California "gamers' lawsuit" against Microsoft-ActivisionBlizzard reassigned to Judge Corley, March 23 case management conference likely to be YouTubed

A few days before Christmas, two California law firms brought a lawsuit, formally on behalf of gamers but primarily to extract a settlement under which they'd get paid, against Microsoft's acquisition of Activision Blizzard (NASDAQ:ATVI). I don't view that sideshow to the Federal Trade Commission's in-house adjudicative proceeding as an additional threat to the deal, but rather regard it as an opportunity to obtain additional information on the matter. The Northern District of California offers second-to-none transparency.

That high degree of transparency involves that judges don't let parties overredact their filings, and that key hearings may be broadcast via YouTube. On March 23 at 1:30 PM Pacific Time, Judge Jacqueline Scott Corley--to whom the case was randomly reassigned on Thursday after Judge Vince Chhabria recused himself without stating the particular reason--will hold an initial case management conference. She has already informed counsel of her participation in the Cameras in Courtroom Pilot Project. Presumably no one will object (though the notice says it would have "no effect on [a party's] case whatsoever").

A week earlier (March 16), the parties will have to file a case management statement in preparation of the hearing.

Judge Corley granted in part a motion to dismiss another antitrust case piggybacking on an FTC action--a class action against Qualcomm--on Friday. This "gamers' lawsuit" against Microsoft-ActivisionBlizzard (DeMartini et al v. Microsoft Corporation, case no. 3:22-cv-08991-JSC) is a class action by any other name as far as litigation economics are concerned. The fact that such cases are routinely brought in the wake of government lawsuits doesn't mean they never have merit, but doesn't validate the related government actions either: it's just a gamble by class-action law firms, and quite often a crapshoot. I don't see the case against Qualcomm going anywhere, and the one against Microsoft-ActivisionBlizzard is even weaker.

Judge Corley has not vacated any filing deadlines set by her colleague before he recused himself. Microsoft's answer to the complaint--instead of which a defendant can also bring a motion to dismiss--is still due on Wednesday, January 11, and its response to the motion for a preliminary injunction ("PI motion") on Friday, January 20. The PI motion hearing was originally scheduled for February 16, but the PI motion has to be renoticed--as Judge Corley has explicitly stated--and I doubt that the PI hearing will be held on an earlier date than the initial case management conference (March 23). Maybe they'll both take place on the same day.

If Microsoft requested an extension by about a month for its deadline to answer or otherwise respond to the complaint, it would be routinely granted. However, Microsoft is interested in resolving any challenges to the deal at the earliest opportunity, and will have to address the allegations and theories in the complaint in its January 20 opposition to the PI motion at any rate.

The six defenses (of 23) that Microsoft and Activision Blizzard dropped from their answer to the FTC's in-house complaint are FTC-specific, so they won't play a role in the "gamers'" lawsuit.

Lawyers from two firms have given notice of their appearance on Microsoft's behalf. The firms are Wilkinson Stekloff, which also represents Microsoft before the FTC's in-house Administrative Law Judge D. Michael Chappell (including this week's initial case management hearing in Washington, D.C.), and Alston & Bird, a firm whose work for Ericsson (most recently against Apple) and Nokia I've mentioned on a number of occasions. At least for the time being, Weil--whose name appeared on filings with the UK Competition & Markets Authority and in the FTC proceeding--is not involved with the California litigation, though at minimum Weil will give advice in the background due to the huge overlap between the cases. Weil represents Apple against Epic Games (same district, but presently before the Ninth Circuit).

Here's a list of all attorneys who have so far been enlisted by Microsoft in the Northern California case:

• Wilkinson Stekloff:

  • Rakesh Kilaru

  • Anastasia Pastan

• Alston & Bird:

  • Valarie C. Williams

  • Tania Rice

From my experience as a litigation watcher, I predict that we will see some additional appearances soon, at the latest right before a PI hearing.

In other Microsoft-ActivisionBlizzard news, Microsoft and the Communications Workers of America (CWA) labor union placed an ad in the Washington Post on Friday that The Verge and other media have reported on. The key messages are that Activision Blizzard employees will benefit from the acquisition with a view to unionization, and that "it’s important to explore solutions that protect competition and consumers while also promoting the needs of workers, economic growth and American innovation."

