In the present matter, the Federal Trade Commission (FTC) sued Qualcomm alleging that Qualcomm violated §§ 1 and 2 of the Sherman Antitrust Act and the FTCA. The FTC alleged that Qualcomm engaged in anticompetitive conduct, including: (i) selling chips only to OEMs (Original Equipment Manufacturer(s)) that paid above-FRAND (Fair, Reasonable, and Non-Discriminatory) royalty rates to license Qualcomm’s SEPs (Standard Essential Patents); (ii) refusing to license its SEPs to rival chip suppliers; and (iii) entering into exclusive dealing arrangements with Apple that prevented rival chip suppliers from competing with Qualcomm to supply Apple’s chip demand.
The District Court ordered a permanent, worldwide injunction prohibiting Qualcomm’s core business practices and concluded that Qualcomm’s licensing practices were an unreasonable restraint of trade under the Sherman Act.
However, on appeal, the Court of Appeals for the 9th Circuit (“9th Circuit” or “Court”) reversed the District Court and vacated its injunction. The 9th Circuit held that Qualcomm’s licensing practices did not violate the Sherman Act, and the exclusive dealing agreements with Apple did not substantially foreclose competition and were terminated years ago.
The 9th Circuit further explained that Qualcomm’s practice of licensing its SEPs exclusively at the OEM level does not amount to anticompetitive conduct in violation of the Sherman Act. The justification used by the 9th Circuit is that Qualcomm does not have an antitrust duty to license to rival chip suppliers.
The Court further held that Qualcomm’s 2011 and 2013 agreements with Apple did not have an actual or practical effect of substantially foreclosing competition in the CDMA modem chip market. The Court emphasized that the antitrust laws, including the Sherman Act, were enacted for the protection of competition, and actual or alleged harms to customers and consumers outside the relevant markets are beyond the scope of antitrust law.
The case is FTC v. Qualcomm Inc., 969 F.3d 974 (9th Cir. 2020) and can be read here.