18-12-13 Order Denying Qualcomm's Request Re. Post-Discovery Events
18-12-13 Order Denying Qualcomm's Request Re. Post-Discovery Events
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18 On October 31, 2018, Plaintiff Federal Trade Commission (“FTC”) and Defendant
19 Qualcomm Inc. (“Qualcomm”) filed briefs regarding Qualcomm’s request to introduce evidence
20 of post-discovery events. ECF Nos. 928, 929. On November 7, 2018, the parties filed response
21 briefs regarding post-discovery evidence. ECF Nos. 932, 933. Having considered all the
22 arguments raised in the parties’ submissions, the relevant law, and the record in this case, and
23 balancing the factors set forth in Fed. R. Evid. 403, the Court DENIES Qualcomm’s request to
25 I. PROCEDURAL BACKGROUND
26 At the initial Case Management Conference (“CMC”) on April 19, 2017, the Court set
27 March 30, 2018, as the close of fact discovery, and a trial date beginning on January 4, 2019. ECF
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1 No. 75. In the parties’ November 8, 2017 Joint Case Management Statement (“JCMS”),
2 Qualcomm proposed that the January 2019 trial relate only to liability and that, if necessary, the
3 Court hold a separate proceeding on remedy. ECF No. 286 at 10 n.3. The Court rejected
4 Qualcomm’s proposal. ECF No. 314 at 4-5. In addition, the Court instructed the parties that any
5 evidence related to post-discovery events must derive from full discovery and not “cherry picked
7 The March 30, 2018 fact discovery cut-off date remained the same throughout the case.
8 However, pursuant to the parties’ stipulations, the Court allowed limited out-of-time depositions
9 due to unavailability of third-party witnesses. On February 20, 2018, the Court approved the
10 parties request to extend the deadline for the deposition of former Qualcomm employee, Mr.
11 Altman, due to Mr. Altman’s planned travel to South America. ECF No. 580. On March 23,
12 2018, the Court approved the parties’ proposal for out-of-time depositions of third-party witnesses
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13 from five companies. ECF No. 645. These depositions were to be completed before May 2018.
14 Id. On April 6, 2018, the Court approved scheduling six out-of-time depositions, including former
15 Qualcomm executive chairman and former board member Dr. Jacobs, former Qualcomm
16 employee Mr. Aberle, and third-party Ericsson employees Mr. Zander and Ms. Petersson. ECF
17 No. 678 at 1-2. These depositions were all to be completed by April 20, 2018. Id. The Court also
18 approved scheduling Mr. Altman’s deposition the week of May 21, 2018, following his return
19 from South America. Id. at 2. In addition, the Court extended the deadline to file motions to
21 In the July 18, 2018 JCMS, the parties notified the Court of a dispute over Qualcomm’s
22 addition, after the close of fact discovery, of three third-party witnesses to its list of likely trial
23 witnesses. ECF No. 780-3 at 2. Neither party disputed that Qualcomm failed to disclose the
24 identities of these witnesses during fact discovery. The Court treated this dispute as a request for
25 out-of-time depositions and denied it because “allowing out-of-time depositions . . . at this late
26 stage of the proceedings may negatively impact the case schedule and prejudice FTC.” ECF No.
27 783 at 3.
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2 first raised the issue in the December 8, 2017 JCMS,1 where it proposed “that the [p]arties should
3 have the mutual opportunity to conduct a limited update of document and deposition discovery
4 closer to the time of trial to ensure that the record contains necessary contemporaneous evidence.”
