19-11-29 MediaTek Acb PDF
19-11-29 MediaTek Acb PDF
No. 19-16122
v.
QUALCOMM INCORPORATED,
Defendant – Appellant.
Steven C. Holtzman
Gabriel R. Schlabach
BOIES SCHILLER FLEXNER LLP
44 Montgomery Street, 41st Floor
San Francisco, CA 94104
Telephone: (415) 293-6800
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TABLE OF CONTENTS
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TABLE OF AUTHORITIES
Cases
Aspen Skiing Co. v. Aspen Highlands Skiing Corp.,
472 U.S. 585 (1985)...................................................................... 10, 11
Broadcom Corp. v. Qualcomm Inc.,
501 F.3d 297 (3d Cir. 2007) ................................................... 12, 13, 23
Cascade Health Solutions v. PeaceHealth,
515 F.3d 883 (9th Cir. 2008)................................................................ 3
City of Anaheim v. S. Cal. Edison Co.,
955 F.2d 1373 (9th Cir. 1992).............................................................. 3
Cont’l Ore Co. v. Union Carbide & Carbon Corp.,
370 U.S. 690 (1962).............................................................................. 2
Conwood Co. v. U.S. Tobacco Co.,
290 F.3d 768 (6th Cir. 2002).............................................................. 32
Crawford v. Gould,
56 F.3d 1162 (9th Cir. 1995).............................................................. 31
Forsyth v. Humana, Inc.,
114 F.3d 1467 (9th Cir. 1997).............................................................. 8
In re Innovatio IP Ventures, LLC Patent Litig.,
2013 WL 5593609 (N.D. Ill. Oct. 3, 2013) ................................... 23, 35
Lorain Journal Co. v. United States,
342 U.S. 143 (1951)............................................................................ 28
McWane, Inc. v. FTC,
783 F.3d 814 (11th Cir. 2015)...................................................... 28, 32
MetroNet Servs. Corp. v. Qwest Corp.,
383 F.3d 1124 (9th Cir. 2004)............................................................ 17
Microsoft Corp. v. Motorola, Inc.,
2013 WL 2111217 (W.D. Wash. Apr. 25, 2013)
aff’d, 795 F.3d 1024 (9th Cir. 2015) ............................................ 22, 23
Oahu Gas Serv., Inc. v. Pac. Res. Inc.,
838 F.2d 360 (9th Cir. 1988).............................................................. 32
Otter Tail Power Co. v. United States,
410 U.S. 366 (1973)............................................................................ 10
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Statutes
Sherman Act § 2 .............................................................................. passim
Rules
Fed. R. App. P. 29(a)(4)(E) ........................................................................ 1
Fed. R. Civ. P. 15(b)................................................................................. 31
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chips per year powering cell phones, tablets, voice assistant devices,
smart TVs, and media players. Having been excluded from CDMA and
District Court decision and the imposition of relief that will restore
competition.
ARGUMENT
Section 2 violation:
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antitrust violation.
(Section II), and “exclusive dealing” (Section III) violations. In doing so,
Carbide & Carbon Corp., 370 U.S. 690, 698-99 (1962) (rejecting effort to
the slate clean after scrutiny of each”); City of Anaheim v. S. Cal. Edison
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Co., 955 F.2d 1373, 1376 (9th Cir. 1992) (“it would not be proper to focus
license its competitors, then insisting that customers have licenses before
being able to buy monopoly chips, and finally manipulating its licenses
to tax and exclude rivals in multiple interlocking ways. Second, the Court
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that the District Court “fail[ed] to identify any harm to competition” (Br.
43, 57-69), did not find that Qualcomm’s conduct “in fact caused any
such harm (id. 69-84). On these bases, Qualcomm argues that the District
Court’s opinion fails to establish a violation under the Rule of Reason and
contrary, it concluded that the evidence must in fact show harm (e.g.,
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6
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LLC v. Eaton Corp., 696 F.3d 254, 289 (3d Cir. 2012) (affirming based on
is doubly incorrect: the court neither inferred harm nor even inferred
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thus harmed the competitive process.” (Br. 23.) This simply ignores the
maintained its share, created entry barriers, and gave Qualcomm power
114 F.3d 1467, 1478 (9th Cir. 1997) (raising rivals’ costs can be
prices).
