When Antitrust, National Security, and Patent Law Collide: An Overview of FTC v. Qualcomm

In 2017, the Federal Trade Commission alleged that Qualcomm was exhibiting anticompetitive behavior by violating FRAND agreements.^[1] In the technology sector, companies typically agree to make patent licenses available to all manufacturers, under fair, reasonable, and nondiscriminatory terms (“FRAND” terms), when a patent is considered “essential to make part of a global or regional standard.”^[2] In this case, the FTC said that the patents held by Qualcomm are standard-essential patents and should accordingly be licensed under FRAND terms, but Qualcomm refused to license their patents to rival chipmakers under a “no license, no chip” policy that prevented rivals from entering the market.^[3]

In November 2018, Judge Koh agreed with the FTC and ruled that Qualcomm had to license some of its technology to its chip competitors.^[4] Further, Qualcomm was prohibited from entering into exclusive dealing agreements for the supply of modem chips and had to negotiate or renegotiate with its customers “under conditions free from the threat of lack of access to chips or software.”^[5] Unsurprisingly, Qualcomm is appealing this heavy-handed decision with the Ninth Circuit Court of Appeals.

On August 23, 2019, the Ninth Circuit Court of Appeals showed early support for Qualcomm.^[6] The test the court applied in reaching their decision to stay requires “whether the stay applicant has made a strong showing that he is likely to succeed on the merits.”^[7] However, the court attempted to appear more lenient by stating it was “satisfied that Qualcomm has shown, at minimum, the presence of serious questions on the merits of the district court’s determinations that Qualcomm has an antitrust duty to license its SEPs to rival chip suppliers.”^[8] Moreover, the court concluded its opinion with reference to the governmental divide over this case between the FTC and Department of Justice (which filed an unprecedented brief in opposition to the FTC), and further noted the Department of Defense and Department of Energy’s arguments that the district court’s injunction threatened national security.^[9]

The Ninth Circuit is scheduled to hear the appeal on February 13, 2020. Aside from the alleged antitrust violations underlying the appeal, it will be interesting to see whether the Ninth Circuit comments on either the DOJ’s brief or Qualcomm’s newest inclusion of a national security argument in its opening brief. Any reference to national security by the Ninth Circuit may lead to a new line of argument by future defendants, in both IP-antitrust cases and beyond.^[10]