Fed. Trade Comm'n v. Qualcomm Inc., 19-16122

• Decision Date: 23 August 2019
• Docket Number: No. 19-16122,19-16122
• Parties: FEDERAL TRADE COMMISSION, Plaintiff-Appellee, v. QUALCOMM INCORPORATED, a Delaware corporation, Defendant-Appellant, Samsung Electronics Company, Ltd.; Samsung Semiconductor, Inc.; Intel Corporation; Ericsson, Inc.; Samsung Electronics America, Inc.; Mediatek Inc.; Nokia Technologies Oy, Intervenors.
• Court: U.S. Court of Appeals — Ninth Circuit

935 F.3d 752

FEDERAL TRADE COMMISSION, Plaintiff-Appellee,

v. QUALCOMM INCORPORATED, a Delaware corporation, Defendant-Appellant,Samsung Electronics Company, Ltd.; Samsung Semiconductor, Inc.; Intel Corporation; Ericsson, Inc.; Samsung Electronics America, Inc.; Mediatek Inc.; Nokia Technologies Oy, Intervenors.

No. 19-16122

United States Court of Appeals, Ninth Circuit.

Filed August 23, 2019

Gary A. Bornstein and Yonatan Even, Cravath Swaine & Moore LLP, New York, New York; Robert A. Van Nest, Eugene M. Paige, Cody S. Harris, and Justina Sessions, Keker Van Nest & Peters LLP, San Francisco, California; Thomas C. Goldstein, Kevin K. Russell, and Eric F. Citron, Goldstein & Russell P.C., Bethesda, Maryland; Willard K. Tom, Morgan Lewis & Bockius LLP, Washington, D.C.; Geoffrey T. Holtz, Morgan Lewis & Bockius LLP, San Francisco, California; Richard S. Taffet, Morgan Lewis & Bockius LLP, New York, New York; for Defendant-Appellant.

Heather Hippsley, Deputy General Counsel; Michele Arington, Assistant General Counsel; D. Bruce Hoffman, Director Bureau of Competition; Jennifer Milici, Deputy Chief Trial Counsel; Joseph R. Baker and Rajesh S. James, Attorneys; Federal Trade Commission, Washington, D.C.; for Plaintiff-Appellee.

Michael F. Murray, Deputy Assistant Attorney General; William J. Rinner, Chief of Staff and Senior Counsel; Daniel E. Haar, Acting Chief, Competition Policy and Advocacy Section; Jennifer Dixton, Patrick M. Kuhlmann, and Jeffrey D. Negrette, Attorneys; United States Department of Justice, Washington, D.C.; for Amicus Curiae United States.

Matthew J. Dowd, Dowd Scheffel PLLC, Washington, D.C., for Amicus Curiae Hon. Paul R. Michel (Ret.)

Jonathan S. Massey, Matthew M. Collette, and Kathryn Robinette, Massey & Gail LLP, Washington, D.C., for Amicus Curiae Ericsson, Inc.

Amanda Tessar, Perkins Coie LLP, Denver, Colorado; Sarah E. Fowler, Perkins Coie LLP, Palo Alto, California; for Amicus Curiae Act | The App Association.

Steven C. Holtzman and Gabriel R. Schlabach, Boies Schiller Flexner LLP, San Francisco, California, for Amicus Curiae Mediatek Inc.

Before: A. WALLACE TASHIMA, MILAN D. SMITH, and MARK J. BENNETT, Circuit Judges.

ORDER

PER CURIAM:

Appellant Qualcomm Incorporated ("Qualcomm") moves for a partial stay pending appeal of the district court’s May 21, 2019 permanent injunction, which it entered following a trial on antitrust claims brought by the Federal Trade Commission ("FTC"). We grant Qualcomm’s motion.

The FTC alleged that Qualcomm, a leader in cellular standard technology, violated Sections 1 and 2 of the Sherman Act and Section 5 of the FTC Act in connection with the licensing of its standard essential patents ("SEPs") and sale of its code division multiple access ("CDMA") and premium long-term evolution ("LTE") modem chips. Specifically, Qualcomm refused to license SEPs to rival chip suppliers, allegedly in contravention of commitments Qualcomm made to certain standard setting organizations in the industry; refused to sell modem chips to any original equipment manufacturers ("OEMs") that lacked patent licensing agreements with Qualcomm; and imposed in its OEM licensing agreements excessive royalty rates on a per-handset basis, irrespective of whether the handset contained a Qualcomm chip or a chip from one of Qualcomm’s competitors. The complaint alleged that the upshot of this conduct was to maintain Qualcomm’s monopoly in the CDMA and premium LTE chip markets and impose an anticompetitive surcharge on its competitors’ chips.

