WEBVTT - Will New York Dissolve the NRA? 0:00:00.480 --> 0:00:05.680 You're listening to Bloomberg Law with June Grasso from Bloomberg Radio. 0:00:06.720 --> 0:00:09.360 The New York Attorney General is suing to dissolve the 0:00:09.520 --> 0:00:12.400 n r A, accusing the gun rights group of engaging 0:00:12.440 --> 0:00:16.640 in a massive fraud against donors. Attorney General Letitia James 0:00:16.720 --> 0:00:20.240 claims that top n r A officials, including its longtime 0:00:20.360 --> 0:00:24.280 leader Wayne Lapierre, have been using the nonprofit organization as 0:00:24.320 --> 0:00:27.920 their personal piggy bank, illegally diverting more than sixty four 0:00:27.960 --> 0:00:31.360 million dollars from the organization in the last three years alone. 0:00:32.040 --> 0:00:37.280 They use millions upon millions dollars from the n r 0:00:37.320 --> 0:00:41.120 A for personal use, including for lavish trips for themselves 0:00:41.120 --> 0:00:47.120 and their families, private jets, expensive meals, and other private travel. 0:00:47.760 --> 0:00:51.040 My guest is Second Amendment expert Adam Winkler, a professor 0:00:51.120 --> 0:00:53.479 at u c l A Law School. Adam the New 0:00:53.560 --> 0:00:58.160 York A g alleged massive fraud, corruption, and self dealing. 0:00:58.640 --> 0:01:01.480 The breath of it is stunning. What strikes you most 0:01:01.520 --> 0:01:05.199 about the allegations, well, just the breadth of them. There's 0:01:05.200 --> 0:01:08.200 so many allegations. It does seem like the n ra 0:01:08.200 --> 0:01:12.160 A leadership has been running the organization without much oversight 0:01:12.240 --> 0:01:16.319 from the board of directors that there's insider deals for directors, 0:01:16.360 --> 0:01:20.759 there's officers like Wayne Lapierre that negotiated a secret seventeen 0:01:20.840 --> 0:01:24.080 million dollar conversation package for when he leaves the n 0:01:24.200 --> 0:01:27.039 r A. Sounds like something you'd expect in a fortune company, 0:01:27.080 --> 0:01:30.440 not a nonprofit organization like the n r A. William Brewer, 0:01:30.520 --> 0:01:33.440 the n r AS lawyer, said, the truth is the 0:01:33.440 --> 0:01:37.440 transactions in question have been reviewed, vetted, and approved. It 0:01:37.480 --> 0:01:39.759 seems like that would be a hard defense to make 0:01:39.880 --> 0:01:42.840 in light of some of these expenses, like the private 0:01:42.959 --> 0:01:46.080 jets for Lapierre's family and more than a quarter of 0:01:46.080 --> 0:01:49.200 a million dollars in designer clothes. How can they prove 0:01:49.280 --> 0:01:52.600 that those kinds of expenses were proper Well, I think 0:01:52.600 --> 0:01:55.840 they really have no choice because the actual transactions happened. 0:01:55.880 --> 0:02:00.000 They can't deny that they happened. And under New York law, 0:02:00.120 --> 0:02:03.400 profits can engage in some kinds of insider deals, but 0:02:03.520 --> 0:02:06.000 they have to follow the appropriate procedures and have to 0:02:06.040 --> 0:02:09.520 be ultimately fair and reasonable to the corporation, in this 0:02:09.560 --> 0:02:12.760 case a nonprofit corporation. So they really have to say 0:02:12.760 --> 0:02:15.919 that these are fair and reasonable transactions, because that's the 0:02:15.960 --> 0:02:19.960 only way that they're going to survive. Did the allegations 0:02:20.040 --> 0:02:23.480 come as a surprise to you or have we heard 0:02:23.600 --> 0:02:27.000 enough in the past with you know, the struggles within 0:02:27.080 --> 0:02:29.400 the n r A that these did not come as 0:02:29.560 --> 0:02:32.919 a complete surprise. Well, they were surprising in a few ways. 0:02:32.919 --> 0:02:35.840 You're absolutely right. There has been a steady stream of 0:02:35.960 --> 0:02:39.080 leaks coming out of the n r a S lawsuit 0:02:39.280 --> 0:02:43.400 with its longtime ad agency, Ackerman McQueen. Ackerman McQueen was 0:02:43.440 --> 0:02:45.640 responsible for the n ra AS messaging for more than 0:02:45.760 --> 0:02:48.600 three decades and they really worked hand in hand with 0:02:48.639 --> 0:02:51.519 the n r A, including creating n r A t 0:02:51.639 --> 0:02:54.520 V and been the