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has remained.
incorrect. As the FTC explains, Qualcomm can find no refuge in the legal
licensing rivals or that refusal-to-deal principles still apply for some other
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under Section 2. Second, even putting aside liability for refusal to deal,
exclusionary conduct.
provide rivals. Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472
U.S. 585, 593-94, 608 (1985); Otter Tail Power Co. v. United States, 410
Curtis V. Trinko, LLP, 540 U.S. 398, 409 (2004). And it stands far from
In Aspen Skiing, the Supreme Court made clear that the ultimate
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doing business with its smaller rival.” 472 U.S. at 610. The record here
Sherman Act when done “to achieve an anticompetitive end.” 540 U.S. at
409. The record here clearly fulfills that requirement, again even
below); and its conduct had the precise anticompetitive effect it intended.
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refusals to deal under the Sherman Act. Qualcomm and its amici point
regulatory scheme, 540 U.S. at 406, does not apply here, as there is no
297, 316-17 (3d Cir. 2007) (noting that Qualcomm’s FRAND commitment
And unlike in Trinko, the licenses Qualcomm refuses to offer are not
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and accepts from its licensees. Trinko, 540 U.S. at 410. In short, refusing
either of the facts required to find that duty under settled precedent: that
short-term profits only to drive out its rivals and reap monopoly profits
down the road.” (Br. 5.) This argument ignores the record and distorts
the law.
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the record evidence that other patent owners in fact do license their
patents at the chip level (e.g., 1ER129, 1ER142); that other suppliers sell
included (e.g., 1ER45, 1ER164-65); and that even Qualcomm sells chips
(1ER89, 1ER163-64).
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SEP licensors have neither the ability nor incentive to leverage customer-
2. Profit Sacrifice
because the refusal is profitable is both circular and misstates the law.
The test is not whether refusing to deal is itself profitable, but whether
challenged conduct, was and would be profitable. Trinko, 540 U.S. at 409
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be perverse.
duty to deal. This is because that remedy is among the most effective
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level licensing would ensure that Qualcomm could not continue to tax the
Corp., 383 F.3d 1124, 1133 (9th Cir. 2004) (“If the defendant already sells
to sell to its competitors, the court can impose a judicial remedy that does
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The violation found by the District Court is not the high prices or
4 Conversely, as discussed below (see infra, Section VI), the violation also
does not concern prices that are too low. The course of conduct on which
the District Court’s finding relies is predominantly non-price conduct,
including refusals to deal, raising rivals’ costs, and imposing exclusivity
and other exclusionary conditions in connection with customers’ licensing
relationship with Qualcomm.
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Had Qualcomm simply raised its own chip prices, there would be no
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Inc., 555 U.S. 438 (2009), suffers from similar defects as its duty-to-deal
monopoly chip supply not only to secure supra-FRAND royalties, but also
species of exclusionary conduct under which Qualcomm will not deal with
6linkLine holds that absent a duty to deal, dealings with rivals may not
violate Section 2. 555 U.S. at 452. But here, as discussed above, there is
ample factual and legal basis for a duty to deal.
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Qualcomm contends that the District Court should have relied on the
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chips policy — as the benchmark for whether its royalties are reasonable.
far beyond any power from its patents.9 Indeed, contrary to Qualcomm’s
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royalties are FRAND decline to rely on the patent owner’s SEP licenses.
