's economy simply can't afford Qualcomm's sky-high patent royalties: LG Electronics, he says, has been incurring losses for 20 fiscal quarters in a row, and some Korean phone makers like Sewon Telecom, Telson, VK, Pantech, Curitel, and SKY, are no longer in business. Most mobile phone makers in the world have single-digit profit margins except for Apple and Samsung (but even Samsung isn't comfortably in the double digits, he claims).

All of that is interesting, but one claim really surprised me:

"Qualcomm is eexrting political and diplomatic pressure to influence the outcome of the appeal currently pending in the Seoul High Court. The #1 subject of the bilateral negotiations of the U.S.-South Korea Free Trade Agreement that resumed in July 2019 after a seven-year hiatus was the KFTC's investigation of Qualcomm's practices. The U.S. delegation alleges that Qualcomm was denied due process though it is guaranteed under the US-Korea FTA."

I don't know what happened in that investigation, but just like Professor Park it also strikes me that the findings in Korea were simply consistent with what other jurisdictions--particularly Judge Lucy H. Koh of the United States District Court for the Northern District of California--also found.

But there's one thing I just don't understand: assuming that the claim of Qualcomm's antitrust woes being the #1 priority for the U.S. in trade talks with South Korea is true, how can Qualcomm possibly influence the U.S. Administration to such an unbelievable extent?

It obviously makes sense for any U.S. government, regardless of the party or people in power, to ensure that its companies are treated fairly abroad. There have been cases of hyperaggressive antitrust enforcement against some U.S. companies in different places at different times. But in this case, Apple and Intel--both larger than Qualcomm--were actually among the complainants, or at least respondents to questions from the KFTC whose answers played a key role in the decision against Qualcomm.

If the Seoul High Court upholds the most important one of the KFTC's decisions--that Qualcomm needs to extend exhaustive SEP licenses to rival chipset makers--, it will simply be in the mainstream of global antitrust law:

• Judge Koh identified such an obligation first on the basis of contract law (Qualcomm's FRAND declarations), then on a duty-to-deal basis (the FTC is now pursuing an antitrust theory that relies on the contract-related finding as opposed to a contractless duty to deal).

• Five automotive companies (Daimler, Continental, Valeo, Gemalto, and BURY Technologies) lodged antitrust complaints with the European Commission's Directorate-General for Competition (DG COMP) against Nokia, and they're all about component-level SEP licensing. Just today the new European Commission was confirmed by the European Parliament (with a two-thirds majority), so I guess we will very soon see a decision to investigate those complaints.

• Huawei is suing Nokia in a German court (Dusseldorf Regional Court), on the basis of EU antitrust law, to secure component-level SEP licenses. It's almost a given that Huawei will prevail, given that Presiding Judge Dr. Thomas Kuehnen of the Dusseldorf appeals court outlined the related legal theory in an article. Also, the Court of Justice of the EU made it reasonably clear in its Huawei v. ZTE ruling that EU antitrust law gives every implementer of a standard the right to a FRAND license.

In light of the global trend toward enforceable component-level licensing obligations, I hope Korea's courts and the KFTC won't make decisions that would disadvantage their local smartphone makers and other electronics companies compared to those based in other jurisdictions.

Follow @FOSSpatents

Share with other professionals via LinkedIn:

Share|

FTC seeks to defend chip-level licensing part of Qualcomm antitrust ruling with right-for-the-wrong-reasons strategy

Late on Friday, the Federal Trade Commission (FTC) filed its answering brief to Qualcomm's appeal (this post continues below the document):

19-11-22 FTC Answering Brie... by Florian Mueller on Scribd

The part I'm most interested in--as always in this context--is chipset-level licensing. When I commented on Qualcomm's opening brief in the summer, I agreed with them in part. The problem with the Aspen Skiing (more recently endorsed in Trinko) logic applied by Judge Lucy H. Koh of the United States District Court for the Northern District of California is that the abandonment of a prior profitable and voluntary conduct is key--and in Qualcomm's case the problem is that they didn't really want to grant exhaustive licenses to rival chipset makers and only did so because they relied on an exhaustion theory that the Supreme Court disagreed with in Quanta. So at a minimum they can argue that they did not do knowingly and willingly what they did until the Quanta decision came out and they changed their licensing strategy.

