On March 29, 2021, the Federal Trade Commission (FTC) confirmed it would not seek Supreme Court review in its lawsuit against Qualcomm, ending a years-long dispute between the agency and the company over Qualcomm’s licensing program. The FTC filed the lawsuit in 2017, alleging Qualcomm’s behavior in licensing its patents was anticompetitive. The agency, briefly, prevailed in 2019, when a district court judge issued an opinion and an injunction against Qualcomm, significantly hindering the company’s ability to license its patents. However, in 2020, a panel of the U.S. Court of Appeals for the Ninth Circuit unanimously reversed the district court, finding in Qualcomm’s favor and allowing the company’s licensing program to continue. The entire Ninth Circuit declined to hear an appeal – leaving the panel’s reversal in effect.
In their ruling, the panel specifically wrote that, “hyper-competitive behavior” is not illegal. The panel’s decision rejecting the FTC’s case was confirmed by the entire Ninth Circuit, which declined to hear an appeal by the agency,
The decision of the FTC to not seek review at the Supreme Court is a good outcome, not just for Qualcomm, but for other innovative companies and innovation itself. While the case has left a cloud of uncertainty over the industry or too long, the final result is positive one. Having courts confirm that hyper-competitive behavior is not illegal (and in fact has benefits) sends a powerful message to innovators.
In an interesting development during this case, the Department of Justice – which shares antitrust enforcement duty with the FTC – took the unusual step of opposing the FTC case. To many antitrust and IP experts, this case was wrongly turning an IP licensing dispute into antitrust violation.
Companies that are developing tomorrow’s technology and driving America and its economy forward are in danger if overzealous antitrust cases like this one are pursued. Agencies who seek to promote competition, should not hinder innovation by interfering with these companies’ abilities to license and enforce their patent rights
First, it has long been understood that dominant firms that achieve that status through innovation and business acumen should not be the target of bold antitrust enforcement. One of the goals of competition law is to force companies to compete in productive ways, such as developing new products and services. When companies develop exciting new technologies, this behavior should be encouraged, not hindered.
Second, antitrust and intellectual property are not foes. Both of them seek to promote, among other things, innovation, even if they go about it through different means. Since the 1990s, it has been understood that simply enforcing a company’s valid intellectual property does not equate to abusive behavior. It is troubling that the modern FTC is willing to take on a viewpoint that was rightly discarded decades ago.
Third, participating in standards development, just like owning intellectual property, does not automatically confer market power or enable a company to behave anticompetitively. Recent scholarly work by legal experts and economists has demonstrated that standard essential patents, particularly those in high-tech industries like cellphones, are not being used anticompetitively. If they were, we would see fewer players in the industry, stagnating technology, and skyrocketing prices unrelated to features. Those indicators of an anticompetitive market are the opposite of what we see – instead, we have constantly evolving and improving phones and technology with new companies regularly entering the market and prices that are related to the features and decreasing overall.
The FTC was correct to see the writing on the wall and bring this case to an end – though reluctantly it seems. There’s a reason the FTC was facing, as Acting Chairwoman Slaughter noted “significant headwinds” with respect to this case – that’s what happens when you’re going the wrong direction.
This case and the legal results should offer a roadmap of a more evidenced based antitrust enforcement that does not seek to reign in IP licensing and punish hyper competition.