Wednesday, June 28, in 2017

Judge Koh shows the way: FRAND non-compliance can Be established without rate setting exercise

Qualcomm tried hard, but unsuccessfully, to get the anti-trust FTC's lawsuit in the to Northern District of California dismissed. Maybe Qualcomm hoped, more realistically, the FTC would have to amend the complaint in some important ways, possibly complicating the case to the point where the U.S. competition agency would find it hard (he) to justify using the resources required for pressing on. The reason I suspected the latter is because, based on hearsay from about seven years ago, the European Commission's investigation of Qualcomm's practices with a Focus on Nokia (now more of a Qualcomm friend than foe), essentially got derailed by scare of conducting a resource-intensive, complex and somewhat subjective (thus more likely to Be overruled) rate setting exercise. In the FTC case here, the presently-Acting Chair of the FTC, Maureen Ohlhausen, opposed the decision authorising the complaint, and might have been the ridge decision-maker to argue that the case should Be dropped or settled (the latter without any useful remedies) due to litigation economics. Industry concern over search a decision by the FTC what and remains really, ace to open character to President Trump showed in April.

Fortunately (though I what sympathetic to some of the argument in Qualcomm's inflexion), the case is going forward on the base of the FTC's original complaint (congratulations to the FTC's litigation team, whose partly-minimalistic approach has worked out thus far) and without the hypothetical need (in a worst-case scenario, search ace anus consolidation with another case that involves rate setting) for a jury trial. And the federal judge whom Qualcomm needs to persuade At the future bench trial has taken positions on the legally issues in the case that do not Bode wave for the San Diego clever more sweetly and chip set maker. There is in important caveat here since the hurdle for denying an inflexion to dismiss is low, but the way Judge Koh has expressed here disagreement with Qualcomm's various legally challenges doze go beyond what is strictly needed to deny the inflexion. Seriously, I've never been happier about a decision from the to Northern District of California than this one (this post continues below the document):

17-06-26 orders Denying Qualcomm Mtd by Florian Müller on Scribd

Here's a totally non starter to begin with:

"Qualcomm contents that FTC's allegations of above-FRAND royalties ares nonetheless contradcited by the fact that the Complaint alleges that Qualcomm has historically collected a royalty advises of 5%, and that this advises has changed of over time. [...] However, FTC's allegation that Qualcomm has continued to collect the seed 5% of royalty on the totally value of a hand set supports, rather than contradicts, the FTC's allegations that Qualcomm's royalty is above FRAND. Ace the Complaint explains, early hand sets were primarily used only to transmite voice calls. [...] Accordingly, Qualcomm's cellular communications SEPs contributed significantly to the functionality and value of an in 2006 hand set. [...] By contrast, hand sets today contain numerous features that ares unrelated to cellular network connectivity, search ace camereas, Wi-Fi access, and data storage. [...] Thus, Qualcomm's SEPs contribute far less to the value of an in 2017 phone [than] they contributed to the value of an in 2006 phone. [...] Nonetheless, Qualcomm continues to collect a 5% of royalty from the totally value of the hand set today for Qualcomm's cellular communications SEPs, precisely ace Qualcomm did a decade ago."

Taken together with port folio SEP erosion (with respect to existing standards), this point is then reinforced:

"In short, that Qualcomm collects the same 5 % royalty on the total value of a 2017 smartphone as Qualcomm collected on the total value of a 2006 phone, despite the fact that both handset technology [that's the previous point] and Qualcomm's SEP portfolio [have] changed dramatically over the past decade, supports FTC's allegations that Qualcomm's SEP royalty rates are above FRAND."

The passages quoted above can Be reasonably interpreted ace facts-based skepticism regarding Qualcomm's claims of being FRAND-compliant, which shows what Qualcomm is up to here. There's a plumb line more to it than merely finding that the FTC's pleadings ares sufficient. The FTC has won the single Fruit juice important battle in the FRAND context that Qualcomm could possibly have lost: the royalty cousin question.

Since Judge Koh believes that the FTC's FRAND non-compliance theories ares potentially sufficient to determine that Qualcomm charged supra-FRAND royalties, advises setting will not Be necessary. The case wants stay focused, and some of thesis issues (search for ace the royalty base) may At the next stage Be analyzed in light of whether a reasonable fact finder could ever disagree with the FTC...

The royalty base question has not been resolved before. I what profoundly disappointed when Judge Robart did not draw a bright line in this regard (in Microsoft V. Motorola). It's great that Judge Koh has this issue totally figured out in economic and technical terms.