real brain CHILDBND. So much of 0:02:54.560 --> 0:02:56.840 what we associate at the n r A S message 0:02:57.240 --> 0:02:59.680 and that lawsuit is very nasty, and a lot of 0:02:59.720 --> 0:03:02.040 leaks have come out that suggests that there has been 0:03:02.360 --> 0:03:06.200 malfeasons inside the n r A. But it was nonetheless 0:03:06.200 --> 0:03:09.639 pretty surprising these allegations for two reasons. One, there were 0:03:09.639 --> 0:03:13.280 surprising allegations such as the seventeen million dollar compensation package 0:03:13.320 --> 0:03:16.560 for Wayne Lapierre that hadn't come out previously, but also 0:03:16.680 --> 0:03:19.600 that the remedy sought by the New York Attorney General 0:03:19.760 --> 0:03:22.440 dissolution of the n r A is the kind of 0:03:22.440 --> 0:03:26.320 remedy that's really reserved for organizations that engage in persistent 0:03:26.440 --> 0:03:30.600 fraud or illegality. So it was really remarkable and surprising 0:03:30.639 --> 0:03:35.119 that such a broad and aggressive remedy was chosen. Well, 0:03:35.120 --> 0:03:38.720 this isn't the first high profile charity that James has targeted, 0:03:38.800 --> 0:03:41.240 but the allegations that are sued against the Trump Foundation 0:03:41.320 --> 0:03:45.720 just pale in comparison to these allegations. Trump dissolved his 0:03:45.920 --> 0:03:49.720 foundation voluntarily, but the n r A is not going 0:03:49.840 --> 0:03:53.760 to do that. What are the chances that they would 0:03:53.800 --> 0:03:58.680 actually be required to dissolve, Well, it's really hard to say. Obviously, 0:03:58.720 --> 0:04:00.800 it seems hard to imagine, and that the n r 0:04:00.840 --> 0:04:05.200 A vast national organization with chapters in every state and 0:04:05.240 --> 0:04:09.640 training programs for police officers, would actually go out of business. 0:04:09.640 --> 0:04:12.200 It seems pretty crazy, just in the sense of it's 0:04:12.240 --> 0:04:14.840 such a big organization, we wouldn't expect to see such 0:04:14.840 --> 0:04:17.880 a thing. The Trump Charitable Foundation was put out of business, 0:04:18.000 --> 0:04:20.320 but it was only Donald Trump and a few people 0:04:20.440 --> 0:04:23.720 who worked for him who were organizing that charitable foundation. 0:04:24.040 --> 0:04:26.240 It wasn't nearly the size of the n r A. 0:04:26.760 --> 0:04:29.440 I think that makes dissolution a little bit less likely, 0:04:29.520 --> 0:04:32.120 because there's going to be plenty of things that the 0:04:32.200 --> 0:04:34.280 n r A has been doing that's been perfectly legal 0:04:34.320 --> 0:04:37.159 and perfectly appropriate. But I think that this is an 0:04:37.160 --> 0:04:41.080 opening salvo. In these kinds of situations, regulators often bring 0:04:41.120 --> 0:04:44.560 their charges to begin the negotiation, and it's really the 0:04:44.640 --> 0:04:48.000 negotiated settlement that really determines what the remedies will be, 0:04:48.200 --> 0:04:49.920 and I expect in this case it will probably be 0:04:49.960 --> 0:04:53.320 something like removal of certain directors or officers, some restitution 0:04:53.440 --> 0:04:56.040 for some of the deals and transactions that have gone on. 0:04:56.320 --> 0:04:58.920 But disillusion is probably not in the cards in the 0:04:59.000 --> 0:05:00.919 long run for the n r So this is not 0:05:01.120 --> 0:05:04.240 likely to go to trial in your view, Well, it's 0:05:04.320 --> 0:05:06.200 hard to say, you know. I definitely don't want to 0:05:06.200 --> 0:05:08.600 predict the future too much. One of the things about 0:05:08.800 --> 0:05:12.719 requesting dissolution as a remedy, I think it does sort 0:05:12.720 --> 0:05:14.880 of put the n l RAS back to the wall 0:05:15.000 --> 0:05:17.640 and makes it maybe less likely that they'll engage in 0:05:17.680 --> 0:05:21.719 the negotiated settlement. If the Attorney General had simply sought 0:05:22.040 --> 0:05:25.719 to remove certain directors and certain officers like Wayne Lapierre 0:05:26.000 --> 0:05:28.680 and a point a receiver to oversee the appointment of 0:05:28.720 --> 0:05:31.280 new directors for a short period of time. It's the 0:05:31.320 --> 0:05:33.200 kind of thing that could have put pressure on other 0:05:33.279 --> 0:05:36.960 board members to push for settlement and for a reform. 