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By Jan Wolfe
(Reuters) – A rare public call by a US Federal Trade Commission (FTC) official demanding that one of the agency's victories be overturned, in a case of anti-competitive business practices by the manufacturer of the Qualcomm Inc. chips, strongly directs the judge's decision to be overturned on appeal, said some legal experts.
FTC commissioner Christine Wilson, nominated by Republican President Donald Trump, wrote in the Wall Street Journal Tuesday that the May 22 judgment against Qualcomm "radically broadened the legal obligation to do business." a company to help its competitors "and was based on a tense interpretation of a 1985 law. US Supreme Court decision.
Judge Lucy Koh of the US District of San Jose, California, said that Qualcomm's licensing practices had strangled competition in some segments of the computer chip market, hurting its competitors, smartphone manufacturers and to consumers. It ordered the San Diego-based company to renegotiate license agreements at reasonable prices, without threatening to cut supplies, and ordered the contract be monitored for seven years to ensure compliance.
The Qualcomm case has been controversial since the beginning of his term in the last days of President Barack Obama's administration. The only Republican commissioner at the FTC at the time said he should not be brought to justice.
Wilson op-ed, one of the FTC's five commissioners, will have no legal weight while Qualcomm appeals Koh's decision, but hints at strong arguments the company needs to appeal, Geoffrey Manne, director of the International Center for Law and Economics, and several other antitrust lawyers have said.
Other experts, however, stated that the decision was well-reasoned and was based on detailed factual findings and the determination of the credibility of the witnesses, namely that the courts of appeal would be reluctant to a second hypothesis. .
FTC spokesman Peter Kaplan said the agency had declined to comment.
The judge has not yet ruled on Qualcomm's request to suspend its decision as it plans to appeal. The decision tipped the shares of Qualcomm and reduced the value of the company by $ 10 billion.
Under US antitrust law, companies can usually decide who they want to do business with. Even the monopolists do not have the so-called "duty to treat" with their competitors.
SUPREME AFFAIRS ASPEN SKIING & # 39; IN THE USA
But the Supreme Court created an exception to this rule in the "Aspen Skiing" case of 1985, claiming that the conclusion of a profitable and tested commercial agreement could constitute a violation of competition law.
As Koh points out in its decision, Qualcomm has already assigned its patents on standard technologies to competing chip makers, although the decision does not specify the extent of the practice. Qualcomm completely abandoned this practice in the early 2000s and began to sell these patents only to companies that manufacture consumer devices, such as smartphones, that contain chips.
Koh said that Qualcomm's turnaround was "motivated by anti-competitive malevolence" and was the type of behavior banned by Aspen Skiing.
In Aspen Skiing, a ski resort operator has waived a long-standing, profitable agreement with a competitor for the joint sale of a combined package.
The Supreme Court said that the company seemed to sacrifice its immediate profits in the hope of defeating a competitor in the long run.
In the first instance, Qualcomm argued that it had never granted complete "full" licenses to other chip vendors. The fact of asking him to grant them now, as Koh ordered, would require him to move to a new trade agreement, rather than requiring a return to a precedent, the company said.
Wilson of the FTC wrote that Koh had misapplied the Supreme Court case. According to the judge's logic, "Aspen Skiing now means that if a company sold a product to a competitor, then it could be bound to a perpetual antitrust obligation to sell each product to each competitor," Wilson said.
Jonathan Barnett, a law professor at the University of Southern California, acknowledged that Koh's decision was about to be overturned by a court of appeal.
The exception created by Aspen Skiing was supposed to be "very close," Barnett said. In 2004, in a case involving Verizon Communications Inc., the High Court had cast doubt on Aspen Skiing, claiming it was "close to the outer limit" of antitrust liability.
Manne stated that Koh had made a mistake in comparing the changes made by Qualcomm to the driving licensing practices at Aspen Skiing.
The move to device-level licensing "has hardly begun with Qualcomm" and has a lot of business sense as it was far more lucrative, said Manne.
But some legal experts said Koh's heavy reliance on factual findings, particularly findings that Qualcomm's executives lacked credibility on the witness stand, made his decision harder to challenge.
The courts of appeal do not overturn the factual findings of the trial judge unless there is a "manifest error" – a high standard difficult to meet.
Koh, for example, stated in his ruling that "many of the testimonials at the Qualcomm executives' trial were contradicted by the proper emails, handwritten notes, and recorded statements of those witnesses inside the Internal Revenue Service."
A Qualcomm lawyer "claimed not to remember" the details of a 2012 meeting until FTC lawyers registered a registration, Koh said. And Qualcomm's executives often responded with "quick and convenient stories" when they were interviewed by their own lawyers, Koh said.
"It was embarrassing and probably very damaging in appeal that Koh carefully documented the lies of Qualcomm's executives," said Christopher Sagers, a professor of antitrust competition law at Cleveland State University.
Qualcomm said in a statement that he was convinced that a "thorough examination of the evidence and a correct interpretation of the law would result in a reversal on the part of the 9th Circuit Court of Appeal".
Manne said that even with the deferential approach adopted by the courts of appeal, Koh's decision was on the ice.
"I really think she's wrong on the law regarding the obligation to deal and Aspen Skiing, and she's likely to back down on appeal," Manne said.
(Report by Jan Wolfe and Diane Bartz in Washington, additional report by Stephen Nellis in San Francisco, edited by Noeleen Walder and Grant McCool)
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