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Qualcomm's summer: anti-monopoly "ban" temporarily removed, mobile phone manufacturers are upset

On August 23, I was in the heat. The US Court of Appeals for the Ninth Circuit (hereinafter referred to as the “Ninth Circuit Court of Appeals” or “Appeals Court”) ruled that the suspension of the operation of the San Jose District Court of the Northern District of California, USA, on May 21 (hereinafter referred to as the “Regional Court”) Made a partial judgment against the US Federal Trade Commission (FTC) v. Qualcomm Antitrust.

At the time of this solar term, which means "the summer leaves," the ruling of the Court of Appeal temporarily relieved Qualcomm from the "solar sun" in the district court. After Qualcomm filed an appeal, the multi-party struggles and games involved in the trial process made the future trend and final result difficult to predict.

Many industry and legal professionals said in an interview with Ji Wei.com that in the face of this anti-monopoly lawsuit initiated by the US administrative agency and the judicial body, it is not easy for Qualcomm to "return completely". The current licensing rate will be further adjusted.

Timeline: How is the “ban” of the District Court temporarily suspended?

On May 21, after two years of trial, the US District Court ruled on the FTC v. Qualcomm anti-monopoly case, ruling that Qualcomm violated the anti-monopoly law and imposed five requirements on Qualcomm in the form of “injunctive relief”.

In short, the five bans include: 1. Qualcomm shall not obtain the patent authorization as a condition for providing chips. It shall negotiate or renegotiate the license agreement with the customer in a reasonable manner; 2. Qualcomm shall be fair, reasonable and non-discriminatory. (FRAND) principle grants standard essential patents (SEPs) to competitors; 3. Qualcomm cannot require customers to sign exclusive supply agreements; 4. Qualcomm cannot interfere with the communication between clients and government agencies on law enforcement and regulatory matters; 5. Qualcomm must accept courts 7 years of compliance supervision.

For Qualcomm, the first two points are the most critical, which is equivalent to requiring them to change the "no license, no chip" business model, can no longer use the chip supply to put pressure on the customer licensing negotiations, and authorization to the competitor means The use of patents at the chip sales level has fundamentally shaken the commercial foundation of Qualcomm's charging model.

The district court's decision made Qualcomm unacceptable, and Qualcomm published an official statement with a strong wording: strongly opposed to the district court's judgment, the conclusions reached by the district court judges, the factual determination and the use of the law strongly disagree, At the same time, the statement will appeal to the Intermediate Court of Appeals in the US Federal Judiciary, the Ninth Circuit Court of Appeals, and will immediately seek to suspend the execution of the District Court's judgment.

In the case of the FTC v. Qualcomm anti-monopoly case, the district court's presiding judge, Lucy Koh, was determined. Not only in early May, before the case was pronounced, it did not pay attention to the recommendations of the US Department of Justice to hold a hearing. Moreover, after the verdict was announced, on July 4, Qualcomm’s motion to suspend the execution of the judgment during the appeal of the Ninth Circuit Court of Appeal was directly rejected.

On July 8, Qualcomm filed a motion with the Court of Appeals for the Ninth Circuit, hoping to suspend the execution of the first two judgments of the District Court during the appeal period.

On July 15th and 16th, Ericsson, the US Department of Energy, the Ministry of National Defense, and the Ministry of Justice successively submitted documents to the court, expressing opinions from various fields such as industry, fact finding, national defense security, and 5G future technology competition. It is hoped that the Court of Appeal will support Qualcomm’s motion and suspend the execution of the District Court’s decision.

On July 18, the FTC filed a motion against the Qualcomm Court of Appeal against Qualcomm's request to suspend the ban.

In the end, the Ninth Circuit Court of Appeals approved the Qualcomm motion on August 23 for three reasons: First, Qualcomm has the possibility of winning the appeal; second, the execution of the district court's judgment in the appeal process will cause damage to Qualcomm; Third, the public interest, including national security, will have an impact on the judgment.

Wang Minsheng, general manager of Shenzhen Guardian Intellectual Property Services Co., Ltd., said in an interview with Ji Wei.com that the appeal court’s decision is that Qualcomm does not need to implement part of the judgment of the district court during the appeal period. Licensing negotiates or renegotiates with customers and authorizes SEPs to competitors.

For Qualcomm, this is a good “window period” that allows it to invest the main energy to deal with the next stage of the appeal, without the need to face the pressure of negotiation that may follow.

Is it necessary to hear "acceleration" from confidence or pressure?

In the US judicial process, after the appeals process is initiated by the Court of Appeal, the parties will be given a time limit for filing an appeal. In this case, Qualcomm needs to submit the initial appeal (openingbrief), indicating the facts, the district court's judgment summary, the current legal standards, and highlighting why the district court's judgment is wrong under the current legal basis. .