Another--potential--problem with the Aspen Skiing logic is that the refusal to license rival chipset makers allows Qualcomm to collect more from end-product makers ("humongously more lucrative" as Qualcomm told the IRS), but there isn't a lot of time that passes between the two steps (refusal at chip level and collection at end-product level)--much less is it a strategy that works only by forcing someone else out of business in order to then turn a monopolist's profit (even with competitors around, it's more profitable).

In order to affirm the district court's ruling under the Aspen/Trinko standard, one would have to overcome some hurdles. The FTC apparently concludes it's smarter to lower the standard in order to prevail.

On pages 69 and 70, the FTC clearly spells it out. Just like at the stay stage, they're not going to try to defend Judge Koh's reasoning--but they do seek to defend the outcome:

"The FTC does not argue that Qualcomm had a duty to deal with its rivals under the Aspen/Trinko standard. But that heightened standard does not apply here, because—unlike the defendants in Aspen, Trinko, and the other duty-to-deal precedents on which it relies—Qualcomm entered into a voluntary contractual commitment to deal with its rivals as part of the SSO process, which is itself a derogation from normal market competition. And although the district court applied a different approach, this Court 'may affirm on any ground finding support in the record.' [...]"

So what does the FTC consider to be a better mouse trap?

They still appear to feel they're in a very strong position on contract law. Judge Koh's summary judgment that held Qualcomm to have a contractual obligation under its FRAND declarations to U.S. standard-setting organizations (ATIS and TIA) to license rival chipset makers is also under attack from Qualcomm (with a "more equal than others"-like argument), but it's going to be far harder for Qualcomm to get that one overturned. They couldn't even get it overturned directly--at most they could get a remand for the purpose of a trial where they could present extrinsic evidence, and even that is unlikely to happen because it's simply not necessary under California law when a contract is perfectly clear.

As for Qualcomm's "more equal than others" argument, the FTC's answering brief notes that "Qualcomm does not deny that it has received chip-level licenses from over 120 companies—including Ericsson," and recalls that Nokia, another amicus curiae supporting Qualcomm on this issue, once "argued to the European Commission 'that Qualcomm's termination of a modem chip license agreement' violated its 'duty to license on FRAND terms.'" (Ironically, Nokia itself is now the target of five automotive-industry complaints over a refusal to license component makers.)

The FTC is very likely to defend Judge Koh's sumamry judgment on contract interpretation. But that will not, in and of itself, result in an affirmance (for different reasons) of the finding that Qualcomm acted anticompetitively by refusing to license rival chipset makers. The FTC makes it clear that "[o]f course, a breach of contract, 'standing alone,' does not 'give rise to antitrust liability.'" But it can be a violation "when it satisfies traditional Section 2 standards--that is, only when it 'tends to impair the opportunities of rivals and either does not further competition on the merits or does so in an unnecessarily restrictive way.'" (citing to the Ninth Circuit's Cascade Health ruling, which does point to Aspen Skiing in that particular context, but without finding that the Aspen Skiing standard as a whole applied to Cascade Health)

Based on the record it's then not hard for the FTC to argue that the opportunities of Qualcomm's chipset rivals were impaired and that this behavior didn't advance competition on the merits. There's plenty of industry testimony to that effect.

