After pointlessly fighting tooth and nail for almost two years, FTC will now be forced to end the case,
after the latest setback at The United States Court of Appeals for the Ninth Circuit (Ninth Circuit). The Ninth Circuit’s well expected en banc denial, following a series of upsets, put the death nail in the coffin. After the direct, clear, and very short seven-line opinion, I am certain that FTC will not even imagine knocking on the doors of the U.S. Supreme Court.
This decision clears all the clouds hovering around Qualcomm–the country’s 5G crown jewel. This will
also have a long-lasting impact not only on its licensing business and policies but also on the technology
industry and innovations as a whole.
Side note: If you would like to know the full background of the case, follow this FTC vs. Qualcomm article series.
A wave of setbacks for the FTC
After some initial success at the United States District Court for the Northern District of California (US
District Court), FTC has constantly seen setbacks, and at times, very harsh rebukes at the Ninth Circuit.
First, the three-judge panel unanimously accepted Qualcomm’s request for the stay, with a ruling that
almost ridiculed the US District Court’s decision. The panel opined it as “…a trailblazing application of
the antitrust laws or … an improper excursion beyond the outer limits of the Sherman Act…”
Second, when another three-judge appeals panel heard the case, its questioning and doubting FTC’s
confusing arguments made it amply clear which way the panel was leaning.
Third, the actual unanimous judgment almost shredded the US District Court’s decision and completely reversed it and threw it out, including the initial summary judgment. The opinion written by Judge Callahan was a tell-a-tale of how US District Court Judge, Lucy Koh miss-applied the antitrust laws.
Finally, this wholesome denial of the en banc request was yet another strong strike against FTC’s
unfounded fascination in continuing the unworthy prosecution of a free and very successful American
enterprise. It indeed quashed the hopes of some who thought the surprise move of FTC Chairman
Joseph J. Simons, a Trump appointee, to authorize the en banc request had brought life back into the
case.
In retrospect, the case has gone through a whole slew of US Federal judges—six judges of the panels, to
some extent the full Ninth Circuit bench of more than 25 judges. But the only sympathizer for FTC, from
the US legal system, seems to be Judge Lucy Koh of the US District Court. As an observer who attended
almost all the court hearings, I found her handling of the case to be bizarre. Some of the examples of her strange behavior include: artificially limiting the discovery period which skewed the case, clinging on to
the hypotheses such as “tax on the competitor,” which were rejected by other courts and judges,
rejecting the testimonies of all of Qualcomm’s executives, including that of its highly respected and
revered founder, and an industry veteran, Dr. Irwin Jacobs.
A series of unfortunate events
As I have indicated many times in my earlier articles, this case had a lot of oddities right from the
beginning and they continued throughout the proceedings. The case was filed in the last days of the
previous administration, with only partial commission present. The sitting FTC commissioner publicly
criticized the case by writing a harsh rebuke on The Wall Street Journal. When the full commission was
constituted, the Chairman recused from the case, making the decision a tie with two commissioners
supporting and the other two opposing. That made the case almost run on autopilot, managed by the
FTC staff. Apple, which was one of the alleged instigators and a major witness in the case, settled with
Qualcomm and ended its active support.
Many U.S. Government agencies opposed FTC’s action. The U.S. Department of Justice, which shares the
responsibility and partners with FTC on antitrust matters, vehemently opposed the case and even took
the unprecedented step of testifying against it at the appeals hearing. Many legal scholars and previous
FTC commissioners, Ninth Circuit judges, opined against the case.
What’s next?
Although FTC has a theoretical option of knocking on the door of the US Supreme Court, I don’t think
these series of setbacks and strong rebukes leave it any option other than to close the case and move
on. If the appeals decision was not unanimous, not a complete reversal, or the en banc was accepted,
there was some justification. Without any of those, it would be utterly stupid for FTC to continue the
case and waste even more taxpayer money.
If they had any doubts, the Ninth Circuit’s en banc unambiguous opinion, which is mere seven lines long
makes it pretty clear. That is the shortest court document that I have ever seen and analyzed. Many go
up to a hundred pages or more.
This decision for sure clears all the doubts around Qualcomm’s licensing policies and the industry-
standard practice of licensing to OEMs. That means the practice of calculating licensing fees based on
the price of the device (with caps, of course) is completely valid and legal.
The case establishes a pretty significant precedence for licensing practices and applicability of antitrust
laws. It will have a long-lasting impact on not only the cellular but almost the entire technology industry
and beyond. With 5G set to transform almost every industry on the planet, the repercussions of the case
are impossible to overstate. Look for a detailed article on this from me soon.
Meanwhile, for more articles like this, and up-to-date analysis of the latest mobile and tech industry
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