FTC v. Qualcomm Incorporated, 935 F.3d 752

Background

FTC sued Qualcomm alleging antitrust violations tied to licensing of standard-essential patents (SEPs) and sales of CDMA and premium LTE modem chips.
Allegations: Qualcomm refused to license SEPs to rival chip suppliers, conditioned chip sales on customers having Qualcomm patent licenses, and charged per-handset royalties that effectively taxed competitor chips.
After a 10-day trial the district court found Qualcomm violated Sections 1 and 2 of the Sherman Act and Section 5 of the FTC Act, and issued a multipart permanent injunction requiring exhaustive SEP licenses for modem-chip suppliers and prohibiting conditioning chip sales on license status.
Qualcomm appealed and moved for a partial stay of the injunction pending appeal, seeking to block the requirements to (1) make exhaustive SEP licenses available to competitors and (2) stop conditioning chip sales on patent-license status and renegotiate licenses.
The Ninth Circuit granted a partial stay, finding serious questions on the merits (particularly the asserted antitrust duty to deal and the per-handset royalty theory), a likelihood of irreparable harm from large-scale business disruptions, and that the balance of equities/public interest favored a stay given divided government views.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether Qualcomm had an antitrust duty to license SEPs to rival chip suppliers	FTC: Qualcomm’s refusal to license SEPs to chip rivals violated antitrust law and commitments to standards bodies, harming competition	Qualcomm: No general duty to deal; Trinko/Colgate principle allows refusal to deal absent narrow Aspen Skiing–type abandonment of profitable course of dealing	Court: Serious questions exist as to duty-to-deal theory; stay granted on injunction requiring exhaustive SEP licenses
Whether per-handset royalty structure unlawfully imposed an exclusionary surcharge on rival chips	FTC: Royalties assessed per handset (not per chip) functioned as an exclusionary surcharge disadvantaging rivals	Qualcomm: Per-handset royalty practice is lawful; absent refusal to deal or below-cost pricing, tying/leverage claim fails	Court: Qualcomm raised a fair prospect of success; serious questions on this theory; stay granted as to royalty/conditioning provisions
Whether irreparable harm justified stay pending appeal	FTC: Public interest in competition and consumers counsels against delay	Qualcomm: Injunction forces large-scale contract renegotiations and business-structural change that cannot be undone on appeal	Court: Qualcomm showed likelihood of irreparable harm from compelled contractual changes; factor favors stay
Balance of equities/public interest	FTC: Injunction protects competition and consumers	Qualcomm + some federal agencies (DoD, DOE, DOJ disagreeing with FTC): injunction may harm consumers/national security; government not united	Court: Because government views are divided and equities favor avoiding disruptive, possibly unlawful change, balance favors stay

Key Cases Cited

Verizon Commc’ns Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398 (2004) (Sherman Act generally does not impose a duty to deal; duty-to-deal exception narrow)
Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585 (1985) (duty-to-deal found where monopolist abandoned profitable course of dealing to exclude competition)
Nken v. Holder, 556 U.S. 418 (2009) (stay factors: likelihood of success, irreparable harm, balance of equities, public interest)
Colgate & Co. v. United States, 250 U.S. 300 (1919) (private refusal to deal generally permissible under Sherman Act)
Lair v. Bullock, 697 F.3d 1200 (9th Cir. 2012) (standard for showing serious questions on the merits for stay)
Leiva-Perez v. Holder, 640 F.3d 962 (9th Cir. 2011) (applicant need not show more-likely-than-not success; fair prospect or serious questions suffice)
Hollingsworth v. Perry, 558 U.S. 183 (2010) (stay/standard discussions cited)
Doe v. Abbott Labs., 571 F.3d 930 (9th Cir. 2009) (monopoly-leveraging pricing claims require refusal to deal or exclusionary conduct in monopoly market)
NCAA v. Board of Regents of the University of Oklahoma, 463 U.S. 1311 (1983) (equities may favor stay where injunction would nullify ongoing contracts and cause irreparable business harm)
Am. Trucking Ass’ns, Inc. v. City of Los Angeles, 559 F.3d 1046 (9th Cir. 2009) (irreparable harm where compliance would force plaintiffs into untenable business choices)
Ohio Citizens for Responsible Energy, Inc. v. NRC, 479 U.S. 1313 (1986) (stay preserves status quo pending appeal)