Federal Trade Commission v. Qualcomm Incorporated , a Delaware corporation

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
FEDERAL TRADE C OMMISSION,
Plaintiff-Appellee,
v.
QUALCOMM INCORPORATED , a
Delaware corporation,
Defendant-Appellant,
S AMSUNG ELECTRONICS C OMPANY ,
LTD.; S AMSUNG S EMICONDUCTOR
INC .; INTEL C ORPORATION ;
ERICSSON, INC .; S AMSUNG
ELECTRONICS AMERICA, INC .;
M EDIATEK INC .; NOKIA
TECHNOLOGIES OY,
Intervenors.
No. 19-16122
D.C. No.
5:17-cv-00220-
LHK
ORDER
Filed August 23, 2019
Before: A. WALLACE TASHIMA, MILAN D. SMITH,
JR., and MARK J. BENNETT, Circuit Judges.
Per Curiam Order

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2 FTC V. QUALCOMM
SUMMARY*
Stay
The panel granted a motion for a partial stay pending
appeal of the district court’s permanent injunction, which it
entered following a trial on antitrust claims brought by the
Federal Trade Commission (“FTC”) against Qualcomm
Incorporated.
The FTC alleged that Qualcomm, a leader in cellular
standard technology, violated Sections 1 and 2 of the
Sherman Act and Section 5 of the FTC Act in connection
with the licensing of its standard essential patents (“SEP”)
and sale of its code division multiple access and premium
long-term evolution modem chips.
The district court determined that Qualcomm’s practices
violated antitrust laws, and entered a multipart permanent
injunction.
To determine whether to issue a stay pending appeal, the
panel considered the factors outlined in Nken v. Holder, 556
U.S. 418, 426 (2009). First, the panel held that Qualcomm
had shown, at a minimum, the presence of serious questions
on the merits of the district court’s determination that
Qualcomm had an antitrust duty to license its SEPs to rival
chip suppliers. Qualcomm likewise made the requisite
showing that its practice of charging original equipment
manufacturers royalties for its patents on a per-handset basis
* This summary constitutes no part of the opinion of the court. It
has been prepared by court staff for the convenience of the reader.

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FTC V. QUALCOMM 3
did not violate antitrust laws. Second, the panel concluded
that Qualcomm had demonstrated a probability of
irreparable harm. Finally, the panel held that the balance of
equities weighed in favor of a stay. The panel concluded that
the requested stay was warranted.
The panel stayed the portions of the district court’s
injunction requiring that Qualcomm must make exhaustive
SEP licenses available to modern-chip suppliers, must not
condition the supply of modern chips on a customer’s patent
license status, and must negotiate or renegotiate license
terms with its customers in that respect.
COUNSEL
Gary A. Bornstein and Yonatan Even, Cravath Swaine &
Moore LLP, New York, New York; Robert A. Van Nest,
Eugene M. Paige, Cody S. Harris, and Justina Sessions,
Keker Van Nest & Peters LLP, San Francisco, California;
Thomas C. Goldstein, Kevin K. Russell, and Eric F. Citron,
Goldstein & Russell P.C., Bethesda, Maryland; Willard K.
Tom, Morgan Lewis & Bockius LLP, Washington, D.C.;
Geoffrey T. Holtz, Morgan Lewis & Bockius LLP, San
Francisco, California; Richard S. Taffet, Morgan Lewis &
Bockius LLP, New York, New York; for Defendant-
Appellant.
Heather Hippsley, Deputy General Counsel; Michele
Arington, Assistant General Counsel; D. Bruce Hoffman,
Director Bureau of Competition; Jennifer Milici, Deputy
Chief Trial Counsel; Joseph R. Baker and Rajesh S. James,
Attorneys; Federal Trade Commission, Washington, D.C.;
for Plaintiff-Appellee.

