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`MORGAN, LEWIS & BOCKIUS LLP
`Richard S. Taffet (pro hac vice)
`richard.taffet@morganlewis.com
`101 Park Avenue
`New York, NY 10178-0060
`Telephone: (212) 309-6000
`Facsimile: (212) 309-6001
`
`MORGAN, LEWIS & BOCKIUS LLP
`Geoffrey T. Holtz (SBN 191370)
`gholtz@morganlewis.com
`One Market, Spear Street Tower
`San Francisco, CA 94105-1596
`Telephone: (415) 442-1000
`Facsimile: (415) 442-1001
`
`
`
`KEKER, VAN NEST & PETERS LLP
`ROBERT A. VAN NEST - # 84065
`rvannest@keker.com
`EUGENE M. PAIGE - # 202849
`epaige@keker.com
`STEVEN A. HIRSCH - # 171825
`shirsch@keker.com
`CODY S. HARRIS - # 255302
`charris@keker.com
`MATAN SHACHAM - # 262348
`mshacham@keker.com
`KRISTIN HUCEK - # 321853
`khucek@keker.com
`DANIEL B. TWOMEY - # 341488
`dtwomey@keker.com
`633 Battery Street
`San Francisco, CA 94111-1809
`Telephone:
`415 391 5400
`Facsimile:
`415 397 7188
`
`
`Attorneys for Defendant
`QUALCOMM INCORPORATED
`
`
`UNITED STATES DISTRICT COURT
`NORTHERN DISTRICT OF CALIFORNIA
`SAN FRANCISCO DIVISION
`
`
`IN RE: QUALCOMM ANTITRUST
`LITIGATION,
`
`This Document Relates To:
`ALL ACTIONS
`
` Case No. 3:17-md-02773-JSC
`
`DEFENDANT QUALCOMM
`INCORPORATED’S REPLY IN
`SUPPORT OF MOTION TO DISMISS
`SECOND AMENDED COMPLAINT
`Date:
`November 15, 2022
`Time:
`9:00 a.m.
`Dept.:
`Courtroom 8, 19th Floor
`Judge:
`Hon. Jacqueline Scott Corley
`Trial Date: Not yet set
`
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`Case 3:17-md-02773-JSC Document 906 Filed 10/17/22 Page 2 of 21
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`TABLE OF CONTENTS
`
`Page
`INTRODUCTION ...............................................................................................................1
`ARGUMENT .......................................................................................................................2
`A.
`FTC v. Qualcomm governs Plaintiffs’ allegations. ..................................................2
`B.
`The Cipro case reveals no “extraordinary” difference between the
`Cartwright and Sherman Acts that could salvage their claims given FTC. .............3
`1.
`Cipro has no relevance to this case. .............................................................4
`2.
`Cipro aligned California antitrust law with federal antitrust law. ...............5
`Neither the Sherman Act nor the Cartwright Act allows courts to invent
`novel antitrust violations by combining lawful acts. ...............................................6
`Plaintiffs’ tying claim is identical to the theory FTC rejected, and both
`California and federal law foreclose it. ....................................................................9
`Plaintiffs’ UCL claim fails. ....................................................................................11
`1.
`No UCL claim lies for conduct deemed lawful under the antitrust
`laws. ...........................................................................................................11
`Plaintiffs’ unfairness claim fails the relevant legal tests. ...........................12
`Plaintiffs ignore the UCL fraud prong’s basic pleading
`requirements. ..............................................................................................14
`CONCLUSION ..................................................................................................................15
`
`E.
`
`2.
`3.
`
`C.
`
`D.
`
`
`
`I.
`II.
`
`III.
