), Petition of the FTC for Rehearing En Banc, 19-16122 (532.63 KB) November 22, 2019 Answering Brief of the Federal Trade Commission in the United States Court of Appeals for the Ninth Circuit (789.64 KB) Qualcomm is represented by Cravath, Swaine & Moore; Goldstein & Russell; Keker Van Nest & Peters; Wilson Sonsini Goodrich & Rosati; and Morgan, Lewis & Bockius. v. Qualcomm, 411 F.Supp.3d 658, (N.D. Cal. (CN) — A Ninth Circuit panel ruled Tuesday that chipmaker Qualcomm did not engage in antitrust behavior, handing the technology company a major win by reversing a lower court decision with potentially devastating consequences to its business. The Ninth Circuit vacated the Northern District of California’s decision and reversed the permanent injunction on a few of Qualcomm’s business practices. 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. iPhone XS, Pixel 3, OnePlus 6T and 20 other phones without headphone jacks See all photos The recent Ninth Circuit panel decision reversing the district court’s judgment in FTC v. Qualcomm, Inc., has important implications for the role of antitrust in standard essential patent (SEP) licensing. The district court held that Qualcomm had an antitrust duty to license its patents to direct competitors, however the appellate panel disagreed finding the argument that the purported anticompetitive surcharge as royalty rates did not constitute antitrust violations and that the lower court did not establish “a cogent theory of anticompetitive harm.” The Ninth Circuit also found that the FTC’s argument that Qualcomm violated FRAND terms failed because the FTC did not show harm. In August, the Ninth Circuit ruled against the FTC in its decision regarding whether Qualcomm violated the Sherman Act. The court went so far as to say that Qualcomm’s business model is “chip-supplier neutral.”, Qualcomm’s special deal with Apple had no impact on hurting competition, and the court noted that Apple terminated the contracts. Qualcomm’s overall goal is to drive the technology out into the world and build optimized mobile devices and optimized networks that deliver the performance that everybody expects. The Ninth Circuit has thrown out an antitrust ruling against Qualcomm, allowing it to continue bundling chips and patents in a way that phone makers and the FTC … FTC Files Unlikely Petition to 9th Circuit to Revisit Favorable Qualcomm Ruling. I have written a lot about the case since its inception and thought it was time to write about a few interesting aspects of the case. By Mike Freeman Sep. 25, 2020 It started as a research and tech transfer company 35 years ago and was licensing CDMA wireless tech before it was selling chips. This leaves intact the panel’s unanimous decision which reversed and vacated the district court ruling in its entirety. Federal Trade Commission v. Qualcomm Incorporated (9th Cir. In September, the FTC filed a petition for a rehearing en banc. The Ninth Circuit characterized Qualcomm's "no license, no chips" policy as a policy of "no license, no problem" as far as rival chipmakers were concerned. Yesterday, the 9th Circuit Court of Appeals denied the FTC’s request to rehear its case against Qualcomm which leaves intact the Appeals Court ruling that found Qualcomm not guilty on all counts of anti-competitive behavior. We conclude that the FTC has not met its burden.”. According to investigative reports, in 2014, “Apple allegedly 'plotted' to hurt Qualcomm years before it sued the company.” We also know that Apple and Samsung had a “common interest” agreement to work closely with FTC. (CN) – After a long, intense and spirited hearing in the Ninth Circuit on Thursday, a three-judge panel will decide whether the world’s leading chip manufacturer is illegally distorting the market or simply outfoxing the competition. I believe one of the most notable things that came out of the case was the distinction between anticompetitive and hypercompetitive behavior. Companies like Qualcomm spend a much higher percentage on “R” than, let’s say, Broadcom who trumpets “R&D.”