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As Reuters and other media outlets reported, the Seoul High Court upheld the record 873ドル million fine the Korea Fair Trade Commission (KFTC) had imposed on Qualcomm. The issues in the South Korean antitrust case are very similar to the ones in the U.S. FTC v. Qualcomm case, and the most important overlap concerns the obligation to extend exhaustive SEP licenses, on FRAND terms, to rival chipset makers.

For the South Korean competition authority, this is a major legal victory. Qualcomm has announced its intent to appeal this matter further to the Supreme Court of South Korea. But that appeal will take roughly half a decade to be resolved.

Qualcomm's problem is not to cough up the (almost) billion-dollar fine. Korea--with Samsung and LG being based there--is a strategically important market. What hurts Qualcomm much more in the short term is that this Korean decision may also serve to demonstrate to the Ninth Circuit that the U.S. FTC and Judge Lucy H. Koh reached decisions that are simply in the global antitrust mainstream. I guess the U.S. FTC will file a request for judicial notice soon--and, by the way, I believe the companies who lodged EU antitrust complaints against Nokia (Daimler, Continental, Valeo, Gemalto, BURY Technologies) should also try to leverage the Korean decision in Brussels.

The United States Court of Appeals for the Ninth Circuit will hear FTC v. Qualcomm on February 13, 2020. In the post I just linked to, I listed my posts on most of the amicus curiae briefs filed in support of the FTC, and subsequently I also blogged about an automotive-industry brief.

Competition enforcement is not meant to serve a revenue-generation purpose. Fines are meant to deter anticompetitive behavior. So the real measure here is what the KFTC is going to do now. If they continue to refrain from actually enforcing the corrective order requiring Qualcomm to license rival chipset makers, with pressure from the U.S. government being considered the primary reason for this failure to enforce, then they're not going to restore fair competition. Qualcomm will then just continue to refuse to license its rivals, and nothing will change in the marketplace.

A Korean source tells me that the Korean public may be too focused on the fine as a major victory for the government while failing to see the importance of actually enforcing the corrective order. And the large companies who originally complained to the KFTC have settled with Qualcomm in the meantime (or, as in Intel's case, have exited the market). Huawei and MediaTek could have complained, but Korean observers believe they aren't interested in that particular jurisdiction to the extent they'd take action there. So, all in all, the KFTC may be reluctant to allocate the resources to an enforcement effort that would be required.

Realistically, I wouldn't expect a Korean enforcement action to begin in the months ahead. However, I'm a bit more optimistic that something might happen in case the Ninth Circuit affirms Judge Koh's decision on chipset-level licensing (even if on the right-for-the-wrong-reasons basis espoused by the FTC and various amici). In that case, the U.S. government would be in a fundamentally weaker position to tell Korea not to enforce a decision upheld not only by a Korean court but also ordered by one U.S. court and affirmed by one of the most important courts of appeal.

Theoretically, Korean antitrust enforcement should be independent--and effective. But in practical terms, it appears that U.S. influence over this is strong, unless some modem chip makers complain actively and vocally in Korea over Qualcomm's continued non-compliance with the KFTC's corrective order.

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A Korea-based source has just drawn my attention to an article (in Korean, but I received a translation) by Kyungsin Park, Professor of Law, Korea University Law School. Professor Park accuses the Korea Fair Trade Commission (KFTC) of a failure to act forcefully in "the legal case of the century," i.e., the Qualcomm case. As I reported in March, Qualcomm could face criminal charges in Korea over its refusal to license chipset makers, but so far--and more than eight months later, it's apparently still the situation--the KFTC hasn't referred this contempt matter to the Prosecutor General's office.

Meanwhile, Qualcomm is--according to the article--spending hundreds of millions of dollars on the appeal. What Professor Park explains based on publicly available data is that it's not primarily about the 900 million dollars of fines the KFTC imposed in its late-2016 decision. The professor says it's just about 1% of Qualcomm's Korean revenues over the last 25 years, or 2% of what "Qualcomm generated through its illegal activities in South Korea." Instead, he writes, it's about the KFTC's corrective orders, which are about Qualcomm's business model.

The article talks about how Samsung ceased to complain about Qualcomm's practices after its new (early 2018) deal. Well, during the course of those Qualcomm antitrust investigations in multiple jurisdictions, Samsung was far from the only company to sign a new chipset purchasing and patent licensing agreement. Apple settled during opening statements at the April 2019 trial in San Diego--as did Korea's LG Electronics a few months later. There's no basis for pointing fingers at those companies: they're in the smartphone business, not in the antitrust enforcement business. But I do agree with the professor that Korea's competition authority (and, needless to say, the courts) have a responsibility here. (As for the companies that settled their formal or informal disputes with Qualcomm, there's plenty of testimony from the time before those deals were struck, and that testimony is still useful, as it was in the U.S. FTC v. Qualcomm case--where Samsung also filed a great amicus curiae brief.)

Professor Park argues--in other words--that South Korea's economy simply can't afford Qualcomm's sky-high patent royalties: LG Electronics, he says, has been incurring losses for 20 fiscal quarters in a row, and some Korean phone makers like Sewon Telecom, Telson, VK, Pantech, Curitel, and SKY, are no longer in business. Most mobile phone makers in the world have single-digit profit margins except for Apple and Samsung (but even Samsung isn't comfortably in the double digits, he claims).

All of that is interesting, but one claim really surprised me:

"Qualcomm is eexrting political and diplomatic pressure to influence the outcome of the appeal currently pending in the Seoul High Court. The #1 subject of the bilateral negotiations of the U.S.-South Korea Free Trade Agreement that resumed in July 2019 after a seven-year hiatus was the KFTC's investigation of Qualcomm's practices. The U.S. delegation alleges that Qualcomm was denied due process though it is guaranteed under the US-Korea FTA."

I don't know what happened in that investigation, but just like Professor Park it also strikes me that the findings in Korea were simply consistent with what other jurisdictions--particularly Judge Lucy H. Koh of the United States District Court for the Northern District of California--also found.

But there's one thing I just don't understand: assuming that the claim of Qualcomm's antitrust woes being the #1 priority for the U.S. in trade talks with South Korea is true, how can Qualcomm possibly influence the U.S. Administration to such an unbelievable extent?

It obviously makes sense for any U.S. government, regardless of the party or people in power, to ensure that its companies are treated fairly abroad. There have been cases of hyperaggressive antitrust enforcement against some U.S. companies in different places at different times. But in this case, Apple and Intel--both larger than Qualcomm--were actually among the complainants, or at least respondents to questions from the KFTC whose answers played a key role in the decision against Qualcomm.

If the Seoul High Court upholds the most important one of the KFTC's decisions--that Qualcomm needs to extend exhaustive SEP licenses to rival chipset makers--, it will simply be in the mainstream of global antitrust law:

• Judge Koh identified such an obligation first on the basis of contract law (Qualcomm's FRAND declarations), then on a duty-to-deal basis (the FTC is now pursuing an antitrust theory that relies on the contract-related finding as opposed to a contractless duty to deal).

• Five automotive companies (Daimler, Continental, Valeo, Gemalto, and BURY Technologies) lodged antitrust complaints with the European Commission's Directorate-General for Competition (DG COMP) against Nokia, and they're all about component-level SEP licensing. Just today the new European Commission was confirmed by the European Parliament (with a two-thirds majority), so I guess we will very soon see a decision to investigate those complaints.

• Huawei is suing Nokia in a German court (Dusseldorf Regional Court), on the basis of EU antitrust law, to secure component-level SEP licenses. It's almost a given that Huawei will prevail, given that Presiding Judge Dr. Thomas Kuehnen of the Dusseldorf appeals court outlined the related legal theory in an article. Also, the Court of Justice of the EU made it reasonably clear in its Huawei v. ZTE ruling that EU antitrust law gives every implementer of a standard the right to a FRAND license.

