DOJ downgrades Delrahim letter to IEEE on standard-essential patents: inter-agency rapprochement with FTC on SEP enforcement?

The language of diplomacy and other governmental communications is very nuanced, like the British Queen's spokespersons saying she's "not amused" when she's actually outraged. The Antitrust Division of the United States Department of Justice ("DOJ-ATR") has taken this concept to a higher level. In what could be described as a digital form of body language, the Biden Administration's DOJ has unequivocally dissociated itself from the Trump Administration's position on standard-essential patent (SEP) enforcement without saying or writing a single word: just by relegating a link to a document (with the PDF remaining in the same place as before) to a long list of links that is, for the most part, merely an archive. Parts of that archive are little more than the dustbin of DOJ-ATR history.

Look at it this way: if a colleague of yours had a picture of her sweetheart on his desk, but all of a sudden decided to put it into a dark storage room, wouldn't that tell you something?

On September 10, 2020, less than two months before the election Donald Trump lost, Qualcomm-aligned Antitrust Assistant Attorney General Makan Delrahim tried to use his remaining time in office--he was going to leave anyway, and he knew what the polls said--tried to deal one final blow to net licensees of SEPs. He supplemented, updated, and appended the DOJ-ATR's 2015 Business Review Letter (BRL) to the Institute of Electrical and Electronics Engineers (IEEE). An IEEE standard all of us use in our everyday lives is WiFi (IEEE 802.11). IEEE has been a strategically important forum at the forefront of how standard-setting organizations could set more specific rules governing SEP enforcement than, for example, ETSI, whose FRAND pledges (which must be interpreted under French law wherever in the world they are enforced) come with a lack of clarity that is fully intended (though some interpretations are still clearly less reasonable than others).

Mr. Delrahim's BRL 2.0 was meant to make the IEEE change course by giving companies like Qualcomm--which in all fairness is a tremendous WiFi innovator--ammunition for IEEE-internal discussions. Qualcomm executives publicly predicted on various occasions that the IEEE was going to make its rules more patentee-friendly under pressure from the federal government. Last month, MLex's Khushita Vasant reported on a recent clash between Qualcomm, Apple, Huawei, and other companies at an IEEE patent policy meeting. It was a clash between the progressives like Apple--who wanted to continue on the path of setting implementer-friendly rules--and those seeking a revision, led by Qualcomm.

What I mentioned at the start of this post obviously doesn't apply to the Trump Administration. Mr. Delrahim's letter to IEEE suggested that the Obama Administration's 2015 BRL to IEEE had been misinterpreted. But Mr. Delrahim also disparaged his predecessor's work by claiming that "[t]he Department's assessment in 2015 of the 'direction' of U.S. law interpreting FRAND commitments on royalty rates and damages assessments was not well-supported and has not proven accurate."

In late March, I was wondering whether the DOJ and the FTC would continue to fundamentally disagree on the application of antitrust law to SEP abuse, given that the FTC didn't seek a Supreme Court review of the Ninth Circuit's FTC v. Qualcomm ruling and mentioned its coordination with the DOJ. But that was just a question, not speculation. Also, the Solicitor General would have had to represent the FTC before the Supreme court, not DOJ-ATR.

Apparently, the Biden Administration is inclined to undo at least some of Mr. Delrahim's SEP policy initiatives. The full extent will become clearer with time. But it's already certain that change has come to DOJ-ATR.

Currently, DOJ-ATR is being run by Acting Assistant Attorney General Richard Powers. Just like we've recently seen quadruple-antisuit injunctions, which I abbreviate as A4SIs and others as AAAASIs, Mr. Powers has a quadruple-A title: he's the Antitrust Acting Assistant Attorney General. What an alphabet soup.

Mr. Powers could have done his own "update" to the 2020 Delrahim letter. That update could simply have stated that the 2020 letter was an aberration, and the 2015 letter was in full force and effect again. But doing so would have required a communication style closer to that of the Trump Administration.

That's where the hierarchical structure of the DOJ-ATR website came in handy. There's one section where one can find the currently valid BRLs. From that one, Mr. Delrahim's letter has been silently removed. His letter to the Avanci patent pool is still there, and it remains to be seen what--if anything--will change in that context. But the 2020 IEEE letter is no longer there. The 2015 BRL to IEEE can still be found on that page. That makes it the one that currently counts.

The original and now-restored BRL tends to strengthen those favoring component-level SEP licensing.

The Delrahim letter to IEEE is now on the page listing "comments to state and other organizations". That page is hidden deep down in the hierarchical structure of the DOJ-ATR website. The dark storage room I mentioned further above.

This move has been clearly interpreted by the tech industry. Cisco's Senior Director, Antitrust and Competition, Gil Ohana, replied to a tweet of mine that this marked the "end of an error":

The end of an error.

— Gil Ohana (@Gilohana) April 15, 2021

A nice wordplay. Few people in California would refer to the Trump years as an "era" not only because #45's reelection bid failed but also for substantive reasons.

But let's also be realistic that there'll be a lof of wrangling over SEP issue now. The downgrade of the Delrahim letter to IEEE is a significant first step.

