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Speaker 1: Welcome to the Bloomberg Law Podcast. I'm June Grosso. Every

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Speaker 1: day we bring you insight and analysis into the most

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Speaker 1: important legal news of the day. You can find more

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Speaker 1: episodes of the Bloomberg Law Podcast on Apple Podcasts, SoundCloud

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Speaker 1: and on Bloomberg dot com slash podcasts. Billions of dollars

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Speaker 1: are on the line for Qualcom at a trial in

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Speaker 1: California where the FTC is challenging its business model and

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Speaker 1: a champ by Qualcom's lawyers just score some points by

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Speaker 1: making an example of its rival Intel ended up being

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Speaker 1: a lively showdown that backfired. Here to Dallas Moore is

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Speaker 1: Bloomberg Intelligence Senior litigation analyst Jennifer Rey. First, Jenn, why

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Speaker 1: is the FTC taking Qualcom to court? Well, you know, June,

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Speaker 1: it really is a pretty complicated matter. But to try

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Speaker 1: to make it as simple as I possibly can. What

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Speaker 1: they're alleging is that Qualcom is unlawfully maintaining a monopoly

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Speaker 1: in certain kinds of chips that are needed in all

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Speaker 1: wireless devices like iPads, iPhones, android phones, that they have

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Speaker 1: engaged in a series of practices, business practices that are

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Speaker 1: interrelated to each other that have weakened their rivals and

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Speaker 1: allowed them to maintain a monopoly they have in ships,

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Speaker 1: which was obtained really through you know, being a leader

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Speaker 1: in technology. So what's Qualcom's defense. Well, first, you know,

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Speaker 1: when you get into the nitty gritty, first, they're challenging

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Speaker 1: each of these practices that the FTC has alleged is

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Speaker 1: anti competitive, right, and there there are several different practices,

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Speaker 1: and what they're saying here is that they're illegally using

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Speaker 1: a monopoly position. And in the antitrust world, what the

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Speaker 1: FTC has to do is show that the anti competitive

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Speaker 1: are harmful effects from this conduct outweigh any kind of

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Speaker 1: legitimate pro competitive business reasons there could be for the conduct. So,

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Speaker 1: of course what Qualcolm is doing is walking through these

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Speaker 1: these various business practices and explaining the reason for the

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Speaker 1: practice and why it was legitimate and why they needed

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Speaker 1: to undertake it. Because if they can show that they

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Speaker 1: had this legitimate reason and that it outweighs this alleged harm,

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Speaker 1: which it's even questionable whether they're is harm, the FTC

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Speaker 1: may have trouble getting to a place where the judge

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Speaker 1: says they've actually violated antitrust laws, even if the practices

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Speaker 1: seem superficially unfair. Now, you were in the courtroom when

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Speaker 1: Qualcom called Intel's chief strategy officer, hoping to make some gains. There,

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Speaker 1: tell us what happened right when you know the FTC

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Speaker 1: called Intel strategy officer because obviously Intel is arrival to Qualcolm.

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Speaker 1: They also make chips that go into these wireless devices.

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Speaker 1: And part of their allegation is that Qualcom's practices weakened

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Speaker 1: its rivals and therefore harmed competition. And I think they

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Speaker 1: were using this witness to show that some of the

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Speaker 1: things Qualcom had done had weakened Intel and slowed down

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Speaker 1: Intel's rate of innovation that might have benefited consumers. This woman,

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Speaker 1: who was very impressive actually, who is now a senior

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Speaker 1: vice president and strategy officer at Intel, had been a

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Speaker 1: general manager in charge of sort of this wireless and

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Speaker 1: data initiative of Intel. And and it was funny because

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Speaker 1: she did a really very good job testifying for ft CE.

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Speaker 1: So it was when the qual Calm outside lawyers tried

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Speaker 1: to do what's called impeach her, make her look like

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Speaker 1: she had documents or previous testimony that contradicted what she's

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Speaker 1: saying now in the stand and you know, they used

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Speaker 1: kind of typical lawyer tactics, sort of reading snippets out

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Speaker 1: of context, and she just didn't let them do it.

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Speaker 1: You know, she was really tough, but in a non

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Speaker 1: aggressive way. And what she did to say absolutely not

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Speaker 1: you can't read that out of context. You have to

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Speaker 1: read the whole thing. And she would read into the

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Speaker 1: record the entire paragraph proceeding and after this snippet and

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Speaker 1: kind of just overwhelmed the qualclm outside attorney and doing so.