That ad will have been noticed by Capitol Hill lawmakers. The FTC risks bringing up politicians on both sides of the aisle against itself: Republicans (who have finally managed to elect Speaker McCarthy) are generally not the biggest fans of the FTC, and Democrats favor unionization.

The Washington Post ad shows how difficult it is these days for a "Big Tech" company to make a major acquisition, just because of the political environment and (sadly) regardless of legal merits. But this is a merger that can make a key contribution to loosening the strangehold of two other "Big Techs"--Apple and Google--on mobile app markets. There is bipartisan consensus about the need for competition in mobile app distribution, even though the Open App Markets Act (OAMA) wasn't put to a vote last year.

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Federal judge further shrinks antitrust class action against Qualcomm: 'No License, No Chips' policy is lawful, but plaintiffs can pursue exclusive-dealing claims under California state laws

The Federal Trade Commission's antitrust litigation against Qualcomm came to a definitive end almost two years ago when the FTC refrained from seeking Supreme Court review of the first-class acquittal the San Diego chipmaker had won in the United States Court of Appeals for the Ninth Circuit. It was a resounding victory for Qualcomm's counsel from multiple firms under the strategic leadership of Cravath Swaine & Moore's Gary Bornstein, whose work for Epic Games (against Apple and Google) I have mentioned many times.

Still, there is a class action pending in the Northern District of California: In Re: Qualcomm Antitrust litigation, but no longer before Judge Lucy H. Koh, who has meanwhile been promoted to the appeals court. Presiding over this case now is Judge Jaqueline Scott Corley, who is based in San Francisco. Yesterday (Friday, January 6), she granted in part and denied in part Qualcomm's motion to dismiss the class action:

In Re: Qualcomm Antitrust Litigation, Order Regarding Motion to Dismiss

In 2021, the Ninth Circuit remanded the certification of the consumer class to the district court, and without going into detail expressed the view that the failure, as a matter of law, of some of the FTC's claims would by extension also dispose of substantial parts of the class-action complaint. Also, the Ninth Circuit took issue with the application of California law to a nationwide class, especially when there are "repealer" and "non-repealer states" with respect to the Illinois Brick doctrine that bars indirect purchasers from seeking antitrust damages unless state laws open the door to such theories. Illinois Brick could have been overruled in Apple v. Pepper (App Store antitrust case), but it wasn't because a narrow Supreme Court majority determined that app downloaders directly purchase from Apple.

Upon remand, the class-action lawyers drastically narrowed their case: it's now only about California law (the Cartwright Act, which is sort of California's Sherman Act, and California Unfair Competition Law (UCL))--and the class is now limited to California consumers. Under the Cartwright Act as well as under California UCL, the class-action lawyers are suing Qualcomm over

1. its "No License, No Chips" policy (device makers must take a standard-essential patent (SEP) license from Qualcomm as a precondition for getting to buy Qualcomm's baseband chips);

2. an allegedly exclusive agreement with Apple (to be precise, there were certain rebates that Apple was eligible for as long as it largely relied on Qualcomm's baseband processors); and

3. allegedly having defrauded the standard-setting process by making FRAND promises without the intent to honor them (such as by granting exhaustive licenses to rival chipmakers).

The doctrine that requires the district court to take into consideration the Ninth Circuit's FTC v. Qualcomm decision in its adjudication of Qualcomm's motion to dismiss the consumer class action is stare decisis (consistency with applicable precedent). The consumers are not collaterally estopped because of the FTC's defeat, nor can any of the factual questions be demeed res judicata given that the class-action lawyers are entitled to their own day in court and could--in theory (though hardly in practice)--present stronger evidence than the federal government.

It is the last point I mentioned that keeps the "exclusive dealing" technically alive. It's a zombie claim as far as I can see: unless the class-action lawyers dig up some silver bullet somewhere, the conclusion is going to be that Intel and other companies wouldn't have been able to provide an adequate replacement for Qualcomm's chips anyway. But it's a dead claim walking for the reason I explained. It will hardly survive summary judgment, though.