In light of the global trend toward enforceable component-level licensing obligations, I hope Korea's courts and the KFTC won't make decisions that would disadvantage their local smartphone makers and other electronics companies compared to those based in other jurisdictions.

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There's three pieces of news regarding Qualcomm's antitrust issues, none of which has huge impact in its own right, but the combination of the three warrants an update.

First, Judge Gonzalo P. Curiel of the United States District Court for the Southern District of California issued an order on Wednesday, denying a motion for judgment on the pleadings through which Apple sought to prevent Qualcomm from seeking, at the trial starting April 15, a declaratory judgment that Qualcomm has met its FRAND obligations under ETSI (a standard-setting organization based in Europe) through its licensing offers (this post continues below the document):

19-03-20 Order Denying Judg... by on Scribd

The legal standard here is that declaratory judgment is available if there's a definite and concrete controversy, and in case of doubt, courts tend to be permissive. In this particular case, the question was whether Qualcomm would stand to gain anything from the declaration it's seeking if it prevailed that it wouldn't already gain from successfully defending itself against Apple's FRAND breach claims. In other words, Qualcomm's defenses would require the court to either agree or disagree with Apple that Qualcomm breached its FRAND obligations; if the court agreed with Apple, Qualcomm would lose anyway, and if the court disagreed with Apple, it would conversely mean that Qualcomm met its obligations. So why issue a specific declaration? Judge Curiel has decided that such a declaration may have value beyond what a successful defense can provide.

Judge Curiel agrees with Apple that the requested declaration of FRAND compliance "will not resolve Apple's antitrust cause of action or disgorgement claims." That's simply the case because Qualcomm's declaratory judgment claim relates to a limited period of only a couple of years (the parties' negotiations in 2015-2017), while the antitrust claims here cover the time since 2008. However, pointing to an Eastern District of Texas decision (HTC v. Ericsson, December 17, 2018), which is obviously not binding on a district court in a different circuit and generally not too persuasive outside of that particular patentee-friendly district, Judge Curiel notes that the theory of an "unwilling licensee" no longer being entitled to the benefits of a FRAND licensing commitment "has been recognized as a legitimate basis for declaratory relief and is legally sufficient to survive Apple's motion." But, in any event, all of the evidence required to resolve this declaratory judgment claim will have to be put before the jury at any rate (just to adjudicate the claims that the parties agree must be resolved)--and Judge Curiel doesn't see a risk of confusion of the issues.

The idea of an implementer of a standard forfeiting its rights to a FRAND license through its conduct in negotiations looks like the kind of pro-patentee extremism the Eastern District of Texas is known for. It's already debatable whether a patent holder may have access to injunctive relief against the products of an unwilling licensee. But the idea that someone's (alleged) failure to make a FRAND counteroffer affords the patent holder the freedom to seek supra-FRAND terms, or hypothetically even to decline granting a license on any terms, is absurd simply because two wrongs don't make a right.

Given the facts, such as that Qualcomm collects about 25% of all patent license fees (counting all industries) in the world and the lion's share of all wireless patent license fees, it's hard to imagine that anyone would find its terms to be FRAND. In fact, Judge Lucy H. Koh's upcoming FTC v. Qualcomm decision may make this clear in a way that the Southern District of California could rely on the Northern District's decision. Even if a jury got confused or misled, the trial judge or, at the latest, the appeals court would certainly find that no reasonable jury could have considered Qualcomm's royalty rates (and various other terms) fair, reasonable, and non-discriminatory. That's why I guess the Ninth Circuit won't even get to decide on whether or not to adopt the Eastern District of Texas line on FRAND compliance declarations.

The second development to report briefly comes down "See I Told Ya So" with respect to a 2009 antitrust fine imposed on Qualcomm by the Korea Fair Trade Commission. As I had explained after a recent decision by South Korea's Supreme Court, it was only about an adjustment in the tens of millions of dollars, while the aggregate of the old 2009 fine and the late-2016 decision that basically kicked off the current wave of Qualcomm antitrust actions is on the order of a billion dollars.

As Reuters reports, the 2009 fine was lowered by 18% to 200ドル million.

The single most important issue facing Qualcomm in Korea is actually a requirement (resulting from the December 2016 order) to extend SEP licenses on FRAND terms to rival chipset makers. Continued non-compliance could at some point result in criminal charges.

The third tidbit relates to another very old Asian antitrust ruling: a 2009 cease-and-desist order by the Japan Fair Trade Commission. A week ago, Qualcomm issued a press release according to which the nine-year proceeding in Japan resulted in the conclusion that Qualcomm doesn't violate Japanese antitrust law through its cross-licensing requirements and non-assertion covenants. Qualcomm's attorneys also filed the Japanese decision with Judge Koh in the FTC case and announced they'd submit a certified translation later.

I have no idea what exactly the antitrust standard in Japan is and don't even know who the complainants were. What I do suspect very strongly is that the JFTC's about-face has a lot--or simply everything--to do with changes in market shares. In 2009, Japanese device makers played a far greater role in the worldwide handset market than today. They're still around, unlike their European counterparts, but almost insignificant outside of their domestic market compared to their rivals from the U.S. (Apple), Korea (Samsung), and China (Huawei, ZTE, Xiaomi etc.). And Sharp even got acquired by a Chinese company (Foxconn). Therefore, I believe the Japanese government's perspective on what benefits the likes of Sony and Panasonic changed fundamentally during the protracted process. Obviously, Qualcomm would have us believe that it simply prevailed in the end because of a more thorough analysis than the one underlying the original decision. But antitrust agencies don't hand down cease-and-desist orders (the most incisive remedy!) on a whimsical basis--they do so after in-depth investigations (and it's hard to imagine the standard would be lower in Japan). That's why a change in economic-policy priorites, with the JFTC potentially looking at Japanese companies as future net licensors, is the most plausible explanation.

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In the Northern District of California, where the Federal Trade Commission is suing Qualcomm, an important summary judgment ruling came down in November, holding that Qualcomm owed rival chipset makers a cellular standard-essential patent (SEP) license on FRAND terms as per the FRAND declarations of two U.S. standard-setting organizations.

Qualcomm now has to digest a summary judgment order adverse to its interests in the Southern District of California, where Judge Gonzalo P. Curiel has determined that Qualcomm cannot claw back incentive payments made to Apple under a Business Cooperation and Patent Agreement (BCPA) based on allegations of Apple being responsible for some of Qualcomm's antitrust worries in the U.S., the EU, and South Korea, or based on Apple allegedly having induced its contract manufacturers to underreport royalties.

Considering that 1ドル billion out of the roughly 30ドル billion Apple and its contract manufacturers are seeking from Qualcomm in that San Diego action relates to Qualcomm having stopped such payments at some point, the amount at stake in this summary judgment context must be multiple billions of dollars as the BCPA took effect at the beginning of the 2013, so the period with respect to which Qualcomm was trying to claw back money must be a lot longer than the one during which Apple believes it should have received another billion dollars that Qualcomm withheld--simply because there were no signs of a dispute during most of that period. Apple's original 2017 complaint said in its § 160 that "Qualcomm conditioned billions of dollars on Apple's silence before courts and regulators about Qualcomm's business practices" (emphasis added).

Qualcomm can't get those billions of dollars back, apart from the hypothetical possibility of a successful appeal. And Apple is now virtually certain to get an extra 1ドル billion that Qualcomm withheld, though it may take another formal step, as I'll discuss further below.

Here's the order, followed by further analysis and commentary:

19-03-14 Apple v. Qualcomm ... by on Scribd

The final part ("CONCLUSION AND ORDER") grants summary judgment to the effect of dismissing, as requested by Apple, Counts VI-IX of Qualcomm's second amended counterclaims. The last one, Count IX, is one with which Qualcomm sought to get the court to decide that it didn't owe Apple the extra billion--and in the last passage before the final conclusion, Judge Curiel indeed finds that "Qualcomm has not shown a genuine dispute that, based on Apple filing a lawsuit, Qualcomm was relieved of its quarterly payment obligations for the second, third, and fourth quarters of 2016."

