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UNITED STATES COURT REPORTERS

1112

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

SAN JOSE DIVISION

FEDERAL TRADE COMMISSION, 

PLAINTIFF,

VS.

QUALCOMM INCORPORATED, A 

DELAWARE CORPORATION,

DEFENDANT.

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C-17-00220 LHK

SAN JOSE, CALIFORNIA

JANUARY 15, 2019

VOLUME 6 

PAGES 1112-1342

TRANSCRIPT OF PROCEEDINGS

BEFORE THE HONORABLE LUCY H. KOH 

UNITED STATES DISTRICT JUDGE

A P P E A R A N C E S:

FOR THE PLAINTIFF: FEDERAL TRADE COMMISSION 

BY: JENNIFER MILICI

 DANIEL J. MATHESON 

 WESLEY G. CARSON

 KENT COX

 NATHANIEL M. HOPKIN

 PHILIP J. KEHL

 MIKA IKEDA 

600 PENNSYLVANIA AVENUE, NW 

WASHINGTON, D.C. 20580

APPEARANCES CONTINUED ON NEXT PAGE

OFFICIAL COURT REPORTERS: LEE-ANNE SHORTRIDGE, CSR, CRR

CERTIFICATE NUMBER 9595

IRENE RODRIGUEZ, CSR, CRR, RMR

CERTIFICATE NUMBER 8074

PROCEEDINGS RECORDED BY MECHANICAL STENOGRAPHY

TRANSCRIPT PRODUCED WITH COMPUTER

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UNITED STATES COURT REPORTERS

1113

APPEARANCES (CONTINUED)

FOR THE DEFENDANT: KEKER, VAN NEST & PETERS 

BY: ROBERT A. VAN NEST

 JUSTINA K. SESSIONS

 EUGENE M. PAIGE

 CHRISTINA BLAIS

 MATAN SHACHAM

 CODY HARRIS

 KRISTIN HUCEK 

633 BATTERY STREET

SAN FRANCISCO, CALIFORNIA 94111 

CRAVATH, SWAINE & MOORE 

 BY: GARY A. BORNSTEIN

 MICHAEL BRENT BYARS

 YONATAN EVEN

 JORDAN D. PETERSON

 MING-TOY TAYLOR

 DEREK SUTTON

 ANDREW HUYNH 

 ANTONY RYAN

825 EIGHTH AVENUE 

 NEW YORK, NEW YORK 10019

ALSO PRESENT: MARK SNYDER 

JEFF DAHM

KEN KOTARSKI 

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UNITED STATES COURT REPORTERS

1114

INDEX OF WITNESSES

PLAINTIFF'S

CARL SHAPIRO

DIRECT EXAM BY MR. JAMES P. 1117 

CROSS-EXAM BY MR. VAN NEST P. 1176 

REDIRECT EXAM BY MR. JAMES P. 1242 

RECROSS-EXAM BY MR. VAN NEST P. 1250 

MONICA YANG

VIDEOTAPED DEPOSITION P. 1298

MARVIN BLECKER 

VIDEOTAPED DEPOSITION P. 1300

DEFENDANT'S

IRWIN JACOBS

DIRECT EXAM BY MR. VAN NEST P. 1252 

CROSS-EXAM BY MR. MATHESON P. 1279 

DURGA MALLADI

DIRECT EXAM BY MS. SESSIONS P. 1302

CROSS-EXAM BY MR. HOPKIN P. 1333

REDIRECT EXAM BY MS. SESSIONS P. 1338 

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UNITED STATES COURT REPORTERS

1115

INDEX OF EXHIBITS

MARKED ADMITTED

PLAINTIFF'S

6814 1275

6719 1285

6722 1287

8260, 8285, 8286 1300 

DEFENDANT'S

9276 1271

9302 1314

JOINT

0014 1291

0053 1298

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1116

SAN JOSE, CALIFORNIA JANUARY 15, 2019 

P R O C E E D I N G S

(COURT CONVENED AT 9:06 A.M.) 

THE COURT: GOOD MORNING, WELCOME. 

MR. VAN NEST: GOOD MORNING, YOUR HONOR. 

THE CLERK: PLEASE BE SEATED. 

THE COURT: OKAY. WELCOME. LET'S HAVE YOUR NEXT 

WITNESS, PLEASE. 

MR. JAMES: RAJ JAMES ON BEHALF OF THE FTC. 

THE PLAINTIFFS CALL AS THEIR NEXT WITNESS 

PROFESSOR CARL SHAPIRO. 

MAY WE APPROACH THE COURT WITH BINDERS? 

THE COURT: YES, PLEASE. 

THE CLERK: PLEASE RAISE YOUR RIGHT HAND. 

(PLAINTIFF'S WITNESS, CARL SHAPIRO, WAS SWORN.)

THE WITNESS: I DO. 

THE CLERK: THANK YOU. PLEASE BE SEATED. 

WOULD YOU PLEASE STATE YOUR FULL NAME AND SPELL YOUR LAST 

NAME FOR THE RECORD. 

THE WITNESS: CARL SHAPIRO. S-H-A-P-I-R-O. CARL 

WITH A "C." 

THE COURT: ALL RIGHT. TIME IS 9:07. GO AHEAD, 

PLEASE. 

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1117

DIRECT EXAMINATION

BY MR. JAMES: 

Q. GOOD MORNING, PROFESSOR SHAPIRO. 

A. GOOD MORNING, MR. JAMES. 

Q. COULD YOU TELL US ABOUT YOUR ACADEMIC BACKGROUND?

A. YES. I'M A PROFESSOR OF THE GRADUATE SCHOOL AT THE 

UNIVERSITY OF CALIFORNIA AT BERKELEY. I'VE BEEN A PROFESSOR 

THERE SINCE 1990. 

I WAS A PROFESSOR AT PRINCETON FOR TEN YEARS BEFORE THAT. 

MY AREA OF SPECIALTY IS THE FIELD OF INDUSTRIAL 

ORGANIZATION WITHIN ECONOMICS, THE IMPLIED PART OF THAT FIELD 

IS ANTITRUST ECONOMICS. 

AND I'VE, DURING MY CAREER, I HAVE HAD EXTENSIVE 

PUBLICATIONS IN THIS AREA AND BEEN IN ACADEMIA.

Q. SO YOU'VE PUBLISHED ARTICLES ON INDUSTRIAL ORGANIZATION, 

ECONOMICS, AND ANTITRUST ECONOMICS? 

A. YES, I HAVE, QUITE A FEW.

Q. ROUGHLY HOW MANY? 

A. I WOULD SAY A HUNDRED OR SO.

Q. PROFESSOR SHAPIRO, HAVE YOU HAD JOBS IN GOVERNMENT THAT 

RELATE TO ANTITRUST LAW AND POLICY? 

A. YES, I HAVE. AS INDICATED IN THE THIRD BULLET HERE, I 

TWICE SERVED AS THE CHIEF ECONOMIST IN THE ANTITRUST DIVISION. 

THE OFFICIAL TITLE IS DEPUTY ASSISTANT ATTORNEY GENERAL FOR 

ECONOMICS AT THE DEPARTMENT OF JUSTICE. 

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1118

AND MY ROLE THERE WAS TO SUPERVISE ALL THE ECONOMISTS 

DOING ANALYSIS WITHIN THE ANTITRUST DIVISION AND TO ADVISE THE 

ASSISTANT ATTORNEY GENERAL REGARDING ANTITRUST ENFORCEMENT AND 

POLICY.

Q. AND APART FROM YOUR TWO TENURES AS DEPUTY ASSISTANT 

ATTORNEY GENERAL, HAVE YOU HAD OTHER JOBS IN GOVERNMENT THAT 

RELATE MORE GENERALLY TO ECONOMIC POLICY? 

A. YES. IT WOULD BE THE SECOND BULLET HERE. RIGHT AFTER 

SERVING THE SECOND TIME IN THE JUSTICE DEPARTMENT, I WAS ABLE 

TO SERVE AS A MEMBER OF THE PRESIDENT'S COUNCIL OF ECONOMIC 

ADVISORS, CEA. THREE MEMBERS OF THE CEA. IT'S A SENATE 

CONFIRMED POSITION, AND THE COUNCIL ADVISES THE PRESIDENT OF 

THE UNITED STATES ON A WIDE RANGE OF ECONOMIC POLICY ISSUES.

Q. HAVE YOU PREVIOUSLY SERVED AS AN EXPERT WITNESS IN 

ANTITRUST MATTERS? 

A. YES, I HAVE. I WOULD SAY OVER MY CAREER OF ABOUT 30 YEARS 

OF DOING THIS, I ESTIMATE I'VE GIVEN EXPERT TESTIMONY IN COURT 

ABOUT 20 TO 25 TIMES. 

MR. JAMES: YOUR HONOR, AT THIS POINT I'D LIKE TO 

TENDER PROFESSOR SHAPIRO AS AN EXPERT IN THE FIELD OF 

INDUSTRIAL ORGANIZATION ECONOMICS AND ANTITRUST ECONOMICS. 

MR. VAN NEST: NO OBJECTION, YOUR HONOR. 

THE COURT: ALL RIGHT. SO CERTIFIED. GO AHEAD, 

PLEASE.

BY MR. JAMES:

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SHAPIRO DIRECT BY MR. JAMES

UNITED STATES COURT REPORTERS

1119

Q. WHY DON'T WE BRING UP THE -- CAN YOU TAKE A LOOK AT THIS 

DEMONSTRATIVE. WHY DON'T WE START WITH A SUMMARY OF YOUR 

CONCLUSIONS. 

COULD YOU BRIEFLY DESCRIBE YOUR CONCLUSIONS THAT YOU 

REACHED IN THIS CASE TO THE COURT? 

A. CERTAINLY. 

SO FOLLOWING THE SLIDE, YOUR HONOR, THE FIRST BULLET, THE 

OPINION THERE, THE CONCLUSION HAS TO DO WITH QUALCOMM'S MARKET 

POWER, MONOPOLY POWER IN TWO MARKETS THAT WE'LL TALK ABOUT, THE 

MARKET FOR CDMA MODEM CHIPS AND THE MARKET FOR PREMIUM LTE 

MODEM CHIPS, AND IT'S MY VIEW THAT QUALCOMM HAD MONOPOLY POWER 

IN THOSE MARKETS THROUGH 2016. 

THE COURT: BEGINNING WHEN? 

THE WITNESS: MY ANALYSIS STARTS AROUND 2006, 

ALTHOUGH THE MORE INTENSIVE PART OF THE ANALYSIS WOULD REALLY 

BE 2011 TO '16. 

THE COURT: OKAY. SO YOU'RE SAYING THEY HAD MARKET 

POWER IN THOSE TWO MARKETS STARTING IN 2006 OR REALLY STARTING 

IN 2011? 

THE WITNESS: OKAY. WELL, THE CDMA MARKET WOULD BE 

STARTING IN 2006. THE PREMIUM LTE MARKET DOESN'T REALLY START 

UNTIL 2011. 

THE COURT: OKAY. THANK YOU FOR THE CLARIFICATION. 

GO AHEAD, PLEASE. 

THE WITNESS: SO THE, THE SECOND BULLET, THIS IS 

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1120

REALLY THE HEART OF WHAT I'VE DONE HERE, IS ANALYZING THE 

EFFECTS OF THREE DIFFERENT QUALCOMM POLICIES THAT OPERATE IN 

CONCERT: THE NO LICENSE, NO CHIPS POLICY, THE INCENTIVE 

PAYMENTS THAT QUALCOMM MAKES TO OEM'S IN SOME OF ITS LICENSING 

NEGOTIATIONS, AND ITS REFUSAL TO LICENSE ITS STANDARD ESSENTIAL 

PATENTS TO ITS MODEM CHIP RIVALS. 

SO LOOKING AT THESE THREE POLICIES WORKING TOGETHER, IT'S 

MY VIEW AND CONCLUSION THAT THEY HARMED COMPETITION IN THE 

MARKETS THAT I'VE JUST -- WE'VE JUST BEEN TALKING ABOUT IN 

THOSE TWO MARKETS. 

AND THE SUB BULLETS HERE I'LL EXPLAIN -- THIS IS WHAT I'LL 

SPEND MOST OF MY TESTIMONY ON -- THE MECHANISM BY WHICH THAT 

HARM TO COMPETITION OCCURRED. 

AND SO, AGAIN, IN BRIEF SUMMARY, THE FIRST STEP OF THIS IS 

THAT QUALCOMM, THROUGH THESE POLICIES, USED ITS MONOPOLY POWER 

OVER MODEM CHIPS TO EXTRACT SUPRA-FRAND ROYALTIES FROM OEM'S, 

AND I'M GOING TO USE THREE TERMS PROBABLY INTERCHANGEABLY, 

SUPRA-FRAND ROYALTIES, UNREASONABLY HIGH ROYALTIES, OR GETTING 

A ROYALTY SURCHARGE. 

AND WHAT I MEAN BY ALL OF THOSE IS SIMPLY THAT QUALCOMM 

WAS ABLE TO GET OEM'S TO PAY ROYALTIES FOR QUALCOMM STANDARD 

ESSENTIAL PATENTS THAT WERE ABOVE THE LEVEL OF REASONABLE 

ROYALTIES. 

SO THAT, THAT'S THE FIRST STEP IN THE EFFECTS AND THE HARM 

THAT I'VE IDENTIFIED TO COMPETITION. 

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1121

AND THEN I'M GOING TO EXPLAIN HOW THE ROYALTY SURCHARGES 

RAISE THE COST OF QUALCOMM'S RIVALS SELLING MODEM CHIPS AND 

WEAKEN THEM AS COMPETITORS AND THAT, THEREFORE, FORTIFIED 

QUALCOMM'S MONOPOLY POWER, LED TO HIGHER PRICES, ULTIMATELY 

HARMING FINAL CONSUMERS. 

AND AS THE LAST PIECE OF THAT, I HAVE CONSIDERED THE 

BUSINESS JUSTIFICATIONS PUT FORWARD BY QUALCOMM AND I DON'T 

BELIEVE THEY PROPERLY JUSTIFY THE CONDUCT THAT THEY ENGAGED IN, 

THESE THREE PIECES OF CONDUCT. 

SO THAT'S THE SECOND MAIN BULLET IN TERMS OF THE 

CONCLUSIONS I'VE REACHED. 

AND THE THIRD HAS TO DO WITH A SPECIFIC ARRANGEMENT THAT 

QUALCOMM MADE WITH APPLE, PARTICULARLY IN 2013, WHERE THEY MADE 

LARGE PAYMENTS TO APPLE IN EXCHANGE FOR APPLE USING QUALCOMM 

CHIPS EXCLUSIVELY. 

AND I ALSO BELIEVE THOSE HARMED COMPETITION AS WELL. 

BY MR. JAMES:

Q. PROFESSOR SHAPIRO, BEFORE WE DELVE INTO THE DETAILS OF 

YOUR ANALYSIS, COULD YOU PROVIDE THE COURT WITH THE MARKET 

CONTEXT IN WHICH YOUR ANALYSIS TAKES PLACE? 

A. SO THERE ARE, I BELIEVE, TWO ITEMS, I'LL SAY, THAT WE WANT 

TO KEEP TRACK OF HERE: THE MODEM CHIPS AND THE STANDARD 

ESSENTIAL PATENTS AND REALLY HOW THEY INTERACT WITH EACH OTHER 

IS AT THE HEART OF THIS CASE AND IS WHAT MAKES IT INTERESTING 

TO ME, BUT ALSO MAKES THE ECONOMICS ANALYSIS, I DON'T KNOW, I 

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1122

DON'T WANT TO SAY TRICKY, BUT THAT'S UNDERLYING WHAT'S GOING 

ON. 

AND THE MODEM CHIPS, I WOULD SAY THE KEY THING TO KEEP IN 

MIND IS THIS IS A MARKET THAT THERE'S RAPID TECHNOLOGICAL 

CHANGE, OF COURSE THAT'S COMMON IN THE WHOLE SEMICONDUCTOR 

SECTOR, HIGH TECH SECTOR, WHICH MEANS IN ORDER FOR COMPANIES TO 

PARTICIPATE AND BE EFFECTIVE COMPETITORS AT SELLING MODEM 

CHIPS, THEY NEED TO ENGAGE IN VERY SUBSTANTIAL R&D 

EXPENDITURES. 

AND THAT MEANS THAT IN ORDER FOR THAT TO PAY, THEY HAVE TO 

HAVE A REASONABLE PROSPECT OF EARNING MARGINS, SUFFICIENT 

MARGINS AND SUFFICIENT VOLUMES TO RECOUP THOSE R&D INVESTMENTS. 

NOW, IT'S RISKY. NOT EVERYBODY WILL RECOUP. BUT THAT'S THE 

WAY THE INVESTMENT DECISIONS GET MADE. SO THAT'S THE CONTEXT 

OF MODEMS. 

AND BECAUSE THE R&D EXPENSES ARE SO HIGH, THERE ARE VERY 

SUBSTANTIAL SCALE ECONOMIES. YOU REALLY CAN'T OPERATE ON A 

VERY SMALL LEVEL AND BE IN THIS GAME BECAUSE YOU WOULDN'T BE 

ABLE TO RECOUP YOUR R&D INVESTMENTS. 

SO THAT'S THE SORT OF MARKET THAT -- I'M SORRY, I'LL SLOW 

DOWN A LITTLE BIT. 

THAT IS THE SORT OF MARKET WHERE INDUSTRIAL ORGANIZATION 

ECONOMISTS EXPECT TO SEE A SMALL NUMBER OF FIRMS, A OLIGAPOLY, 

NOT A LARGE NUMBER OF FIRMS, BUT WE'RE CONCERNED IN THAT CASE, 

IF WE END UP WITH ONE FIRM OR A DOMINANT FIRM, THAT THEY COULD 

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GAIN AND PERHAPS ABUSE MONOPOLY POWER. SO THAT'S THE MODEM 

CHIP BUSINESS. 

AND THEN SIDE BY SIDE WE HAVE THE STANDARD ESSENTIAL 

PATENTS, THE CELLULAR SEPS, WHICH ARE CRITICAL FOR -- FOR A 

CHIP MAKER TO SELL A COMPLIANT CHIP, THEY NEED TO PRACTICE 

THESE PATENTS, THEY'RE ESSENTIAL. 

AND SO THE LICENSE TO THOSE PATENTS ARE THE OTHER KEY 

PIECE OF THIS, AND ALONG WITH THE COMMITMENTS TO LICENSE ON 

FAIR AND REASONABLE TERMS WHICH QUALCOMM AND OTHERS HAVE MADE. 

SO THOSE ARE THE TWO PIECES, MODEMS WITH SCALE ECONOMIES 

AND WHAT AN ECONOMIST WOULD CALL THE COMPLEMENTARY INPUT OF THE 

STANDARD ESSENTIAL PATENTS, THAT THE OEM AND THE CHIP MAKER 

NEED THE CHIPS AND THE LICENSES FOR THE PATENTS. THAT'S THE 

CONTEXT. 

Q. LET'S MOVE TO THE NEXT DEMONSTRATIVE. 

SO WE'VE HEARD A LOT OF REFERENCES OVER THE PAST WEEK TO 

QUALCOMM'S NO LICENSE, NO CHIPS POLICY. WHAT DO YOU MEAN WHEN 

YOU REFER -- WHEN YOU USE THOSE TERMS? 

A. I'M REFERRING TO THE QUALCOMM POLICY THAT IF AN OEM DOES 

NOT HAVE A LICENSE TO QUALCOMM'S CELLULAR SEPS, THEN QUALCOMM 

WILL NOT SELL THAT OEM THEIR MODEM CHIPS. 

Q. ARE THERE OTHER CHALLENGE PRACTICES RELATED TO QUALCOMM NO 

LICENSE, NO CHIPS POLICY? I BELIEVE YOU MENTIONED SOME ON THE 

LAST SLIDE. 

A. YES. SO THIS WORKS TOGETHER WITH QUALCOMM'S REFUSAL TO 

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1124

LICENSE ITS CELLULAR STANDARD ESSENTIAL PATENTS TO ITS RIVALS, 

AND THE INCENTIVE PAYMENTS THAT WERE USED IN SOME CASES TO 

INDUCE OEM'S TO SIGN LICENSES. 

Q. AND AS AN ANTITRUST ECONOMIST, WHAT IS YOUR OVERALL 

CONCERN REGARDING THIS COMPLEX OF POLICIES? 

A. SO THE FUNDAMENTAL CONCERN THAT ONE HAS HERE AND THAT I'VE 

EXPLORED IN DETAIL IS THAT QUALCOMM IS USING ITS MARKET POWER, 

ITS MONOPOLY POWER OVER THE CHIPS TO EXTRACT AN UNREASONABLY 

HIGH ROYALTY FOR THE STANDARD ESSENTIAL PATENTS, AND THAT IN 

DOING THAT, THAT IS EFFECTIVELY A TAX OR RAISES THE COST OF ITS 

RIVALS AND THEREBY WEAKENS THEM AS COMPETITORS AND FORTIFIES 

QUALCOMM'S MONOPOLY POWER.

Q. COULD YOU ELABORATE ON THE SECOND HALF OF THAT, LIKE 

ASSUMING THAT QUALCOMM WAS ABLE TO USE THIS COMPLEX OF POLICIES 

TO RAISE ROYALTY RATES, YOU KNOW, HOW WOULD THAT BE A MATTER OF 

COMPETITION CONCERN? 

A. SO I HOPE IT'S CLEAR, ACTUALLY, IF A MONOPOLIST FINDS A 

WAY TO WEAKEN ITS RIVALS BY RAISING THEIR COST, THEN THAT'S 

GOING TO BE A COMPETITION CONCERN. THE RIVALS WILL BE 

DISADVANTAGED AND THE MONOPOLY POWER WILL BE GREATER. 

SO THIS TAX OR THIS ROYALTY SURCHARGE WILL HAVE 

SIGNIFICANT ADVERSE, OR I'LL SAY ANTICOMPETITIVE EFFECTS IF 

QUALCOMM IS ABLE TO ACHIEVE THAT, AND WE'RE GOING TO TALK ABOUT 

HOW THEY DID THAT. 

Q. IN ANALYZING THESE PRACTICES, DID YOU CONSIDER WHAT THE 

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1125

WORLD WOULD LOOK LIKE WITHOUT THE PRACTICES? 

A. YES. SO FUNDAMENTAL TO DOING ANTITRUST ECONOMICS IN A 

CASE WHERE YOU'RE LOOKING AT PRACTICES, WE NEED TO -- IF WE'RE 

TRYING TO IDENTIFY WHAT ARE THE EFFECTS OF THE PRACTICES, WE 

WOULD SAY WHAT WOULD THE WORLD LOOK LIKE WITHOUT THEM AND 

COMPARE THAT TO WHAT WE ACTUALLY SAW. SO WE NEED TO IDENTIFY 

WHAT WE CALL A COUNTER FACTUAL, MAYBE YOU'VE HEARD THE TERM BUT 

FOR WORLD, I'LL SAY COUNTER FACTUAL. 

COUNTER FACTUAL, IF QUALCOMM HAD NOT ENGAGED IN THESE 

PRACTICES, HOW WOULD THINGS HAVE PLAYED OUT? AND THEN DO OUR 

BEST TO COMPARE THAT OUTCOME TO THE ONE WE SAW. THAT'S WHAT I 

MEAN BY EVALUATING THE EFFECTS OF THE PRACTICES.

Q. AND WHAT DOES THE COUNTER FACTUAL LOOK LIKE HERE? 

A. SO I THINK THE CLEANEST, MAYBE EASIEST WAY TO SEE THAT IS 

TO FIRST SUPPOSE THAT QUALCOMM HONORED ITS FRAND COMMITMENTS 

AND LICENSED ITS CELLULAR STANDARD ESSENTIAL PATENTS TO ITS 

MODEM CHIP RIVALS, HOW WOULD THINGS HAVE PLAYED OUT IF THEY HAD 

OFFERED THOSE LICENSES? 

AND IN THAT CASE, I WOULD SAY THE, THE RIVALS AND QUALCOMM 

WOULD NEGOTIATE A LICENSE AND, OF COURSE, IF THEY COULDN'T 

AGREE ON THE TERMS, THEN QUALCOMM COULD SUE THE RIVAL FOR 

PATENT INFRINGEMENT AND A COURT, OR MAYBE ARBITRATION, 

ARBITRATORS WOULD ESTABLISH THE REASONABLE ROYALTY RATE. 

SO BARGAINING IN THE SHADOW OF THAT COURT DETERMINED RATE, 

I WOULD EXPECT -- AND THIS IS IN THE COUNTER FACTUAL -- WE 

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1126

WOULD EXPECT AND HAVE THAT QUALCOMM WOULD, IN FACT, LICENSE ITS 

PATENTS, THESE CELLULAR STANDARD ESSENTIAL PATENTS TO ITS 

RIVALS ON REASONABLE TERMS. 

SO THAT'S KIND OF THE CLEANEST FIRST WAY TO VIEW THE 

COUNTER FACTUAL. 

AND THEN THE RIVALS ARE ABLE TO COMPETE AGAINST QUALCOMM 

IN SELLING TO OEM'S THE MODEM CHIPS, BEARING THE COST OF THE 

REASONABLE ROYALTIES, BUT NOT BEARING ANY HIGHER COSTS, NOT 

PAYING SOME ROYALTY SURCHARGE, JUST BEARING THAT REASONABLE 

ROYALTY COST. 

AND THAT IS THE COUNTER FACTUAL THAT WE WILL BE COMPARING 

THE OUT -- THE REAL WORLD TO THAT. 

Q. YOU TALKED ABOUT A COUNTER FACTUAL IN WHICH QUALCOMM WOULD 

BE LICENSING ITS MODEM CHIP RIVALS; RIGHT? 

A. YES, THAT'S WHAT I WAS JUST TALKING ABOUT.

Q. WOULD THAT EXCLUDE THE POSSIBILITY OF QUALCOMM ENTERING 

INTO LICENSING ARRANGEMENTS WITH OEM'S AS WELL? 

A. NO, NO. SO IT SEEMS -- WE WOULD EITHER -- NO. 

SO IF QUALCOMM CHOSE TO LICENSE TO OEM'S, PERHAPS THAT 

WOULD BE MORE EFFICIENT, AND I UNDERSTAND THAT PARTICULARLY 

FROM MR. MOLLENKOPF'S TESTIMONY, THAT QUALCOMM HAS SOME OF 

THEIR CELLULAR STANDARD ESSENTIAL PATENTS READ ON THE DEVICE, 

BUT NOT ON THE CHIP. 

SO IF THEY FOUND IT MORE EFFICIENT TO LICENSE TO THE 

OEM'S, THAT WOULD ABSOLUTELY BE, YOU KNOW, ALLOWED. THERE'S 

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UNITED STATES COURT REPORTERS

1127

NOTHING PREVENTING THAT FROM HAPPENING. 

BUT IN THAT SITUATION, THEN IN THE COUNTER FACTUAL, 

QUALCOMM WOULD NOT BE ALLOWED TO, TO USE THE NO LICENSE, NO 

CHIPS POLICY, MEANING WHEN AN OEM IS NEGOTIATING WITH -- EXCUSE 

ME. 

WHEN QUALCOMM IS NEGOTIATING WITH AN OEM, THEY WOULD NOT 

BE ABLE TO THREATEN WITHHOLDING CHIPS AS PART OF THAT LICENSING 

NEGOTIATION. 

Q. LET'S BRING UP THE NEXT DEMONSTRATIVE. 

SO WHAT WOULD NEGOTIATIONS BETWEEN QUALCOMM AND OEM'S ON 

LICENSING LOOK LIKE IN THE BUT FOR WORLD THAT -- OR COUNTER 

FACTUAL THAT YOU DESCRIBED? 

A. SO THAT'S WHAT THIS SLIDE IS INTENDED TO DEPICT. 

THE KEY IDEA, I THINK, IS THAT IF QUALCOMM'S -- IMAGINE 

NOW QUALCOMM LICENSING ITS CELLULAR SEPS TO AN OEM. THEY 

CANNOT LINK THOSE NEGOTIATIONS WITH THEIR NEGOTIATIONS OF THEIR 

OWN CHIPS. 

AND THE WAY I THINK IS REALLY BEST INSTRUCTIVE TO THINK 

ABOUT THIS WHOLE THING IS THE OEM IS TRYING TO FIGURE OUT AND 

DETERMINE WHAT ROYALTY DO THEY HAVE TO PAY QUALCOMM WHEN THEY 

BUILD A HANDSET THAT CONTAINS A NON-QUALCOMM CHIPSET? THAT'S 

THE PRICE THEY'RE NEGOTIATING OVER. 

AND IN NEGOTIATING THAT PRICE, IF THEY CAN'T AGREE ON IT, 

THEN QUALCOMM COULD SUE THE OEM FOR PATENT INFRINGEMENT, THEY 

COULD GO TO COURT AND GET A REASONABLE ROYALTY DETERMINED. 

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1128

SO -- BUT QUALCOMM IS NOT ALLOWED TO RETALIATE AGAINST 

THAT OEM IF THEY HAVEN'T SIGNED A LICENSE OR HAVEN'T AGREED TO 

QUALCOMM'S PREFERRED TERMS. QUALCOMM IS NOT ALLOWED TO 

RETALIATE BY WITHHOLDING CHIPS. 

AND LIKEWISE, IN TERMS OF THE INCENTIVES, THEY'RE NOT 

ALLOWED TO LINK THE INCENTIVES ON CHIP SUPPLY ARRANGEMENTS TO 

THE LICENSING NEGOTIATIONS. 

SO IT'S BASICALLY A DE-LINKING OF THE TWO NEGOTIATIONS 

THAT QUALCOMM WOULD THEN BE HAVING WITH AN OEM. THE LICENSING 

NEGOTIATIONS, WHICH IS OVER HOW MUCH DOES THE OEM HAVE TO PAY 

QUALCOMM WHEN THEY BUILD AND SELL A DEVICE CONTAINING A 

NON-QUALCOMM CHIPSET, THAT'S ONE NEGOTIATION. IT DOESN'T HAVE 

ANYTHING TO DO WITH QUALCOMM CHIPS. 

AND THEN THE OTHER NEGOTIATION IS WHEN QUALCOMM IS SELLING 

ITS CHIPS TO THE OEM, AND IN THAT NEGOTIATION, QUALCOMM CAN 

ABSOLUTELY WITHHOLD THE CHIPS IF THE, IF THE OEM WON'T PAY WHAT 

QUALCOMM WANTS FOR THEIR CHIP, INCLUDING THE RIGHT TO USE THOSE 

CHIPS; THAT IS TO SAY, THAT PRACTICE QUALCOMM'S CELLULAR 

STANDARD ESSENTIAL PATENT, THEN QUALCOMM DOESN'T HAVE TO SELL 

THEM THE CHIP. THEY SAY NO. 

THE TWO NEGOTIATIONS ARE DE-LINKED IN THE COUNTER FACTUAL. 

AND THE OUTCOME OF THAT THEN, WHAT'S GOING TO HAPPEN IN 

THAT WORLD IS THAT -- AND THESE ARE THE SUB BULLETS HERE. IN 

THE MIDDLE BULLET, FOR THE ROYALTIES, IF THEY CAN'T AGREE ON 

THE ROYALTIES, THE COURT WILL SET THE RATE. SO QUALCOMM CAN 

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UNITED STATES COURT REPORTERS

1129

OBTAIN REASONABLE ROYALTIES FOR ITS STANDARD ESSENTIAL PATENTS 

FROM THE OEM, AND THAT'S WHAT THE OEM WOULD HAVE TO PAY 

QUALCOMM WHEN THEY BUILD AND SELL A HANDSET THAT CONTAINS A 

NON-QUALCOMM CHIPSET. 

SO WE EXPECT, AGAIN, REASONABLE ROYALTIES IN THAT 

SITUATION FOR THOSE HANDSETS. 

AND THEN ON THE CHIP SIDE, QUALCOMM CAN EXTRACT WHATEVER 

THE MARKET WILL BEAR FOR ITS CHIPS, AND IN MANY CASES THEY 

HAVE -- YOU KNOW, THERE'S NO GOOD ALTERNATIVES, SO I EXPECT 

QUALCOMM TO GET A NICE MARGIN AND QUALCOMM CAN CAPTURE THE FULL 

MARKET VALUE OF CHIPS AT A MONOPOLY PRICE. 

AND I'LL USE THE WORD "ALL-IN PRICE" TO REFER TO WHAT 

QUALCOMM WOULD THEN CHARGE THE OEM FOR ITS CHIP, ALONG WITH THE 

LICENSE, IF YOU WANT TO PUT IT THAT WAY, OR ANYHOW, RIGHTS TO 

USE THE CHIP IN ITS DEVICE. 

SO THAT'S THE COUNTER FACTUAL AS DESCRIBED WHEN QUALCOMM 

AND THE OEM ARE NEGOTIATING. 

AND IT LEADS TO THE SAME ECONOMIC OUTCOME AS THE COUNTER 

FACTUAL WHERE QUALCOMM LICENSES TO THE RIVAL. THE KEY THING IN 

EITHER OF THESE -- AND THIS IS THE KEY ELEMENT OF THE COUNTER 

FACTUAL THAT WE'LL BE COMPARING TO WHAT HAPPENED -- IS WHEN AN 

OEM BUILDS AND SELLS A DEVICE CONTAINING THE NON-QUALCOMM 

CHIPSET, QUALCOMM RECEIVES A REASONABLE ROYALTY FOR ITS SEPS ON 

THAT. 

AND WHETHER QUALCOMM RECEIVES THAT ROYALTY FROM THE OEM OR 

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1130

FROM THE RIVAL IS ECONOMICALLY IMMATERIAL. THAT'S A 

FUNDAMENTAL ECONOMIC PRINCIPLE FROM THE TEXTBOOKS. IT DOESN'T 

MATTER AT ALL. 

