Tuesday, October 16, 2018

FTC and Qualcomm trying to settle antitrust matter by November 14, but Judge Koh may rule on chipset licensing anytime

On Monday, the Federal Trade Commission and Qualcomm brought a joint administrative motion asking Judge Lucy H. Koh of the United States District Court for the Northern District of California not to adjudicate between now and November 14 the FTC's motion to require Qualcomm to extend standard-essential patent (SEP) licenses to rival chipset makers such as Intel:

"Pursuant to Local Civil Rule 7-11, Plaintiff Federal Trade Commission ('FTC') and Defendant Qualcomm Incorporated ('Qualcomm') hereby jointly move the Court to defer ruling on the FTC's Motion for Partial Summary Judgment [...] for a period of 30 days (until November 14, 2018). The FTC and Qualcomm each continues to stand behind the positions in its filings on the FTC's Motion. The Parties believe, however, that deferral of a ruling would facilitate the Parties' ongoing discussions concerning the potential settlement of this litigation.

The Parties do not request that the trial of this matter be taken off calendar and do not request any change to the schedule established by the Court's Case Management Order (ECF No. 678) or the Court's Order Continuing Further Case Management Conference (ECF No. 826). The Parties also do not request that the Court defer ruling on any other pending motion."

Judge Koh gave this administrative motion short shrift: she denied it quickly, without any further explanation.

Since my first commentary on the motion, I've always felt that nothing would make a settlement more likely at this stage than an order granting the motion and reminding Qualcomm of obligations it entered into when it made FRAND licensing declarations to two U.S. standard-development organizations, TIA and ATIS. Yesterday's administrative motion validates that assessment: while the FTC and Qualcomm have presumably talked about settlement on numerous occasions (even if just calling someone to find out whether the other party's position has changed), the current situation is unique. The importance of SEP licenses to competitors couldn't be made clearer than by a motion that says the parties don't have a problem with decisions on any other pending motion but this one. This motion unsurprisingly appears to scare the living daylights out of Qualcomm.

From the outside we can only ask ourselves three questions:

  1. Would a settlement between the FTC and Qualcomm be a good thing?

    The answer obviously depends on the terms. A settlement following a ruling according to which Qualcomm must license competing baseband chip makers like Intel would definitely be preferable over one at this stage since the FTC would then at least have accomplished something important and useful, and Qualcomm would be under more pressure to settle the remaining parts of the case. But if Qualcomm has simply made headway with its DC lobbying efforts and the Trump Administration wants to let it off the hook, then a settlement in all likelihood won't help and private-party litigation (such as Apple's Southern California case, a hypothetical lawsuit by Intel seeking a FRAND license to Qualcomm's SEPs, or the 250 million consumers' class action) would have to answer the most important questions. Just yesterday I published an infographic that shows all the presently-pending smartphone patent and antitrust cases, most of which involve Qualcomm in one way or another.

  2. Is it good news that Judge Koh denied the administrative motion to defer?

    Absolutely. The sooner she resolves the actual motion now, the better for industry and consumers. It's not about whether a settlement would be desirable. It's about whether the outcome will be good.

  3. Why did she deny it?

    We can just speculate. There are some possibilities that aren't even mutually exclusive. One possibility is that she's already done most of the work and a ruling is imminent. Whether or not her order is far along, she may be concerned about parties pushing a court around like they could tell a taxi driver "please wait another hour, we'll pay you for your time." Also, it may just not seem practical to her to rule on some other pending motions first: if the court finds Qualcomm has to extend licenses to rival chipset makers (as its ATIS and TIA declarations strongly suggest), some other questions (substantive as well as evidentiary) may be easier to resolve. And she, too, may feel that if a weak FTC-Qualcomm settlement doesn't really help, we'll just see more private litigation. And where would someone like Intel sue Qualcomm for a license? Presumably in her district, and the case would most likely be assigned to her.

    Judges generally like settlements, and this is particularly true of Judge Koh. But since she's a neutral arbiter--unlike the FTC, which has done great work so far but can be influenced through political lobbying that has nothing to do with the merits of the case--, she may think she has a particular responsibility here to ensure that certain problems be solved. If they can be solved without a trial, great. But if it takes a trial, or at least a decision on the motion regarding chipset licensing, so be it.

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