This month’s CLIP of the month is “Section 2 Mangled: FTC v. Qualcomm on the Duty to Deal, Price Squeezes, and Exclusive Dealing” by Douglas H. Ginsberg, Joshua D. Wright and Lindsey Edwards. This case, which we have discussed in previous posts (see here and here), touches upon many areas of interest to readers of this blog, such as whether there is any obligation for SEP licensing to take place at a particular level of trade, whether that be at the end product level (e.g. handsets in this case) or at the level of the component(s) which practise the invention (e.g. chipsets). The article is written in response to Judge Koh’s decision handed down in May this year by the U.S. District Court Northern District of California, which found against Qualcomm for a number of its licensing practices. The authors find the following three errors in that decision:
- The District Court extended the exception to the general rule that refusals to deal are permitted beyond the boundaries set by antitrust precedent.
- It incorrectly characterised an alleged price squeeze as a “tax” in order to circumvent the Supreme Court’s prohibition on price squeeze claims that are not accompanied by both a duty to deal and predatory pricing.
- It erred in finding that Qualcomm’s exclusive dealing with Apple violated antitrust law, as the FTC had failed to prove that this arrangement led to substantial foreclosure of competitors from the market.
Judge Koh’s decision has attracted a wide range of views from antitrust practitioners, enforcers and business. Perhaps the most obvious sign of the lack of consensus on this issue is the Department of Justice’s brief in support of Qualcomm’s motion for a partial stay on remedies pending appeal, thus opposing the FTC – its sister agency – which had brought the case. It remains to be seen whether the Ninth Court will also find fault with the District Court’s assessment of Qualcomm’s licensing practices.