In its efforts to avoid the Aspen/Trinko standard ("a generalized duty to deal with its rivals" as the FTC describes it), the FTC's brief distinguishes the cases because there was no equivalent of a voluntary FRAND licensing commitment in order to have one's inventions included in a standard in Aspen Skiing. The FTC argues that "the antitrust violation lies in the failure to act as agreed"--again, not just because a breach of contract would be an antitrust violation in all cases related to competition issues but because Qualcomm's FRAND commitments "are among the 'meaningful safeguards' that SSOs have adopted to mitigate this serious risk to competition":

"Courts have therefore recognized that conduct that breaches or otherwise 'side-steps' these safeguards is appropriately subject to conventional Sherman Act scrutiny, not the heightened Aspen/Trinko standard. Of particular relevance here, the Third Circuit held that a rival chipmaker had adequately alleged that Qualcomm itself violated Section 2 because it falsely promised an SSO that it would license its technology on FRAND terms, 'but then breached those agreements.' Broadcom [...]. The Third Circuit declined to apply the Aspen/Trinko test, emphasizing that the case 'd[id] not involve a refusal to deal.' [...] It would thus be inappropriate to apply the heightened Aspen/Trinko standard to a monopolist's exploitation of the SSO process to reinforce its anticompetitive conduct."

The FTC then points to a case in which the Ninth Circuit also "applied traditional antitrust standards to breaches of voluntary commitments made to mitigate antitrust concerns" (in that case, a merger remedy) and a similar approach in the District of New Jersey:

"In Mount Hood Stages, Inc. v. Greyhound Corp., [...] (9th Cir. 1977), this Court upheld a judgment holding that Greyhound violated Section 2 by refusing to interchange bus traffic with a competing bus line after voluntarily committing to do so in order to secure antitrust approval from the Interstate Commerce Commission for proposed acquisitions. [...[; see also, e.g., Biovail Corp. Int'l v. Hoechst Aktiengesellschaft, [...] (D.N.J. 1999) (breach of commitment to deal in violation of FTC merger consent decree exclusionary under Section 2).

What I like conceptually about the FTC's line of reasoning here is that FRAND commitments don't come out of nowhere: if the companies sitting at the standard-setting table didn't make those commitments, competition enforcers would have to take action against them at that stage, given that standard-setting is by definition exclusionary. The FRAND commitment is what enables the positive aspects of standardization, which no one would deny, to outweigh concerns over its potentially exclusionary effects--by making exclusion impossible (as long as each participant honors their FRAND pledge). Just like I called Greyhound's commitment in the Mount Hood Stages case a "merger remedy," the FRAND pledge a company makes to a standard-setting organization is a cartel remedy. Then, provided that non-compliance has anticompetitive effects, it constitutes an antitrust violation if the Ninth Circuit adopts the Third Circuit's application of the law.

Follow @FOSSpatents

Share with other professionals via LinkedIn:

Share|

Qualcomm's German outside counsel: all mobile communications technology resides in baseband chipset

In the FTC v. Qualcomm antitrust litigation, particularly in its opposition to the FTC's motion for summary judgment on chipset-level licensing, Qualcomm disputed that cellular standards are implemented by baseband chips. Qualcomm claimed that only "complete devices" can implement cellular standards (which failed to persuade Judge Lucy H. Koh of the United States District Court for the Northern District of California).

That's why I just can't help but share a soundbite from today's Nokia v. Daimler patent infringement hearing in Munich. Today, Quinn Emanuel's Dr. Marcus Grosch represented Daimler against Nokia's standard-essential patent (SEP) assertions. But he also represented Qualcomm in its German patent infringement actions against Apple. Here's a fundamental truth he told the Munich court today:

"All that we're talking about with respect to mobile communications technologies is ultimately in the baseband chip."

That quote made my day--and justifies an unusually short blog post by my standards.

Follow @FOSSpatents

Share with other professionals via LinkedIn:

Share|

Component-Level SEP Licensing Conference -- Brussels, 12 November 2019 -- Program & Registration

As promised, here's the detailed program for FOSS Patents' Chipset-Level SEP Licensing conference, which will be held at the Sofitel Le Louise hotel in Brussels on Tuesday, November 12, 2019. (There will soon be news regarding a similar event in Northern California in mid-January.)

You can find the program as well as ticket registration forms on the EventBrite page for this conference. For your convenience, the conference program is included below. The names of the moderators and panelists will be announced soon.