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Dallas-based federal judge dismisses Continental's antitrust complaint against Avanci, Nokia, Sharp, and some patent trolls

After Judge Lucy H. Koh of the United States District Court for the Northern District of California granted a motion by the Avanci patent pool to transfer Continental's antitrust case over component-level licensing to the Northern District of Texas, I stopped following the case. Meanwhile, the complaint was amended once, but on Thursday, Chief United States District Judge Barbara Lynn dismissed the entirety of the first amended complaintwith prejudice (this post continues below the document):

20-09-10 Order Dismissing C... by Florian Mueller

The first hurdle for Conti's complaint was Article III standing and ripeness. Judge Lynn did not consider the mere possibility of car makers like Daimler seeking indemnification from Continental to satisfy the ripeness requirement:

"Plaintiff does not allege in the FAC that any OEMs with which it has entered into indemnity agreements have been or will likely be forced to take a non-FRAND license from Defendants. Plaintiff also does not allege that those OEMs will, or even can, pass the costs of those licenses onto Plaintiff through indemnity obligations."

As a litigation watcher I'm in a position to say that Nokia and Sharp (who are among Avanci's co-defendants) are definitely trying hard, through the pursuit of standard-essential patent (SEP) injunctions in Gemany, to coerce Daimler into a license agreement. But I can also understand that the district court would have wanted to see something more than a merely hypothetical possibility of indemnification claims arising from certain Avanci members' unwillingness to license component makers.

What isn't even mentioned in the decision is the fact that Sharp has meanwhile licensed Huawei, which in turn also benefits Continental, but in and of itself shows that

• Sharp, unlike Nokia, is willing to extend exhaustive component-level licenses, and

• the existence of the Avanci pool indeed doesn't prevent such license deals from being concluded.

The Dallas-based court nevertheless found that Continental had Article III standing on the basis of its allegation that the defendants refused to grant Conti a license. But with indemnification no longer being part of the consideration in the further analysis, the next problem Conti's complaint faced (after easily overcoming the Foreign Trade Antitrust Improvement Act hurdle with respect to foreign patents) was that, in Judge Lynn's opinion, "[t]he anticompetitive conduct allegedly directed at the downstream OEMs does not create an antitrust injury for the upstream TCU suppliers, like Plaintiff." Instead, the court held that OEMs (i.e., car makers in this context) would be the correct parties to complain.

I understand the court's rationale, but I struggle with the result as I find it hard to imagine how a car maker like Daimler could bring an antitrust complaint to the effect of requiring a SEP holder like Nokia to license its suppliers. Daimler could, as it does in Germany, raise an antitrust affirmative defense to infringement cases on that basis. But it's hard to understand how and why the would-be willing licensee (here, Conti) "is not the best entity to bring this antitrust action to vindicate the injury alleged" (which alleged injury, as explained before, was recognized by the court with respect to the refusal to license Conti).

The court's dismissal with prejudice (meaning that Conti can appeal this to the Fifth Circuit, which as the decision notes has limited case law on SEPs, but it's game over in district court now, short of successful defibrillation) is additionally based on a complete disagreement with Conti's federal antitrust theories under the Sherman Act. I'm a frequent critic of Antitrust Assistant Attorney General Makan "Macomm" Delrahim's amicus brief and business review letter campaign favoring SEP abusers and even foreign patent trolls like the Softbank-owned Fortress group, but there's no denying that his activities are impactful. Between the lines of Judge Lynn's decision it's clear that the Justice Department's Antitrust Division strongly influenced the court's thinking and particularly persuaded the judge of the idea that SEP issues aren't really antitrust problems but should be resolved under other laws (contract law, patent law).

The DOJ's statement wouldn't have been needed, however, for the dismissal of Conti's theory that Avanci's members--contrary to what Avanci's contributor agreement actually says--engaged in parallel conduct to the effect of either not licensing component makers or doing so only at the same prices at which the Avanci pool licenses car makers. In this regard, Conti simply had no facts to allege. They wanted a fishing expedition, but by failing at this early stage of proceeding, Conti never got (and probably never will get) the chance to prove that the Avanci group is an anti-component-maker conspiracy.

After dismissing the federal antitrust claims, the court also exercised its discretion not to deal with state claims (contract or state competition law).

Assuming that Conti won't appeal or, more likely, the Fifth Circuit will affirm this dismissal in the event of an appeal by Conti, what does this mean for the automotive patent wars, and for the Avanci pool?

It merely means that a rather ambitious--almost long-shot--attempt by Conti to succeed with a novel attack vector failed.

Neither does this mean that anyone is now going to take an Avanci license as a result of that decision nor that key Avanci members such as Nokia couldn't still face antitrust liability--or simply lose patent infringement actions--over their conduct further down the road.

If Conti's complaint had succeeded, it would have been--depending on what analogy you prefer-- a hole in one or a lucky punch for the automotive industry at large against Avanci. But the automotive industry still has another option: simply to starve Avanci unless and until that pool agrees to grant exhaustive component-level licenses on FRAND terms.

In its current configuration, Avanci must be treated as troll. Don't feed the troll.

Avanci itself can't bring infringement actions. Only its members can--and some are already litigating against Daimler and Tesla. Car makers should just let those Avanci contributors sue, and then defeat them in court. Most of the time, the patents will be invalid or not actually standard-essential. When a patent is held valid and infringed at all, courts will have to adjudicate any FRAND defenses, be they based in contract law (which is how U.S. courts prefer to address the problem) or antitrust law (which is the European way, and the Dusseldorf Regional Court's upcoming referral of key component-licensing questions to the Court of Justice of the EU spells doom for Avanci's current business model). And sometimes the solution will come from negotiation rather than litigation, as Huawei's exhaustive component-level license to Avanci member Sharp's SEPs shows.