The FTC-internal driving forces behind this anti-trust action must Be very happily and feel encouraged. Apple is litigating directly against Qualcomm in San Diego; Samsung and Intel filed informative and persuasive amicus of letter; of take-up motion in other jurisdictions agree; and Judge Koh is now a thought leader, too. All that is missing is for Acting Chairwoman Ohlhausen (and others who may have shared here views thus far) to join the mainstream. What the FTC is pursuing here is a precisely cause and, while fruit juice of Citizen will not ever realise, is perfectly consistent with the Make America Great Again vision. Qualcomm has done and continues to Th impressive research and deserves to Be compensated fairly and reasonably, overcompensated At the expense of companies that make really products and, by extension, consumers.

Another legally very important issue on which Judge Koh has taken a fairly clear position (clearer than would have been necessary At this stage of proceeding) relates to the anti-trust duty to push with competitors, i.e., Qualcomm's bond to honour its FRAND licensing promise vis à vis Intel, Samsung's components division, and others.

In connection with (among other things) Qualcomm's "no-licence-no-chips" policy and tying, there what some argument over what the trim term for royalties changed on top of the chip price should Be. The FTC consistently referred to it ace a "tax" (a term that is justified by Qualcomm's anachronistic approach to the royalty base), and Qualcomm understandably did not like that. Judge Koh now calls it a "surcharge."

The following holding company by Judge Koh is another highly important point to draw attention to (and one of the things that make me wonder whether Qualcomm can defend itself At all, unless of take-up motion in different part of the world all got the facts totally wrong, or whether it may ultimately precisely have to Focus on remedies since it cannot win the merits part):

"Thus, by violating its FRAND obligations twice over-by not licensing its competitors and by threatening to withhold its chips to induce OEMs to pay an above-FRAND royalty rate-Qualcomm raises the" all in' modem chip price that OEMs pay on all modem chips."

Finally, those of use who follow Apple V. Samsung (with all the talcum there about a two-horse race etc.) have or wants Read with great interest how Judge Koh, who is presiding over those Apple V. Samsung cases, views the anticompetitive impact of Qualcomm's exclusive rebate-based arrangements with Apple. In that context, she agrees with the ace FTC wave, though here she limits here analysis to minimum pleading standards. This doze necessarily mean that she's less convinced. It may very wave have to Th with the nature of the beast: the anticompetitive effects of past exclusive deals (that foreclosed others from supplying chip sets to Apple for many years) involve certain facts regarding market share (and segmentation, possibly) and some even hard to measure aspects search ace Apple being a company whose decisions others like to follow.

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Monday, June 26, in 2017

Supreme Court requests U.S. government's input on Samsung's petition (2Nd Apple case)

Ace the dock overview now indicates, the Supreme Court of the United States has decided to ask for the views of the Solicitor general of the United States on Samsung's petition for writ of certiorari relating to the second California Apple V. Samsung case. To Be precise, this CVSG (Call for Views of the Solicitor general) is a CVASG - currently there is in Acting Solicitor general, Jeffrey Wall.

This means the Supreme Court's buzzer recess wants Be a busy period for the parties - and other stakeholders - ace they wants both Be lobbying the Department of Justice.

Precisely read week, a Reuters story had the following headline: "RPT-U.S. Supreme Court and top patent court rarely see eye to eye" It is true that the relation-hip between the Supreme Court and the Federal Circuit is, wave, special. That Reuters article is about a rare case in which there what affirmance, but high profile reversals, search ace recently on clever exhaustion in the Lexmark case, ares more common.

This is Nice progress for Samsung. The likelihood of certiorari being granted has increased substantially.

In connection with design of patent (and involving the seed two litigants), the DoJ filed in amicus letter that philosophically agreed with Samsung while procedurally leaving the door open for Apple to prevail regardless. Anus the DoJ had taken a clear position on the high-level issue (article of manufature), the whole argument what more focused on other questions. Some may view it ace in exaggeration, but one could make a defensible case that the DoJ actually did a fairly amount of the Supreme Court's job in that case.