The "fraud" prong has been dismissed directly because the consumer plaintiffs are not Qualcomm's competitors and, therefore, can't allege reliance on Qualcomm's FRAND promise.

The claim that "No License, No Chips" constitutes anticompetitive tying has also been dismissed directly (under either state law). Its fundamental deficiency is that the allegedly tied product--licenses to Qualcomm's SEPs--is not available from a rival seller: only Qualcomm licenses its SEPs to smartphone makers.

The class-action lawyers made a legalistic argument in that context: a 2015 decision by the California Supreme Court (Cipro) involving reverse payment settlements under the Hatch-Waxman Act, which is (broadly speaking) about creating incentive for the makers of generic versions of patented drugs to challenge the relevant patents: the first one to take down a patent gets a certain exclusivity period. As a result, some pharmaceutical companies entered into settlements with the first challenger at the expense of all of their joint competitors.

In the Qualcomm case, the class-action lawyers argued that Cipro shows a greater willingness by the California state judiciary to find antitrust violations in patent holders' dealing and practices. Judge Corley declined the invitation to "strike a new path in tying jurisprudence under the Cartwright Act, just as Cipro did in the realm of horizontal restraint." She said that there is no case law at the moment that supports the "novel tying theory" against Qualcomm, and the district court won't broaden the scope of Cipro by predicting potential changes in California case law based on a philosophical interpretation of Cipro.

The class-action lawyers could now try to appeal Judge Corley's decision to the extent their claims got dismissed, and hope that someone will make new law in order for their tying claim to be revived. They can also try to argue it doesn't matter that consumers themselves never relied on any FRAND licensing promise by Qualcomm. And they can try to win the factual debate over whether there were any anticompetitive effects from the Qualcomm-Apple agreement in question.

They can try any or all of the above--but it's highly unlikely to lead to any payout to California consumers. The biggest obstacle to a settlement here may be the fact that Qualcomm is on the winning track, even if it takes another year or two (or more).

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Microsoft, Activision Blizzard drop 6 of their 23 defenses, no longer challenge constitutionality of FTC's in-house lawsuit; UK CMA extended deadline by almost two months

On Wednesday, the FTC's Chief (and currently only) Administrative Law Judge (ALJ) D. Michael Chappell handed down an order (PDF) granting parallel motions by which Microsoft and Activision Blizzard--with the FTC's consent--sought to withdraw six of their 23 defenses to the agency's merger complaint. The dropped defenses (16-22) challenged the constitutionality of this proceeding and even of the FTC as an institution. The previous defense #23, which says the FTC oversteps its Section 5 competences, is the new defense #17.

Microsoft's amended answer (PDF) is already available on the FTC's website; Activision Blizzard King's presumably won't take long to show up as well.

When I commented on the original answers, I likened Microsoft's answer to Candy Crush--explosive in a sweet and smooth way--and ABK's to Call of Duty (frontal assault, but with high precision). The defenses, however, were the same, and will again be identical.

I took note of the constitutional challenges and may have been the only commentator so far to put them into the context of the Axon Enterprise, Inc. v. Federal Trade Commission case that is currently being adjudicated by the Supreme Court. As I have commented very favorably on the FTC's work in many instances, even including an entire month-long trial in San Jose four years ago, I'd just like to see the FTC make the right decisions in each case and set the right priorities, while some (especially a few Republican politicians) would like to abolish it.

Lawyers--outside and in-house counsel alike--have a duty to identify and develop all potential defenses, and when there is the possibility (based on how the Axon hearing went) of the conservative SCOTUS majority calling the FTC's in-house adjudicative proceeding into question, it's a natural thing for defendants to do to preserve their rights. But the basis on which the case should be decided is simply its own merits.

What is not known is whether Microsoft and Activision Blizzard (after internally agreeing to drop those defenses) then just asked the FTC whether it would oppose such a motion, or whether this is a harbinger of a thawing period between the agency and the private parties. Whatever the climate may be, the fact that such defenses were raised at all shows that the FTC must act prudently. A forceful but reasonable FTC will continue to have the support of centrist politicians and (enough) Supreme Court judges, but an exceedingly aggressive one that tilts at windmills may end up shooting itself in the foot, or worse.