Avanci has been around for years, and it only has small-scale license agreements in place. From what I hear, the seemingly largest Avanci deal ever doesn't even include 4G patents. Avanci will be relieved to see the dismissal of Conti's U.S. antitrust action, but that decision doesn't solve a single one of Avanci's fundamental problems.

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Macomm Delrahim makes strides toward antitrust action against IEEE over its standard-essential patent policy: updated Business Review Letter

Emboldened by a Ninth Circuit panel's decision to overturn a district court's FTC v. Qualcomm antitrust ruling, Antitrust Assistant Attorney General Makan Delrahim--whom I call "Macomm" because he's a former and presumably future Qualcomm lawyer who has been unabatedly promoting Qualcomm's SEP enforcement agenda in his current office--updated (DOJ press release; supplemental letter (PDF)) the Justice Department's 2015 Business Review Letter to the Institute of Electrical and Electronics Engineers (IEEE) with respect to the DOJ's take on the IEEE's patent policy.

For ten years this blog has tried to provide original content, so rather than provide duplicative commentary, let me just point you to Professor Thomas Cotter's analysis (note the four items he specifically criticizes, "all of which are (in [Professor Cotter's] view) much more of an overstatement than the overstatement [AAAG Delrahim] claims to be correcting") and a 2018 paper by Professor Jorge Contreras on the way Mr. Delrahim changed the DOJ's focus in this context.

I'd just like to add a few thoughts and my opinion to the last two sentences of Professor Cotter's Comparative Patent Remedies blog post

"I would have thought that someone who believes in free markets would conclude that, if a private entity [here, the IEEE] adopts a policy that turns out badly [here, the IEEE patent policy that AAAG Delrahim claims unfairly disadvantages patent holders], that entity should have to suffer the consequences [here, the effects of discouraging innvotators from contributing to industry standards], rather than needing the guiding hand of the Antitrust Division to save it from itself."

The above sentence--to which I added various explanations as I didn't quote the passages leading to it--is a diplomatic way of telling Mr. Delrahim that he--a Republican president's appointee--isn't being a good Republican in the IEEE context...

Unfortunately, conservative talk radio hosts wouldn't ever discuss a topic as esoteric as SEP enforcement. At least a few academics and bloggers do.

"Or could this be a not-to[o]-subtle hint that, if Donald Trump wins re-election, IEEE could find itself in the agency's cross-hairs?"

I'll answer this question, which looks like a rhetorical one anyway: YES, that's what it is all about, in two ways:

• When reading the supplemental letter, I noticed multiple suggestions that the IEEE revise its patent policy to the effect of giving SEP holders more leverage in an enforcement situation and, as a result, in negotiations.

  I doubt that the IEEE will do so in the coming months. We're not even two months away from Election Day, after which Mr. Delrahim's days in office may be numbered.

  Mr. Delrahim presumably doesn't even expect its letter to persuade the IEEE. He just wants to be able to say, at the time of taking enforcement action, that he gave the IEEE one last chance to avoid an investigation. PR and politics are particularly important when doing something very controversial--and even more so, when doing something highly controversial against an extremely well-respected organization. Mr. Delrahim knows that when he announces the investigation he's preparing for, many of America's most innovative companies will side with the IEEE.

• The only outcome of an IEEE investigation led by Mr. Delrahim would be a holding that the IEEE's patent policy is "anticompetitive" in the sense of limiting SEP holders' ability to aggressively enforce their rights. The DOJ would have to sue the IEEE, and the previous Business Review Letter would have complicated any litigation. In court, the DOJ could have made the same argument as in its supplemental letter: the IEEE allegedly misrepresented the 2015 BRL as an "endorsement" of its patent policy. Regardless of whether an agency's decision not to take action against something is accurately called an "endorsement" (a question on which even reasonable people could fail to agree), the retraction of the 2015 letter is simply a necessary step with a view to what Mr. Delrahim undoubtedly has in mind.

If President Trump does it again, Mr. Delrahim will likely stay on, and then the IEEE knows what's going to happen, but fortunately the courts will decide.

In the other scenario, Mr. Delrahim could theoretically do what the outgoing Democratic majority of the Federal Trade Commission did in the last days of the Obama Administration by filing an action against Qualcomm. However, the difference is that an FTC action may continue (as one could see in the Qualcomm case) even after a presidential transition, while the DOJ would be 100% under the control of the new party in power. That's why such an investigation or litigation might be short-lived.

The updated BRL is disconcerting at any rate.

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Make Trolls Great Again: Antitrust Assistant Attorney General Makan Delrahim serves Patent Trolls, not President Trump

As the most vocal Trump supporter among intellectual property bloggers, I want Four More Years for #45, but should "Quid pro quo Joe" win, I would take some comfort in the fact that Antitrust AAG Makan "Macomm" Delrahim would have to return to private practice. His shameless and increasingly distasteful pro-patent-troll lobbying is a disgrace for the entire Donald J. Trump Administration. Instead of supporting America's innovation economy and protecting American consumers (all of which is even more important in the face of the coronavirus crisis), he's advancing an agenda that runs counter to the President's focus on creating jobs. Patent trolls are all about rent-seeking for a few shrewd businessmen--Judge Posner likened them to "highwaymen"--and don't create or sustain jobs; the real economy--with Apple and Intel being two particularly good examples--needs to be protected against patent abuse, but the United States now has an "antitrust chief" who couldn't care less about innovation, competition, jobs, and consumer welfare. He's a lobbyist for patent trolls--not because he's got any connection to trolls, but because his former and presumably future client, Qualcomm, shares many strategic interests with trolls, which is why Qualcomm is a member of pro-troll lobbying groups whose membership consists mostly of trolls.