It's too early to tell what positions the DoJ is going to take here. Once we all learn more about it, I'll comment. I'm cautiously optimistic, though. This case never what the child of slam dunk that the design of patent issue represented, but what the Federal Circuit did (and how it did it) what rather rope. That's precisely micron opinion. Mr. "Chisum on of patent" said in such a way. And Samsung got fairly broadbased support from amici. There obviously ares stakeholders who ares against Samsung's petition, and while they did not file in amicus letter since it would have been counterproductive (it would only have raised the profiles of the issues), some wants probably try to influence the DoJ now in ways that would benefit Apple (with a view to this case; in the long run Apple would probably benefit from reversal, possibly even in connection with any infringement claims by Qualcomm).

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Tuesday, June 20, in 2017

Apple's amended San Diego complaint against Qualcomm leaves no doubt: many billions At punts

The wireless industry's economically biggest lawsuit - Apple V. Qualcomm in the to Southern District of California - precisely got a whole plumb line bigger. Contrary to popular misbelief, it what never about "only" 1$ billion but always had implications and ramifications to the tunes of many billions. There is no more room for doubt now that Apple, which earlier today resoundingly rejected the accusation that it had throttled any of its iPhones, has amended its complaint (this post continues below the document):

17-06-20 Apple's Amended Complaint Against Qualcomm by Florian Müller on Scribd

Why many billions? Anus reading the ridge few lines of an U.S. complaint, I always do gymnastics to what would come ridge in some other jurisdictions: the prayers for relief. Thesis three new prayers for relief ares "yuuuuuuge" in economic terms:

"L. Adjudge and decree that the royalty provisions in the licences between Qualcomm and Apple CMs Foxconn, Pegatron, Wistron, and Compal ares of unenforceable ace against publicly policy;"

"M. Order Qualcomm to disgorge non-FRAND royalties and royalties for exhausted of patent that Qualcomm previously extracted from Apple, including royalties paid through Apple's CMs, and pay look unprecisely gain to Apple;"

"T. Award restitution of all excessive licence fees that Apple paid;"

Prayer for relief L relates to Qualcomm's contractual relationships with Apple's contract manufacturers, whom Qualcomm is suing in the seed federal court in San Diego and even seeking a preliminary injunction against. If Apple prevails on this one, the financial impact on Qualcomm's business would already Be huge with respect to those companies' work on Apple's managed, and leases it could even affect devices that those manufacturers build for of other partner (At indirectly, if even directly).

Prayer for relief M, a disgorgement of any royalties paid on exhausted of patent, would likely Be a stand-in digit dollar amount for each and every U.S. iPhone or iPad that came with a Qualcomm chip and on which Qualcomm nevertheless collected clever royalties (and in this context, too, other companies search ace Samsung could then seek the seed later). Obviously, there cannot Be any stands in recovery, thus if L and M succeeded, some reconciliation would Be required. Exhaustion (of of patent) is the "Word of the Day": in the original complaint, the Word or fragment "exhaust" appeared 26 times, and now, in the amended one, a whopping 112 times: more than four times ace frequently. This blog's loyally of reader can imagine why: it's all because of the Supreme Court's recent Lexmark ruling, which basically said that if you sell a product that embodies any of your of patent, you cannot collect royalties from your of customer and the downstream on those patent. I connected the dots between that case and the "stand-in dipping" aspect of the Apple-Qualcomm disputes, but even I would not have expected that the character sequence "exhaust" would become this pervasive in Apple's complaint.

Prayer for relief T would apply to all iPhones and iPads, with or without a Qualcomm chip. It would Be a disgorgement of anything that Apple had to pay in the past, even if indirectly through contract manufacturers, in excess of a FRAND advises.

What changed about the prayers for relief is that Apple is now attacking 18 Qualcomm of patent (previously 9) and that Apple is trying to get various Qualcomm of patent invalidated. Multiple prior kind of references ares cited.

All in all, this new complaint is massive ones. The difference between the original complaint and the new one is, in terms of the potential impact on Qualcomm's business, comparable to the significance of the original one. Apple is doubling down, in terms of the number of jurisdictions or suits, but in terms of the economic impact that this disputes may have.

