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30 January 2019Patents

FTC and Qualcomm present closing arguments in FRAND trial

Closing arguments in the antitrust suit brought by the US Federal Trade Commission (FTC) against Qualcomm have wrapped up, and the case is now in the hands of a judge.

On Tuesday, January 29, both sides presented hour-long closing arguments to the US District Court for the Northern District of California, ending a battle in the courtroom which began on January 4.

The FTC brought the  suit against Qualcomm in January 2017, accusing the microchip manufacturer of using anti-competitive tactics to maintain a monopoly over the industry.

Qualcomm faced accusations of extracting royalties above fair, reasonable, and non-discriminatory (FRAND) terms from its licensees.

The FTC has the burden of proving that Qualcomm has a monopoly and that it uses its market power to command high royalties from smartphone makers.

It also must show that by doing this, Qualcomm hurts competitors and will continue to do so in the future.

On Tuesday, FTC attorney Jennifer Milici argued that Qualcomm uses its power in the 3G and 4G chip market to force companies like Apple to sign licensing agreements with excessively high royalties, according to  CNET.

She said if Qualcomm isn’t stopped, it will do the same in the 5G market.

Milici said Qualcomm “acquired monopoly power in the modem chip market” and “put up roadblocks” that hurt competitors. “It is beyond dispute the conduct is ongoing,” she added.

Qualcomm’s attorney, Robert Van Nest, of law firm Keker, Van Nest & Peters, countered the FTC’s argument and said the agency had failed to meet its burden in the case.

According to  Courthouse News Service, Van Nest denied Milici’s claims against Qualcomm and said it had won its business “through superior innovation and better products”.

“High royalties alone is not the basis for their complaint of harm,” Van Nest said. “They have to show harm to competition.”

He argued that such harm hadn’t occurred, citing examples of Samsung and Huawei having developed their own modems, and a competitor MediaTek, which is the world’s second biggest wireless chipmaker.

“If the task is to decide whether Qualcomm maintained its position through innovation, skill, technology or through licensing practices, it’s a lay-down hand,” Van Nest said.

The FTC hasn’t “proven anything with respect to licensing practices that had an impact on advancement of this technology”, he added.

Milici argued that Qualcomm had harmed competitors by employing a “no licence, no chip” policy.

She said there was “consistent” testimony from smartphone makers such as Apple, Samsung and LG that they felt pressured to sign licences because they were worried that they would lose access to Qualcomm’s modems.

During the trial, Apple’s chief operating officer Jeff Williams testified that Apple felt it had to sign contracts at high prices to maintain access to Qualcomm’s chips, CNET reported.

“Customers who heard these statements certainly viewed them as threats,” Milici said.

The FTC also argued in its closing statement that the fact companies still license chips from Qualcomm and that it “does not have to cut off chip supply is proof of market power”.

Customers have no other viable modem options, so they must sign licensing deals with Qualcomm to get its chips, Milici argued.

“We don’t know and can’t know” what the market would look like without Qualcomm's licensing practices, she added.

In its closing arguments, Van Nest said the companies that had testified against it, such as Apple, did so because they want to pay lower licensing rates.

“They’re all big sophisticated companies with their own leverage,” he said. “Their testimony was, ‘Oh yeah, we felt threatened and had to do what we did.’ I would say this testimony was presented to this court in a very misleading fashion,” he added.

Presiding judge Lucy Koh will now decide the outcome of the case.

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