0:05:37.279 --> 0:05:39.200 But now that disillusion is on the table, I think 0:05:39.240 --> 0:05:41.040 it's going to be a long while before we get 0:05:41.040 --> 0:05:43.400 a resolution in this case, Adam. The n r A 0:05:43.520 --> 0:05:47.479 counter suit accusing the Attorney General of violating the group's 0:05:47.600 --> 0:05:51.680 free speech rights and unfairly targeting the gun rights lobby. 0:05:52.000 --> 0:05:54.839 Are those strong claims. I think the n r A 0:05:55.000 --> 0:05:57.600 suit is baseless and not going to go anywhere. Look, 0:05:57.680 --> 0:06:00.800 these allegations were first brought a light by the n 0:06:00.880 --> 0:06:04.159 r rais lawsuit with that agency. No matter who the 0:06:04.160 --> 0:06:07.240 Attorney General was, whether it was Latitia James who clearly 0:06:07.240 --> 0:06:08.960 doesn't like the n r A and I said so, 0:06:09.640 --> 0:06:11.799 or someone else, they would have had to take action 0:06:11.839 --> 0:06:14.800 in light of the grievous nature of some of the 0:06:14.839 --> 0:06:17.640 insider deals that the n r A leadership has engaged in. 0:06:18.160 --> 0:06:21.640 And I don't think that arguing that prosecutors are politically 0:06:21.640 --> 0:06:25.320 motivated really ever got any defendant very far in a 0:06:25.400 --> 0:06:28.800 court of law. It's a parallel lawsuit the Washington d C. 0:06:28.960 --> 0:06:32.720 Attorney General opened a second front, suing the n r 0:06:32.800 --> 0:06:37.799 A for allegedly misusing charitable funds to finance improper laverst 0:06:37.839 --> 0:06:42.159 spending by executives. How does that play into this or 0:06:42.240 --> 0:06:44.599 does it at all? Is it a separate track? No, 0:06:44.760 --> 0:06:48.960 I'm sure that these prosecutions are related, that these actions 0:06:49.000 --> 0:06:51.320 by the Attorney General of d C and the Attorney 0:06:51.320 --> 0:06:53.520 General of New York are somewhat coordinated, and that they're 0:06:53.520 --> 0:06:57.320 sharing information. I'm sure. And it's the same basic set 0:06:57.320 --> 0:07:01.680 of facts, um. The only differences is that the n 0:07:01.839 --> 0:07:05.400 r A has two different nonprofit organizations. It's got it's 0:07:05.560 --> 0:07:08.840 five oh one C three. It's charitable arm that's located 0:07:08.880 --> 0:07:11.960 in Washington, d C. Chartered in Washington, d C. And 0:07:12.000 --> 0:07:14.440 that's known as the n r A Foundation. That's the 0:07:14.480 --> 0:07:17.600 one that the DC Attorney General is going after. And 0:07:17.640 --> 0:07:20.320 the five oh one C four the National Rifle Association 0:07:20.400 --> 0:07:22.760 that we often think about, um, when we think about 0:07:22.760 --> 0:07:26.000 the n r R that's the organization that's uh social 0:07:26.040 --> 0:07:28.880 welfare corporation that's formed in New York and that the 0:07:28.960 --> 0:07:31.280 Attorney General of New York is going after. But that's 0:07:31.320 --> 0:07:35.960 the same basic set effects. The n r A has 0:07:36.120 --> 0:07:39.920 had a lot of political clout in the past. Where 0:07:39.920 --> 0:07:43.400 does this lawsuit and the in fighting that proceeded it, 0:07:43.480 --> 0:07:47.160 plus the drain in financial resources, where does it leave 0:07:47.200 --> 0:07:51.400 its political clout? Well, I think the n r A 0:07:51.600 --> 0:07:55.600 still remains a very powerful player in American politics because 0:07:56.040 --> 0:07:58.800 it's cloud really comes from having a bunch of voters 0:07:58.880 --> 0:08:01.160 that listen to the nl RA and that really care 0:08:01.200 --> 0:08:04.480 about gun rights and opposed gun control. And I think 0:08:04.520 --> 0:08:06.760 those voters are still going to make their voices heard 0:08:06.800 --> 0:08:09.760 come election day. At the same time, there's no way 0:08:09.760 --> 0:08:13.160 that all this disorganization and disarray and focus of the 0:08:13.280 --> 0:08:15.400 n r A on this lawsuit with acrimental Queen and 0:08:15.440 --> 0:08:17.360 now on the lawsuits by the New York and d 0:08:17.440 --> 0:08:20.320 C Attorney General, how can that not be a distraction 0:08:20.440 --> 0:08:23.400 for its top leaders probably won't be able to spend 0:08:23.400 --> 0:08:26.360 the kind of time and energy focusing on the election 0:08:27.000 --> 0:08:31.280 that they'd like to. How much have gun control advocates 0:08:31.320 --> 0:08:37.640 cut into the n r A financially as well as politically, Well, 0:08:37.679 --> 0:08:40.600 I think that in the recent years, gun control advocates 0:08:40.600 --> 0:08:43.320 have made great headway in terms of organization, in terms 0:08:43.360 --> 0:08:46.960 of money. You know, before the new Town massacre back 0:08:47.000 --> 0:08:52.160 in the gun control organizations were pretty poorly organized, pretty 0:08:52.200 --> 0:08:56.640 poorly funded, and the Democratic Party wasn't taking that seriously 0:08:56.800 --> 0:08:59.760 issues of gun violence prevention. Now we've seen a real 0:08:59.760 --> 0:09:02.280 scene change and it's become one of the issues at 0:09:02.280 --> 0:09:05.240 the very top of the Democratic Party agenda. We see 0:09:05.280 --> 0:09:07.720 gun control groups that are outspending the n r A 0:09:07.840 --> 0:09:10.839 in some elections, and they're also affecting the n r 0:09:10.920 --> 0:09:13.920 A in things like these complaints brought by the New 0:09:13.960 --> 0:09:16.640 York Attorney General and the d C Attorney General. A 0:09:16.679 --> 0:09:21.679 lot of this activity has been revealed through investigations by 0:09:22.000 --> 0:09:25.960 organization like every Town for Gun Safety and its publication, 0:09:26.040 --> 0:09:29.760 the TRACE and other advocacy groups working in the space 0:09:30.000 --> 0:09:32.199 that are trying to reveal the problems with the n 0:09:32.320 --> 0:09:34.600 r A. So I don't think there's a real separation 0:09:34.679 --> 0:09:36.680 from what we're seeing from the New York Attorney General 0:09:37.120 --> 0:09:41.760 and the linkage to gun control organizations. President Trump suggested 0:09:41.880 --> 0:09:45.360 that the n r A move to Texas. Obviously, they 0:09:45.360 --> 0:09:49.280 can't move their assets while this investigation, while the lawsuit 0:09:49.360 --> 0:09:53.120 is going on. But what about starting over in a 0:09:53.120 --> 0:09:57.080 different state where the where the laws of the political 0:09:57.800 --> 0:10:01.880 charities laws may not be as stric M. Well, we 0:10:01.960 --> 0:10:06.719 might see the n r A and its leadership reform 0:10:06.800 --> 0:10:10.480 a new corporation, a new organization, a new lobbying group, 0:10:10.559 --> 0:10:15.160 maybe the National Revolver Association rather than the National Rifle 0:10:15.200 --> 0:10:19.600 Association somewhere else. But the key difference here is that 0:10:19.720 --> 0:10:22.000 it cannot take the n r AS assets with it. 0:10:22.000 --> 0:10:24.400 It doesn't get the can't take the membership list, It 0:10:24.520 --> 0:10:29.720 can't take the assets, the buildings and UM, the goodwill 0:10:29.800 --> 0:10:32.800 and the brand, and all the training facilities and training 0:10:32.800 --> 0:10:35.439 programs that the n r A has. That's all stuck 0:10:35.440 --> 0:10:38.040 in New York now, and just re performing a new 0:10:38.120 --> 0:10:41.320 organization in Texas is not going to change that. So 0:10:41.960 --> 0:10:43.760 I don't think that even if the n r A 0:10:43.920 --> 0:10:45.960 is dissolved, we're not going to see the end of 0:10:46.720 --> 0:10:50.080 organized advocacy for the Second Amendment and opposition to gun 0:10:50.080 --> 0:10:52.720 control UM. But it's just not going to be the 0:10:52.880 --> 0:10:56.040 n r A that's doing it. President Trump is is 0:10:56.120 --> 0:11:00.000 constantly pushing the idea that Democrats will erode your set 0:11:00.000 --> 0:11:02.760 an Amendment rights. Do you think that will be a 0:11:02.840 --> 0:11:07.000 big issue in the upcoming campaign. I expect that Donald 0:11:07.040 --> 0:11:09.680 Trump and the Senate Republicans are going to make a 0:11:09.720 --> 0:11:13.800 big issue out of gun violence prevention. I think both 0:11:13.880 --> 0:11:17.160 Joe Biden and Kamala Harris have come out in favor 