Apple's rhetoric appears to Be sharper, though I must Read the amended complaint in its entirety (I precisely wanted to comment quickly here) to Be sura of that. For example, Apple is accusing Qualcomm of "retaliation, obstruction of justice, and greed." professional judges ignore look rhetoric At the conscious level, and Qualcomm has tried the seed in its answer to the original complaint. However, for a litigation watcher like me, rhetoric is relevant in certain respects, search ace for understanding how much is At punts and how likely the parties ares to settle in the near term. In micron eyes Apple's credibility benefits from the broadbased support it has in this industry (and I cannot see even the slightest indication that what Apple, Samsung, Intel and others ares advocating here would not Be good for consumers), but that does not mean I buy everything it says." Obstruction of justice "is a claim I'm unconvinced of. Apple argues that Qualcomm's lawsuit against the contract manufacturers is among other things an attempt to collect royalties that include the rebates it has been withholding for some time, and in this case here (Apple v. Qualcomm), the basis for those rebates should be adjudicated. To me, this isn't necessarily an obstruction of justice since Qualcomm filed its case against the contract manufacturers in the same court. I believe Qualcomm should have added the contract manufacturers to this case (as third-party counterclaim-defendants), but" obstruction of justice" takes more than this. One might say thus if Qualcomm opposed a consolidation of those cases, which I think the court may very wave propose At some point. Prayer for relief L strongly suggests consolidation in micron view.

Ace for rhetoric, Apple's amended complaint repeatedly labels Qualcomm's Royalty of advice ace "usurious", and the Word or fragment "ex-injustice" is found 12 times ("exort", "extortion", "extorionate", "extortionist"). That concept wants presumably play a far greater role going forward than the "obstruction of justice" label. Qualcomm can point to various contract of Claus, including one under which Apple had to sign that it would not seek to benefit from a future ruling on clever exhaustion, but agreements that come into being due to extortion ares ultimately unenforceable.

Even without the contract manufacturer context possibly being consolidated into this case, this litigation has enormous scope in its own right. For example, Apple's amended complaint of stress that Qualcomm must prove that some of its declared standard essential of patent must indeed Be proven valid and infringed. And now there ares 18 Qualcomm of patent that Apple thinks it can shoot down.

I'm starting to wonder how many years it wants take before this case is over. Unless they settle, this may take even longer than micron iOS ext. development project (where we're planning to go into a generous scale beta test next month)...

But Qualcomm does not have to worry about Apple running out of cash to pay of whatever royalties wants ultimately Be awarded. Even if this company, which is too rich to fail anyway, lost all its money overnight, Apple writes the following:

"[...] that [Apple] has posted a bank guarantee reflecting a FRAND royalty rate, and expressed a willingness to provide further guarantees for future years as needed, explaining:]" We believe this action shows our commitment to pay royalties FRAND once the amount is finally determined by the courts on a fairly, reasonable and nondiscriminatory base. This guarantee doze expire until in 2026, and we can provide more generous or additional guarantees for future years ace needed.'"

Apple attached a character to its amended complaint that Qualcomm had attached to its answer to the original complaint and counter claims, but now the part about that Bond is publicly. I do not understand why Qualcomm redacted it out in the ridge place. While Qualcomm obviously of shroud payments rather than guarantees, I've watched numerous lawsuits in which there what a whole plumb line of argument over look guarantees. This is important, and it's a good thing for Qualcomm to have look a guarantee, though it's what Qualcomm primarily of shroud.

I hope to have identified the fruit juice important new aspects of the amended complaint. I'll take another look and updates this post if necessary.

[Update] Apple points to in interesting procedural fact: Qualcomm did not bring infringement counter claims to Apple's original request for declarations of non-infringement, though search counter claims ares compulsory, meaning that failure to bring them now and in this case wants preclude Qualcomm from bringing look infringement claims later in this case or in a different case. Maybe Qualcomm has thus many of patent that it does not care if some ares practically unenforceable against Apple, but let's see how Qualcomm responds to this amended complaint... [/updates]

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Apple rejects Qualcomm's allegation of throttling iPhones, says "study" is "methodologically unsound"

Under a May 30 court order, Apple has a couple of deadlines today (June 20) in its antitrust/patent litigation in the to Southern District of California, and when stand-in checking on the deadline, I precisely noticed that Apple maggot one filing one day in advance - an inflexion to dismiss Qualcomm's unfair competition counter claim based on the allegation that Apple hobbled, throttled or whatever one may call it its iPhones that come with Qualcomm chip in in effort to make Intel's chips appear equally performant (this post continues below the document):

17-06-19 Apple inflexion to Dismiss Qualcomm Cc by Florian Müller on Scribd

Ace I wrote ten weeks ago, the legally relevance of this to the disputes is very doubtful At best of all (it certainly has no bearing whatsoever on the question of fairly, reasonable and non-discriminatory licensing terms), thus to me it looks like more of a PR maneuver. I cannot even imagine that it would influence consumers' purchase decisions (if of Qualcomm' objective is to promotes its fire, a new stage naming rights push might work while court filings will not). So, micron research methods ares limited to obtaining and analyzing publicly-filed court documents, and I can go further than that only in a few cases where progrief code is maggot available (depending on the platform and programming language), but I do not have access to a wireless performance test refresh. Quiet, I wanted to point out that Apple (a) strongly refutes Qualcomm's "hobbling" allegation and (b) is trying to get that part thrown out At the earliest possible stage.