SO THE TAKE AWAY ON THE COUNTER FACTUAL IS QUALCOMM GETS 

THOSE REASONABLE ROYALTIES WHEN THE OEM IS MAKING A DEVICE THAT 

DOES NOT CONTAIN THEIR CHIPS. 

Q. DOES THAT CONCLUDE YOUR ANALYSIS OF THE COUNTER FACTUAL? 

A. HAPPILY, IT DOES. 

Q. LET'S MOVE ON TO THE REAL WORLD. 

HOW ARE LICENSING NEGOTIATIONS IN THE REAL WORLD DIFFERENT 

FROM THE LICENSING NEGOTIATIONS YOU JUST DESCRIBED? 

A. OKAY. SO I HAVE A COUPLE SLIDES HERE, YOUR HONOR, THAT GO 

THROUGH IN A CONCEPTUAL KIND OF NUMERICAL EXAMPLE TO EXPLAIN 

HOW THE ROYALTY SURCHARGE AFFECTS -- THE EFFECTS OF A ROYALTY 

SURCHARGE, OR UNREASONABLY HIGH ROYALTY. 

SO WE'RE FOCUSSING ON A SITUATION WHERE THE OEM PURCHASES 

A MODEM CHIP FROM A RIVAL MANUFACTURER, A NON-QUALCOMM MODEM 

CHIP, AND I JUST WANT TO SET UP WHAT THE ECONOMICS OF THAT 

TRANSACTION LOOK LIKE IF THE ROYALTY IS AT A REASONABLE LEVEL, 

THAT'S THIS SLIDE, AND THEN THE NEXT SLIDE IS GOING TO BE ONE 

IF THEY'RE AT AN UNREASONABLY HIGH LEVEL. 

GO BACK, PLEASE, TO THE PREVIOUS SLIDE. 

SO THE KEY CONCEPT HERE, STANDARD CONCEPT IN ECONOMICS IS 

GAINS FROM TRADE, WHICH IS HOW -- WHEN THERE'S A BUYER AND A 

SELLER, HOW MUCH VALUE IS ADDED BY BEING ABLE TO DO A DEAL? 

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1131

HOW BIG IS THE PIE THAT THEY GET TO SPLIT BY HAVING A 

TRANSACTION? 

SO IN MY EXAMPLE -- AND THE NUMBERS ARE PURELY 

ILLUSTRATIVE OR CONCEPTUAL TO GET THE CONCEPTS. BUT SUPPOSE 

THAT THE OEM IS WILLING TO PAY AS MUCH AS $40 FOR THE CHIP. IN 

ECONOMICS WE CALL THAT WILLINGNESS TO PAY. I'LL USE THE TERM 

VALUE. $40. 

AND THAT REFLECTS, YOU KNOW, HOW MUCH MONEY THEY CAN MAKE 

WITH THE HANDSET WITH THAT CHIP IN IT. 

SO THAT'S THE VALUE. 

ON THE OTHER HAND, THERE ARE SOME COSTS THAT HAVE TO BE 

INCURRED. THE RIVAL, LET'S ASSUME THAT THE COST OF MAKING THE 

CHIP IS $5. AND THERE'S A ROYALTY THAT HAS TO BE PAID TO 

QUALCOMM, THE REASONABLE ROYALTY, ASSUMED TO BE $10. SO 

THAT'S -- IF YOU LOOK ON THE BAR ON THE RIGHT-HAND SIDE HERE, 

THOSE ARE THE BLUE, THE DARKER BLUE. THOSE ARE COSTS THAT MUST 

BE INCURRED IF THIS TRANSACTION GOES FORWARD. 

THOSE COSTS IN TOTAL COME TO $15. THAT LEAVES $25 GAINS 

FROM TRADE. 

AND BARGAINING, THEY WOULD BARGAIN OVER THAT, AND LET'S 

JUST STICK WITH A NEUTRAL ASSUMPTION, THEY SPLIT THE GAINS FROM 

TRADE EQUALLY. 

IF THAT'S THE CASE, THERE'S $25 OF GAINS FROM TRADE, SO 

THEY EACH GET 12.50 OF SURPLUS FROM THIS TRANSACTION. 

FOR THE RIVAL, WHAT THAT MEANS IS SINCE -- LET'S SUPPOSE, 

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1132

TO MAKE SIMPLE, THAT THE OEM IS WRITING THE CHECK TO QUALCOMM 

FOR THE ROYALTY. SO THE RIVAL, IF THEY'RE GOING TO GET 12.50 

OF MARGIN, THEY HAVE A $5 CHIP, THEY'RE GOING TO SELL THE CHIP 

FOR 17.50. SO THAT'S GOING TO BE THE CHIP PRICE. 

FROM THE OEM'S POINT OF VIEW, THEY'RE GOING TO HAVE TO PAY 

17.50 FOR THE CHIP, THEY'RE GOING TO PAY $10 TO QUALCOMM, TO 

THE ALL-IN PRICE TO THE OEM IS 27.50, AND THEY HAD A $40 VALUE, 

THAT THEY HAD AN ALL-IN PRICE OF 27.50, SO THE BUYER GETS A 

SURPLUS OF 12.50. 

AND THE SAME SURPLUS AS THE SELLER SINCE WE'RE ASSUMING 

THAT THEY SPLIT THE GAINS EQUALLY. 

SO THIS IS THE BASELINE WITH A REASONABLE ROYALTY. AND 

I'M -- YOU KNOW, THE ASSUMPTION HERE WITH MY NUMBERS IS THIS IS 

A PROFITABLE TRANSACTION FOR BOTH SIDES AND THEY -- AND 

QUALCOMM GETS ITS REASONABLE ROYALTY OF $10. 

SO THE WHOLE POINT HERE IS NOW TO COMPARE THIS TO WHAT 

HAPPENS IF WE ADD AN ADDITIONAL ROYALTY SURCHARGE THAT QUALCOMM 

GETS? SO THAT'S THE NEXT SLIDE. PAR. 

Q. BEFORE YOU -- 

A. OH, A QUESTION?

Q. YES. BEFORE WE GET THERE, I WANTED TO INVESTIGATE EXACTLY 

WHAT KIND OF LEVERAGE ARE WE TALKING ABOUT THAT'S BEING BROUGHT 

TO BEAR IN THESE LICENSING NEGOTIATIONS IN THE REAL WORLD THAT 

WASN'T PRESENT IN THE COUNTER FACTUAL YOU DESCRIBED EARLIER? 

A. OKAY. THE -- THE -- OKAY. 

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UNITED STATES COURT REPORTERS

1133

IN THE REAL WORLD, THE LEVERAGE THAT WE'RE TALKING ABOUT 

IS THAT QUALCOMM, WHEN NEGOTIATING THE LICENSE FOR ITS STANDARD 

ESSENTIAL PATENTS, WOULD TELL THE OEM, IF YOU DON'T SIGN A 

LICENSE, WE WILL NOT SELL YOU OUR CHIPS. 

Q. AND AS AN ECONOMIST, HOW WOULD YOU PREDICT THAT BRINGING 

THAT MODEM CHIP LEVERAGE TO BEAR ON LICENSING NEGOTIATIONS 

WOULD AFFECT ROYALTY RATES? 

A. SO THE BARGAINING THEORY, REALLY BASIC BARGAINING THEORY 

WOULD TELL US THAT LEVERAGE MEANS FROM THE OEM'S POINT OF VIEW, 

IF THEY DON'T SIGN A LICENSE, NOT ONLY WOULD THEY HAVE TO GO TO 

COURT AND SORT IT OUT, WHICH IS FAIR ENOUGH, BUT THEY WOULD 

LOSE ACCESS TO QUALCOMM'S MODEM CHIPS AND THAT IS GOING TO 

IMPOSE A NUMBER OF COSTS ON THEM. 

AND WE CAN TALK NOW OR LATER ABOUT THOSE COSTS AND WHAT 

THE OEM'S HAVE SAID, BUT THAT'S A VERY HEAVY HAMMER THAT 

QUALCOMM IS BRINGING DOWN, AT LEAST AS A THREAT, IN THOSE 

NEGOTIATIONS BECAUSE THAT WOULD BE VERY COSTLY TO THE OEM'S TO 

LOSE ACCESS TO QUALCOMM'S MODEM CHIPS.

Q. YOU REFERRED TO IT BEING A VERY HEAVY HAMMER. IS THERE 

ANY EVIDENCE IN THIS CASE THAT SUPPORTS THAT CONCLUSION? 

A. YES, I THINK THERE'S BEEN A LOT OF EVIDENCE. YOUR HONOR 

HAS HEARD QUITE A BIT FROM A NUMBER OF OEM'S, BLACKBERRY, 

LENOVO, HUAWEI, APPLE THAT HAVE THAT FEAR, I GUESS LET'S CALL 

IT, OF NOT -- OF LOSING ACCESS TO QUALCOMM'S MODEM CHIPS REALLY 

SUBSTANTIALLY SHIFTED THE NEGOTIATIONS OVER ROYALTIES AND THEY 

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UNITED STATES COURT REPORTERS

1134

FELT PRESSURED TO AGREE TO ROYALTIES HIGHER THAN THEY -- 

SIGNIFICANTLY HIGHER THAN THEY OTHERWISE WOULD HAVE.

Q. THAT'S TESTIMONY IN EVIDENCE FROM OEM'S. 

DO YOU SEE ANY EVIDENCE ON THE QUALCOMM SIDE THAT SUPPORTS 

THAT CONCLUSION? 

A. YES. QUALCOMM, I THINK THERE'S QUITE A LOT OF EVIDENCE ON 

THE QUALCOMM SIDE THAT THEY WERE VERY WELL AWARE THAT QCT, 

THEIR CHIP BUSINESS, WAS SUPPORTING QTL TO BE ABLE TO GET 

HIGHER ROYALTIES BY BRINGING THIS LEVERAGE TO BEAR. 

AND WE SEE ALSO THAT IDEA COMING UP PRETTY CLEARLY ON THE 

TWO OCCASIONS WHEN QUALCOMM CONSIDERED SPLITTING THE COMPANY UP 

INTO THE -- INTO A CHIP BUSINESS AND A LICENSING BUSINESS AND 

IDENTIFIED AS A DRAWBACK TO THAT JUST, OF COURSE, ONE OF A 

NUMBER OF FACTORS TO CONSIDER, BUT A DRAWBACK TO THAT THAT THE 

LICENSING BUSINESS WOULD BE MUCH MORE VULNERABLE TO ATTACK IF 

THEY DIDN'T HAVE THE CHIP BUSINESS TO HELP DEFEND THEM USING 

THIS POLICY. 

Q. SO IS THE EVIDENCE YOU REVIEWED FROM OEM'S AND FROM 

QUALCOMM CONSISTENT WITH THE PREDICTIONS THAT THE BARGAINING 

THEORY LED YOU TO? 

A. YES. SO I THINK THE EVIDENCE ACROSS THE BOARD IS 

CONSISTENT WITH THAT. AS I SAY, BOTH SIDES OF THE NEGOTIATIONS 

HERE, THE OEM'S AND THE QUALCOMM -- AND QUALCOMM CLEARLY 

EXPECTED, AND I WOULD SAY BELIEVED, THAT THIS BARGAINING -- 

THIS LEVERAGE THAT QUALCOMM BROUGHT TO BEAR ON THE CHIPS 

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UNITED STATES COURT REPORTERS

1135

SHIFTED THE LICENSING NEGOTIATIONS SUBSTANTIALLY IN QUALCOMM'S 

FAVOR AND LED TO A SIGNIFICANTLY HIGHER ROYALTY THAN QUALCOMM 

WOULD OTHERWISE HAVE BEEN ABLE TO ACHIEVE. 

Q. NOW WE'VE COVERED HOW THE LEVERAGE MIGHT LEAD TO A ROYALTY 

SURCHARGE. 

COULD YOU NOW EXPLAIN WHAT THE AFFECTS OF THAT ROYALTY 

SURCHARGE WOULD BE ON TRANSACTIONS BETWEEN OEM'S AND QUALCOMM 

RIVALS? 

A. OKAY. 

Q. WE'LL MOVE TO THE NEXT DEMONSTRATIVE? 

A. OKAY. SO THAT'S WHAT THE SECOND SLIDE IS DESIGNED TO SHOW 

YOUR HONOR, TO -- SO LET'S WALK THROUGH THE NUMBERS HERE, HOW 

THE ECONOMICS OF THE TRANSACTION BETWEEN QUALCOMM AND -- EXCUSE 

ME -- BETWEEN AN OEM AND A RIVAL MANUFACTURER CHANGE WHEN WE 

ADD THE ROYALTY SURCHARGE. 

SO IF YOU LOOK ON THE -- AT THE RIGHT-HAND SIDE HERE IN 

RED WE'VE GOT THE ADDITIONAL ROYALTY SURCHARGE, THIS IS ON TOP 

OF THE FRAND ROYALTY ITSELF. SO THE -- NOW THE COSTS THAT ARE 

ASSOCIATED WITH THIS TRANSACTION FOR THE TWO PARTIES ARE THE 

PRODUCTION COSTS OF $5 FOR THE RIVAL, THE REASONABLE ROYALTY OF 

$10, AND THE ROYALTY SURCHARGE ON TOP OF THAT OF $10. SO 

THAT'S $25 OF COSTS. AND, THEREFORE, THE GAINS FROM TRADE 

SHRINK DOWN TO $15. THEY WERE PREVIOUSLY 25. 

SO LET'S CONTINUE TO MAKE THIS SIMPLE IN THAT NEUTRAL 

ASSUMPTION THAT THE GAINS FROM TRADE ARE SPLIT EQUALLY. IN 

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UNITED STATES COURT REPORTERS

1136

THAT CASE, THE $15 OF GAINS FROM TRADE ARE SPLIT, EACH SIDE 

GETS $7.50 OF SURPLUS. AND BY THE SAME LOGIC WE HAD BEFORE, 

WHAT THAT MEANS IS THAT THE PRICE OF THE MODEM CHIP IS GOING TO 

BE 12.50, THAT IS, THE $5 PRODUCTION COST, I SAID THE RIVAL 

GETS A 7.50 MARGIN, SO THE PRICE IS 12.50. 

BUT THEN FROM THE OEM'S POINT OF VIEW, THE ALL-IN PRICE IS 

THE 12.50 THEY HAVE TO PAY FOR THE CHIP, PLUS THE $20 OF 

ROYALTIES THEY HAVE TO PAY QUALCOMM. SO THE ALL-IN PRICE IS 

32.50. 

AND COMPARED WITH THE -- THE KEY POINT IS TO COMPARE THIS 

TO THE PREVIOUS EXAMPLE WITH THE REASONABLE ROYALTY. SO NOW 

THE RIVAL IS HARMED BY $5 BECAUSE THEIR MARGIN WAS REDUCED FROM 

7.50 TO 12.50. THE OEM'S COSTS GO UP BY $5, THE ALL-IN PRICE 

IS THEIR COST HERE, THEY HAVE TO PAY THE ROYALTIES AND THE CHIP 

PRICE, THAT GOES UP BY $5. 

SO BETWEEN THE TWO OF THEM, THE RIVAL IS HARMED BY $5, THE 

OEM'S COST GOES UP BY $5, THAT SPLITS THE $10 SURCHARGE. 

THEY'VE GOT TO COVER IT SOMEHOW IF THEY'RE GOING TO DO THIS 

TRANSACTION. IF THEY'RE SPLITTING THE GAINS FROM TRADE 

EQUALLY, THAT'S HOW IT'S GOING TO GO, IT'S GOING TO BE SPLIT. 

NOW, THE OEM WON'T NECESSARILY EAT THAT WHOLE $5 EXTRA 

COST. IN GENERAL, THEY WILL BE ABLE TO PASS SOME OF THAT ON TO 

THEIR CUSTOMERS, PARTICULARLY IF ALL THE OTHER OEM'S ARE 

EXPERIENCING THE SAME COST INCREASE. PRETTY -- SO WE WOULD 

EXPECT THAT $5 OF OEM COSTS TO BE SPLIT IN TERMS OF ULTIMATE 

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UNITED STATES COURT REPORTERS

1137

INCIDENTS BETWEEN THE OEM AND THE FINAL CONSUMERS. 

OKAY. SO NOW WE'VE PRETTY MUCH GOT THE PIECES. 

THE EFFECT OF THE ROYALTY SURCHARGE IS TO REDUCE THE GAINS 

FROM TRADE ON THIS TRANSACTION, CAUSE THE OEM'S COST TO GO UP, 

CAUSE THE RIVAL TO GET A LOWER MARGIN, AND SOME OF THIS COST 

INCREASE WILL BE PASSED ON TO FINAL CONSUMERS. 

SO BASIC BARGAINING THEORY PREDICTS THESE CONSEQUENCES OF 

THE ROYALTY SURCHARGE. 

Q. LET'S MOVE ON TO THE NEXT DEMONSTRATIVE. 

SO YOU'VE BEEN FOCUSSING ON A SINGLE TRANSACTION BETWEEN 

AN OEM AND A QUALCOMM RIVAL. 

COULD YOU SUMMARIZE THE EFFECTS OF TRANSACTIONS BETWEEN 

OEM'S AND QUALCOMM'S RIVALS MORE GENERALLY? 

A. YES. SO WHAT I'D LIKE TO DO NOW IS PIVOT FROM THE 

NUMERICAL EXAMPLE OF A SINGLE TRANSACTION TO REALLY TALK MORE 

GENERALLY ABOUT THE IMPLICATIONS FOR THESE TRANSACTIONS AND THE 

MARKET AS A WHOLE. 

SO THE EFFECT OF THE SURCHARGE THAT QUALCOMM WAS ABLE TO 

ACHIEVE IS TO -- HAS BEEN TO IMPOSE A BURDEN ON TRANSACTIONS 

BETWEEN THE OEM'S AND QUALCOMM'S RIVALS. AND TO AN ECONOMIST, 

THESE ARE ECONOMICALLY EQUIVALENT TO A TAX ON THOSE 

TRANSACTIONS. AND I JUST MEAN BY THAT THERE'S A COST THAT 

THOSE TRANSACTION PARTIES HAVE TO PAY, YOU KNOW, MUCH LIKE IF 

THE GOVERNMENT HAS A TAX, THE BUYER AND SELLER HAVE TO -- 

TOGETHER, BETWEEN THEM, THEY HAVE TO WRITE A CHECK TO THE 

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UNITED STATES COURT REPORTERS

1138

GOVERNMENT. AND THAT'S THE BURDEN ON THE TRANSACTION. 

SO THAT'S THE EFFECT OF THE ROYALTY SURCHARGE. 

AND THEN THE CONSEQUENCES, BOTH THE BUYERS AND SELLERS IN 

THOSE TRANSACTIONS ARE HARMED. THE OEM IS THE BUYER. THEY'RE 

HARMED. THE ALL-IN PRICE GOES UP. THE RIVALS ARE HARMED, 

THEY'RE GETTING SMALLER MARGIN. 

AND THE COMBINED HARM EQUALS THE ROYALTY SURCHARGE IF WE 

ALSO INCLUDE THE CONSUMERS, OKAY? 

SO THIS HARM IS SPLIT IN THE END BETWEEN THE RIVAL'S 

MARGINS BEING REDUCED, THE OEM'S HAVING THEIR MARGINS REDUCED 

SOMEWHAT, AND CONSUMERS PICKING UP SOME OF THE TAB. 

SO THAT'S THE, THE ECONOMIC INCIDENTS OF THE ROYALTY 

SURCHARGE. 

AND THEN IF WE GO TO THE LAST BULLET, THERE'S AN 

ADDITIONAL ECONOMIC EFFECT THAT I HAVEN'T IDENTIFIED. I WAS 

TALKING ABOUT TRANSACTIONS THAT TOOK PLACE AND HOW THEY WOULD 

BE -- GAINS FROM TRADE WOULD BE REDUCED. 

AS WITH ANY TAX, WHEN YOU TAX CERTAIN TRANSACTIONS, THE 

QUANTITY WILL FALL. THE NUMBER OF TRANSACTIONS WILL FALL 

BECAUSE SOME TRANSACTIONS WILL NOT HAVE ENOUGH GAINS FROM TRADE 

TO BEAR THE BURDEN OF THE TAX. 

SO WE WILL ALSO EXPECT TO SEE A REDUCTION IN THE NUMBER OF 

TRANSACTIONS TAKING PLACE, THAT IS, OEM'S PURCHASING MODEM 

CHIPS FROM QUALCOMM'S RIVALS, AND THAT IS GOING TO CAUSE 

FURTHER HARM TO THE RIVALS, OEM'S, AND CONSUMERS. THE RIVALS 

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1139

PERHAPS MOST CLEARLY BECAUSE THEY'RE SELLING FEWER CHIPS. 

THEY'RE MAKING LOWER MARGINS ON THE CHIPS THEY SELL, AND 

THEY'RE SELLING FEWER CHIPS. 

OEM'S AND CONSUMERS, THERE WOULD BE SOME TRANSACTIONS, IF 

QUANTITY GOES DOWN, THAT WOULD BE ASSOCIATED WITH PRICE GOING 

UP AND SOME FURTHER HARMS. 

SO THOSE ARE THE EFFECTS OF THE ROYALTY SURCHARGE ON 

THINKING BROADLY ABOUT THE TRANSACTIONS TAKING PLACE BETWEEN 

OEM'S AND QUALCOMM'S RIVALS. 

Q. YOU'VE READ THE FIRST DAY'S TRIAL TRANSCRIPT; RIGHT? 

A. YES, I HAVE.

Q. AND DID YOU READ MR. VAN NEST'S STATEMENT ABOUT QUALCOMM'S 

POLICY OF NOT LICENSING RIVAL CHIP MAKERS? 

A. I DID.

Q. HE SAID, "IT ALLOWS CHIP MAKERS TO COMPETE WITHOUT PAYING 

ANY MONEY TO QUALCOMM, SO THE CHIP MAKERS, ARE IN EFFECT, FREE 

RIDING. THEY'RE NOT TAKING A LICENSE. THEY'RE ALSO NOT PAYING 

ANY ROYALTIES." 

HOW DO YOU RESPOND TO THAT? 

A. I RESPOND BADLY TO THAT. THAT IS INCORRECT AS A MATTER OF 

ECONOMICS. I THINK YOU CAN SEE THAT I WORK THROUGH THE 

ECONOMIC EFFECT OF THE REFUSAL TO LICENSE, QUALCOMM'S REFUSAL 

TO LICENSE TO THE RIVALS. 

AND THE PROBLEM -- THE REASON THIS IS INCORRECT IS THE 

OEM -- EXCUSE ME. 

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1140

WHEN THE RIVALS -- THEY'RE NOT PAYING THE LICENSE, THEY'RE 

NOT PAYING THE ROYALTIES DIRECTLY TO QUALCOMM. BUT WHEN THEY 

SELL THE CHIPS, THEIR CUSTOMERS HAVE TO PAY AN UNREASONABLY 

HIGH ROYALTY TO QUALCOMM. THAT IS ECONOMICALLY EQUIVALENT TO 

THE RIVALS THEMSELVES HAVING TO PAY THAT UNREASONABLY HIGH 

ROYALTY. IT DOESN'T MATTER WHICH SIDE OF THE TRANSACTION IS 

PAYING THE TAX, THE ECONOMICS ARE EXACTLY THE SAME. 

SO THIS IS JUST DEAD WRONG TO SAY THEY'RE FREE RIDING. 

THEY ARE BEING HARMED, THE RIVALS ARE BEING HARMED BECAUSE OF 

THE SURCHARGE THAT THEIR CUSTOMERS HAVE TO PAY. 

Q. LET'S MOVE TO THE NEXT DEMONSTRATIVE. 

SO QUALCOMM HAS ALSO MADE AN ARGUMENT THAT EVEN IF THEY 

GOT A ROYALTY SURCHARGE, IT WOULD NOT DISADVANTAGE THEIR RIVALS 

RELATIVE TO THEM. 

QUALCOMM'S EXPERT, PROFESSOR NEVO, HAS WRITTEN "PROFESSOR 

SHAPIRO'S THEORY IS FLAWED BECAUSE ANY ALLEGED TAX WOULD NOT 

DISPROPORTIONATELY AFFECT THE DEMAND FOR QUALCOMM'S RIVAL'S 

CHIPS RELATIVE TO THE DEMAND FOR QUALCOMM'S CHIP. THE TAX IS 

CHIP-AGNOSTIC AND NON-DISCRIMINATORY. ANY TAX WOULD APPLY 

EQUALLY TO PURCHASES OF QUALCOMM'S CHIPS AND RIVALS' CHIPS." 

AND HOW DO YOU RESPOND TO THAT ARGUMENT? 

A. WELL, I'M SORRY TO SAY THIS IS ALSO INCORRECT. 

THE -- AND I THINK THE EASIEST WAY TO SEE THAT, YOUR 

HONOR, IS TO GO BACK AND LOOK AT WHAT I JUST DID AND COMPARE IT 

TO WHEN QUALCOMM SELLS ITS CHIPS. 

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SO WE JUST WENT THROUGH THE SURCHARGE IS A BURDEN ON 

TRANSACTIONS BETWEEN QUALCOMM -- EXCUSE ME -- BETWEEN THE OEM 

AND QUALCOMM'S RIVALS, AND IT REDUCES THE GAINS FROM TRADE BY 

THE AMOUNT OF THE SURCHARGE. 

LET'S THINK NOW ABOUT THE TRANSACTIONS BETWEEN QUALCOMM 

AND AN OEM, OKAY? BECAUSE PROFESSOR NEVO IS SAYING THAT THE 

TAX IS CHIP-AGNOSTIC, NON-DISCRIMINATORY. 

WELL, THE ROYALTY SURCHARGE DOES NOT REDUCE THE GAINS FROM 

TRADE BETWEEN QUALCOMM AND THE OEM IN THE SAME MANNER BECAUSE 

THEY'RE NOT PAYING -- BECAUSE QUALCOMM IS THE RECIPIENT OF THE 

ROYALTIES, OKAY? IT'S A FUNDAMENTAL DIFFERENCE. 

WHEN AN OEM BUYS A CHIP FROM A RIVAL, THE TWO OF THEM 

TOGETHER HAVE TO WRITE A CHECK TO QUALCOMM. 

WHEN AN OEM BUYS A CHIP FROM QUALCOMM, THERE'S NO MONEY 

GOING OUT TO THIRD PARTIES. 

IF YOU WANT TO THINK ABOUT THIS AS QUALCOMM'S CHIP 

DIVISION IS BEARING THE COST OF THOSE ROYALTIES LIKE ITS RIVALS 

ARE, THAT'S OKAY. BUT THEN THERE'S AN EQUAL OFFSETTING BENEFIT 

OR REVENUE TO QUALCOMM'S LICENSING DIVISION BECAUSE THEY'RE THE 

RECIPIENT OF THE ROYALTY. 

SO THAT'S JUST FUNDAMENTALLY DIFFERENT BETWEEN THE TWO 

TRANSACTIONS, AND THAT'S ACTUALLY CLEAREST WHEN WE THINK ABOUT 

TRANSACTIONS THAT EXPAND THE MARKET FOR MODEM CHIPS. 

SO IT'S JUST NOT CORRECT TO SAY THAT, THAT A ROYALTY 

SURCHARGE IS -- AFFECTS THESE TWO TYPES OF TRANSACTIONS 

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1142

EQUALLY. IT'S A MISTAKE. 

Q. LET'S TURN TO THE NEXT DEMONSTRATIVE. SO FAR WE'VE BEEN 

FOCUSSING ON HOW THE ROYALTY SURCHARGE AFFECTS GAINS FROM 

TRADE. 

WHAT ARE THE COMPETITIVE EFFECTS OF THE ROYALTY SURCHARGE 

ON THE MARKET AS A WHOLE, INCLUDING ON QUALCOMM? 

A. OKAY. SO THIS IS REALLY THE BOTTOM LINE IN TERMS OF THE 

COMPETITIVE EFFECTS, THE CONCERNS FOR ANTITRUST OF THIS SET OF 

PRACTICES. 

I THINK I'VE ALREADY ESTABLISHED OR EXPLAINED THAT THE 

ROYALTY SURCHARGE RAISES THE COST OF QUALCOMM'S RIVALS, WEAKENS 

THEM. THAT'S, I GUESS, IMMEDIATE TO AN ANTITRUST ECONOMIST. 

IF THESE RIVALS HAVE HIGHER COSTS, THEY'RE GOING TO BE LESS 

EFFECTIVE COMPETITORS, MEANING THEY'RE GOING TO HAVE TO PASS ON 

THOSE COSTS TO SOME DEGREE TO THEIR -- IN THEIR PRICES, AND 

THAT MAKES THEM LESS EFFECTIVE COMPETITORS. 

SO RIVALS ARE WEAKENED. THIS INEVITABLY FORTIFIES 

QUALCOMM'S MONOPOLY POWER. 

AND THAT HAS ADVERSE EFFECTS ON COMPETITION IN THE SHORT 

RUN AND THE LONG RUN. THE SHORT RUN, WE'RE GOING TO END UP 

WITH HIGHER ALL-IN PRICES FOR THE CHIPS, BASICALLY HIGHER COSTS 

FOR THE OEM'S. 

AND IN THE LONG RUN -- WE'RE STILL AT THE PREVIOUS RUN -- 

THE LONG RUN, I HAVEN'T TALKED ABOUT THAT, BUT IT'S INEVITABLE 

THAT SINCE THE RIVALS ARE HAVING THEIR MARGINS SQUEEZED ON THE 

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1143

CHIPS THEY'RE SELLING, THEIR MARGINS ARE BEING REDUCED AND 

THEY'RE SELLING FEWER CHIPS, THAT THE OPERATING PROFITS THEY 

CAN EARN FROM BEING IN THIS BUSINESS ARE REDUCED AND THAT IS 

GOING TO INEVITABLY REDUCE THEIR INCENTIVES TO MAKE R&D 

INVESTMENTS. 

NOW, THERE'S A LOT OF OTHER FACTORS THAT AFFECT R&D 

INVESTMENT, BUT THERE IS A MINUS, THIS IS KIND OF A HEADWIND, 

IF YOU WILL, THAT THEY'LL BE FACING. 

SO THAT'S THE SHORT RUN AND THE LONG RUN ADVERSE EFFECTS 

ON COMPETITION. 

AND THEN I WANT TO EMPHASIZE THAT THE HIGHER PRICES ARE 

NOT JUST THE PRICES FOR THE RIVAL MODEM CHIPS, BUT QUALCOMM'S 

PRICES ARE ALSO GOING TO GO UP, AND I HAVEN'T MADE THAT POINT 

YET, SO LET ME EXPLAIN WHY. 

AND IT'S THE ALL-IN PRICES THAT MATTER, BECAUSE THAT'S 

WHAT AFFECTS THE OEM'S COSTS. 

WHY WILL QUALCOMM'S ALL-IN PRICES GO UP? WELL, THERE'S 

TWO REASONS. FIRST, THEY'VE GOT RIVALS WHO ARE WEAKENED AND 

CHARGING HIGHER ALL-IN PRICES BECAUSE THEY'RE HAVING TO PAY THE 

SURCHARGE. SO AS A GENERAL RULE, WHEN YOUR COMPETITORS RAISE 

THEIR PRICE, IT TENDS TO GIVE A FIRM INCENTIVE TO RAISE HIS 

PRICE AS WELL IN OLIGOPOLIES, AND IN ADDITION TO THAT, QUALCOMM 

IS LESS KEEN TO COMPETE TO WIN BUSINESS FROM ITS COMPETITORS 

BECAUSE EVEN WHEN IT LOSES, IT GETS A ROYALTY SURCHARGE. 

AND SO THAT'S ANOTHER REASON WHY QUALCOMM WILL NOT BE AS 

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1144

AGGRESSIVE IN PRICING AND WILL TEND TO RAISE ITS ALL-IN PRICES 

DUE TO THE ROYALTY SURCHARGE. 

SO FROM THE POINT OF VIEW OF COMPETITION AND THE COST 

HERS, THE OEM'S, I WOULD EXPECT THE PREDICTION HERE WOULD BE 

THAT THE EFFECT OF THIS IS TO CAUSE ALL-IN MODEM PRICES TO GO 

UP FOR THE QUALCOMM MODEMS AND THE RIVAL MODEMS. 

AND THAT IN TURN IS GOING TO GET PASSED THROUGH TO 

CONSUMERS BECAUSE THIS IS ACROSS THE BOARD, THIS IS ALL THE 

OEM'S, AND SO WE'RE GOING TO HAVE PASS THROUGH SO THE FINAL 

CONSUMERS WILL BE HARMED AS WELL. 

SO WHEN YOU PUT ALL THIS TOGETHER, WE GET REALLY THE FULL 

PANOPLY OF ANTICOMPETITIVE CONCERNS THAT ONE HAS IN 

MONOPOLIZATION CASES, WEAKENED RIVAL, FORTIFIED MONOPOLY POWER, 

TENDENCY TO DISCOURAGE RIVALS FROM INVESTING, EITHER PUSHING 

THEM TO EXIT OR DISCOURAGE ENTRY, HIGHER PRICES FOR CONSUMERS, 

FOR DIRECT CUSTOMERS, AND HARM PASSED DOWNSTREAM TO FINAL 

CONSUMERS. THOSE ARE THE EFFECTS OF THESE THREE POLICIES 

WORKING TOGETHER. 

Q. SO YOU'VE BEEN ANALYZING QUALCOMM'S USE OF MODEM CHIP 

LEVERAGE TO OBTAIN A ROYALTY SURCHARGE ON TRANSACTIONS BETWEEN 

RIVALS AND OEM'S. 

IS IT MATERIAL TO YOUR ANALYSIS THAT THE SURCHARGE TAKES 

THE FORM OF A ROYALTY AS OPPOSED TO BEARING ANOTHER LABEL? 