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`
`
`Federal Cases
`
`TABLE OF AUTHORITIES
`
`
`
`Page(s)
`
`1305 Ridgwood, LLC v. Athas Capital Grp.,
`2022 WL 4139514 (N.D. Cal. Sep. 12, 2022) .........................................................................13
`
`Caltex Plastics, Inc. v. Lockheed Martin Corp.,
`824 F.3d 1156 (9th Cir. 2016) .................................................................................................13
`
`Catena v. Capitol Records, LLC,
`2012 WL 12942740 (C.D. Cal. July 11, 2012) ........................................................................13
`
`City of San Jose v. Office of the Com’r of Baseball,
`776 F.3d 686 (9th Cir. 2015) ...................................................................................................11
`
`Epic Games, Inc. v. Apple, Inc.,
`559 F. Supp. 3d 898 (N.D. Cal. 2021) ...............................................................................11, 12
`
`F.T.C. v. Actavis, Inc.,
`570 U.S. 136 (2013) ...............................................................................................................5, 6
`
`Filco v. Amana Refrigeration, Inc.,
`709 F.2d 1257 (9th Cir. 1983) ...................................................................................................8
`
`FTC v. Qualcomm, Inc.,
`969 F.3d 974 (9th Cir. 2020) ........................................................................................... passim
`
`Gonzalez v. Drew Indus. Inc.,
`2009 WL 10671688 (C.D. Cal. 2009)......................................................................................14
`
`Lona’s Lil Eats, LLC v. Doordash,
`2021 WL 151978 (N.D. Cal. Jan. 18, 2021) ............................................................................15
`
`Lorenzo v. Qualcomm,
`2009 WL 2448375 (S.D. Cal. Aug. 10, 2009) .........................................................................15
`
`Lozano v. AT&T Wireless Services, Inc.,
`504 F. 3d 718 (9th Cir. 2007) ..................................................................................................13
`
`MacDonald v. Ford Mo. Co.,
`37 F. Supp. 3d 1087 (N.D. Cal. 2014) .....................................................................................13
`
`In re Osborne,
`76 F.3d 306 (9th Cir. 1996) .......................................................................................................2
`
`Pacific Bell Telephone Co. v. linkLine Communications, Inc.,
`555 U.S. 438 (2009) ...................................................................................................................8
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`Case 3:17-md-02773-JSC Document 906 Filed 10/17/22 Page 4 of 21
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`
`
`In re Qualcomm Antitrust Litig.,
`328 F.R.D. 280 (N.D. Cal. 2018) ...............................................................................................3
`
`Reiter v. Sonotone Corp.,
`442 U.S. 330 (1979) ...................................................................................................................6
`
`Roffman v. Perfect Bar, LLC,
`2022 WL 4021714 (N.D. Cal. Sept. 2, 2022) ..........................................................................14
`
`Royal Primo Corp. v. Whitewater W. Indus., Ltd.,
`2016 WL 4080177 (N.D. Cal. July 29, 2016) ..........................................................................14
`
`Scilex Pharma. v. Sanofi-Aventis U.S. LLC,
`552 F. Supp. 3d 901 (N.D. Cal. 2021) .....................................................................................15
`
`Snow v. Align Tech., Inc.,
`586 F. Supp. 3d 972 (N.D. Cal. 2022) .................................................................................4, 11
`
`Stromberg v. Qualcomm Inc.,
`14 F.4th 1059 (9th Cir. 2021) ............................................................................................1, 2, 3
`
`Transparent-Wrap Mach. Corp. v. Stokes & Smith Co.,
`329 U.S. 637 (1947) ...................................................................................................................6
`
`State Cases
`
`Adhav v. Midway Rent A Car, Inc.,
`37 Cal. App. 5th 954 (2019) ....................................................................................................15
`
`Arce v. Kaiser Foundation Health Plan, Inc.,
`181 Cal. App. 4th 471 (2010) ..................................................................................................12
`
`In re Automobile Antitrust Cases I & II,
`1 Cal. App. 5th 127 (2016) ..................................................................................................8, 11
`
`Belton v. Comcast Cable Holdings, LLC,
`151 Cal. App. 4th 1224 (2007) ................................................................................................10
`
`Berryman v. Merit Property Mgmt, Inc.,
`152 Cal. App. 4th 1544 (2007) ................................................................................................13
`
`Camacho v. Auto. Club of S. Cal.,
`142 Cal. App. 4th 1394 (2006) ................................................................................................13
