FTC v. Qualcomm: What Really Is Going On

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OPINION
FTC v. Qualcomm: What Really Is Going On

I’ve been watching antitrust instances actively for the reason that 1980s. I needed to research historic antitrust instances going again to Standard Oil and RCA, with the intention to guarantee compliance with a associated consent decree When I labored at IBM. Each of the opposite instances had one factor in widespread: Both of the businesses being charged have been massively and clearly monopolies.

There have been many questions on whether or not they have been behaving badly or actually had an hostile influence on competitors, however there usually was little question they’d monopoly energy.

The present FTC v. Qualcomm case is vastly totally different, in that the 2 corporations that apparently have been screaming they have been broken are 4 instances and 10 instances bigger than Qualcomm, and so they have a historical past of anticompetitive conduct.

During the closing arguments, I had a ton of wtf moments, because the FTC introduced forth extremely silly arguments. During the shut, it felt as if the FTC lawyer hadn’t actually ready, hadn’t organized her proof into what I’d have considered an apparent framework, and just about simply known as Qualcomm names with little to again up her claims.

This is not highschool pre-law — that is federal courtroom. The high quality of labor was extra in keeping with what you would possibly count on to see from an overworked and under-resourced public defender with too many instances.

The implication that the FTC successfully was working for Apple was significantly disturbing throughout a time once I, and others, are more and more involved that the U.S. authorities is being run by massive corporations by way of lobbyists.

I’ll share my ideas in regards to the troubling FTC vs. Qualcomm litigation after which shut with my product of the week: a formidable replace to my go-to house safety digital camera resolution, Arlo.

The FTC’s Murky Case Against Qualcomm

The FTC’s place was that Qualcomm, by way of use of its patent portfolio and licensing, restricted competitors by abusing its energy as a monopoly. This allegation ought to have led to a closing argument that clearly delineated three pillars of proof. When I used to be finding out prelaw, I acquired coaching from a choose, and I’m nonetheless a fan of tight group concerning the way you current your authorized arguments and proof.

In this case, the FTC ought to have established three pillars of proof to point out that Qualcomm was appearing as a monopoly. If it wasn’t, then it did not have the ability to commit the crime that was alleged. Second, the FTC ought to have established that Qualcomm was abusing its monopoly energy. Without abuse, there was no crime. Third, the FTC ought to have proven that Qualcomm broken the business, as a result of that’s what drives the treatment. Any harm must be corrected.

There have been no apparent pillars of proof within the FTC’s argument. First, if Qualcomm was appearing as a monopoly, then it should have dominated its market. However, the three largest gamers within the smartphone market — Samsung, Huawei and Apple — usually haven’t used Qualcomm modems or processors. Samsung and Huawei principally have made their very own, and Apple has purchased them from Intel.

In truth, in the event you take a look at Qualcomm vs. both Intel or Apple, it’s comparatively tiny, with simply one-fourth the worth of Intel and one-tenth the worth of Apple. Granted, each corporations have been having important points, however Qualcomm cannot be blamed for an enormous lack of demand for Apple’s merchandise, or for Intel’s incapability to solidify a administration group.

Intel’s points just about begin with its having a board that, for essentially the most half, would not know the distinction between a GPU and a CPU. Intel can not seem to discover a new CEO who’s each certified and dumb sufficient to take the job.

Second, the FTC wanted to point out not solely that Qualcomm was a monopoly, but in addition that it abused its monopoly energy. Given that I do not assume it got here near reaching its burden of proof on the query of Qualcomm being a monopoly, the abuse competition instantly grew to become problematic. The FTC argued that Qualcomm illegally tied its patent portfolio to its modem gross sales, but it surely offered no proof that Qualcomm ever reduce modem provide to a purchaser that did not have a patent license.

There was a reliable motive to tie these two issues collectively: Implementing considered one of Qualcomm’s modems did require the usage of Qualcomm’s patents, and a license would have averted litigation. I discovered it significantly troubling that the FTC argued that decreasing litigation was an instance of abuse of energy. I’m guessing that was as a result of the fee believed that standard corporations — as in non-abusive monopolies — should spend hundreds of thousands on pointless litigation with the intention to function. Maybe this had one thing to do with job safety, however I positive did not get the connection.

Virtually all the witnesses the FTC introduced ahead who stated that Qualcomm compelled their corporations into signing a contract have been countered by witnesses Qualcomm’s attorneys known as — staff from the identical corporations who stated these accounts have been BS. Each FTC witness was impeached by a coworker, which actually made the FTC’s case look fabricated.

Third, the problem of damages was telling. During the shut, the instance the FTC used was that each time Apple requested a concession from Qualcomm, Qualcomm needed a concession in return. It was as if the FTC existed in some unusual parallel universe the place solely the larger firm could make calls for, and the smaller agency can say nothing however “yes sir, can I have another?”

It was clearly bullying conduct by Apple, and the FTC appeared to be saying that any firm that might resist Apple’s bullying clearly was abusing its energy. I significantly thought that the U.S. authorized system was beginning to look as if it was based on ideas you’d extra possible see in a third-world nation, the place the legal guidelines are regardless of the highly effective say they’re.

The FTC’s Impeachable Expert

What I discovered significantly weird was the distinctive concept supplied by the FTC’s lead skilled, Carl Shapiro, a professor of economics on the University of California, Berkeley. Shapiro concluded that Qualcomm’s enterprise mannequin have to be unlawful, though his view appeared to don’t have any connection to any information. He supplied no analysis or empirical proof — only one man’s concepts about how the world must work. More importantly, he made it clear that anybody who disagreed with him — together with judges (and I’ll get to this in a second) — was an fool.