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4 FTC V. QUALCOMM
Michael F. Murray, Deputy Assistant Attorney General;
William J. Rinner, Chief of Staff and Senior Counsel; Daniel
E. Haar, Acting Chief, Competition Policy and Advocacy
Section; Jennifer Dixton, Patrick M. Kuhlmann, and Jeffrey
D. Negrette, Attorneys; United States Department of Justice,
Washington, D.C.; for Amicus Curiae United States.
Matthew J. Dowd, Dowd Scheffel PLLC, Washington, D.C.,
for Amicus Curiae Hon. Paul R. Michel (Ret.)
Jonathan S. Massey, Matthew M. Collette, and Kathryn
Robinette, Massey & Gail LLP, Washington, D.C., for
Amicus Curiae Ericsson, Inc.
Amanda Tessar, Perkins Coie LLP, Denver, Colorado; Sarah
E. Fowler, Perkins Coie LLP, Palo Alto, California; for
Amicus Curiae Act | The App Association.
Steven C. Holtzman and Gabriel R. Schlabach, Boies
Schiller Flexner LLP, San Francisco, California, for Amicus
Curiae Mediatek Inc.
ORDER
PER CURIAM:
Appellant Qualcomm Incorporated (“Qualcomm”)
moves for a partial stay pending appeal of the district court’s
May 21, 2019 permanent injunction, which it entered
following a trial on antitrust claims brought by the Federal
Trade Commission (“FTC”). We grant Qualcomm’s
motion.

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FTC V. QUALCOMM 5
The FTC alleged that Qualcomm, a leader in cellular
standard technology, violated Sections 1 and 2 of the
Sherman Act and Section 5 of the FTC Act in connection
with the licensing of its standard essential patents (“SEPs”)
and sale of its code division multiple access (“CDMA”) and
premium long-term evolution (“LTE”) modem chips.
Specifically, Qualcomm refused to license SEPs to rival chip
suppliers, allegedly in contravention of commitments
Qualcomm made to certain standard setting organizations in
the industry; refused to sell modem chips to any original
equipment manufacturers (“OEMs”) that lacked patent
licensing agreements with Qualcomm; and imposed in its
OEM licensing agreements excessive royalty rates on a per-
handset basis, irrespective of whether the handset contained
a Qualcomm chip or a chip from one of Qualcomm’s
competitors. The complaint alleged that the upshot of this
conduct was to maintain Qualcomm’s monopoly in the
CDMA and premium LTE chip markets and impose an
anticompetitive surcharge on its competitors’ chips.
After a ten-day trial, the district court issued extensive
findings of fact and determined that Qualcomm’s practices
violate the antitrust laws. The district court concluded that
Qualcomm (1) has an antitrust duty to license its SEPs to
rival chip suppliers, and (2) engaged in anticompetitive
conduct by using its royalty rates to effectively impose a
surcharge on its competitors’ chips. The district court
entered a multipart permanent injunction.
Qualcomm seeks a stay of the injunction’s provisions
requiring that Qualcomm make exhaustive SEP licenses
available to its competitors, prohibiting Qualcomm from
conditioning chip sales on the purchase of patent licenses,
and requiring Qualcomm to negotiate or renegotiate its
license agreements in that respect.

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6 FTC V. QUALCOMM
To determine whether to issue a stay pending appeal, we
consider “(1) whether the stay applicant has made a strong
showing that he is likely to succeed on the merits;
(2) whether the applicant will be irreparably injured absent a
stay; (3) whether issuance of the stay will substantially injure
the other parties interested in the proceeding; and (4) where
the public interest lies.” Nken v. Holder, 556 U.S. 418, 426
(2009) (quoting Hilton v. Braunskill, 481 U.S. 770, 776
(1987)). An applicant for a stay “need not demonstrate that
it is more likely than not they will win on the merits,” but
rather must show “a reasonable probability” or “fair
prospect” of success. Leiva-Perez v. Holder, 640 F.3d 962,
966–67 (9th Cir. 2011) (quoting Hollingsworth v. Perry, 558
U.S. 183, 190 (2010)). Applying those factors here, we grant
Qualcomm’s motion for a partial stay of the injunction
pending appeal.
It is well-settled that, “as a general matter, the Sherman
Act ‘does not restrict the . . . right of [a] trader or
manufacturer engaged in an entirely private business, freely
to exercise his own independent discretion as to parties with
whom he will deal.’” Verizon Commc’ns Inc. v. Law Offices
of Curtis V. Trinko, LLP (“Trinko”), 540 U.S. 398,
408 (2004) (second alteration in original) (quoting United
States v. Colgate & Co., 250 U.S. 300, 307 (1919)). The
Supreme Court recognized a very limited exception to that
general rule when a monopolist terminated a voluntary and
profitable course of dealing with a competitor and sacrificed
short-term benefits to exclude competition in the long run.
See generally Aspen Skiing Co. v. Aspen Highlands Skiing
Corp., 472 U.S. 585 (1985). That exception, however, is “at
or near the outer boundary of [Sherman Act] liability.”
Trinko, 540 U.S. at 409. And, here, even the two
government agencies charged with the enforcement of
antitrust laws—the FTC and the Antitrust Division of the