Does it mean that Qualcomm has to write a check now (in the event it can't obtain a stay)? In material terms I guess it does. In formal terms, the court still has to enter judgment on Apple's claim seeking the extra billion as the summary judgment order per se just declines to enter judgment on Qualcomm's related (declaratory judgment) counterclaim in Qualcomm's favor.

But what hurts Qualcomm even more is that it can't get back billions of dollars for the previous years.

The order is heavily redacted and I found it easier to understand after going back to a document I published a few weeks ago: the parties' trial brief on disputed contract terms, which addressed their positions on Sections 4 (based on which Qualcomm alleged interference by Apple with the contract manufacturers' relationships with its contract manufacturers) and Section 7 (based on which Qualcomm alleged a breach because of Apple's interactions with antitrust enforcement agencies). The related part of the pretrial brief on disputed contract terms (found in the older post I just linked to) begins on page 28 based on the numbering at the bottom of the page, or page 30 based on the page numbering of the PDF viewer. By the way, in that document Qualcomm, too, confirms that this issue here was about billions of dollars:

"In exchange for those commitments and other consideration, Qualcomm agreed to pay Apple billions of dollars in quarterly Business Cooperation and Patent Payments ('BCP payments')."

Note that those payments were made to Apple even though Apple wasn't making direct payments to Qualcomm itself: Apple's contract manufacturers bought the chips, paid the royalties, and charged eveything to Apple, and Apple then got an effective rebate in the form of Qualcomm paying Apple those kickbacks contingent upon some behavior (or on refraining from some behavior, to be precise).

Judge Curiel's reasoning is very balanced, but even though he agreed with Qualcomm on some subissues (such as that a safe harbor in the contract allowing Apple to respond to regulators wouldn't cover lies in the sense of things Apple would have said without reasonably believing they were true), Apple ultimately won and Qualcomm's BCPA-related clawback claims were found to have no merit--without any exception.

From a policy point of view, I'm profoundly concerned about any contract clause that prevents (by otherwise imposing a financial penalty) a party from antitrust complaints, be it with regulators or with courts. Let's look at it this way: a contract precluding a party from reporting crimes to the police would undoubtedly be unenforceable. Most antitrust violations aren't crimes--but they definitely are something that should also be reported to the appropriate authorities (competition enforcement agencies). There's a strong public interest in antitrust enforcement, and the freedom of parties to agree on certain term should end where that one is in jeopardy. However, Judge Curiel's ruling isn't that broad and general, though in one specific context he wrote:

"Under these circumstances, enforcing the BCPA so as punish Apple for responding to regulatory investigations would deter parties from responding to regulatory investigations and have the effect of concealing ongoing illegal conduct to the detriment of the public and perpetuating improper conduct."

The above sentence raises the question of why Qualcomm insists that its conduct was perfectly legal (as it did at the January FTC trial) while paying billions of dollars to ensure that no illegal conduct would be reported. The only conclusion a reasonable observer can reach is that Qualcomm has a lot of bad conduct to hide.

Judge Curiel reached his conclusion that Apple's summary judgment motion had merit by rejecting Qualcomm's theories one by one (except for some subissues that weren't sufficient for Qualcomm to get anything on the bottom line).

Qualcomm's allegations in the antitrust enforcement context come down to saying

• that Apple "lied," but Judge Curiel can't see any credible evidence of Apple not having said things it reasonably believed to be true;

• that Apple induced Samsung to influence the Korea Fair Trade Commission (KFTC) so it would broaden its investigation of Qualcomm's practices and impose worldwide remedies (as opposed to remedies specific to the Korean market);

• that Apple's responses to questions from regulators such as the FTC or European Commission aren't protected by the BCPA's safe harbor for responses to regulators since Apple had played a role in instigating those investigations prior to signing the BCPA (but Judge Curiel disagreed with this because of the public interest in companies responding to questions from regulators);

• that Apple attempted to expand the scope of the European Commission's investigation; and

• that Apple induced the FTC to bring its 2017 lawsuit against Qualcomm.

Judge Curiel found that Apple didn't "lie" and that its answers were within the sometimes rather broad scope of the questions asked by regulators. Even if Qualcomm didn't like what Apple said or what regulators did in the aftermath, Apple was allowed to say what it said; also, some of what Qualcomm said Apple induced some agencies to do didn't even happen anyway.

The argument that Apple basically asked questions that were the effect of its pre-agreement efforts to get regulatory agencies interested didn't work because of the strong public interest in companies responding to those government agencies. Therefore, the judge disagrees with Qualcomm that Apple breached the implied covenant of good faith and fair dealing when negotiating and signing that BCPA with Qualcomm.

So before the related San Diego trial even begins (another one over "only" 31ドル million dollars is at the stage of jury deliberations, with no verdict reached yet), the first several billion dollars Qualcomm was seeking are already gone (again, absent a successful appeal by Qualcomm to the Ninth Circuit). Just like the FTC went into the January trial with tailwinds from summary judgment, Apple is going to go into its own Qualcomm trial next month on the basis of already having won something very significant.

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Qualcomm presently has to defend itself against antitrust cases around the globe, and is awaiting, like the industry at large, Judge Lucy H. Koh's upcoming ruling following the FTC v. Qualcomm trial held in San Jose in January. But while most of the industry is eagerly anticipating the decision, Qualcomm is still lobbying hard to avoid it. The "national security" concerns purportedly voiced by Department of Defense and Department of Energy officials in this context are the non sequitur of the decade, given that any security issues would relate to actual products (and would have to be addressed at that level, such as by taking a "trust but verify" attitude toward Huawei's base stations), not to patent licensing practices. ACT | The App Association has thankfully already debunked that BS with a short post that points to a more detailed write-up by a Gibson Dunn lawyer (PDF). I recommend both documents strongly. They are so good that I really don't feel I have anything to add at the moment.

In five weeks, the huge Apple, Foxconn et al. v. Qualcomm trial will commence in San Diego (Southern District of California), where a trial of a sideshow lawsuit is currently taking place even though the way the mirror case in the ITC went suggests the complaint has very little or no merit. A second trial will be held in July over Apple's patent infringement counterclaims, and to be honest, I don't have any opinion on those claims yet for lack of having performed even the most superficial analysis so far.

But there's also a number of things going on overseas. Today I'd like to draw some attention to the situation in South Korea, where the current earth-spinning wave of antitrust actions against Qualcomm started in December of 2016 with a decision by the Korea Fair Trade Commission (KFTC) that involved a 853ドル million fine. The fine, however, is not what Qualcomm is primarily concerned about. A highly knowledgeable Korean source tells me that Qualcomm's efforts to appeal the KFTC's decision clearly focus on behavioral remedies: remedial orders that require Qualcomm to do something, or to cease doing something.

Since a Korean court's denial of Qualcomm's motion to stay the execution of the KFTC's remedial orders (a denial that was upheld on appeal as I just learned), I haven't written about the Korean situation. That's because my own primary research is limited to the U.S. (easy for me to do wherever I am, thanks to electronic access), Germany (provided I'm there when something happens), and occasionally also including the rest of Europe (especially the UK, sometimes also the Netherlands, France, and other countries). With respect to Asian cases, I depend on sources, and fortunately I get an increasing quality and quantity of information from that part of the world.