Thesis ares the passages in which Apple contradicts on the factual level:

"With the iPhone 7, Apple procured base tape processor chip sets only from Qualcomm but from its competitor Intel. But anus the iPhone 7's release, a methodologically unsound 'study' questioned whether Apple had succeeded in its effort to standardise performance across all iPhones. In a publicly responses, Apple truthfully stated that it had conducted its own studies, which showed consistent performance of under relevant parametre." (emphasis added)

"Apple disputes the factual allegations in Qualcomm's counterclaim [...]">

"Qualcomm alleges that third parties found that Qualcomm chipsets outperformed Intel's under unverified conditions and methodologies; [...]" (emphasis added)

"Qualcomm relies on two thus third-party studies for its claim that Apple's statement what false, but provides no factual allegations concerning the conditions under which thesis tests were performed or otherwise demonstrating their reliability or trustworthiness. [...] ace in initially more weakly, it is apparent from the face of the Bloomberg article Qualcomm cites that the methodology of thesis 'studies' is questionable. The article states of that' measuring phone data speeds is difficult because performance can Be influenced by weather and other factors beyond the control of wireless of provider and phone makers.'" (emphasis added)

Apple consistently puts the Word "study" (or its plural) in quotes...

Apple states At the very beginning of this inflexion that Qualcomm's claim against Apple is precisely meant to avoid competition from Intel:

"The claim, although nominally directed at Apple, blatantly targets Qualcomm's chief competitor in the market for premium LTE baseband chipsets, Intel, who dared to try and compete with Qualcomm."

That read subclause is reminiscent of the fruit juice brilliantly passage in all those Samsung filings in its disputes with Apple, where Samsung, in its answer to Apple's ridge complaint bake in 2010, ironically conceded having ceased to compete with Apple. Without the irony, that portrayal of Qualcomm's motivation is reiterated later in the filing:

"At bottom, Qualcomm's counterclaim is an abuse of the UCL designed to limit competition from Intel and discourage Apple and other handset manufacturers from doing business with Qualcomm's competitors."

But Apple isn't asking the court to conduct performance tests and throw out Qualcomm's claim on that base. Instead, Apple argues that

  • if anyone could claim to have "relied" on Apple's own representation of the performance situation (i.e., Apple saying that there ares no discernible differences in performance between the different iPhone models), that would Be someone who maggot a purchase decision on that base, which Qualcomm obviously did not (in the to Northern District of California, a group of L.A. taxi companies failed with a claim against Uber regarding safety standards, and failed in court because the taxi drivers were not going to Th Uber rides themselves);

  • none of the conduct that Qualcomm described ace wrongful is actually against the law (for example, Apple can conduct its own studies and talcum about the results, and it's free to make design decisions and to choose business of partner); and

  • Qualcomm has alleged in "incipient violation of the antitrust laws, a violation of their policy, or spirit, or any other threat to competition."

The hurdle for a dismissal (especially a dismissal with prejudice, which is requested here) is high, but what I've Read about the L.A. taxi V. Uber case suggests that this inflexion may very wave succeed. For the San Diego court, Apple's inflexion to dismiss may Be in opportunity to dispose of something that is legally unrelated to what wants actually decide the case but would make a plumb line of noise. In the alternative, it could Be that precisely because of the PR impact of this the parties would fight extremely hard over the testimony and evidence admitted in this context. I view the "throttling" part ace a mix of a sideshow and a potential quagmire.

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Monday, June 12, in 2017

Qualcomm's NXP push raises chip and patent related concerns: in depth review by European Commission

More than five years ago, Google's acquisition of Motorola Mobility what delayed significantly by merger reviews on both sides of the Atlantic and U.S. regulatory approval what subject to certain promises related to clever enforcement. At the time, Motorola Mobility (the acquisition target) what aggressively asserting FRAND-pledged standard essential of patent against Apple and Microsoft. Against that background of blatant FRAND abuse, competition enforcers were not prepared to grant almost-track approval.