A. NO, IT DOES NOT MATTER. I THINK ONE WAY TO SEE THAT MOST 

CLEARLY IS TO THINK OF A HYPOTHETICAL WHERE A MONOPOLIST TELLS 

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UNITED STATES COURT REPORTERS

1145

ITS CUSTOMER, IF YOU WANT MY PRODUCT, THEN AS A CONDITION, YOU 

NEED TO PAY ME A FEE EVERY TIME YOU BUY A PRODUCT FROM MY 

COMPETITORS. 

THAT WOULD BE, I WOULD THINK, BLATANTLY ANTICOMPETITIVE BY 

RAISING THE COSTS OF THE RIVALS AND DISCOURAGING CUSTOMERS FROM 

PURCHASING FROM THE RIVALS. 

THAT IS ECONOMICALLY EQUIVALENT TO WHAT WE'VE GOT HERE 

WITH THE ROYALTY SURCHARGE BECAUSE THE REASONABLE ROYALTIES 

QUALCOMM IS ENTITLED TO BECAUSE OF THEIR PATENTS. 

BUT THE ROYALTY SURCHARGE, THAT IS DISCONNECTED FROM THEIR 

R&D AND INVENTIONS -- LET ME RESTATE THAT. 

THAT IS DISCONNECTED FROM THE STANDARD ESSENTIAL PATENTS. 

THAT'S AN EXTRA PIECE. AND SO IT REALLY OPERATES JUST LIKE 

THIS NAKED TAX IN MY HYPOTHETICAL TO RAISE RIVALS' COSTS AND 

HARM COMPETITION. 

AND THE FACT THAT IT'S CALLED A ROYALTY DOESN'T CHANGE 

THOSE ECONOMICS. BECAUSE I REALLY WANT TO EMPHASIZE, THE 

REASONABLE ROYALTY, THEY'RE TOTALLY ENTITLED TO THOSE. IT'S -- 

WE'RE TALKING ABOUT SOMETHING ABOVE AND BEYOND THAT, AND THAT 

OPERATES LIKE THIS NAKED TAX. 

Q. HAVE YOU ENCOUNTERED ANY EXAMPLES OF A NAKED TAX? 

A. YES. A CASE -- THERE WAS A CASE IN THE 1990S WHERE 

MICROSOFT HAD A PRACTICE, THE MONOPOLY IN THAT CASE WAS 

MICROSOFT'S MONOPOLY OVER THE WINDOWS OPERATING SYSTEM THAT 

THEY WERE LICENSING TO COMPUTER OEM'S, AND THEY HAD A PRACTICE 

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1146

WHERE THEY -- AN OEM HAD TO PAY MICROSOFT A LICENSE FEE ON 

EVERY COMPUTER THEY SHIPPED, WHETHER IT HAD WINDOWS OR NOT. 

AND SO THAT BASICALLY MEANT THEY HAD TO PAY ON A COMPUTER 

THAT DIDN'T HAVE WINDOWS. 

AND THE JUSTICE DEPARTMENT OBJECTED TO THAT AND THEY ENDED 

UP WITH A SETTLEMENT, I GUESS A CONSENT DECREE, THIS IS AROUND 

1994, '95, AND MICROSOFT STOPPED THAT PRACTICE. 

Q. YOU'VE DONE THIS WHOLE ANALYSIS. YOU'RE AWARE THAT 

QUALCOMM'S OFFERED VARIOUS BUSINESS JUSTIFICATIONS FOR ITS 

PRACTICES? 

A. YES, I AM. 

Q. AS AN ANTITRUST ECONOMIST, JUST TAKING A STEP BACK, HOW DO 

YOU THINK ABOUT BUSINESS JUSTIFICATIONS? 

A. WELL, WHEN EVALUATING BUSINESS JUSTIFICATION, WE ARE 

LOOKING FOR A LEGITIMATE, PROCOMPETITIVE OBJECTIVE THAT THE 

COMPANY IS TRYING TO ACHIEVE THAT CANNOT BE ACHIEVED BY LESS 

RESTRICTIVE MEANS.

Q. AND HAVE YOU CONSIDERED THE BUSINESS JUSTIFICATIONS THAT 

QUALCOMM HAS PROFFERED? 

A. I HAVE. 

Q. AND WHAT CONCLUSION HAVE YOU REACHED REGARDING THOSE 

BUSINESS JUSTIFICATIONS? 

A. I DON'T BELIEVE THEY MEET THE STANDARD; THAT IS, THEY 

DON'T REALLY QUALIFY ACCORDING TO THE -- AS MEETS THE STANDARD 

I JUST DESCRIBED. 

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1147

AND WHAT I MEAN IS AS I UNDERSTAND THE GIST OF THEIR 

BUSINESS JUSTIFICATIONS, IS THAT WITHOUT THESE PRACTICES, THEY 

COULD NOT OBTAIN REASONABLE RETURNS ON EITHER THEIR MODEM CHIPS 

OR THEIR STANDARD ESSENTIAL PATENTS. 

AND SO THESE PRACTICES ARE JUSTIFIED ON THAT BASIS. 

Q. HAVE YOU READ THE TRANSCRIPT FROM LAST FRIDAY WHEN 

MR. MOLLENKOPF WAS ON THE STAND? 

A. YES, I HAVE. 

Q. AND HE PROFFERED A BUSINESS JUSTIFICATION FOR QUALCOMM'S 

NO LICENSE, NO CHIPS POLICY. DID YOU FIND THAT CONVINCING? 

A. NO, I DID NOT. 

Q. HE SAID THAT, YOU KNOW, QUOTE -- OR RATHER, HE WAS ASKED, 

"IF YOU ATTEMPTED TO PRICE THE FULL VALUE OF I.P. INTO YOUR 

CHIPS, WOULD YOU BE ABLE TO RECOVER ON THE PATENTED INVENTIONS 

THAT ARE OUTSIDE THE CHIPS?"

AND HE ANSWERED, "NO, NOT UNLESS WE LICENSED TO OTHER 

PEOPLE AS WELL." 

SO HOW DO YOU THINK ABOUT THIS? 

A. WELL, I GUESS I'M LOOKING TO SEE WHERE QUALCOMM'S PRACTICE 

IS NECESSARY TO GET EITHER REASONABLE ROYALTIES ON THE STANDARD 

ESSENTIAL PATENTS OR, YOU KNOW, A MARKET -- MARKET VALUE FOR 

THEIR CHIPS, OKAY, WHATEVER THE MARKET WILL BEAR FOR THE CHIPS 

BECAUSE THEY ARE A LEADER IN CHIPS, AND THEY HAVE VERY GOOD 

ENGINEERS. 

SO THE PROBLEM WITH WHAT HE SAID IS IF YOU LOOK AT THE 

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1148

COUNTER FACTUAL I'VE DESCRIBED, WITHOUT THESE POLICIES, 

QUALCOMM CAN GET EXACTLY THAT, WHICH IS IF THEIR CHIP IS GREAT, 

THEY CHARGE WHAT THEY WANT FOR THE CHIP. NOTHING IS PREVENTING 

THEM FROM DOING THAT. AND THEY GET REASONABLE ROYALTIES ON THE 

PATENTS. 

SO HE SEEMED TO SAY THAT WHEN THEY'RE SELLING THEIR CHIP 

TO AN OEM, JUST CHARGING FOR THE CHIP TOGETHER WITH THE RIGHT 

TO USE IT SOMEHOW WOULDN'T BE ENOUGH AND THEY'D HAVE TO LICENSE 

SOMEBODY ELSE. 

WELL, I AGREE THEY DO NEED TO LICENSE THE OEM WHEN THE OEM 

IS MAKING A DEVICE THAT CONTAINS A NON-QUALCOMM CHIP. 

BUT THERE'S NO REASON -- THEIR POLICIES ARE NOT NECESSARY 

TO ENTER INTO SUCH A LICENSE ON REASONABLE TERMS AND, IN FACT, 

THEIR POLICIES ARE DESIGNED TO EXTRACT UNREASONABLE TERMS ON 

THAT VERY -- ON THOSE VERY TRANSACTIONS. 

SO I DON'T THINK IT HOLDS UP IN TERMS OF ECONOMICS, WHAT 

HE SAID. 

Q. LET'S MOVE ON TO THE NEXT DEMONSTRATIVE. 

AND LET'S TURN TO YOUR OPINIONS ON MARKET DEFINITION AND 

MONOPOLY POWER. 

ACTUALLY, JUST TO BE CLEAR, WHEN YOU AS AN ECONOMIST THINK 

ABOUT MONOPOLY POWER, WHAT ARE YOU THINKING ABOUT? 

A. SO AS AN INDUSTRIAL ORGANIZATION ECONOMIST, WE TALK ABOUT 

MARKET POWER, FIRST HAVING MARKET POWER, AND THEN IF THEY HAVE 

A SUBSTANTIAL DEGREE OF MARKET POWER, WE WOULD TEND TO CALL IT 

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1149

MONOPOLY POWER, AND IT REALLY MEANS THE COMPANY HAS SUFFICIENT 

POWER THAT, THROUGH SOME UNILATERAL CONDUCT, THEY COULD 

POTENTIALLY HARM COMPETITION. 

AND THAT GOES ALONG WITH REALLY CUSTOMERS NOT HAVING GOOD 

ALTERNATIVES TO WHAT THEY OFFER, OR LIMITED ALTERNATIVES.

Q. AND HOW DO ANTITRUST ECONOMISTS EVALUATE THE PRESENCE OR 

ABSENCE OF MONOPOLY POWER? 

A. SO THERE'S REALLY KIND OF TWO ROOTS. ONE IS LOOKING FOR 

DIRECT EVIDENCE OF THE POWER, OKAY? AND SO DIRECT EVIDENCE. 

AND THEN THE OTHER IS A STRUCTURAL APPROACH WHERE WE WOULD 

DEFINE THE MARKET, MEASURE MARKET SHARES, AND HIGH MARKET 

SHARES WOULD TEND TO BE MORE INDICATIVE OF MONOPOLY POWER, AND 

THEN CHECK ENTRY CONDITIONS BECAUSE IN SOME CASES A HIGH MARKET 

SHARE DOES NOT IMPLY MONOPOLY POWER BECAUSE IF IT'S A MARKET 

THAT'S VERY EASY TO GET INTO. 

SO THAT STRUCTURAL APPROACH HAS THOSE THREE STEPS, DIRECT 

AND THEN STRUCTURAL. 

Q. AND WHICH OF THESE APPROACHES DID YOU USE IN THIS CASE? 

A. I USED BOTH APPROACHES TO EACH OF THE TWO MARKETS THAT 

WE'RE GOING TO BE LOOKING AT, WHICH IS CDMA MODEM CHIPS AND 

PREMIUM LTE MODEM CHIPS.

Q. AND UNDER THE STRUCTURAL APPROACH THAT YOU DESCRIBED, WHAT 

TOOLS DO ANTITRUST ECONOMISTS USE TO DEFINE RELEVANT MARKETS? 

A. SO THE IDEA OF THE RELEVANT MARKET IS TO IDENTIFY -- IS TO 

FIND REASONABLE SUBSTITUTES FOR THE PRODUCTS OF THE FIRM IN 

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UNITED STATES COURT REPORTERS

1150

QUESTION. 

AND WE CAN DO THAT BY EITHER LOOKING AT GENERALLY 

QUALITATIVE EVIDENCE ABOUT WHAT CUSTOMERS SAY ABOUT 

SUBSTITUTES, AND ALSO BY THIS TECHNIQUE CALLED THE HYPOTHETICAL 

MONOPOLIST TEST, WHICH WE CAN PERFORM TO IDENTIFY A SET OF 

REASONABLE SUBSTITUTES. 

Q. AND HOW DOES THE HYPOTHETICAL MONOPOLIST TEST DO THAT? 

A. THE HYPOTHETICAL MONOPOLIST TEST IDENTIFIES A SET OF 

CANDIDATE PRODUCTS THAT WE'RE TESTING TO SEE IF IT'S A RELEVANT 

MARKET. 

SO IN OUR CASE, THIS WILL BE CDMA MODEM CHIPS, FOR 

EXAMPLE, AND ASKS IF A MONOPOLIST CONTROLLED ALL OF THOSE 

PRODUCTS, WAS THE ONLY ONE SUPPLYING IT -- THAT'S THE 

HYPOTHETICAL MONOPOLIST -- WOULD THE PRICE BE SIGNIFICANTLY 

HIGHER THAN WOULD RESULT IF WE HAD COMPETITION WITHIN THAT 

PRODUCT CATEGORY? 

AND IF THE PRICE BETWEEN -- IF THE PRICE DIFFERENCE 

BETWEEN MONOPOLY AND COMPETITION IS SIGNIFICANT, THEN THAT 

GROUP OF PRODUCTS PASSES THE TEST AND QUALIFIES AS A RELEVANT 

PRODUCT MARKET UNDER THIS METHODOLOGY. 

Q. AND WHICH MARKETS HAVE YOU EXAMINED AS PART OF YOUR 

ANALYSIS? 

A. CDMA MODEM CHIPS AND PREMIUM LTE MODEM CHIPS. 

Q. AND FOR THE PURPOSES OF YOUR ANALYSIS, HOW DID YOU DEFINE 

CDMA MODEM CHIPS? 

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A. ANY MODEM CHIP THAT IS COMPLIANT WITH THE 3G OR 2G CDMA 

STANDARDS. 

Q. DOES THAT DEFINITION ENCOMPASS MODEM CHIPS THAT MAY COMPLY 

WITH CDMA 2G OR 3G STANDARDS, BUT COMPLY WITH OTHER STANDARDS 

AS WELL? 

A. YES. THIS INCLUDES MULTIMODE CHIPS. 

Q. AND WHAT KINDS OF EVIDENCE DID YOU EXAMINE TO DETERMINE 

WHETHER QUALCOMM HAD MONOPOLY POWER IN A MARKET FOR CDMA MODEM 

CHIPS? 

A. WELL, THE DIRECT EVIDENCE APPROACH WOULD BE LOOKING AT 

CUSTOMERS AND THEIR ALTERNATIVES FOR QUALCOMM'S CDMA MODEM 

CHIPS AND WHETHER THEY HAD GOOD ALTERNATIVES, WHICH ONE WAY TO 

FRAME THAT IS IF THEY WEREN'T ABLE TO BUY QUALCOMM'S CDMA MODEM 

CHIPS, COULD THEY EASILY SUBSTITUTE OTHER CHIPS OR NOT?

Q. AND WHAT KINDS OF DIRECT EVIDENCE DID YOU FIND IN THIS 

CASE? 

A. WELL, THERE'S A LOT OF TESTIMONY FROM THE OEM'S ON EXACTLY 

THIS POINT. OF COURSE, IT COMES UP IN THE NO LICENSE, NO CHIPS 

DISCUSSION BECAUSE ULTIMATELY IT'S THE SAME UNDERLYING 

QUESTION, THAT ONE AFTER ANOTHER, THE OEM'S HAVE INDICATED THAT 

THEY DID NOT HAVE GOOD OR ANY ALTERNATIVES IN SOME CASES TO 

QUALCOMM'S MODEM CHIPS, CDMA MODEM CHIPS THAT THEY WANTED TO 

BUY AND THEY NEEDED TO BUY TO BUILD CDMA COMPLIANT DEVICES. 

Q. AND APART FROM LOOKING AT DIRECT EVIDENCE, DID YOU 

CONSIDER A STRUCTURAL APPROACH TOWARD THE MARKET FOR CDMA MODEM 

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1152

CHIPS? 

A. YES. I ALSO TOOK THE STRUCTURAL APPROACH WITH DEFINING 

THE MARKET, MEASURING MARKET SHARES, AND CHECKING ENTRY 

CONDITIONS. 

Q. AND WHAT WAS THE FIRST STEP OF THAT APPROACH WITH REGARD 

TO CDMA MODEM CHIPS? 

A. SO DEFINING THE RELEVANT MARKET WOULD BE BASICALLY TAKING 

THE SET OF, AS A CANDIDATE MARKET, THE CDMA MODEM CHIPS AND 

ASKING WHETHER IT WOULD MAKE A DIFFERENCE WHETHER THERE WOULD 

BE COMPETITION OR MONOPOLY WITHIN THOSE -- WITHIN THAT 

CATEGORY, WHETHER THAT WOULD MATTER, WHETHER IT WOULD MAKE A 

SIGNIFICANT DIFFERENCE FOR PRICES. SO THAT WOULD APPLY IN THE 

HYPOTHETICAL MONOPOLIST TEST TO THIS CANDIDATE MARKET.

Q. AND WHAT KINDS OF QUALITATIVE EVIDENCE DID YOU FIND 

REGARDING SUBSTITUTION BETWEEN CDMA MODEM CHIPS AND OTHER MODEM 

CHIPS? 

A. SO THE -- AGAIN, THE -- I THINK THE EVIDENCE, OEM'S AND 

THE QUALCOMM'S SIDE AS WELL, IS THAT AN OEM WANTS TO BUILD A 

CDMA COMPLIANT DEVICE CANNOT SUBSTITUTE A NON-CDMA MODEM CHIP, 

SO THEY'RE REALLY NOT A PRACTICAL SUBSTITUTE. 

AND ANY DOWNSTREAM COMPETITION BETWEEN CDMA AND NON-CDMA 

HANDSETS WOULD NOT LEAD TO SUBSTANTIAL SUBSTITUTION AT THE 

UPSTREAM LEVEL.

Q. DOES A CANDIDATE MARKET CONSISTING OF CDMA MODEM CHIPS 

SATISFY THE HYPOTHETICAL MONOPOLY TEST? 

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A. YES, IT DOES. I PERFORMED THAT TEST.

Q. AND HOW DID YOU PERFORM IT? 

THE COURT: I'M SORRY TO INTERRUPT. WOULD ALL PLEASE 

MAKE ROOM SO PEOPLE DON'T HAVE TO STAND IN THE BACK? IF YOU 

COULD SQUEEZE IN? THANK YOU. 

GO AHEAD, PLEASE. 

BY MR. JAMES:

Q. HOW DID YOU PERFORM THE HYPOTHETICAL MONOPOLIST TEST WITH 

RESPECT TO THE MARKET FOR CDMA MODEM CHIPS? 

A. SO WE'RE TRYING TO LOOK FOR EVIDENCE THAT WOULD COMPARE 

THE PRICE IF CDMA MODEM CHIPS WERE MONOPOLIZED VERSUS MORE 

COMPETITIVE. 

AND WE HAVE A NATURAL EXPERIMENT TO DO THAT. WE HAVE 

MEDIATEK ENTERED THE MARKET FOR CDMA MODEM CHIPS IN 2015 AND 

THAT ALLOWS US TO SEE WHAT THE PRICE RESPONSE WAS TO THAT ENTRY 

AND THAT GIVES SOME INDICATION OF THE GAP BETWEEN MONOPOLY 

PRICES AND COMPETITIVE PRICES. 

AND I WAS ABLE TO DETERMINE THAT IN THE AREAS WHERE 

MEDIATEK WAS A COMPETITIVE THREAT TO QUALCOMM, WHICH WAS NOT 

ACROSS THE BOARD BY ANY MEANS WITHIN CDMA MODEM CHIPS, QUALCOMM 

VIEWED -- QUALCOMM HAD PRICE RESPONSES TO THAT THAT WERE 

SIGNIFICANT, MORE THAN 5 PERCENT OF PRICE, AND THAT THAT'S 

EXACTLY WHAT WE'RE LOOKING FOR IN TERMS OF THIS TEST. 

Q. EXACTLY HOW WERE THOSE PRICE RESPONSES RELEVANT TO THE 

HYPOTHETICAL MONOPOLIST TEST? 

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A. SO THE -- ADDING EVEN SOME COMPETITION TO THE MARKET IN 

2015, WHICH MEDIATEK DID, CAUSED THE PRICES FOR SELECTED MODELS 

TO GO DOWN BY AT LEAST 5 PERCENT. THAT TELLS US THAT THE GAP 

BETWEEN THE MONOPOLY PRICE, THE FULLY MONOPOLIZED PRICE AND A 

TRULY COMPETITIVE PRICE WOULD BE MORE THAN 5 PERCENT, AND 

THAT'S EXACTLY WHAT THE TEST IS LOOKING FOR TO DETERMINE 

WHETHER THIS SET OF PRODUCTS IS A RELEVANT MARKET USING THIS 

TEST. 

Q. DID YOU ALSO IMPLEMENT THE HYPOTHETICAL MONOPOLIST TEST IN 

ANOTHER WAY? 

A. I ALSO -- YES, I DID, THROUGH SOMETHING CALLED THE CDMA 

ADDER. 

SO QUALCOMM'S PRICING WAS TO ADD THAT ADDER TO CDMA CHIPS 

OVER EQUIVALENT UMTS MODEM CHIPS, AND THAT WAS ANOTHER 

INDICATION THAT THE PRICE QUALCOMM WAS ABLE TO GET WAS 

SIGNIFICANTLY HIGHER THAN A COMPETITIVE PRICE FOR CDMA MODEM 

CHIPS, ESSENTIALLY PRICING BASED ON VALUE RATHER THAN MORE OF A 

COST-BASED PRICE THAT COMPETITION WOULD TEND TO PUSH TOWARDS. 

AND THAT ALSO, FOLLOWING THE HYPOTHETICAL MONOPOLIST TEST, 

LED TO THE CONCLUSION THAT CDMA MODEM CHIPS IS A RELEVANT 

PRODUCT MARKET.

Q. LET'S BRING UP THE NEXT DEMONSTRATIVE. 

UNDER THE STRUCTURAL APPROACH AFTER DEFINING A RELEVANT 

MARKET, WHAT WAS THE NEXT STEP? 

A. SO THE NEXT STEP IS TO MEASURE MARKET SHARES, AND THAT'S 

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1155

WHAT THE CHART SHOWS HERE CDMA UNITS AND SHARES FROM 2008 -- 

EXCUSE ME, 2008 TO 2016. 

AND YOU CAN SEE HERE THAT QUALCOMM'S SHARE THROUGH 2014 

WAS ABOVE 90 PERCENT, SOMETIMES WELL ABOVE 90 PERCENT. AND 

THEN IT DID FALL TO 83 PERCENT IN 2015 AND 61 PERCENT IN 2016. 

THIS IS MEASURED BY UNITS. 

AND THE REASON IT FELL, THE PRIMARY REASON, IS THAT WHEN 

MEDIATEK DID GET IN AND START TO MAKE SIGNIFICANT SALES. 

ALMOST ALL OF MEDIATEK'S SALES WERE IN CHINA. IN 2015, I THINK 

96 PERCENT OF THEIR SALES WERE IN CHINA, AND IN 2016, ABOUT 82 

PERCENT OF THEIR SALES WERE IN CHINA. 

AND I'M INCLUDING ALL THOSE HERE, IT'S A WORLDWIDE MARKET 

I'M MEASURING, AND THAT'S -- SO THAT'S WHAT HAPPENED. 

AND WE CAN SEE -- SO THIS SHOWS QUALCOMM'S SHARE OVER THIS 

WHOLE PERIOD OF TIME. 

Q. DID YOU ALSO CONSIDER QUALCOMM'S INTERNAL ASSESSMENTS OF 

ITS OWN SHARE IN THE MARKET FOR CDMA MODEM CHIPS? 

A. YES. THEY HAD INTERNAL ASSESSMENTS. THEY'RE IN MY 

REPORT. THEY'RE EVEN HIGHER THAN THE NUMBERS THAT I'VE GOT 

HERE IN THE RECENT YEARS. 

THE COURT: I'M SORRY TO INTERRUPT. WE HAVE MORE 

PEOPLE STANDING IN THE BACK. WOULD YOU PLEASE MAKE ROOM? IF 

YOU COULD PLEASE SQUEEZE IN TOWARDS THE WALLS. THANK YOU. 

THANK YOU. GO AHEAD, PLEASE. 

BY MR. JAMES:

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1156

Q. THIS DEMONSTRATIVE SHOWS UNIT SHARES. DID YOU ALSO 

CALCULATE REVENUE SHARES? 

A. YES. SO THAT'S ANOTHER WAY WE CAN MEASURE MARKET SHARES, 

AND, AGAIN, THE SAME TIME PERIOD, 2008 TO 2016. 

AGAIN, QUALCOMM'S SHARE THROUGH 2013 -- 2014 IS, YOU KNOW, 

96 PERCENT OR HIGHER. 

AND THEN IT DOES FALL IN 2015 AND 2016 AS MEDIATEK GETS 

IN. QUALCOMM'S SHARE STAYS UP, THOUGH, AT 89 PERCENT IN 2015 

AND 74 PERCENT IN 2016 ON THE REVENUE BASIS. 

AND ALMOST ALL OF THE REST IS, IS MEDIATEK IN THOSE YEARS. 

Q. AND AFTER CALCULATING SHARES, WHAT'S THE FINAL STEP IN THE 

STRUCTURAL APPROACH? 

A. WELL, THESE SHARES ARE QUITE HIGH AND WOULD TEND TO 

SUPPORT A CONCLUSION OF MONOPOLY POWER JUST ON A STRUCTURAL 

BASIS. 

SO ONE NEEDS TO CHECK, ARE THE SHARES SOMEHOW GIVING A 

MISLEADING IMPRESSION, THAT SOMEHOW THE HIGH SHARE DOES NOT GO 

ALONG WITH MONOPOLY POWER BECAUSE IT'S VERY EASY TO GET INTO 

THIS MARKET AND ANY ATTEMPT TO CHARGE MONOPOLY PRICES OR 

EXERCISE MONOPOLY POWER WOULD BE RAPIDLY MET WITH ENTRY AND, 

THEREFORE, INEFFECTUAL. 

AND THAT'S JUST NOT THE CASE IN THIS MARKET. THIS IS NOT 

AN EASY MARKET TO GET INTO, THE CDMA MODEM CHIPS. 

IT TAKES A CONSIDERABLE AMOUNT OF TIME, LARGE R&D 

INVESTMENT. I THINK MR. MOLLENKOPF POINTED OUT, IT TAKES YEARS 

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1157

OF RELATIONSHIP WORKING WITH CUSTOMERS CAN BE IMPORTANT, 

GETTING YOUR MODEMS TESTED, WORKING WITH CARRIERS. 

SO I'M NOT SAYING PEOPLE CAN'T DO THOSE THINGS. PEOPLE 

HAVE ENTERED THE MARKET. BUT IT'S NOT SO EASY AND SO QUICK 

THAT THE MARKET SHARES WOULD BE MISLEADING IN TERMS OF THE 

STRUCTURAL APPROACH. 

Q. AND DOES THAT CONCLUDE OUR DISCUSSION OF YOUR CONCLUSION 

THAT QUALCOMM HAD MONOPOLY POWER IN THE MARKET FOR CDMA MODEM 

CHIPS? 

A. YES, IT DOES. 

Q. LET'S TURN TO THE MARKET FOR PREMIUM LTE MODEM CHIPS. 

WHAT ARE PREMIUM LTE MODEM CHIPS? 

A. SO AS I'M USING THE TERM, PREMIUM LTE MODEM CHIPS ARE 

MODEM CHIPS THAT WENT INTO PREMIUM HANDSETS, AND THEN, OF 

COURSE, WHAT IS THAT? 

PREMIUM HANDSETS I'M DEFINING TO BE HANDSETS THAT COST AT 

LEAST $400 DOLLARS, EXCEPT IN THE EARLY YEARS OF LTE, 2011 AND 

12, I'M USING A $300 CUTOFF. 

AND THOSE -- THAT DEFINITION IS ONE THAT I'VE TAKEN FROM 

QUALCOMM'S OWN INTERNAL USAGE. I DID NOT JUST MAKE -- I DID 

NOT CREATE THAT ONE ON MY OWN, THE DEFINITION.

Q. DID YOU CONSIDER BOTH DIRECT EVIDENCE AND THE STRUCTURAL 

APPROACH WHEN ASSESSING QUALCOMM'S MARKET POWER IN THE MARKET 

FOR PREMIUM LTE MODEM CHIPS? 

A. YES, I DID. 

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Q. WHAT DIRECT EVIDENCE OF MONOPOLY POWER DID YOU FIND? 

A. SO THE DIRECT EVIDENCE -- 

YOUR HONOR, THIS IS GOING TO REALLY PARALLEL WHAT WE JUST 

DID ON CDMA MODEM CHIPS. 

WE HAVE DIRECT EVIDENCE, WHICH IS THE OEM'S, YOU KNOW, 

TESTIFYING THAT THEY -- IF THEY WERE NOT ABLE TO PURCHASE 

QUALCOMM PREMIUM LTE MODEM CHIPS, THEY WOULD REALLY HAVE NO OR 

FEW GOOD ALTERNATIVES, AND THAT, AGAIN, WE TALKED ABOUT THAT 

WITH NO LICENSE, NO CHIPS, THAT IT WOULD BE VERY COSTLY FOR 

THEM TO LOSE ACCESS TO QUALCOMM'S PREMIUM LTE MODEM CHIPS. 

AND SO THAT'S A DIRECT MEASURE OF QUALCOMM'S POWER IN 

SELLING THOSE CHIPS DURING THIS PERIOD OF TIME. 

Q. THEN TURNING TO THE STRUCTURAL APPROACH, WHAT WAS YOUR 

FIRST STEP? 

A. SO, AGAIN, WE HAVE TO DEFINE THE RELEVANT MARKET, WHICH IN 

THIS CASE MEANS TESTING TO SEE WHETHER PREMIUM LTE MODEM CHIPS 

ARE A RELEVANT -- IS A RELEVANT -- CONSTITUTE A RELEVANT 

PRODUCT MARKET. 

AND THIS IS A LITTLE TRICKIER THAN THE CDMA MODEM CHIPS 

BECAUSE WE REALLY HAVE TO CONSIDER WHETHER NON-PREMIUM LTE 

MODEM CHIPS ARE A GOOD SUBSTITUTE FOR PREMIUM LTE MODEM CHIPS. 

SO THAT'S -- THAT'S WHAT THE MARKET DEFINITION EXERCISE IS 

ABOUT HERE. 

Q. AND DID YOU FIND QUALITATIVE EVIDENCE REGARDING 

SUBSTITUTION BETWEEN PREMIUM LTE MODEM CHIPS AND OTHER MODEM 

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1159

CHIPS? 

A. SO -- YES. AGAIN, THE OEM TESTIMONY I THINK IS QUITE 

CLEAR ON THIS, AND SOME DOCUMENTS FROM QUALCOMM, TOO, AS I 

RECALL, INDICATING THAT IF AN OEM IS LOOKING TO MAKE A HIGH END 

PHONE OR A DEVICE, THEY REALLY NEED A CHIP THAT GOES ALONG WITH 

THAT AND HAS THE VARIOUS FEATURES THAT ARE NECESSARY, AND SOME 

CHIPS WILL DO THAT AND SOME OF THE LOWER END CHIPS WILL NOT. 

AND SO BY LOOKING AT THE PREMIUM CHIPS AS I'M DOING, I'M 

INCLUDING THE MODEM CHIPS THAT THE OEM'S ACTUALLY FOUND TO BE 

ACCEPTABLE IN THESE HIGHER END DEVICES, THE PREMIUM HANDSETS. 

AND SO THE OEM'S ARE SAYING, NO, THEY COULD NOT EASILY 

SUBSTITUTE. IT WOULDN'T REALLY WORK TO SUBSTITUTE A 

NON-PREMIUM MODEM CHIP IN A PREMIUM PHONE. 

Q. AND HOW DID YOU -- RATHER, DID YOU IMPLEMENT THE 

HYPOTHETICAL MONOPOLIST TEST WITH RESPECT TO THE MARKET FOR 

PREMIUM LTE MODEM CHIPS? 

A. SO I DID AGAIN IMPLEMENT THE HYPOTHETICAL MONOPOLIST TEST. 

IT'S A VERY SIMILAR PARALLEL TO WHAT WE TALKED ABOUT FOR CDMA 

MODEM CHIPS, WHICH IS LOOKING AT THE EVENT OF MEDIATEK ENTERING 

WITH PREMIUM LTE MODEM CHIPS IN 2015 AND THE PRICE RESPONSE TO 

THAT.

Q. AND WHAT DID YOU FIND? 

A. AGAIN, I FOUND THAT THERE WAS A SIGNIFICANT PRICE RESPONSE 

TO THAT ENTRY IN THE AREAS WHERE, WHERE MEDIATEK WAS 

COMPETITIVE, AND FOR THE EXACT SAME REASONS AS FOR THE CDMA 

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1160

MARKET DEFINITION EXERCISE, THIS IS THE SORT OF EVIDENCE ONE 

LOOKS FOR IN PERFORMING THE HYPOTHETICAL MONOPOLIST TEST TO -- 

YOU'RE TRYING TO COMPARE MONOPOLY TO A COMPETITIVE PRICE, AND 

HERE WE'VE GOT THE SIGNIFICANT PRICE REDUCTION WITH SOME 

ADDITION OF COMPETITION THAT WILL UNDERESTIMATE THE GAP BETWEEN 

MONOPOLY AND MORE COMPETITIVE, AND SINCE THE GAP WE SEE IS AT 

LEAST 5 PERCENT AND IS SIGNIFICANT, THAT TELLS US THE TEST IS 

SATISFIED AND THIS GROUP OF PRODUCTS QUALIFIES AS A RELEVANT 

PRODUCT UNDER THE TEST. 

Q. AFTER DEFINING A RELEVANT MARKET, WHAT WAS THE NEXT STEP 

UNDER THE STRUCTURAL APPROACH? 

A. SO THEN WE'RE GOING TO MEASURE MARKET SHARES IN THIS 

MARKET, AND SO THIS ONLY STARTS IN 2011 BECAUSE THAT'S WHEN THE 

PREMIUM LTE MODEM CHIPS FIRST GET SHIPPED. 

AND WE CAN SEE HERE -- THIS IS UNITS AGAIN. QUALCOMM'S 

MARKET SHARE, THEY'RE THE -- THEY'RE THE SOLE SUPPLIER OF THESE 

FOR A COUPLE YEARS, SO 2013. 

