U.S. DoJ Weighs in on Qualcomm Case

Article By : Rick Merritt

Advising the U.S. District Court judge overseeing the FTC's antitrust case against Qualcomm to not disrupt the 5G market is an unusual step on the part of the Justice Department

The U.S. Department of Justice (DoJ) filed an unusual “statement of interest” in a suit against Qualcomm brought by the Federal Trade Commission, advising District Judge Lucy Koh to take caution in her pending ruling. The DoJ told Koh if she rules against Qualcomm she should hold a hearing and briefing, letting the company and potentially others argue about impact any punitive actions could have for the emerging 5G cellular market.

“Because an overly broad remedy could result in reduced innovation, with the potential to harm American consumers, this Court should hold a hearing and order additional briefing to determine a proper remedy that protects competition while working minimal harm to public and private interests,” said the seven-page statement signed by Andrew C. Finch, a principal deputy assistant attorney general.

“There is a plausible prospect that an overly broad remedy in this case could reduce competition and innovation in markets for 5G technology and downstream applications that rely on that technology. Such an outcome could exceed the appropriate scope of an equitable antitrust remedy. Moreover, it has the distinct potential to harm rather than help competition,” Finch wrote.

“This is a very surprising move by the DOJ. It is extremely rare for them to interfere in the Federal Trade Commission’s cases,” said Mark A. Lemley, a Stanford law professor who has followed the case.

In the San Jose case, the FTC asked the court to prohibit Qualcomm from requiring a patent license as a condition of selling its chips, a policy it said chilled competition. Qualcomm’s “no license, no chips” policy remains central to its licensing program that generates much of its corporate profits.

The judge’s decision in the FTC case could force Qualcomm to renegotiate some of its licensing deals and rates. It could also force it to license rival chip vendors with its standard-essential patents.

Testimony in the case ended in late January after generating a bookshelf worth of evidence binders. When the parties rested, Koh advised both sides she would need time significant time to review the evidence before ruling.

A decision is expected any day. However, Apple and Qualcomm, two of the main players in the dispute, settled their differences over cellular patents in mid-April.

Qualcomm reported this week it will book at least $4.5 billion in payments and released liabilities from Apple as a part of the deal which includes a multi-year product supply agreement.

In calling for a hearing on any Qualcomm punishment, the DoJ pointed to an appellate court’s decision in U.S. vs. Microsoft, an earlier antitrust suit. It said a “party has the right to judicial resolution of disputed facts not just as to the liability phase, but also as to appropriate relief,” something the judge in that case apparently did not provide.

“Remedies should not crush a tiger’s spirit; they should train, not tame. Among other things, this means that equitable remedies should not interfere with the defendant’s innovation incentives going forward,” Finch wrote, quoting one legal scholar.

The DoJ letter has a political element of the Trump Administration weighing in on a case originally brought under the Obama Administration, according to a Reuters report. FTC commissioners are currently divided over the case, in part because one commissioner had to recuse himself from the case due to having done work for Qualcomm, it said.

It’s an “odd situation for sure, with the DOJ weighing in and asking for ‘leniency’ from the judge, so to speak, in a suit brought by the FTC. It makes the whole thing look awfully partisan, given that the suit was brought by two Democratic Commissioners against the objections of the single Republican Commissioner at that time,” said Jennifer Rie, a senior antitrust litigation analyst for Bloomberg Intelligence who attended parts of the San Jose trial.

“We don't know why Qualcomm has not been able to reach a settlement with the FTC…The DOJ antitrust division chief has been pretty open about his disagreement with the suit and the approach taken by the FTC. It will be very interesting to see how this all plays out,” added Rie.

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