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Avoiding Bad Precedent?

Despite FTC-Qualcomm Decision, SEP Concerns Remain

The FTC's decision not to seek Supreme Court review of its antitrust case against Qualcomm (see 2103300003) leaves standard-essential patent (SEP) and competition issues on the table, tech officials said in interviews after last week's decision. A Qualcomm proponent argued the FTC knew it had a weak case and wanted to avoid setting bad precedent before the high court.

Given the agency’s 9th U.S. Circuit Court of Appeals loss, it would have been a “tough case to bring to the Supreme Court,” said Computer & Communications Industry Association Patent Counsel Joshua Landau. SEP cases will continue to surface until there’s more clarity, he said. Landau said then-DOJ Antitrust Division Chief Makan Delrahim, who wrote in opposition to the FTC in the case, “stepped fairly far away from the consensus view of what SEP law permits and allows.”

The FTC’s decision followed the long and costly journey to the 9th U.S. Circuit Court of Appeals, said ACT|The App Association Communications Director Ashley Durkin-Rixey. The decision not to prolong the case doesn’t mean SEP abuse and the role of antitrust law disappears, said Senior Director-Public Policy Graham Dufault. Further SEP abuse from aggressive licensors is an issue for the automotive industry, he added. That sector sided with the FTC in the Qualcomm case (see 2010070003).

Acting Chairwoman Rebecca Kelly Slaughter signaled in her announcement that the FTC had a weak case from the start, said International Center for Law & Economics Innovation Policy Director Kristian Stout, whose organization filed in support of Qualcomm. “If there were in fact problems with the way Qualcomm behaved, every aspect of it sounded to me like at most a contract violation that should have been resolved in a civil suit,” he wrote. “The antitrust theories they tried to advance were speculative.” The trend seems to be enforcers bringing cases for the sake of bringing cases, he said.

The FTC didn’t necessarily have the option of seeking high court review, said former FTC antitrust attorney Kevin Hahm, now at Hunton Andrews: The “headwinds” Slaughter cited likely involved commissioners' 2-2 split between Democrats and Republicans. The FTC appealed for 9th Circuit en banc review with the support of then-Republican Chairman Joe Simons (see 2009250068). That motion was denied Oct. 28, and there’s a 90-day window to file a writ of certiorari with SCOTUS. “If that was the case, she needed the third Dem to be on the commission before that clock ran out,” he said.

The agency would have been facing a 6-3 conservative Supreme Court majority, said Bloom Strategic Counsel’s Seth Bloom, who argued in favor of the FTC in the case. The court has been “hostile” toward antitrust claims in recent years, he said: “They would have been concerned about the national precedent that could have been set if they appealed to the Supreme Court and got an adverse decision.” He agreed with the agency that Qualcomm was abusing SEPs and not living up to its promises under fair, reasonable and nondiscriminatory (FRAND) terms.

Not appealing shows a “pragmatic recognition that the Supreme Court likely wouldn’t have come down on their side,” said Freshfields’ Andrew Ewalt. It’s better to live with the 9th Circuit decision than have SCOTUS “make it applicable throughout the country,” he added. “That approach leaves more options open to them to make similar arguments in future cases.” The 9th Circuit decision won’t affect the FTC’s willingness to file cases in the future, predicted Hogan Lovells’ Chuck Loughlin: “Like any litigant, the FTC will have to consider the 9th Circuit opinion, but I don’t think it will be deterred from filing cases.”

Qualcomm declined comment. The FTC pointed to Slaughter's comments in announcing the decision.

Slaughter’s recent comments before the House Antitrust Subcommittee (see 2103190013) show there’s no lack of interest in licensing abuse, said Dufault. Slaughter told House Intellectual Property Subcommittee ranking member Darrell Issa, R-Calif., the agency needs to make sure market power isn’t abused. FRAND commitments need to be honored so “market power from your inclusion in a standard on which many implementers read doesn’t allow you to exclude competitors from the market,” she said. “That’s different from the way we traditionally think about patents, which are really rights to exclude.”