In a big victory for the smart device essential patents holder, a three-judge panel of the Ninth Circuit Court of Appeals has reversed a district court decision and lifted a permanent, worldwide, injunction against Qualcomm. 

Computer companies will appeal that decision to the full circuit.

The Federal Trade Commission had contended that Qualcomm had unlawfully monopolized the "code division multiple access ('CDMA') and premium long-term evolution ('LTE')" cellular modern chip markets, and the district court agreed.  

 Related: DOJ Issues New Advice on Standard Essential Patents 

But a three-judge panel of the Ninth Circuit was unpersuaded. Writing for the majority, Judge Consuelo M. Callahan said that the district court "erred in holding that Qualcomm was under an antitrust duty to license rival chip manufacturers." 

In May 2019, a California district court ruled that the way Qualcomm licensed its modem chips for handsets was anticompetitive--siding with the Federal Trade Commission, which had sued the company for having "harmed competition in two markets for baseband processors [modem chips]."   

But saying that Qualcomm has demonstrated "serious questions" about that district court's decision, the U.S. Court of Appeals for the Ninth Circuit subsequently stayed that decision, the latest twist in a year's-long legal battle. 

Qualcomm had refused to license standard essential patents for smart phone technology in promises it made to standards-setting bodies and charged excessive royalty rates, the district court concluded, agreeing with the FTC that Qualcomm was preserving its monopoly of the LTE chip market, effectively levying a surcharge on competitor's chips.  

Not so fast said the Ninth Circuit panel. Callahan said that panel concluded that Qualcomm's policy for licensing its standard essential patents, "however novel," did not violate the Sherman Act prohibition on anticompetitive conduct.  

The FTC had argued that even if Qualcomm was not under an antitrust duty to license its patents to original equipment manufacturers (OEMs) it was engaged in anticompetitive conduct, but the court said it had not sufficiently explained how Qualcomm's alleged breach of a contractural commitment by itself impaired its rivals.  

She said given that the FTC failed on that count, it looked less critically at Qualcomm's pro-competitive arguments for its OEM-level licensing policy, which the judge said, in any case, "appeared to be reasonable and consistent with current industry practice." 

The district court held that Qualcomm's licensing royalty rates equated to an anticompetitive surcharge. Wrong, said Callahan. "The panel held that Qualcomm’s patent-licensing royalties and 'no license, no chips' policy did not impose an anticompetitive surcharge on rivals’ modem chip sales. Instead, these aspects of Qualcomm’s business model were 'chip-supplier neutral' and did not undermine competition in the relevant markers," she wrote.

As to the two agreements with Apple (2011 and 2013) that were the subject of the FTC complaint and court decision, Callahan wrote: "The panel held further that Qualcomm’s 2011 and 2013 agreements with Apple have not had the actual or practical effect of substantially foreclosing competition in the CDMA modem chip market. Also, because these agreements were terminated years ago by Apple itself, there was nothing to be enjoined." 

“Judge Koh's [district court] opinion detailed how Qualcomm’s anticompetitive business practices have driven its competitors out of the modem business and raised prices in the cellular industry," said Joshua Landau, patent counsel for the Computer & Communications Industry Association (CCIA). "The 9th Circuit ignored those factual findings and greenlit Qualcomm's anticompetitive business practices.

"CCIA is disappointed in the 9th Circuit's deeply flawed decision and hopes that the Federal Trade Commission will ask for review en banc to correct the numerous errors in the panel opinion."

The Senate Judiciary Committee Wednesday (May 6) will vet the nomination of Supreme Court Justice Brett Kavanaugh's vacant seat on the U.S. Court of Appeals for the D.C. Circuit. 

That is the court of principal jurisdiction for challenges to FCC decisions, and is the court that heard multiple network neutrality rule decision challenges. 

Related: D.C. Court Stays FCC Contract Decision 

The President's pick for the seat is conservative Justin R. Walker, a former clerk for Kavanaugh when he was on the D.C. court and a former intern for Sen. Majority Leader Mitch McConnell. 

Walker is currently a judge on the U.S. District Court for the Western District of Kentucky. Before that, he was a professor at the Brandeis School of Law (University of Louisville). He graduated from Duke University and Harvard Law School. 

The U.S. Department of Justice has given a heads up on its plans to appeal the June U.S. District Court decision that paved the way for the completion of AT&T’s $108.7 billion merger with Time Warner, claiming in a court filing that the presiding judge in that case ignored “fundamental principles of economics and common sense,” in approving the deal.

U.S. District Court Judge Richard Leon ruled on June 12,  after a six-week trial that the government had failed to prove its case that the merger would not be in the public interest.

Related: AT&T Completes Time Warner Purchase 

AT&T completed its merger with Time Warner two days later, on June 14, but agreed to hold the Turner assets, including CNN, TNT and TBS, separately until Feb. 28, 2019, in case the Justice Department decided to launch an appeal.

Leon had urged the government not to appeal his decision, but on July 12, Justice said it would seek to have his ruling overturned. 

In a brief filed with the U.S. Court of Appeals for the District of Columbia Circuit Monday, Justice said that most vertical mergers are pro-competitive or competitively neutral, but AT&T-Time Warner is different in that it would meld a top programmer and distributor.

“This merger’s combination of Turner’s competitively significant programming content with the vast distribution footprint of DirecTV, among other circumstances, makes this the exceptional vertical merger whose effects are to lessen competition substantially,” DOJ said in its filing.

DOJ had argued in the past that the merger would allow AT&T to substantially raise prices, would increase the potential for programming blackouts and would give AT&T an advantage over other distributors. All of those arguments were rejected by Judge Leon.

Related: Justice Pushes for Expedited AT&T-Time Warner Arguments 

But DOJ said the Judge failed to recognize a fundamental principle of business: that companies would do everything possible to maximize profits.

“The district court’s determination that Time Warner would not exercise increased bargaining leverage post-merger also erroneously rejected evidence that a merged AT&T-Time Warner would maximize profits of the firm as a whole by imposing higher programming costs on rival distributors,” DOJ said in the filing. “The court’s analysis rested on a fundamental misunderstanding of the principle of corporate-wide profit maximization: it treated the principle as a question of fact that must be proved ‘reasonable’ in light of the record evidence.”

AT&T has vowed to fight the appeal, and in a statement showed no signs of giving up the battle.

“Appeals aren’t ‘do-overs,’” said AT&T general counsel David McAtee in a statement. “After a long trial, Judge Leon weighed the evidence and rendered a comprehensive 172-page decision that systematically exposed each of the many holes in the Government’s case. There is nothing in DOJ’s brief today that should disturb that decision.”

AT&T is expected to file its own brief with the D.C. Circuit by Sept. 20. Both sides are scheduled to submit final briefs in October, at which time oral arguments would begin.