As an app developer, my number one wish is for the FTC to realize the potential of Microsoft-ActivisionBlizzard to put a serious competitive constraint on the incumbent mobile app stores (initially in jurisdictions like the EU with its Digital Markets Act, and at some point also the U.S.). Regardless of whether one shares the FTC's concerns over the impact of the transaction in question on some other markets, I think the merits of the procompetitive argument concerning mobile app stores are beyond reasonable doubt and perfectly reconcilable with the FTC's mandate, so I can't see why the FTC couldn't recognize that fact as well and figure out a solution. The only beneficiaries of a decision to block that transaction are console market leader Sony and the mobile app store monopolists.

While I'm an independent app maker, I can very much relate to the interests of software companies' employees, too. Bloomberg Law published an interesting article (also yesterday) about the Communications Workers of America (CWA) labor union continuing to support the deal. The article also mentions that approximately 300 workers at ZeniMax studios (mostly game testers, I believe) just unionized.

Over in the United Kingdom, the Competition & Markets Authority (CMA) yesterday gave notice (PDF) of an extension of the deadline of its Microsoft-ActivisionBlizzard inquiry from March 1 to April 26. That's almost two months, but the agency "aims to complete the inquiry as soon as possible and in advance of this date."

The reasons given for this delay include--among others--"a large volume of evidence as well as main party and third party submissions." It was interesting to see that, despite Sony making so much noise about why the deal is allegedly bad for PlayStation gamers and the PlayStation having a far larger installed base than the Xbox, 75% of the answers actually support the transaction (in that post I explain why the result should neither be over- nor underrated). That also applies to the only published submission by a large third party, apparently another game maker.

Earlier this week, Microsoft's lead counsel in the FTC case said that her client was hopeful to work out solutions in the EU and/or UK in the near term, and would then propose the same set of remedies to the FTC as well. The CMA's notice of extension doesn't say that remedies have been proposed, but it is simply a fact that merger reviews take longer when that is the case, so this may have contributed to the extension. At least it's a plausible assumption when connecting the dots between the FTC hearing and the CMA notice.

The stock market didn't react negatively to the UK announcement (the NASDAQ:ATVI stock moved sideways), which shows that professional risk arbitrageurs don't feel it portends a prohibition decision.

All of yesterday's news taken together suggests to me, too, that the plausible explanations for what happened are pretty much in the range from "normal course of business" to "detente on more than one front".

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French fine over App Store privacy violations undermines credibility of one of Apple's two favorite pretexts for monopoly abuse, pours fuel on fire of German antitrust authority's ATT investigation

Yesterday it became known that on December 29 a panel of the Commission nationale de l'informatique et des libertés (CNIL; National Commission on Informatics and Liberty)--which is tasked with the enforcement of the EU's General Data Privacy Regulation in France--"imposed an administrative fine of 8 million euros" on an Ireland-based Apple subsidiary for failing to obtain the consent of French iPhone users (specifically, users of version 14.6 of the operating system) "before depositing and/or writing identifiers used for advertising purposes on their terminals."

The same CNIL actually played a very regrettable role--which calls into question whether the ones running that agency really understand how mobile ecosystems work--when it effectively prevented French antitrust watchdog Autorité de la concurrence (Adcl; Competition Authority) from ordering interim measures against Apple's introduction of App Tracking Transparency (ATT). The economic fallout from ATT is disastrous, and a narrow-minded government agency that obstructs through government-internal lobbying--whether it's for dogmatic reasons, institutional influence, or someone's ego--the enforcement of competition law against such a massive abuse fails its country's companies and consumers alike.

I actually remember the CNIL's rapporteur on this Apple case, Professor François Pellegrini (now a vice president of the agency), from the days of the EU legislative process on the patentability of computer-implemented inventions (aka "software patents directive"). Back in the day we fundamentally disagreed on strategy, and we haven't been in contact in well over a decade. I don't know whether he was in any way responsible for the CNIL's misguided opposition to antitrust enforcement against ATT.

