Qualcomm Wins on Appeal Against FTC in Antitrust Suit

On August 11, 2020, the United States Court of Appeals for the Ninth Circuit ruled in favor of Cravath client Qualcomm Incorporated, a leading innovator of cellular technology, in its appeal from an adverse California federal court decision in an antitrust lawsuit filed by the Federal Trade Commission (“FTC”). In a complete defense victory for Qualcomm, the three‑judge panel for the Ninth Circuit unanimously reversed the district court’s judgment and vacated a permanent, worldwide injunction that prohibited several of Qualcomm’s core business practices.

The FTC’s January 2017 complaint alleged that certain of Qualcomm’s practices relating to its patent licensing and modem chipset businesses violated the federal antitrust laws. The case was tried over ten days in January 2019 and, in May 2019, the court issued a decision finding in favor of the FTC and issuing a permanent injunction against Qualcomm. Cravath continued to represent Qualcomm on appeal, and oral arguments were heard in February 2020.

Following the district court’s ruling, Qualcomm moved to stay portions of the court’s post-trial injunction that required Qualcomm to change its longstanding patent licensing practices. In August 2019, the Ninth Circuit granted Qualcomm’s request in full, finding that Qualcomm had raised, “at a minimum,” serious questions as to the correctness of key aspects of the district court’s ruling. Underscoring the case’s significance and its implications for the development of next‑generation cellular technology, the United States Department of Justice filed a statement in support of Qualcomm’s motion for a stay of the district court’s judgment, pointing to the threat to “competition, innovation and national security,” as well as harm to consumers, that would result if the injunction against Qualcomm were to stand.

In ruling for Qualcomm, the Court of Appeals held that Qualcomm’s practice of licensing its standard essential patents exclusively at the original equipment manufacturer level does not violate the antitrust laws because Qualcomm is under no antitrust duty to license rival chip suppliers and, to the extent Qualcomm breached any of its fair, reasonable, and nondiscriminatory commitments—an issue the court did not reach—the appropriate remedy lies in contract and patent law. The court further held that Qualcomm’s patent-licensing royalties and “no license, no chips” policy do not impose an anticompetitive surcharge on rivals’ modem chip sales, but instead are “chip‑supplier neutral” and do not undermine competition in the relevant antitrust markets. Additionally, Qualcomm’s 2011 and 2013 agreements with Apple, the court found, did not substantially foreclose competition in the modem chip market. Throughout the ruling, the Court of Appeals repeatedly cited the Supreme Court’s decision in Ohio v. American Express, which Cravath won for American Express in 2018 (please click here to read the related website item on this representation).

The Cravath trial and appellate team was led by partners Gary A. Bornstein, Yonatan Even and Antony L. Ryan and included partner Richard W. Clary; practice area attorneys Brent Byars and Alexander S. del Nido; and associates Michael J. Zaken, Brendan C. Benedict, Nathaniel A. W. Crider, Andrew D. Huynh, Eric J. Zepp, Vadim Egoul, Anthony D. Lauriello, Amanda R. Bakowski and Kathryn E. Bolas. Many other partners, associates and discovery attorneys were also deeply involved in related cases and investigations over the years.

The case is Federal Trade Commission v. Qualcomm Incorporated, No. 17-cv-00220 (N.D. Cal.), No. 19-16122 (9th Cir.).