Just like chipset-level licensing is going to be the most interesting part of Judge Koh's impending decision (her summary judgment to that effect was great, but it was limited to two particular FRAND commitments), it's also a cornerstone (to say the least!) of the Korean antitrust case against Qualcomm. As I reported about two years ago, Qualcomm allegedly kept Samsung out of the wireless chipset market through restrictive contract terms, an impression that was confirmed by some of Samsung's videotaped testimony in the FTC trial. However, with a view to the FTC trial and its overall global antitrust woes, Qualcomm entered into a new agreement with Samsung more than a year ago. Qualcomm's "gag orders" in contracts are well-known, so it's a safe assumption that Samsung, whether or not it even has the desire to do so anymore, simply can't pursue antitrust charges against Qualcomm without potentially being held to have breached its contract.

In December 2018 it became known that LG Electronics became (once again) a party to the Korean proceedings. While nowhere near as large and powerful as Samsung, LG is also an interesting and impressive Korean company. In fact, while only number two in this field in Korea, LG is yet a more significant mobile handset maker than everything that the entire, digitally degenerated, European continent (just thinking of that utter morony and indicator of digital-age delusion named "Article 13") brings to the table in that particular product category.

The aforementioned Korean source believes LG wanted a similar deal from Qualcomm as Samsung got, but Qualcomm gave LG short shrift, and that's why LG rejoined the appellate proceedings as an interested party.

In my opinion, the single most important one of the KFTC's remedial orders is the one that requires Qualcomm to extend exhaustive standard-essential patent (SEP) licenses to rival chipset makers including the chipset divisions of device makers. A "covenant to sue last" is the very opposite of a clearly-exhaustive license: it's an attempted end-run around the actual requirement.

From what I hear (including what I heard at the January trial), Qualcomm appears to continue to go about its patent licensing business as if the KFTC's remedial orders didn't exist or weren't enforceable. But they do exist, and they are enforceable, so Qualcomm is practically at the mercy of the Korean government in this regard.

There comes a point when the South Korean government will have to step up the pressure massively. In the alternative, South Korea's reputation as an antitrust jurisdiction would be in jeopardy. The KFTC can't turn a blind eye to Qualcomm's blatant contempt of the remedial order regarding chipset licensing without paying a reputational price. What will other antitrust offenders do in other (present and future) cases?

I have been pointed to two Korean articles:

• a story published on hani.co.kr, entitled "Qualcomm Scoffing at the KFTC's 'Remedial Orders Against Patent Bullying'--KFTC 'Not Doing Much'" and

• an eDaily.co.kr report on a parliamentary hearing where KFTC chairman Kim Sang-Joo said he would "take actions if Qualcomm does not implement the remedial orders," but a high-ranking KFTC official, its director general Shin Yeong-ho, also pointed to the fact that the competition enforcement agency would firstly have to find that Qualcomm is in contempt of an order that does not state specific deadlines before it can take the next step.

That next step would involve criminal charges. There are some differences between different jurisdictions in terms of antitrust enforcement:

• In the U.S., the goverment has to sue an antitrust violator, like in the FTC v. Qualcomm case. It's then up to a court to enter a judgment, and remedial orders must then take the shape of an injunction (absent a settlement such as a consent decree, of course). Failure to comply with the injunction can then give rise to contempt proceedings (again, in court).

• The European Commission's competition enforcement division can hand down an order, and the affected company can appeal it to the EU's judiciary in Luxembourg (examples: the Republic of Ireland and Apple are appealing the "state aid" decision on Apple's Irish taxes, and Google is also in the process of appealing a couple of EU antitrust rulings). Enforcement of EU decisions is ultimately always limited to fines, but they can hurt.

• The KFTC is in a stronger position. It has quasi-judicial authority like the EC, but the consequences of failing to comply with an enforceable KFTC decision are worse because enforcement means a criminal complaint is filed by the KFTC with the Prosecutor General's office in accordance with Article 71 of Korea's Monopoly Regulations and Fair Trade Act (MRFTA). According t Article 67, para. 6, of the MRTFA, executives failing to comply with a corrective measure or prohibition order taken under various articles of the law can be fined or, in serious cases, imprisoned for up to two years. By contrast, the EU Commission can't imprison anyone because it's a supranational institution.

More and more people in Korea appear to be wondering why the KFTC is sitting by idly as Qualcomm disregards the remedial orders. The articles indicate that Jeon Haechul, a member of South Korea's national parliament, asked tough questions last year.

Talking about companies that have not received a better licensing offer from Qualcomm despite the KFTC's remedial orders, one of the articles specifically names LG, Intel, Apple, Huawei, and MediaTek. The terms of Samsung's agreement with Qualcomm are not known beyond what was said in the public part of the U.S. FTC proceedings.

The KFTC had already been very patient in the build-up to its decision, granting Qualcomm about three times as many hearings as it usually does before making a decision. But whenever its patience will be exhausted, Qualcomm's wireless SEPs will have to be licensed at the chipset level, which will also result in exhaustion, but in the sense of exhaustion under patent law. "Exhaustion" is the magic word here.

With more than a year having passed since Qualcomm's new deal with Samsung, something will have to happen in the not too distant future. If Judge Koh decides the question of chipset-level licensing, on a broader basis than last year, in the U.S. FTC's favor, the KFTC may (and in my view should) be encouraged to take this antitrust matter to the next level, giving Qualcomm one last warning before pursuing criminal charges.

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[Update] The analysis below, which was based on Yonhap's first report, has meanwhile been confirmed by the Korea Herald. The Supreme Court decision is largely a win for Korea's Fair Trade Commission (headline: "Supreme Court rules in favor of FTC in decade-old battle with Qualcomm"), with at least 200 billion won out of the 273 billion won fine having been upheld. Just as I had assumed, Qualcomm may get an adjustment in the tens of millions of dollars, but no more than that. [/Update]

South Korea's leading news agency, Yonhap, just reported on a decision by South Korea's Supreme Court relating to a decision the Korea Fair Trade Commission (KFTC) made almost ten years ago: a 273.2 billion won (243ドル million) antitrust fine on Qualcomm for one particular type of conduct has been vacated, requiring a new decision by a lower court.

This appellate decision is unrelated to the much bigger (1.03 trillion won = presently almost 950ドル million) fine imposed on Qualcomm by the KFTC in December 2016. That one will take many years before it reaches the Supreme Court.

So let's put all of this into perspective. The old 2009 matter, which apparently took almost a decade to make its way up to South Korea's top court, was about incentive payments by Qualcomm "to Samsung Electronics Co. and LG Electronics Inc. between 2000 and 2009 on condition that they only use Qualcomm chips for certain smartphone models" (quoting Yonhap). That decision was affirmed by the Seoul High Court in 2013 for its anticompetitive effect. According to Yonhap, the Seoul High Court determined the incentive payments "effectively forced Korean buyers [= Samsung and LG] to refrain from exploring other deals with [Qualcomm's] competitors," and the Seoul High Court took particular issue with some of what was paid to LG because it "undermined fair competition."

Today, however, South Korea's Supreme Court determined that LG's share in the (presumably Korean) smartphone market in the years 2006-2008 was "well below the 40 percent level," which in the top court's opinion makes it "less likely" that these exclusive dealings had anticompetitive effects.

So what's the actual impact of this decision to vacate the 2009 fine, apart from being unrelated to the 2016 case (in which the fine is almost four times as high)?

My interpretation of Yonhap's report is that a limited adjustment amounting to tens of millions of dollars is somewhat likely, but large parts of the 243ドル million fine presumably won't be affected. I believe this adjustment will have limited impact on the number because

• Samsung is clearly bigger than LG (the fine related to Qualcomm's payments to Samsung and LG), and

• the appeal succeeded with respect to only a subset of the period the fine relates to (the fine was for 2000-2009, while the Supreme Court's decision to vacate is based on a market share determination for 2006-2008, i.e., only about a third of the period at issue).