Subsequently, the FTC needs to submit a reply (answeringbrief), and strive to state that the district court's first-instance judgment is correct, and the court of appeal should uphold the original judgment.

Finally, Qualcomm can also submit a brief counter-request (optionalreplybrief) to refute some of the legal arguments in the defense filed by the FTC. The counter-argument is generally not necessary, and Qualcomm has the right to choose to submit or not.

A noteworthy detail is that Qualcomm filed an appeal to the Ninth Circuit Court of Appeal on July 8 and asked for a temporary suspension of the District Court's decision, and also filed a motion with the court to speed up the trial. On July 10, the motion was approved by the Court of Appeal and a timetable for the parties to file a complaint:

Prior to August 9, Qualcomm filed an initial appeal. Before October 4, the FTC filed a reply and Qualcomm submitted an optional counter-argument before October 25.

An industry lawyer said in an interview with Jiwei.com that Qualcomm proposed to speed up the trial for several reasons: First, increase the chances of the Court of Appeal to suspend the execution of the ban; second, Qualcomm has ample confidence to win the appeal.

Another legal person agrees, and he believes that Qualcomm's current pressure comes from industry and capital market uncertainty about the prospects of the case. Qualcomm needs to give the industry a positive signal and good expectations for the capital market.

The person mentioned that on August 21, Qualcomm and LG announced a re-signing of a five-year agreement, and on August 29, Qualcomm and the Saudi company Dallha signed a patent license agreement covering multi-mode small base stations, in these two press releases. It is explicitly mentioned that the terms of the agreement are consistent with Qualcomm's established global patent license terms.

"In the near future, Qualcomm hopes to release the information that the district court's decision does not affect the existing agreement terms, thereby reducing the uncertainty brought by the district court judgment to the industry and capital markets." The source said.

According to the collection of micro-understanding, after the two parties submitted the appeal, the Court of Appeal arranged the time for the trial. In most cases, the cases heard by the Ninth Circuit Court of Appeal did not include the court session. The judge directly tried and made a judgment based on the appeal of both parties. However, the above-mentioned industry lawyers expect that there will be a high probability of the case.

In the court debate, the Court of Appeal will focus on hearing and adjudicating the legal disputes between the two parties, and will not decide the factual disputes. When considering whether the district court's judgment has a legal basis, it will give the factual judgment a great degree of respect. The Court of Appeal does not refer to the examiner and does not allow the submission of new evidence. All evidence must be presented in the District Court.

In addition, there is only one judge in the District Court, and the Court of Appeal will jointly hear the case by a three-member collegial panel. The final result will be decided by three judges.

If the final appeal court’s decision supports the district court, it does not mean that the case is conclusive. At that time, Qualcomm can ask the Court of Appeal to conduct a joint trial, which will involve more than a dozen judges. In addition, Qualcomm can choose to continue appealing to the US Supreme Court.

The above-mentioned industry lawyers told Ji Wei.com that subsequent appeals must be approved by the Supreme Court. Generally speaking, the Supreme Court agrees that the proportion of appeals is not high, generally not exceeding 5%. Therefore, the Ninth Circuit appeal The outcome of the court hearing is critical to Qualcomm.

Regarding the final judgment date of the case, the lawyer said that the judgment time of the judge is variable, and it usually takes 12-18 months to make.

Do multi-party wrestling games talk about jurisprudence or politics?

In recent years, Qualcomm's unique "chip + licensing" business model and rate issues have repeatedly been challenged by antitrust agencies from many countries and regions around the world, and Qualcomm has also incurred huge litigation costs and economic losses.

But with its leading research capabilities in the wireless communications industry, strong litigation capabilities in the judicial system, and deep industry contacts and resource capabilities, Qualcomm's business model has not been shaken. The high profits from the licensing business also help in technological innovation and invention in the field of wireless communications.

This time, in the face of anti-monopoly lawsuits initiated by the US local administrative agencies, the judiciary, and the Qualcomm business model, can Qualcomm pass?

In an interview with Jiwei.com, a legal person said that the threshold for suspending the execution of district court judgments is low from the judgment of the Court of Appeal. Therefore, this does not mean that the final trial results will benefit Qualcomm.

The source further stated that the district court's presiding judge, Lucy Koh, was prestigious in the legal profession and was responsible for numerous major patents and antitrust cases, including a seven-year final settlement between Apple and Samsung. The cases in which they are responsible are rarely lost. Because of the existence of the judgment of the district court, Qualcomm is not optimistic about the situation.