08:30 AM	Registration & Reception
09:00 AM	Introductory Session
	Patent exhaustion and attempted workarounds Technical aspects of embodiment of patented invention by component
10:00 AM	"All Comers" Or Not? Access to Licenses Under Contract Laws
	The ETSI FRAND declarations and the licensability positions taken in litigation Summary judgment in FTC v. Qualcomm based on ATIS and TIA FRAND pledges
10:30 AM	Morning Coffee Break
11:00 AM	Patent Licensing: Implications for Business
	Seeking component-level licenses: experiences from the field Patent royalties in the IoT industry: an economics perspective
12:30 PM	Lunch
01:30 PM	The 2019 FTC v. Qualcomm Ruling: Key Holdings, Next Steps, Global Impact
	Judge Lucy H. Koh's findings of fact, conclusions of law, and remedial orders Procedural road map Consistent and conflicting earlier decisions by U.S. courts Could Judge Koh's reasoning be adopted under Art. 102 TFEU?
03:00 PM	Afternoon Coffee Break
03:30 PM	Antitrust Complaints Over Component-Level Licensing
	EU antitrust complaints over SEP licensing Continental antitrust lawsuit against Avanci
04:00 PM	Bonus Session: Access to Injunctive Relief
	Evolution of national case law on SEP injunctions since Huawei v. ZTE The proportionality requirement under the EU enforcement directive State of play in the German patent reform debate
05:00 PM	Reception

Again, the signup page is https://www.eventbrite.com/e/component-level-sep-licensing-tickets-74853834835.

In May I had already written about this idea. After further thought--and discussions that led, among other things, to the inclusion of the "bonus session" on injunctive relief--the conference program took its current shape. Brussels, the de facto capital of the EU, turned out to be the most logical location for the European edition of this conference.

Component-level licensing is presently the single hottest topic relating to standard-essential patents (SEPs). I stepped forward a few months ago because I thought the time was ripe for a conference that would focus on this aspect of SEP licensing. I look forward to welcoming many of you on November 12, and to interesting presentations and discussions!

For questions relating to the conference, please don't hesitate to contact me at fosspatents@gmail.com.

Follow @FOSSpatents

Share with other professionals via LinkedIn:

Share|

Qualcomm makes "more equal than others"-like argument in Ninth Circuit appeal of Judge Koh's summary judgment on chipset licensing of SEPs

Component-level (including, but not limited to, chipset-level) licensing of standard-essential patents (SEPs) is the hot topic for the technology industry, especially in the Internet of Things era, for its standard-setting organizations, for regulators, and--increasingly--for Article III courts in the U.S. and their counterparts in other jurisdictions.

Approximately four months ago, I announced my plans to organize conferences on this subject on both sides of the Atlantic. Here's an update on those plans before discussing the subject in connection with Qualcomm's Ninth Circuit appeal of the FTC's antitrust win in the Northern District of California:

• In a couple of days, registration will begin for FOSS Patents' Brussels conference on November 12, 2019 at the Sofitel Le Louise. I will publish the detailed conference program--we'll cover the legal, regulatory, policy, economic, and technical aspects--and registration links in a very few days.

• I had also said there would be such an event in the San Francisco Bay Area. I can't go into specifics regarding the latter. Suffice it to say that there will soon be a related announcement for mid-January, and you'll read about it on this blog, too.

Now, back to Qualcomm's antitrust appeal. On August 24, the San Diego-based chipmaker won a stay (for the duration of the appellate proceedings) of the injunction Judge Lucy H. Koh had issued. Later that day, Qualcomm filed its opening brief. A week later, the DOJ and various other Qualcomm allies filed their amicus curiae briefs.

Judge Koh had identified two different legal bases on which Qualcomm has an obligation to extend chipset-level SEP licenses on FRAND terms to its rivals:

• The first section of Qualcomm's appellate opening brief addresses the antitrust duty to deal. As a follow-up to my analysis (which agrees with Qualcomm on two key issues, but disagrees on everything else as well as on the ultimate conclusion), I discussed the subject of compulsory patent licensing.

• But about a year ago, Judge Koh had also granted the FTC summary judgment on the question of whether Qualcomm's FRAND pledges to two U.S. standard-setting organizations--ATIS and TIA--created an obligation to license rival chipset makers.