What could be the case is that the KFTC fined Qualcomm particularly hard for the LG deal (should it have taken even more issue with the terms of that deal than with the terms of Qualcomm's deal with Samsung). So maybe the adjustment will be greater than tens of millions of dollars. But even if, hypothetically speaking, half of the 2009 fine was overturned, it would only amount to about 10% of the total of the 2009 and 2016 rulings. [See the update: it really is just about an adjustment in the tens of millions of dollars according to the Korea Herald]

LG recently became a party to the appellate proceedings related to the 2016 matter. Samsung used to be a party to the proceedings relating to the 2016 decision, but dropped out after effectively settling its dispute with Qualcomm throuhg a new commercial deal in 2018 that involved not only patent licenses but also the use of Samsung's foundry by Qualcomm.

Testimony from Samsung and LG, and documents referring to Samsung and LG, also played a role in last month's U.S. antitrust trial (Federal Trade Commission v. Qualcomm) in San Jose.

At the end of the Northern California trial, Judge Koh indicated that her ruling would take more time than her decisions usually do (there's probably no faster federal judge than her). With a view to another potential government shutdown (which may happen after this week), FTC staff inquired about whether they should keep some members of the litigation team available in order to respond to a ruling during the shutdown. Judge Koh then ruled out that a decision would come down before February 15 (after which date government funding might be interupted again) and invited the FTC to inquire again shortly before February 15. But Judge Koh also noted that the next shutdown would also affect her court. I guess we'll see an FTC filing with Judge Koh's court in a couple of days, and then Judge Koh may provide some indication of a likely ruling date. A delay of the decision in the FTC case would potentially affect the Apple et al. v. Qualcomm trial scheduled to go to trial on April 15 in San Diego (Southern District of California), as some of the issues to be decided by Judge Koh are relevant to Judge Curiel's case.

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Yesterday (Tuesday, January 22) was Day 8 of the FTC v. Qualcomm antitrust trial in San Jose (Northern District of California). The parties don't have much trial time left for testimony on Friday and Monday, and closing arguments have been moved up from next week's Friday to Tuesday. Thereafter, we'll have to wait. As Judge Koh said after the trial session: "Sadly, this opinion's gonna take some time." But that's because she'll presumably deliver something extremely well-reasoned (which doesn't mean that reasonable people might not be able to disagree here or there). The combination of two Apple v. Samsung cases with this landmark antitrust case and numerous other Silicon Valley disputes makes her the world's #1 technology industry judge--and apart from political considerations it's time for her to serve on an appeals court.

The way I see the current state of affairs, Qualcomm really doesn't appear to have any silver bullets. Practically all major players have now testified against Qualcomm (I'll talk more about that on or after Friday since a handful of videotaped Samsung depositions are on the list, though we've already heard testimony from Samsung that supports the FTC). Qualcomm's efforts to impeach industry witnesses have been largely unsuccessful.

Industry consensus hurts Qualcomm in two ways: much of what was said has probative value (even on such questions as whether supra-FRAND royalties were charged), and beyond that, Judge Lucy H. Koh has simply heard from multiple sides now what the issues are. The only company siding with Qualcomm here is Nokia, a company that actually brought the first antitrust complaint over Qualcomm's supra-FRAND patent royalties that I'm aware of. At the time, the EU had a tendency to underenforce (now it is, except with respect to some cases such as Qualcomm, quite the opposite). Meanwhile Nokia's handset business has gone down the tubes, and it's become a patent troll, so it's Qualcomm's natural ally. Nokia's anti-FRAND lobbyist at ETSI and other organizations, Dirk Weiler, claimed not to know whether Nokia was a net licensor. If true, that might make him the only Nokia employee above the level of a receptionist not to know the answer...

The battle of the experts will reach its culmination with Professor Nevo's testimony on Friday, though the FTC's expert economist in this case, Professor Shapiro, has already commented on his methodology and will be able to rebut on Monday.

Qualcomm declared one of its employees, Lorenzo Casaccia (VP of Technical Standards, spending most of his time with 3GPP), an expert on 3GPP. An employee-expert hybrid, but most of what he said was at a technical and practical level, and served to underpin Qualcomm's already pretty successful attack on the approved-contribution counting that one of the FTC's three experts, Michael Lasinski, indirectly relied upon. At times, Mr. Casaccia's testimony sailed close to the hearsay wind, and he claimed to know from people who represented Ericsson and, which he mentioned even more often and more emphatically, Huawei in standard-setting meetings and allegedly told him how their companies had instructed them to inflate the number of approved contributions (the obvious motivation being to increase the percentage of the overall royalties considered reasonable for a standard that a given company would get). Inflation happens by, for instance, splitting up a set of purely editorial/typographical corrections into multiple submissions, none of which has any substance, but every one of which gets counted. I can't verify Mr. Casaccia's allegations, but he said this under oath and it wouldn't surprise me to see an expert known to do a lot of work for Huawei rely on a methodology susceptible to manipulation and favorable to Huawei's financial and strategic interests...

Getting back to non-hybrid experts, I was underwhelmed. In fact, the hybrid employee-expert, with his narrowly-tailored topic, was actually more convincing than the non-hybrids.

One of Qualcomm's experts does nothing else for a living than testifying in litigation: Dr. Tasneem Chipty. Her firm's website says: "Matrix Economics is a boutique consulting firm focused on competition analysis for adversarial proceedings, including antitrust litigation and merger reviews." (emphasis added) There's no doubt she has a lot of experience, but the FTC's Dan Matheson (the order of names on the FTC's filings in this case suggests to me he's #2, after Jennifer Milici) impeached her very effectively. I wouldn't have expected her to struggle so much. When Mr. Matheson asked her about other "thin modem" (meaning baseband chips that are standalone chips as opposed to system-on-a-chip products that do everything including app processing) customers during a certain period, after she had claimed Apple was essentially the only buyer at the time, he pointed to Samsung and its own Exynos chips. The shocking thing was that she wasn't even able to say whether Samsung had used a greater or lower number than 200 million (!) of such chips during the relevant period--and she had to concede she didn't consider this a fact relevant to her analysis.

Dr. Chipty also had to admit she never defined what represents a premium chipset. And with respect to Samsung again, she lumped all of its R&D expenses together, so Mr. Matheson asked her whether she knows Samsung also makes, for instance, washing machines. She was evasive, but lost again.

There was even another major deficiency in Dr. Chipty's testimony that the FTC didn't even raise, but this blog reported on the relevant fact a long time ago: the Korea Fair Trade Commission (KFTC) investigated Qualcomm because it prevented Samsung's Exynos division from selling chips to third-party customers such as Meizu. But Dr. Chipty said Professor Shapiro had allegedly made a mistake by not considering Samsung as a competitor in the "merchant" (= ready to sell to others) modem chip market. But the parallel proceedings in Korea--the country Judge Koh's ancestors immigrated from--show that Qualcomm took measures to avoid such competition.

Professor Shapiro will get to rebut her testimony on Monday. I guess he will do so, but in my opinion he doesn't have to anymore. Dr. Chipty appeared a bit unsure and uncomfortable in the second half of her cross-examination. She clearly underperformed.

Qualcomm also called Professor Ted Snyder, the dean of Yale Management School. His testimony isn't worth talking about in detail here. It can be summed up in only five words: "You can't argue with success." In other words, because Qualcomm succeeded and others did not, he didn't care to look into any of the allegedly anticompetitive patterns of behavior at issue in the case. To explain briefly, he says his analysis was "empirical" and focused on "real-world outcomes" and whether they could be "fully explained" with "industry factors," which he claimed they can, but on cross-examination he had to concede that, for just one example, prices could have come down even faster without the additional presence of anticompetitive conduct.

So Qualcomm fielded a hybrid employee-expert who bashed other patent holders but made many reasonable, factual points; a full-time expert witness who potentially considered a quantity of more than 200 million thin modem chips irrelevant to her analysis of what is "competitive relevant" (exactly what she claimed Professor Shapiro failed to consider); an economist with a pointless "You can't argue with success" angle; and we also heard a dreamer (not in the DACA sense, of course): former Qualcomm employee and now professor Jeff Andrews.