5 ECF No. 378 at 5. At that time, the parties stated that they “have agreed to meet and confer
6 regarding the need for a further refresh of discovery closer to trial and the scope of any such
7 refresh.” Id. at 6. In the December 8, 2017 JCMS, FTC raised the concern that any additional
8 discovery must be produced in a timely manner so as not to prejudice the FTC. Id. Qualcomm
9 does not dispute FTC’s statement that the parties last discussed the possibility of refreshing
10 discovery in February 2018. ECF No. 914 at 10; ECF no. 928 at 2 n.2. Qualcomm did not raise
11 this issue with the Court from December 9, 2017 through October 17, 2018. ECF Nos. 672, 705,
13 In the October 17, 2018 JCMS, the parties first notified the Court of the current dispute
14 over Qualcomm’s intention to introduce evidence of events that post-date the March 30, 2018
15 deadline for the close of fact discovery. ECF No. 914 at 7-17. During the October 24, 2018
16 CMC, the parties presented their views on the relevance of post-discovery events to any potential
17 injunctive relief. ECF No. 921 at 50-60. The Court ordered the parties to submit further briefing
18 on the issue. ECF No. 922. Accordingly, the parties submitted briefs on October 31, 2018, and
22 by the parties. Navellier v. Sletten, 262 F.3d 923, 941-42 (9th Cir. 2001). In addition, the Federal
23 Rules of Evidence “confer broad discretion on the trial judge to exclude evidence on any of the
24 grounds specified in Rule 403.” United States v. Hearst, 563 F.2d 1331, 1349 (9th Cir. 1977); see
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26 The parties acknowledge that they discussed this issue in a December 1, 2017 meet and confer,
prior to submitting the December 8, 2017 JCMS, but the parties dispute what was said during the
27 meet and confer. Compare ECF No. 914 at 9 n.14 (FTC’s description) with id. at 15 (Qualcomm’s
description).
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1 also United States v. Olano, 62 F.3d 1180, 1204 (9th Cir. 1995) (“trial courts have very broad
2 discretion in applying Rule 403” (quoting Borunda v. Richmond, 885 F.2d 1384, 1388 (9th Cir.
3 1988) (alteration omitted)). Fed. R. Evid. 403 provides that “[t]he court may exclude relevant
4 evidence if its probative value is substantially outweighed by a danger of one or more of the
5 following: unfair prejudice, confusing the issues, misleading the jury, undue delay, wasting time,
6 or needlessly presenting cumulative evidence.” The ruling below balances the factors set forth in
7 Rule 403.
8 III. DISCUSSION
9 Qualcomm argues that events taking place after the close of discovery are directly relevant
10 to current market conditions and therefore “[t]he Court cannot enter a forward-looking injunction
11 without hearing evidence of important events occurring after the close of discovery.” ECF No.
12 929 at 2. Specifically, Qualcomm argues that “there can be no ongoing violation of the FTC Act
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13 if Qualcomm does not currently have monopoly power in a relevant market for modem chips.”
14 ECF No. 929 at 2. Qualcomm argues that the Court should consider post-discovery events
15 showing that (1) “major OEMs have substantially reduced or even ceased purchasing CDMA and
16 so-called ‘premium LTE’ modem chips from Qualcomm,” and (2) “Qualcomm and major OEMs
17 have entered into several license agreements covering 5G products.” ECF No. 929 at 3. Without
18 consideration of these events, Qualcomm argues, any injunctive relief would be based on
19 “speculation” as to Qualcomm’s current market power rather than “actual evidence of current
20 market conditions.” ECF No. 933 at 1-2. As to any supplemental discovery required, Qualcomm
21 argues that the parties could negotiate a targeted discovery protocol. ECF No. 933 at 3.
22 The FTC argues that evidence produced prior to the discovery cut-off shows that “there is
23 a cognizable risk of recurrent violation of the FTC Act through Qualcomm’s use of market power
24 to weaken rivals,” which is sufficient to warrant injunctive relief. ECF No. 928 at 1. The FTC
25 challenges Qualcomm’s request because (1) Qualcomm has not shown good cause to modify the
26 trial schedule or re-open discovery; (2) it is too late to conduct meaningful additional discovery
27 prior to trial, and therefore the FTC would be prejudiced by Qualcomm’s request to introduce
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1 evidence of post-discovery events; and (3) the FTC’s request for injunctive relief does not require
2 additional discovery. In its response brief, the FTC also argues that the question of “what
3 evidence would be sufficient for the Court to enter an injunction” is not currently before the Court.
