The first Apple/Qualcomm International Trade Commission (ITC) case is about to kick into high gear, with the prehearing conference scheduled for Friday and the hearing (essentially the equivalent of a trial in the ITC) opening next week. Qualcomm has already dropped several patents from this case and in a companion European case admitted that some of its patents are of questionable validity.
Setting aside the merits of the patents in the ITC case, why is Qualcomm using the ITC as part of their litigation strategy?
Earlier this year, Patent Progress covered cases brought by three different competition authorities across the world, two of which have already found Qualcomm to have acted illegally and fined the company as a result.
Qualcomm has a history of anti-competitive actions with respect to patents—for example, nearly fifteen years ago, Qualcomm was up to the same tricks. Qualcomm failed to tell the H.264 standard-setting organization about its patents when participating in the standard-setting process. Qualcomm compounded this by attempting to conceal over 200,000 pages of evidence of standards abuse and making “repeated false claims during discovery, trial, and post-trial, by Qualcomm’s attorneys and witnesses.” The end result? Qualcomm not only had its H.264 video patents held unenforceable, but was also sanctioned for lying to the court.
In other words, Qualcomm has a long history of trying to use its standard-essential patents (SEPs) in anti-competitive ways.
Qualcomm would almost certainly say that this ITC case doesn’t involve any SEPs. But in reality, it’s just another example of Qualcomm abusing its patent portfolio.
Qualcomm’s End Run
Essentially, Qualcomm’s strategy is to use the ITC to avoid two problems.
First, it’s trying to avoid the findings of the numerous worldwide competition authorities that are investigating Qualcomm’s anti-competitive tactics (several of which have already fined Qualcomm significant sums of money.) The ITC lacks jurisdiction to hear antitrust counterclaims, with counterclaims required to be removed to district courts while the ITC action continues. This means that, even if Qualcomm is clearly using these patents as part of an anti-competitive scheme and has been found to be doing so by the FTC, the ITC can’t take it into account in their investigation.
Second, Qualcomm is trying to get around its obligation to license its SEPs (the majority of its patent portfolio) on ‘fair, reasonable, and non-discriminatory’ (FRAND) terms. In general, courts won’t allow injunctions on FRAND patents because the patent owner commits to an obligation to license their patents under FRAND terms as part of participation in a standards development process. This means that the irreparable harm required for an injunction under the eBay test will rarely exist when FRAND patents are at stake. Qualcomm’s ITC filing uses non-FRAND patents in an attempt to obtain an exclusion order preventing Apple from importing products that don’t use Qualcomm chips. Once it has an exclusion order, Qualcomm can leverage that to force Apple to take an unfair and unreasonable license to Qualcomm’s FRAND patents, in violation of Qualcomm’s FRAND obligations, and can further use the exclusion order to try to eliminate Intel, its main competitor in the baseband chip market.
In other words, by going to the ITC, Qualcomm is attempting to find a forum that will allow it to ignore competition authorities and break its promises—the promises that Qualcomm made to other companies so that those companies would agree to allow Qualcomm’s technology into cellular standards.
The ITC Is A Trade Court
The ITC is the International Trade Commission. It was created to avoid unfair practices in import trade — to allow domestic manufacturers a venue for addressing unfair practices by foreign companies that might not be amenable to suit in an American court. But the champions of the ITC likely didn’t envision it being used by one American company to assert monopoly power over another American company and thus obtain far more than the value of its technological contribution.
But that’s exactly what Qualcomm is trying to do.