On August 30, 2019, Cause of Action Institute (CoA) filed an amicus brief in the Ninth Circuit in support of Qualcomm in FTC v. Qualcomm, Inc., No. 19-16122.  This unprecedented, highly controversial case of international importance represents FTC’s latest ultra vires attempt to expand its powers.  It does so here by seeking to transmogrify an alleged breach of contract into an antitrust violation.  A former FTC Commissioner, a current FTC Commissioner, the U.S. Department of Justice, numerous other federal agencies, a former Chief Judge of the Federal Circuit, leading antitrust scholars, and others all publicly oppose FTC’s wayward lawsuit against Qualcomm.

In January 2017, a divided Commission voted 2-1 (over the dissent of Honorable then-Commissioner Maureen Ohlhausen) to authorize FTC Staff to sue Qualcomm—an innovator and U.S. leader in 5G mobile network technology—in federal court alleging that Qualcomm’s patent licensing practices violate Section 5 of the FTC Act and the Sherman Act.  Yet, FTC lacked any evidence of actual harm to the competitive process, let alone current harm.  In May 2019, the district court found Qualcomm liable for antitrust violations based on FTC’s novel legal theory and imposed sweeping worldwide injunctive relief.  This ruling, if allowed to stand, punishes and deters innovation and damages the U.S. tech industry.  In August 2019, the U.S. Court of Appeals for the Ninth Circuit stayed the most immediately harmful portions of the injunction.

As Qualcomm explained in detail in its opening brief, the decision below should be reversed because, inter alia, it is contrary to antitrust law and unsupported by evidence of actual harm to the competitive process.

The CoA amicus brief focuses on four additional ways that FTC exceeded its statutory authority in this case, arrogating to itself powers that Congress did not intend to give it, in violation of the separation of powers:

  • FTC was not authorized to sue Qualcomm in federal court for permanent injunctive relief because this is not a “proper case” for such relief, as required by Section 13(b) of the FTC Act; instead, if anything, FTC should have proceeded against Qualcomm in its in-house administrative court.
  • Whatever antitrust authority FTC may have to police patent-related conduct, it cannot launch an antitrust assault on Qualcomm’s patent licensing practices based on overreaching “duty to deal” and “surcharge” liability theories untethered from, and in conflict with, existing patent law. FTC lacks authority to regulate such practices due to the “clear incompatibility” between the patent law and FTC’s liability theory under the analysis of the Supreme Court’s precedent in Credit Suisse Sec. LLC v. Billing, 551 U.S. 264 (2007).
  • The mandatory injunction FTC obtained here—including an edict that Qualcomm must renegotiate its existing licensing contracts and must license its patents to other companies, and a requirement that it must file reports with FTC—is not authorized by law and in excess of FTC’s statutory authority, violates due process, and is also unenforceable for vagueness.
  • FTC had no reason to believe that Qualcomm “is violating or is about to violate” antitrust law when it sued in 2017, as required by Section 13(b), and therefore lacked authority even to bring this case against Qualcomm in federal court.

Our full amicus brief can be viewed here.

More information about this case can be found here and here.

John J. Vecchione is President and CEO at Cause of Action Institute. Michael Pepson is Special Counsel for Administrative Law at Cause of Action Institute. Jessica L. Thompson is Counsel at Cause of Action Institute.