`
`Cel-Tech Comm’ns, Inc. v. L.A. Cellular Tel. Co.,
`20 Cal. 4th 163 (1999) .......................................................................................................12, 13
`
`In re Cipro Cases I & II,
`61 Cal. 4th 116 (2015) ..................................................................................................... passim
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`
`
`Durell v. Sharp Healthcare,
`183 Cal. App. 4th 1350 (2010) ................................................................................................13
`
`Fisherman’s Wharf Bay Cruise Corp. v. Superior Court,
`114 Cal. App. 4th 309 (2004) ................................................................................................8, 9
`
`Flagship Theatres of Palm Desert, LLC v. Century Theatres, Inc.,
`55 Cal. App. 5th 381 (2020) ......................................................................................................5
`
`Kwikset Corp. v. Superior Court,
`51 Cal. 4th 310 (2011) .......................................................................................................14, 15
`
`McAdams v. Monier, Inc.,
`182 Cal. App. 4th 174 (2010) ..................................................................................................13
`
`Michelle Bev. v. Apple Inc.,
`No. 20CV370535 (Cal. Sup. Ct. Feb. 4, 2022) ........................................................................12
`
`Morrison v. Viacom, Inc.,
`66 Cal. App. 4th 534 (1998) ....................................................................................................10
`
`In re Tobacco II Cases,
`41 Cal. App. 4th 1257 (2007) ..................................................................................................14
`
`Federal Statutes
`
`FTC Act .........................................................................................................................................13
`
`Hatch-Waxman Act .........................................................................................................................4
`
`Sherman Act........................................................................................................................... passim
`
`Federal Rules
`
`Fed. R. Civ. P. 9 .............................................................................................................................14
`
`State Statutes
`California Cartwright Act ..................................................................................................... passim
`
`California Unfair Competition Law ....................................................................................... passim
`
`
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`Case 3:17-md-02773-JSC Document 906 Filed 10/17/22 Page 6 of 21
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`
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`I.
`
`INTRODUCTION1
`The Ninth Circuit directed this Court to “reconsider the viability of Plaintiffs’ claims
`given FTC v. Qualcomm,” noting that FTC “likely has preclusive effect” on this case, and that
`“there would have to be some extraordinary difference for Plaintiffs’ claims here to not fail as a
`matter of law.” Stromberg v. Qualcomm Inc., 14 F.4th 1059, 1063, 1074–75 (9th Cir. 2021).
`Plaintiffs’ Opposition to Qualcomm’s Motion proves that the Ninth Circuit was right to predict a
`lack of viability. Plaintiffs in no way distinguish their claims from those that FTC rejected. On the
`contrary, this case challenges precisely the same business practices that the Ninth Circuit declared
`both lawful and hypercompetitive. For example, Plaintiffs’ Opposition makes clear that their
`tying allegation mirrors the “no-license, no-chips” theory that the Ninth Circuit rejected as a
`matter of law in FTC. Plaintiffs’ Opposition also offers no reason to part ways with the Ninth
`Circuit’s holding that the FRAND violations alleged here cannot support a viable antitrust claim.
`And, crucially, Plaintiffs fail to explain how the SAC alleges any competitive harm arising from
`the Qualcomm business practices that the Ninth Circuit found caused no such antitrust harm as a
`matter of law. Although Plaintiffs vaguely reference a different evidentiary record than that in
`FTC, they nowhere explain how that evidence could establish a claim in light of FTC.
`In an effort to create daylight where none exists, Plaintiffs rely heavily on a single
`California Supreme Court case, In re Cipro Cases I & II, 61 Cal. 4th 116 (2015). Cipro, however,
`offers no sanctuary because it has no relation to the claims and issues presented here, and fails to
`establish that state antitrust law deviates from federal antitrust law. Cipro discusses a discrete set
`of antitrust issues related to “reverse payment patent settlements,”—issues not remotely
`implicated in this case. And to the extent Cipro discussed an analytical approach applicable under
`the Cartwright Act to determine if patent-related conduct harms competition, it fully aligned state
`antitrust law with federal law—under which an antitrust claim was found unviable.
