Today, the Ninth Circuit issues an Order that stays Judge Koh’s injunction entered in the FTC v. Qualcomm case in order to maintain the status quo so that the Ninth Circuit can decide whether Judge Koh’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”, which is not decided by this Order but “is a matter for another day.”

We provide a summary of the ruling below and, as always, recommend reading the 7-page Order for yourself (see link in first sentence above).   The Ninth Circuit has not decided the substantive issues–that will be done on “another day”–but did indicate that Qualcomm had raised meritorious arguments that (1) Qualcomm was not required to license its SEPs to rival chip suppliers and (2) Qualcomm could assess royalties on its SEPs on a per-handset basis (rather than based on modem chip component of the handset).

As far as next steps, the parties and interested amicus on all sides of the issue are preparing briefing on an expedited schedule in preparation for a hearing at the Ninth Circuit in January 2020.
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And the dance has officially begun in the U.S. inter-governmental dispute about applying competition law to the technical standard setting process between the U.S. Federal Trade Commission (FTC) and U.S. Department of Justice (DOJ) and we all have an invitation to the brawl.  DOJ filed an Amicus Brief that supports Qualcomm’s request that the Ninth

Last week, the U.S. Federal Trade Commission (FTC) Staff filed a response that attacks the U.S. Department of Justice (DOJ) Statement of Interest in the FTC v. Qualcomm case. (See May 3, 2019 post on DOJ Statement of Interest).  FTC Staff stated that it did not request the DOJ filing, which FTC Staff called untimely.  FTC Staff also indicated that the focus of DOJ’s Statement of Interest–the need for briefing and an evidentiary hearing on remedy–was misplaced because evidence of remedy already has been considered and the trial court already decided not to consider remedy separately.  And FTC Staff disagrees with DOJ’s view of the law.

The FTC Staff position is not unexpected given the differing views of the role of competition law with standard essential patents between the FTC Staff’s position (which was set when this case was filed as a parting-shot in the last few days of the old administration) and the current DOJ administration.  That FTC Staff would take off the gloves so soon and start exchanging public, adversarial blows with its sibling agency is a bit unexpected.  But, of course, they may argue that DOJ drew first blood in filing the Statement of Interest. 
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Magistrate Judge Fallon recently Recommended Dismissing competition law counterclaims brought by TCT Mobile (TCT) against Godo Kaisha IP Bridge 1 (IP Bridge) and Panasonic and Judge Bataillon has now Adopted that ruling.  Those counterclaims were based on alleged improper conduct relating to standard essential patents (SEPs)  on European Telecommunications Standards Institute (ETSI) 2G, 3G and 4G wireless standards that IP Bridge acquired from Panasonic after those standards were adopted.  While the standards were under development, Panasonic had committed to license the SEPs on fair, reasonable and non-discriminatory (FRAND) terms.  TCT’s competition law counterclaims generally concerned allegations that:

  • Panasonic made FRAND commitments it did not intend to keep in order to induce the standards body to keep Panasonic’s technology in the standards;
  • After the standards were adopted, Panasonic transferred the patents to IP Bridge which offered to license the patents on terms that were not FRAND and
  • There was some type of improper concerted action between Panasonic and IP Bridge (this aspect is fairly redacted and unclear).

This case presents an interesting nuance of competition claims against a party (IP Bridge) that acquired SEPs from an original owner (Panasonic) who made a FRAND commitment.  In this case, TCT alleged that something about the transfer of the patents to IP Bridge was meant to circumvent Panasonic’s FRAND commitment (but the details of those allegations are redacted in the public court documents).

This case also indicates that an antitrust injury-in-fact cannot arise solely from a patent owner filing an infringement lawsuit on FRAND-committed SEPs.  That’s because a successful FRAND defense by the accused infringer will lead to remedies consistent with the FRAND commitment and, in any event, any relief ultimately granted by the court would be lawful.

The decision also has a unique procedural posture.  This is a decision by a magistrate judge that recommends to the presiding district court judge how to rule on the issue.  Such magistrate judge recommendations are common in patent  cases.  The presiding district court judge usually adopts a magistrate judge’s recommendation, but is not required to do so.  So we will await the district court judge’s decision whether to adopt Judge Fallon’s recommendation here.