  Qualcomm wants that part overturned as well, and is tackling it in the fifth and final section of its Ninth Circuit opening brief. The remainder of this post will discuss that particular section.

Qualcomm's procedural objective is for the November 2018 summary judgment to be vacated. In that case, the district court would have to consider all sorts of evidence Qualcomm would like to present. I'm sure that in the hypothetical event of a remand for this purpose, Qualcomm would again appeal any finding in the FTC's favor, but for now, Qualcomm firstly wants a second bite at the apple--possibly also hoping to just settle the case with the FTC in that scenario.

I don't recall whether this was Qualcomm or one of its allies, but someone had even made a jurisdiction-related argument in recent months, according to which the FTC's summary judgment motion on a matter of contract interpretation was out of place in an antitrust case. Qualcomm's Ninth Circuit opening brief doesn't say that, however.

Qualcomm does not--as it could not--argue that the language of those ATIS and TIA FRAND declarations unambiguously rules out chipset-level licensing. Instead, the common denominator of Qualcomm's attack vectors against the summary judgment decision is that there was extrinsic evidence that the district court allegedly failed to consider. Such evidence would be partly technical (related to whether or not a baseband chip practices and implements a cellular standard), partly related to other SEP policies (ETSI--which would raise questions under French law--and ANSI) that Qualcomm says the ATIS and TIA FRAND declarations must be compatible with, and partly about industry practice and, closely related to that one, the industry's understanding of SEP licensing obligations.

Qualcomm engages in hair-splitting when it says, after conceding "that some modem chips infringe some Qualcomm SEPs," that "infringement of a patent does not determine what 'implements' or 'practices' an ATIS or TIA standard," which Qualcomm argues are two "legally and factually distinct" questions. However, the definition of a SEP is that it's inevitably infringed by implementing the relevant standard. Theoretically, one can also infringe a SEP without practicing or implementing any standard it's been declared essential to--but the reason those modem chips do infringe is because they do just that.

The argument that only complete devices can implement an entire standard ignores that the modem chip in a smartphone is simply the mastermind that controls all of the technical operations and functions that make the device as a whole standards-compliant.

Qualcomm's #1 vulnerability is that virtually the entire industry testified at trial that Qualcomm insists on license grant-backs that exhaustively licenses Qualcomm's baseband chips. Qualcomm tries to explain this dual standard away now by stressing that it "has received incoming cross-licenses pursuant to outgoing licenses it has granted to OEMs that manufacture complete cellular devices," and "patent holders will not grant outbound portfolio-wide licenses while leaving themselves exposed to opportunistic claims of infringement by their licensees."

What Qualcomm seeks to portray as a perfectly reasonable kind of symmetry is actually a massive asymmetry. The asymmetrical effect is that the customers of Qualcomm's baseband chips are covered (thanks to exhaustion) with respect to patents held by the likes of Samsung (which is also a chipmaker, not only a device maker) and Ericsson (which makes network infrastructure, not handsets at this stage), while no one can buy a chipset and be covered with respect to Qualcomm's patents. Even buying a Qualcomm chipset doesn't ensure this because Qualcomm (never mind that notion called patent exhaustion) will collect a patent royalty on top of the selling price of the chip.

What's good for the goose is good for the gander. If others are required to grant exhaustive chipset-level SEP licenses to Qualcomm, it can work the other way round as well. But Qualcomm's Orwellian logic is that all patent holders are equal, and one--Qualcomm--is more equal than all others.

If the Ninth Circuit figures this out, Qualcomm will have a huge credibility problem. That wouldn't be formally dispositive, of course, but it wouldn't help them.

Follow @FOSSpatents

Share with other professionals via LinkedIn:

Share|

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'être:

"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.