`Plaintiffs’ efforts to salvage their UCL claim also fail. They point to no case in which a
`
`
`1 “Complaint” and “SAC” refer to Plaintiffs’ Second Amended Consolidated Class Action
`Complaint (“SAC”) and “Opp.” refers to Plaintiffs’ Opposition to Qualcomm’s Motion to
`Dismiss. ECF 901. Unless otherwise indicated, emphases were added to quotations; and internal
`quotation marks, ellipses, brackets, footnotes, and citations were omitted from them.
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`court has allowed a UCL claim based on the very same conduct alleged to violate the antitrust
`laws to proceed after that conduct had been held lawful in a binding judicial opinion. Plaintiffs
`also misstate the relevant law, arguing that they need not allege fraud with particularity or plead
`actual reliance when in fact they must do both.
`In short, Plaintiffs ask this Court to allow state antitrust and unfair competition claims to
`proceed after the Ninth Circuit has rejected the very same allegations against the same defendant,
`having concluded that Qualcomm’s practices caused no competitive harm. They ask this Court to
`take that plunge by adopting a novel reading of both the Cartwright Act and the UCL unsupported
`by any case law demonstrating a divergence between state and federal law on the key issues in
`this case. The Court should decline that invitation and dismiss the SAC with prejudice.
`ARGUMENT
`II.
`FTC v. Qualcomm governs Plaintiffs’ allegations.
`A.
`Plaintiffs’ attempt to avoid FTC’s “preclusive effect” fails. Stromberg, 14 F.4th at 1074.
`Plaintiffs’ Opposition reveals no material differences between their claims and the claims rejected
`in FTC. What Plaintiffs call the “NLNC Tying” claim is the same “no-license, no chips” claim at
`issue in FTC. Opp. at 2; FTC v. Qualcomm, Inc., 969 F.3d 974, 984 (9th Cir. 2020). Their
`“Exclusive Dealing” claim echoes the “exclusive dealing” that FTC concluded foreclosed no
`competition in the relevant market. Opp. at 2; FTC, 969 F.3d at 1004. And FTC likewise
`addressed the claim that Qualcomm breached its FRAND obligations to SSOs. Opp. at 5; FTC,
`969 F.3d at 984. The claims and facts are identical.
`Faced with that problem, Plaintiffs correctly define stare decisis and then fail to apply it.
`As Plaintiffs say, stare decisis applies to cases “involving identical or similar material facts and
`arising in . . . a lower court in the judicial hierarchy.” In re Osborne, 76 F.3d 306, 309 (9th Cir.
`1996). That is undoubtedly the case here. This Court is bound by the Ninth Circuit, which ruled
`on a case involving identical material facts and challenged conduct, in a parallel action brought
`by a federal antitrust enforcer, against the very same defendant named here. What’s more, the
`Ninth Circuit expressly instructed this Court to examine Plaintiffs’ claims in light of FTC,
`suggesting that doing so “may well warrant dismissal.” Stromberg, 14 F.4th at 1075.
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`Plaintiffs’ efforts to escape FTC’s stare decisis effect fail for two reasons. First, although
`Plaintiffs assert that the SAC presents factual allegations materially different from the FTC’s,
`they never identify those differences, much less explain their legal significance. Pointing only to
`2018 expert reports for support, Plaintiffs contend that their analysis of the amount by which
`Qualcomm’s royalties are allegedly supra-competitive differs from FTC. See Opp. 6 n.3. But
`those opinions offer no facts different from those in FTC, which were found insufficient as a
`matter of law. Instead, the SAC pleads only that Qualcomm’s conduct hypothetically enabled
`supra-competitive royalties. SAC ¶ 74. This retread of the FTC’s theory falls far short of showing
`any factual differences between the two cases, and indeed, Plaintiffs participated in coordinated
`discovery with the FTC and had the full benefit of that now-closed discovery when crafting their
`SAC. Second, as explained below, Plaintiffs fail to establish any relevant difference between the
`legal analysis applicable here as compared to FTC. See Part II.B, infra.