AND THEN THEIR SHARE DOES DECLINE SOME, NOT MUCH IN 2014, 

BUT MORE IN '15 AND '16. IT DECLINED TO 81 PERCENT IN 2015, 

AND THEN 57 PERCENT IN 2016. 

AND THE REASON IS THERE'S A SIGNIFICANT PIECE THERE OF 

MEDIATEK, AGAIN, PROBABLY PREDOMINANTLY IN CHINA. BUT WE ALSO 

SEE SAMSUNG AND INTEL COMING IN IN 2016, WHICH IS WHEN THEY'RE 

WINNING SOME OF THE IPHONE SALES BY 2016. 

SO -- OKAY. SO, BUT, AGAIN, QUALCOMM'S SHARE IS NEARLY 

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1161

100 PERCENT FOR THE FIRST SEVERAL YEARS, THEN 81 PERCENT, AND 

THEN 57 PERCENT IN 2016. 

Q. APART FROM RUNNING YOUR OWN NUMBERS, DID YOU ALSO CONSIDER 

QUALCOMM'S INTERNAL CALCULATIONS OF ITS OWN SHARE IN THE MARKET 

FOR PREMIUM LTE MODEM CHIPS? 

A. YES, I DID. AND THEIR ESTIMATE OF SHARE IS HIGHER THAN 

MINE AS I RECALL. 

IS THIS A CONFIDENTIAL NUMBER, I'M NOT SURE, THEIR 

INTERNAL NUMBER? 

Q. I THINK WE CAN STOP WITH GENERAL CONSISTENCY FOR NOW. 

A. OKAY. SO, YES, THEY HAVE -- THEY HAVE -- IT'S IN MY 

REPORT, BUT I WON'T READ IT. 

THE -- THEY HAVE AN INTERNAL ESTIMATE OF THEIR SHARE IN 

PREMIUM LTE MODEM CHIPS. THEY LOOK AT PREMIUM, THEY LOOK 

SEPARATELY AT HIGH, WHICH I GUESS IS THE NEXT LEVEL IN THE 

QUALITY BANDS. 

AND SO I HAVE LOOKED AT THAT, AND THEIR NUMBERS ARE HIGHER 

THAN MINE FOR 2016. 

Q. AND THESE ARE UNIT SHARES, BUT YOU ALSO RUN REVENUE SHARES 

FOR THE MARKET FOR PREMIUM LTE MODEM CHIPS? 

A. YES, I USED THE SAME DATA TO CALCULATE REVENUE SHARES, AND 

WE GET THE SAME PATTERN, WHICH IS QUALCOMM IS A SOLE SUPPLIER, 

AND THEN WE SEE SOME ENTRY HERE, IT'S THE SAME COMPANIES. THE 

DIFFERENCE HERE IS THAT QUALCOMM'S SHARE STAYS UP A BIT HIGHER 

IF WE USE THE REVENUE MEASURE. 81 PERCENT IN 2015 AND 63 

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1162

PERCENT IN 2016. 

Q. AND UNDER THE STRUCTURAL APPROACH, WHAT WAS YOUR FINAL 

STEP WITH REGARD TO THE PREMIUM LTE MODEM CHIP MARKET? 

A. SO THEN WE'RE ASKING -- THESE MARKET SHARES ARE QUITE HIGH 

AND WOULD TEND TO INDICATE SIGNIFICANT MARKET POWER. ARE THEY 

SOMEHOW GIVING US A FALSE POSITIVE IN THAT RESPECT BECAUSE 

ENTRY IS SO EASY THAT THERE'S REALLY NO SIGNIFICANT POWER 

THERE? 

AND AGAIN, I THINK IT'S QUITE CLEAR THAT ENTRY IS NOT EASY 

INTO THIS MARKET. YOU KNOW, SAMSUNG AND INTEL HAVE GOTTEN IN, 

AND MEDIATEK, BUT IT TAKES TIME. IT'S NOT EASY TO DO. AND 

IT'S THE SORT OF MARKET WHERE THE MARKET SHARES ARE MEANINGFUL 

FOLLOWING THE STRUCTURAL APPROACH, AND IT'S NOT THE CASE THAT 

ENTRY IS SO EASY THAT WE SHOULD -- THAT WE WOULD BRUSH ASIDE 

THESE TYPE OF MARKET SHARES IN THIS STRUCTURAL ANALYSIS. 

Q. DOES THAT CONCLUDE THE ANALYSIS UNDERLYING YOUR CONCLUSION 

REGARDING QUALCOMM'S MONOPOLY POWER IN THE MARKET FOR PREMIUM 

LTE MODEM CHIPS? 

A. YES, IT DOES.

Q. LET'S BRING UP THE NEXT DEMONSTRATIVE. AND AS A FINAL 

TOPIC FOR PROFESSOR SHAPIRO, I'D LIKE TO DISCUSS QUALCOMM'S 

AGREEMENTS WITH APPLE. 

LET'S FOCUS ON THE 2013 AGREEMENTS. YOU'RE FAMILIAR WITH 

THESE; RIGHT? 

A. YES, I AM.

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1163

Q. COULD YOU BRIEFLY DESCRIBE THE COMPETITIVE CONTEXT IN 

WHICH YOU ANALYZED THE 2013 AGREEMENTS? 

A. CERTAINLY. 

SO THE COMPETITIVE CONTEXT IS REALLY IN 2012 LEADING INTO 

2013, SO IT'S STILL RELATIVELY EARLY DAYS FOR THE LTE 4G MODEM 

CHIPS. QUALCOMM WAS IN A DOMINANT POSITION IN THOSE CHIPS AND 

WAS SUPPLYING APPLE ALL OF ITS MODEM CHIPS, THE PREMIUM LTE 

MODEM CHIPS. 

BUT INTEL WAS KNOCKING AT THE DOOR. INTEL WAS TRYING TO 

GET IN FOLLOWING THEIR ACQUISITION OF INFINEON. 

AND THE ROUTE IN AT THE APPLE ACCOUNT LOOKED MOST LIKELY 

TO BE THAT INTEL WOULD FIRST -- COULD GET DESIGN WINS AT THE 

IPADS, WHICH WOULD BE DATA ONLY, AND THEN INTEL HOPED TO BUILD 

THAT INTO THEN WINNING THE IPHONE BUSINESS, WHICH WAS A LOT 

LARGER VOLUME. THAT WOULD BE THE BIGGER PRIZE. 

AND SO IN THE CONTEXT WHERE QUALCOMM IS CONCERNED ABOUT 

INTEL'S INROADS HERE AT APPLE BECAUSE APPLE IS A LARGE AND 

STRATEGIC CUSTOMER AND INTEL IS VERY KEEN TO GET IN THERE, AND 

IT'S IN THAT CONTEXT THAT WE SEE THESE AGREEMENTS BEING SIGNED 

BETWEEN QUALCOMM AND APPLE IN EARLY 2013. 

Q. YOU DESCRIBED THE AGREEMENTS IN YOUR SUMMARY OF 

CONCLUSIONS AS INVOLVING EXCLUSIVITY. WHAT DO YOU MEAN BY 

THAT. 

A. I MEAN THE FOLLOWING VERY SPECIFIC THING: THAT UNDER 

THESE AGREEMENTS, IF APPLE HAD DECIDED TO LAUNCH DEVICES THAT 

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1164

CONTAINED NON-QUALCOMM MODEM CHIPS, APPLE WOULD HAVE FACED A 

VERY LARGE FINANCIAL PENALTY IN THE FORM OF HAVING TO FORFEIT 

CERTAIN PAYMENTS THAT QUALCOMM WOULD OTHERWISE BE MAKING TO 

APPLE. 

Q. BUT YOU'RE AWARE THAT THE AGREEMENTS DOESN'T -- OR RATHER 

DON'T EXPRESSLY CONDITION QUALCOMM'S SALE OF CHIPS TO APPLE ON 

APPLE REMAINING EXCLUSIVE; RIGHT?

A. I'M AWARE OF THAT. AND, IN FACT, IN 2016, APPLE DID PICK 

INTEL CHIPS FOR THE IPHONE. 

SO I'M NOT SAYING THE AGREEMENTS WERE DE JURE EXCLUSIVE. 

I'M STUDYING THE ECONOMIC INCENTIVES THAT THE AGREEMENTS 

CREATED IN THE FORM OF THIS LARGE PENALTY THAT APPLE WOULD BEAR 

IF THEY CHOSE TO PICK INTEL FOR THE IPADS. 

Q. AND WHAT DO YOU MEAN BY VERY STRONG INCENTIVES? 

A. WELL, THE WAY THE AGREEMENTS WORKED WAS THAT -- AND 

PARTICULARLY THE FIRST AMENDED TRANSITION AGREEMENT WHICH HAD 

THESE PROVISIONS -- WAS THAT QUALCOMM WOULD MAKE CERTAIN 

PAYMENTS TO APPLE OVER TIME, INCENTIVE PAYMENTS, AND SO LONG AS 

APPLE REMAINED EXCLUSIVE WITH QUALCOMM, THOSE PAYMENTS WOULD BE 

MADE FOLLOWING A CERTAIN SCHEDULE. 

BUT IF THERE CAME A TIME WHEN APPLE BROKE FROM EXCLUSIVITY 

AND LAUNCHED A DEVICE WITH A NON-QUALCOMM MODEM CHIP, THEN 

THERE WOULD BE SIGNIFICANT CONSEQUENCES FINANCIALLY FOR APPLE, 

REALLY IN TWO FORMS YOU COULD THINK ABOUT IT. 

FIRST, SOME OF THE PAYMENTS THAT QUALCOMM HAD MADE BY THAT 

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UNITED STATES COURT REPORTERS

1165

TIME WOULD BE CLAWED BACK BY QUALCOMM FROM APPLE. 

AND, SECOND, QUALCOMM -- PAYMENTS THAT WERE SCHEDULED TO 

BE MADE FROM QUALCOMM TO APPLE IN THE FUTURE WOULD NOT BE MADE. 

AND I USE THE TERM "PAYMENTS AT RISK" TO CAPTURE BOTH OF 

THOSE CONCEPTS. "PAYMENTS AT RISK" MEANING FROM APPLE'S POINT 

OF VIEW, IF THEY LAUNCH A DEVICE WITH A NON-QUALCOMM CHIP IN 

IT, THEY WILL LOSE THOSE PAYMENTS SO THEY ARE AT RISK. 

Q. LET'S BRING UP THE NEXT DEMONSTRATIVE. PORTIONS OF THIS 

DEMONSTRATIVE AND THE ONE THAT FOLLOW HAVE BEEN SEALED BY ORDER 

OF THE COURT, AND SO I'LL CAUTION YOU, PROFESSOR SHAPIRO -- 

THE COURT: I UNSEALED SOME OF THOSE NUMBERS BECAUSE 

QUALCOMM PUBLICLY DISCLOSED THEM ON FRIDAY THROUGH THEIR CEO, 

MOLLENKOPF. 

MR. JAMES: I THINK FOR NOW WE'LL PROCEED WITH A 

GENERAL DISCUSSION AND -- 

THE WITNESS: THE TRUTH IS, YOUR HONOR, YOU PUT THE 

FEAR OF GOD INTO ME ON THAT ANYHOW, SO I'M VERY CAUTIOUS HERE. 

THE COURT: OKAY. WELL, APPLE DIDN'T SEEK TO SEAL 

THEM AND QUALCOMM REVEALED THEM PUBLICLY. SO THE 640 MILLION 

IN FATA INCENTIVES IS PUBLIC. 

THE WITNESS: OKAY. THAT NUMBER. OKAY. 

THE COURT: UM-HUM. 

THE WITNESS: OKAY. THANK YOU. 

BY MR. JAMES:

Q. SO WHAT DOES THIS DEMONSTRATIVE SHOW? 

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A. OKAY. SO THIS -- SO THIS SHOWS THE MAGNITUDE OF THESE 

PAYMENTS THAT QUALCOMM MADE TO APPLE THAT WERE CONDITIONED ON 

EXCLUSIVITY, AND THE FIRST ROW SHOWS THE PAYMENTS UNDER THE 

TRANSITION AGREEMENT SIGNED IN 2011, AND THOSE ARE RELEVANT FOR 

ANY ANALYSIS BECAUSE SOME OF THOSE WERE STILL AT RISK AFTER THE 

SECOND AGREEMENT WAS SIGNED IN FEBRUARY OF 2013, THE FATA, AS 

I'LL CALL IT, FIRST AMENDED TRANSITION AGREEMENT, AND THE 

SECOND ROW SHOWS THE MAGNITUDE OF THOSE. 

THE REASON THERE ARE TWO COLUMNS, YOUR HONOR, IS THE FIRST 

COLUMN OF THESE NUMBERS IS WHAT APPLE REPORTED. THE SECOND 

COLUMN IS WHAT QUALCOMM PROJECTED. 

THEY'RE SOMEWHAT DIFFERENT. MY ANALYSIS DOES NOT HINGE 

ON -- IT APPLIES WHICHEVER SET OF NUMBERS YOU WOULD USE, I 

WOULD REACH THE SAME CONCLUSION, AND THEN THERE'S JUST A TOTAL 

THERE. 

SO THESE ARE VERY LARGE SUMS OF MONEY. 

BUT I DO NOTE, AS YOU MENTIONED, YOUR HONOR, THAT WHILE 

THESE ARE THE TOTAL PAYMENTS AT RISK, NOT ALL THESE PAYMENTS 

WERE ULTIMATELY MADE FROM QUALCOMM TO APPLE BECAUSE APPLE 

SACRIFICED A GOOD CHUNK OF THEM IN 2016 WHEN THEY LAUNCHED THE 

IPHONE 7 USING THE INTEL CHIPS IN SEPTEMBER 2016.

Q. AND SO THOSE ARE THE PAYMENTS. 

WHAT ARE THE CONSEQUENCES IN TERMS OF COMPETITION? 

A. SO THE CONCERN WITH THIS TYPE OF STRUCTURE, THESE LARGE 

PAYMENTS CONDITIONED ON EXCLUSIVITY, IS THAT THEY WILL, AS A 

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1167

PRACTICAL MATTER, BLOCKADE AN ENTRANT FROM GETTING INTO THE 

MARKET. 

SO WHEN EMPLOYED BY A MONOPOLIST IN A SITUATION WHERE 

THERE'S AN ENTRANT WHO HAS -- WHO'S NOT IN THE MARKET REALLY 

AND IS TRYING TO GET IN AND THIS CUSTOMER IS THE KEY ROUTE IN, 

THEN THE CONCERN WOULD BE THAT THIS WOULD BLOCK THAT ENTRY AND 

HARM COMPETITION BECAUSE THE ENTRANT, IN THIS CASE INTEL, 

WOULD -- BY NOT GETTING THIS, THE BUSINESS THAT THEY HAVE A 

SHOT AT, THAT IS CURRENTLY AVAILABLE, THE IPAD BUSINESS I'M 

TALKING ABOUT HERE, THAT THEY WOULD BE THEN A WEAKER -- NOT -- 

LET ME PUT IT DIFFERENTLY. 

IF INTEL IS ABLE TO GET THIS BUSINESS, THIS FOOTHOLD, THEY 

WILL BECOME A STRONGER COMPETITOR IN THE FUTURE. AND SO 

BLOCKING THAT CAN HAVE COMPETITIVE EFFECTS. 

THAT'S THE UNDERLYING CONCERN THAT I WOULD HAVE HERE WITH 

THIS STRUCTURE AS AN ANTITRUST ECONOMIST.

Q. IN THIS CONTEXT, IS THERE A SECOND CONCERN AS WELL? 

A. YES. THERE'S AN ADDITIONAL CONCERN HERE THAT THAT'S NOT 

THE STANDARD ONE THAT ANTITRUST ECONOMISTS LOOK AT, BUT IT'S IN 

PLAY HERE, NAMELY, THAT THE CONCERN, LET'S SAY, FROM QUALCOMM'S 

PERSPECTIVE THAT IF THEY -- IF APPLE BECOMES LESS RELIANT ON 

QUALCOMM FOR THESE PREMIUM LTE MODEM CHIPS, THAT APPLE WILL BE 

IN A BETTER POSITION OR MORE LIKELY TO CHALLENGE QUALCOMM'S 

LICENSING PRACTICES AND THEIR -- ULTIMATELY THE ROYALTIES 

THEY'VE BEEN COLLECTING FOR THEIR STANDARD ESSENTIAL PATENTS. 

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1168

AND THAT IS A STRATEGIC BENEFIT TO QUALCOMM OF KEEPING 

APPLE IN THEIR, IN THEIR CAMP, IF YOU WILL, OR HAVING APPLE 

CONTINUE TO PURCHASE THE QUALCOMM CHIPS AND NOT MOVE TO INTEL. 

Q. WHAT ANALYSIS HAVE YOU DONE OF THE 2013 AGREEMENT? 

A. SO I'M ABLE TO LOOK AT THE 2013 AGREEMENT AND PERFORM WHAT 

WE CALL A -- EXCUSE ME -- A PROFIT SACRIFICE TEST, ALSO KNOWN 

AS AN EQUALLY EFFICIENT COMPETITOR TEST, REALLY TO SEE WHETHER 

THE PENALTIES THAT APPLE FACED IF THEY HAD GONE WITH INTEL FOR 

THE IPADS WERE DISPROPORTIONATE OR UNREASONABLY HIGH. 

Q. AND WHEN YOU SAY UNREASONABLY HIGH, WHAT DO YOU MEAN? 

A. SO I THINK THE EASIEST WAY TO SEE THAT IS TO TAKE IT FROM 

THE PERSPECTIVE OF THE ENTRANT, INTEL -- THIS IS THE EQUALLY 

EFFICIENT COMPETITOR TEST -- TO ASK, IMAGINE AN ENTRANT, AND 

IT'S REALLY MORE ABSTRACT, IT DOESN'T HAVE TO BE INTEL, IMAGINE 

AN ENTRANT WHO'S JUST AS EFFICIENT AS QUALCOMM AND THEIR ENTRY 

ROUTE TO FIRST GET A CERTAIN QUANTITY OF SALES THAT IS 

CURRENTLY AVAILABLE AT APPLE? AND I'M GOING TO TALK ABOUT THE 

IPADS AS THAT GROUP. 

BUT WHATEVER THAT GROUP IS, IF THEY COULD MAKE THOSE SALES 

AND EARN SOME MARGINS ON THOSE, JUST LIKE QUALCOMM IS, WOULD 

THEY BE ABLE TO MAKE MONEY IN THE FACE OF THIS AGREEMENT? 

WHICH MEANS THEY'D HAVE TO COMPENSATE APPLE FOR THE PENALTY 

THAT APPLE WOULD BEAR FOR THE PAYMENTS THAT APPLE WOULD LOSE 

FROM QUALCOMM. 

SO YOU'RE ASKING IF AN EQUALLY EFFICIENT ENTRANT COULD 

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SHAPIRO DIRECT BY MR. JAMES

UNITED STATES COURT REPORTERS

1169

MAKE A PLAY FOR THESE CONTESTABLE UNITS, CONTESTABLE SALES, 

WHICH ARE GOING TO BE IPADS, GIVEN THEY'D HAVE TO BUY APPLE OUT 

OF THE CONTRACT? AND THAT -- COULD THEY MAKE MONEY DOING THAT? 

IF THAT WOULD BE PROFITABLE FOR AN ENTRANT, THEN THE 

AGREEMENT PASSES MUSTER UNDER THE TEST. 

IF THAT WOULD BE UNPROFITABLE FOR THE ENTRANT, THEN THE 

AGREEMENT IS GOING TO FAIL THIS TEST. 

IT'S VERY MUCH LIKE PRICE COST TEST IN PREDATORY PRICING, 

BUT IT HAS THIS STRUCTURE OF WE'VE GOT THIS PENALTY PAYMENT AND 

THAT -- WE'RE ATTRIBUTING THAT TO THESE SALES BECAUSE THE 

ENTRANT UNDER THIS METHODOLOGY WOULD HAVE TO COMPENSATE THE 

CUSTOMER FOR THE LOST INCENTIVE PAYMENTS.

Q. WHAT ARE THE CONSEQUENCES OF A DEAL OF THIS KIND FOR 

RELATIONSHIPS BETWEEN APPLE AND POTENTIAL ENTRANTS? 

A. SO -- I THINK THE RECORD SHOWS THAT IN THE PRESENCE OF 

THIS DEAL, IT WAS NOT GOING TO BE -- APPLE'S VIEW WAS IT WAS 

NOT GOING TO BE ECONOMICALLY PRACTICABLE TO GO TO INTEL -- WE 

CAN TALK ABOUT POTENTIAL ENTRANTS GENERALLY, BUT INTEL WAS IN 

THE FLESH, IF YOU WILL -- TO GO WITH THEM FOR IPADS OR FOR, 

LET'S SAY, A MODERATE AMOUNT OF VOLUME. 

IT REALLY MEANS FROM APPLE'S POINT OF VIEW, THEY'RE EITHER 

GOING TO STAY WITH QUALCOMM EXCLUSIVELY OR THEY'RE GOING TO 

HAVE TO GO QUITE BIG FOR AN ENTRANT TO MAKE IT WORTH PAYING THE 

PENALTY, AND THE ENTRANT WOULD HAVE TO OFFER SIGNIFICANTLY 

BETTER PRICES THAN QUALCOMM ON LARGE VOLUMES IN ORDER FOR IT TO 

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SHAPIRO DIRECT BY MR. JAMES

UNITED STATES COURT REPORTERS

1170

PAY FOR APPLE. 

AND SO THAT'S, THAT WAS THE CONSEQUENCE ONCE THE 

AGREEMENTS WERE SIGNED OF THE SITUATION AS BETWEEN APPLE AND 

ANY POTENTIAL ALTERNATIVE SUPPLIER. 

Q. HOW DID YOU IMPLEMENT THE TEST IN THIS CASE? 

A. SO I IMPLEMENTED THE TEST BY IDENTIFYING WHAT WE CALL THE 

CONTESTABLE UNITS, WHICH ARE THE SALES THAT WERE CURRENTLY 

AVAILABLE TO INTEL, SEEING WHAT MARGIN THEY COULD EARN ON THOSE 

IF THEY WERE AS EFFICIENT AS QUALCOMM, AND THEN SEEING WHETHER 

THEY COULD STILL MAKE MONEY IF THEY HAD TO COVER THE PENALTY 

LIKE I SAID. 

ANOTHER WAY TO THINK ABOUT IT THAT'S ECONOMICALLY 

EQUIVALENT, AND THIS WOULD BE THE PROFIT SACRIFICE LABEL, IS 

FROM QUALCOMM'S POINT OF VIEW, THEY MADE SALES -- THEY MADE 

PROFITS ON THE IPAD SALES, THE CONTESTABLE SALES, THROUGH SOME 

MARGINS. BUT THEY WOULD HAVE AVOIDED PAYING A LARGE AMOUNT OF 

MONEY TO APPLE IF APPLE HAD NOT BOUGHT THOSE PRODUCTS. 

SO IF WE ATTRIBUTE THOSE QUALCOMM PAYMENTS TO THESE 

PRODUCTS AS A COST EFFECTIVELY, AS A PAYOUT FROM QUALCOMM, WAS 

QUALCOMM SACRIFICING PROFITS TO MAKE THESE SALES? 

AND SO IT'S EXACTLY THE SAME ARITHMETIC, WAS QUALCOMM 

SACRIFICING PROFITS WITH THIS ATTRIBUTION OF THE PROFITS, OR 

WOULD INTEL HAVE HAD TO LOSE MONEY IN THE FIRST ROUND AS PART 

OF AN ENTRY STRATEGY? 

SO I DID THAT BY MEASURING THE MARGIN ON THOSE PRODUCTS 

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UNITED STATES COURT REPORTERS

1171

AND THE SIZE OF THE PENALTY PAYMENTS THAT WOULD HAVE APPLIED TO 

THE IPAD, TO THE IPAD SALES. 

Q. LET'S BRING UP THE NEXT DEMONSTRATIVE. 

ARE THESE YOUR CALCULATIONS? 

A. YES. SO THIS IS -- THIS IS REALLY FROM THE PROFIT 

SACRIFICE PERSPECTIVE. A COMPARISON OF QUALCOMM'S DIRECT 

MARGINS ON THE APPLE IPADS TO THE INCENTIVE PAYMENTS THAT WERE 

AT RISK. 

SO THE CONTESTABLE PRODUCTS HERE ARE A SERIES OF IPADS 

THAT APPLE ENDED UP LAUNCHING STARTING IN OCTOBER 2014, AND 

THERE'S -- THERE'S EVIDENCE IN THE RECORD THAT THIS WAS THE -- 

A LIKELY PLAN THAT APPLE WAS PURSUING BEFORE THEY SIGNED THE 

AGREEMENTS WITH QUALCOMM, TO WORK WITH INTEL ON THIS BASIS 

FIRST WITH THE IPADS, SEE HOW IT WOULD GO, AND THEN POSSIBLY 

AWARD THEM IPHONES LATER. 

SO THEY WERE IN VERY ACTIVE DISCUSSIONS WITH INTEL, AS YOU 

HEARD FROM MS. EVANS. I THINK YOU HEARD FROM MR. BLEVINS AND 

WILLIAMS AS WELL ON THIS. 

SO THESE ARE THE CONTESTABLE PRODUCTS. THEN -- I'M GOING 

TO ASSUME ALL THESE NUMBERS ARE CONFIDENTIAL. 

SO THE INCENTIVE PAYMENTS AT RISK -- OH, AND YOU CAN SEE 

HOW MANY UNITS WERE INVOLVED THROUGH THE PERIOD OF TIME I'M 

ABLE TO MEASURE. 

THEN YOU CAN SEE THE INCENTIVE PAYMENTS AT RISK, WHICH IS 

TO SAY IF APPLE HAD GONE WITH INTEL FOR THESE PRODUCTS AND 

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SHAPIRO DIRECT BY MR. JAMES

UNITED STATES COURT REPORTERS

1172

LAUNCHED THEM IN OCTOBER 2014, AT THAT TIME, HOW MUCH -- WHAT 

WOULD THE INCENTIVE PAYMENTS AT RISK UNDER THE FATA, AND THAT'S 

THE NUMBER, THE LARGE NUMBER IN THE MIDDLE HERE UNDER A, 

LABELED A. 

AND THEN WE'RE COMPARING THAT TO THE DIRECT MARGINS THAT 

QUALCOMM EARNED ON THESE PRODUCTS, WHICH IS B, A SMALLER 

NUMBER. 

AND SINCE THE INCENTIVE PAYMENTS AT RISK ARE FAR IN EXCESS 

OF THE MARGINS, WE SEE THIS WAS PROFIT SACRIFICE WHEN WE DO 

THIS ATTRIBUTION OF THE INCENTIVE PAYMENTS TO THESE SALES. 

THE OTHER PERSPECTIVE WOULD BE FOR INTEL TO GET IN, IF 

THEY COULD HAVE EARNED THESE SAME MARGINS SHOWN AS B, ASSUMING 

THEY'RE EQUALLY EFFICIENT, THEY COULD MAKE THOSE MARGINS, BUT 

THEY'D HAVE TO BUY APPLE OUT OF THE CONTRACT. THAT WOULD COST 

THE AMOUNT SHOWN IN A. THAT WOULD BE A BIG LOSS. 

AND, IN FACT, NEITHER APPLE NOR INTEL CONSIDERED THAT 

BECAUSE IT WAS -- THAT WAS UNREALISTIC, WHICH IS AN INDICATION 

OF HOW, HOW BADLY THE FATA FAILED THIS TEST ACTUALLY. 

SO THAT'S THE FINDING, THAT'S THE RESULT OF THE TEST, THAT 

THIS STRUCTURE OF THIS AGREEMENT INVOLVED A PROFIT SACRIFICE BY 

QUALCOMM, OR WOULD BLOCK AN EQUALLY EFFICIENT COMPETITOR FROM 

MAKING THESE CONTESTABLE SALES, OR WOULD REQUIRE THAT 

COMPETITOR TO LOSE A SUBSTANTIAL AMOUNT OF MONEY TO GET THAT 

FOOTHOLD IN THE MARKET. 

Q. AND YOU SAID THAT ONE OF THE INPUTS INTO YOUR TEST WAS HOW 

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SHAPIRO DIRECT BY MR. JAMES

UNITED STATES COURT REPORTERS

1173

MUCH BUSINESS WAS AT STAKE AT THE TIME; IS THAT RIGHT? 

A. YES, THOSE ARE THE IPADS HERE, THAT'S THE NOTION OF 

CONTESTABLE PRODUCTS.

Q. DID YOU ALSO CONSIDER MORE BUSINESS WAS AT STAKE AT THE 

TIME THAN THE IPADS? 

A. YES, I DID. 

SO THERE ARE -- THE RECORD IS NOT COMPLETELY CLEAR ON 

THIS. YOU KNOW, THERE'S A LOT OF NEGOTIATION BACK AND FORTH. 

THIS, I THINK, IS THE, THE -- I THINK THIS IS THE BEST 

GROUP OF PRODUCTS TO USE FOR THIS TEST. 

BUT THERE ARE SOME INDICATIONS THAT AT LEAST QUALCOMM WAS 

CONCERNED THAT INTEL MIGHT BE ABLE TO WIN MORE THAN THAT AT 

THAT TIME. YOU KNOW, WE'RE NOT TALKING ABOUT WHAT THEY MIGHT 

LEARN LATER. THE WHOLE IDEA IS THAT THIS IS THIS FOOTHOLD 

THROUGH THE CONTESTABLE PRODUCTS. 

AND PERHAPS EVEN INTEL COULD HAVE, AT THAT TIME, DISPLACED 

SOME OF THE MAV 10 SALES. THAT'S ONE OF THE QUALCOMM CHIPS AT 

THE TIME, MAV 10 LOW, WHICH WOULD BE SOME OF THE IPHONES ALSO 

FOR 2014, IN WHICH CASE THERE WOULD BE MORE CONTESTABLE 

PRODUCTS. 

SO I CONSIDERED THAT AS A SENSITIVITY ANALYSIS, OR 

ROBUSTNESS CHECK. IF ONE EXPANDED THE SET OF CONTESTABLE 

PRODUCTS, WOULD THE TEST RESULTS CHANGE, AND THEY DID NOT. 

Q. AND THEN MOVING BACK, WHAT ARE THE IMPLICATIONS OF AN 

UNREASONABLY HIGH PENALTY, AS YOU PUT IT, OR PROFIT SACRIFICE 

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SHAPIRO DIRECT BY MR. JAMES

UNITED STATES COURT REPORTERS

1174

FOR COMPETITION? 

A. WELL, THE -- THIS IS A TEST WE CAN PERFORM AS ANTITRUST 

ECONOMISTS AND IT'S SIMILAR TO PREDATORY PRICING TEST. I THINK 

IT'S INFORMATIVE, I HOPE IT'S INFORMATIVE FOR THE COURT AS THE 

CONCERN BEING IF THERE'S SUBSTANTIAL PROFIT SACRIFICE ON THE 

CONTESTABLE PRODUCTS SO THAT AN EQUALLY EFFICIENT COMPETITOR 

COULD NOT GAIN A FOOTHOLD WITHOUT HAVING TO LOSE A SIGNIFICANT 

AMOUNT OF MONEY, THAT THAT CAN SLOW DOWN OR BLOCKADE ENTRY IN 

THIS SITUATION, AND THAT'S A HARM TO COMPETITION. 

Q. SO NOW WE'RE DONE WITH APPLE. 

I WAS WONDERING IF YOU COULD JUST GIVE A QUICK SUMMARY OF 

YOUR OVERALL CONCLUSIONS. JUST TO RECAP, YOU ANALYZED THREE OF 

QUALCOMM'S PRACTICES: THE NO LICENSE, NO CHIPS POLICY, 

INCENTIVE PAYMENTS, AND THE REFUSAL TO LICENSE RIVALS 

COLLECTIVELY, AND WHAT WERE THE CONCLUSIONS FLOWING FROM THAT? 

THE COURT: I'M SORRY, LET ME ASK YOU. IT'S 10:38. 

SHOULD WE GO AHEAD AND TAKE OUR BREAK NOW, OR ARE YOU ABOUT TO 

FINISH? 

MR. JAMES: I'M ABOUT TO FINISH. 

THE COURT: OKAY. GO AHEAD. SORRY FOR THE 

INTERRUPTION. 

GO AHEAD, PLEASE. 

BY MR. JAMES:

Q. CAN YOU PROVIDE A BRIEF SUMMARY TO THE COURT SO THAT WE 

CAN MOVE ON TO OUR BREAK. 

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UNITED STATES COURT REPORTERS

1175

A. IT WILL BE VERY BRIEF INDEED. THIS IS JUST A RECAP. 

I THINK THE THREE POLICIES WORK TOGETHER, AND REALLY THE 

NO LICENSE, NO CHIPS WORKING TOGETHER WITH THE REFUSAL TO 

LICENSE RIVALS SET UP A SITUATION WHERE QUALCOMM WAS ABLE TO 

USE ITS CHIP LEVERAGE TO BRING TO BEAR IN NEGOTIATIONS WITH 

OEM'S TO GET UNREASONABLY HIGH ROYALTIES ON ITS CELLULAR SEPS, 

AND CRITICALLY SO THAT WHEN AN OEM PURCHASED A MODEM CHIP FROM 

A RIVAL OF QUALCOMM, THEY WOULD BE PAYING QUALCOMM MORE THAN A 

REASONABLE AMOUNT. 

AND THAT ULTIMATELY LEADS TO A VARIETY OF HARMS TO 

COMPETITION. THAT'S THE CENTRAL POINT ABOUT NO LICENSE, NO 

CHIPS, AND THEN WE HAD THIS ADDITIONAL MUCH MORE SPECIFIC 

CONDUCT, IN PARTICULAR THE CONTRACT SIGNED IN 2013 WITH APPLE, 

THAT FURTHER HAD -- CAUSED SOME ADDITIONAL DANGER OF HARM TO 

COMPETITION BECAUSE INTEL WAS TRYING TO GET IN AT THAT TIME. 