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FTC V. QUALCOMM 7
Department of Justice (“DOJ”), see FTC v. AT&T Mobility
LLC, 883 F.3d 848, 862 (9th Cir. 2018) (en banc)—disagree
as to whether Qualcomm’s conduct implicates the duty to
deal. Indeed, while the FTC prosecuted this antitrust
enforcement action, the DOJ filed a statement of interest
expressing its stark disagreement that Qualcomm has any
antitrust duty to deal with rival chip suppliers.
We are satisfied that Qualcomm has shown, at minimum,
the presence of serious questions on the merits of the district
court’s determination that Qualcomm has an antitrust duty
to license its SEPs to rival chip suppliers. See Lair v.
Bullock, 697 F.3d 1200, 1204 (9th Cir. 2012). Qualcomm
likewise has made the requisite showing that its practice of
charging OEMs royalties for its patents on a per-handset
basis does not violate the antitrust laws.1 See Doe v. Abbott
Labs., 571 F.3d 930, 931 (9th Cir. 2009) (holding that
“allegations of monopoly leveraging through pricing
conduct in two markets” do not “state a claim under § 2 of
the Sherman Act absent an antitrust refusal to deal (or some
other exclusionary practice) in the monopoly market or
below-cost pricing in the second market” (citation omitted)).
Turning to the second Nken factor, we conclude that
Qualcomm has demonstrated a probability of irreparable
harm. The injunction requires Qualcomm to enter new
contractual relationships and renegotiate existing ones on a
large scale. The fundamental business changes that the
1 Breaking from her standard practice, then-FTC Commissioner
Maureen K. Ohlhausen issued a written dissenting statement to express
her disagreement with the theory urged in the complaint and adopted by
the district court that Qualcomm’s royalty rates operate as an
exclusionary tax or surcharge on competitor products. See Dissenting
Statement of Commissioner Maureen K. Ohlhausen In the Matter of
Qualcomm, Inc., No. 141-0199, January 17, 2017.

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8 FTC V. QUALCOMM
injunction imposes cannot be easily undone should
Qualcomm prevail on appeal. See NCAA v. Bd. of Regents
of Univ. of Okla., 463 U.S. 1311, 1313–14 (1983) (White,
Circuit Justice) (equities favored stay where, absent a stay,
appellant’s contracts to broadcast collegiate football games
would be void and could not be enforced, putting at risk
business for entire season); Am. Trucking Ass’ns, Inc. v. City
of Los Angeles, 559 F.3d 1046, 1057–59 (9th Cir. 2009)
(irreparable harm likely where order subjected plaintiff to
immediate “Hobson’s choice” of either (1) signing
agreements that would cause it to “incur large costs” and
“disrupt and change the whole nature of its business” or
(2) refusing to sign agreements, causing “a loss of customer
goodwill” and potentially entire loss of business).
Finally, the balance of equites also weighs in favor of a
stay. See Lair, 697 F.3d at 1215. Although the hardship to
the party opposing the stay and the public interest usually
merge when the government is the opposing party, see Nken,
556 U.S. at 435, this case is unique, as the government itself
is divided about the propriety of the judgment and its impact
on the public interest. Indeed, the Department of Defense
and Department of Energy aver that the injunction threatens
national security, and the DOJ posits that the injunction has
the effect of harming rather than benefiting consumers.
Whether the district court’s order and injunction
represent a trailblazing application of the antitrust laws, or
instead an improper excursion beyond the outer limits of the
Sherman Act, is a matter for another day. For now, weighing
all relevant factors, we conclude that the requested stay is
warranted. Therefore, pending the resolution of this appeal
or until further order of this court, we stay the portions of the
district court’s injunction requiring that (1) “Qualcomm
must make exhaustive SEP licenses available to modem-

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FTC V. QUALCOMM 9
chip suppliers,” and (2) “Qualcomm must not condition the
supply of modem chips on a customer’s patent license
status” and “must negotiate or renegotiate license terms”
with its customers in that respect. This stay has the effect of
maintaining the status quo ante during this expedited appeal.
See id. at 429 (“A stay ‘simply suspend[s] judicial alteration
of the status quo[.]’” (first alteration in original) (quoting
Ohio Citizens for Responsible Energy, Inc. v. NRC, 479 U.S.
1213, 1313 (1986) (Scalia, Circuit Justice))).
The current briefing schedule shall remain in effect, and
the clerk shall place this appeal on the calendar for January
2020. See 9th Cir. Gen. Order 3.3(f).
So ordered.

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