`Put simply, the doctrine of stare decisis applies here. To evade it, Plaintiffs must identify
`an “extraordinary difference” between their claims and those rejected in FTC. Because they
`cannot meet that standard, Plaintiffs attempt to read the word “extraordinary” out of the opinion,
`suggesting that any deviation between state and federal law would satisfy the Ninth Circuit’s
`directive. Opp. at 7. Not so. Stromberg listed the sorts of differences that might theoretically
`qualify as “extraordinary.” 14 F.4th at 1075. Here, Plaintiffs have identified no relevant
`difference, much less an extraordinary one, in how a court would analyze the claims at issue
`under the Cartwright Act in contrast to the Sherman Act—i.e., an alleged duty to deal with
`chipmakers, an exclusive dealing claim, or a tying claim rooted in the no-license, no chips
`practice—either alone or in combination. Nor do Plaintiffs explain why, throughout this litigation,
`they contended that the two analyses mirrored each other. See In re Qualcomm Antitrust Litig.,
`328 F.R.D. 280, 296 (N.D. Cal. 2018). That being so, Plaintiffs’ SAC fails.
`
`B.
`
`The Cipro case reveals no “extraordinary” difference between the Cartwright
`and Sherman Acts that could salvage their claims given FTC.
`
`As Qualcomm’s Motion demonstrates, federal and state law are in accord on the core
`antitrust principles relevant to the claims asserted here. See Mot. at 9–11. Cipro is in no way to
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`the contrary. If anything, it undermines Plaintiffs’ extraordinary-differences argument.
`
`Cipro has no relevance to this case.
`1.
`Plaintiffs’ reliance on Cipro is misplaced because it has no factual or legal relevance to
`this case. There, the California Supreme Court addressed highly situation-specific antitrust claims
`involving “reverse-payment settlements” of patent disputes between brand-name and generic drug
`makers. Cipro, 61 Cal. 4th at 130. In such cases, brand-name and generic drug makers are alleged
`to collude to prolong the receipt of, and to divide between them, monopoly profits arising from a
`pharmaceutical patent. Generally, the claim is that a patentee would agree to share its patent-
`monopoly profits with a generic drug maker on the condition that the generic (1) settles its
`challenge to the patent’s validity and (2) delays its entry into the market until at or near the
`patent’s expiry. Id. at 130–35. This collusive scheme may harm competition because of the
`unique nature of generic/brand-name competition. As Cipro made clear, the “question” presented
`concerned “the ability of a patent holder to make agreements restricting competition during the
`life of its patents,” specifically by “pay[ing] the would-be competitor to withdraw its [invalidity]
`challenge and refrain from competing” until the patent had nearly expired. Id. at 130.
`This is not a reverse-payment settlement case, nor is it in any way akin to one. As Cipro
`explains, reverse-payment settlements are a specific type of antitrust conspiracy between
`competitors—“[a]n agreement to exchange consideration for elimination of any portion of the
`period of competition that would have been expected had a patent been litigated.” Id. at 150. The
`result is to delay the generic competitor’s entry into the market and thus “permit monopoly
`premiums still to be charged and simply divided up between the patent holder and patent
`challenger,” to consumers’ detriment. Id. at 141. Such settlements occur in a “unique context”
`and are “somewhat suspicious” because “a party with no claim for damages walks away with
`money simply so it will stay away from the patentee’s market.” Snow v. Align Tech., Inc., 586 F.
`Supp. 3d 972, 982 (N.D. Cal. 2022). Such facts are far afield from Plaintiffs’ claims.
