Speaker 1: M Welcome to the Bloomberg Law Podcast. I'm June Grosso.
Speaker 1: Every day we bring you insight and analysis into the
Speaker 1: most important legal news of the day. You can find
Speaker 1: more episodes of the Bloomberg Law Podcast on Apple podcast,
Speaker 1: SoundCloud and on Bloomberg dot com slash podcasts. It may
Speaker 1: have looked like Qualcom was in for smooth sailing after
Speaker 1: it's settled an antitrust lawsuit brought by Apple last month,
Speaker 1: But not so fast. Now our federal judge has ruled
Speaker 1: that Qualcom violated anti trust law by abusing its dominant
Speaker 1: position in the market for cell phone chips to exact
Speaker 1: excessive licensing fees, giving the FTC the win. Joining me
Speaker 1: as Harry first professor of anti trust law at n
Speaker 1: y U Law School. So Professor Judge Lucy co ruled
Speaker 1: against Qualcom on virtually every point and said that it's
Speaker 1: licensing practices have strangled competition in certain modem chip markets.
Speaker 1: Is that exactly what Apple had accused it of? Well, um,
Speaker 1: Apple accused it of exacting excessive royalty rates UM and
Speaker 1: forbidding it from using through its exclusivity agreements, from using
Speaker 1: other chips, particularly chips by Intel. The two cases are
Speaker 1: similar in the sense that the Federal Trade Commission had
Speaker 1: included Apple's exclusivity agreements in its case, but um the
Speaker 1: two parties are really seeking different things. So Apple was
Speaker 1: seeking lower royalty rates in the end, the Federal Trade
Speaker 1: Commission is really attacking um uh Qualcomm's business model. UM,
Speaker 1: but it too was very worried about the high prices
Speaker 1: that um qualcomm has been able to exact on its
Speaker 1: patent licensing. As far as the judge's opinion was, with
Speaker 1: her language very strong, I think very is a is
Speaker 1: a weak adjective. Uh. Very yes, very strong, although in
Speaker 1: some ways not surprising. She had been ruling in preliminary rulings,
Speaker 1: particularly at a fairly recent stage in the proceedings that
Speaker 1: it looked pretty much like the Federal Trade Commission UM
Speaker 1: case was pretty strong, So I actually wasn't surprised at
Speaker 1: how she came out. But when you read through her opinion,
Speaker 1: it's really a litany of um uh qual comes licensing practices,
Speaker 1: what their intent was, and what the effect has been
Speaker 1: on innovation and pricing UH in in cell phone technology
Speaker 1: and handsets more generally. So UM It's it is quite strong.
Speaker 1: UH it's based on UM, you know, trial hearing witnesses
Speaker 1: doing the things that trial core judges are supposed to do,
Speaker 1: which is to judge the evidence, assess the credibility of
Speaker 1: the um of the various witnesses on both thoughts, and
Speaker 1: come to a decision. So it's it's a pretty strong case.
Speaker 1: What about the remedies. What kind of remedies did she
Speaker 1: order and will they disrupt Qualcom's business model? Well, UM,
Speaker 1: the remedies that she ordered were targeted pretty much too
Speaker 1: UM the allegations of the Federal Trade Commission's complaint. So
Speaker 1: a primary UM part of the complaint was UM. Well,
Speaker 1: actually two things. The policy of UM no chips, no license, UM,
Speaker 1: you had to if you wanted the chips, you had
Speaker 1: to license the technology, which the Commission said kept prices up.
Speaker 1: So she said you can't do that. UM. They have to.
Speaker 1: They're licensing for the technology can be subject to just
Speaker 1: mute UM and arbitration UM. And they also now in
Speaker 1: addition to licensing handset makers, they have to license competing
Speaker 1: chip makers UM. And that's been a big source of
Speaker 1: UM major contention and a way that Qualcom has been
Speaker 1: able to obtain higher royalty rates by not licensing the
Speaker 1: chip makers, which means that any handset maker, even if
Speaker 1: they buy chips from someone else, still has to take
Speaker 1: a license from qualcom UH and still has to pay royalties,
Speaker 1: and the royalties are high. Will that will her remedies
Speaker 1: possibly lower costs for Apple and other smartphone makers? They well,
Speaker 1: there are a lot of smartphone makers, Um, they the
Speaker 1: UM Commission and her opinion talked about six of them.
Speaker 1: So yes, it should lower costs for them, and it
Speaker 1: it ought to in the end lower prices for consumers.
Speaker 1: A lot of people buy UH smartphones and they've been
Speaker 1: paying UM these rates that are higher than the rates
Speaker 1: really that qualcom UH in a sense had promised UH
Speaker 1: to charge. And when those rates go down, that's a
Speaker 1: major part of the costs of of a handset. So yes,
Speaker 1: it should be should lead to lower prices for the
Speaker 1: makers and for consumers in the end. Now Qualcolm said
Speaker 1: it quotes strongly disagrees with the judges conclusions or interpretation
Speaker 1: of the facts and her application of the law, and
Speaker 1: it will appeal. What are its chances on appeal, Well,
Speaker 1: it's always hard to say exactly. Um. That the it
Speaker 1: becomes difficult to appeal cases that have been tried where
Speaker 1: a judge has made uh strong factual findings. Um, i'd
Speaker 1: like in the case, I would uh say, in that way,
Speaker 1: it's similar to the case that was brought in the
Speaker 1: late nineties against Microsoft, where the judge made extensive factual
Speaker 1: findings which very much supported the decision of the Court
Speaker 1: of Appeals to affirm what the judge did. So they
Speaker 1: have a bit of a hard slog to go against
Speaker 1: those findings, the two thirty page opinions, and uh, it's
Speaker 1: it's very hard to overturn factual findings, you know, unless
Speaker 1: they're clearly arbitrary, So so they'll have a problem making
Speaker 1: those change. So. Qualcom currently has the most advanced five
Speaker 1: gen modems in the market, and the Trump administration has
Speaker 1: said it's vital to us competition with China in that technology.
Speaker 1: It went so far as to interfere or try to
Speaker 1: interfere in these proceedings by asking the judge for hearing
Speaker 1: on any remedies. Is there any kind of interference that
Speaker 1: the administration could do at this point? Well, um, I
Speaker 1: I'm not sure. The Trump administration has lots of different
Speaker 1: policies that get expressed in different ways, So uh, in
Speaker 1: any trust cases. It's true the Justice Department did file
Speaker 1: a rather extraordinary petition to get involved at the remedy hearing,
Speaker 1: But in terms of how that works out in an
Speaker 1: an appeal in this case, UM, it's hard for me
Speaker 1: to see it going another way any way other than um,
Speaker 1: was there some mistake in law? Did the judge improperly
Speaker 1: grant the remedy? Whether the Justice Department will file a
Speaker 1: brief in the Ninth Circuit Court of Appeals on qualcom side,
Speaker 1: We'll just have to see. I'm a little be a
Speaker 1: little careful about talking some sort of overall Trump administration
Speaker 1: policy towards qualcom um, because any trust policies tend to
Speaker 1: be a little more targeted and focused and not so
Speaker 1: much focused on UM competition with China or UM. You
Speaker 1: know how all of this will affect that. All right, Well,
Speaker 1: thank you so much for joining us. Professor that's Professor
Speaker 1: Harry First of n y U Law School. Thanks for
Speaker 1: listening to the Bloomberg Law Podcast. You can subscribe and
Speaker 1: listen to the show on Apple Podcasts, SoundCloud, and on
Speaker 1: Bloomberg dot com slash podcast. I'm June Brasso. This is
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