MR. JAMES: NO FURTHER QUESTIONS. 

THE COURT: OKAY. IT'S 10:39. 

LET'S GO AHEAD, PLEASE, AND TAKE A 15 MINUTE BREAK. 

THANK YOU. WE'LL SEE YOU IN 15 MINUTES. 

(RECESS FROM 10:40 A.M. UNTIL 10:56 A.M.) 

THE COURT: GOOD MORNING. WELCOME BACK. PLEASE TAKE 

A SEAT. 

OKAY. TIME IS 10:56. GO AHEAD, PLEASE. 

MR. VAN NEST: THANK YOU, YOUR HONOR. WE'VE PASSED 

OUT THE NOTEBOOKS TO PROFESSOR SHAPIRO, AND THE COURT HAS ONE 

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UNITED STATES COURT REPORTERS

1176

AS WELL. 

THE COURT: OKAY. THANK YOU. 

MR. VAN NEST: YOU'RE WELCOME. 

CROSS-EXAMINATION

BY MR. VAN NEST: 

Q. GOOD MORNING, PROFESSOR SHAPIRO. 

A. GOOD MORNING. 

Q. YOU TESTIFIED THAT QUALCOMM POSSESSED MONOPOLY POWER IN 

CDMA MODEM CHIPS FROM 2006 THROUGH 2016; IS THAT RIGHT?

A. YES, THAT'S CORRECT. 

Q. AND YOU ALSO TESTIFIED THAT QUALCOMM POSSESSED MONOPOLY 

POWER, IN YOUR VIEW, IN THE PREMIUM LTE MARKET YOU DEFINE IN 

2011 THROUGH 2016; CORRECT? 

A. YES. 

Q. BUT YOU'RE NOT OFFERING ANY OPINION THAT QUALCOMM HAS 

MONOPOLY POWER IN ANY CHIP MARKET IN 2017; ISN'T THAT RIGHT? 

A. THAT IS CORRECT. 

Q. AND SIMILARLY, YOU'RE NOT OFFERING ANY OPINION THAT 

QUALCOMM HAS MONOPOLY POWER IN ANY CHIP MARKET IN 2018, EITHER? 

A. THAT IS CORRECT. 

Q. IN FACT, AS YOU NOTED IN YOUR REPORT, QUALCOMM'S SHARE OF 

WHAT YOU CALL PREMIUM LTE CHIPS FELL IN 2015 AND 2016 AS 

SAMSUNG, INTEL, AND MEDIATEK CAME INTO THE MARKET; RIGHT? 

A. THAT IS CORRECT. 

Q. AND YOU ALSO NOTED THAT QUALCOMM'S MARKET SHARE IN WHAT 

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1177

YOU CALL PREMIUM LTE FELL IN 2017 AS A RESULT OF INTEL GAINING 

GROUND AT APPLE; CORRECT? 

A. I NOTED THAT FOR 2016 IN MY TESTIMONY.

Q. YOU ALSO TESTIFIED THAT THERE WAS SOME DIMINISHMENT OF 

QUALCOMM'S MARKET POWER IN 2017 RELATIVE TO 2016 AS A RESULT OF 

INTEL GETTING IN AT APPLE? 

A. I DON'T -- ARE YOU USING THE DEPOSITION OR -- HERE NOW IN 

COURT?

Q. I'M JUST ASKING WHETHER YOU REMEMBER TESTIFYING TO THAT 

DURING YOUR DEPOSITION? 

A. OH, YES. I DIDN'T KNOW YOU WERE REFERRING TO MY 

DEPOSITION. I DO REMEMBER THAT.

Q. OKAY. AND YOU STAND BY THAT TESTIMONY TODAY? 

A. I DO. 

Q. OKAY. AND QUALCOMM'S MARKET SHARE IN CDMA WENT DOWN IN 

2017 AS A RESULT OF ADDITIONAL COMPETITION THERE, TOO. YOU 

TESTIFIED TO THAT? 

A. YES, I THINK THAT'S CORRECT. THERE'S BEEN -- THEIR MARKET 

SHARE DECLINED AS BEST WE COULD MEASURE IT, WHICH WAS IMPERFECT 

DUE TO DATA LIMITATIONS. 

Q. AND ACCORDING TO YOUR CALCULATIONS, QUALCOMM'S MARKET 

SHARE IN THE PREMIUM LTE MARKET YOU DEFINED HAS DECLINED QUITE 

A BIT IN THE LAST COUPLE OF YEARS THAT YOU ANALYZED; RIGHT?

A. I THINK THAT'S FAIR.

Q. CAN WE HAVE PROFESSOR SHAPIRO'S SLIDE 16, PLEASE. 

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SHAPIRO CROSS BY MR. VAN NEST

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1178

THIS IS FROM YOUR REPORT. DO YOU SEE IT THERE, PROFESSOR 

SHAPIRO? 

A. I DO.

Q. YOU CAN SEE THAT IN, ACCORDING TO YOUR CALCULATIONS, IN 

2014 IN THE PREMIUM LTE MARKET, YOU HAD QUALCOMM AT 96.7 

PERCENT; 81 PERCENT IN 2015; 57 PERCENT IN 2016; CORRECT? 

A. 57 PERCENT IN 2016, THAT'S RIGHT, AS SHOWN HERE, THAT'S 

CORRECT.

Q. THAT'S RIGHT. SO AS YOU JUST SAID A MOMENT AGO, 

QUALCOMM'S SHARES IN THIS MARKET FELL FAIRLY DRAMATICALLY IN 

THOSE LAST COUPLE OF YEARS? 

A. THEY FELL FROM 97 PERCENT TO 81 TO 57.

Q. OKAY. AND DURING THAT SAME PERIOD, SAMSUNG AND MEDIATEK, 

THEIR SHARES GREW QUICKLY; RIGHT? 

A. YES, THAT IS TRUE, ESPECIALLY MEDIATEK AS SHOWN IN THIS 

DIAGRAM.

Q. MEDIATEK CAME INTO THE MARKET IN LATE 2014, AND BY 2016 

THEY HAD 27.4 PERCENT; CORRECT? 

A. THAT'S CORRECT, WE'RE MEASURING BY UNITS HERE, MOST IN 

CHINA.

Q. AND SAMSUNG SIMILARLY GREW QUICKLY. THEY CAME IN AND BY 

2016, THEY ALSO HAD 8 PERCENT OF THIS MARKET? 

A. THAT'S RIGHT, THEY'RE VERTICALLY INTEGRATED. 

Q. AND THESE FIGURES DON'T INCLUDE HUAWEI AND HISILICON 

BECAUSE YOU WEREN'T ABLE TO GET AHOLD OF THAT DATA; IS THAT 

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1179

RIGHT? 

A. THAT'S CORRECT. IF YOU LOOK AT THE NOTE HERE, HISILICON 

IS NOT SHOWN HERE. IT -- A REASONABLE ESTIMATE IS THAT THEY 

GAINED -- THEY ACTUALLY HAD A SHARE GOING UP FROM MAYBE HALF A 

PERCENT TO 3 PERCENT DURING THAT PERIOD OF TIME, 2014, '15, 

'16.

Q. AND IT COULD BE HIGHER; CORRECT?

A. WELL, THAT'S DR. CHIPTY'S NUMBER. I THINK -- C-H-I-P-T-Y 

SHOWN THERE. 

I THINK -- WELL, I WOULD CERTAINLY SAY WE HAVE INCOMPLETE 

DATA. I THINK THIS WAS -- SHE CONSTRUCTED AN ESTIMATE. IT 

COULD BE TOO HIGH, IT COULD BE TOO LOW. THAT'S THE ESTIMATE.

Q. ACTUALLY, IN YOUR REPORT, YOU SAID IT COULD BE AS HIGH AS 

10.9 PERCENT IN 2016 FOR HUAWEI; CORRECT? 

A. YES. I THINK I HAD A -- I HAD A DIFFERENT METHOD THAT LED 

TO A HIGHER UPPER END THERE. THESE ARE HER NUMBERS.

Q. OKAY. AND IF WE INCLUDED A 10 PERCENT NUMBER FOR 

HISILICON, THE SHARE FOR QUALCOMM AND OTHERS WOULD PROBABLY 

FALL FURTHER; CORRECT? 

A. IT WOULD FALL FURTHER, YES. 

Q. I THINK YOU SAID DURING YOUR DIRECT TESTIMONY THAT THE 

INDUSTRY WE'RE TALKING ABOUT HERE, MODEM CHIPS AND CELLULAR, IS 

SUBJECT TO RAPID TECHNOLOGICAL CHANGE. 

DID I GET THAT RIGHT? 

A. YOU DID.

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SHAPIRO CROSS BY MR. VAN NEST

UNITED STATES COURT REPORTERS

1180

Q. IN YOUR REPORT, YOU CALLED THIS INDUSTRY DYNAMIC; CORRECT? 

A. YES, THAT -- I BELIEVE THAT. I THINK OF IT THAT WAY.

Q. OKAY. AND YOU RECOGNIZE THAT WHEN ANALYZING A MARKET 

THAT'S EXPERIENCING RAPID CHANGE, ONE'S ANALYSIS SHOULD ACCOUNT 

FOR CHANGING INDUSTRY CONDITIONS; RIGHT? 

A. CERTAINLY. 

Q. AND ACCORDING TO YOU, PROFESSOR SHAPIRO, IT'S NOT POSSIBLE 

TO CONDUCT A DETAILED ANALYSIS OF QUALCOMM'S MARKET POWER 

BEYOND THE AVAILABLE RELEVANT DATA OR OTHER EVIDENCE; ISN'T 

THAT RIGHT? 

A. I WOULD TAKE THAT AS A TOTALITY. WE USE THE EVIDENCE WE 

HAVE AND WE CAN'T REALLY GO BEYOND THAT. 

Q. OKAY. AND AT THE TIME YOU FORMED YOUR OPINIONS AND 

CREATED YOUR REPORT, IT WAS THE CASE THAT IT'S NOT REALLY 

POSSIBLE TO RELIABLY ANALYZE THE MARKET FOR 5G CHIPS AT THIS 

TIME? 

A. WELL, IF YOU MEAN BY ANALYZE THE MARKET, PREDICT MARKET 

SHARES, FOR EXAMPLE, OR KNOW EXACTLY WHICH CHIPS OR DEVICES 

WILL COME OUT AT WHAT TIME, I THINK THAT'S, THAT'S FAIR. 

WE DO HAVE A PRETTY GOOD INDICATION THAT QUALCOMM'S GOT 

SOME LEADERSHIP POSITION THERE, JUST AS THEY DID WITH 4G. 

BUT THAT WOULD NOT BE A FULL ANALYSIS OF THE MARKET.

Q. RIGHT. AND YOU SAID IN YOUR REPORT, "IT IS THUS NOT 

POSSIBLE RELIABLY TO ANALYZE THE MARKET FOR 5G CHIPS AT THIS 

TIME." 

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RIGHT? 

A. COULD YOU SHOW ME WHERE THAT IS? I WANT TO MAKE SURE I 

UNDERSTAND THE CONTEXT.

Q. SURE. IT'S IN PARAGRAPH 113 OF YOUR REPORT. YOUR REPORT 

IS IN THE FIRST TAB OF THE NOTEBOOK. 

A. OKAY. 

Q. WE CAN PUT IT UP ON THE SCREEN IF THAT'S EASIER. 

A. NO. WELL, ACTUALLY, IT'S NOT EASIER FOR ME. BUT IT'S UP 

TO YOU.

Q. LET'S PUT IT UP ON THE SCREEN, PLEASE, PARAGRAPH 113. 

A. OF MY REPORT?

Q. I'M SORRY. 

A. THAT DOESN'T SEEM RIGHT TO ME.

Q. I APOLOGIZE. IT'S YOUR REBUTTAL REPORT. I APOLOGIZE. 

WE'VE GOT A LOT OF REPORTS. 

A. THAT'S TRUE. 

Q. CAN WE HAVE IT UP? 

IT'S THE PARAGRAPH THAT SAYS, 5G-COMPLIANT CHIPS ARE NOT 

BEING INCORPORATED INTO HANDSETS UNTIL 2019. 

NOW I HAVE IT. 

"IT IS THUS NOT POSSIBLE RELIABLY TO ANALYZE THE MARKET 

FOR 5D CHIPS AT THIS TIME." 

YOU SAID THAT IN YOUR REBUTTAL REPORT; CORRECT? 

A. YES. AND WHY DON'T WE READ THE NEXT SENTENCE THEN. 

Q. YOU'LL GET A CHANCE TO DO THAT, PROFESSOR SHAPIRO, WITH 

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YOUR COUNSEL -- 

A. OKAY. SO I STAND BY THAT.

Q. -- IF YOU THINK IT'S INCOMPLETE. 

BUT YOU STAND BY THE STATEMENT THAT IT'S NOT POSSIBLE TO 

ANALYZE IT RELIABLY AT THIS TIME; RIGHT? 

A. I STAND BY THIS. I JUST WANTED TO UNDERSTAND THE CONTEXT. 

Q. OKAY. NOW, I THINK YOU TESTIFIED THAT THIS WAS A MARKET, 

THE MODEM CHIP MARKET, THAT WAS DIFFICULT TO BREAK INTO, 

ALTHOUGH SOME FOLKS HAVE DONE SO. 

A. THAT'S FAIR. 

Q. OKAY. AND, IN FACT, SEVERAL PEOPLE HAVE BROKEN INTO BOTH 

THE CDMA AND THE PREMIUM LTE MARKETS; CORRECT? 

A. YES. 

Q. SAMSUNG HAS BROKEN IN? 

A. SAMSUNG IS NOW IN THIS MARKET.

Q. MEDIATEK? 

A. YES. 

Q. HUAWEI? 

A. YES. 

Q. INTEL? 

A. AGREED. 

Q. AND I THINK YOU SAID AT THE START OF YOUR TESTIMONY, IN A 

MARKET LIKE THIS WHERE R&D IS EXPENSIVE, YOU COULDN'T EXPECT 

THERE TO BE MORE THAN A FEW FIRMS ANYWAY; RIGHT? 

A. I THINK THAT YOU WOULD -- YOU WOULD -- IT ALL DEPENDS ON 

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THE SCALE. BUT YOU COULD END UP WITH A FEW FIRMS, THAT'S 

RIGHT. WHETHER A FEW IS THREE OR SIX, IT DEPENDS ON THE 

PARTICULARS. BUT THAT WAS THE IDEA.

Q. BUT I GOT IT RIGHT, DIDN'T I? YOU SAID RIGHT UPFRONT THAT 

IN A MARKET LIKE THIS WHERE RESEARCH AND DEVELOPMENT IS 

EXPENSIVE, YOU WOULDN'T EXPECT THERE TO BE MORE THAN A FEW 

FIRMS IN IT ANYWAY. DIDN'T YOU SAY THAT? 

A. I THINK SO.

Q. AND NOW WE HAVE A FEW FIRMS IN THE MARKET, DON'T WE? 

A. WE DO HAVE A FEW FIRMS IN THE MARKET.

Q. AND DIDN'T -- 

A. AND DURING THE PERIOD OF TIME THAT I WAS ANALYZING, THAT 

WAS REALLY BEFORE A LOT OF THIS ENTRY TOOK PLACE AND QUALCOMM 

HAD A DOMINANT POSITION. AND THAT WAS EXACTLY THE SET -- WHAT 

I SAID WE WERE CONCERNED ABOUT, THAT WE WOULD HAVE ONE OR A 

MONOPOLY RATHER THAN A FEW OR SEVERAL.

Q. NOW, SOME OF THESE FOLKS GOT IN FAIRLY QUICKLY TO THE 

MARKET; ISN'T THAT FAIR?

A. I DON'T KNOW WHAT YOU MEAN BY THAT. I TEND TO THINK THAT 

IT TAKES TIME, QUITE A WHILE TO GET INTO THIS MARKET.

Q. WELL, INTEL BOUGHT VIA IN 2015 ACCORDING TO YOUR REPORT; 

ISN'T THAT RIGHT? 

A. I THINK THAT'S CORRECT.

Q. AND BY 2016, INTEL WAS SELLING CDMA CHIPS IN THE MARKETS 

WE'RE TALKING ABOUT AS YOU REFLECTED EARLIER THIS MORNING. 

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A. OKAY. WHEN WE TALK ABOUT ENTRY AND ENTRY BARRIERS -- 

Q. EXCUSE ME JUST A MINUTE. 

A. -- WE'RE NOT TALKING ABOUT ACQUISITION. 

Q. -- PROFESSOR SHAPIRO. 

WEREN'T THEY SELLING CHIPS WITHIN A YEAR OF PURCHASING 

VIA? THAT'S WHAT I ASKED. 

A. OKAY. BUT THAT DOESN'T -- OKAY. IT'S JUST MISLEADING 

BECAUSE IF YOU ENTER BY ACQUISITION, THAT'S NOT THE RIGHT 

QUESTION. OF COURSE YOU CAN ENTER A MARKET BY ACQUIRING 

SOMEBODY WHO'S ALREADY SELLING THAT PRODUCT. THAT'S NOT THE 

QUESTION FOR ENTRY ANALYSIS.

Q. OKAY. WELL, LET'S ASK A DIFFERENT QUESTION THEN. 

MEDIATEK WAS ABLE TO QUICKLY GAIN MARKET SHARE WHEN IT 

DECIDED TO ADD CDMA TO ITS LTE CHIPS; ISN'T THAT RIGHT? 

A. I DON'T KNOW HOW LONG IT TOOK THEM TO DEVELOP AND THEN 

INTRODUCE THE CDMA FUNCTIONALITY. I'D HAVE TO, I DON'T KNOW, 

LOOK THAT UP. I DON'T HAVE THAT MEMORIZED.

Q. WELL, YOUR REPORT REFLECTS THAT THEY BEGAN PRODUCING 

CHIPS, CDMA CHIPS WITH LTE IN 2014, AND THAT BY THE FIRST 

QUARTER OF 2015, THEY WERE SELLING AND SHIPPING INTO THE 

MARKET. 

DOES THAT SOUND ABOUT RIGHT? 

A. YES. I THINK THEY MADE A SMALL NUMBER OF SALES IN 2014 

AND THEN MORE IN 2015. THAT REFERS TO ESSENTIALLY THE LAUNCH 

OF PRODUCTS CONTAINING THEIR CHIPS AND SALES. 

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THAT'S NOT THE QUESTION OF HOW -- THAT'S NOT THE SAME 

ISSUE OF HOW LONG IT TAKES TO DEVELOP AND PLAN ENTRY. THAT'S 

NOT THE SAME QUESTION.

Q. AND BY 2016, AS WE OBSERVED, MEDIATEK HAD 36 PERCENT OF 

THE CDMA MARKET ACCORDING TO YOUR SLIDES?

A. RIGHT. I THINK I SAID THEY'VE MADE, I THINK, GOOD INROADS 

IN CHINA. THAT'S BEEN THE HEART OF WHAT THEY'VE BEEN ABLE TO 

ACHIEVE, YES.

Q. NOW, IN YOUR REPORT, YOU DEFINE MONOPOLY POWER AS THE 

POWER TO MAINTAIN A HIGH SHARE AND EARN SUPRA-NORMAL PROFITS 

WITHOUT BEING BETTER. 

DOES THAT SOUND FAMILIAR? 

A. COULD YOU SHOW ME THAT, PLEASE?

Q. SURE. IT'S IN YOUR REPORT, PARAGRAPH 202 AT FOOTNOTE 422. 

IT'S IN THE FOOTNOTE AT THE BOTTOM. AND I HAVE IT ON THE 

SCREEN IF THAT'S EASIER, PROFESSOR SHAPIRO. 

A. OKAY. THAT'S A QUOTE FROM AN ARTICLE BY FRANK FISHER AS 

ONE OF THE WAYS IN WHICH ECONOMISTS, ANTITRUST ECONOMISTS CAN 

DESCRIBE MONOPOLY POWER. THAT'S NOT MY WORDS.

Q. ALL RIGHT. BUT YOU RELIED ON THEM. YOU REFERENCE THEM IN 

YOUR REPORT? 

A. I REFERENCED IT IN MY REPORT. MY WORDS ARE IN THE 

PARAGRAPH, NOT THE FOOTNOTE. BUT I'M REFERENCING IT TO 

INDICATE THERE'S A NUMBER OF DIFFERENT LANGUAGE THAT ANTITRUST 

ECONOMISTS USE AND AROUND THIS CONCEPT OF MONOPOLY POWER.

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Q. OKAY. THE CONCEPT IS THAT YOU'RE LOOKING FOR POWER THAT 

COMES FROM SOMETHING WITHOUT ACTUALLY BEING BETTER; RIGHT? 

THAT'S THE CONCEPT HE'S REFLECTING IN THE NOTE? 

A. NO, NO, NO, THAT'S NOT CORRECT, NO. 

LOOK, MOST MONOPOLISTS GOT THERE BY BEING INNOVATIVE AND 

HAVING REALLY GOOD PRODUCTS, OKAY? AND WHEN YOU'RE TALKING 

ABOUT A MAINTENANCE OF MONOPOLY QUESTION CASE, THE QUESTION IS, 

THAT'S GOOD. BUT THEN DID THEY THEN BLOCKADE OTHERS FROM 

COMPETING? SO I CAN'T THINK OF A MONOPOLIST WHO DIDN'T 

INITIALLY -- WELL, THAT'S PROBABLY TOO STRONG A STATEMENT. 

BUT, NO, THERE'S NO QUESTION THAT QUALCOMM, YOU KNOW, HAS 

DONE IMPORTANT R&D AND, YOU KNOW, HAS GOOD ENGINEERING AND 

SHOULD GET THE RETURN FOR ALL THAT. THAT'S, THAT'S -- I'M NOT 

BRINGING THAT INTO QUESTION.

Q. OKAY. SO YOU WOULD AGREE WITH ME THAT QUALCOMM EARNED ITS 

POSITION INITIALLY AT LEAST, EVEN ACCORDING TO YOU, THROUGH 

INNOVATION, SKILL, FORESIGHT, AND BETTER PRODUCTS; RIGHT? 

A. WELL, I THINK IF YOU GO BACK TO THE EARLY '90S WHEN 

THEY'RE FIRST COMING OUT WITH THEIR CHIPS AND THEIR CDMA 

INNOVATION, I THINK THEY SHOULD BE -- YOU KNOW, GET A LOT OF 

CREDIT FOR THAT, AND I THINK THEY DO, ACTUALLY. 

SO, YOU KNOW, IN TERMS OF THE COMPANY'S HERITAGE, YOU 

KNOW, HEAR HEAR.

Q. HEAR HEAR. HEAR HEAR, THEY GOT THERE ON INNOVATION, 

PERFORMANCE, BETTER PRODUCTS; RIGHT? 

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A. I'M TALKING ABOUT THE EARLY '90S. WE'RE SAYING INITIALLY 

HOW DID THEY ACHIEVE REALLY THEIR INITIAL POSITION IN BOTH 

CHIPS AND IN PATENT -- IN THE EARLY CELLULAR STANDARD ESSENTIAL 

PATENTS.

Q. NOW, YOU'RE -- 

A. I'M NOT CALLING ANY OF THAT INTO QUESTION. I'M TALKING 

ABOUT, YOU KNOW, WE'RE STARTING IN 2006, SO THAT'S MANY YEARS 

LATER AFTER THAT, 10, 15 YEARS LATER.

Q. RIGHT. NOW, OBVIOUSLY YOU DIDN'T MAKE A TECHNICAL 

EVALUATION OF QUALCOMM'S MODEM PRODUCTS OR COMPARE THAT TO THE 

PRODUCTS OF OTHERS IN YOUR REPORT; IS THAT RIGHT? 

A. THAT IS CORRECT.

Q. OKAY. BUT TO THE EXTENT YOU LOOKED AT EVIDENCE FROM THE 

RELEVANT PERIOD ABOUT QUALCOMM'S PERFORMANCE, VIRTUALLY ALL OF 

THAT EVIDENCE WAS THAT THEIR MODEMS WERE GENERALLY CONSIDERED 

BETTER THAN THE REST; RIGHT? 

A. I DON'T KNOW THAT I WOULD, WOULD MAKE SUCH A SWEEPING 

STATEMENT. BUT LET'S TAKE PREMIUM LTE MODEMS.

Q. WELL, EXCUSE ME, PROFESSOR. I THINK YOU'VE ANSWERED MY 

QUESTION. 

A. OKAY.

Q. BUT YOU DID MAKE SUCH A STATEMENT. YOU SAID, "THE 

EVIDENCE INDICATES THAT OEM'S DID NOT REGARD OTHER SUPPLIERS' 

CDMA MODEM CHIPS AS GOOD ALTERNATIVES TO QUALCOMM FOR MOST OF 

THE RELEVANT TIME PERIOD, PARTICULARLY PRIOR TO 2015." 

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RIGHT? 

A. COULD YOU SHOW ME WHERE THAT IS, PLEASE?

Q. SURE. PARAGRAPH 209. 

A. YES.

Q. IT'S THE VERY FIRST SENTENCE. 

A. SO -- THANK YOU. THAT'S EXACTLY -- 

Q. SO MY QUESTION IS, ISN'T THAT A STATEMENT THAT YOU MADE IN 

YOUR REPORT? 

A. YES, IT IS. AND THAT'S -- THAT WAS EXACTLY THE 

QUALIFICATION I WAS, I WAS MAKING IN RESPONSE TO THE PREVIOUS 

QUESTION, WHICH IS I DON'T WANT TO MAKE A BROAD, SWEEPING 

STATEMENT ACROSS ALL MODEMS AND ALL TIME. 

BUT, YES, I THINK QUALCOMM WAS -- YOU KNOW, I STAND BY 

THIS STATEMENT REGARDING THE CDMA MODEM CHIPS DURING THAT 

PERIOD OF TIME.

Q. OKAY. AND YOU OBSERVED ELSEWHERE THAT VIA DID NOT PRODUCE 

MODEM CHIPS COMPATIBLE WITH 3G WCDMA STANDARDS, LTE, OR ANY 

COMBINATION OF THESE NON-CDMA STANDARDS; CORRECT? 

A. THAT IS CORRECT DURING THAT PERIOD OF TIME. 

Q. AND YOU SAID VIA TRAILED QUALCOMM IN CDMA CAPABILITIES, 

DEVELOPING CDMA 2000 -- THAT'S 3G -- YEARS AFTER QUALCOMM 

BROUGHT CHIPS WITH THIS TECHNOLOGY TO THE MARKET; CORRECT? 

A. YES. THESE ARE ALL PART OF THE REASONS WHY QUALCOMM HAD 

MONOPOLY POWER OVER THOSE CHIPS.

Q. AND AS A MATTER OF FACT, YOU DID AN ANALYSIS AND CONCLUDED 

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THAT QUALCOMM WAS THE FIRST TO RELEASE CHIPS IN NEARLY ALL 

PREMIUM LTE CATEGORIES; RIGHT? 

A. YES. AS I SHOWED, THEY WERE THE SOLE SUPPLIER FOR THE 

FIRST COUPLE YEARS OF PREMIUM LTE MODEM CHIPS.

Q. LET'S TAKE A LOOK AT SLIDE 18 FROM YOUR REPORT. I'M 

SORRY, SLIDE 18 FROM YOUR SLIDE DECK. 

A. OKAY. 

Q. THIS WAS NOT SHOWN THIS MORNING DURING YOUR DIRECT 

EXAMINATION, BUT IT'S FROM YOUR REPORT. 

THIS IS AN ANALYSIS THAT YOU PERFORMED; CORRECT? 

A. YES, THIS IS FROM MY REPORT, FIGURE 15.

Q. AND FIGURE 15 ILLUSTRATES THAT QUALCOMM WAS THE FIRST TO 

RELEASE CHIPS IN NEARLY ALL PREMIUM LTE CATEGORIES; CORRECT? 

A. I FIND THIS HARD TO READ. BUT, YES, I THINK THAT'S 

CORRECT.

Q. OKAY. AND JUST TO ILLUSTRATE IT, LET'S START ON THE LEFT 

IS QUALCOMM, AND ON THE FAR LEFT, THOSE ARE PERIODS OF TIME, 

QUARTERS IN EACH YEAR; CORRECT?

A. YES, THAT'S CORRECT.

Q. SO THE BIG BLUE BOX, THAT'S CATEGORY 3, DOWNLOAD, UPLOAD, 

DOWNLINK, UPLINK FROM PREMIUM LTE. QUALCOMM WAS A COUPLE YEARS 

AHEAD OF THE NEXT COMPETITOR, SAMSUNG TWO YEARS LATER; CORRECT? 

THE COURT: I'M SORRY TO INTERRUPT. 

CAN YOU ALL SCOOT IN SO WE CAN ACCOMMODATE SOMEONE 

STANDING IN THE BACK? THANK YOU. 

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THE WITNESS: SO I THINK THAT'S CORRECT. FOR 

CATEGORY 3, IT'S SHOWING QUALCOMM SHIPPING IN FOURTH QUARTER OF 

2010 AND SAMSUNG SHIPPING IN THE FOURTH QUARTER OF 2012. 

BY MR. VAN NEST: 

Q. RIGHT. AND TO THE SAME EFFECT, CATEGORY 4, QUALCOMM 

SHIPPED IN THE SECOND QUARTER OF 2013, SAMSUNG DIDN'T SHIP 

UNTIL A YEAR LATER. SO THEY WERE ABOUT A YEAR AHEAD IN THAT 

ONE; RIGHT? 

A. I AGREE. 

Q. AND GENERALLY THE CONCLUSION YOU DREW FROM THIS, WHICH IS 

IN THE RELEVANT TIME PERIOD WE'RE TALKING ABOUT AND THE MARKET 

YOU'RE ANALYZING IS THAT QUALCOMM WAS RELEASING CHIPS FASTER 

THAN ANYONE ELSE IN NEARLY ALL PREMIUM LTE CATEGORIES; RIGHT? 

A. YES. THEY WERE THE LEADER. THIS IS ALL PART OF THE 

REASONS WHY THEY HAD MONOPOLY POWER IN THAT MARKET.

Q. YOU ALSO RELIED ON VARIOUS MARKET STATEMENTS TO THE EFFECT 

THAT QUALCOMM REMAINS A CLEAR LEADER WITH ALL THE SOLUTIONS 

FROM OTHERS LAGGING BEHIND IN TIMING AND BREADTH; RIGHT? 

A. I THINK THAT'S THE SAME GENERAL POINT. IS THAT A QUOTE 

FROM MY REPORT?

Q. IT IS. 

A. OKAY. 

Q. YOU STAND BY THAT? 

A. THAT SOUNDS CORRECT TO ME. 

Q. OKAY. AND THAT QUALCOMM STOOD OUT BY PROVIDING MULTIMODE 

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SUPPORT BEFORE ANYONE ELSE DID; RIGHT? 

A. OKAY. 

Q. YOU NOTED IN THE REPORT THAT QUALCOMM CONTINUALLY RELEASES 

NEWER, FASTER LTE MODEM CHIPS THAN ANYONE ELSE; RIGHT? 

A. WHY DON'T YOU SHOW ME THIS AGAIN? I JUST WANT TO MAKE 

SURE WE'VE GOT THE RIGHT CONTEXT. THIS ALL SOUNDS RIGHT TO ME, 

BUT -- 

Q. SURE. THIS IS IN PARAGRAPH 446 OF YOUR REBUTTAL. 

A. OKAY.

Q. THE REBUTTAL? 

A. IT'S JUST IF YOU'RE GOING TO GET ME TO BE ON THE WITNESS 

STAND AND SAY, "YES, I SAID THAT," I'D LIKE TO ACTUALLY CHECK 

THAT THAT'S WHAT I SAID.

Q. THERE'S NOTHING WRONG WITH THAT, PROFESSOR SHAPIRO. WE 

HAVE IT ALL RIGHT HERE?

A. OKAY. THANK YOU. 

THE COURT: THE REBUTTAL REPORT ENDS AT PARAGRAPH 

430. IS THERE A SECOND SECTION? OH, YOU MEAN THE APPENDIX? 

THE WITNESS: MAYBE YOU HAVE -- I HAVE PARAGRAPH 446 

AT PAGE C 11. THERE'S SOME APPENDICES. 

THE COURT: GOT IT. 

MR. VAN NEST: DO YOU HAVE IT? CAN WE DISPLAY IT? 

THE COURT: GO AHEAD, PLEASE. 

MR. VAN NEST: IT'S IN THE APPENDIX, YOUR HONOR. I'M 

SORRY. 

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THE WITNESS: OKAY. I SEE THAT. 

BY MR. VAN NEST: 

Q. THAT'S WHAT YOU SAID, AND YOU STAND BY THAT? 

A. OKAY. I AGREE. 

Q. AND I THINK IT SOUNDS LIKE YOU'VE BEEN READING TRIAL 

TESTIMONY AS WE GO ALONG; CORRECT? 

A. YES, I HAVE. 

Q. YOU READ A NUMBER OF THE OTHER OEM'S TESTIFYING THAT 

QUALCOMM WAS SIMPLY BETTER THAN ANYTHING ELSE; RIGHT? 

A. IN MANY CASES, YES, THAT'S WHY THEY WERE VERY CONCERNED 

ABOUT LOSING ACCESS TO QUALCOMM CHIPS. IT'S THE SAME IDEA. 

Q. SO, FOR EXAMPLE, MR. BLUMBERG, WHEN HE WAS HERE TESTIFIED 

BY VIDEO THAT "QUALCOMM HAD THE BEST CHIPSET AVAILABLE AND IT 

WOULD BE DIFFICULT TO CONVINCE CONSUMERS OR CARRIERS TO SPEND 

FOR A HIGH END PHONE IF IT DID NOT HAVE THE FEATURES, 

FUNCTIONS, AND PERFORMANCE THAT THE QUALCOMM CHIP PROVIDED"; 

RIGHT? 