. Tom Goldstein, representing Qualcomm, delivers remarks to the three judges overseeing the appeal. As a result, Qualcomm collected large royalties and allegedly violated patent FRAND terms. As you would expect, Qualcomm was elated. F.T.C. The News: The U.S. Federal Trade Commission on Friday filed a motion to rehear an antitrust lawsuit it lost on appeal against Qualcomm Inc. On August 11, 2020, a Ninth Circuit panel reversed the District Court for the Northern District of California ’s judgment in FTC v. Qualcomm, Inc. Cellular and mobile technologies are complex, and each generation grows more complex. After that, Apple went to Intel. © 2021 Forbes Media LLC. I write about disruptive companies, technologies and usage models. I think it is critical for the sake of this conversation to split “R” and “D.” “R” as in “research” is highly risky and can start a decade in advance of any tangible product coming out of it. 2017).”, “Our job is not to condone or punish Qualcomm for its success, but rather to assess whether the FTC has met its burden under the rule of reason to show that Qualcomm’s practices have crossed the line to “conduct which unfairly tends to destroy competition itself.” Spectrum Sports, 506 U.S. at 458. At the Ninth Circuit Court of Appeals, the three-judge panel unanimously overruled every one of Judge Koh’s rulings, citing the vast difference between being anticompetitive and hypercompetitive. On 5G, Qualcomm’s early foundational inventions drove the standards, with 5G R&D efforts starting more than ten years ago, and that adds up to Qualcomm having invested over $61 billion in R&D, 20+% of revenue every year. Qualcomm should not have to directly license its modem competitors like Huawei, Samsung, Intel (at the time), Unisoc (Spreadtrum), or MediaTek. Lastly, the FTC alleged that the appellate panel “seriously erred” when it dismissed the district court’s “findings about the harm to OEMs – including higher prices that are passed on to retail consumers – because OEMs ‘are Qualcomm’s customers, not its competitors.’” The FTC argued that the Ninth Circuit erroneously believed “that such harm is not cognizable because it ‘falls outside the relevant antitrust markets.’” However, the FTC claimed that this is a misstatement of the law. 9th Circuit Qualcomm Opinion: ... to make out the FTC’s claim, Qualcomm’s licensing tactics would have had to harm competition in the licensing market or … Opinions expressed by Forbes Contributors are their own. Patrick founded Moor Insights & Strategy based on in his real-world world technology experiences with the understanding of what he wasn’t getting from analysts and consultants. “D” as in “development” are the expenditures that productize IP for sale in the form of a chip. ). Yes, Qualcomm is very competitive and took enormous research risks and spent over $61B in R&D to get there. Because the FTC did not meet its initial burden under the rule of reason framework, the panel was less critical of Qualcomm’s procompetitive justifications for its OEM -level licensing policy—which, in any case, appeared to be reasonable and consistent with current industry practice. However, the FTC claimed that the Ninth Circuit the “panel declared that because Qualcomm has concealed its surcharge in a ‘patent royalty,’ the entire payment is subject to challenge only ‘in patent law, not antitrust law.’” Moreover, this contradicts the economic substance reasoning. Apple then settled with Qualcomm which included paying Qualcomm for the years it had withheld payment. The only thing the FTC ever showed was that there was a theoretical possibility that it could happen in the future. He is grounded in reality as he has led the planning and execution and had to live with the outcomes. Moorhead also has significant board experience. Our Analysis of the Ninth Circuit Panel Decision Reversing FTC v. Qualcomm August 27, 2020 . The court said if the customers do not like the price of the IP, they should bring it up in contract court to show how it is not fair, reasonable, and non-discriminatory (FRAND). Wait, I thought there was no competition (sarcasm added. Qualcomm’s stock plummeted to $53 (today $121), which led to a hostile takeover attempt by Broadcom. 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In a strongly worded opinion, the Ninth Circuit reversed the entirety of the district court’s holding, which found that Qualcomm violated Sections 1 and 2 of the Sherman Act. Without any evidence of harm to competition, increased prices to consumers, or a decrease in innovation, Judge Koh still ruled Qualcomm guilty.