After a ten-day trial, the district court issued extensive findings of fact and determined that Qualcomm’s practices violate the antitrust laws. The district court concluded that Qualcomm (1) has an antitrust duty to license its SEPs to rival chip suppliers, and (2) engaged in anticompetitive conduct by using its royalty rates to effectively impose a surcharge on its competitors’ chips. The district court entered a multipart permanent injunction.

Qualcomm seeks a stay of the injunction’s provisions requiring that Qualcomm make exhaustive SEP licenses available to its competitors, prohibiting Qualcomm from conditioning chip sales on the purchase of patent licenses, and requiring Qualcomm to negotiate or renegotiate its license agreements in that respect.

To determine whether to issue a stay pending appeal, we consider "(1) whether the stay applicant has made a strong showing that he is likely to succeed on the merits; (2) whether the applicant will be irreparably injured absent a stay; (3) whether issuance of the stay will substantially injure the other parties interested in the proceeding; and (4) where the public interest lies." Nken v. Holder , 556 U.S. 418, 426, 129 S.Ct. 1749, 173 L.Ed.2d 550 (2009) (quoting Hilton v. Braunskill , 481 U.S. 770, 776, 107 S.Ct. 2113, 95 L.Ed.2d 724 (1987) ). An applicant for a stay "need not demonstrate that it is more likely than not they will win on the merits," but rather must show "a reasonable probability" or "fair prospect" of success. Leiva-Perez v. Holder , 640 F.3d 962, 966–67 (9th Cir. 2011) (quoting Hollingsworth v. Perry , 558 U.S. 183, 190, 130 S.Ct. 705, 175 L.Ed.2d 657 (2010) ). Applying those factors here, we grant Qualcomm’s motion for a partial stay of the injunction pending appeal.

It is well-settled that, "as a general matter, the Sherman Act ‘does not restrict the ... right of [a] trader or manufacturer engaged in an entirely private business, freely to exercise his own independent discretion as to parties with whom he will deal.’ " Verizon Commc’ns Inc. v. Law Offices of Curtis V. Trinko, LLP ("Trinko "), 540 U.S. 398, 408, 124 S.Ct. 872, 157 L.Ed.2d 823 (2004) (second alteration in original) (quoting United States v. Colgate & Co. , 250 U.S. 300, 307, 39 S.Ct. 465, 63 L.Ed. 992 (1919) ). The Supreme Court recognized a very limited exception to that general rule when a monopolist terminated a voluntary and profitable course of dealing with a competitor and sacrificed short-term benefits to exclude competition in the long run. See generally Aspen Skiing Co. v. Aspen Highlands Skiing Corp. , 472 U.S. 585, 105 S.Ct. 2847, 86 L.Ed.2d 467 (1985). That exception, however, is "at or near the outer boundary of [Sherman Act] liability." Trinko , 540 U.S. at 409, 124 S.Ct. 872. And, here, even the two government agencies charged with the enforcement of antitrust laws—the FTC and the Antitrust Division of the Department of Justice ("DOJ"), see FTC v. AT&T Mobility LLC , 883 F.3d 848, 862 (9th Cir. 2018) (en banc)—disagree as to whether Qualcomm’s conduct implicates the duty to deal. Indeed, while the FTC prosecuted this antitrust enforcement action, the DOJ filed a statement of interest expressing its stark disagreement that Qualcomm has any antitrust duty to deal with rival chip suppliers.

We are satisfied that Qualcomm has shown, at minimum, the presence of serious questions on the merits of the district court’s determination that Qualcomm has an antitrust duty to license its SEPs to rival chip suppliers. See Lair v. Bullock , 697 F.3d 1200, 1204 (9th Cir. 2012). Qualcomm likewise has made the requisite showing that its practice of charging OEMs royalties for its patents on a per-handset basis does not violate the antitrust laws.¹ See Doe v. Abbott Labs. , 571 F.3d 930, 931 (9th Cir. 2009) (holding that "allegations of...