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From Antitrust Law Daily, August 30, 2018

Consumers lack standing for preliminary injunction against Qualcomm enforcing ITC order

By Jeffrey May, J.D.

In an antitrust action against Qualcomm Incorporated, complaining consumers lacked standing to seek a preliminary injunction preventing Qualcomm from enforcing any exclusion or cease-and-desist order that the International Trade Commission (ITC) might issue in separate patent-infringement proceedings against Apple Inc. Among other things, the consumers took issue with exclusive agreements between Qualcomm and Apple. Qualcomm initiated proceedings in the ITC, claiming that "Apple’s imported mobile electronic devices that do not incorporate a Qualcomm brand [modem chip] . . . infringe, or are manufactured by processes that infringe, one or more claims" of Qualcomm’s patents, and seeking an order excluding infringing Apple mobile devices from importation into the United States. The antitrust plaintiffs lacked Article III standing to seek their requested relief as their purported harm depended upon a number of contingencies. The chain of inferences was too speculative to conclude that the plaintiffs faced an imminent risk of injury (In re Qualcomm Antitrust Litigation, August 29, 2018, Koh, L.).

In denying the consumers’ motion for a preliminary injunction, the federal district court in San Jose, California, explained that the case required an understanding of the complicated interaction between cellular communications standards, standard essential patents (SEPs), and the market for baseband processors, or "modem chips." The plaintiffs alleged that Qualcomm used its SEPs and its modem chips monopoly to harm competition in certain modem chips markets. More specifically, Qualcomm allegedly used its dominance in the supply of Code Division Multiple Access standard and premium-Long-Term Evolution (LTE) modem chips to skew SEP licensing negotiations toward outcomes that benefitted Qualcomm and harmed Qualcomm’s modem chip competitors, thereby driving up prices for products containing the chips. The plaintiffs’ allegations pointed to: Qualcomm’s "no license-no chips" policy, Qualcomm’s refusal to license its SEPs to its competitors, and Qualcomm’s exclusive deals with Apple pursuant to which Apple used only Qualcomm’s modem chips in Apple’s flagship products. Separate from the consumer action is an FTC enforcement action against Qualcomm for engaging in unfair methods of competition.

The plaintiffs lacked Article III standing to pursue the relief that they sought because their theory of future injury was too speculative to satisfy the well-established requirement that threatened injury must be "certainly impending," according to the court. The plaintiffs did not claim that they were injured by the mere pendency of an action before the ITC. Rather, they asserted that if the ITC issued an exclusion or cease-and-assist order, Qualcomm’s enforcement of that order would cause economic harm to consumers in the marketplace. The court decided that the chain of inferences was too speculative because the following events would have to occur in order for the plaintiffs to experience their asserted injury: (1) the ITC’s administrative law judge had to issue an initial determination on patent infringement and validity and whether exclusion was in the public interest (by September 14, 2018); (2) the full ITC had to review the ALJ’s initial determination and enter a final exclusion or cease-and-desist order based on Qualcomm’s proving (a) patent infringement, (b) patent validity, and (c) that exclusion is in the public interest (expected by January 14, 2019); (3) the President had to refrain from exercising his authority to disapprove the ITC’s exclusion determination; (4) if an appeal is taken, the Federal Circuit had to allow issuance of an exclusion order; and (5) Qualcomm had to enforce the exclusion or cease-and-desist order against Apple.

The consumers can still pursue antitrust and consumer protection claims against Qualcomm. Last year, the court granted with prejudice Qualcomm’s motion to dismiss Plaintiffs’ federal antitrust claims to the extent those claims seek damages. However, the plaintiffs retained their California Cartwright Act and UCL claims in their entirety and their federal antitrust claims to the extent those claims did not seek damages. Qualcomm also continues to face the FTC allegations. The court also denied a motion to dismiss the FTC suit.

The case is No. 5:17-md-02773-LHK.

Attorneys: Jeffrey Greg Lewis (Keller Rohrback LLP) for Karen Stromberg. Daniel Allen Sasse (Crowell & Moring LLP) and Richard J. Stark (Cravath, Swaine & Moore LLP) for Qualcomm Inc.

Companies: Qualcomm Inc.; Apple Inc.

MainStory: TopStory Antitrust CaliforniaNews FederalTradeCommissionNews

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