Professor Andrews's tasks was to opine, which he did in the form of a rave review, on 34 handpicked Qualcomm patents in order to make the case that Qualcomm's standard-essential patent portfolio contains some technically very valuable stuff (which, even though his analysis stopped far short of patent valuation, let alone portfolio valuation, implied a justification for high royalties).

He looked and sounded like a Qualcomm fanboy. I remember Samsung's lawyers from the Quinn Emanuel firm criticizing Apple for presenting fanboy-style testimony referring to Steve Jobs as "St. Eve," and that testimony ("slavish adoration of their client") may have been structurally similar to what we got from Professor Andrews yesterday.

I've been working on patent policy for too long (about 15 years by now) to consider 34 handpicked patents representative of a portfolio consisting of tens of thousands standard-essential patents. And even a representative selection (which this one clearly wasn't--it had obviously been put together by Qualcomm for the purpose of buttresing its claim of core innovation, which isn't completely wrong but nowhere near as right as its royalty demands are exorbitant) would, based on litigation statistics, likely consist of mostly invalid and/or non-infringed patents.

Motorola built the first mobile phone. But even Motorola's litigation results were very disappointing. The search for a valid patent that can't be worked around (a truly standard-essential patent can't, but participants in standard-setting overdeclare) is the search for a needle in haystack, or for the Holy Grail.

If Qualcomm believed in its patents, why did it provide a covenant not to sue to Apple over a bunch of them just to avoid an adjudication of Apple's declaratory-judgment claims in the Southern District of California under the Super Sack doctrine? In the San Diego case, the motivation may have been to avoid any decision on the sensitive (for Qualcomm) subject of patent exhaustion. Still, a patent holder doesn't exude confidence by ducking declaratory judgment.

On the #ftcqcom Twitter thread, someone repeatedly posted new institutions of inter partes reviews (IPRs) by the Patent Trial and Appeal Board (PTAB) of the United States Patent and Trademark Office (USPTO) relating to Qualcomm patents. Over the course of the last 8 days, PTAB instituted reviews of a total of 19 (nineteen!) {Update] 21 (twenty-one!) [/Update] Qualcomm patents challenged by Apple.

$QCOM #FTCQCOM US Patent Office just instituted 2 more IPR patent challenges (now the total is 21). These two are both on QCOM Pat. 9535490, which is the only patent ALJ Pender found valid and infringed in the first ITC case. See IPR2018-01344, 46.

— Patent Pundit (@PunditPatent) January 23, 2019

Such reviews are instituted only if a substantive question of patentability has been raised. Under the recent SAS decision by the Supreme Court (I didn't like the outcome but expressed my respect for Justice Gorsuch's principled approach), this means that even if only a single claim warranted a review, all challenged claims must be adjudicated.

On Unified Patents' website, one can run a search for PTAB institutions against Qualcomm during the relevant period and access further details. There's presumably no overlap with the 34 patents Professor Andrews looked at, but statistically any set of patents faces these issues when challenged in litigation. Qualcomm can theoretically defend each and every claim on review, but its statistically very unlikely. The dreamer expert talked about 34 patents as if one couldn't doubt their validity and essentiality. If Qualcomm asserted them in litigation, the professor would get a reality check of the most sobering kind. In my observation, about 90% of all wireless patents asserted in litigation fail.

As Judge Posner already explained in Apple v. Motorola, the compensation a SEP holder is entitled to comes down to the incremental value of an invention over the next best alternative at the time of standard-setting. Even if some of Qualcomm's techniques, such as for carrier aggregation (using multiple segments of spectrum), were adopted, the alternative wouldn't have been "nothing," but something else (and there's no indication Professor Andrews discussed this incremental value other than presumably just relying on the patent specification and the prior art it cites).

Through cross-examination, the FTC got Professor Andrews to confirm that he hadn't performed any valuation nor any comparison with other companies' patents. That should be enough to render his testimony irrelevant. But I'm sure Judge Koh, with her extensive patent-related expertise, views a set of 34 non-litigated patents with a healthy dose of skepticism, like anyone with experience in that field would.

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While things slow down in Western countries between Christmas and New Year's Day, "Tis the season" has a different meaning in South Korea. Two years ago at this time of the year, the Korea Fair Trade Commission (KFTC) slammed Qualcomm with a fine. And now BusinessKorea reports that LG Electronics has joined the related antitrust lawsuit.

LG's decision is important since Samsung withdrew from the case last year following a comprehensive business agreement with Qualcomm involving patents, chipsets, and manufacturing. However, depending on how the FTC v. Qualcomm trial (scheduled to start on Friday, January 4) will go, Qualcomm may have to renegotiate its deal with Samsung anyway.

According to BusinessKorea, other complainants in Korea include Apple, Intel, MediaTek, and Huawei. MediaTek is mentioned from time to time in connection with Qualcomm's conduct, and one of my New Year's resolutions for this blog will be to find out at least a little bit more about the role they play. The fact that the name of this Taiwanese semiconductor company keeps coming up got me curious.

Meanwhile in Germany, where Qualcomm capitalized on the terrible "defendant's dilemma" laid out by the court, we may still have to wait a little before we know about a potential stay of enforcement of the injunction. Today is yet another public holiday in Germany (Second Christmas Day). Since the ruling came down on Thursday afternoon, the earliest time when Apple could realistically have filed an appeal and a motion to stay enforcement would have been Friday, December 21 (if they had already prepared an appellate brief in anticipation of what happened). But this is a high-profile case, with major economic implications, so maybe the appellate judges are already looking into this despite the Holiday Season. German judges are free to take case files home (it's all on paper though some courts, such as the Federal Patent Court, internally work with electronic documents to an increasing extent) and work whenever and wherever they please. The most fundamental question will be whether the appeals court affirms or reverses the lower court's agnosticism (the court stated in public that there may not even be an infringement).

It doesn't look like enforcement has already begun. Qualcomm firstly needs to post the bond or make the deposit (north of 1ドル.5 billion in the aggregate of two injunctions, a fact missed by fake news media and clueless commentators) and on that basis serve the injunction on Apple. They said it would take a few days, so maybe enforcement will begin later this week.

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There's a third summary judgment motion related to Qualcomm's business practices that is worth talking about, though it is admittedly a distant third given the enormous potential of the FTC's motion regarding the licensong of rival chipset makers and Apple's motion targeting Qualcomm's "double-dipping" (chipset sales + patent royalties). In a lower-profile motion that nevertheless highlights a major issue, Apple has asked Judge Gonzalo Curiel of the United States District Court for the Southern District of California to throw out Qualcomm's counterclaims according to which Apple has to repay rebates amounting to billions of dollars because it breached a "Business Cooperation and Patent Agreement" (BCPA) through its efforts to instigate and broaden antitrust investigations into Qualcomm's conduct (this post continues below the document):

18-09-01 Apple Motion Re. R... by on Scribd

In order to understand the context of the motion, one needs to go back to last year's (amended) complaint, in which Apple stated the issue as follows ("Nature of the Action", paragraph 1):

"Qualcomm pursues its illegal practices through a secret web of agreements designed to conceal and obfuscate its conduct. In at least one such agreement, Qualcomm inserted a gag order that prevented an aggrieved party from seeking relief that could curb Qualcomm's illegal conduct, in an effort to keep courts and regulators in the dark and its coerced customers quiet." (emphasis added)

A "gag order" relating to information that stakeholders give to regulators is highly problematic. Allowing this kind of scheme would enable companies with huge leverage to impede the work of competition authorities to the point that antitrust action would be both less likely to happen and far less likely to succeed.