0:11:17.200 --> 0:11:20.720 of strong, new, aggressive gun control laws. And I think 0:11:20.760 --> 0:11:24.520 that's something that um or Donald Trump, especially who doesn't 0:11:24.520 --> 0:11:26.840 have a lot of good things to point to right 0:11:26.880 --> 0:11:32.400 now in his election campaign, demonizing Biden, issuing warnings about 0:11:32.480 --> 0:11:34.400 what law the law is going to be like. If 0:11:34.400 --> 0:11:37.600 Biden wins, it's pretty much all the president has right now, 0:11:37.760 --> 0:11:41.960 and I think that will include issues of the Second 0:11:42.000 --> 0:11:45.000 Amendment and gun policy for sure. Thanks for being on 0:11:45.040 --> 0:11:48.400 the Bloomberg Law Show. Adam. That's Professor Adam Winkler of 0:11:48.480 --> 0:11:53.120 a u c l A Law School. After years of 0:11:53.200 --> 0:11:57.040 legal and regulatory obstacles, Qualcolm's business model and it's no 0:11:57.240 --> 0:12:00.800 License no Chips policy survives a league challenge from the 0:12:00.840 --> 0:12:04.240 Federal Trade Commission. The Ninth Circuit Court of Appeals has 0:12:04.280 --> 0:12:06.960 thrown out a lower court decision that would have required 0:12:07.000 --> 0:12:10.280 the chip maker to renegotiate billions of dollars worth of 0:12:10.320 --> 0:12:14.040 agreements with smartphone makers, ruling that the judge was wrong 0:12:14.120 --> 0:12:17.559 to side with the FTC in finding that Qualcom had 0:12:17.640 --> 0:12:21.880 violated antitrust law, joining me as Jennifer Ree, Bloomberg Intelligence 0:12:21.920 --> 0:12:27.400 senior litigation analyst, This is certainly a major victory for Qualcom. 0:12:27.440 --> 0:12:30.720 Shares initially jump more than four percent on the news 0:12:30.720 --> 0:12:34.680 of the decision. Explain why it's so important, Well, this 0:12:34.840 --> 0:12:37.880 really was major. Qualcom couldn't have come out better than 0:12:37.920 --> 0:12:40.640 it came out with this decision. A disrecord had found 0:12:40.640 --> 0:12:43.800 that the way Qualcolm was licensing its patents was anti competitive, 0:12:44.240 --> 0:12:46.920 and the licensing of its patents and the royalties are 0:12:47.080 --> 0:12:50.280 huge part of Qualcom's revenue. And what the district Court 0:12:50.320 --> 0:12:53.520 had said is because the way Qualcolm was licensing these patents, 0:12:53.520 --> 0:12:56.800 that had to go back and had to renegotiate basically 0:12:57.000 --> 0:13:01.160 almost all of its licensing agreements for certain modem chips, 0:13:01.360 --> 0:13:04.840 certain cellular chips of different generations that are used in 0:13:04.880 --> 0:13:08.160 our basically everybody's cell phones, and it would have really 0:13:08.200 --> 0:13:11.520 cut into Qualcom's revenue. So what happened here with the 0:13:11.559 --> 0:13:15.400 appeal is that the appellate court basically just reversed everything. 0:13:15.400 --> 0:13:18.280 As a matter of law. It said that every single 0:13:18.360 --> 0:13:21.800 practice of Qualcom that the District Court took through and 0:13:21.840 --> 0:13:26.280 claimed was illegal monopolization was not, and it erased everything 0:13:26.320 --> 0:13:29.640 to Qualcom did. It vacated the injunction and it essentially 0:13:29.720 --> 0:13:33.560 left Qualcolm free just to continue its business practices as 0:13:33.559 --> 0:13:35.840 they were before the f PC sued them in two 0:13:35.880 --> 0:13:38.960 thousand seventeen. So it's a huge one for Qualcom because 0:13:38.960 --> 0:13:41.920 it preserves this big piece of revenue that they're able 0:13:41.960 --> 0:13:45.160 to achieve with these patents. The trial Judge Lucy co 0:13:45.480 --> 0:13:49.480 wrote a really thorough two d thirty three page opinion 0:13:50.320 --> 0:13:55.559 and Qualcom does have this no license, no chips policy, 0:13:55.720 --> 0:13:59.760 it's dominant. Why did the appellate court not find that 0:13:59.760 --> 0:14:03.800 that was enough? Well, you know, it's it's very complicated, 0:14:03.840 --> 0:14:06.360 and that's part of the reason why the District Court's 0:14:06.360 --> 0:14:09.920 opinion was so long. The theories of harm that the 0:14:10.120 --> 0:14:13.840 FTC put forward are are complicated and and in my 0:14:13.920 --> 0:14:17.080 mind a little bit convoluted theories, and the District Court 0:14:17.160 --> 0:14:19.200 had to walk through a lot of different practices and 0:14:19.280 --> 0:14:22.760 the way those practices into relate in order to reach 0:14:22.800 --> 0:14:24.920 her conclusion. And that's part of the reason it's so 0:14:25.000 --> 0:14:29.440 long and so thorough on the no license, no chips policy. 