Presumably, the French digital economy--represented by the France Digitale industry association--was no less disappointed in the CNIL's irresponsible support of Apple's abusive scheme than I was. Regardless, France Digitale brought a complaint with the CNIL over Apple's self-preferencing: they just asked that Apple be held to the GDPR standard, and the CNIL found that Apple was out of compliance at least with respect to iOS 14.6.

Apple made a jurisdictional argument according to which only Ireland's data protection agency would be able to enforce the GDPR against Apple, and EU politicians have criticized Ireland for treating its largest tax payers and key foreign investors with kid gloves. Apple portrayed the way in which end users' actions on the App Store (viewing, downloading, and purchasing apps) were tracked as just a natural extension of an authentication method that would be necessary at any rate.

The €8M amount is not even chump change for Apple, but there are reasons for which Apple--in a statement first published by San Francisco-based Financial Times correspondent Patrick McGee--declared itself "disappointed with this decision" and vowed to appeal.

I've read the French decision (PDF) in full. In para. 92, the order notes that Professor Pellegrini established three criteria for the conformity of the mechanism by which iOS obtains user consent to targeted advertising based on a set of IDs (device ID, device pack ID etc.):

1. The relevant window must be in French.

2. Apple can't just broadly claim that it does not track user activities.

3. No identifier may be used for (targeted) advertising purposes prior to obtaining, through a valid mechanism, the user's consent to such use of their data.

Apple then said (according to para. 93) that it had meanwhile translated the relevant on-screen messages to French, and that no identifier would be stored on the end-user device or read for advertising purposes ahead of the user's consent. And in March 2023 (at the latest), Apple said it would also change the text from "Apple does not track your activities" to "Apple does not track your activities in third-party apps and on third-party websites."

Whether those changes will satisfactorily alleviate all concerns is unclear at this stage, but let's assume for now that the €8M fine is indeed just a penalty for past conduct and Apple does not have to make changes beyond what it said would be the state of affairs in March 2023 (if not sooner). In that case, Apple's Search Ads business would probably thrive in France just like before. ATT kneecapped all advertising networks on iOS. End users are mostly going to grant Apple the requested consent unless Apple would have to display the same "alarmist" warning that end users see when a third-party app requests such consent. Instead, Apple focuses on user benefits (more relevant ads) when its own business is concerned, and emphasizes fear, uncertainty, and doubt (FUD) when it's about third-party apps.

So, if the fine doesn't hurt, and if the CNIL itself is not in a position to fully address Apple's self-preferencing, why does the decision (provided that Apple's appeal fails) still matter?

• The most important effect would be if the CNIL stopped supporting Apple with respect to ATT. Maybe the CNIL has started to realize that it made a mistake last time, such as when it became known that Apple was bullying Meta/Facebook and, when it didn't get the revenue share it wanted, put ATT in place. If the CNIL could at least stay neutral with respect to antitrust enforcement against ATT, that would be great, but I don't know whether that's the case. Hopefully Apple has lost that governmental ally.

• Where I have no doubt about a positive effect is the investigation of the German Bundeskartellamt (Federal Cartel Office) into self-preferencing with respect to ATT, but also more generally the anticompetitive effects of that money and power grab (see also the FCO's English-language press release). So far the Federal Cartel Office has been a dog that barks but doesn't really bite Big Tech (a topic I'll address in another post when I find the time for it). Anyway, the fact that a French government agency has already found Apple to engage in self-preferencing that apart from antitrust considerations even violates the GDPR is a silver bullet for political and psychological reasons.

• There is a French App Store case in which the Paris Commercial Court rendered a decision last month, and which is about the app tax as opposed to ATT. Apple's two key pretexts for its App Store monopoly abuse are privacy and security. Apple's credibility on privacy has taken a hit now.

• Last year, Apple CEO Tim Cook got a lukewarm reception at a gathering of privacy activists. Any decision that calls into question Apple's actual commitment to privacy will further reduce the willingness of that crowd to support Apple's commercial interests in continued monopoly abuse. Of course, Apple can still buy goodwill from privacy as well as security "experts" and "activists"--and Apple engages in astroturfing anyway, no matter the context.