Most of Apple's motion focuses on compliance ("we didn't breach the agreement"), not on (un)enforceability, but at least Section A.5 makes a public-policy argument:

"Any interpretation of the BCPA that would prevent Apple from responding to the [regulatory] agencies' requests (whether based on subject matter or the alleged truthfulness thereof) or would allow Qualcomm—the target of agency investigations—to receive repayment of billions of dollars based on Qualcomm's own (incorrect) view of their contents would contravene established public policy. The public policy of California favors full disclosure of concerns about unlawful conduct to governmental investigators." (emphasis in original)

"Apple had a legal duty to comply with all subpoenas and CIDs [Civil Investigate Demands] from the FTC. Moreover, FTC rules of practice state that the FTC 'expects all parties to engage in meaningful discussions with staff.' [...] Inherent in this expectation is freedom from retaliation if the investigation's target dislikes a response. For this reason, responses to CIDs are generally confidential 'to safeguard the rights of individuals under investigation and to protect witnesses from retaliation.'"

"The same is true in Korea. The KFTC has stated that it 'relies heavily on third parties to gain information” relevant to ongoing investigations and to detect anticompetitive activity in Korea. [...] And Korean antitrust law expressly states that an investigative target cannot retaliate against, or give 'any disadvantage' to, another entrepreneur for 'cooperating with investigations' of unfair trade practices."

Apple's legal argument in the summary judgment motion is mostly about evidentiary failure on Qualcomm's part (for an example, Apple says there's no evidence Tim Cook discussed the KFTC investigation with his counterpart, whom Qualcomm didn't even seek to depose), about timing (Apple's first written correspondence with certain regulators occurred in eah case after the regulator had launched an investigation; and the BCPA expired at some point, so Qualcomm can't claim a breach based on what occurred post-expiration), and so forth. If Qualcomm convinces Judge Curiel that there is room for factual dispute, the motion may be denied (though Apple could still prevail on any of this at trial). If Apple's strategy works, the court will hold that nothing Apple did constituted a violation of the BCPA (reasonable interpretation provided). And if my wish was granted, the court would sua sponte place a lot more emphasis on the enforceability part than Apple did.

A few more quotes from Apple's complaint show the importance of the underlying issue:

"Qualcomm's recent effort to cover its tracks—by punishing Apple for providing truthful testimony at the request of government regulators—underscores the lengths to which Qualcomm will go to protect its extortion scheme."

"The BCPA carved out, as it must, an acknowledgment that Apple has a responsibility to respond to enforcement agencies' requests for information. But in restraining Apple from initiating action or bringing concerns to law enforcement, Qualcomm conditioned billions of dollars on Apple's silence before courts and regulators about Qualcomm's business practices. And Qualcomm is now interpreting that agreement to retaliate against Apple for responding to requests for information about Qualcomm's practices from competition agencies, inhibiting law-enforcement review of Qualcomm's anticompetitive practices."

"232. Specifically, Qualcomm offered to pay Apple the nearly 1ドル billion it owed if Apple would, in Qualcomm's words:

(i) publicly and specifically retract and correct each of Apple's misstatements about Qualcomm to regulatory agencies [...]; (ii) inform the relevant agencies that such statements were and are untrue; (iii) disclose Apple’s correspondence with any agencies relating to any investigation of Qualcomm;10 (iv) provide any and all additional facts to regulators and Qualcomm relating to Apple's dealings with Intel concerning any possible or actual consideration from Intel to Apple relating to Apple's implementation of WiMax or the use of Intel chips; and (v) provide Qualcomm with the requested information about any communications between Apple’s senior executives and Samsung.

233. Thus, in an extraordinary and transparent effort to manipulate regulatory iinvestigations into its anticompetitive behavior, Qualcomm offered to repay Apple nearly 1ドル billion in withheld BCP Payments if Apple recanted its true and, in many cases, sworn testimony before government agencies and instead gave false testimony favorable to Qualcomm."

In light of the above, the term "gag order" is actually an understatement. Qualcomm wanted to be exonerated by using Apple, in exchange for a billion-dollar payment, as its mouthpiece. Demanding a retraction of a statement is reminiscent of what certain communist dictatorships used to do during the Cold War. They, too, obligated people to publicly speak against their previous statements.

While it's understandable that Qualcomm will try anything in a multi-billion-dollar dispute to save money and, therefore, claims that Apple breached the agreement, the most important question is why Qualcomm put a "gag order" in place and made a billion-dollar offer for retracting statements Apple had made to regulators. Why would Qualcomm have done all of that in the first place if its business model was as legal as it keeps telling courts and the general public?

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After the EU "grandslammed" Qualcomm with a 1ドル.2 billion fine (joining the FTC and Asian regulators in holding Qualcomm's conduct illegal), Qualcomm has finally had some good news to report: just in time for its earnings call, Qualcomm announced a new five-year license agreement with Samsung. In addition to the joint press release with Samsung, Qualcomm issued a press release in which it mentioned that "Samsung will be withdrawing its interventions in Qualcomm's appeal of the KFTC decision in the Seoul High Court."

The most interesting question would be whether Qualcomm had to substantially lower its fees and prices in order to get this deal done with Samsung. I can't imagine that Samsung wouldn't have used its leverage from Qualcomm's overall situation, including Broadcom's hostile takeover bid. This is probably a pretty good deal for Samsung. However, Qualcomm presumably wanted to avoid doing a deal on terms that would undermine its credibility with a view to rate-setting decisions that courts in different jurisdictions will have to make. Apparently there was a set of deal terms that both parties considered beneficial, and it allows both of them to focus on other issues.

What else does this new agreement mean for the pending lawsuits and ongoing antitrust proceedings?

It's unlikely that Samsung would now, after complaining about how Qualcomm's practices "directly harmed" the Korean electronics giant in two strategic business areas, suddenly file amicus briefs in support of Qualcomm. After all, Samsung will need leverage again when renewing the current deal in a few years' time. So Samsung will most likely play a neutral part and sit by idly and silently as regulators on three continents, Apple, and possibly other device makers (rumor has it that Huawei stopped paying royalties last year) are squaring off with Qualcomm in different venues.

Samsung is Korea's largest corporation (accounting for roughly 20% of GDP), but not its only one. Presumably the KFTC will continue to defend its decision in court, and other companies (such as LG) may still be very interested in the process. However, South Korea is now a less relevant "theater" in the worldwide Qualcomm antitrust war. Qualcomm is still in trouble in the U.S., the EU, and Taiwan. And it remains to be seen what will happen in China if it's true that Huawei was the device maker that halted its royalty payments.

In a nutshell, Qualcomm has one enemy less, but still a huge pile of problems--and still no major ally in court or in the antitrust arena.

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Last December, the Korea Fair Trade Commission (KFTC) handed down a decision against Qualcomm that U.S. tech companies welcomed. The following month, the FTC and Apple sued Qualcomm on antitrust grounds in California. In March, it became known that Qualcomm's refusal to licenses its standard-essential patents (SEPs) on FRAND terms to other chipset makers is one of the various concerns the Korean competition authority has.

Today, Reuters reports that a Korean court has denied a motion by Qualcomm to stay the execution of the KFTC ruling. That ruling, among other things, requires Qualcomm to negotiate patent licenses with its competitors and to adjust its royalty demands from device makers.

Qualcomm is still trying--and undoubtedly will keep trying--to get the KFTC decision overturned. And it can probably appeal the denial of the motion. But every defeat of this kind makes things harder for Qualcomm in other jurisdictions. So far, antitrust agencies and judges alike reject Qualcomm's legal theories. According to a source cited by Reuters, the court wasn't convinced of Qualcomm suffering irreparable harm from the KFTC ruling. Presumably, the likelihood to prevail on the merits (or, more appropriately in this case, a lack thereof) was also a factor in Korea as it would be in the jurisdictions I know.

No matter how often Qualcomm loses in one venue or another, each of the allegations brought against it must be analyzed independently--by courts and regulators, and also by those of us who express their opinions (as I do all the time). They can be wrong 99 times and right the 100th time. But fancy infographics and other aggressive, well-orchestrated PR efforts are no substitute for credibility. Qualcomm and Acting FTC Chair Maureen Ohlhausen untiringly try to convince us that everyone else is wrong and they are right on these FRAND issues. The "everyone else" who's allegedly wrong includes ever more agencies and courts. That's a growing problem for Qualcomm.