Patent Litig., 2013 WL 5593609, at *5-8, 37-39 (N.D. Ill. Oct. 3, 2013)
Ericsson, 2018 WL 4488286, at *8-15 (C.D. Cal. Sept. 14, 2018) (similar
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cited by the District Court are relevant benchmarks, but claims that the
was at trial.10
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Moreover, the District Court did not rely on other SEP holders’
its monopoly chip supply without Qualcomm ever proving the merits of
that Qualcomm recognized that its chip power has enabled it to sustain
its royalty rates (1ER158-62), undermining the notion that the pure
for the District Court’s conclusion that Qualcomm’s royalties are supra-
FRAND goes far beyond what Qualcomm describes in its appeal and
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and premium LTE chips if they did not conclude licenses, thereby setting
selling chips to OEMs that did not hold a license to Qualcomm’s SEPs.”
power. Labeling a threat “ordinary” does not render it any less a threat,
especially where the record evidence shows that the “ordinary” practice
components, and the District Court properly condemned them under the
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of monopoly power.
license terms. (Br. 16, 100.) But this argument ignores the evidence that
doing so. (1ER179-83.) Indeed, Qualcomm has used express license and
theory,” claiming that the threats did not exclude competition in the
relevant chip markets. (Br. 100-01.) But this argument ignores the law
license terms, including terms that directly raised rivals’ costs. Such
when the monopolist has a product that customers need (here, CDMA
and premium LTE chips) but faces competition in other parts of its
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product line. Lorain Journal Co. v. United States, 342 U.S. 143, 152
(1951); McWane, Inc. v. FTC, 783 F.3d 814, 820-21 (11th Cir. 2015);
U.S. at 415 n.4. Here, the District Court relied on evidence of the
Qualcomm first argues that its agreements did not in fact constitute
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But the District Court made clear that the agreements went well beyond
that rivals with competitive products could not surmount. (E.g., 1ER92-
at 269.
1ER187-88.) But even were this not the case, viewing the exclusivity
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that when one looks at the OEMs — including Apple, Samsung, LGE,
Finally, Qualcomm faults the District Court for going beyond the
the FTC explains (FTC Br. 97-99), this misconstrues the District Court’s
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Apple agreements. (1ER154.) But even had it not, Federal Rule of Civil
Cir. 1995), which expressly limited its holding to the permissible scope of
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since trial, one significant competitor, Intel, publicly announced its exit,
reverse despite the fact that that very argument presumes a continuation
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2, 32.) But monopoly only perpetuates the insecurity of supply, and that
proven itself immensely profitable and has devoted the lion’s share of its
— far more than to R&D ($16.2 billion). Even cutting Qualcomm’s profits
at the OEM level” (e.g., Br. 132, 135-36), industry practice is inconsistent
with the notion that TIA and ATIS IPR policies require chip-level
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are merely cross-licenses (Br. 137), but fails to explain how this
distinction, which, as the FTC points out (FTC Br. 75), is incorrect and
chip suppliers. 13
relevant only if it does not alter the terms of the relevant contract. The
terms of the policies at issue are unambiguous: SEP owners must offer
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supposedly does not require licensing at the chip level, and because TIA’s
14 These admissions also support the District Court’s finding that the
chip price should serve as the royalty base for Qualcomm’s cellular SEPs
because the chip is the smallest saleable patent practicing unit
(“SSPPU”), and refute Qualcomm’s suggestion (Br. 98) that its SEPs read
on more than the modem chip. Contrary to Chief Judge Michel’s
suggestion (Michel Br. 13-15), there is nothing inconsistent between SEP
cases and the SSPPU principle, which has been applied in such cases.
E.g., Innovatio, 2013 WL 5593609, at *13-14. And contrary to
Qualcomm’s argument (Br. 96-97), the Federal Circuit’s CSIRO and
Exmark decisions, which simply hold that comparable past licenses may
establish a market royalty without reference to any royalty base
(including the SSPPU), do not undermine the District Court’s findings
here. As discussed above, the District Court referenced other SEP
owners’ licenses as benchmarks, complementing its findings regarding
the SSPPU principle.
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Qualcomm did not establish at trial that ETSI’s IPR Policy rejects chip-
level licenses. To the contrary, the ETSI IPR Policy is consistent with a
“devices” that “fully conform” to cellular standards, and ETSI has not
matter of the plain meaning of the ATIS and TIA policies. MediaTek and
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