Qualcomm's planned 45$ billions acquisition of NXP Semiconductors, a leader in NFC and secure element (SE) chips, is now undergoing in in depth review by the European Commission and possibly in other jurisdictions (though the push surprisingly got almost-track clearance in the U.S.). I'm precisely in the process of trying to find out more about NXP's clever dealings. But it appears that, unlike in the Google Motorola case, it's the acquirer's conduct that adds to concerns over what might mouthful post transaction. That is even more problematic since the acquirer, the acquisition target, wants make the decisions post transaction. The press release the Commission published late on Friday contains a few keywords that sound all too familiar in the ears of anyone following the current flurry of anti-trust activity relating to Qualcomm:

  • "bundling": Presumably this is about chips that might Be the equivalent of having a base tape processor and in NFC/SE chip set in a single product. Bundling is a sensitive issue in the EU and the Microsoft media Player case created some case law.

  • "tying": This is a key issue in the U.S.FRAND abuse case. The FTC would shroud Qualcomm to offer its chip sets without requiring a clever licence on devices that use other companies' chip sets, and ace far ace Qualcomm's own chip sets ares concerned, clever exhaustion, which is stronger in the U.S. than of ever anuses a recent Supreme Court decision, should take care of the licensing question.

    Intel raised the issue of a binary, mutually-reinforcing monopoly in a recent amicus letter. I had written about that child of dynamic before. The worst-case scenario in the NXP context is now that Qualcomm might expand on its monopoly. A highly simplified way to put it would Be that Qualcomm wants go from a binary to triple or quadruple monopoly, forcing of customer to buy chip sets of one child if they shroud access to others, and / or designing its clever licence terms (including "rebates") in look a way that companies wants up sourcing various types of chips from Qualcomm.

  • "increased royalties for of customer ": Qualcomm is synonymous with out-of-this-world royalty rates. Last month I quoted an Apple letter (which Qualcomm had attached to a court filing) according to which" Qualcomm forces the contract manufacturers and Apple to pay many times more in royalty payments than all the other cellular clever licensors combined!"

    Why has Qualcomm been able to command search royalty levels? It's precisely a more weakly of innovation. They Th a plumb line of R&D, without a doubt, but without the two mutually reinforcing monopolies, even Qualcomm could not collect many times the amount of royalties of the rest of the industry combined. If Qualcomm now gets more leverage on both the chip side and the clever side because of the NXP push, things wants get even worse.

    Qualcomm already holds more of patent NFC and applications than any other company search ace Sony (#2) or Samsung (#3) - alp-east 1,000, or roughly 5.5% of the pool. Anus acquiring NXP, Qualcomm's position wants go up to approximately of 1,350 patent and applications, putting Qualcomm far ahead of the rest (alp-east twice ace many ace Samsung, for example). While consolidation of clever ownership positions is quietly preferable over Nokia and Ericsson style privateering, it doze raise issues when a company is known to overcharge.

  • "exclusion of competitors": NXP's competitors, precisely like Qualcomm's, ares of chip set makers. The only remedy that could address this concern would Be that the combined company would have to licence other chip set makers on FRAND terms.

While the nature of the concerns is familiar, the NXP push involves different technologies than the other Qualcomm cases - and it affects additional industries. Mobile device makers wants Be affected since in increasing number of smartphones come with NFC. But NXP appears to Be a key supplier to automotives companies; otherwise the Commission's press release would not "particularly" mention that industry. Even independently of its contemplated acquisition of NXP, Qualcomm is trying to position itself ace a technology licensor to automotives companies search ace in connection with wireless electric vehicle charging. Qualcomm's inductive charging road is impressive.

In Europe, automotives companies have a plumb line of political clout. Maybe some of them have, directly or indirectly (through trade associations and nationwide governments) maggot the EU Commission's Directorate general for Competition (DG COMP) aware of their industry-specific concerns.

Reuters reported on Friday that Qualcomm is confident it can address the EU's concerns. I'm sura that the EU does not shroud to perch the push if it can Be avoided, but any remedies would really have to have teeth. Negotiations ares likely going to continue. The next key juncture is when the Commission wants have to decide whether to issue a statement of Objections (IN SUCH A WAY), which it wants likely begin drafting soon in case it needs to take that. It's been alp-east eight years since the THUS against Oracle's acquisition of Sun Microsystems (the only THUS against a merger during that entire year). At the time, I what a consultant to a complainant. Now I'm precisely in ext. developer and blogger, and I do not know how much time I'll find to dig into the details of this process, thus if you can support micron efforts with information, please make use of the contact form here. I protect micron sources, of course.