I’ve labored with of us like this up to now and I’m positive you will have as properly. They are so extraordinarily narcissistic that they do not settle for something from anybody however themselves. Now this legend in his personal thoughts additionally was a pivotal skilled within the AT&T Time Warner trial, and the choose in that trial went off on how poorly based Shapiro’s testimony was, and the way removed from actuality his fanciful concept was. Seriously, the choose went on and on along with his observations that Shapiro’s feedback have been so poorly based as to be lower than nugatory, earlier than ruling in favor of the merger and in opposition to the DoJ.

The FTC attorneys’ selection to make use of this man should come all the way down to the very fact they could not discover another certified skilled who agreed with them, and hoped, which was fairly silly, that Qualcomm’s attorneys would not discover out about that prior case (Shapiro claimed below oath that he did not keep in mind it. There isn’t any means that’s true, given how he went after the choose when it was introduced up.)

Seriously, the man was a narcissist. Anyone who went after him, just like the choose within the AT&T/TM trial did, can be on his immortal mortal enemies checklist. Even for a standard particular person, if choose have been to tear you or me a brand new bung gap like that choose did, we might keep in mind it until the tip of days. Shapiro claimed he forgot it in just a few months. I doubt any of us are that gullible — however apparently, the FTC was.

Does the FTC Now Work for Apple?

There is plenty of apparently unlawful conduct happening within the authorities now. Just take a look at the spectacular variety of indictments popping out of the Mueller probe. Further, the quantity of self-dealing in congress is scary.

This case, in my thoughts, is like two bullies (Apple and Intel) that went to a smaller child who’s prepared to combat again, and complaining that the smaller child is a bully as a result of he will not go over his lunch cash.

Go again and take a look at what I stated about Qualcomm pushing again on Apple’s calls for. Now add the FTC’s argument that as a result of Qualcomm would not settle for Apple’s demand that each patent be arbitrated individually by a panel — we’re speaking 1000’s of patents — Qualcomm was at fault. This actually was the FTC complaining that Qualcomm would not hand over its lunch cash to an even bigger and vastly extra highly effective agency.

Now I’m undecided the FTC rank and file are on board with this, as a result of its authorized group appeared to be making an attempt to throw this combat. The undeniable fact that they used the impeachable skilled, gave considered one of their least-capable attorneys accountability for the shut (actually, she carried out like a first-year affiliate), and made no actual try to prepare their proof in a hierarchy that will enable the choose to resolve extra simply of their favor, makes me assume there’s a riot within the FTC and that they need to lose this factor.

The Qualcomm shut was removed from the very best I’ve seen — possible as a result of the FTC was so disjointed that it compelled a less-organized response — but it surely was massively higher executed than what the FTC did. Compared to the FTC utilizing considered one of its most junior of us, Qualcomm used considered one of its most senior, as a result of the corporate thought the case was that necessary.

Now this may increasingly come all the way down to the FTC being inept, however I noticed some robust litigators on its group final Friday that ought to have performed the shut (each males, and I’ll get to that in a second), however they weren’t used.

Two different causes are regarding. One is that the FTC attorneys knew Judge Koh would rule of their favor no matter their case, in order that they actually did not must do the work. The different is that they knew Judge Koh would decide a feminine lawyer over a male lawyer and subordinate the proof and arguments to that selection.

The choose got here throughout to me as succesful and competent, however I have not performed the analysis on her that the FTC possible has so I stay involved. I’ve seen plenty of judges cellphone it in, however she wasn’t considered one of them. (I used to be really fairly impressed.)

Wrapping Up

The FTC did not appear to come back near assembly its burden of proof that Qualcomm was a monopoly and even had monopoly energy to abuse. It additionally fell brief on proving dangerous conduct, and the damages appeared to don’t have any basis in actual fact. The time period considered one of my outdated legislation professors used was “throwing crap against the wall,” and I’m no extra a fan of that technique than he was.

The hazard of the FTC getting this mistaken is excessive, as a result of Qualcomm is vital to the U.S. lead within the 5G rollout. If the federal government cripples Qualcomm, it principally fingers the market off to the Chinese and Huawei. If Qualcomm is responsible, that’s problematic, but when it was charged wrongfully, on condition that the U.S. is in a declared commerce warfare with China, that’s probably treasonous.

There can also be the growing concern that, because of finances slicing, our authorities is an offshoot of huge enterprise. The ever-wealthier tail is wagging the ever extra poorly funded canine, and even the promise of a profitable company gig has way more potential to deprave than it ever has earlier than. This little piece, which particulars how lobbyists legally corrupt authorities, ought to give us all a bit extra pause.

So, and to recap: The FTC did not arrange its shut in a means that will finest current the proof it had; a lot of the proof was invalidated; its key skilled was impeached; and the closing lawyer was the weakest I’ve seen on the podium. It was as if the FTC needed to make a press release or show a degree that had nothing to do with Qualcomm. I’ve an concept what that’s — however it’s too harmful to share. If that is an elaborate sting, there is just one possible candidate.

Rob Enderle's Product of the Week

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Because this new digital camera from Arlo considerably improves my house safety, it’s my product of the week.


Rob Enderle has been an ECT News Network columnist since 2003. His areas of curiosity embrace AI, autonomous driving, drones, private expertise, rising expertise, regulation, litigation, M&E, and expertise in politics. He has an MBA in human sources, advertising and pc science. He can also be an authorized administration accountant. Enderle at present is president and principal analyst of the Enderle Group, a consultancy that serves the expertise business. He previously served as a senior analysis fellow at Giga Information Group and Forrester. Email Rob.



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