Last June, CCIA filed comments on the public interest issues implicated by Qualcomm’s ITC complaint against Apple. (The ITC is required to take into account whether the public interest would be harmed by exclusion.)
Last month, the ITC Administrative Law Judge (ALJ) agreed with our comments, determining that an exclusion order was not in the public interest. However, ALJ Pender’s determination isn’t final—the International Trade Commission (ITC) has been asked to review his determination. As part of that process, the Commission invites further comments from members of the public.
Yesterday, CCIA filed additional comments, reiterating certain aspects of the original analysis, while also confirming the analysis provided by ALJ Pender was correct. In particular, CCIA’s comments note that an exclusion order would harm consumers, would harm competition in the United States, and would pose a risk to U.S. national security.
Harm to Consumers
As I recently noted, in a related Qualcomm case, Judge Koh found that “extensive documentary evidence suggests that Qualcomm imposed an industry-wide” royalty in excess of what they were entitled to receive. This sort of excessive royalty in turn raises prices to consumers and reduces the amount Qualcomm’s customers can spend on research and development of new features, further harming consumer welfare. Qualcomm’s prior behavior is relevant to understanding the present situation—their past anti-competitive abuse of patents illustrates that their aim in the present litigation is maintenance of their monopoly power.
ALJ Pender agreed, noting that an exclusion order was likely to cause Intel—Qualcomm’s sole competitor—to cease to compete. And ALJ Pender noted that if Qualcomm held a monopoly, it would have a negative impact on “quality, innovation, supply, and prices.”
Harm to Competition
While much of the testimony on which ALJ Pender made certain determinations is redacted, he came to a clear conclusion on the issue of competitive harm. Specifically, he concluded that in the event of an exclusion order, Intel “will almost certainly exit the baseband chip market.” In addition to the obvious harms of re-establishing Qualcomm’s baseband chipset monopoly, ALJ Pender noted that U.S. competitiveness in 5G standard development—an issue of national importance—would be harmed if Intel ceased to participate in standards development.
In addition to these current competitive harms, CCIA’s comments note that exclusion raises the risk of future harms to competition. In particular, anyone considering entering the baseband chipset market—a market which already faces extremely high barriers to entry—would reasonably look at Qualcomm’s actions and consider the additional risk of exclusion as a further barrier to entry, creating a disincentive to enter into competition.
Harm to National Security
Finally, ALJ Pender noted that an exclusion order would harm U.S. national security. ALJ Pender isn’t alone in this determination—he’s agreeing with the Committee on Foreign Investment in the United States (CFIUS) analysis of the Broadcom-Qualcomm merger. CFIUS reviews acquisitions where a foreign corporation is acquiring an American corporation, like the proposed Broadcom-Qualcomm acquisition. CFIUS refused to allow the Broadcom-Qualcomm merger in large part due to concerns over reducing American involvement in 5G as it would create a real risk of harms to national security. ALJ Pender agreed, finding explicitly that U.S. leadership in 5G is important to U.S. national interests and thus to the public interest. Given ALJ Pender’s finding that Intel would likely cease to compete in 5G in the event of an exclusion order, harming American involvement in 5G, the clear public interest weighs against exclusion.
Not Excluding Is the ITC Doing What It’s Supposed to Do
These concerns might sound a bit odd—normally, patent cases are about the patent, not the public. But the ITC has a statutory mandate to do more than just consider the patent owner’s interests. Consistent with a patent’s nature as a public franchise, where the public grants limited rights to a patent owner, Congress intended for the ITC to consider the public interest and to refrain from acting when action would harm the U.S. public. The ITC has been remiss in its attention to this aspect of its role in the past. ALJ Pender’s careful attention to the potential harms the ITC can cause—and his open acknowledgement that other fora might be more appropriate in some cases—is a step in the right direction.