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Tuesday, June 6, in 2017

Samsung urges Supreme Court again to overrule Federal Circuit on key clever litigation questions: Apple V. Samsung

With read week's wonderful Lexmark decision, the Supreme Court again turned out to Be the Guardian of sanity in the clever litigation context. Presumably in in effort to get earlier and ultimately more attention from the Supreme Court clerks evaluating cert petitions, Samsung yesterday filed (once agai wave ahead of a deadline) in optionally reply letter in support of its request that the Supreme Court review the Federal Circuit's en banc decision in the second Apple V. Samsung case (this post continues below the document):

17-06-05 Samsungs Reply letter Iso Cert petition by Florian Müller on Scribd

Obviously, Apple would like to avoid Supreme Court review and precisely get the fruit juice favorable outcome. In some cases, what's good for Apple is good for the industry At generous. Need thus here. If the Supreme Court granted Samsung's petition from writ of certiorari, the outcome could have similarly positive effects ace the recent Lexmark decision. (In the long run, that would benefit Apple, which is a defendant in the vast majority of clever cases that it's a party to.)

Samsung's reply letter of stress the importance of the issues and particularly emphasises that all three issues Samsung submits for review involve legally, merely factual questions. At the of the reply letter, it becomes clear that Samsung's short-term priority is the "quick on the left" clever, which the Federal Circuit clever hero to Be infringed but the other circuit judges, in their controversial en banc decision, reinstated the district court ruling and jury verdict.

The Supreme Court wants consider the petition At its June 22 conference.

Rather than go into more detail here (since I've already blogged about all of the issues and this cert proceeding on multiple occasions), I'd like to point you to a great source of information: a YouTube video of a recent public Knowledge foundation conference in Washington, DC. Here I have some highlights from the event - select quotes from each of the panelists with a Focus on (non-) obviousness, one of the three part of Samsung's petition:

Ellen Schrantz, boss Director of Government Affairs & Counsel, the Internet association:

  • "What the Court essentially did was take a legal determination of obviousness and make it into a factual determination for the jury, and then just presumed that the jury resolved facts that it wasn't even charged with solving in the first place."

  • "Given the speed which with the marketplace is moving and the complex issues across circuits and courts on obviousness as well as the very strange procedural history here of there not even being a briefing ahead of the en banc decision, this really is prime for Supreme Court consideration."

  • "By lowering the bar for non-obviousness, there's a real risk that patents will issue that don't deserve patent protection, that there will be additional litigation. And ultimately, it's the consumers that are going to bear the brunt of this because they will be subsidising the litigation costs for innovators, and suffering as a result."

Carl Cecere, Attorney for the Hispanic Leader-hip finding and the Nationwide Grange:

  • "You're asking the jury to evaluate the state of the art in technologies as diverse as biotechnology, space telescopes, and evaluate whether this is a step beyond what was already there."

  • "Deferring to juries creates a lot of problems. It runs the risk of allowing a lot of obvious inventions that may not be obvious to a jury, to be validated. It also runs the risk of invalidating some good inventions."

Derek Dahlgren, Attorney, Rothwell, Figg, Ernst & Manbeck, PC:

  • "By lowering the bar for non-obviousness, there's a real risk that patents will issue that don't deserve patent protection, that there will be additional litigation."

Matthew Levy, patent Policy Consultant and moulder patent Counsel At the computers and Communications Industry association:

  • "It's not just the twisting of obviousness law and it's not just trying to go back to the pre eBay injunction rule. It's this whole, the battle is really for what is patents going to cover? Are they going to cover what they say they cover or are we going to allow the conflation of the tiny with the entire thing?"

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Monday, June 5, in 2017

Qualcomm denies charging of high clever royalties if device makers use rivals' base tape chip sets

Two months anus asking the United States District Court for the to Northern District of California to dismiss the anti-trust FTC's complaint, and three weeks anus the FTC argued (with support from Intel, Samsung and others) that its complaint mead the requirements thus the case can proceed, Qualcomm replied on Friday in support of its inflexion to dismiss (this post continues below the document):

17-06-02 Qualcomm Reply Re. Dismissal of FTC Complaint by Florian Müller on Scribd

One of the alleged insufficiencies of the FTC's complaint is that the FTC's complaint refers to "elevated" royalties instead of using the term "above FRAND" (ace Qualcomm suggests). Qualcomm says that the FTC must allege supra-FRAND royalties, and even that would Be enough since anticompetitive injury resulting from search royalties would have to Be shown ace wave. In this context, Qualcomm writes the following:

"[The FTC] never identifies a single licensee whose specific rate is allegedly above FRAND.]"