5 A. Legal Standard
6 Injunctive relief should be granted if "there exists some cognizable danger of recurrent
7 violation." United States v. W.T. Grant Co., 345 U.S. 629, 633 (1953). In a case governed by the
8 Federal Trade Commission Act (“FTCA”), “an injunction will issue only if the wrongs are
9 ongoing or likely to recur.” Fed. Trade Comm’n v. Evans Prods. Co., 775 F.2d 1084, 1087 (9th
10 Cir. 1985). Injunctive relief may be appropriate under this standard even when the unlawful
11 conduct has ceased. See id. at 1088 ("Even though Evans' alleged violations have completely
12 ceased, we must review whether those violations are likely to recur."); see also Fed. Trade
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13 Comm’n v. Accusearch Inc., 570 F.3d 1187, 1201-02 (10th Cir. 2009) (concluding that the district
14 court properly issued an injunction under the FTCA despite cessation of the unlawful conduct
15 because of the possibility of recurrence); Fed. Trade Comm’n v. Affordable Media, LLC, 179 F.3d
16 1228, 1237 (9th Cir. 1999) (same); Fed. Trade Comm’n v. Lake, 181 F. Supp. 3d 692, 703 (C.D.
17 Cal. 2016) (issuing an injunction where defendant's pattern of past unlawful conduct indicated a
19 The FTC brings its complaint against Qualcomm under § 5 of the FTCA, which prohibits
21 methods of competition” under the FTCA includes “violations of the Sherman Act.” Fed. Trade
22 Comm’n v. Cement Inst., 333 U.S. 683, 693-94 (1948). In its Order Denying Motion to Dismiss,
23 the Court concluded that the FTC adequately alleged that Qualcomm’s conduct violates § 1 and §
24 2 of the Sherman Act. ECF No. 133 at 18. “Section 2 of the Sherman Act makes it unlawful for a
25 firm to ‘monopolize.’” United States v. Microsoft Corp., 253 F.3d 34, 50 (D.C. Cir. 2001). “The
26 offense of monopolization has two elements: ‘(1) the possession of monopoly power in the
27 relevant market”; and (2) “the willful acquisition or maintenance of that power” through
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2 superior product, business acumen, or historic accident.’” Id. (quoting United States v. Grinnell
3 Corp., 384 U.S. 563, 570–71 (1966)); see also McWane v. Fed. Trade Comm’n, 783 F.3d 814, 828
4 (11th Cir. 2015) (applying these two elements in a case brought under § 5 of the FTCA). “Section
6 restraint of trade or commerce among the several States.” Allied Orthopedic Appliances, Inc. v.
7 Tyco Health Care Grp. LP, 592 F.3d 991, 996 (9th Cir. 2010).
10 power is required. The legal standard for an injunction requires the FTC to show that “the wrongs
11 are ongoing or likely to recur.” Evans Prods. Co., 775 F.2d at 1087. Qualcomm agrees that this is
12 the proper standard, and it fails to identify anything in the standard that requires the Court to
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14 Qualcomm argues that the Court cannot rely upon “stale” evidence to support an
15 injunction, but the cases that Qualcomm relies upon are distinguishable. In Fed. Trade Comm’n v.
16 AbbVie Inc., 329 F. Supp. 3d 98, 145 (E.D. Pa. 2018), the court denied injunctive relief where the
17 evidence "[did] not establish that defendants have a pattern or practice" of conduct violating
18 antitrust laws and generic versions of the drug in question had been on the market for over three
19 years. In Fed. Trade Comm’n v. Merch. Servs. Direct, LLC, No. 13-CV-0279-TOR, 2013 WL
20 4094394, at *3 (E.D. Wash. Aug. 13, 2013), the court denied injunctive relief where there was
21 insufficient evidence based on past violations to conclude that future violations were likely to
22 occur. In reaching this conclusion, the court noted that the evidence submitted "[was]
24 In United States v. Dish Network, LLC, No. 09-3073, 2016 WL 29244 (C.D. Ill. Jan. 4,
25 2016), defendant had violated telemarketing laws over a multi-year period. In September 2015,
26 less than four months before a January 2016 trial was set to begin and over three years after the
27 close of fact discovery, defendant produced call records and audit reports for the purpose of
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1 showing its compliance with applicable laws. Id. at *2-3. The court held that plaintiffs would be
2 “prejudiced by the admission of this evidence because they have never had the opportunity to
3 depose anyone about the documents or ensure that the new procedures have been implemented.”