• In all App Store cases worldwide, the privacy pretext plays a role, and any credible decision that holds Apple in violation of data privacy laws, especially when there is a close connection with tracking user activities on the App Store, is somewhat relevant. However, Epic Games v. Apple is now at the appellate stage, and Epic rightly argued at the appellate hearing that only procompetitive justifications count (which was the key issue in NCAA v. Alston). So the question of how much substance there is to Apple's privacy pretext wouldn't even matter in that scenario. And at the hearing, the key judge--Ninth Circuit Judge Milan D. Smith--very much emphasized market definition, where the concern is a potential failure of proof. I continue to hope that Judge Smith will arrive at the conclusion that the district judge made enough mistakes in the market definition context to warrant a remand, and in that case I hope he will get the support of at least one other member of the panel. In a retrial, privacy could again become a topic of discussion unless the appeals court makes it clear that only procompetitive justifications matter.

• Ultimately, I don't think the ATT problem can be solved through the enforcement of privacy rules, and even if self-preferencing came to an end, Apple would benefit from it (as app makers would still have to rely on non-ad revenues, some of which Apple can tax). The only solution is the availability of third-party app stores that enable developers to reach iOS users without having to submit their apps to Apple's app review. Apple could then try to use its control over iOS in other ways, but there are various technical ways in which users and devices can be identified even if Apple tries to complicate it (even fingerprints).

All in all, I think the CNIL decision (again, provided that it isn't overturned) has the potential to come back to haunt Apple in a number of contexts--and around the globe. And let me quote the assessment of the CNIL decision by French antitrust lawyer (and Adlc adviser) Fayrouze Masmi-Dazi, who advises various clients with respect to Apple's App Store abuse:

"It is a very important decision and another step towards sanctioning illicit practices - the Paris commercial court also sanctioned Apple for the significant imbalance of several contractual provisions of its developer[] license agreement."

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Huawei uniquely attains net-licensor status without defining its patent licensing business as profit center: 20+ license agreements struck in 2022

Huawei may have become the information and communications technology industry's first "accidental net licensor" of major proportions. In this context, "accidental" doesn't mean that anybody got hurt (nor that it was never intended): it's just that this outcome wasn't the original ambition.

The week before last, the South China Morning Post reported that "last year the company’s royalty income exceeded the expenses it paid for licensing technologies from other companies for the first time, according to Huawei."

What makes this all the more surprising is that Huawei's 2021 total revenue was still in the $100 billion range. It's easy to be a net licensor with a small product business, but for a large-scale (actually, hyperscale) implementer it's astounding, even when considering that "Huawei last year filed a record 6,952 patent applications, up 27 per cent from the previous year, through the Patent Cooperation Treaty (PCT)," which "made Huawei the world’s biggest PCT filer for five consecutive years."

While it is now imperative for Huawei to generate more revenue from patent licensing in order to fund its innovative activity despite the fallout from a U.S. trade ban, there are no signs of Huawei having sacrificed the values it defended during its net-implementer times. It's just that when it runs the numbers at (or toward) the end of a given year, the company now finds that its income from outbound patent licensing exceeds its royalty payments to third parties. That's my interpretation of the following one-sentence paragraph from the South China Morning Post article:

"However, [Huawei IP chief Alan] Fan said the company is not treating IP licensing as a business or relying on it as a major revenue stream."

The Chinese newspaper says "Huawei founder Ren Zhengfei told the company’s intellectual property (IP) team to step up efforts to turn its vast pool of patents into revenue via 'reasonable pricing' and 'generate an appropriate return' on the R&D investments, according to a company memo made public in April." So it is probably fair to say that

• yes, Huawei is now placing greater strategic emphasis than before on outbound licensing, but

• no, this doesn't mean Huawei intends to generate a high percentage of its total profits from IP royalties.

Another factor that enabled Huawei's licensing income to surpass its licensing costs is that certain types of technologies with respect to which Huawei holds particularly powerful rights--such as wireless connectivity and video/audio codecs--have become extremely ubiquitous. Take connected cars: according to the SCMP article, Huawei "has reached royalty agreements with 15 carmakers globally, including Audi, Mercedes-Benz and BMW."

