Antitrust Officials Unlikely to Appeal Qualcomm Case to Supreme Court

The two sides’ fortunes reversed last year when a three-judge panel on the San Francisco-based Ninth U.S. Circuit Court of Appeals issued an emphatic decision for Qualcomm, saying the FTC hadn’t demonstrated that the company’s practices were anything other than lawful attempts at profit maximization.

The deadline for the FTC to appeal to the Supreme Court is in less than two weeks and, after consultation with the Justice Department, the commission isn’t likely to do so, people familiar with the matter said.  If the commission lets the deadline pass without action, the case will be over.

The FTC, Justice Department and Qualcomm all declined to comment.

San Diego-based Qualcomm designs and markets chips that facilitate cellphones’ communications with cell towers. It also holds a broad portfolio of patents, including many covering key telecommunications technologies.

The FTC alleged Qualcomm crossed legal lines by refusing to sell chips to device makers unless those companies also paid licensing fees on Qualcomm’s broader patent portfolio. That arrangement made it difficult for phone makers to challenge Qualcomm’s royalty rates, and meant those manufacturers were paying royalties even if they used a competitor’s chips, the commission alleged.

Qualcomm said it became the market leader through years of ingenuity and a $60 billion investment in technologies that now drive the industry.  The company maintained that it was simply obtaining the reward on that investment, saying its practices did not foreclose any chip competitors from the market.

The case previously created an unusual split—and hard feelings—between the FTC and the Justice Department, which share antitrust authority. The department during the Trump administration supported Qualcomm’s position and argued against the FTC in court.

Government discussions about what, if anything, to do now have been complicated by the transition between the Trump and Biden administrations. The five-member FTC currently has one vacancy and is split 2-2 between Democrats who supported the case and Republicans who didn’t.

At the Justice Department, the Biden administration hasn’t yet nominated people to serve as solicitor general, the government’s lawyer at the Supreme Court, or as chief of the department’s antitrust division.

The solicitor general’s office is being run in an acting capacity by Biden administration pick Elizabeth Prelogar, who is expected to eventually serve in a deputy role.

The solicitor general’s office is unlikely to file a Supreme Court petition on behalf of the FTC because it is not convinced the case is a good candidate for Supreme Court review, the people familiar with the matter said.  That view, however, does not mean the current Justice Department supports the arguments made previously by Trump-era officials against the FTC’s case, the people said.

The FTC is unlikely to mount a high court appeal on its own without the Justice Department on board, the people said.

It’s also not clear whether the FTC could bring a Supreme Court appeal even if it wanted to.  The commission’s current 2-2 split means there is no majority support right now for the Qualcomm case, and it’s not clear under FTC practices whether a formal vote would be needed to file an appeal to the high court.

Any government appeal would have faced long odds. The FTC already failed to persuade the liberal-leaning Ninth Circuit to reconsider the case with more judges participating, and no judge publicly registered support for the FTC’s request.

If the commission pressed ahead, it would run the risk of creating an adverse precedent at the Supreme Court.

The case raised difficult issues at the intersection of antitrust law, which protects competition, and patent law, which gives intellectual-property owners like Qualcomm the right to exclude competitors from using their inventions unless they pay licensing fees.

Liberal enforcers have placed more weight on the side of antitrust enforcement, while conservatives have placed more emphasis on the patent rights that companies enjoy.

Write to Brent Kendall at [email protected]