Last month, probably for the first time in U.S. history, the federal government threw its weight behind a dubious foreign organization against two of America's most innovative companies. The DOJ's antitrust division filed a Statement of Interest (i.e., an amicus curiae brief in the name of "the United States") supporting Fortress and its various patent trolls, such as Uniloc, against Apple and Intel. The Uniloc group (just one part of foreign-owned Fortress's holdings) has brought about 600 (!) lawsuits, and courts have exposed some its lies. Just two examples--the first one is about Uniloc's connection to the Eastern District of Texas, which they made up in part just to keep a lawsuit there:

"Mr. Burdick, Uniloc's only party witness residing within the Eastern District of Texas, does not spend the majority of his time in the Plano office. [...] Mr. Burdick spends equally as much time in Plano, as he does in Boise, Idaho and in southern California. [...] In addition, Mr. Etchegoyen [the CEO of Uniloc Luxembourg] spends about twenty percent of his time in either Newport Beach or Irvine, California and owns a residence in Newport Beach, which he uses when he 'is doing business in Orange County.' [...] Both Mr. Burdick and Mr. Etchegoyen have held around one hundred 'top-level strategy meetings' in southern California, for Uniloc business purposes. [...] Mr. Etchegoyen separately travels to southern California every month to meet with Mr. Turner, Uniloc Luxembourg S.A.'s CFO. [...] All of these facts fly in the face of Uniloc's prior representations: that Uniloc had only one full-time employee, Tanya Kiatkulpiboone, working at its office in Irvine, California as of April 2017 [...]; that Mr. Etchegoyen has lived in Hawaii since well before the filing date of the Complaint and does not maintain a residence in California [...]; and that Mr. Burdick does not work in California [...] ; and that Apple 'attempts to exaggerate Uniloc's ties to California'" (emphasis added)

Source: Memorandum Order and Opinion at 16-17, Uniloc USA, Inc. v. Apple Inc., No. 2:17-cv-00258 (E.D. Tex. Dec. 22, 2017)

A judge also suspected that Uniloc creates shell entities only for the purpose of letting them go bankrupt in case a prevailing defendant obtains an award of legal fees:

"The Court suspects that Uniloc's manipulations in allocating rights to the patents-in-suit to various Uniloc (possibly) shell entities is perhaps designed to insulate Uniloc Luxembourg from any award of sanctions in the event Uniloc loses this litigation (or some substantial part thereof)." (emphasis added)

Source: Uniloc 2017 LLC v. Google LLC, No. 2:18-cv-00553 (E.D. Tex. Jul. 1, 2019), Dkt. 28 Exhibit V

When a company--particularly a foreign organization--engages in such shady practices, "the United States" (federal government) should not intervene--much less at the district court level--to support that kind of party. But "Macomm" Delrahim is out of control, and Attorney General Barr may not even be aware of what's going on (and, especially, going wrong).

Apple and Intel have replied to the DOJ's brief, but not on the basis of the issues I just raised. The purpose of Apple and Intel's submission is to point out some major inconsistencies

• between positions taken by the DOJ in the past in similar contexts and the pro-foreign-troll anti-American-innovators brief filed last month;

• between the DOJ's current merger guidelines and the position taken in the pro-foreign-troll anti-American-innovators statement; and

• even between two sections of that pro-foreign-troll anti-American-innovators submission (which is just absurd and shows that the DOJ's Antitrust Division is now only seeking to support certain types of parties as opposed to defending overarching principles).

On the first part of Apple and Intel's responsive filing, a footnote provides examples of AAG Delrahim's "expanded amicus program through which the Department increasingly files amicus briefs":

• Motion for Leave to File Statement of Interest, Continental Automotive Systems, Inc. v. Avanci, LLC, No. 3:19-CV-02933-M (N.D. Tex. Feb. 27, 2020);

• Statement of Interest of the United States; Lenovo (United States) Inc. v. IPCOM GMBH & CO., KG, No. 5:19-CV-01389-EJD (N.D. Cal. Oct. 25, 2019); and

• Notice of Intent to File a Statement of Interest of the United States of America, U-Blox AG v. Interdigital, Inc., No. 3:19-CV-0001-CAB (BLM) (S.D. Cal. Jan. 11, 2019.

The Apple-Intel brief doesn't even mention the DOJ's interventions on Qualcomm's behalf, but Qualcomm is not a troll. In the three cases listed above, the DOJ supported trolls (Avanci is a pool/platform company, some of whose members are trolls).

Whatever Judge Edward Chen ultimately decides, Apple and Intel's reply may have helped to mitigate the impact of the DOJ's Statement of Interest. But Mr. Delrahim will likely continue to make such disgraceful and distateful filings with courts all across the United States, unless and until he gets replaced.

Finally, here's the Apple-Intel brief:

20-04-13 Apple Intel Respon... by Florian Mueller on Scribd

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YOUR TAX DOLLARS AT WORK: Justice Dept. defends foreign-owned patent trolls against Apple and Intel

Apple and Intel--two American high-tech icons--are suing Softbank-owned Fortress Investment on antitrust grounds in the Northern District of California. Their complaint admittedly raises legal questions of first impression. Fortress brought a motion to dismiss the complaint just on the basis of the legal theories it is based upon. Apple and Intel obviously oppose that motion.