The article also mentions two major cross-license agreements that Huawei announced last month: one with OPPO and another with Nokia.

On the bottom line, it appears that Huawei is now less prepared than in the past to condone free-riding on its innovations, but constructive implementers won't find it hard to strike agreements, compared to the royalty demands they face in most other negotiations...

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Microsoft-ActivisionBlizzard remedies to be agreed upon in EU and/or UK will be proposed to FTC: first hearing held in U.S. adjudicative proceeding

The Federal Trade Commission's Chief (and currently only) Administrative Law Judge, D. Michael Chappell, just held a telephonic hearing in the adjudicative proceeding brought by the FTC against the acquisition of Activision Blizzard by Microsoft. There were some technical issues as far more people--many of them presumably risk arbitrageurs and members of the legal community--wanted to dial in than they had anticipated. I agree with Judge Chappell that the AT&T operator appeared to handle the situation well under the circumstances.

The hearing was short and procedural as opposed to evidentiary. Just a few points:

1. FTC staff attorney James Weingarten said there was no parallel proceeding in district court at this stage and there were no plans at this time, but the FTC may seek to block the transaction in the future depending on how things progress.

2. It seemed to me that the FTC is not giving more than lip service at this stage to the possibility of working out a settlement. But it appears that at least the lawyers for all three parties (FTC, Microsoft, Activision Blizzard) are in a position to reach agreements on scheduling questions.

3. Microsoft's lead counsel Beth Wilkinson mentioned the July 18, 2023 termination date in the meger agreement and said her client was "preparing for all options." While "a resolution would be ideal," the other options include an in-house FTC trial or a trial in federal court, where Microsoft anticipates the FTC may have to run pretty soon.

4. Mrs. Wilkinson made reference to a number of regulatory reviews in different jurisdictions, some of which have already cleared the deal (most recently Chile), and expressed hopes of receiving clearance in each of them over the next few months.

5. She placed particular emphasis on the processes in the European Union and the UK, where there appears (as far as I understood it) to be a possibility of near-term settlements, and the remedies agreed upon with the European Commission and/or the Competition & Markets Authority will then also be proposed to the FTC.

6. Microsoft's counsel exuded confidence as well as a constructive attitude. Activision Blizzard's counsel--parts of whose answer to the FTC's complaint were belligerent--had nothing to add. But again, this was just a case management conference and not about the merits, so there wasn't much to be said.

A scheduling order will issue shortly.

I saw a recent report according to which some Brussels observers believe the European Commission will issue a Statement of Objections (SO) this month, but that a settlement could fall into place thereafter.

In related news, various articles have appeared over the past 24 hours or so that suggest Microsoft is unreasonably denying knowledge of the release date of Activision's Call of Duty title. I tweeted about one of them:

I disagree with @verge on this: it's Activision Blizzard's job--not Microsoft's--to admit or deny what the FTC alleges with respect to Activision Blizzard. Guys, read BOTH filings, not just 1

Also it's obvious that Microsoft simply wants to close the deal, as opposed to stalling https://t.co/YvVo7S3S9n

— Florian Mueller (@FOSSpatents) January 3, 2023

I commend Matt Stoller for having raised a number of Big Tech issues over the years, and The Verge for its efforts to cover certain tech competition issues in depth, but in this context they--and those who echoed their views--were simply wrong. The mistake they made was to expect Microsoft to comment on something that concerned Activision Blizzard. Microsoft simply can't make an admission on Activision Blizzard's behalf, and there is a reason why parties have the choice not only between admitting or denying, but also declining (where appropriate) to take a definitive position.

The answer is simply in Activision Blizzard's filing. Paragraph 6 of its Specific Responses to the Commission's Allegations contains the following passage:

"Activision denies the allegations of the second sentence of Paragraph 6, except to admit that it released the first entry in the Call of Duty franchise in 2003 and that it has released at least one installment in the Call of Duty franchise every year since 2003." (emphasis added)

There is nothing "petty" or "bizarre" here: Activision Blizzard confirmed the release date, and it would have added no value at all if Microsoft had done so as well.