Follow @FOSSpatents

Share with other professionals via LinkedIn:

Share|

Macabre Qualcomm-internal presentation used tombstones to illustrate competitors' exits from mobile chipset market

In a medical context, "to exit" means "to die." That particular meaning of the word appears to have served as inspiration for somebody at Qualcomm who made the macabre design choice to depict the exits of key competitors from the mobile chipset market (Freescale in 2008, ST Ericsson in 2010, Texas Instruments in 2011, Broadcom in 2012, and Nvidia in 2014) as a graveyard at the bottom of a chart with tombstones to the left and right (click on the image to enlarge; this post continues below the image):

The document was highlighted yesterday by MediaTek's amicus curiae brief in support of the FTC's opposition to Qualcomm's motion to stay the enforcement of the FTC's antitrust remedies (this post continues below the document):

19-07-25 MediaTek Amicus Br... by Florian Mueller on Scribd

A MediaTek executive was also a key witness earlier this year in the FTC v. Qualcomm antitrust trial in the Northern District of California. MediaTek, which competes with Qualcomm mostly in the lower-priced market segment, "sells more than 1.5 billion semiconductor chips per year powering cell phones, tablets, voice assistant devices, smart TVs, and media players." Qualcomm's lawyers and expert witnesses sometimes point to the fact that MediaTek succeeded in a certain part of the market in an effort to blame other companies' problems just on their own decisions and execution.

MediaTek's brief focuses on Qualcomm's obligation to extend an exhaustive SEP license on FRAND terms to rival chipset makers. MediaTek argues (and I agree) that it's in the public interest for Qualcomm to begin meeting that obligation sooner rather than later.

The law firm representing MediaTek here is Boies Schiller & Flexner, which also represented Apple against Qualcomm. Boise Schiller's William Isaacson, the American Lawyer Litigator of the Year 2016, was spotted at the FTC v. Qualcomm trial in San Jose in January every single day.

Also yesterday, Qualcomm filed its optional but expected reply brief to the FTC's opposition to the motion to stay enforcement. I've uploaded it to Scribd and will write about it later today, or over the weekend.

A decision to allow various interventions was made a few days ago by the following three Ninth Circuit judges: Judge Mary M. Schroeder, Judge William C. Canby, and Judge Morgan B. Christen. Senior Judges Schroeder and Canby are Carter appointees; Judge Christen was appointed by Barack Obama. At first sight there's no reason to believe that these judges are going to be exceedingly sympathetic to the Trump Administration officials supporting Qualcomm. It wouldn't help Qualcomm either if the panel became aware of any of the various op-eds authored by Qualcomm shills and allies describing FTC v. Qualcomm as "an Obama case."

Follow @FOSSpatents

Share with other professionals via LinkedIn:

Share|

In response to Qualcomm's motion to stay FTC's antitrust remedies, industry body says DOJ antitrust chief has "aspirational policy positions"

Over the course of the last 14 months, U.S. Antitrust AAG (Assistant Attorney General) Makan Delrahim has been mentioned here on half a dozen occasions, most of which were directly--and some of them at least indirectly--related to his tireless advoacy on his former client Qualcomm's behalf (1, 2, 3, 4, 5, and 6). In the second one of those posts, I quoted an article (PDF) according to which Mr. Delrahim's positions "lack legal support" and are simply "out of sync with a large and growing body of US case law" on such issues as injunctive relief and FRAND royalty rates.

In an amicus curiae brief filed last week to support the FTC's opposition to Qualcomm's motion to stay the enforcement of antitrust remedies, ACT | The App Association described that lack of legal support and desynchronization with case law as follows:

"[...] Mr. Delrahim expressly desires to change Supreme Court precedent, whereas the district court and this Court are required to apply existing law. Notably, AG Barr, in sworn testimony to the FTC, has also voiced views and 'theories' contrary to Mr. Delrahim's aspirational policy positions." (emphasis in original)

That's a diplomatic way of saying that the man who is often referred to as "U.S. antitrust chief" (though the Federal Trade Commission is safely outside his sphere of influence, which is why he's resorting to amicus briefs) has an agenda of swimming against the judicial tide in the FRAND/SEP context.