4 Id. at *9. The court explained that defendant “only produced a highly selective portion of the
5 documents.” Id. at *9. Nonetheless, “in an exercise of discretion,” the court decided to bifurcate
6 the trial, leaving the issue of the permanent injunction for later proceedings. Id. The court
7 reopened discovery solely on the issue of the permanent injunction, but the court warned that
8 “[c]ontinually producing newly-created evidence only serves to further delay this case and
9 imposes an undue burden on the parties and the Court.” Id. In addition, the court imposed
10 sanctions on defendant for its failure to disclose the post-discovery evidence sooner, including
11 payment of reasonable attorneys’ fees and expenses related to the supplemental discovery. Id.
12 While the court in Dish Network exercised its discretion to bifurcate the trial and allow additional
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13 discovery as to injunctive relief, it did not conclude that additional discovery was necessary for it
14 to issue an injunction. In fact, the court explained that if defendant did not provide all the required
15 supplemental discovery and pay plaintiffs’ attorneys’ fees, then the court would proceed without
17 Unlike the current case, the cases cited by Qualcomm involved delays of several years
18 between the most up-to-date evidence and trial. In addition, in the cases cited by Qualcomm,
19 courts concluded that post-discovery evidence showed a change from the defendant’s past conduct
20 that was relevant to whether unlawful conduct was “likely to recur.” Evans Prods. Co., 775 F.2d
21 at 1087. As discussed below, Qualcomm seeks to introduce evidence related to changes in its
22 market position, but Qualcomm does not argue that any of the evidence relates to a change in its
23 own conduct with respect to licensing agreements or pricing of its products. Accordingly,
24 regardless of whether any unlawful conduct is presently occurring, evidence of Qualcomm’s past
25 conduct is sufficient to show whether any violations are “likely to recur.” Evans Prods. Co., 775
26 F.2d at 1087.
27 None of the cases cited by Qualcomm support the proposition that the Court must consider
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2 explained that continually producing new evidence would only burden the parties and the court.
3 2016 WL 29244, at *9. By their very nature, proceedings under the FTCA require courts to
4 consider defendants’ past conduct for evidence that “wrongs are ongoing or likely to recur.” Evans
8 evidence on any of the grounds specified in Rule 403.” Hearst, 563 F.2d at 1349; see also
9 Navellier, 262 F.3d 923, 941-42 (9th Cir. 2001) (explaining that the Court has broad discretion to
10 manage the conduct of a trial and the evidence presented by the parties).
11 The Court finds that any probative value of the proposed post-discovery evidence is
12 substantially outweighed by the danger of unfair prejudice to the FTC. Dish Network, which
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13 Qualcomm cites to the Court in support of Qualcomm’s position that consideration of current
14 conditions is necessary, explains why the FTC would be prejudiced by Qualcomm’s attempt to
15 introduce evidence of post-discovery events: “[plaintiffs] have never had the opportunity to depose
16 anyone about the documents or ensure that the new procedures have been implemented.” 2016
17 WL 29244, at *9.
18 The Court agrees with the FTC that the discovery required to test Qualcomm’s assertions
19 regarding evidence of post-discovery events “would have to include documents and testimony
20 from multiple Qualcomm custodians involved in licensing and chip sales, as well as document and
21 deposition discovery from third parties.” ECF No. 928 at 3. Adding to the burden that the FTC
22 would face, many of these third parties are located abroad. As explained above, the legal standard
23 for injunctive relief does not require the sort of continuously updated discovery that Qualcomm
24 proposes.