Over the last couple of days, various parties filed amicus curiae briefs with the court. Apple and Intel are notably supported by

• Unified Patents, CableLabs, Patreon, and Bitmovin;

• the Fair Standards Alliance (whose members include many major information & communications technology as well as automotive companies); and

• the R Street Institute, the Center for Democracy & Technology, Public Knowledge, Engine Advocacy, and the Electronic Frontier Foundation (while that brief is formally filed in support of neither party, it does side with Apple and Intel on the only subissue it addresses, which is the market power that even weak patents--due to the difficulties in getting them invalidated--confer upon their owners).

But Fortress has an ally that you wouldn't expect to back a foreign-owned patent troll group trying to extract money from some of America's greatest tech companies (having filed dozens of lawsuits against the likes of Apple, Google, and by extension, Intel): the United States Department of Justice, claiming to speak on behalf of the United States (i.e., the federal government).

Makan "Macomm" Delrahim, a former Qualcomm lawyer and now the Assistant Attorney General heading the DOJ's Antitrust Division, stops at nothing in his tireless efforts to help patent holders maximize their returns at the expense of the wider economy and actual innovation (this post continues below the document):

20-03-20 Statement of Inter... by Florian Mueller on Scribd

Mr. Delrahim and his subordinates' submission supports Fortress with respect to the claims brought by Apple and Intel under federal antitrust law. The fact that Fortress is Japanese-owned doesn't mean that the DOJ couldn't have good reasons for supporting them: it's about fundamental legal questions that also affect American patent holders. The real issue here is that even if Fortress were American-owned, it would simply be irreconcilable with the America First philosophy to back hyperagressive patent trolls (who sometimes bring dozens of lawsuits against just one defendant such as Apple or Google).

It's shocking, and I wanted to share the news. In a future post I may go into detail on the motion to dismiss (possibly after Fortress's reply brief). The case is still on my watchlist.

The ongoing coronavirus crisis--in which Fortress was about to prevent essential research, but then backtracked under public pressure, while Apple offered a major contribution--is not going to go away anytime soon. Short of a vaccine or effective and reliable cure, many restrictions will remain in force for some time, and many people's lives won't return to normal. The damage that virus is causing to the global economy is beyond belief. Governments around the world will soon face an ecomomic policy challenge of unprecedented proportions. For a swift recovery, it's advisable to support product-making and service-providing companies (like Apple, Intel, and Google) against patent trolls like Fortress and its numerous shell companies who just siphon off money from those who create many jobs. The real economy needs to highlight that simple fact to President Trump and his closest advisers. Enough is enough.

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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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FTC to Ninth Circuit: Qualcomm "abandoned" national security argument by failing to introduce evidence

This is a follow-up to yesterday's post on the Federal Trade Commission's answering brief to Qualcomm's opening brief on appeal. Before talking about another aspect--national security--I'd like to share some further thoughts about the FTC's right-for-the-wrong reasons strategy.

I believe a private party would have been fairly likely to defend Judge Lucy H. Koh's ruling on either ground: her Aspen Skiing approach and the FTC's Third Circuit Broadcom logic. That's because private parties--and especially their counsel--try to leave no stone unturned. It would have been possible for the FTC to argue that the Aspen Skiing standard is too high, but that it's met regardless if one makes a certain effort to shoehorn this case into that pattern (by arguing that Qualcomm might not have known what it was doing when it temporarily granted exhaustive licenses to chipset makers, but it didn't do so involuntarily). But it appears that the FTC's litigation team felt it was prudent to focus completely on a Third Circuit precedent that the Ninth Circuit doesn't have to, but may very well adopt. The fact that Qualcomm won a (partial) stay of the injunction likely played a role here. At the stay stage, the FTC didn't attempt to defend the Aspen Skiing reasoning (as Qualcomm noted in its reply brief), but now it's clear that the FTC is rather confident that the summary judgment on contract interpretation regarding licenses to rival chipset makers will stand (that's a precondition now for the chipset licensing-related antitrust theory), and is more optimistic that the Ninth Circuit will agree with the Third Circuit.

Maybe some amici curiae will still defend the chipset licensing part of the district court's ruling. But the focus is now going to be on what the FTC has chosen as its appellate strategy for chipset licensing. As I wrote yesterday, it comes down to viewing the FRAND licensing commitments that participants in standard-setting enter into as a cartel remedy, and the fact that there already is a remedy in place under competition law then lowers the hurdle for finding non-compliance to be an antitrust violation (not every non-compliance, but under certain conditions).

The likelihood of this case going all the way up to the Supreme Court (where Oracle v. Google has finally arrived, by the way) has just increased. Should the Ninth Circuit decide along similar lines as the Third Circuit, Qualcomm will point to other circuits (such as the Fifth Circuit) to argue there's a circuit split. The FTC could argue the same if it had to appeal, but whether the FTC, given its internal stalemate, could actually bring an appeal is another question.

What helped Qualcomm tremendously when seeking a stay from the Ninth Circuit was the national security argument that the Antitrust Division of the Department of Justice--run by a former Qualcomm lawyer--stressed. Statements by officials from the Department of Defense and the Department of Energy were attached to the DOJ's filing.

It's hard to think of a more important factor in the public-interest context of an injunction than national security. It's a big term. But here it rings hollow. It's a non sequitur.