0:14:30.040 --> 0:14:32.080 Part of the recent Qualcom is able to do that 0:14:32.680 --> 0:14:35.280 is because it had the i P that was needed 0:14:35.360 --> 0:14:40.440 to practice certain standards. When an international standards board shows 0:14:40.520 --> 0:14:43.480 the standards that would be used for cellular devices to 0:14:43.520 --> 0:14:46.880 be able to communicate with each other, those standards incorporated 0:14:47.000 --> 0:14:49.440 Qualcom's i P. So it means it has what's called 0:14:49.480 --> 0:14:52.720 standard essential patents. And when you have standard essential patents, 0:14:52.760 --> 0:14:55.040 anyone who wants to practice that patent, and in this 0:14:55.120 --> 0:14:57.800 case that means any chip maker that's going to supply 0:14:58.120 --> 0:15:01.160 mobile phone needs to get a lit license from you. 0:15:01.160 --> 0:15:04.320 You are required to license on what's called fair, reasonable 0:15:04.360 --> 0:15:08.080 and non discriminatory terms. So here what Qualcolm was doing 0:15:08.120 --> 0:15:11.080 was licensing the o e M, the companies that actually 0:15:11.120 --> 0:15:13.800 make the final product or the cell phone or the iPads, 0:15:14.080 --> 0:15:17.080 and not licensing the companies that make the chips that 0:15:17.160 --> 0:15:19.760 practice the patents that go into those phones. And what 0:15:19.920 --> 0:15:23.120 the no license, no chips policy said is o E 0:15:23.280 --> 0:15:25.320 M S, you will be practicing our i P, but 0:15:25.440 --> 0:15:27.560 you don't have to get a license from US, so 0:15:27.680 --> 0:15:29.320 long as the o e M that you sell to 0:15:30.000 --> 0:15:32.720 has a license. And likewise, O E M S, we 0:15:32.800 --> 0:15:35.160 won't supply our chips to you unless you have a 0:15:35.200 --> 0:15:38.760 license from US. So it sounds like it's abuse. If 0:15:38.800 --> 0:15:41.560 it sounds like it's monopolistic. But the fact of the 0:15:41.600 --> 0:15:45.040 matter is that in order to create an antitrust claim 0:15:45.080 --> 0:15:48.280 out of that, you have to show how that claim 0:15:48.320 --> 0:15:52.520 harmed competition in the relevant market. And in this case, somebody, 0:15:52.640 --> 0:15:54.760 whether it be the O e M or whether it 0:15:54.800 --> 0:15:57.440 be the chip rival, must take a license from Qualcom 0:15:57.440 --> 0:16:00.080 because Qualcom has the i P that goes into the 0:16:00.080 --> 0:16:02.440 the practice of the O e MS product or the chip. 0:16:02.600 --> 0:16:04.920 So either the O e M or the chip maker 0:16:05.000 --> 0:16:07.400 has the license. And in this case the court said 0:16:07.560 --> 0:16:11.320 there's nothing wrong with Qualcom refusing to licensees chip rivals 0:16:11.400 --> 0:16:13.800 and requiring the license to be at the O e 0:16:13.960 --> 0:16:16.600 M level. That was another piece of that. And once 0:16:16.640 --> 0:16:19.320 you get to that place, the no license, no chips 0:16:19.360 --> 0:16:22.280 policy is a little bit different, because what the court 0:16:22.400 --> 0:16:25.640 saw was that Qualcom saying, hate chip makers. You can 0:16:25.680 --> 0:16:27.760 go sell the any O e M. You don't have 0:16:27.840 --> 0:16:29.880 the license to us. We're not going to sue you 0:16:30.000 --> 0:16:32.520 for infringing our patents so long as that O M 0:16:32.600 --> 0:16:35.440 has a license from US, and therefore, in the patent 0:16:35.520 --> 0:16:39.200 world can legally use our i P. And what the 0:16:39.400 --> 0:16:41.640 PC had to do to somehow suggest that that was 0:16:41.680 --> 0:16:45.760 anti competitive was suggest that Qualcom's royalties were so high, 0:16:46.160 --> 0:16:49.280 so super competitive, that it was able to then undercut 0:16:49.480 --> 0:16:52.000 with its chips the pricing of its chip's rivals, and 0:16:52.040 --> 0:16:53.960 that left an O e M better off if it 0:16:54.080 --> 0:16:57.600 acquired chip and licensing from Qualcom because it's cheaper because 0:16:57.600 --> 0:17:00.440 the chip rivals will have to charge more for their ships. 