The US Court of Appeals for the Ninth Circuit on Tuesday rejected a district court judge’s antitrust judgment against Qualcomm Inc. The appeals court found that the Federal Trade Commission (FTC) had not shown that Qualcomm engaged in illegal monopolization.
Qualcomm has contributed to CDMA and LTE cellular standards. It patents and licenses its innovations, which include cellular standard essential patents (SEPs), non-cellular SEPs and non-SEPs. Cellular SEPs are needed to practice a particular cellular standard. International standard-setting organizations require patent holders to commit to license their SEPs on fair, reasonable and nondiscriminatory terms before their patents are incorporated into standards.
The FTC filed suit claiming that Qualcomm violated the Sherman Act by “unreasonably restraining trade in, and unlawfully monopolizing, the code division multiple access (CDMA) and premium long-term evolution (LTE) cellular modern chip markets.” The FTC argued that Qualcomm engaged in anti-competitive conduct, violating § 2 of the Sherman Antitrust Act, even though Qualcomm was not subject to an antitrust duty to deal.
The district court held that Qualcomm’s business practices in CMDA and LTE cellular modern chip markets violated the Sherman Antitrust Act. The court granted a permanent, worldwide injunction prohibiting these business practices.
On appeal, the Ninth Circuit held that the FTC did not show that Qualcomm engaged in illegal monopolization because the FTC did not show how Qualcomm impaired competitors’ opportunities. The court noted that there was a line between anticompetitive behavior and hypercompetitive behavior, and Qualcomm’s behavior was not hypercompetitive. The court held that Qualcomm’s patent-licensing royalties and “no license, no chips” policy were “chip-supplier neutral” and did not undermine competition.
Because of this, the appeals court held that the district court went beyond the scope of the Sherman Antitrust Act and reversed the lower court’s decision.