Qualcomm Case Could Cause FTC, Justice Dept. to Collide (1)

Stay current on the latest developments from agencies including the CFPB, Federal Reserve, FDIC, and OCC to advise clients on real-life regulatory situations.

By Alexei Alexis

The Federal Trade Commission could find itself at odds with the Justice Department on patent licensing and antitrust questions in the technology space if it continues with an Obama-era suit against smartphone chipmaker Qualcomm Inc.

DOJ antitrust chief Makan Delrahim has said repeatedly that concerns about patent owners abusing their monopoly power are overstated. That stance potentially places him at odds with FTC’s pending lawsuit against Qualcomm.

The suit accuses Qualcomm of violating antitrust laws by employing abusive patent licensing tactics. It was filed in the U.S. District Court for the Northern District of California during the last week of the Obama administration over the objections of Republican Commissioner Maureen Ohlhausen, who is still with the agency. The case can be withdrawn by a majority of commissioners, but Qualcomm competitors such as Intel Corp. and Samsung Electronics want it to continue.

Joseph Simons, the FTC’s new chairman, has been silent on the case. But his track record suggests he might not have a problem with continuing it. He spearheaded a similar action against semiconductor manufacturer Rambus Inc. when he was the agency’s competition bureau chief during the George W. Bush administration.

At a press briefing June 20, Simons said his general goal is to ensure that the FTC is a “vigorous” enforcer. He also said he envisions an “extremely high” level of cooperation with the DOJ. He declined to speak about Qualcomm specifically.

“A lot of people in the antitrust circles are wondering if this means potential tension or conflict between the two agencies,” Daryl Lim, director of the Center for Intellectual Property, Information Technology and Privacy Law at the John Marshall Law School in Chicago, told Bloomberg Law.

“Simons has had very different views on some of these patent questions compared with the current head of antitrust at DOJ,” he said.

Lim moderated a related discussion on innovation and antitrust June 21 at the American Antitrust Institute’s annual conference in Washington. The panelists included Suzanne Munck, deputy director and chief counsel for intellectual property at the FTC.

Antitrust in Flux

This year’s conference comes while U.S. antitrust policy is in a state of flux.

“I think there’s a lot of real soul searching that’s going on in antitrust law right now,” Lim said.

Delrahim is evaluating how the DOJ’s antitrust division should move forward after a devastating loss in a suit to block AT&T Inc.’s takeover of Time Warner Inc. That result in that case might require the agency to rethink its approach to vertical mergers, which involve companies that don’t directly compete.

The FTC, meanwhile, is planning to convene a series of hearings on a broad range of issues that come under the agency’s jurisdiction, including the role of intellectual property and competition policy in promoting innovation.

The hearings, announced June 20, are designed to help the commission identify areas for improvement in enforcement and policy guidance and cover a range of topics such as competition and consumer protection issues in communication, information, and media technology networks, and the role of intellectual property and competition policy.

“The idea is that we want to make sure that we are taking stock of where antitrust law is today,” Munck said at the AAI conference. The FTC is planning 15 to 20 hearings between September 2018 and January 2019.

The DOJ wrapped up a series of roundtables last month exploring various competition policy questions. Delrahim said at the AAI conference that the department is working toward publishing a summary of those discussions by the fall.

Can They Unify?

Simons said in a briefing with reporters June 20 that his views are close to Delrahim’s on how to fix anticompetitive mergers. Delrahim has said he doesn’t support behavioral fixes for competition issues presented by mergers. Instead, he wants structural remedies, such as partial divestitures.

But Lim said the agencies may not be able to reach a unified position on patents.

Delrahim has staked out a policy on intellectual property that strongly favors patent owners such as Qualcomm. He gave a speech in November, widely cited in the patent world, that pushed back on the notion that antitrust laws should be used to stop alleged patent licensing abuses. Under antitrust law, a patent owner’s unilateral refusal to offer a license, even if the patent is essential to a standard, is “per se legal,” Delrahim said, adding that other areas of the law may be more appropriate for such disputes.

The speech was blasted in a Jan. 24 letter that was signed by antitrust scholars such as Lim and Qualcomm competitors Intel and Samsung, among other critics.

Former FTC Democratic commissioner Terrell McSweeny, who supported the Qualcomm suit, said at the AAI conference that U.S. antitrust regulators have historically been active in monitoring patent licensing in the tech area to ensure competition. The question now, she said, is whether there’s “the potential for the two agencies to start to differ more significantly” on these issues than they have in the past.

The only clue patent attorneys have seen on the FTC’s stance on the issue came June 7, when the agency filed an amicus brief in a generic drug patent suit saying Zydus Pharmaceuticals Inc. can claim that a patent infringement suit against it is a “sham” designed to keep it from competing against Takeda Pharmaceutical Co. with a generic drug. The brief, while limited to a legal question within a generic drug law, signals that the FTC isn’t willing to foreclose the idea that patent litigation can be anticompetitive.

To contact the reporter on this story: Alexei Alexis in Washington at aalexis@bloomberglaw.com

To contact the editor responsible for this story: Fawn Johnson at fjohnson@bloomberglaw.com

Copyright © 2018 The Bureau of National Affairs, Inc. All Rights Reserved.

Request Antitrust on Bloomberg Law