Further, this decision concerns a Rule 12(b)(6) motion to dismiss causes of action based on the initial pleadings.  Such motions are difficult to win because of the tremendous deference the court must give to the challenged pleading — e.g., the court considers whether TCT states a “plausible” claim if the court assumes (without deciding) that all factual allegations TCT raises are true and draws all reasonable inferences in TCT’s favor.   And courts are even more reluctant to grant a Rule 12(b)(6) motion against competition law claims, which may be factually complex and require information in the hands of the alleged wrong-doer that can be obtained only in discovery.   In this case, however, TCT apparently had almost a year of discovery and two attempts to plead its competition law claims, which may have provided the court more comfort in its dispositive ruling here.
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Yesterday, the U.S. Department of Justice (DOJ) Assistant Attorney General (AAG) for the Antitrust Division Makan Delrahim spoke  in Brussels about maintaining a close working relationship and coordination with European Union’s Directorate General for Competition (DG Competition) in competition law enforcement.  AAG Delrahim’s remarks included suggestion that the European competition authorities shift toward the more balanced  approach to standard essential patents (SEPs) that he recently articulated for the U.S. (See our Dec. 20, 2017 post on AAG Delrahim’s remarks on shift in U.S. DOJ’s SEP enforcement approach).  Some key points in AAG Delrahim’s remarks include:

  • “I believe that strong protection of these [IP] rights drives innovation incentives, which in turn drive a successful economy.”
  • “I worry that we have strayed too far in the direction of accommodating the concerns of technology licensees who participate in standard setting bodies, very likely at the risk of undermining incentives for the creation of new and innovative technologies.”
  • The tension between innovators and implementers “is best resolved through free market competition and bargaining.  And that bargaining process works best when standard setting bodies respect intellectual property rights … including the very important right to exclude.”
  • If a patent owner violates a standard-setting commitment, “remedies under contract law, rather than antitrust remedies, are more appropriate to address licensee’s concerns.”

Below is a a complete excerpt of AAG Delrahim’s remarks in Brussels with respect to intellectual property and SEPs:
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The Korea Fair Trade Commission (“KFTC”) recently issued a press release stating its intent to issue a written decision that will impose an $865 Million sanctions and a corrective order against Qualcomm for abuse in licensing standard essential patents (“SEPs”) in the mobile communications industry.  Specifically, on December 28, 2016, the KFTC released a three-page English-translated summary of a 27-page Korean-language  press release.  Qualcomm issued its own press release, which includes an unofficial English translation of the 27-page KFTC press release.

This was only a press release by the KFTC and an actual written decision  has yet to issue from which any action will be taken.  Accordingly, at this point we provide a summary of the KFTC Press Release and conclude with important questions or issues to look for when the actual written decision of the KFTC issues.  For example, Korean-based Samsung had some of the same or similar licensing practices as U.S.-based Qualcomm and prevailed in U.S. litigation on whether such practices breached the same ETSI FRAND obligations at issue here.  The KFTC written decision may show why Samsung’s activities were okay, but Qualcomm’s were not.

To be clear:  This is a summary based on a review of an unofficial translation of the KFTC Press Release and may not reflect actual facts or the facts and theories upon which the KFTC ultimately bases its written decision.  In other words, assume that the qualification “The KFTC Press Release may indicate that …” applies to everything below since there could be error in the KFTC’s factual findings, the unofficial translation of it, or our summary thereof.
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Yesterday, Judge Andrews in the District of Delaware issued an Order that denied InterDigital’s motion to dismiss Microsoft’s Complaint that alleged violation of antitrust laws based on InterDigital’s enforcement of patents alleged to be essential to 3G and 4G cellular ETSI standards and subject to commitments to license on fair, reasonable and non-discriminatory (“FRAND”) terms.  At this early procedural stage of the case, the issue was not whether Microsoft would prevail in the case or whether the allegations in the Complaint were true; rather, at this initial case stage Judge Andrews considered whether Microsoft had stated “plausible” claims against InterDigital upon which relief could be granted if what Microsoft alleged in the Complaint was true when viewing the Complaint in a light most favorable to Microsoft.  He decided that was the case and is allowing the case to proceed.

This ruling itself is not necessarily important as a precedential matter given the relatively low threshold for surviving a motion to dismiss and inability to challenge the factual assertions, but this will be an interesting case to follow as it matures because it is one of the few contemporary instances of a U.S. court considering the application of competition law to standard essential patents (“SEPs”) with sophisticated parties on both sides of the issue.
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Yesterday, Qualcomm issued a press release announcing resolution of the investigation under China’s Anti-Monopoly Law by China’s National Development and Reform Commission (“NDRC”) of Qualcomm’s licensing practice for standard essential patents.  In addition to Qualcomm paying a $975 million fine, the China’s NDRC approved Qualcomm’s proposed rectification plan, summarized as follows:

  • Qualcomm will offer licenses

The Northern District of California recently granted judgment on the pleadings in favor of patent-plaintiff ChriMar Systems, Inc. on antitrust and state law unfair competition counterclaims filed by accused infringers Cisco and Hewlett-Packard (HP).  According to the court, the crux of Cisco’s and HP’s counterclaims alleged that ChriMar failed to disclose and commit to license