`Moreover, Cipro’s analysis appears to be limited to the specific context of reverse-
`payment settlements between brand-name and generic drug makers. Cipro’s analysis turns in part
`on the particular incentives created by the Hatch-Waxman Act, a federal statute designed to speed
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`generics to market in part by allowing their makers to “piggyback” on existing safety and efficacy
`data during the FDA-approval process. Cipro explains in detail how Hatch-Waxman had the
`“unintended consequence[]” of giving the brand-name patentee and the first generic that files an
`FDA application “an incentive to effectively establish a cartel through a reverse payment
`settlement,” regardless of “the degree of likely validity of a patent[.]” 61 Cal. 4th at 135. No
`similar statutory incentive for cartelization exists here.
`Given Cipro’s utter dissimilarity to the claims, policies, and legal analysis at issue here,
`Plaintiffs’ attempt to rely on Cipro’s dicta fails. They cite it as a basis for ignoring the cases that
`Qualcomm cited in its opening brief that reject “tying” theories where no competition exists in the
`allegedly tied market and there is consequently no competition for the alleged tying to foreclose.
`See Mot. at 12–14. But those cases apply directly here, because Qualcomm lawfully exercises its
`patent rights in what Plaintiffs allege is either the market for Qualcomm’s SEPs or the market for
`SEPs in general. Although Plaintiffs point out that the patentee in Cipro likewise had “a
`monopoly in its own patents,” Opp. 14, Cipro isn’t a tying case, it’s an antitrust-conspiracy case
`where the patentee pays off a competitor not to compete. Plaintiffs make no such conspiracy
`allegations, plead no payments to competitors, and never explain how the case relates to claims
`based on allegations of monopolization and tying. Cipro therefore reveals no “extraordinary
`difference” between state and federal antitrust law.
`
`Cipro aligned California antitrust law with federal antitrust law.
`2.
`Even if Cipro were at all relevant to Plaintiffs’ claims, it would undermine Plaintiffs’
`extraordinary-differences argument by illustrating just how closely Cartwright Act jurisprudence
`tracks Sherman Act jurisprudence. See Flagship Theatres of Palm Desert, LLC v. Century
`Theatres, Inc., 55 Cal. App. 5th 381, 400 (2020) (“[F]ederal cases interpreting the Sherman Act
`are applicable to problems arising under the Cartwright Act.”). Cipro subjected reverse-payment
`settlements to a “structured rule of reason test” that considers the possibility that the patent in
`question might be found invalid if challenged. 61 Cal. 4th at 161. In so holding, Cipro hewed
`closely to FTC v. Actavis, Inc., 570 U.S. 136 (2013), a U.S. Supreme Court opinion that adopted a
`rule-of-reason analysis for Sherman Act reverse-payment-settlement cases. Cipro devoted an
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`Case 3:17-md-02773-JSC Document 906 Filed 10/17/22 Page 11 of 21
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`entire section to Actavis and applied its reasoning pervasively, citing it dozens of times. See 61
`Cal. 4th at 140–42. Far from announcing a legal rule that diverged from federal law, Cipro
`aligned California law with federal law on the substantive antitrust questions before it. Its
`decision to do so followed the general principle that Cipro embraced and that applies here:
`“[s]tate antitrust law ordinarily is fully compatible with federal law.” Id. at 160. What Cipro did
`not do is identify a general rule that state antitrust law is broader than federal antitrust law on fact
`patterns involving patents, which is the unsupported conclusion Plaintiffs ask the Court to reach.
`Because Cipro demonstrates no relevant, much less extraordinary, difference between
`state and federal antitrust law, Plaintiffs resort to quoting Cipro dicta that offer this Court no
`guidance—e.g., “the abuse of patent rights may also run afoul of antitrust law,” Opp. at 12
`(emphasis omitted), and “[the Cartwright Act’s] principal goal is the preservation of consumer
`welfare.” Id. at 17 n.14. This dicta gets Plaintiffs nowhere because both observations have long
`applied with equal measure to federal antitrust jurisprudence. See Transparent-Wrap Mach. Corp.