A. THAT SOUNDS RIGHT. THAT'S EXACTLY THE TYPE OF EVIDENCE I 

CONSIDER RELEVANT FOR MARKET DEFINITION.

Q. AND MS. EVANS, FROM INTEL, SHE SAID THAT INTEL WAS STILL 

TWO YEARS BEHIND QUALCOMM ON SHIPPING LTE. 

DO YOU RECALL REVIEWING THAT TESTIMONY?

A. I DO REMEMBER, ALTHOUGH WHAT WAS THE -- I GUESS I WANT TO 

GET THE TIMEFRAME ON THAT. THAT WAS IN THE EARLIER LTE DAYS?

Q. LATE 2012. SO A COUPLE YEARS IN. 

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A. OKAY.

Q. RIGHT? 

A. I DO REMEMBER HER SAYING THEY WERE BEHIND AND THAT WAS 

PART OF HER JOB WAS TO CATCH UP.

Q. RIGHT. AND BY LATE 2012, SHE FELT INTEL, WITH ALL OF ITS 

EFFORT AND RESOURCES, WAS STILL TWO YEARS BEHIND? 

A. YES, AND I THINK THAT'S WHY INTEL HAD A SHOT AT CERTAIN 

SALES AT APPLE, BUT THEY WEREN'T YET POSITIONED TO REALLY GO 

FOR A MUCH LARGER VOLUME. 

Q. I'D LIKE TO BEGIN TALKING ABOUT THE TESTIMONY YOU GAVE ON 

THE TAX THEORY OF ANTICOMPETITIVE HARM. 

A. OKAY.

Q. DO YOU RECALL THAT TESTIMONY THIS MORNING? 

A. I DO.

Q. ACTUALLY, I THINK IT WOULD BE EASIER IF WE COULD BREAK 

THIS DOWN. 

YOUR HONOR, I HAVE AN EASEL. IF YOU COULD PULL IT UP? 

CAN YOU SEE IT OVER HERE, PROFESSOR SHAPIRO, FROM THERE? 

A. I CAN SEE THE EASEL. WHETHER I CAN SEE WHAT YOU WRITE ON 

IT REMAINS TO BE SEEN.

Q. WELL, YOU AND I MIGHT HAVE THE SAME PROBLEM. BUT WE'LL 

TRY. 

I BELIEVE WHAT YOU SAID WAS THAT QUALCOMM -- THE STARTING 

POINT FOR THIS WAS THAT QUALCOMM USED ITS MONOPOLY POWER OVER 

MODEM CHIPS TO EXTRACT SUPRA-FRAND ROYALTIES FROM OEM'S; 

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CORRECT? 

A. YES. 

Q. THAT'S KIND OF THE CORNERSTONE OF THE STARTING POINT OF 

THIS OPINION? 

A. THAT'S THE KEY LEVERAGE THAT WAS APPLIED USING THE NO 

LICENSE, NO CHIPS IN CONJUNCTION WITH REFUSING TO LICENSE.

Q. OKAY. ALL RIGHT. I'M GOING TO WRITE "TAX THEORY" AT THE 

TOP. 

AND IT STARTS WITH, LET'S CALL IT -- YOU REFERRED TO IT AS 

A TAX, SO I'LL CALL IT A SUPRA-FRAND TAX. 

OKAY. THAT'S THE EXCESS ROYALTIES THAT YOU SAY QUALCOMM 

IS ABLE TO EXTRACT FROM OEM'S; CORRECT? 

A. OKAY. SO THAT'S WHAT I'VE BEEN CALLING THE ROYALTY 

SURCHARGE. 

Q. THAT'S RIGHT, THE ROYALTY SURCHARGE. 

A. OKAY.

Q. AND UNDER YOUR THEORY, THAT ACTS LIKE A TAX THAT RAISES 

THE COST OF RIVAL CHIP MAKERS; RIGHT? 

A. THAT'S THE CORRECT ECONOMICS, YES. 

Q. OKAY. SO RIVALS' COST -- THESE ARE CHIP MAKERS -- THEY GO 

UP UNDER THIS THEORY; RIGHT? 

A. THEY DO GO UP. THAT'S THE CORRECT ECONOMICS.

Q. THAT'S RIGHT. EVEN THOUGH THE OEM IS PAYING THE PREMIUM, 

ACCORDING TO YOU, THE TAX FALLS ON THE -- ECONOMICALLY UNDER 

YOUR THEORY -- FALLS ON THE RIVAL; CORRECT? 

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A. NO. WHAT I'M SAYING IS THE TAX FALLS ON THE TRANSACTIONS 

TAKING PLACE.

Q. OH. 

A. THE TAX IS APPLIED TO A TRANSACTION, THAT'S ALL TAXES.

Q. AND THEN -- 

A. AND THEN I'M SAYING ECONOMICALLY, WHEN TREATED AS THOUGH 

THE RIVAL IS PAYING THAT, EVEN THOUGH THE OEM IS, BUT THE 

ECONOMICS IS THAT IT FALLS ON THE TRANSACTION.

Q. OKAY. BUT IT RAISES RIVALS' COST. YOU SAID THAT THIS 

MORNING? 

A. YES.

Q. OKAY. 

A. AND I THINK A GOOD WAY TO THINK ABOUT IT IS TO THINK ABOUT 

IT BEING A COST TO THE RIVAL, AND THEN WE TRACE -- INCREASED 

COST TO THE RIVAL -- SORRY -- AND THEN WE TRACE THROUGH THE 

ECONOMIC IMPLICATIONS OF THAT.

Q. OKAY. AND ONE IMPLICATION, AGAIN FROM YOUR TESTIMONY, IS 

THAT THE RIVALS' INCOME, OPERATING INCOME, GOES DOWN BECAUSE 

ITS COSTS WENT UP; RIGHT? 

A. RIGHT. WELL, IN A GIVEN TRANSACTION, I EXPLAINED HOW THAT 

WOULD HAPPEN. AND MORE GENERALLY, IT WOULD HAPPEN BECAUSE 

THE RIV -- TO THE EXTENT THE RIVAL COULD NOT FULLY PASS ON 

THESE COSTS TO ITS CUSTOMERS.

Q. OKAY. IF THEY DON'T PASS ON THE COST, THEN IT'S THEIR 

INCOME THAT WILL SHRINK; RIGHT? 

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A. NORMALLY, AS A GOOD RULE, WHEN A FIRM'S COSTS GO UP, THEY 

HAVE TO EAT SOME OF IT AND THEY PASS SOME OF IT ON. 

AND TO THE EXTENT THEY EAT IT, THEIR INCOME GOES DOWN -- 

Q. OKAY. 

A. -- ON EXISTING TRANSACTIONS, AND, OF COURSE, AS I ALSO 

SAID, THE NUMBER OF TRANSACTIONS FALLS. SO THAT'S ANOTHER 

REASON THAT INCOME GOES DOWN.

Q. OKAY. AND THEN YOU SAID THAT WHEN INCOME GOES DOWN, THAT 

CAN BE EXPECTED TO REDUCE RIVALS' INVESTMENT IN R&D, RESEARCH 

AND DEVELOPMENT; RIGHT? 

A. EVERYTHING ELSE EQUAL, THAT -- I MEAN, IT'S REALLY THE 

EXPECTED FUTURE EARNINGS THAT DRIVE THE R&D INVESTMENT. 

SO, YES, EVERYTHING ELSE EQUAL, I THINK THAT'S A 

COMPLETELY UNCONTROVERSIAL ECONOMIC PROPOSITION.

Q. AND YOU SAY THAT ULTIMATELY WILL LEAD TO HARM TO 

COMPETITION BECAUSE INNOVATION WILL SLOW DOWN, AMONG OTHER 

REASONS; RIGHT? 

A. WELL, THAT'S -- EXACTLY. THAT'S THE MECHANISM, AND THAT 

WOULD BE THE GENERAL -- I THINK THE CLEAR PREDICTION ALL ELSE 

EQUAL.

Q. OKAY. NOW, ACCORDING TO YOU, SORT OF THE CENTRAL 

COMPETITIVE PROBLEM HERE IS THE SUPRA-FRAND ROYALTY THAT YOU 

START OFF WITH; CORRECT? 

A. YES. THE USE OF THE CHIP MONOPOLY TO ACHIEVE THAT ON 

QUALCOMM'S PART, YES.

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Q. OKAY. AND YOU'RE NOT OFFERING ANY OPINION AS TO WHAT THE 

FRAND RATE OR RANGE OF QUALCOMM'S SEP IS; ISN'T THAT RIGHT? 

A. THAT IS CORRECT. 

Q. RIGHT. YOU'RE RELYING ON MR. LASINSKI FOR THAT? 

A. NO, I'M NOT RELYING ON HIM.

Q. WELL, YOU UNDERSTOOD, WHEN YOUR DEPOSITION WAS TAKEN YOU 

SAID, "MR. LASINSKI IS COVERING THAT"; RIGHT? 

A. YES. HE'S THE ONE WHO'S OFFERING AN OPINION ABOUT THE 

FRAND RATE.

Q. RIGHT. AND YOU ARE NOT OFFERING AN OPINION ABOUT EITHER 

THE FRAND RATE OR THE FRAND RANGE AS PART OF YOUR ANALYSIS; 

CORRECT? 

A. THAT'S CORRECT.

Q. ALL RIGHT? 

A. I'M OFFERING AN OPINION ABOUT THE SUPRA -- THE ROYALTY 

SURCHARGE, NOT THE LEVEL ON WHICH IT'S APPLIED. NOT THE 

REASONABLE ROYALTY BASE TO WHICH IT'S APPLIED. 

Q. YEAH. YOU'RE ASSUMING THE SURCHARGE AND YOU'RE WORKING 

THROUGH YOUR ANALYSIS HERE IN THE TAX THEORY; CORRECT? 

A. NO, I'M NOT ASSUMING THE SURCHARGE. I EXPLAINED HOW IT 

AROSE.

Q. OKAY. BUT YOU HAVEN'T DONE ANY QUANTITATIVE ANALYSIS OR 

ECONOMIC QUANTITATIVE ANALYSIS TO COME UP WITH A FRAND RATE OR 

A FRAND RANGE; RIGHT? 

A. LIKE I SAID, THAT'S WHAT MR. LASINSKI IS DOING. I'M 

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TESTIFYING ABOUT THE ROYALTY SURCHARGE.

Q. OKAY. SO POINT ONE: IF THE COURT WERE TO DETERMINE THAT 

THE EVIDENCE DOESN'T SUPPORT THE EXISTENCE OF A SUPRA-FRAND 

ROYALTY, THEN THE REST OF YOUR ANALYSIS CAN BE IGNORED; RIGHT? 

IT DEPENDS ON THAT AS A STARTING POINT? 

A. SO IF THE COURT WERE TO DETERMINE THAT ALL THIS LEVERAGE 

DIDN'T LEAD TO ANYTHING IN TERMS OF A SUPRA -- A ROYALTY 

SURCHARGE -- 

Q. THAT'S RIGHT? 

A. -- THEN THE ECONOMIC CONSEQUENCES OF THE SURCHARGE WOULD 

NOT COME INTO PLAY. I THINK THAT'S LOGICAL.

Q. I THINK THAT'S WHAT I SAID. 

A. I JUST -- 

Q. UNLESS THE EVIDENCE SUPPORTS THE EXISTENCE OF A 

SUPRA-FRAND ROYALTY, THIS ANALYSIS IS IRRELEVANT; RIGHT? I 

THINK THAT'S WHAT YOU JUST SAID, BUT -- 

A. I GUESS I -- I'M RESISTING, I ADMIT A LITTLE BIT, THAT 

IRRELEVANT MAKES ME FEEL BAD. 

(LAUGHTER.) 

BY MR. VAN NEST: 

Q. DON'T FEEL BAD. 

A. BUT I THINK THAT, YES, THE BUILDING BLOCK FOR, FOR THIS 

DISCUSSION OF EFFECTS IS THAT QUALCOMM WAS ABLE TO ACHIEVE A 

ROYALTY SURCHARGE BY APPLYING THE CHIP LEVERAGE. 

SO, YES, THAT IS CORRECT.

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1199

Q. OKAY. I'M NOT HERE TO MAKE YOU FEEL GOOD. YOU KNOW THAT. 

(LAUGHTER.) 

THE WITNESS: I WAS HOPING, BUT -- 

BY MR. VAN NEST: 

Q. OKAY. 

SO COULD WE HAVE SLIDE 28 FROM -- SO HERE'S WHAT YOU -- 

HERE'S WHAT YOU SHOWED THIS MORNING. 

I TAKE IT THIS IS PURELY ILLUSTRATIVE. I THINK THAT'S 

WHAT YOU SAID. 

A. YES.

Q. THAT THE ROYALTY SURCHARGE THERE IS HYPOTHETICAL? 

A. THAT'S CORRECT.

Q. RIGHT? IT'S NOT BASED ON ANY QUANTITATIVE ANALYSIS THAT 

YOU DID OR LASINSKI DID OR ANYBODY DID. IT'S JUST A NUMBER 

YOU'VE ASSUMED; RIGHT?

A. IT'S ILLUSTRATIVE. I THOUGHT I WAS CLEAR ON THAT. 

Q. OKAY, GOOD. AND THE RIVALS' COST, THE CHIP MAKER'S COST, 

THAT $5 NUMBER, THAT'S ILLUSTRATIVE, TOO? 

A. ALL THE NUMBERS HERE ARE.

Q. OKAY. AND YOU'RE NOT IMPLYING BY THIS THAT THE ROYALTIES 

ARE ALWAYS NEGOTIATED ALONG WITH CHIP PRICING SALES; CORRECT? 

A. I DON'T UNDERSTAND THAT QUESTION. 

Q. IT'S NOT YOUR TESTIMONY THAT LICENSES ARE ALWAYS 

NEGOTIATED IN CONJUNCTION WITH CHIP SALES? THEY'RE OFTEN DONE 

SEPARATELY; CORRECT? LICENSE NEGOTIATIONS ARE SEPARATE FROM 

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1200

CHIP SALES?

A. OFTEN THEY ARE, YES.

Q. OKAY. 

A. WE'RE TALKING ABOUT QUALCOMM; RIGHT?

Q. YES, QUALCOMM. SO YOU'RE NOT TRYING TO IMPLY ANYTHING 

ABOUT TIMING WITH YOUR EXAMPLE HERE? 

A. I DON'T UNDERSTAND WHAT YOU'RE SAYING BECAUSE THIS IS NOT 

ABOUT A CHIP SALE BY QUALCOMM. THIS IS A CHIP SALE BY A RIVAL. 

SO YOU'RE THROWING ME OFF.

Q. FAIR ENOUGH. FAIR ENOUGH. 

AND ALSO THE RIVALS' COST, THAT HYPOTHETICAL NUMBER IS 

SUBSTANTIALLY LOWER THAN WHAT YOUR REPORT SUGGESTS IS THE 

RIVALS' COST ON AVERAGE; RIGHT? 

A. THESE ARE JUST ILLUSTRATIVE NUMBERS. THEY'RE NOT MEANT 

TO -- IT'S JUST A CONCEPT.

Q. OKAY. THE ACTUAL NUMBER FROM YOUR REPORT FOR RIVALS' COST 

IS SOMEWHERE BETWEEN $16 AND $21, NOT $5; RIGHT? 

A. I DON'T KNOW. THE COSTS CHANGE OVER TIME AND BY TYPE OF 

CHIP. SO IF YOU WANT TO SHOW ME WHAT THAT IS.

Q. SURE. 

A. BUT, NO, YOU SHOULD NOT THINK THIS $5 HAS ANYTHING TO DO 

WITH -- IT'S NOT MEANT TO BE AN ACTUAL CHIP COST. IT'S MEANT 

TO ILLUSTRATE THE CONCEPT.

Q. FAIR ENOUGH. BUT COULD WE HAVE DEMONSTRATIVE SLIDE 13 UP 

TO BUTTON THIS UP. THIS IS A SLIDE YOU PREPARED FOR TODAY, YOU 

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1201

DIDN'T SHOW IT, BUT IT'S SOMETHING YOU PREPARED; RIGHT? 

A. CORRECT.

Q. FROM YOUR REPORT? 

A. OKAY.

Q. COULD WE HIGHLIGHT THE SECOND LINE, THE TOP BOX, PLEASE. 

THIS IS THE SMARTPHONE HIGH WITH WLAN, AND AUC, THAT STANDS FOR 

AVERAGE UNIT COST; CORRECT? 

A. OKAY.

Q. SO YOU ACTUALLY HAD IN YOUR REPORT NUMBERS BETWEEN $16 AND 

$21 THAT ARE SIGNIFICANTLY HIGHER THAN THE $5 THAT YOU PUT IN 

YOUR ILLUSTRATION; CORRECT? 

A. WELL, YEAH. IF YOU'RE GOING TO PICK THE TOP ROW. BUT 

THEN WHY DON'T YOU PICK ANOTHER ROW. I CAN ALREADY SEE ANOTHER 

ROW WHERE THE AVERAGE UNIT COST IS 2.50 OR 2.29 OR IN THE $2 

RANGE. SO THEY'RE ALL OVER THE PLACE.

Q. OKAY. WE'RE TALKING ABOUT PREMIUM LTE CHIP, AREN'T WE, 

PROFESSOR SHAPIRO? 

A. YES.

Q. AND IF WE'RE TALKING ABOUT PREMIUM LTE CHIP, I'VE GOT THE 

RIGHT COLUMN UP ON THE BOARD; RIGHT? 

A. I THINK YOU MEAN THE RIGHT ROW. 

Q. YOU'RE RIGHT. THE RIGHT ROW? 

A. WELL, MAYBE IF I -- CAN I LOOK AT THE WHOLE CHART AGAIN? 

I MEAN, THERE'S -- HIGH, MID -- YEAH, I THINK THAT'S RIGHT FOR 

THIS CHART. 

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Q. OKAY. 

A. YEAH, I THINK YOU'RE RIGHT. 

Q. LET'S GO BACK TO 28. 

AND YOU ALSO HAVE NOT DONE ANY QUANTITATIVE ANALYSIS TO 

DETERMINE HOW MUCH OF THE SURCHARGE, IF ANY, WAS CAUSED BY CHIP 

LEVERAGE WITH RESPECT TO ANY OEM; ISN'T THAT RIGHT? 

A. I'VE NOT DONE A QUANTITATIVE MEASUREMENT THERE. BUT DID I 

SAY -- I THINK I SAID IN TESTIMONY, AND CERTAINLY IN MY REPORT, 

THAT THE KEY THING TO LOOK AT IS THE COST TO THE OEM OF LOSING 

THE QUALCOMM CHIP SUPPLY BECAUSE THAT'S THE LEVERAGE THAT WAS 

BROUGHT TO BEAR AND THAT'S SOMETHING, YOU KNOW, OEM'S HAVE 

TESTIFIED ABOUT BEING VERY SUBSTANTIAL.

Q. BUT, AGAIN, YOU HAVEN'T DONE ANY QUANTITATIVE ANALYSIS TO 

DETERMINE HOW MUCH OF THE SURCHARGE YOU'RE OPINING ABOUT, IF 

ANY, WAS CAUSED BY CHIP LEVERAGE AS OPPOSED TO THE THREAT OF 

LITIGATION, THE FEAR OF LITIGATION, THE FEAR OF INJUNCTIONS AND 

OTHER FACTORS; RIGHT? YOU HAVEN'T DONE THAT? 

A. I HAVE NOT QUANTIFIED THE ROYALTY SURCHARGE.

Q. OKAY. NOW -- 

A. BUT I BELIEVE IT'S SUBSTANTIAL. 

Q. LET'S GO BACK TO RAISING RIVALS' COSTS. 

THIS IS PART OF YOUR THEORY, BUT, IN FACT, YOU HAVEN'T 

DONE ANY ECONOMIC ANALYSIS OF THE ACTUAL COSTS IN THE REAL 

WORLD OF ANY OTHER CHIP MAKER; RIGHT? 

A. ARE YOU REFERRING TO THE ROYALTY COSTS OR OTHER COSTS WHEN 

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1203

YOU SAY THE COSTS? 

Q. OTHER COSTS IN THE REAL WORLD THAT RIVALS INCUR. 

A. I HAVE NOT DONE AN ANALYSIS OF THEIR PRODUCTION COSTS. I 

DON'T NEED TO DO THAT.

Q. OKAY. IN OTHER WORDS, THERE ARE LOTS OF THINGS THAT CAN 

AFFECT RIVALS' COSTS IN THE REAL WORLD, INCLUDING PRODUCTION 

COSTS; RIGHT? 

A. RIGHT. AND I'M FOCUSSING ON HOW THE COSTS WERE RAISED, 

NOT WHAT THE LEVEL WAS TO START WITH.

Q. OKAY. AND ENGINEERING COSTS CAN GO UP AND DOWN; RIGHT?

A. CERTAINLY.

Q. MARKETING COSTS CAN GO UP AND DOWN? 

A. OF COURSE. 

Q. HEAD COUNT CAN GO UP AND DOWN? 

A. AND VARY ACROSS RIVALS. 

Q. AND YOU KNEW, IN DOING YOUR WORK, THAT THE FTC HAD ACCESS, 

IF THEY WANTED IT, TO FINANCIAL INFORMATION ABOUT COSTS FROM 

ALL OF THESE OTHER RIVAL CHIP MAKERS; RIGHT? 

A. I'M NOT SURE EXACTLY WHAT THEY HAD ON THAT.

Q. OKAY. 

A. SOMETIMES COMPANIES ARE NOT COMPLETELY -- DON'T GIVE ALL 

THE INFORMATION IN A USABLE WAY. I DON'T KNOW.

Q. OKAY. BUT IT'S CERTAINLY THE CASE THAT YOU HAVEN'T 

QUANTIFIED THE EFFECT ON ANY OTHER CHIP MAKER OF THE QUALCOMM 

SUPRA-FRAND ROYALTY YOU'RE ASSUMING, HAVE YOU? 

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1204

A. I'VE SAID ALREADY I HAVE NOT -- I HAVE NOT QUANTIFIED THE 

MAGNITUDE OF THE ROYALTY SURCHARGE. 

I POINTED OUT STRONG REASONS TO BELIEVE THAT IT WAS 

SUBSTANTIAL. 

Q. YOU HAVEN'T QUANTIFIED THE EFFECT OF THIS ROYALTY ON ANY 

OTHER CHIP MAKER; RIGHT? 

A. WELL, I HAVEN'T QUANTIFIED THE ROYALTY SURCHARGE, SO -- IN 

GENERAL, SO I HAVEN'T QUANTIFIED IT REGARDING SPECIFIC CHIP 

MAKERS, EITHER. THAT FOLLOWS. 

Q. OKAY. AND -- FAIR ENOUGH. 

RIVALS' INCOME, I THINK YOU'D PROBABLY GIVE ME THE SAME 

ANSWER, YOU DIDN'T DO ANYTHING FROM A QUANTITATIVE STANDPOINT 

TO LOOK AT WHAT HAPPENED TO ANY OF THESE RIVALS' INCOMES DURING 

THIS RELEVANT PERIOD; RIGHT? 

A. THAT'S RIGHT. I'M NOT -- I'M NOT DOING THE DAMAGES 

CALCULATION FOR THE RIVALS WHO WERE INJURED. 

Q. IN OTHER WORDS, RIVALS' INCOME, LIKE RIVALS' COSTS, CAN GO 

UP AND DOWN BASED ON LOTS OF FACTORS; CORRECT?

A. WE'RE TALKING AGAIN ABOUT THE NON-ROYALTY COSTS?

Q. THAT'S RIGHT? 

A. CERTAINLY. IT'S A DYNAMIC INDUSTRY. THESE THINGS CHANGE.

Q. THEY CHANGE, AND THEY CHANGE WEEKLY, MONTHLY, SOMETIMES 

DAILY; RIGHT?

A. RIGHT. AND THAT'S EXACTLY WHY IT WOULD BE A COMPLETE 

WASTE OF TIME TO LOOK AT ALL OF THAT, WHEN I CAN FOCUS ON THE 

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SURCHARGE, WHICH IS THE EXTRA COST THAT'S ASSOCIATED WITH THE 

CONDUCT AT ISSUE.

Q. OKAY. AND I UNDERSTAND THAT YOU THINK IT'S A WASTE OF 

TIME, BUT I JUST WANT TO FIND OUT WHAT YOU DID AND DIDN'T DO? 

A. FINE.

Q. AND ONE THING THAT I GUESS YOU DIDN'T DO WAS ANY FINANCIAL 

OR ECONOMIC ANALYSIS OF ANY RIVAL CHIP MAKER; CORRECT? 

A. YOU MEAN THEIR OVERALL OR THE EFFECTS OF THE PRACTICES? I 

WASN'T CLEAR THERE.

Q. YOU DIDN'T ANALYZE THE DIRECTION UP OR DOWN OR SIDEWAYS OF 

THE OPERATING INCOME OF ANY OF THE CHIP MAKER RIVALS THAT 

YOU'RE HERE CLAIMING WERE HARMED; CORRECT? 

A. I'VE EXPLAINED WHY THE INCOME WOULD BE REDUCED 

SUBSTANTIALLY BY A ROYALTY SURCHARGE, AND I -- BUT IF YOU'RE 

SAYING DID I MEASURE THEIR INCOME AND HOW IT WENT UP AND DOWN 

OVER TIME BECAUSE OF PROBLEMS THEY HAD IN THEIR OPERATIONS? 

NO, I DIDN'T DO THAT. 

Q. OKAY. NOW, SIMILARLY, YOU DID NOTHING WHATSOEVER TO 

ANALYZE WHETHER RIVALS' R&D SPENDING, RESEARCH AND DEVELOPMENT, 

WENT UP, DOWN, OR REMAINED THE SAME; RIGHT? 

A. AGAIN, YOU'RE JUST TALKING ABOUT WHAT HAPPENED OR THE 

EFFECT -- HOW IT MOVED OVER TIME OR THE EFFECTS OF THE QUALCOMM 

PRACTICES?

Q. I'M TALKING ABOUT WHAT ACTUALLY HAPPENED IN THE REAL WORLD 

DURING THE PERIOD OF TIME THAT YOU SAY QUALCOMM HARMED PEOPLE. 

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1206

THAT'S WHAT I'M TALKING ABOUT. 

A. WELL, I LOOKED -- I LOOKED AT THE DIFFERENT SUPPLIERS AND 

WHAT HAPPENED TO THEM. THAT'S PART OF MY GENERAL BACKGROUND 

EVALUATION I WOULD SAY. YOU KNOW, PEOPLE WHO EXITED, LIKE 

BROADCOM, PEOPLE WHO CAME IN, LIKE INTEL. SURE, I LOOKED AT 

THOSE THINGS.

Q. OKAY. 

A. BUT I DIDN'T -- I'M NOT OFFERING AN OPINION ABOUT THEIR 

FINANCIAL CIRCUMSTANCES.

Q. AND YOU DID NOT PUT ANY NUMBER ON ANY DECLINE IN R&D 

INVESTMENT BY ANY COMPETITOR; RIGHT? 

A. AGAIN, I JUST WANT THIS TO BE CLEAR. DECLINE IN R&D 

INVESTMENT BECAUSE -- FOR ANY REASONS? OR BECAUSE OF 

QUALCOMM'S CONDUCT? I JUST DON'T KNOW WHAT YOU'RE ASKING ME. 

Q. YOUR PATH TO HARM INVOLVES A SITUATION -- I THOUGHT I 

UNDERSTOOD, PROFESSOR SHAPIRO -- 

A. YEP.

Q. -- IN WHICH OVER OTHER TIME RIVALS' COMMITMENT TO RESEARCH 

AND DEVELOPMENT WOULD TEND TO GO DOWN. THAT'S WHAT WE 

ESTABLISHED EARLIER WITH THIS ARROW; RIGHT? 

A. ALL OTHER THINGS EQUAL, THAT WOULD BE THE EFFECT OF THE 

ROYALTY SURCHARGE AND THE REDUCED MARGINS AND VOLUMES. 

Q. BUT MY POINT IS -- MY QUESTION IS, EXCUSE ME, YOU DIDN'T 

DO ANYTHING TO SEE WHETHER THEY ACTUALLY DID GO DOWN DURING THE 

PERIOD YOU'RE TALKING ABOUT; RIGHT? THAT'S ALL I WANT TO KNOW. 

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1207

A. I DON'T THINK -- I THINK YOU'RE STILL CONTINUING TO 

CONFLATE TWO VERY DIFFERENT ISSUES.

Q. EXCUSE ME? 

A. WHAT HAPPENED TO THE R&D? 

Q. UM-HUM. 

A. AND THE EFFECT OF QUALCOMM'S PRACTICES. SO I THINK WE 

NEED TO BE CLEAR ABOUT THE DIFFERENCE. NO, I DIDN'T TRACK -- I 

DIDN'T REPORT -- I DIDN'T REPORT AS PART OF MY ANALYSIS THE 

MONTH, THE QUARTERLY OR ANNUAL R&D BY SAMSUNG IN THIS AREA, IF 

THAT COULD BE BROKEN OUT. NO, I'M NOT DOING THAT. 

THAT IS NOT INFORMATIVE, AS FAR AS I'M CONCERNED, ABOUT 

GIVEN ALL WHAT YOU'RE TALKING ABOUT, ABOUT THE EFFECTS OF THE 

PRACTICES HERE, WHICH MY ANALYSIS IS LATER FOCUSSED ON THAT. 

Q. OKAY. BUT JUST TO COMPLETE IT -- YOU DIDN'T CONDUCT ANY 

ANALYSIS OF HUAWEI'S R&D SPENDING DURING THIS PERIOD AT ALL; 

RIGHT? 

A. AGAIN, IF YOU MEAN BY ANALYSIS, DID I DO SOME CALCULATIONS 

WITH THEIR FINANCIALS AND SAY SOMETHING ABOUT THAT IN MY 

REPORT? NO. 

Q. OKAY. AND YOU DIDN'T DO THAT WITH INTEL? 

A. THAT IS NOT PART OF MY ANALYSIS OR METHODOLOGY OR ANYTHING 

I NEED TO DO TO -- UNDER MY OPINIONS, NO. 

Q. YOU DIDN'T DO IT WITH SAMSUNG, BROADCOM, ERICSSON OR 

MARVEL, OR ANY OTHER CHIP MAKER, THAT WAS OPERATING IN THIS 

TIME PERIOD; RIGHT, PROFESSOR SHAPIRO? 

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1208

A. AGAIN, PERFORMING SOME TYPE OF ANALYSIS, YOU DON'T REALLY 

EVEN KNOW WHAT YOU MEAN, WHAT THAT WOULD BE. I'VE EXPLAINED 

WHY IT'S NOT RELEVANT AS FAR AS I UNDERSTAND THE QUESTION. 

I DID NOT PRESENT ANY OF THOSE ANALYSES AS PART OF MY 

REPORT, NO.

Q. OKAY. IN FACT, YOU HAD A CHANCE TO REVIEW DR. CHIPTY'S 

REPORT AND SHE ASSEMBLED SOME INFORMATION ABOUT RESEARCH AND 

DEVELOPMENT EXPENSES BY COMPETITORS; CORRECT? 

A. YOU KNOW, I THINK PROFESSOR SNYDER, I THINK, HAD A LOT OF 

MATERIAL ON THIS. THAT'S WHAT'S IN MY MIND. 

IF YOU WANT TO SHOW ME SOMETHING FROM DR. CHIPTY, I'M 

HAPPY TO LOOK AT IT. 

Q. WELL, LET'S TAKE A LOOK AT PARAGRAPH 58 FROM DR. CHIPTY'S 

REPORT. 

ACTUALLY, YOUR HONOR, I HAVE THIS IN A SEPARATE WALLET 

BECAUSE IT'S PRETTY BIG. I CAN HAND IT OUT OR I CAN JUST SHOW 

IT ON THE SLIDE. 

THE COURT: I'M TAKE ONE. DO YOU HAVE ONE? 

THE WITNESS: I DON'T HAVE ONE. 

MR. VAN NEST: MAY I APPROACH THE WITNESS, YOUR 

HONOR. 

THE WITNESS: I DON'T NEED A COPY OF THIS BIG REPORT 

MYSELF. I'M HAPPY TO LOOK AT THE PARAGRAPH. 

THE COURT: OKAY. WELL, I'D LIKE A COPY, PLEASE. 

MR. VAN NEST: I HAVE ONE RIGHT HERE, YOUR HONOR 

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(HANDING). 

THE WITNESS: IT'S BEEN WEIGHING DOWN MY BACK ALREADY 

FOR A WHILE, SO -- 

BY MR. VAN NEST: 

Q. IT'S GETTING FULL UP THERE? 

A. IF I FEEL LIKE I NEED IT, I'LL ASK. HOW ABOUT THAT?

Q. COULD WE GO TO EXHIBIT 11. 

OKAY. DR. CHIPTY LOOKED AT ACTUAL REAL WORLD RESEARCH AND 

DEVELOPMENT SPENDING BY SEVERAL CHIP MAKERS, QUALCOMM, HUAWEI, 

INTEL, MEDIATEK, SAMSUNG. 

DO YOU SEE THAT IN EXHIBIT 11? 

A. I DO. BUT THIS IS FIRM-WIDE INVESTMENT. THIS ISN'T ABOUT 

MODEM CHIPS.

Q. AND YOU CERTAINLY HAD A CHANCE TO COMMENT ON THIS IN YOUR 

REBUTTAL REPORT AFTER YOU HAD A CHANCE TO REVIEW IT IN HER 

REPORT; CORRECT? 

A. CERTAINLY, YES, I DID HAVE A CHANCE.

Q. AND YOU DIDN'T TAKE ISSUE WITH IT ONE WAY OR THE OTHER, 

DID YOU? 

