Q’comm Cries Foul in Appeal

Article By : Rick Merritt

Qualcomm argued that an injunction against its cellular patent licensing practices could hurt U.S. security given its leadership in 5G

Qualcomm said that its position in 5G cellular is vital to U.S. national security in asking a court to stay an injunction against its patent licensing practices. The argument — one of several in its request — threatens to pit the Trump administration against a May 21 decision by a Ninth Circuit Court judge.

In a case brought by the Federal Trade Commission (FTC), Judge Lucy Koh ruled that Qualcomm’s “no license, no chips” policy and its exclusive licensing deals with smartphone makers were anti-competitive. Qualcomm said that the ruling misinterprets complex antitrust law and would unfairly hurt Qualcomm and the cellular industry.

As evidence of the harms caused by the court's decision, Qualcomm noted that the order effectively knocked 15% off the value of its stock price, or more than $14 billion, as investors assumed that the company might have to renegotiate lucrative licensing deals. Among its most visceral and controversial arguments, however, Qualcomm said that the ruling could jeopardize U.S. national security.

Qualcomm filed as evidence the Trump Administration’s March 2018 order striking down a proposed hostile takeover by Broadcom. “A threat to Qualcomm’s business model and leadership position [in 5G] … creates attendant national security risks,” Qualcomm’s attorneys wrote, citing the decision of the U.S. Treasury’s Committee on Foreign Investment in the United States.

They also cited a May 2 “letter of interest” in the case filed by the Department of Justice that one legal expert called highly unusual. They cautioned Judge Koh not to “reduce competition and innovation in markets for 5G technology and downstream applications that rely on that technology.”

“The head of the National Telecommunications and Information Administration has identified 5G leadership as critical for the U.S. economy and national security,” Qualcomm added.

Ironically, the company also argued that the 5G market is still small and competitive in order to counter Koh’s finding that Qualcomm is likely to extend anti-competitive practices seen in 3G and 4G technologies (CDMA and LTE) to 5G.

“The FTC has never defined a 5G chip market, and for good reason — such a market did not exist at the time of trial, and the uptake of 5G-enabled devices is a small fraction of the overall handset market,” Qualcomm argued in its stay request.

“Competition likely will be fierce also in the nascent 5G chip arena: All of Qualcomm’s major competitors — including MediaTek, Samsung, and Huawei — have developed or announced 5G products.”

In addition, Qualcomm argued that the ruling’s requirement to license rival chipmakers would harm the cellular industry.

“By condemning the practice of licensing only complete cellular devices (which all major cellular [standards-essential patent (SEP)] holders have employed for decades), the Order threatens to upend the entire wireless communications industry (including the licensing practices of other major SEP holders like Ericsson, Nokia, and InterDigital) and undermine incentives to contribute the foundational technology underlying cellular standards and systems.”

Much of the stay request noted “a thicket of complicated and highly contestable law” in the case, which deserved review under appeal.

Qualcomm also asked the judge to expedite the process of granting a stay. It requested that the judge ask the FTC to respond by May 31 and for the court to “schedule a hearing on Qualcomm’s motion as soon thereafter as practicable … [Because] the probability of irreparable harm … increases with each day the Court’s injunction stays in place.”

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