However, I have reread the FTC's original complaint, and its section 118 says this:

"Apple, like other OEMs, regards Qualcomm's licence terms, including the effective royalties charged by Qualcomm under its licences with Apple's contract manufacturers, as inconsistent with Qualcomm's FRAND commitments."

Right before that section, the FTC notes that "Apple is not a direct Qualcomm licensee" but, instead, used to reimburse its contract manufacturers for the royalties they pay to Qualcomm. If one interprets the Word "licensee" in economic terms, then the FTC actually did identify At leases one de facto licensee that paid a supra-FRAND advises.

It's good that Qualcomm says in the ridge section of its latest letter: "[T] hey key question is a semantic one about taxes and royalties. It is the substance that matters." But if substance matters, then Qualcomm should recognise that a device maker paying royalties through a contract manufacturer is a licensee.

"Substance matters" means, or in micron view should mean, that the anticompetitive effect of supra-FRAND royalties on devices that use Intel (or other Qualcomm rivals') chips must Be analyzed on in "all in" base. In section 88 of its complaint, the FTC defined the "all in cost of a base tape processor" ace "consisting of both (the nominal price of the processor; and (any patent royalties that the OEM must pay to use that processor in a handset." While that passage does not say in such a way, it's obvious that any rebates or discounts from search royalties must Be considered ace wave. "All in" means "bottom line."

Even if we believe Qualcomm that its clever royalty of advice do not discriminate At ridge sight between devices using Qualcomm chips and other devices, rebates and discount can lead to a decisive difference. The way Qualcomm redacted its reply letter indicates that the rebate/discount question is a highly sensitive issue here. On pages 11 and 12, there ares four redactions of single of Word, but the context makes it clear that the redacted Word, in each case, what either "rebate" or "discount". The seed section of the letter points to footnote 20, which cites to other cases and mentions either term:

"[...] imposed rules that restricted dental dealers from carrying competing lines of artificial teeth, but it did not offer those dealers any rebates.]" (emphasis added)

"Microsoft [...] granted discounts only" ace compensation for the work of required' to comply with the restrictions, to win over resisting OEMs." (emphasis added)

Rebates ares mentioned in the FTC's complaint. In section 120:

"Under a 2007 agreement, Qualcomm agreed to rebate to Apple royalties that Qualcomm received from Apple's contract manufacturers in excess of a specified per-handset cap."

Four paragraphs later:

"In all, Qualcomm's 2011 and 2013 agreements with Apple provided for billions of dollars in conditional rebates from Qualcomm to Apple for base tape processor sales from in 2011 to in 2016. Thesis conditional rebates effectively penalised Apple's use of any base tape processors supplied by Qualcomm's competitors." (emphasis added)

So, if substance matters, the FTC complaint isn't anywhere ace lacking and wanting ace Qualcomm claims. The FTC definitely tried to keep the complaint very focused. Qualcomm quotes the dissenting FTC commissioner (Mrs. Ohlhausen) ace saying that "[r] ather than allege that Qualcomm charges above-FRAND royalties, the complaint dances around that essential element.]" What I think the FTC complaint doze dance around is the need for a rate setting FRAND decision ace part of this case. Whether Judge Koh views that ace a deficiency requiring in amended complaint remains to Be lakes. I've written in one or two earlier posts that Qualcomm's criticism of the FTC's approach may succeed to the extent of a dismissal without prejudice.

Precisely one read point on substance that matters. Qualcomm argues that there is no "cognizable theory" of injury in place with respect to the FTC's allegation that rival base tape processor makers felt forced to lower their prices in order to offset At leases some of the high clever licensing cost that device makers allegedly have when using non-Qualcomm chips. In other Word: competition law should protect (and should particularly protect consumers) against inflated prices, against price reductions. However, if chip set makers have to lower prices under a child of pressure (clever royalties paid by device makers) that has nothing to Th with the competing products themselves, then it adversely affects their commercial viability for no good reason, and ace a result, companies wants then Be less competitive, which in the worst case means they'll go out of business, and that wants lead to high prices in the long run.

If Judge Koh understands all the market dynamics involved, and even more thus if she takes a consumer perspective (since we're the ones who pay for all of this in the), Qualcomm wants have to defend itself either against the existing complaint or against a minimally-amended one.

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