0:17:00.480 --> 0:17:03.320 They can't charge these low prices that Clock I'm charging 0:17:03.440 --> 0:17:05.919 because they can't offset it with these high royalties. But 0:17:06.000 --> 0:17:09.320 in antitrust, based on precedents, the way that becomes an 0:17:09.320 --> 0:17:13.400 anti trust violation is if it's predatory pricing, and that's 0:17:13.400 --> 0:17:17.040 what this court said. They said, only if that's predatory pricing, 0:17:17.400 --> 0:17:20.359 will that violate the antitrust laws. And the SPC didn't 0:17:20.400 --> 0:17:23.000 show that it's predatory pricing. You have to show that 0:17:23.040 --> 0:17:26.280 it's pricing below cost to drive out your rivals to 0:17:26.600 --> 0:17:29.800 later recoup what you lost in those low costs sales. 0:17:30.080 --> 0:17:32.959 And none of that was alleged or shown in the trial. 0:17:33.240 --> 0:17:36.760 That's how this court said the no lessons, no chips 0:17:36.800 --> 0:17:40.320 policy doesn't violate anti trust laws for entanglements for the 0:17:40.400 --> 0:17:45.040 company jen the court said anti competitive behavior is illegal 0:17:45.119 --> 0:17:49.200 under federal anti trust law. Hyper competitive behavior is not 0:17:49.800 --> 0:17:54.040 and that seems to illustrate the reasoning behind the court's decision. 0:17:54.480 --> 0:17:58.920 This was business, tough business, but not anti competitive exactly. 0:17:58.960 --> 0:18:02.360 They even said later, this is just qualcom with sharp elbos, 0:18:02.400 --> 0:18:06.760 you know, hyper competitive, aggressive, maximizing their profits, and all 0:18:06.800 --> 0:18:09.359 of that is fine, and all of that encourages innovation 0:18:09.680 --> 0:18:12.680 and June, this is exactly why I have been saying 0:18:12.720 --> 0:18:15.359 for quite a long time. It's just very difficult for 0:18:15.400 --> 0:18:19.800 a plaintiff under current US precedent to prove illegal monopolization 0:18:19.840 --> 0:18:23.840 in court because there's a very fine line between anti 0:18:23.840 --> 0:18:28.520 competitive conduct and hyper competitive conduct. And the Distretport found 0:18:28.560 --> 0:18:30.919 this to be anti competitive. It crossed the line from 0:18:31.000 --> 0:18:35.359 hyper competitive into illegal, and this appellate court said, no, 0:18:35.560 --> 0:18:38.119 it didn't. It didn't cross that line, and it's simply 0:18:38.160 --> 0:18:42.399 hyper competitive. And it's an incredibly difficult determination for any 0:18:42.560 --> 0:18:45.240 judge or jury to make. And it's part of the 0:18:45.280 --> 0:18:48.880 reason why it's hard to prove monopolization because in our 0:18:48.960 --> 0:18:52.560 courts right now, the prevailing approach is to be more 0:18:52.600 --> 0:18:56.639 concerned about what's called false positives and false negatives, and 0:18:56.680 --> 0:19:00.320 false positives refers to finding violations of anti trust law 0:19:00.600 --> 0:19:03.920 when the conducts did not Endact Calm competition, and they're 0:19:03.960 --> 0:19:08.600 more concerned about that then finding a false negative, which 0:19:08.600 --> 0:19:12.760 would be finding no violation when the behavior actually did injure. 0:19:13.080 --> 0:19:17.879 And it's exactly what I think Congress is thinking about 0:19:17.960 --> 0:19:20.439 and a lot of antitrust activists are thinking about right 0:19:20.480 --> 0:19:23.160 now because they think that emphasis needs to be slipped. 0:19:23.720 --> 0:19:26.200 They think there needs to be more concerned over false 0:19:26.240 --> 0:19:28.879 negatives than there is over false positive and this court 0:19:28.920 --> 0:19:32.280 showed the exact opposite. Their concern was about a false 0:19:32.320 --> 0:19:35.879 positive and finding that what they thought was hyper competitive 0:19:35.920 --> 0:19:42.359 behavior being anti competitive. And this case was unusual because 0:19:42.359 --> 0:19:46.760 there was a rare split among the regulators where the 0:19:46.920 --> 0:19:53.040 Justice Department sided with QUA Common actually intervened in the lawsuit. 