Not only is Mr. Delrahim at loggerheads with the case law but most industry players disagree with him. ACT says in its filing that "[t]he companies and associations that have joined [ACT | The App Association] in efforts to curtail SEP abuses represent over $100B annually in R&D spending across a range of industries, own hundreds of thousands of patents (including SEPs), employ 50 million+ Americans, and contribute trillions of dollars to annual U.S. GDP." (emphasis in original)

As to Mr. Delrahim allegedly "expressly desir[ing] to change Supreme Court precedent," I've looked up the speech ACT is referring to. What he said is a bit more nuanced. He argued that the Supreme Court "has not yet commented on [a particular] issue," though he did concede that "[i]n a handful of cases, the U.S. Supreme Court has recognized that there can be antitrust liability for collusive activity that manipulates the standard-setting process to gain an advantage over rivals," and "recognizes that concerted action among implementers or innovators at the same level of the supply chain could constitute an antitrust violation." But, in general, ACT is right that Mr. Delrahim's approach to SEP-related legal questions is that he'd rather make new law than just live with the existing one.

Not only in this context but generally speaking, the ACT's filing complement and reinforces the FTC's opposition brief to Qualcomm's motion, lodged with the Ninth Circuit after an endeavor to the same end failed in Judge Koh's court, for an enforcement stay. Where the FTC stays true to its low-key tone, the ACT is far more combative and directly points the appeals courts to some striking contradiction and inconsistencies between what Qualcomm and its amicis are saying now and what Qualcomm has said and done before, including that "[Qualcomm] even sued a rival chipmaker for breach of FRAND based on the rival's refusal to license [Qualcomm]." (emphasis in original) The ACT brief also notes that Qualcomm Technology Licensing's current president, Alex Rogers, said the following more than a decade ago (he was a vice president at the time): "Saying [Qualcomm] refuse[s] to license competitors is like saying McDonald's refuses to sell hamburgers [...] It's nuts. It's crazy."

With respect to the public interest, Qualcomm's allegations of irreparable harm, and the strategic interests of an amicus like Ericsson, the ACT brief is direct and forceful where the FTC is rather low-key. When it comes to the merits, however, the FTC's brief does a really great job defending Judge Lucy H. Koh's ruling. In a recent post I already took the position that it doesn't make sense that a refusal to deal can only constitute an antitrust violation if it's bad for short-term profitability. The FTC cites to a Third Circuit decision, ZF Meritor LLC v. Eaton Corporation, that explains this very well. Let me quote that one more extensively than the FTC (facing page limits) did, but not without pointing out that the specific context here was exclusive dealing, which is also an issue in the FTC v. Qualcomm case but not relevant to the motion for an enforcement stay:

"Although the Supreme Court has created a safe harbor for above-cost discounting, it has not established a per se rule of non-liability under the antitrust laws for all contractual practices that involve above-cost pricing. See Cascade Health Solutions v. PeaceHealth, [...] (9th Cir. 2007) (stating that the Supreme Court's predatory pricing decisions have not 'go[ne] so far as to hold that in every case in which a plaintiff challenges low prices as exclusionary conduct[,] the plaintiff must prove that those prices were below cost'). Nothing in the case law suggests, nor would it be sound policy to hold, that above-cost prices render an otherwise unlawful exclusive dealing agreement lawful. We decline to impose such an unduly simplistic and mechanical rule because to do so would place a significant portion of anticompetitive conduct outside the reach of the antitrust laws without adequate justification.

"'[T]he means of illicit exclusion, like the means of legitimate competition, are myriad.' Microsoft, [...] ('Anticompetitive conduct can come in too many different forms, and is too dependent on context, for any court or commentator ever to have enumerated all the varieties.') [...]"

Qualcomm has the right to file an optional reply brief, and I guess it will. At that point, or on some other occasion should there surprisingly be no reply brief, I'll go into more detail on some of the theories. Below please find the FTC filing as well as the ACT's high-energy and high-value amicus brief:

19-07-18 FTC Opposition to ... by Florian Mueller on Scribd

19-07-19 ACT the App Associ... by Florian Mueller on Scribd

Follow @FOSSpatents

Share with other professionals via LinkedIn:

Share|