The FTC case has the potential to reduce Qualcomm's margins, but not to render it unprofitable. The security concern relates to Qualcomm's chips, not patents (a patent can't be secure or insecure, but an embodiment of an invention can be). So Qualcomm would have to lose such a huge part of its revenues that it couldn't be competitive in the chipset business (where it's currently the undisputed leader).

In its intragovernmental quarrel with the DOJ's Antitrust Division, the FTC points to the DOJ Antitrust Division's poor timing: just like a request for a separate hearing on remedies was made months after the trial, the DOJ also raised those national-security concerns late in the game.

According to the FTC, "Qualcomm alluded in passing to national security in a pretrial filing, it introduced no evidence on the topic," which is why the FTC says Qualcomm "abandoned it."

Qualcomm simply couldn't have shown that the viability of the company was at stake, much less in light of its financials. The FTC says in a footnote what it noted on at least one prior occasion: "Qualcomm spends more on stock buybacks and dividends than it does on R&D. [...] (showing 2015-2017 R&D of $16.13 billion versus combined stock buybacks and dividends of $25.63 billion)."

Qualcomm's (and its Antitrust Assistant Attorney General friend's) "national security" strategy is not about rules of procedure or economic logic. It's all about diverting attention away from the merits and, more than anything else, about politicizing what should be a straightforward matter of competition law.

It worked for Qualcomm at the stay stage: a motions panel with a conservative majority explicitly placed a lot of emphasis on the Administration's input. Now they hope it will help again--or, at the latest, when this matter reaches the Supreme Court.

When politics is the name of the game Qualcomm is trying to play, who cares about whether an argument was presented to the district court in time? Who cares about evidence, or abandonment as a result of not introducing evidence? It's all just about influencing the judges. The FTC makes a compelling argument that there's no substance to Qualcomm's national security concern, and that there's a strong public interest in competition enforcement. As the FTC recalls, competition also works wonders for product quality, so having more than one U.S. baseband chipset maker is ultimately also the best-case outcome for national security. I hope the Ninth Circuit will see through the "national security" smokescreen, and not be swayed by it when adjudicating the antitrust issues before it.

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USPTO Director Iancu looking to fix standard-essential patents policy that just ain't broke

Four weeks ago, USPTO director Andrei Iancu gave a keynote address at a Brussels conference on standard-essential patents (SEP) strategy. That event, organized by commercial conference organizer Premier Cercle, covered a wide range of SEP-related topics (unlike my upcoming conference, which is focused on the #1 hot-button issue, component-level licensing).

After explaining the importance of standards, Director Iancu recalled the 2013 joint statement with the USPTO on SEP remedies. Mr. Iancu, without attributing this view to any particular organization or person, said that the 2013 policy statement has been interpreted "as putting the thumb on the scale against injunctive relief for FRAND-encumbered standard essential patents in most cases." And he then mentioned the recent decision of the DOJ Antitrust Division, under Antitrust Assistant Attorney General Makan Delrahim, to withdraw their agency's support for that joint statement.

In that Brussels speech, Mr. Iancu repeatedly indicated that the 2013 policy might not give SEP holders as much leverage as he--a former patent litigator--would like them to have. While the USPTO had not and has not withdrawn its support for the statement yet, he said his agency was "now carefully studying the issue and discussing it internally, with [their] stakeholders, and with other relevant government agencies." He describes the possibility of a new policy in the hypothetical, but let's be realistic: he's not going to stick to the 2013 policy, and the question is just how radical (on a scale from "grossly unbalanced" to "extremist") its replacement will be.

Rutgers Law School professor Michael A. Carrier published a reply to Director Iancu's speech on Law360 (and SSRN) a few days ago. Professor Carrier diplomatically exposes Director Iancu's quest for balance as unwarranted, given that the 2013 policy statement already struck one between SEP hold-up on the one hand and delay tactics by unwilling licensees on the other hand. As the paper notes, the Federal Circuit even cited to that policy statement in a decision clarifying that injunctive relief was available to SEP owners in more situations than a district court had said.

That Law360 article is not the first call on Director Iancu not to join AAG Delrahim in disowning the 2013 policy statement. Earlier this year, an open letter by multiple stakeholders and groups (which I had previously linked to on two occasions) delivered the same message.

Those efforts aren't totally in vain, but the most one can hope for is that the new policy statement won't be totally outrageous, though chances are that it will be.

Messrs. Delrahim and Iancu represent almost precisely the same school of thought with respect to patent policy. There's only a difference in style. While Mr. Delrahim doesn't seem to care about coming across as rash, radical, and highly partisan (as former outside counsel to Qualcomm) and won't even refrain from utterly absurd initiatives such as suggesting that standard-setting organizations that seek to give meaning to FRAND might violate the antitrust laws (while SEP abusers don't in his view) or making an untimely filing in a court case reflecting ignorance of the record, Mr. Iancu is more concerned about perception. He's a more sophisticated pretender. Now he's pretending to be on a quest for balance. He sure isn't.

In his Brussels speech, European-born Mr. Iancu tried to portray himself as understanding both sides of the SEP negotiating table, and called himself "sensitive to the business realities of licensing--both in and out--patent portfolios," including FRAND-encumbered ones. I don't doubt that his former firm (which he'll presumably return to), Irell & Manella, also advised implementers of standards and defended alleged infringers. But I've usually seen them represent plaintiffs, and their page on IP litigation primarily touts their record and expertise in IP enforcement. They also have an IP transactions practice that focuses on the maximization of the value of IP portfolios--which is exactly Mr. Iancu's mission (make bad patents strong again).