A. I DIDN'T FEEL IT WAS ANYTHING THAT I NEEDED TO RESPOND TO. 

I GUESS I MAY HAVE HAD MY FOLKS LOOK AND SEE IF THIS WAS 

ACCURATE.

Q. OKAY. 

A. BUT I DON'T SEE WHY THE FIRM-WIDE R&D -- INTEL IS A VERY 

BIG FIRM, THEY MAKE A LOT OF PRODUCTS. THEY SPEND A LOT ON 

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R&D. I DON'T SEE WHY THAT'S RELEVANT TO THE ANALYSIS OF THE 

EFFECT OF THIS PRACTICE ON R&D INCENTIVE. 

Q. WELL, INTEL, IF THEY CHOSE TO SPEND THE MONEY, THEY COULD 

DO IT. THEY'VE GOT THE MONEY; RIGHT? 

A. THAT IS NOT HOW I, AS AN ECONOMIST, THINK ABOUT R&D 

INVESTMENT. IT'S NOT A MATTER OF HOW MUCH MONEY YOU HAVE. 

IT'S A MATTER OF WHAT INVESTMENTS ARE PAYING GIVEN THE RISK AND 

THE REWARD.

Q. IN ANY EVENT, PROFESSOR SHAPIRO, IT'S CERTAINLY THE CASE 

THAT YOU HAVE NOT QUANTIFIED THE EFFECTS OF QUALCOMM'S BUSINESS 

PRACTICES ON ANY OTHER CHIP MAKER DURING THIS RELEVANT PERIOD; 

CORRECT? 

A. I HAVE NOT QUANTIFIED THAT, THAT IS CORRECT. I HAVE 

REASON TO BELIEVE THE ROYALTY SURCHARGE WAS SUBSTANTIAL AND 

THAT HAS INEVITABLE CONSEQUENCES. BUT I HAVE NOT DONE THE TYPE 

OF FINANCIAL ANALYSIS YOU'VE BEEN ASKING ME ABOUT. 

Q. NOW, YOU ALSO HAVEN'T CONDUCTED ANY ANALYSIS TO DETERMINE 

HOW MARKET SHARES WOULD HAVE BEEN DIFFERENT BUT FOR QUALCOMM'S 

CONDUCT IN THE BUT FOR WORLD; RIGHT? 

A. THAT IS TRUE. I'M NOT OFFERING A BUT FOR SET OF, OR 

COUNTER FACTUAL SET OF MARKET SHARES.

Q. OKAY. THAT'S TRUE FOR BOTH THE CDMA MARKET AND THE 

PREMIUM LTE MARKET THAT YOU DEFINED AS WELL; CORRECT? 

A. THAT IS CORRECT.

Q. THAT'S NOT SOMETHING THAT YOU UNDERTOOK AS PART OF YOUR 

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1211

REPORT? 

A. CORRECT. 

Q. I WANT TO TALK FOR A FEW MINUTES ABOUT YOUR TAKE ON FRAND. 

YOU'VE WRITTEN ABOUT FRAND? 

A. I HAVE. 

Q. OKAY. AND YOU'VE WRITTEN BEFORE THAT A FRAND RATE WOULD 

BE A REASONABLE RATE FOR A PARTY'S ENTIRE PORTFOLIO OF STANDARD 

ESSENTIAL PATENTS; CORRECT? 

A. THAT'S HOW IT'S OFTEN DISCUSSED. 

Q. OKAY. 

A. AND I THINK I'VE WRITTEN THAT IN MY PAPERS, YES, THAT'S 

CORRECT.

Q. OKAY. AND YOU'VE ALSO SAID THE CONSENSUS APPROACH TO 

FRAND FOR SEPS ARE ROYALTIES THAT WOULD RESULT FROM 

HYPOTHETICAL NEGOTIATIONS OVER LICENSING TERMS BEFORE THE 

INTELLECTUAL PROPERTY IS INCORPORATED INTO A STANDARD; RIGHT? 

A. YES. 

Q. AND THAT'S SOMETHING, MAYBE THE ONLY THING, BUT SOMETHING 

THAT YOU AND PROFESSOR NEVO BOTH AGREE ON; RIGHT? 

A. I THINK WE AGREE ON MORE THAN THAT. 

Q. OKAY. 

A. BUT I'M GLAD TO KNOW HE AGREES WITH THAT.

Q. I HOPE THAT'S TRUE. 

AND SO THE CONSENSUS VIEW, ACCORDING TO YOU AND TO 

PROFESSOR NEVO, IS THAT THE ROYALTY REASONABLE WOULD BE ONE 

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NEGOTIATED AT ARM'S LENGTH BETWEEN A BUYER AND A SELLER BEFORE 

THERE'S A STANDARD IN PLACE, OR BEFORE THE PROPERTY IS 

INCORPORATED IN THE STANDARD; CORRECT? 

A. CONCEPTUALLY, THAT'S CORRECT, WITH THE IDEA BEING AT A 

TIME WHEN THERE WOULD BE TECHNOLOGIC -- A CHOICE BETWEEN 

DIFFERENT TECHNOLOGIES AND THEREFORE DIFFERENT PATENTS THAT 

WOULD BECOME STANDARD ESSENTIAL. 

Q. OKAY. AND THE REASONABLE FRAND RATE IS A RATE NEGOTIATED 

BEFORE THE STANDARD IS ADOPTED, NOT A RATE THAT DIFFERS 

DEPENDING ON WHEN EACH LICENSEE CHOOSES TO ENTER THE MARKET? 

YOU'VE SAID THAT AS WELL? 

A. UM, IT'S GOING TO DEPEND ON THE PARTICULARS, BUT I'LL GO 

WITH YOU ON THIS FOR A WHILE, FOR NOW.

Q. OKAY. IN FACT, YOU'VE WRITTEN THAT YOURSELF? 

A. I DON'T KNOW WHAT YOU'RE REFERRING TO. 

Q. YOU SAID THAT FOR PARTIES MAKING A FRAND COMMITMENT DURING 

THE STANDARD SETTING PROCESS, THE REASONABLE PRICE IS THE PRICE 

THEY WOULD NEGOTIATE AT THAT POINT, NOT A PRICE THAT DIFFERS 

FOR EACH IMPLEMENTER DEPENDING ON THE HAPPENSTANCE OF WHEN THAT 

PARTY BEGAN IMPLEMENTING THE STANDARD; RIGHT? 

A. YOU NEED TO SHOW ME WHERE THAT IS.

Q. OKAY. THAT'S IN YOUR ARTICLE -- THAT'S IN YOUR TAB THERE. 

THERE'S AN ARTICLE THAT YOU AND PROFESSOR LEMLEY WROTE. IT'S 

TAB -- A SIMPLE APPROACH BY LEMLEY AND SHAPIRO. IT'S BEHIND 

YOUR REPORTS. 

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I AM READING FROM PAGE 1147. 

A. OKAY. 

Q. DO YOU HAVE IT? 

A. I'M LOOKING AT IT, YES.

Q. OKAY. FOR STANDARD ESSENTIAL PATENTS, A REASONABLE 

ROYALTY SHOULD BE BASED ON A HYPOTHETICAL, ARM'S LENGTH 

NEGOTIATION THAT TAKES PLACE AT THE TIME THE STANDARD SETTING 

ORGANIZATION IS SETTING THE STANDARD. 

WE ALREADY COVERED THAT AND YOU ACKNOWLEDGED THAT'S YOUR 

VIEW. 

A. OKAY.

Q. AND PROFESSOR NEVO'S VIEW AS WELL; CORRECT?

A. OKAY. AND I BELIEVE WHAT WE'RE SAYING HERE IS IF -- IF 

A -- LET ME MAKE SURE I GET THE LANGUAGE HERE RIGHT. 

IF AN IMPLEMENTER ENTERS THE MARKET LATER, AT WHICH TIME 

THERE ARE FEWER CHOICES BECAUSE THE PATENT IS ALREADY IN THE 

STANDARD, THEN WE DON'T TAKE THAT AS THE TIME AT WHICH A 

NEGOTIATION OCCURS. 

WE ASK ABOUT WHAT THAT IMPLEMENTER WOULD HAVE NEGOTIATED 

EARLIER BEFORE THERE WAS THE LOCK IN TO THE STANDARD. 

Q. BUT THE -- 

A. THAT'S THE POINT.

Q. FAIR ENOUGH. BUT THE IMPLEMENTER ALSO DOESN'T GET A BREAK 

OFF THE FRAND RATE SIMPLY BECAUSE HE OR SHE ENTERED LATER? 

THAT'S ALSO WHAT YOU'RE SAYING; CORRECT? 

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A. WELL, NO, THAT IS NOT CORRECT ACTUALLY, BECAUSE IF 

SOMEBODY ENTERS AT A POINT WHERE MAYBE, FOR EXAMPLE, SUPPOSE 

THAT THE MOST OF THE PORTFOLIO OF ONE LICENSEE, STANDARD 

ESSENTIAL PATENT HOLDER HAS EXPIRED, OKAY? THEN THE SITUATION 

IS GOING TO CHANGE BY THEN.

Q. BUT WHAT I SAID -- WHAT YOU SAID IN THE ARTICLE WAS THE 

REASONABLE PRICE IS THE PRICE THEY WOULD NEGOTIATE AT THAT 

POINT -- THAT'S THE BEGINNING -- NOT A PRICE THAT DIFFERS FOR 

EACH IMPLEMENTER DEPENDING ON THE HAPPENSTANCE OF WHEN THAT 

PARTY BEGINS TO IMPLEMENT THE STANDARD. 

THAT'S WHAT YOU WROTE; CORRECT? 

A. RIGHT. AND WHAT I WAS SAYING IS IT'S VERY IMPORTANT, THE 

WHOLE -- THE ESSENCE OF THIS IS TO AVOID PATENT HOLDUP, WHICH 

IS A PREVIOUS ARTICLE THAT MARK AND I HAD WRITTEN, AND THE FACT 

THAT SOMEBODY COMES IN LATER DOES NOT MEAN THEY SHOULD BE 

SUBJECT TO HOLDUP. 

Q. NOW -- 

A. THAT'S THE POINT.

Q. PROFESSOR SHAPIRO, YOU KNOW THAT A NUMBER OF LICENSE 

AGREEMENTS THAT QUALCOMM ENTERED INTO WITH OEM'S WERE ENTERED 

INTO BEFORE QUALCOMM TECHNOLOGY WAS ADOPTED INTO A STANDARD? 

YOU'RE AWARE OF THAT? 

A. I GUESS THERE ARE DIFFERENT STANDARDS OVER TIME. MAYBE 

YOU SHOULD TELL ME WHAT SPECIFIC LICENSE AGREEMENTS YOU MEAN. 

I'M REALLY -- 

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Q. WELL -- 

A. THERE ARE MANY DIFFERENT FACT PATTERNS. I'M NOT SURE WHAT 

YOU'RE REFERRING TO.

Q. SURE. YOU HAVEN'T EVEN ATTEMPTED TO FORM AN OPINION ON 

WHETHER QUALCOMM'S EARLY CDMA LICENSES, FOR EXAMPLE, WITH 

NOKIA, MOTOROLA, OR AT&T, ARE FRAND OR NOT; RIGHT? 

A. YOU KNOW, THIS HASN'T EVEN ATTEMPTED ALSO JUST -- IT 

JUST -- OKAY. I GUESS I DIDN'T ATTEMPT TO DO THAT, THAT IS 

TRUE.

Q. AND, THEREFORE, YOU ARE NOT IN A POSITION TO EXPRESS ANY 

OPINION, YOU HAVEN'T EXPRESSED AN OPINION, ON WHETHER THOSE 

LICENSE AGREEMENTS ARE FRAND OR NOT; RIGHT? 

A. SUCH AS A 1991 AGREEMENT BETWEEN QUALCOMM AND AT&T? 

THAT'S THE SORT OF THING WE'RE TALKING ABOUT?

Q. THAT'S ONE EXAMPLE. 

A. NO, I DON'T KNOW WHETHER THAT WAS FRAND OR NOT. I HAVE NO 

REASON TO THINK IT WASN'T. I JUST -- THAT'S -- WHAT IS THAT, 

28 YEARS AGO? NO. 

Q. AND SIMILARLY, YOU BECAME AWARE THAT SAMSUNG AND QUALCOMM 

ENTERED INTO A LICENSE AGREEMENT IN 1993; CORRECT? 

A. I DON'T HAVE THESE EARLY LICENSE AGREEMENTS MEMORIZED. IF 

YOU WANT TO SHOW ME SOMETHING IN MY REPORT OR SHOW ME THE 

AGREEMENT.

Q. WELL, LET'S TAKE A MORE RECENT ONE. THEY ENTERED INTO A 

SAMSUNG AGREEMENT IN 2018 AS WELL; RIGHT?

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1216

A. YES, I AM AWARE OF THAT. 

Q. OKAY. AND YOU'RE NOT AWARE OF ANYTHING RELATED TO CHIPS 

OR CHIP POWER THAT AFFECTED THE 2018 AGREEMENT BETWEEN QUALCOMM 

AND SAMSUNG, ARE YOU? 

A. I JUST DON'T THINK I KNOW THE PARTICULARS OF THAT. THAT 

WAS -- WAS THAT, WHAT, LIKE FEBRUARY OF 2018?

Q. ACTUALLY, YES. YOU TESTIFIED THAT YOU WERE NOT AWARE OF 

ANYTHING RELATED TO CHIPS OR CHIP POWER THAT AFFECTED THE 2018 

AGREEMENT BETWEEN QUALCOMM AND SAMSUNG; RIGHT? 

A. OKAY. LIKE I SAID, I -- I DON'T KNOW THE SPECIFICS OF 

THAT AGREEMENT, SO I JUST -- I DON'T THINK I ANALYZED THAT. WE 

COULD CHECK MY REPORT. 

Q. YOU TESTIFIED THAT ONE OF THE AFFECTS OF QUALCOMM'S 

CONDUCT, AT LEAST IN YOUR VIEW BASED ON THE TAX THEORY, WAS 

THAT CONSUMER PRICES HAVE GONE UP; RIGHT? 

A. WELL, AGAIN -- NO, NOT THAT THEY'VE GONE UP OVER TIME. 

THAT'S NOT THE PREDICTION. 

THESE ARE INDUSTRIES WHERE PRICES -- QUALITY DOES TEND TO 

COME DOWN, OFTEN RAPIDLY. 

THE POINT IS OTHER THINGS EQUAL, WHEN COSTS GO UP AND YOU 

IMPOSE A TAX, PRICE WILL GO UP. WHEN COSTS GO UP, PRICE WILL 

GO UP. 

Q. OKAY. SO, AGAIN, THAT'S PART OF YOUR THEORY THAT STARTS 

WITH A CONCLUSION THAT THERE'S A SUPRA-FRAND TAX EXTRACTED BY 

QUALCOMM'S CONDUCT; CORRECT? 

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A. YES. THE HARM TO CONSUMERS ARISING FROM HIGHER ALL-IN 

MODEM PRICES FLOWS FROM THE ROYALTY SURCHARGE.

Q. YEAH. SO, AGAIN, IF THE COURT WERE TO FIND THAT THE 

EVIDENCE DOESN'T SUPPORT THE EXISTENCE OF A SUPRA-FRAND TAX, 

YOUR OPINION AS TO HARM TO CONSUMERS, THAT GOES AWAY, TOO? 

A. SO IF THE COURT WERE TO FIND THAT THE NO LICENSE, NO 

CHIPS, THAT COMPLEX OF POLICIES WAS INEFFECTUAL, THEN -- AND 

THERE WERE NO ROYALTY SURCHARGE, THEN THESE RESULTS WOULD NOT 

FLOW BECAUSE THEY ARE EXPLAINING THE CONSEQUENCES OF SUCH A 

SURCHARGE.

Q. AND YOU HAVEN'T CONDUCTED ANY QUANTITATIVE ANALYSIS 

COMPARING HOW PRICING WOULD HAVE BEEN IN THE BUT FOR WORLD; 

RIGHT? 

A. THAT'S CORRECT, I HAVEN'T QUANTIFIED THE SURCHARGE WHICH I 

THINK YOU WOULD NEED TO DO TO GO THEN TRY TO TRACK THE 

PASSTHROUGH EFFECTS OF THE SURCHARGE. SO, NO, I HAVE NOT 

QUANTIFIED THOSE EFFECTS.

Q. AND YOU HAVEN'T DONE THAT FOR EITHER THE CDMA MARKET OR 

THE PREMIUM LTE MARKET; CORRECT? 

A. IT'S THE SAME ANSWER. I DID NOT QUANTIFY THE ROYALTY 

SURCHARGE, SO TRACING THROUGH THOSE EFFECTS IN EITHER OF THOSE 

MARKETS AND QUANTIFYING THAT IN TERMS OF IMPACT ON CONSUMERS, I 

HAVE NOT DONE THAT QUANTIFICATION.

Q. SO YOU HAVEN'T QUANTIFIED THE EFFECTS OF QUALCOMM'S 

CONDUCT ON HANDSET PRICES, EITHER; RIGHT? 

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1218

A. I THOUGHT THAT'S WHAT WE WERE TALKING ABOUT, BECAUSE 

THAT'S WHAT LEADS TO CONSUMER HARM WOULD BE THE HIGHER HANDSET 

PRICES RESULTING FROM THE HIGHER ALL-IN MODEM CHIP PRICES.

Q. AND AGAIN, PROFESSOR SHAPIRO, THAT IS WHAT WE'RE TALKING 

ABOUT, AND I JUST WANT TO BE CLEAR, YOU HAVEN'T QUANTIFIED THE 

EFFECTS OF QUALCOMM'S CONDUCT ON HANDSET PRICES AT ALL; RIGHT? 

A. I THINK IT'S THE SAME THING I'VE ALREADY ANSWERED. TO 

QUANTIFY THAT WOULD FLOW FROM A QUANTIFICATION OF THE ROYALTY 

SURCHARGE. I SAID I HAVE REASON TO BELIEVE IT'S SIGNIFICANT, 

BUT I'M NOT PUTTING A NUMBER ON IT. SO THEN I DON'T QUANTIFY 

THESE FOLLOW-ON AFFECTS.

Q. CAN I GET A YES OR NO TO MY QUESTION, PLEASE? 

A. MAYBE YOU WANT TO -- I DON'T KNOW EXACTLY WHAT IT WAS, 

SO... 

Q. YOU HAVE NOT QUANTIFIED THE EFFECTS OF QUALCOMM'S CONDUCT 

ON HANDSET PRICES IN ANY MARKET; RIGHT? 

A. THAT IS CORRECT. 

Q. ON TOP OF THAT, YOU HAVEN'T CONDUCTED ANY ANALYSIS, 

EMPIRICAL OR OTHERWISE, TO DETERMINE WHETHER THE OEM'S YOU'RE 

TALKING ABOUT HERE WOULD HAVE PASSED THROUGH SOME, ALL, OR NONE 

OF WHAT YOU CLAIM IS A SUPRA-FRAND ROYALTY; CORRECT? 

A. NO, THAT'S NOT CORRECT. 

Q. WELL, DO YOU TESTIFY -- DID YOU TESTIFY IN DEPOSITION THAT 

YOU HAVEN'T CONDUCTED ANY EMPIRICAL ANALYSIS TO ASSESS THE 

PASSTHROUGH RATES TO CONSUMERS OF ANY CHANGE IN QUALCOMM'S 

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ROYALTIES? DID YOU GIVE THAT TESTIMONY, SIR? 

A. WELL, THAT -- WHY DON'T WE LOOK AT THAT. THAT'S A 

DIFFERENT QUESTION THAN THE ONE YOU JUST ASKED ME BECAUSE IT 

WAS TALKING ABOUT EMPIRICAL ANALYSIS AND PASSTHROUGH RATES, AND 

THAT WASN'T THE QUESTION YOU ASKED ME PRIOR TO CALLING OUT MY 

DEPOSITION.

Q. OKAY. WELL, THEN, MAYBE WE MISUNDERSTOOD EACH OTHER. BUT 

I THINK THE FACT IS YOU HAVEN'T CONDUCTED ANY EMPIRICAL 

ANALYSIS TO TRY AND ASSESS THE PASSTHROUGH RATES TO CONSUMERS 

OF ANY CHANGE IN QUALCOMM'S ROYALTIES; RIGHT? 

A. SO WHEN YOU SAY EMPIRICAL ANALYSIS AND MEASURE -- I'M 

TAKING YOU TO MEAN QUANTIFICATION AGAIN. AND I, AGAIN, AM 

SAYING I HAVE NOT QUANTIFIED THOSE EFFECTS WOULD BE PASSTHROUGH 

OF THE ROYALTY SURCHARGE AND IMPACT ON CONSUMERS. 

BUT I HAVE CONDUCTED -- 

Q. YOU'VE ANSWERED MY QUESTION, PROFESSOR SHAPIRO. 

A. OKAY.

Q. AND IF THERE'S MORE THAT YOU'VE DONE, I'M SURE THAT'LL 

COME OUT THIS AFTERNOON. 

A. FAIR ENOUGH. 

Q. NOW, SEPARATE AND APART FROM THIS ANALYSIS WE'VE BEEN 

DISCUSSING, YOU ANALYZED HARM YOU SAY FLOWS FROM -- FLOWED FROM 

THE APPLE AGREEMENTS WITH QUALCOMM IN 2013; CORRECT? 

A. CORRECT. 

Q. NOW, APPLE ENTERED INTO THOSE AGREEMENTS VOLUNTARILY, 

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1220

DIDN'T IT? 

A. YES.

Q. IT'S A VERY SOPHISTICATED BUYER? 

A. I'M SURE. 

Q. IT'S A LARGE, STRATEGIC CUSTOMER?

A. IT IS. 

Q. AND AS A LARGE, STRATEGIC CUSTOMER, APPLE HAS A LOT OF 

ASSETS ON THEIR SIDE OF THE BARGAINING TABLE; FAIR? 

A. YES.

Q. AND APPLE'S AWARE THAT THEY'RE AN IMPORTANT BUYER; RIGHT? 

A. ONE MIGHT SAY OVERLY SO. 

Q. APPLE WOULDN'T ENTER INTO ANY AGREEMENT THAT IS AGAINST 

ITS OWN INTERESTS; RIGHT? THAT'S WHAT YOUR THEORY REQUIRES? 

A. MY THEORY?

Q. LET ME -- LET ME REASK IT. 

APPLE WOULDN'T ENTER INTO ANY AGREEMENT THAT IS AGAINST 

ITS OWN INTERESTS; RIGHT? 

A. SO AS AN ANTITRUST ECONOMIST, MY STANDING ASSUMPTION IS 

COMPANIES ACT IN THEIR OWN INTERESTS AND TRY TO MAXIMIZE 

PROFIT, AND THAT WOULD CERTAINLY APPLY TO APPLE.

Q. ALL RIGHT. AND YOU CERTAINLY WOULDN'T USE THE WORD 

"COERCED" TO DESCRIBE THE AGREEMENTS THAT QUALCOMM SIGNED WITH 

APPLE; RIGHT? 

A. I DON'T GENERALLY USE THE WORD "COERCED" AS AN ANTITRUST 

ECONOMIST. I KNOW PEOPLE USE IT, BUSINESS PEOPLE USE IT, 

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1221

LAWYERS USE IT. I JUST -- IT'S NOT A WORD THAT I TEND TO USE. 

Q. WELL, BUT IN FACT YOU TESTIFIED THAT IN PARTICULAR, YOU 

WOULDN'T USE IT HERE; RIGHT? 

A. THAT IS TRUE. I DON'T USE IT IN GENERAL, AND I DON'T USE 

IT HERE.

Q. AND YOU DIDN'T USE IT IN CONNECTION WITH THE APPLE 

AGREEMENT WITH QUALCOMM; CORRECT? 

A. I DID NOT.

Q. INSTEAD, YOU SAID THE APPLE REPRESENTATIVES NEGOTIATING 

THE AGREEMENTS WERE BIG BOYS AND GIRLS; RIGHT? 

A. THAT SOUNDS LIKE ME. 

(LAUGHTER.) 

BY MR. VAN NEST: 

Q. AND INDEED IT WAS. 

NOW, THE FIRST TRANSITION AGREEMENT -- EXCUSE ME. 

THE FIRST AMENDMENT, THE 2013 AGREEMENT, IT EXPIRED AT THE 

END OF 2016; CORRECT?

A. I BELIEVE SO.

Q. OKAY. AND IN TERMS OF ANY EFFECT THAT IT HAD, YOU HAVEN'T 

IDENTIFIED ANY OTHER CHIP MAKER BESIDES INTEL THAT YOU SAY WAS 

FORECLOSED FROM APPLE'S BUSINESS AS A RESULT OF THE AGREEMENT; 

RIGHT? 

A. THAT IS TRUE.

Q. AND YOU'RE NOT OFFERING ANY OPINION ON WHETHER QUALCOMM 

ENTERED INTO SO-CALLED EXCLUSIVE DEALS WITH ANYONE OTHER THAN 

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1222

APPLE; RIGHT?

A. THAT IS CORRECT.

Q. YOU'RE FOCUSSING ON THIS AGREEMENT WITH APPLE WHICH THIS 

MORNING YOU CALLED AN EXCLUSIVE DEALING ARRANGEMENT; CORRECT? 

A. YES.

Q. NOW, I THINK YOU CONCEDED THIS, BUT THE AGREEMENT ISN'T 

DE JURE EXCLUSIVE, THERE'S NO REQUIREMENT THAT APPLE REFRAIN 

FROM BRINGING IN ANOTHER CHIP MAKER; RIGHT? 

A. CORRECT. 

Q. AND, IN FACT, APPLE RETAINED THE RIGHT TO DO THAT 

THROUGHOUT THE TERM OF THE FIRST AMENDMENT; CORRECT? 

A. YES. I THINK -- JUST TO BE PRECISE, THE RIGHT TO DO THAT, 

THE AGREEMENT DID NOT -- WOULD NOT TREAT APPLE IN BREACH OF THE 

AGREEMENT, FOR EXAMPLE, IF THEY DID THAT. 

Q. ALL RIGHT. 

A. IF THAT'S WHAT YOU MEAN BY THE RIGHT TO DO IT. 

Q. THEY HAD THE RIGHT TO DO IT? 

A. I JUST -- WHEN YOU TALK ABOUT THE RIGHT, I JUST WANT TO BE 

PRECISE. YOU'VE GOT A CONTRACT. THE CONTRACT SAYS THINGS. IF 

THEY DID THAT, THAT WOULD BE CONSEQUENCES AND THEY WOULDN'T BE 

IN BREACH. 

Q. RIGHT. 

A. I DON'T KNOW IF YOU MEAN ANYTHING OTHER THAN THAT.

Q. AND YOU ARE FAMILIAR ENOUGH WITH THE AGREEMENTS TO KNOW 

THERE WAS NO MINIMUM PURCHASE REQUIREMENT AS MR. WILLIAMS TOLD 

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US THE OTHER DAY? 

A. OKAY, THAT'S RIGHT.

Q. AND THEY WEREN'T REQUIRED -- APPLE WASN'T REQUIRED TO 

PURCHASE ANY CHIPS FROM QUALCOMM AT ALL; RIGHT? 

A. WELL, NO. THE EXCLUSIVITY ARRANGEMENTS COVER ALL OF THAT.

Q. BUT THERE WAS NO MINIMUM PURCHASE REQUIREMENT, NO VOLUME 

GUARANTEE? THAT'S WHAT MR. WILLIAMS SAID WHEN HE WAS HERE THE 

OTHER DAY. 

A. THAT SOUNDS RIGHT, YES, I AGREE.

Q. AND, YET, APPLE WAS EXPECTING AND NEGOTIATING FOR AND 

RECEIVED, UNDER THE AGREEMENT, SOME VERY LARGE UPFRONT 

PAYMENTS; RIGHT? 

A. IN EXCHANGE FOR EXCLUSIVITY. THAT'S THE POINT. 

Q. OKAY. NOW, IN FACT, AS I THINK YOU SAID, APPLE DID BRING 

IN A SECOND SUPPLIER IN 2016. THAT WAS INTEL? 

A. CORRECT.

Q. THAT HAPPENED BEFORE THE AGREEMENT EXPIRED? THAT WAS IN 

DECEMBER; CORRECT? 

A. I THINK IT WAS SEPTEMBER ACTUALLY.

Q. BUT THE AGREEMENT EXPIRED IN DECEMBER; RIGHT? 

A. OH, I SEE. YES, I THINK THAT'S RIGHT. YOU'RE TELLING ME 

THAT. THAT SOUNDS RIGHT TO ME.

Q. AND AS OF 2018, INTEL BEGAN SUPPLYING 100 PERCENT OF THE 

MODEM CHIPS IN THE NEW IPHONE RELEASES; CORRECT? 

A. THAT'S MY UNDERSTANDING, YES. 

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Q. AND AS A RESULT, I THINK WE ESTABLISHED EARLIER, OF INTEL 

GAINING GROUND AT APPLE, QUALCOMM'S MARKET SHARE DECREASED FROM 

2016 INTO 2017; CORRECT? 

A. INEVITABLY THAT WOULD RESULT, YES. 

THE COURT: I'M SORRY TO INTERRUPT, BUT I'D LIKE TO 

TAKE OUR LUNCH BREAK NOW. IT'S NOON. 

MR. VAN NEST: THAT'S FINE, YOUR HONOR. 

THE COURT: ALL RIGHT. SO WE WILL SEE EVERYONE BACK 

AT 1:00 O'CLOCK. 

THANK YOU. 

(THE LUNCH RECESS WAS TAKEN FROM 12:00 P.M. UNTIL 1:05 

P.M.)

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AFTERNOON SESSION

(COURT CONVENED AT 1:05 P.M.) 

THE CLERK: COME TO ORDER, COURT IS NOW IN SESSION. 

THE COURT: OKAY. GOOD AFTERNOON. WELCOME BACK. 

MR. VAN NEST: GOOD AFTERNOON, YOUR HONOR. 

THE COURT: I HAVE A QUICK QUESTION. 

PLEASE TAKE A SEAT. 

YESTERDAY WAS THE DEADLINE FOR THE PARTIES TO FILE THEIR 

REVISED MOTIONS TO FILE THEIR FINDINGS OF FACT AND CONCLUSIONS 

OF LAW. QUALCOMM DID THAT. THE FTC DID NOT. IS THAT BECAUSE 

YOU'RE NOT SEEKING TO SEAL ANYTHING IN YOUR DOCUMENT? OR DID 

YOU MISS THE DEADLINE? 

MS. MILICI: YOUR HONOR, I'M SORRY, I'M NOT CERTAIN 

WHAT THE STATUS OF THAT IS. I THINK WE DID FILE THAT PRETRIAL 

STATEMENT, BUT I'M NOT PRESENTLY CERTAIN. BUT I CAN FIND OUT 

IF WE'RE STILL SEEKING TO SEAL SOMETHING. 

THE COURT: OKAY. IF YOU NEED AN EXTENSION OF THE 

DEADLINE, YOU SHOULD LET ME KNOW. 

WHAT I'D LIKE TO DO IS TO -- SO I JUST -- WE HAVE NO 

PENDING SEALING MOTIONS IN THIS CASE, I JUST FILED THREE OF 

THEM OVER LUNCH. 

SO WHAT I'D LIKE TO DO IS TO HAVE YOU WAIT, UNLESS YOU 

WANT TO DO YOURS SOONER, UNTIL THE TRIAL IS OVER BECAUSE 

THROUGH THE DEPOSITIONS AND, YOU KNOW, CERTAIN THINGS ARE 

BECOMING PART OF THE PUBLIC DOMAIN, AND SO THERE'S NO NEED FOR 

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US TO INTERIM SEAL IT AND THEN HAVE SOMEONE TESTIFY TO IT AND 

THEN -- SO I WAS GOING TO HAVE YOU JUST -- YOU COULD DO WHAT I 

ASKED QUALCOMM TO DO, IS WAIT UNTIL THE END OF THE TRIAL, UNTIL 

FEBRUARY 8TH, A WEEK AFTER THE TRIAL IS OVER, AND THEN, YOU 

KNOW, LOOK BACK AND FIGURE OUT WHAT NOW IS PUBLIC AND SO THEN 

YOU CAN NARROWLY TAYLOR IT, INSTEAD OF MAKING YOU DO AN INTERIM 

REQUEST. 

AND THEN WHAT I WOULD LIKE YOU TO DO ALSO WITH THE 

ADDITIONAL TIME IS GO TO THE THIRD PARTIES AND SAY, DO YOU CARE 

ABOUT THIS ANYMORE? DO YOU WANT THIS SEALED OR NOT? 

AND I WOULD LIKE THE THIRD PARTY DECLARATIONS TO ACCOMPANY 

YOUR MOTIONS SO THAT I KNOW -- BECAUSE IT'S A LITTLE BIT 

COMPLICATED IF I GET AN INTERIM MOTION FROM THE PARTIES AND 

THEN YOU ALL SAY, BUT YOU MIGHT BE GETTING DECLARATIONS FROM 

OTHER PEOPLE, I DON'T KNOW WHO, WHEN, IF I'LL GET THEM. IT 

WOULD JUST BE EASIER IF I COULD HAVE ONE COORDINATED POSITION, 

AND IT WOULD BE A LOT EASIER TO GRANT THEN KNOWING EVERYONE'S 

POSITION IS COORDINATED. 

MS. MILICI: WE'RE VERY HAPPY TO DO THAT. THANK YOU, 

YOUR HONOR. 

THE COURT: OKAY. SO WHY DON'T YOU SIMILARLY FILE 

YOURSELF ON FEBRUARY 8TH, JUST LIKE QUALCOMM, WITH THE THIRD 

PARTY DECLARATIONS. AND DO NOT TRY TO SEAL ANYTHING THAT 

BECOMES UNSEALED DURING THIS PROCESS. OKAY? 

MS. MILICI: UNDERSTOOD, YOUR HONOR. THANK YOU. 