0:19:54.320 --> 0:19:58.439 And I'm wondering was the Justice Department's position more of 0:19:58.480 --> 0:20:02.520 a business decision because there was a lot of talk 0:20:02.600 --> 0:20:07.199 about how important Qualcom is to five G, and the 0:20:07.280 --> 0:20:12.320 Trump administration had intervened to stop a broad Com takeover 0:20:12.520 --> 0:20:16.200 of qual Calm for that same reason. So how much 0:20:16.320 --> 0:20:19.359 was five G and the importance of five G to 0:20:19.400 --> 0:20:25.000 the country involved in the Ninth Circuit's decision. I don't 0:20:25.000 --> 0:20:28.520 think that it was involved very much. I think only 0:20:28.640 --> 0:20:32.640 in one aspect. The Court mentioned that the district court 0:20:32.760 --> 0:20:35.760 hadn't given enough weight to the pro competitive aspects of 0:20:35.760 --> 0:20:38.520 what Qualcom was doing, but the court didn't really get 0:20:38.560 --> 0:20:40.600 into it, and I really don't think that the five 0:20:40.680 --> 0:20:44.119 G issue really entered into this decision. I think it 0:20:44.160 --> 0:20:46.960 would have been the same decision whether the Department of 0:20:47.000 --> 0:20:50.200 Justice intervened or not. But I do think that that 0:20:50.320 --> 0:20:54.560 intervention was in part political and related to the desire 0:20:54.640 --> 0:20:57.680 of this administration for America to be at the forefront 0:20:57.720 --> 0:21:02.159 of five G and afraid at hampering Qualcom's innovation in 0:21:02.320 --> 0:21:05.480 R and D. By imposing these licensing restrictions would have 0:21:05.560 --> 0:21:08.800 hampered qualcom zone R and D and work in five G. 0:21:09.280 --> 0:21:13.800 But the Department of Justice here the UH making del Raheim, 0:21:13.840 --> 0:21:16.480 the Assistant Attorney General for Anti trust, has taken the 0:21:16.520 --> 0:21:22.080 position in the past that where a company maybe violating 0:21:22.119 --> 0:21:27.240 its obligations um to license standard essential patents in a fair, reasonable, 0:21:27.240 --> 0:21:30.479 and nondiscriminatory manner, that that is has nothing to do 0:21:30.520 --> 0:21:32.960 with anti trust law, that the question as to whether 0:21:32.960 --> 0:21:35.879 they're violating that commitment is a patent law question and 0:21:35.920 --> 0:21:38.720 a contract law question, and that it's not a violation 0:21:38.720 --> 0:21:41.120 of anti trust and that's part of why he stepped in, 0:21:41.359 --> 0:21:46.439 because the distreport said their failure to um UH license 0:21:46.480 --> 0:21:48.920 their patents in the fair, reasonable and non discriminatory manner 0:21:49.000 --> 0:21:51.719 also violated anti trust law, and he wanted to make 0:21:51.760 --> 0:21:53.840 the point that he disagreed that he didn't think anti 0:21:53.840 --> 0:21:56.639 trust had a part in that UH sort of a 0:21:56.680 --> 0:22:01.320 business negotiation between two parties. The g C hasn't said 0:22:01.359 --> 0:22:04.840 whether it's going to take any further action. It could 0:22:05.640 --> 0:22:08.440 ask for a rehearing. It could ask for an on 0:22:08.680 --> 0:22:12.720 bank hearing of the Ninth Circuit Court of Appeals. It 0:22:12.760 --> 0:22:16.520 could go to the Supreme Court. What are its chances 0:22:16.840 --> 0:22:21.119 in either of those? Very low for both um I 0:22:21.160 --> 0:22:23.920 don't see the Supreme Court taking this case. And even 0:22:23.920 --> 0:22:27.840 if they did, with the conservative majority right now and 0:22:27.960 --> 0:22:30.879 understanding the way it's likely Gorsas and Kabanat would look 0:22:30.920 --> 0:22:33.679 at this, I think this decision would be affirmed. And 0:22:33.760 --> 0:22:37.000 with respect to getting a rehearing, you know, this is 0:22:37.040 --> 0:22:40.600 the second panel of three judges on the Ninth Circuit 0:22:41.000 --> 0:22:44.359 that has criticized the District Court's opinion. You know, about 0:22:44.359 --> 0:22:46.760 a year ago, Qualcom asked for a stay if it 0:22:46.920 --> 0:22:49.880