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The European Commission's Directorate-General for Competition--the 28-nation bloc's top antitrust agency--has been criticized on various occasions (on which it went after U.S. tech companies) that it focused more on the strategic interests of competitors of their investigation targets than on consumer harm, which is the central and paramount aspect of U.S. antitrust law. And more than once it has been alleged or insinuated that draconian fines or a certain order to collect taxes were driven, in no small part, by a desire to siphon off billion-dollar amounts from highly-innovative American companies.

It's not always easy, and in some contexts I'm not at all inclined in the first place, to defend DG COMP against such criticism, though it is definitely the most impactful division of an EU institution that is, in pretty much every other regard, little more than the EU Council's de facto secretariat.

The issues raised by Qualcomm's aggressive conduct are serious from a consumer point of view since every European consumer effectively pays a Qualcomm SEP (standard-essential patents) monopoly tax on every smartphone or other cellular device sold in the EU's Single Market. There may not be any significant European smartphone maker left, nor any European chipset maker (Infineon's mobile chips division was acquired by Intel, a Silicon Valley company, and might still be a European company if not for Qualcomm's behavior). But with more than 500 million consumers living in the EU, the European aspect of Qualcomm's patent licensing and other practices is very important nonetheless.

By requiring Qualcomm to extend FRAND patent licenses to all comers, including rival chipset makers (even if those may typically be American and Asian corporations), the EU Commission could have a far greater positive impact than the fines it might impose on Qualcomm would suggest. Qualcomm's annual worldwide revenues are in the 25ドル billion range, so theoretically the EU could fine Qualcomm to the tune of 2ドル.5 billion (10%), but more likely the amount would "only" be in the hundreds of millions (since 10% is the absolute maximum under EU law).

So by giving the Qualcomm matter(s) as much attention as other tech antitrust matters DG COMP is pursuing, and as much as other major competition agencies (such as the FTC and the KFTC) are giving their investigations of Qualcomm's unilateral conduct, the EU Commission could demonstrate that this is about principles of fair competition and consumer interests, not about being used by someone's competitors, and that revenue generation is not really the objective. However, should the EU just stay on the sidelines of the Qualcomm matter, some will compare such lack of follow-through against what's going on in some other cases.

There are two EU cases involving Qualcomm, but it's been quiet about them lately:

• In late June, the Commission stopped the clock in the Phase II merger review of Qualcomm's proposed acquisition of NXP, but restarted it two weeks ago (August 16). The new deadline for a decision (which, if the Commission stayed firm and Qualcomm didn't offer meaningful concessions, would be a decision to block the merger) is December 6.

• Further to a complaint by Icera, a once-European semiconductor company acquired by Nvidia and closed down later, DG COMP opened an investigation of Qualcomm's exclusivity arrangements and predatory pricing in July 2015 (technically, two parallel investigations) and issued Statements of Objection in December 2015. Since then there hasn't been any news. The narrow scope of those investigations hasn't been widened.

  Some delay was caused by Qualcomm's refusal to respond to a January 2017 information request by DG COMP. Qualcom argued it would cost millions of euros for "thousands of working hours" (in the aggregate of the effort made by up to 50 employees and external advisers) to comply. The EU Commission then ordered Qualcomm to produce the requested information lest it be fined more than half a million euros per day. Qualcomm took this matter to the EU General Court (formerly called the Court of First Instance), which upheld the Commission's order by decision of July 12 as Qualcomm failed to convince the judges it faced significant disruption of its business or other serious and irreparable harm.

In legal terms, and with respect to the professionals on the case teams, those are two separate matters. In practical terms, however, neither investigation exists in a vacuum. From a certain level up, the decision-makers are the same, and even below that level, people will be aware of what's going on in the other case. Qualcomm's unwillingness to cooperate with an information request does nothing to improve its relationship with the Commission--and this could also affect the merger review, which could turn into a bitter fight anytime now.

There is a potential overlap with respect to remedies, too. The most logical and most meaningful remedy would be a requirement to extend FRAND patent licenses to rival chipset makers. That wouldn't resuscitate Icera, but it would be unbelievably positive for consumers (though it would just be a reasonable interpretation of the relevant FRAND licensing promises). It's also what the FTC wants to see happen, and apparently the KFTC, too.

Hopefully there will be some positive EU developments to report in the coming months. If not, we can still talk about possible reasons then.

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South Korea's competition watchdog, the Korea Fair Trade Commission (KFTC), has just imposed a 853ドル million fine on Qualcomm for "monpolistic" practices involving its patent dealings. In particular, the antitrust agency stated that Qualcomm "has violated its agreement to license patents on fair, reasonable and non-discriminatory (FRAND) terms."

Qualcomm can and will appeal this decision, but the mobile device industry at large is keeping its fingers crossed that Korea's top court will affirm the KFTC ruling. The fact that Qualcomm filed an action in the U.S. in order to get access to information provided by Apple, Samsung and others to Korea's competition authority is interesting. It's hard to imagine that those companies would have told the KFTC "we're OK with what Qualcomm is doing and we're happy to pay even more going forward."

ACT | The App Association (which I'm not a member of, though I am an app developer), a tech industry group headquartered in Washington, DC, has just sent out the following statement that applauds the Korean competition enforcers:

"The Korea Fair Trade Commission (KFTC) has, after an extensive investigation, decided to significantly fine, and impose a corrective order on, Qualcomm Incorporated for systematically violating the commitments the company made to license its standards essential patents under fair, reasonable and non-discriminatory (FRAND) terms. FRAND abuse is an anticompetitive danger that poses a serious threat to the future of mobile computing and the Internet of Things.

Curbing the abuses the KFTC is addressing is an issue we are passionate about. That is why we launched All Things FRAND, an effort committed to ensuring a balance between patent licensor and licensee that FRAND commitments safeguard. And while FRAND promises are important, they are meaningless – and undermine innovation, particularly for small businesses – when ignored during subsequent licensing negotiations. ACT | The App Association applauds the KFTC's decision in this matter, and looks forward to analyzing the details of its corrective order that will contribute to growing global precedent upholding the purpose and meaning of FRAND obligations."

I wish to point out that ACT is generally very IPR owner-friendly, but when it comes to FRAND licensing of standard-essential patents, its positions are pretty consistent with mine. An organization that takes similar positions on FRAND (and of which Google is a member) is the Brussels-based Fair Standards Alliance. Presumably the reason the FSA hasn't spoken out on the Korean ruling yet is simply that people in Brussels tend to be on vacation this week (to a far greater extent than in the U.S.).

Many years ago, the European Commission was taking a look at Qualcomm's practices but failed to take decisive action. Qualcomm currently does face an EU antitrust issue but with a somewhat different focus than the Korean case. I think the Korean regulator has the right set of priorities; maybe the EU Commission will bring additional charges, as it did against Google (more than once). I would also like to see some antitrust inquiry into Qualcomm's practices by the FTC or DoJ under the incoming Trump Administration. President-elect Trump highlighted the uniqueness of America's top innovators at a recent meeting with tech industry CEOs, and I'm optimistic he and his staff will be more sympathetic to the concerns of the likes of Apple, Google and Amazon than to those seeking to extract undue leverage from standard-essential patents.

If anyone would like to provide me with information on Qualcomm's practices and antitrust complaints or cases anywhere in the world, please get in touch via my contact form. I'm very interested in finding out more about this and I'll try to draw more attention to major SEP issues involving Qualcomm or anyone else.

[Update] A reader has kindly pointed me to an unofficial translation (apparently created by Qualcomm itself) of the KFTC press release, which is a highly informative document that warrants further discussion here at a later stage. [/Update]

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