Groups Urge Trump to Pursue FTC-Qualcomm Antitrust Suit

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By Malathi Nayak

The Federal Trade Commission’s lawsuit against Qualcomm Inc. alleging anticompetitive patent-licensing practices should continue, trade groups representing technology and automobile companies urged the Trump administration in a letter April 21.

The letter asked President Donald Trump to ensure that the case is “allowed to run its course without prejudice or political interference.”

ACT—The App Association, which is sponsored by information technology companies such as Apple Inc., automaker lobby group the Alliance of Automobile Manufacturers and 13 companies, including Intel Corp, HP Inc., Dell Inc. and Samsung Electronics America Inc., signed the letter. Many of the companies license patents essential to wireless communication technology.

The FTC filed an antitrust lawsuit against the chipmaker Jan. 17 in the U.S. District Court for the Northern District of California days before Trump took office, alleging that its licensing practices around standard essential patents unfairly cut out competitors. The FTC suit came when Democrats were a majority on the commission. Republican Maureen Ohlhausen, who is now the FTC’s acting chairwoman, opposed the commission’s 2-1 decision to sue Qualcomm. Federal Trade Commission v. Qualcomm Inc. , N.D. Cal., No. 5:17-cv-00220, Complaint filed 1/17/17 .

Ohlhausen dissented, saying the commission’s action was based on a flawed legal theory. The enforcement action was brought by the FTC on the eve of a new presidential administration and “will undermine U.S. intellectual property rights in Asia and worldwide,” she said.

The five-member FTC currently has three vacancies. Democrat Terrell McSweeny, who is the other sitting commissioner alongside Ohlhausen, voted in favor of suing Qualcomm. No more than three members on the commission can be from the same party. Trump hasn’t yet selected a long-term nominee to chair the commission or other potential commissioners. Ohlhausen supporters are urging Trump to pick her, but Utah Attorney General Sean Reyes is expected to be a top contender.

Qualcomm and the FTC did not immediately respond to requests from Bloomberg BNA for comment.

Qualcomm Vows to Fight

The lawsuit presents yet another regulatory challenge to Qualcomm’s bread-and-butter business of licensing technology patents. The chipmaker gets most of its profits from selling the rights to use patents that are essential to all modern mobile phone systems. Qualcomm has argued that its licensing follows industry standards that have been in place for more than 20 years and are used by other companies.

The company has faced similar antitrust scrutiny in South Korea and the European Union. In 2015, Qualcomm said it paid $975 million to settle a related case in China.

The FTC alleged in its complaint that Qualcomm used anticompetitive tactics to maintain a monopoly in baseband processors—devices that manage cellular communications. Qualcomm maintains an anticompetitive policy under which it supplies its baseband processors only on the condition that mobile phone manufacturers agree to its preferred license terms, the FTC said.

Qualcomm offered Apple “billions of dollars in conditional rebates” on license fees if it exclusively used Qualcomm baseband processors in the iPhone from 2011 to 2016, according to the FTC. The company denies allegations and has vowed to fight them, saying they have no legal basis and seek to advance mobile phone manufacturers’ interests and bargaining power.

Qualcomm filed a motion April 4 asking the California court to dismiss the lawsuit. The FTC’s response is due by May 12, according to court filings.

U.S. District Judge Lucy Koh has scheduled a trial in the case to begin Jan. 3, 2019. Koh set the close of discovery for March 30, 2018, as proposed by the FTC. Qualcomm had asked that discovery go until Nov. 1, 2018.

CORRECTION: An earlier version of this story incorrectly stated that ACT--The App Association represents Apple Inc.

To contact the reporter on this story: Malathi Nayak in Washington at mnayak@bna.com

To contact the editor responsible for this story: Mike Wilczek at mwilczek@bna.com

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