25 Moreover, the parties have been aware of the fact discovery cutoff date and trial date since
26 the first CMC, ECF No. 75, and the Court has enforced that discovery cutoff throughout the case.
27 In November 2017, Qualcomm proposed bifurcating the trial, and the Court rejected that proposal.
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1 ECF No. 314 at 4-5. The Court explained, at that time, that any evidence related to post-discovery
2 events must derive from “full discovery” and not “cherry picked data.” Id. at 26-27. Thus,
3 throughout the proceedings, the parties have been aware of the Court’s intention to maintain the
4 discovery cutoff date and to hold a single trial as to liability and remedy. The Court’s Order here
5 is consistent with its past orders with regards to discovery and trial management.
6 In its response brief, Qualcomm states that “Qualcomm does not seek to reopen
7 discovery.” ECF No. 933 at 1. Rather, “Qualcomm asks only that the Court consider evidence of
8 current market conditions.” ECF No. 933 at 1. Qualcomm does not explain how it proposes to
9 have the Court consider evidence of current market conditions without reopening discovery.
12 discovery events. First, Qualcomm seeks to introduce “[u]pdated evidence of OEM procurement
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13 decisions,” especially as related to the fact that Apple now sources modem chips exclusively from
14 Intel. ECF No. 929 at 3-4. Qualcomm argues that this evidence shows that “it does not, and is not
15 about to, have power in any market alleged by the FTC.” ECF No. 933 at 4. Second, Qualcomm
16 seeks to introduce post-discovery evidence of license agreements covering 5G products. ECF No.
17 929 at 3. Qualcomm argues that these “agreements are highly important because they were
18 executed at a time when Qualcomm does not sell 5G chips commercially and thus cannot have any
19 monopoly power in 5G chips.” Id. at 4. Qualcomm states that it produced ten post-discovery
20 agreements to the FTC before the end of expert discovery, and that the expert report of Dr. Aviv
22 Qualcomm does not argue that any post-discovery evidence shows a change in
23 Qualcomm’s own business conduct. All of the proposed evidence relates to alleged shifts in
24 Qualcomm’s market power. Moreover, the Court finds that some of this evidence is already in the
25 record. The Court agrees with the FTC that “Apple’s decision to use Intel chips was made before
26 the close of discovery and is the subject of existing discovery.” ECF No. 928 at 3. In addition, as
27 discussed above, the Court approved several out-of-time depositions which extended through May
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1 2018, roughly 7 months before the January 4, 2019 trial. During those 7 months, this Court has
2 ruled on at least one discovery motion, one objection to Magistrate Judge Cousin’s discovery
3 order, one summary judgment motion, multiple Daubert motions, multiple motions in limine, and
4 pretrial motions. The time required to rule on such motions will always necessitate some delay
5 between fact discovery cutoff and trial. The Court finds that the 7 month delay in this case was
7 At best, the categories of evidence identified by Qualcomm would show some shift in
8 Qualcomm’s market power since the close of discovery. By necessity, the evidence at trial will
9 never be fully up-to-date following the cutoff for discovery. As discussed above, the Court can
10 properly issue an injunction if the evidence already in the record shows that unlawful conduct is
11 “likely to recur.” Evans Prods. Co., 775 F.2d at 1087. The Court concludes that Qualcomm fails
12 to identify any post-discovery evidence that would be necessary for the Court to determine
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13 whether unlawful conduct is likely to recur. Accordingly, as discussed above, any probative value
14 of the specific evidence proposed by Qualcomm is outweighed by the risk of prejudice to the FTC.
15 IV. CONCLUSION
16 For the foregoing reasons, the Court DENIES Qualcomm’s request to introduce evidence
18 1. The parties may only seek to introduce evidence produced on or before the March 30,
19 2018 fact discovery cutoff and the testimony from the limited authorized out-of-time
21 2. The January 2019 trial will address both liability and remedy.
22 IT IS SO ORDERED.
23
25 ______________________________________
LUCY H. KOH
26 United States District Judge
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