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Speaker 1: So she was a good witness for the FTC and

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Speaker 1: we know how hard it is to do on cross

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Speaker 1: examination to take control that way. But I understand also

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Speaker 1: that when she left there was laughter in the courtroom.

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Speaker 1: You know. I think it was because she was from

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Speaker 1: Senegal and had a thick French accent and was I

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Speaker 1: think culturally very different on this stand than some of

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Speaker 1: the other people who had been on the stand before

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Speaker 1: her who were Americans, and was really kind of you know,

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Speaker 1: I don't even charm really and and laughed and engaged

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Speaker 1: with the judge. And I think at the end there

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Speaker 1: several things she said that were just very funny, and

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Speaker 1: she was really guileless, and I think that the guilelessness

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Speaker 1: of her testimony kind of charmed those that were watching.

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Speaker 1: And at the end when asked, both sides were asked,

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Speaker 1: would they have to recall this witness, and both sides

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Speaker 1: said no, she was finished. And the judge told her

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Speaker 1: she was finished. She started cheering from the stand and

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Speaker 1: it was funny and I think that caused, you know,

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Speaker 1: the full courtroom, including the press that was there, to

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Speaker 1: laugh a little bit. Oh, it's great to have, you know,

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Speaker 1: a change. Sometimes the testimony goes on and on, it

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Speaker 1: gets very dull and and this is a very technical trial,

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Speaker 1: so you know, they're aspects of it that are really

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Speaker 1: in the weeds and really technical, and to be honest,

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Speaker 1: you know, kind of boring. And so this sort of

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Speaker 1: changed the flow in the rhythm. You say boring and dress.

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Speaker 1: I never thought i'd hear never again. So does it

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Speaker 1: appear that either side is ahead in this trial so far? Well,

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Speaker 1: I will say, going into trial, certainly the FTC at

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Speaker 1: the momentum, there have been some pre trial rulings by

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Speaker 1: the judge that consistently been against qualcom and for the FTC.

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Speaker 1: So going in they had the momentum with this judge.

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Speaker 1: All we've seen so far is the FTC side. Qualcom

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Speaker 1: will start this week presenting its own affirmative case. So

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Speaker 1: because of that, it seems like the FTC has the lead,

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Speaker 1: and I believe it does, mostly because of what happened

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Speaker 1: pre trial. But we'll have to see by February when

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Speaker 1: this will be finished. You know where things stand now.

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Speaker 1: There's a global web of litigation between Apple and Qualcom,

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Speaker 1: which I won't ask you to describe as it's so complex,

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Speaker 1: But will a decision in this case affect that litigation

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Speaker 1: in any way? You know it will. Overall. What's being

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Speaker 1: contended in both are unreasonably high royalty rates that Qualcom

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Speaker 1: is charging for its patents, both standard essential patents everybody

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Speaker 1: must have them in order to implement the wireless standard

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Speaker 1: and non essential patents. That's what's that issue here in

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Speaker 1: the FTC case, and that's generally what's that issue in

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Speaker 1: Apple's lawsuits. And to the extent that Qualcom loses here

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Speaker 1: in the TC suit and the judge decides that their

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Speaker 1: business practices have allowed them to charge these unreasonably high

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Speaker 1: royalty rates. Really that puts Apple in a very strong

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Speaker 1: position in terms of any kind of settlement discussions. With

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Speaker 1: Qualcom in that suit, and I think Apple would probably

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Speaker 1: prefer to settle that suit then to go through with

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Speaker 1: the litigation. This is before a judge, or most of

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Speaker 1: these antitrust trials before judges, because I know that the

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Speaker 1: Time Warner one was as well. Yeah, almost always now,

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Speaker 1: particularly the merger cases like Tim Warner, are in front

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Speaker 1: of a judge and not a jury. It's pretty complex

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Speaker 1: and the economic aspects are very complex. All right, Well,

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Speaker 1: you made it easy for us can as always, Thanks

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Speaker 1: so much, Thank you. That's Jennifer Ray. She's Bloomberg Intelligence

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Speaker 1: CEE litigation analysts. Thanks for listening to the Bloomberg Law podcast.

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Speaker 1: You can subscribe and listen to the show on Apple Podcasts, SoundCloud,

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Speaker 1: and on Bloomberg dot com slash podcast. I'm June Brolso

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Speaker 1: this is Bloomberg