However, another lawyer said that Qualcomm has accumulated a lot of resources in the administrative and judicial circles for many years. After winning the time, Qualcomm is bound to do its best in the appeal process. At the same time, Qualcomm's position in the industry, the United States for its emphasis on 5G and other aspects, there will be more support and lobbying voices, and may eventually affect the trend of the case.

"From the current point of view, this case has not only been a matter of the judicial level, but has entered a process of multi-party struggle," the lawyer said.

On July 12th and July 15th, the US Department of Energy and the Ministry of National Defense and other agencies submitted a statement to the Court of Appeal, saying that Qualcomm is considering the irreplaceability of wireless communication and 5G, as well as the public interest and national defense security. The court can suspend the execution of the judgment.

In addition, as another anti-monopoly agency in the United States other than the FTC, the US Department of Justice (DOJ) also expressed to the District Court and the Court of Appeal that the facts of the district court were not recognized. Judging from the jurisprudence of the anti-monopoly facts, the Ministry of Justice and the FTC and the District Court have differences. It should be noted that Makan Delrahim, the head of the Anti-Monopoly Bureau of the Ministry of Justice, previously served as an external legal counsel for Qualcomm.

Therefore, for the trial of this case, Qualcomm has a strong self-defense ability and strong resources. The three presiding judges of the Court of Appeal may decide on the anti-monopoly facts, even the judge’s own tendency and the ideology. Affecting the final result, this also makes the future trend of the case unpredictable.

Wang Minsheng believes that Qualcomm has been deeply involved in the administrative and judicial fields for many years, especially this time in the United States. Qualcomm will have a deeper focus. From the legal point of view and from the political point of view, it will use all resources to win the most. Favorable results.

"Anti-monopoly cases involve legal evaluations in economics. Now the reasons for both sides are relatively sufficient. At the same time, this case involves public interest, including the US national defense security, technological leadership and other factors. If these are taken into account, appeals How the court seeks a balance between the jurisprudence and the interests of all parties will be the point of view for the trial of future cases, and there may be a politically high judgment in the end." Wang Minsheng said.

Is it true that mobile phone manufacturers are talking about it?

Although the final trend of Qualcomm appeal is unpredictable, many industry and legal professionals have said in an interview with Jiwei. It is not easy for Qualcomm to achieve “full body retreat” in this anti-monopoly lawsuit. To a large extent, Qualcomm's overall machine charging model will remain unchanged, but at the licensing rate, Qualcomm may be forced to make adjustments to a reasonable level that is generally accepted by the industry.

This is based on several reasons: First, the sentiment of Qualcomm's model and licensing rates, including the US industry, has not been effectively released. Different from Qualcomm’s previous anti-monopoly reviews in many places around the world, including the China Development and Reform Commission, the Korea Fair, the Taiwan Regional Fair, and the European Commission, the FTC directly chose to sue Qualcomm in the District Court. The results of the judicial decision are more binding.

Second, behind the voice of doubt, in the face of the ever-decreasing hardware profit margin, Qualcomm's rates are putting pressure on mobile phone companies. The case involved many industrial chain manufacturers including Apple, Samsung, LG, Blackberry, MediaTek, Huawei, etc. In the view of these manufacturers, the current rates are still too high. This is also supported by the District Court's decision, which requires Qualcomm to negotiate with the client on reasonable principles. If negotiations cannot be reached, the third party's arbitration may be sought, and in this process Qualcomm cannot threaten the customer or the party is out of stock.

The third is to consider that the case involves not only the interests of all parties in the industry chain, but also the public interest in 5G, future technological innovation, and national interests such as national defense. Rate adjustment is a way that all parties can accept. Being able to balance the moods and demands of the industry will not make Qualcomm hurt, thus weakening the influence of the industry and the US's leading position in science and technology.

Although the district court's judgment has been temporarily suspended, Qualcomm also said that the current licensing business has not received the impact of litigation, but also released a positive signal, but this does not prevent mobile phone manufacturers from turbulent.

In a filing with the Court of Appeal, Qualcomm stated that the District Court’s decision has caused at least two customers to question the existing license terms and rates. According to the understanding of the micro-network, some manufacturers have asked to negotiate with Qualcomm.

A person in the mobile phone industry told Ji Wei.com that one was because of the judgment of the district court. Second, after Qualcomm and Apple reconciled, according to Apple’s payment of 4.7 billion US dollars in license fees and public information, Qualcomm The license rate gave Apple a big discount.

"This $4.7 billion corresponds to Apple's product sales in about 11 quarters. If you consider the direct licensing agreement signed with Apple and the possible licensing system for both parties, the overall fee.