`v. Stokes & Smith Co., 329 U.S. 637, 647 (1947) (“A patent may be so used as to violate the anti-
`trust laws.”); Reiter v. Sonotone Corp., 442 U.S. 330, 343 (1979) (“Congress designed the
`Sherman Act as a consumer welfare prescription.”).2 Plaintiffs also quote Cipro’s statement—
`which confirms Qualcomm’s position—that the Cartwright Act’s method of analyzing
`anticompetitive harm from patent-related restraints is “not materially different from that applied
`in any other garden-variety antitrust case.” Opp. at 10. That concession dooms Plaintiffs’
`argument: FTC performed a robust rule-of-reason analysis regarding the conduct at issue. See 969
`F.3d at 996. There is no reason to conclude that California law requires a contrary result.
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`C.
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`Neither the Sherman Act nor the Cartwright Act allows courts to invent novel
`antitrust violations by combining lawful acts.
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`In their quest for extraordinary differences that could justify disregarding FTC, Plaintiffs
`argue that federal law (as applied in FTC) considers challenged practices “in isolation” while
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`2 There is therefore no basis for Plaintiffs’ assertion that Cipro “signal[s] it would not agree with”
`FTC’s holding that the remedy for breaching alleged FRAND commitments sounds in contract or
`patent, rather than antitrust. Opp. at 10. Under both federal and California law, abuse of patent
`rights may implicate antitrust law, but that does not explain how Cipro bears on how the
`Cartwright Act will treat SEP licensing conduct generally, or Qualcomm’s conduct specifically.
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`Cartwright Act cases view the conduct as a whole. Opp. at 10–11. This argument fails because
`federal and state law employ the same mode of analysis for assessing whether challenged conduct
`harms competition. For relevant purposes, both federal and California antitrust law analyze
`conduct under the same rule-of-reason approach to determine whether in the first instance, under
`some liability theory (e.g., exclusive dealing, tying, duty to deal, etc.), the conduct harms
`competition. Neither allows courts to find antitrust liability based on an amalgamation of conduct
`that existing antitrust doctrines deem lawful. Plaintiffs’ contrary arguments are unsound.
`To begin with, Plaintiffs mischaracterize FTC as holding that “each aspect of Qualcomm’s
`alleged conduct, viewed in isolation, failed to establish harm to competition.” Opp. at 16. Not so.
`The entire appeal was predicated on a collective theory of liability. See FTC, 969 F.3d at 987. The
`Ninth Circuit not only separately evaluated the legal merits of each of Qualcomm’s claims of
`error, but it also examined the interaction of Qualcomm’s challenged business practices. As
`framed by the Ninth Circuit, its focus was “on the impact, if any, of Qualcomm’s practices in the
`area of effective competition.” FTC, 969 F.3d at 993. In undertaking its analysis, the Ninth
`Circuit holistically evaluated Qualcomm’s practices of (1) licensing its SEPs only at the OEM
`level, (2) offering rival chip makers agreements that “function as patent-infringement
`indemnifications,” and (3) selling chips only to OEMs who compensated Qualcomm for their use
`of its SEPs in their end-user products (the “no license, no chips” or “NLNC” practice). The court
`concluded that those practices, “taken together, are ‘chip supplier neutral’—that is, OEMs are
`required to pay a per-unit licensing royalty to Qualcomm for its patent portfolios regardless of
`which company they choose to source their chips from.” Id. at 984–85. That finding of chip-
`supplier neutrality in turn played a key role in the court’s analysis, including its holding that
`Qualcomm had no duty to deal with competitors, id. at 995, and its rejection of the FTC’s theory
`that Qualcomm’s alleged breach of FRAND commitments and its NLNC policy “impose[d] an
`anticompetitive surcharge on rivals’ modem chip sales,” id. at 1005; see also id. at 995–96, 1002–
`03. In sum, the Ninth Circuit reviewed the totality of Qualcomm’s conduct to determine whether
`the FTC proved that such conduct “unfairly tends to destroy competition itself,” and concluded
`that it did not. Id. at 1005.
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`Case 3:17-md-02773-JSC Document 906 Filed 10/17/22 Page 13 of 21
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`While FTC examined all of Qualcomm’s challe