Apart from focus, it's good for the IP litigation business when even bad patents are kept alive (take Mr. Iancu's PTAB guidelines for an example) or when even FRAND-pledged patents can be asserted aggressively in litigation, regardless of whether a given litigator is on the asserting or defending side in a given situation. They get paid either way.

I'd love to be wrong on this, but I'd be surprised if Mr. Iancu didn't simply agree with Mr. Delrahim on virtually every aspect of SEP enforcement, just that Mr. Iancu tries to mislead people to think that he's open-minded about it. He's a patent enforcement extremist, the proverbial fox in charge of the hen house, and even Professor Carrier's strong defense of the existing SEP policy statement sadly won't change Mr. Iancu's mind, I'm afraid.

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U.S. DOJ, Nokia, InterDigital, Dolby, 20 law profs among amici curiae supporting Qualcomm's Ninth Circuit appeal of antitrust ruling in FTC's favor

On Friday (August 30), one week after Qualcomm's opening brief in its Ninth Circuit appeal of Judge Lucy H. Koh's antitrust ruling in favor of the Federal Trade Commission as well as the Ninth Circuit's August motions panel's decision to grant Qualcomm a stay of two injunctive remedies, eight amicus curiae briefs were filed in support of Qualcomm--some officially claiming to support neither party, but practically all of them supporting Qualcomm's positions.

I'm not overwhelmed because neither the filers nor, at first sight, their views are a suprise. But inundated I do feel.

So far I've just commented on one part of Qualcomm's opening brief: its argument, with which I agree in two respects but not in all others, against the component-level licensing obligation. I'm going to do a follow-up to that one because I've concluded that SEPs really are subject to compulsory licensing, as they already were in Germany a long time ago under the Orange-Book-Standard doctrine there, and I found an interesting old U.S. case where the DOJ imposed a compulsory-licensing obligation on a patent holder. But before I even got there, much less found time to address the other parts of Qualcomm's opening brief, there's been that flood of amicus curiae briefs.

Let's start with the one that will bear most weight with the judges based on the submitter--the Antitrust Division of the Department of Justice (DOJ) filed an amicus brief on the United States' behalf (this post continues below the document):

19-08-30 DOJ acb by Florian Mueller on Scribd

Once again, Antitrust Assistant Attorney General Makan Delrahim's division is doing his former client a favor. In addition to backing Qualcomm's core positions on the merits, the DOJ argues that even if any liability finding was affirmed, the United States Court of Appeals for the Ninth Circuit should vacate the injunction and remand the case to the United States District Court for the Northern District of California for a remedies hearing. Additional briefing and a hearing on remedies are procedural steps the DOJ already suggested a few months ago.

Two former chief judges of the Federal Circuit are also among the individuals and organizations rallying behind the San Diego chipmaker. Retired Chief Judge Paul R. Michel, who already supported Qualcomm's motion to stay, argues among other things that the Smallest Salable Patent-Practicing Unit (SSPPU) rule isn't all that important and, if it was, it should be applied differently here. His successor Randall R. Rader, who stepped down over allegations of being improperly close to a patent litigator, is one of 20 antitrust and patent law professors who also filed an amicus brief. On the list of signatories of that one I saw several names of professors who have previously taken pro-SEP-holder positions. The usual suspects, one might say, but that also applies to Nokia's and InterDigitroll's (okay, the company is named "InterDigital") briefs. No company other than Qualcomm has such a strong and immediate interest in the outcome of this appeal as Nokia, which is a defendant to automotive industry supplier Continental's FRAND/antitrust case against the Avanci patent pool firm and some of its contributors (Avanci, Nokia, Sharp and others are trying to get that one dismissed or to be transferred out of Judge Koh's San Jose court, but Continental's opposition brief appears more than strong enough to prevent a venue transfer). And it bears repeating that Nokia itself once formally complained about Qualcomm's business practices at a time when Nokia was the market-leading handset maker.

Interestingly, I haven't seen a filing by Ericsson (hopefully not due to an oversight of mine)...

Dolby Laboratories is another patent monetizer who has repeatedly supported SEP abusers through amicus briefs.

The International Center for Law and Economics and an organization named Alliance of U.S. Startups & Inventors for Jobs ("USIJ") have also made filings.

I've uploaded all eight documents to Scribd, and linked to them from this post. I may very well comment on their content later on as I digest and discuss the different pillars of Qualcomm's appellate strategy. The FTC is going to get an extension until shortly before Thanksgiving to file its responsive brief, so there still is a lot of time to talk about the issues--and the hearing probably won't take place before late January at the earliest, with February being more likely.

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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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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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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

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On DOJ's behalf, former Qualcomm lawyers file amicus brief in support of Qualcomm and point to paper co-authored by Qualcomm lobbyist: Ninth Circuit appeal of consumer class certification

This is the first part of today's little trilogy of FRAND-related posts.

In early May, the Antitrust Division of the DOJ, under Qualcomm's former outside counsel and now-Assistant Attorney General Makan Delrahim, filed an amicus brief with the United States District Court for the Northern District of California more than three months after the FTC v. Qualcomm trial (!), seeking to dissuade--to no avail, as we know by now--Judge Lucy H. Koh from ordering injunctive remedies against the chipset maker that generates two thirds of its profits from patent licensing, not product sales. The FTC sharply disagreed with this attempt by a government department to influence the outcome of an antitrust case brought by an independent government agency, and Judge Koh, in her late-May ruling, gave the DOJ's initiative short shrift.