It may have been tempting to engage in "clickbaiting" at a time when there's a shortage of tech industry news, but I would strongly recommend to some commentators and reporters to read both Microsoft's and Activision Blizzard's filings in the FTC case before blaming one for not addressing something we may be able to find in the other.

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InterDigital announces arbitration agreement with Samsung, renewal with Panasonic, video codec license deal with LG

This morning, publicly-traded patent licensing firm InterDigital (NASDAQ:IDCC) announced license agreements with three major East Asian companies:

• The most important one of those press releases involves consumer electronics giant Samsung--a company whose licensing department is known to be tough, but definitely effective. It was no secret that the previous license agreement was set to expire on December 31. Ten years ago, InterDigital brought infringement lawsuits against Samsung. This time around, it's a renewal with final terms to be decided by binding arbitration. InterDigital CEO Liren Chen commented on this suboptimal but apparently acceptable solution:

  "While we always prefer to conclude our license agreements through amicable good faith negotiation, independent binding arbitration provides an effective mechanism for resolving licensing disputes. I welcome Samsung’s willingness to enter into a new license with us and their commitment to work through the remaining issues in arbitration."

  An InterDigital filing with the Securities and Exchange Commission is more specific, though it still doesn't answer my most important questions:

  "On January 1, 2023, InterDigital, Inc. (the 'Company') and Samsung Electronics Co. Ltd. ('Samsung') agreed to have a panel of arbitrators establish the royalties to be paid by Samsung for a worldwide license to certain of the Company’s patents from and after January 1, 2023, as well as any other terms to a patent license agreement on which the parties are unable to agree. The determination by the panel will be in the form of a patent license agreement and will be final, binding and non-appealable, subject to certain limited exceptions. The parties have agreed to conduct the arbitration in a diligent manner. The Company expects the arbitration to conclude within approximately 18 months.

  "Each of the parties has also agreed not to initiate certain claims against the other party during the arbitration. Any licenses under our joint licensing program with Sony relating to digital televisions and standalone computer display monitors will not be included in the scope of the arbitration."

  Arbitration is inherently opaque. We'll likely never find out what parameters the parties gave the arbitrators. What we may be able to deduce from InterDigital's quarterly financial reports is whether Samsung continues to make some payments in the meantime. It's possible that the parties agreed on a certain amount that Samsung will pay per quarter while still reserving its rights to take the position in arbitration that the royalty rate should actually be lower.

  Ten years ago, Samsung also agreed with Nokia on arbitration to determine the royalty amount, though it was unclear what subset of patents was subject to arbitration. Third parties who believe to know the terms of the deal mostly suspect that the arbitration result fell short of Nokia's expectations--but again, this depends on the parameters, which can favor one side or the other, or provide a level playing field.

  At some point some news of a Nokia-Samsung renewal or, failing that, infringement litigation should also surface, but I don't know when that agreement expires.

• Panasonic renewed its DTV and HEVC patent licenses with InterDigital. Unlike the scope of the InterDigital-Samsung arbitration, the Panasonic deals also involve some Sony patents, as InterDigital's Chief Licensing Officer Eeva Hakoranta said that the DTV deal was signed under a "joint digital TV licensing program which continues to deliver considerable value to InterDigital, [its] partner Sony, and to [its] licensees."

• The announcement of InterDigital's HEVC and VVC video codec patent license agreements with LG Electronics sounds like a new license (covering LG's TVs and PCs) rather than a renewal, but this may be due to the fact that the Korean company exited the smartphone business, which according to a February 2018 press release had a license to InterDigital's patents. It could be that the only reason the new deal is not called a "renewal" is that it no longer involves cellular SEPs.

In the summer, InterDigital announced a license agreement with Amazon, and in early October a renewal (by seven years) of its license deal with Apple. InterDigital is, however, embroiled in litigation with a couple of companies. The more important one of them is OPPO, which fights hard when sued but prefers to reach license agreements on reasonable terms, such as very recently with Huawei. InterDigital is now also waiting for a UK court ruling in its SEP dispute with Lenovo.

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