The Antitrust Division of the DOJ, which has so far been disproportionately more active filing amicus briefs than actually enforcing the antitrust laws (though Mr. Delrahim is now apparently taking aim at Apple and Google). And on Monday, the AAAG (Antitrust AAG), did it again. The latest filing supports Qualcomm's Ninth Circuit appeal of Judge Koh's certification of a 250-million-consumer class seeking an average of $20 per U.S. smartphone purchaser from Qualcomm on the grounds of supra-FRAND patent license fees ultimately having been passed on to consumes (this post continues below the document):

19-06-10 Amicus Brief by US... by on Scribd

This latest DOJ amicus brief is at least timely (filed one week after Qualcomm's opening brief in accordance with applicable rules); it is a joint filing by the DOJ with the states of Texas, Ohio and Louisiana; and while the consumer class action got consolidated with the FTC case, a reversal of class certification wouldn't weaken the FTC's case in any way, so I was going to say that at least the DOJ is not antagonizing a federal government agency again. But... unfortunately there's footnote 7, and that footnote is so insane that it makes the early-May request for a hearing on remedies appear reasonable by comparision:

"7 Caution is particularly appropriate with respect to this case because the interaction of antitrust law and patent rights in cases like this one is in flux. Although claims of the sort in this case are grounded in certain scholarly literature, see Fiona M. Scott Morton & Carl Shapiro, Strategic Patent Acquisitions, [...] (2014), such claims and theories of liability remain controversial, and more recent scholars have questioned their viability, see Douglas H. Ginsburg, Koren W. Wong-Ervin & Joshua D. Wright, The Troubling Use of Antitrust to Regulate FRAND Licensing, [...] (2015); Assistant Attorney General Makan Delrahim Delivers Keynote Address at University of Pennsylvania Law School: The 'New Madison' Approach to Antitrust and Intellectual Property Law (Mar. 16, 2018), https://www.justice.gov/opa/speech/assistant-attorney-general-makan-delrahim-delivers-keynote-address-university."

First, FRAND abuse is not just a subject of academic debate as the term "grounded in certain scholarly literature" suggests. There's FRAND case law in the U.S., especially in the Ninth Circuit. Decisions, not just writings.

But the unbelievable absurdity here is something else. AAG Delrahim was outside counsel for Qualcomm for many years (which may be the reason for which he didn't formally sign last month's filing with Judge Koh's court); as I already pointed out last month, his deputy Andrew Finch joined him from a law firm that has also done a lot of high-profile work for Qualcomm. So the two first signatories of the filing are former Qualcomm lawyers who behave as if they were still were. That would be a credibility issue, but what is really an insanity here is that they seek to support their claim of FRAND antitrust laws being "in flux" by pointing to "scholars" taking that position--and then they point to a paper co-authored by Qualcomm lobbyist Koren W. Wong-Ervin (whom I already mentioned last fall) and a speech by Mr. Delrahim (again, a former Qualcomm lawyer) himself.

Mrs. Wong-Ervin is just one of three authors of that paper; but the fact that someone who shortly thereafter was hired to become a Qualcomm lobbyist was involved taints that paper in this Qualcomm-specific context.

So they ignore U.S. case law on standard-essential patent (SEP) abuse by portraying it as just a subject of academic debate, and then they suggest there's a more recent countercurrent, but they base that claim on a paper co-authored by a Qualcomm lobbyist and a speech by Qualcomm's best friend in the U.S. government (and the first signatory of the amicus brief in question), Mr. Delrahim.

The DOJ can do better than that. I really do have the greatest respect for the department and have supported the DOJ's positions on various occasions (once even in the "travel ban" context), but--sorry to say so--no matter how hard I try, I can't have respect for such idiocies as footnote 7.

Other than that footnote, that amicus brief is reasonable, even though reasonable people can disagree with it. The key antitrust issue here is this: Illinois Brick doesn't give indirect purchasers (here, the consumers bought phones, but the makers of those devices paid patent royalties to Qualcomm) standing to seek damages under federal antitrust laws; but many states have, as some say, "repealed" (or one might also say "worked around") Illinois Brick by allowing such claims under state competition laws. California is one of those "repealer" states, while the states that joined the DOJ in this week's filing (Louisiana, Ohio, and Texas) are among the states that declined to do so. The biggest question in this appeal is whether Judge Koh correctly held that states like the three I just mentioned have no interest in precluding their citizens from seeking compensation from a California company (here, Qualcomm) under California state law, given that many or even most of them presumably purchased their phones in their home states, not California.

The U.S. Chamber of Commerce has also filed a brief in support of Qualcomm's appeal of the class certification decision, as has the Washington Legal Foundation.

While I think Judge Koh's class certification decision should be upheld, I wouldn't deny that Qualcomm and its amici reasonably dispute that California law should benefit non-Californian smartphone purchasers. The federal government as well as some "non-repealer" states can legitimately raise a federalist issue here, whether or not one ultimately agrees with them. But footnote 7 is just too much. It shows that the DOJ's Antitrust Division, under AAG Delrahim, is simply in the tank for Qualcomm. "Qualcomm, right or wrong, our former client"--that appears to be the attitude. And it led those Qualcomm allies to claim that "scholars" disagree on how to handle the complicated intersection of patent rights and antitrust laws only because Qualcomm and its allies, unsurprisingly, have a certain position.

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