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THE COURT: ALL RIGHT. I'M ALSO ASSUMING THAT YOU'LL 

PROBABLY HAVE OBJECTIONS TO EACH OTHER'S CLOSING ARGUMENT 

SLIDES. 

MS. MILICI: I THINK THAT'S SAFE. 

THE COURT: WELL, SURPRISE ME, OKAY, AND DON'T. 

BUT IF YOU DO, CAN WE DO THE SAME HIGH PRIORITY OBJECTION 

PROCESS AND HAVE YOU FILE THOSE THURSDAY MORNING AT 8:00 SO WE 

CAN GIVE YOU RULINGS THAT DAY. WE'LL TRY TO DO IT AS SOON AS 

WE CAN SO YOU CAN INCORPORATE THEM INTO YOUR PREPARATION. 

MR. VAN NEST: WE HAD NONE TO THE OPENINGS, SO I'M 

ANTICIPATING THE SAME FOR THE CLOSING. 

THE COURT: ALL RIGHT. THAT WOULD BE GREAT. 

MS. MILICI: WE DID WORK OUT OBJECTIONS TO EACH OTHER 

DIRECTLY BEFORE THE OPENINGS, SO WE MIGHT STILL SURPRISE YOU. 

THE COURT: OKAY. 

MS. MILICI: BUT IF WE DO HAVE OBJECTIONS, I THINK 

THAT -- 

THE COURT: IF YOU COULD DO IT ALONG THAT TIMEFRAME, 

AND THE SAME PROCESS. 

MR. VAN NEST: WE'LL GET -- IF WE HAVE OBJECTIONS, 

WE'LL GET THEM IN THAT MORNING, YOUR HONOR. 

THE COURT: PERFECT. 

MR. VAN NEST: BUT I'M NOT REALLY ANTICIPATING THAT. 

THE COURT: OKAY. WELL, THAT -- THANK YOU. IF YOU 

DON'T, I REALLY APPRECIATE THAT. 

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OKAY. AND THEN I'M ACTUALLY THINKING THAT MAYBE WE WILL 

COME UP WITH A CHART AND ASK -- YOU KNOW, YOU CAN COMMENT ON IT 

AND THEN ASK YOU TO POPULATE IT. 

MR. VAN NEST: YOU COULD DO THAT. WE'VE BEEN TALKING 

AND I SAID WE'D HAVE SOMETHING TO YOU BY THE END OF THE WEEK, 

AND I THINK -- WELL, WE'VE BEEN TALKING ABOUT WHAT WE'RE GOING 

TO PROPOSE. 

THE COURT: ALL RIGHT. 

MR. VAN NEST: GIVE US A CHANCE. 

THE COURT: ALL RIGHT. THAT'S FINE. 

MR. VAN NEST: IF YOU DON'T LIKE IT, THEN YOU CAN -- 

SURE. GIVE US A SHOT. 

THE COURT: THAT'S FINE. THAT'S FINE. 

MR. VAN NEST: THANK YOU. 

THE COURT: ALL RIGHT. NOW, LET'S GO BACK TO THE 

CROSS-EXAMINATION. 

TIME IS 1:09. GO AHEAD, PLEASE. 

BY MR. VAN NEST: 

Q. GOOD AFTERNOON, PROFESSOR SHAPIRO. WELCOME BACK. 

A. THANK YOU. GOOD AFTERNOON. 

Q. I WANT TO PUT UP ON THE SLIDE SOMETHING THAT MAY -- 

SOME OF THIS IS SEALED, YOUR HONOR, SO I'VE COVERED THE 

CAP? 

THE COURT: OKAY. 

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BY MR. VAN NEST: 

Q. IT'S SLIDE 37, MR. DAHN. IT'S A SLIDE THAT YOU SHOWED 

THIS MORNING. 

WHILE WE GET THAT UP, LET ME JUST ASK, THERE WERE TWO 

TRANSITION AGREEMENTS AS YOU UNDERSTAND IT, PROFESSOR SHAPIRO, 

ONE IN 2011 AND ONE IN 2013? 

A. YES, THAT'S RIGHT.

Q. OKAY. AND THE PRODUCTS, THE INTEL PRODUCTS YOU'RE 

CLAIMING WERE FORECLOSED, THEY'RE LATER, 2014, 2016; CORRECT? 

A. CONTESTABLE PRODUCTS HERE THAT ARE USED FOR THIS TEST ARE 

A LAUNCH BEGINNING IN 2014. 

Q. OKAY. AND SO YOU'RE NOT IDENTIFYING ANY APPLE DEVICE THAT 

INTEL WAS EXCLUDED FROM IN 2011, 2012 OR 2013; CORRECT? 

A. MY CONTESTABLE PRODUCTS DO NOT INCLUDE THOSE EARLIER APPLE 

DEVICES.

Q. OKAY. AND IS THAT BECAUSE, AS MR. WILLIAMS SAID 

YESTERDAY, APPLE WANTED TO HAVE A SOLE SOURCE WITH QUALCOMM 

ANYWAY? OR BECAUSE INTEL PRODUCTS WEREN'T READY? OR BOTH? 

A. I AM SIMPLY LOOKING AT WHAT -- THE BUSINESS THAT WAS 

CURRENTLY AVAILABLE, OR CONTESTABLE AT THE TIME LEADING UP TO 

THE 2013 AGREEMENTS.

Q. OKAY. 

A. SO THAT -- THAT'S HOW -- THAT'S HOW I PICKED THIS SET OF 

PRODUCTS.

Q. OKAY. BUT IN OTHER WORDS -- IN OTHER WORDS, YOU'RE NOT 

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CONTENDING THAT THERE WAS ANY FORECLOSURE AT AN EARLIER TIME, 

2011, 2012, 2013 AS A RESULT OF THESE AGREEMENTS? 

A. NO. THE EFFECTS WOULD BE FELT HERE STARTING WITH THE 

PRODUCTS LISTED ON THIS CHART -- 

Q. OKAY. 

A. -- WHICH ARE STARTING IN 2014.

Q. OKAY. AND AS WE SEE ON THE CHART HERE, THE PRODUCTS 

YOU'RE LISTING, THOSE ARE ALL LIMITED TO -- THOSE ARE IPADS, 

NOT PHONES; RIGHT? 

A. YES. THESE ARE THE CONTESTABLE PRODUCTS AT THE TIME THAT 

I'M USING FOR THE TEST. 

OF COURSE, TO THE EXTENT INTEL WAS KEPT OUT OF GETTING 

INTO THE APPLE ACCOUNT AT THIS TIME, IT HAD SOME FOLLOW-ON 

EFFECTS AS WELL.

Q. WE'LL GET TO THAT IN A MINUTE. 

A. OKAY.

Q. I JUST WANT TO BE SURE THE COURT'S CLEAR. 

THE PRODUCTS THAT YOU'RE LISTING HERE AS CONTESTABLE, IN 

OTHER WORDS, THAT INTEL HAD A SHOT TO GET, THOSE ARE ONLY 

IPADS, NOT IPHONES; RIGHT? 

A. THAT'S CORRECT. THESE -- THESE HERE ARE IPADS AS SHOWN, 

CORRECT.

Q. AND YOU'VE DONE YOUR ANALYSIS HERE ON PROFIT SACRIFICE, ET 

CETERA, BASED ONLY ON THE IPADS, GIVING NO CONSIDERATION TO THE 

IPHONES; RIGHT? 

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A. WELL, IN THIS PRIMARY SCENARIO HERE, THE CONTESTABLE 

PRODUCTS DO NOT INCLUDE ANY IPHONE.

Q. OKAY. AND THAT'S BECAUSE AS OF THIS TIME, OCTOBER 2014, 

INTEL WASN'T COMPETITIVE FOR IPHONES; RIGHT? 

A. NO, NO. THAT'S -- YOU'VE GOT THE TIMING -- THAT'S NOT 

CORRECT IN TERMS OF THE TIMING.

Q. WELL, PUT IT THIS WAY: YOU'RE NOT CONTENDING THAT AS OF 

THIS DATE, THE DATE THAT THIS SLIDE PRESENTS, OCTOBER OF 2014, 

THAT ANY OF THE IPHONE PRODUCTS WERE CONTESTABLE BY INTEL; 

RIGHT? 

A. WHAT I'M SAYING IN MY PRIMARY SCENARIO THAT I PRESENTED TO 

THE COURT WAS THAT THE BUSINESS THAT INTEL WAS -- HAD A REAL 

PROSPECT OF WINNING FROM APPLE PRIOR TO THE SIGNING OF THE FATA 

WAS THIS SET OF PRODUCTS AND NOT IPHONE PRODUCTS AT THAT TIME. 

Q. OKAY. 

A. THEY WOULD HAVE TO FIRST SELL THESE AND THEN GET INTO THE 

IPHONE WAS THE LOGIC OF IT. 

Q. AND -- 

THE COURT: I'M SORRY TO INTERRUPT YOU. 

COULD YOU ALL PLEASE MAKE ROOM FOR PEOPLE STANDING IN THE 

BACK? THANK YOU. 

SORRY TO INTERRUPT. 

GO AHEAD, PLEASE. 

MR. VAN NEST: THAT'S QUITE ALL RIGHT, YOUR HONOR.

Q. AND THAT'S BECAUSE INTEL DIDN'T HAVE A SHOT AT IPHONE AS 

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OF THIS TIME; RIGHT? 

A. THE IPHONE THAT WOULD HAVE -- IN THAT FIRST -- AT THAT 

FIRST INSTANCE, THERE'S A -- AGAIN, I THINK THERE'S SOME 

AMBIGUITY. THAT'S WHY MY SECOND SCENARIO DOES INCLUDE SOME 

IPHONES. 

BUT THE PRIMARY SCENARIO DOES NOT BECAUSE APPLE WAS 

PURSUING THIS STRATEGY OF WORKING WITH INTEL FIRST ON THE IPADS 

AS A STEPPING STONE, IF YOU WILL, TO DO THE IPHONES LATER.

Q. RIGHT. THEY DIDN'T ACTUALLY TRUST INTEL TO GO INTO THE 

IPHONE STRAIGHT AWAY. THEY WANTED THEM TO GO INTO THE IPAD 

FIRST? 

A. YOU KNOW, TRUST IS A LITTLE BIT OF A LOADED TERM. WHAT I 

UNDERSTAND FROM MR. BLEVINS IS THAT THEY WERE PREPARED TO GO 

FORWARD WITH INTEL ON THE IPADS. AND THEN LATER THEY WOULD 

HOPE THAT THAT WOULD BE A GOOD SECOND ALTERNATIVE TO QUALCOMM 

FOR THE IPHONES.

Q. RIGHT. BUT THEY WERE PERFECTLY WILLING AND, OF COURSE, 

HAD BEEN SINGLE SOURCING FROM QUALCOMM FOR ALL PRODUCTS, 

IPHONES, AND IPADS; CORRECT? 

A. WELL, UNDER THE TRANSITION AGREEMENT, YES, THEY WERE 

EXCLUSIVE WITH QUALCOMM.

Q. AND THAT'S BECAUSE QUALCOMM HAD A SINGLE SKU, A SINGLE 

UNIT THAT COULD MAKE DO FOR ALL OF THOSE PRODUCTS; RIGHT? 

A. WELL, I THINK THAT'S TRUE. BUT I DON'T -- I WOULDN'T 

ATTRIBUTE THAT FACT TO THE EXCLUSIVE ARRANGEMENT BETWEEN APPLE 

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AND QUALCOMM UNDER THE TRANSITION AGREEMENT. 

Q. NOW, UNDER YOUR VIEW OF THE WORLD, IF INTEL HAD GOTTEN 

INTO THE IPAD FIRST EARLIER, THEY HAD A SHOT AT GETTING INTO 

THE IPHONE EARLIER; RIGHT? 

A. THAT'S RIGHT. IT WOULD HAVE IMPROVED THEIR PROSPECTS AND 

PUT THEM IN A STRONGER POSITION TO GET INTO THE IPHONE EARLIER 

THAN THEY ULTIMATELY DID, AND ALSO IT WOULD JUST MADE THEM MORE 

GENERALLY A STRONGER COMPETITOR IN THE MARKET FOR PREMIUM LTE 

MODEM CHIPS. 

Q. AND AS -- I THINK YOU TESTIFIED THAT THE EARLIEST, EVEN 

UNDER YOUR SCENARIO, THAT INTEL WOULD HAVE QUALIFIED TO BE IN 

AN IPHONE WAS AROUND 2015?

A. YES, THAT WOULD BE THE PRIMARY SCENARIO HERE -- 

Q. OKAY. 

A. -- IS THAT IT WOULD BE THE 2015 IPHONES THAT INTEL WOULD 

HAVE BEEN IN A STRONGER POSITION TO COMPETE FOR IF THEY HAD 

FIRST BEEN IN IPADS.

Q. AND AS IT TURNED OUT, AS YOU'VE SAID, INTEL SKIPPED RIGHT 

INTO THE IPHONE WITHOUT PRODUCING AN IPAD FIRST, AND THAT 

HAPPENED IN SEPTEMBER OF 2016; RIGHT? 

A. SO -- YES, IF I CAN MAKE SURE WE'RE SAYING THE SAME THING. 

APPLE ULTIMATELY PICKED INTEL CHIPS FOR THE IPHONE IN 2016 

WITHOUT FIRST TESTING THEM OUT, IF YOU WILL, IN AN EARLIER IPAD 

MODEL.

Q. SO THE UPSHOT OF THAT IS THAT INTEL GOT INTO THE IPHONE 

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ONLY ABOUT A YEAR LATER THAN YOU WERE PREDICTING IN YOUR 

SCENARIO; CORRECT? 

A. THAT IS CORRECT.

Q. OKAY. AND THAT WAS TWO YEARS AGO PLUS; RIGHT? 

A. THEY DID GET IN IN 2016, AND SO THAT'S ABOUT TWO YEARS OR 

SO. 

OH, YES -- THE PLUS THREW ME OFF. I UNDERSTAND, YES. 

Q. NOW, AS IT TURNS OUT, BASED ON WHAT MS. EVANS SAID, INTEL 

ABANDONED ITS SYSTEM ON A CHIP MOBILE DEVELOPMENT PROGRAM BACK 

IN 2016; RIGHT? 

A. I CAN'T REMEMBER THE EXACT TIME, BUT SHE DID SAY THAT IT 

HAD NOT -- I THINK SHE SAID IT FAILED, THAT DEVELOPMENT 

PROGRAM.

Q. RIGHT. AND NOT ONLY DID IT FAIL, BUT THEY DON'T HAVE ANY 

INTEREST IN REVIVING IT BECAUSE THEY'RE NOT INTERESTED IN BEING 

IN THE HANDSET BUSINESS; RIGHT? 

A. I DON'T THINK INTEL IS INTERESTED IN BEING IN THE HANDSET 

BUSINESS.

Q. THEY'RE NOT INTERESTED IN SELLING SYSTEM ON A CHIP, WHICH 

IS WHAT MOST OEM'S TODAY ARE DEMANDING; RIGHT? 

A. I THINK THEY ARE NOT OFFERING THE SOC BECAUSE THEY'VE 

FOCUSSED ON THE THIN MODEMS AND THEY'RE HEADING INTO 5G AND THE 

INTERNET OF THINGS AS I UNDERSTAND WHAT SHE SAID.

Q. AND RIGHT NOW THE PRIMARY, PERHAPS ONLY, PURCHASER OF THIN 

MODEMS IN THE HANDSET BUSINESS IS APPLE; RIGHT? 

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A. I DON'T THINK THEY'RE THE ONLY CUSTOMER. 

Q. CERTAINLY THEY'RE THE VAST MAJORITY OF THIN MODEM SALES, 

AREN'T THEY? 

A. FOR INTEL, YEAH.

Q. FOR ANYBODY? 

A. I DON'T KNOW THE NUMBERS. YOU MEAN LIKE IN 2018?

Q. WELL, 2017, '16. DURING THE PERIOD YOU EVALUATED, WAS 

ANYBODY OTHER THAN APPLE BUYING THIN MODEMS? 

A. THEY WERE. I'D HAVE TO CHECK. IN MY HEAD, I THINK THAT 

APPLE WAS BUYING MAYBE TWO-THIRDS OF THEM, SOMETHING LIKE THAT.

Q. BUT IN ANY EVENT -- 

A. I DON'T KNOW THE EXACT NUMBER.

Q. IN ANY EVENT, IF WE TAKE MS. EVANS OF INTEL AT HER WORD, 

APPLE'S AGREEMENTS WITH QUALCOMM HAVEN'T CAUSED HARM TO ANY 

OTHER OEM FOR WHICH INTEL IS NOT A COMPETITOR ANYWAY; RIGHT? 

A. WELL, I THINK IF YOU POSTULATE THAT IF THERE'S AN OEM THAT 

INTEL WOULD NOT HAVE POSSIBLY BEEN A COMPETITOR FOR, THEN THE 

SLOW DOWN DELAY, IF YOU WILL, AT APPLE, BY DEFINITION WOULDN'T 

AFFECT THAT OEM'S SOURCING THAT OPTION.

Q. RIGHT. AND SINCE INTEL IS NOT MAKING SYSTEM ON A CHIP, 

THAT'S THE VAST, VAST MAJORITY OF ALL HANDSET MAKERS; RIGHT? 

A. WELL, IF YOU'RE COUNTING BY NUMBER OF MAKERS RATHER THAN, 

SAY, UNITS OF VOLUME HERE? IS THAT WHAT YOU MEAN BY MAJORITY?

Q. ANYWAY YOU KNOW IT, PROFESSOR SHAPIRO. 

A. WELL, APPLE IS VERY LARGE, RIGHT? SO YOU'RE SAYING APART 

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FROM APPLE, THOUGH? IS THAT WHAT YOU'RE SAYING?

Q. THAT'S RIGHT. APART FROM APPLE, THERE'S VIRTUALLY NO 

OTHER HANDSET MAKER THAT WOULDN'T PREFER, DOESN'T, IN FACT, 

PREFER BY NOW SYSTEM ON A CHIP AS OPPOSED TO A THIN MODEM? 

THAT'S MY POINT. 

A. RIGHT. I THINK THEY ARE GENERALLY BUYING SOC'S, ALTHOUGH 

I DON'T KNOW WHAT THE TECHNICAL SIDE OF IT WOULD BE ABOUT, YOU 

KNOW, BASICALLY BUYING A THIN MODEM AND MARRYING IT WITH AN 

APPLICATION PROCESSOR, IF THAT WAS ATTRACTIVE.

Q. SO IF THAT'S THE CASE, AND IT IS, THE FACT THAT INTEL -- 

THE FACT THAT THERE WAS ANY DELAY AT ALL HAS NO EFFECT ON ANY 

OTHER OEM BECAUSE THEY'RE NOT BUYING THOSE THIN MODEMS ANYWAY; 

RIGHT? 

A. I THINK THE WAY THINGS HAVE PLAYED OUT IN FACT, GIVEN 

INTEL'S FAILURE WITH THAT PROGRAM, THAT THESE AFFECTS HAVE 

PROVEN TO BE MORE LIMITED, THE COMPETITIVE EFFECTS, THAN THEY 

MIGHT HAVE BEEN IF INTEL HAD BEEN MORE SUCCESSFUL. OF COURSE, 

THAT WAS UNKNOWN AT THE TIME BACK IN 2012.

Q. YEAH. AND IN FACT, THE ONE MAJOR TARGET FOR INTEL, APPLE, 

THEY HAVE 100 PERCENT OF THE BUSINESS NOW AS WE ESTABLISHED 

EARLIER; RIGHT?

A. YES. THEY'VE ACHIEVED THAT AT APPLE. THAT'S MY 

UNDERSTANDING.

Q. NOW, I WANT TO COME BACK HERE TO YOUR SLIDE 37 AND JUST 

MAKE SURE THAT THE COURT UNDERSTANDS WHAT YOU'RE DOING HERE. 

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AS I UNDERSTAND IT, YOU'VE IDENTIFIED FIVE IPAD MODELS 

THAT YOU SAY WERE THE THINGS THAT INTEL WAS QUALIFIED FOR IN 

2014 AT APPLE; RIGHT? 

A. I WOULD PUT IT -- I DON'T WANT TO USE -- I DIDN'T USE THE 

WORD "QUALIFIED." I GUESS I WOULD SAY THAT APPLE WAS -- 

Q. CONSIDERING? 

A. -- YOU KNOW, SERIOUSLY CONSIDERING GIVING TO INTEL 

STARTING WITH THE 2014 MODELS, AND THAT WOULD BE BASICALLY AN 

AWARD AND A PATH THAT APPLE WAS PREPARED TO GO DOWN.

Q. AND THE NUMBER UNDER A, COLUMN A, INCENTIVE PAYMENTS AT 

RISK, THOSE ARE ALL THE INCENTIVE PAYMENTS THAT WERE AT RISK 

UNDER THE FIRST AMENDED TRANSITION AGREEMENT; RIGHT? 

A. AS OF OCTOBER 22ND, 2014.

Q. YOU'RE COMPARING THAT TO B. B IS NOTHING MORE THAN THE 

REVENUES, OR THE MARGINS I GUESS, FROM JUST THE IPADS; RIGHT? 

A. THAT'S CORRECT. 

Q. NOW, WHEN MR. MOLLENKOPF WAS HERE, HE TESTIFIED THAT HIS 

GOAL WAS TO GET THE BUSINESS THAT WAS AVAILABLE AT APPLE; 

RIGHT? 

A. THAT SOUNDS GENERALLY RIGHT, SURE.

Q. AND HE PRESENTED PROJECTIONS OF WHAT QUALCOMM EXPECTED TO 

EARN UNDER THIS AGREEMENT WITH APPLE IN 2013; CORRECT? 

A. HE PRESENTED -- ARE YOU REFERRING TO THE PROJECTIONS HE 

PRESENTED TO THE BOARD OF DIRECTORS LATER IN 2013?

Q. YES. YES. 

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A. I RECALL THAT, YES.

Q. OKAY. AND COULD WE HAVE UP -- AND WE'RE STILL CLOSED UP 

HERE -- CAN WE HAVE UP, PLEASE, CX 5389. 

DO YOU HAVE IT THERE, PROFESSOR SHAPIRO? 

A. I DO. 

Q. NOW, YOU'RE NOT SUGGESTING THAT THIS ANALYSIS THAT YOU 

SHOWED THE COURT THIS MORNING WAS ANYTHING THAT WAS DONE AT 

QUALCOMM? THEY DIDN'T DO THIS ANALYSIS OF YOUR PROFIT 

SACRIFICE PROGRAM; RIGHT? 

A. I DON'T THINK THEY DID THE SAME ANALYSIS I DID. I'M NOT 

SAYING THAT.

Q. OKAY. AND, IN FACT, WHAT WAS PRESENTED TO THE BOARD OF 

DIRECTORS HERE IS IN 5389, AND IT SHOWS -- AND, AGAIN, THIS IS 

PARTIALLY UNDER SEAL, PROFESSOR -- BUT IT SHOWS NET REVENUE 

NUMBERS FAR IN EXCESS OF WHAT'S SHOWN ON YOUR SLIDE 37 BECAUSE 

THEY'RE LOOKING AT THE ENTIRETY OF THE DEAL, NOT JUST THE 

IPADS; RIGHT? 

A. OH, YES. THE ENTIRE DEAL WAS PROFITABLE FOR QUALCOMM.

Q. AS A MATTER OF FACT, IT WAS EXTREMELY PROFITABLE ACCORDING 

TO THESE PROJECTIONS AND MR. MOLLENKOPF'S TESTIMONY; CORRECT? 

A. YES. I SEE THAT THERE'S A LOT OF PROFITS HERE. I THINK 

THIS MEANS -- IT TOOK ME -- IT WOULD TAKE ME A WHILE TO PARSE 

THROUGH WHAT THE ALTERNATIVE IS. IF THEY DON'T SIGN THE DEAL, 

THEY'RE LOSING A GREAT DEAL OF BUSINESS. 

SO IS THAT THE ASSUMPTION, THAT THEY WOULD LOSE ALL THIS 

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1239

BUSINESS WITHOUT THE DEAL?

Q. WELL, MY QUESTION WAS MORE SIMPLE. THIS IS THE ANALYSIS 

THAT MR. MOLLENKOPF PRESENTED TO HIS BOARD AND IT SHOWS THE 

DEAL AS BEING EXTREMELY PROFITABLE OVER THE ENTIRE PERIOD OF 

THE DEAL, NET OF THE INCENTIVES; CORRECT? 

A. WELL, I SEE THE PROFITS. BUT TO SAY IT'S EXTREMELY 

PROFITABLE, FOR ME TO KNOW WHAT THAT MEANS, I HAVE TO KNOW IN 

COMPARISON WITH WHAT. 

AND I CAN'T TELL THAT RIGHT NOW. 

Q. WELL -- 

A. IT WOULD TAKE ME LONGER READING THE NUMBERS. THAT'S ALL.

Q. IN COMPARISON WITH YOUR PROFIT SACRIFICE FORMULA, IT'S 

CERTAINLY FAR MORE FAVORABLE THAN WHAT YOU SHOWED ON SLIDE 37; 

CORRECT? 

A. WHAT DO YOU MEAN BY "FAVORABLE"?

Q. BETTER BY A VERY, VERY LARGE NUMBER. 

A. BETTER FOR QUALCOMM? 

Q. YES. 

A. WELL, CERTAINLY. IF YOU INCLUDE ALL OF THESE SALES THAT 

WHATEVER IS BEING COUNTED AS GENERATED BY THIS DEAL AND WOULD 

NOT OCCUR WITHOUT THE DEAL OVER THE WHOLE PERIOD OF TIME 

THROUGH FISCAL '16, THAT'S NOT THE PROFITS SACRIFICE TEST THAT 

AN ANTITRUST ECONOMIST RUNS.

Q. UNDERSTOOD. 

A. THAT'S A DIFFERENT QUESTION.

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1240

Q. BUT I GUESS MY QUESTION IS, IN THE REAL WORLD WHEN 

QUALCOMM SIGNED THIS DEAL WITH APPLE, QUALCOMM WAS EXPECTING TO 

EARN A SIGNIFICANT PROFIT OVERALL ON THE TRANSACTION; CORRECT? 

A. I BELIEVE THAT'S CORRECT, WITH WHATEVER COUNTER FACTUAL 

THEY HAD IN MIND WITHOUT THE DEAL. BUT THAT'S WHAT WAS 

PRESENTED. 

I'M NOT DISPUTING THAT.

Q. THANK YOU. THANK YOU. 

NOW, WE TALKED EARLIER, AND YOU AND I TALKED EARLIER, 

ABOUT THE POLICY AT QUALCOMM OF NOT SELLING CHIPS TO OEM'S WHO 

DO NOT HAVE A LICENSE. 

DO YOU RECALL THAT TESTIMONY? 

A. YES. 

Q. YEAH. AND YOU UNDERSTOOD THAT THAT'S BEEN QUALCOMM'S 

POLICY FOR MANY YEARS? 

A. I DO.

Q. AND THAT'S QUALCOMM'S POLICY REGARDLESS OF WHAT PARTICULAR 

CELLULAR STANDARD WE'RE TALKING ABOUT; RIGHT? 

A. YES, I UNDERSTAND THAT.

Q. SO IT APPLIES TO CDMA, TO PREMIUM LTE AS YOU DEFINE IT, TO 

WCDMA, ALL ACROSS ALL TECHNOLOGIES, QUALCOMM'S POLICY HAS BEEN 

THE SAME; CORRECT? 

A. THAT'S MY UNDERSTANDING, YES. 

Q. AND YOU HAVE NOTED IN YOUR REPORT THAT IF OEM'S HAD ACCESS 

TO CHIPS FROM OTHER PEOPLE AT A COMPARABLE PRICE AND WITH 

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1241

SUFFICIENT VOLUME, THEN QUALCOMM'S POLICY OF SELLING CHIPS ONLY 

TO FOLKS WITH A LICENSE COULD HAVE NO EFFECT IN ELEVATING THE 

PER UNIT ROYALTY PRICE; RIGHT? 

A. CAN YOU SHOW ME WHAT PART OF MY REPORT YOU'RE REFERRING 

TO, PLEASE?

Q. WELL, LET ME ASK YOU FIRST. DO YOU RECALL CONCLUDING THAT 

IF OEM'S HAD SUFFICIENT ALTERNATIVES AND ENOUGH VOLUME AND AT A 

COMPARABLE PRICE, THAT THE POLICY THAT YOU'VE BEEN SO CRITICAL 

OF WOULD HAVE NO EFFECT IN ELEVATING ROYALTIES AT ALL? 

A. IF THE COST TO AN OEM OF LOSING ACCESS TO QUALCOMM'S CHIPS 

WERE NIL, THEN THE NO LICENSE, NO CHIPS POLICY WOULD HAVE NO 

BITE, AND, THEREFORE, IT WOULD NOT BE ABLE -- QUALCOMM WOULD 

NOT BE ABLE TO ELEVATE ROYALTIES ABOVE REASONABLE LEVELS USING 

THAT POLICY ALONE. 

Q. AND AS I THINK WE ESTABLISHED EARLIER TODAY, YOU DON'T 

HAVE AN OPINION ON WHAT MARKET POWER QUALCOMM HAS TODAY; 

CORRECT? 

A. I'M NOT OFFERING OPINIONS ABOUT THEIR MONOPOLY POWER IN 

2019. 

MR. VAN NEST: THANK YOU. 

I HAVE NO FURTHER QUESTIONS, YOUR HONOR. 

THE COURT: OKAY. TIME IS 1:28. LET ME KNOW, ARE 

YOU READY? 

MR. JAMES: YES. 

THE COURT: LET'S WAIT UNTIL MR. VAN NEST SITS DOWN. 

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1242

MR. JAMES: SURE. 

MR. VAN NEST: THANK YOU, YOUR HONOR. 

THE COURT: OKAY. GO AHEAD, PLEASE. 1:29. NO, 

1:28. ACTUALLY, YOU GOT A COUPLE SECONDS. GO AHEAD. 

THE WITNESS: YOU RUN A TIGHT SHIP AROUND HERE. 

REDIRECT EXAMINATION

BY MR. JAMES: 

Q. HELLO AGAIN, PROFESSOR SHAPIRO. YOU WERE ASKED ABOUT YOUR 

OPINION REGARDING QUALCOMM'S MONOPOLY POWER IN CDMA AND HOW 

THAT OPINIONS COVERS THE PERIOD FROM 2006 TO 2016; RIGHT? 

A. YES.

Q. AND DID YOU FORM AN OPINION THAT QUALCOMM DIDN'T HAVE 

MONOPOLY POWER BEFORE THAT TIME? 

A. NO, I DID NOT ADDRESS THAT ONE WAY OR ANOTHER IN MY 

OPINION.

Q. MR. VAN NEST ASKED YOU IF YOU HAD QUANTIFIED THE ROYALTY 

SURCHARGE. 

IS THAT RIGHT? 

A. HE DID, A NUMBER OF TIMES.

Q. AND YOU SAID YOU HADN'T? 

A. CORRECT. 

Q. BUT IT'S PART OF YOUR OPINION THAT THE SURCHARGE IS 

SUBSTANTIAL; RIGHT?

A. THAT IS CORRECT.

Q. AND HOW DO YOU KNOW THAT? 

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A. SO BASED ON THE BARGAINING PRINCIPLES, THE ABILITY OF 

QUALCOMM TO ELEVATE THE ROYALTY ABOVE THE REASONABLE LEVEL BY 

USING THE THREAT OF A -- OF NOT SELLING CHIPS TO AN OEM IS 

PROPORTIONATE TO THE POWER OF THAT THREAT IN PARTICULAR, THE 

COST TO THE OEM OF NOT BEING ABLE TO OBTAIN ACCESS TO THE 

QUALCOMM CHIPS. 

AND I THINK THERE'S -- I'M RELYING ON OEM TESTIMONY HERE, 

AND BEYOND THAT, THAT THAT COST WAS VERY HIGH FOR OEM'S, AND SO 

I WOULD EXPECT, USING BARGAINING THEORY, THAT THE ROYALTY 

SURCHARGE THAT QUALCOMM WAS ABLE TO OBTAIN BY DEPLOYING THAT 

THREAT WAS ALSO -- WAS SUBSTANTIAL. 

Q. AND MR. VAN NEST ASKED YOU ABOUT WHETHER YOU HAD EXAMINED 

CHANGES IN RIVALS' R&D INVESTMENTS OVER TIME, I THINK ON A 

COMPANY-WIDE BASIS. 

DO YOU REMEMBER THAT?

A. YES, I DO. 

Q. SO MR. VAN NEST WAS PROPOSING KIND OF A COMPARISON OF 

BEFORE VERSUS AFTER. 

WAS THAT YOUR UNDERSTANDING?

A. I GUESS I FEEL LIKE HE WAS JUST SAYING, DID YOU TRACK THE 

R&D OVER TIME, WITH A SUGGESTION THAT THE THEORY SAYS IT SHOULD 

GO DOWN, AND IF IT DIDN'T GO DOWN, THERE WOULD BE A PROBLEM 

WITH THE THEORY.

Q. AND IN YOUR REPORT AND IN YOUR TESTIMONY TODAY YOU 

REFERRED TO A DIFFERENT KIND OF COMPARISON BETWEEN THE WORLD WE 

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1244

SEE TODAY AND THE WORLD IN A COUNTER FACTUAL WITHOUT QUALCOMM'S 

CONDUCT; IS THAT RIGHT? 

A. YES, IT IS.

Q. AND HOW ARE THE TWO KINDS OF COMPARISONS, THE ONE PROPOSED 

BY MR. VAN NEST AND THE ONE THAT YOU TALKED ABOUT IN YOUR 

TESTIMONY, HOW DO THEY DIFFER FROM ONE ANOTHER? 

A. WELL, IT'S A REALLY VERY DIFFERENT QUESTION. 

SO WE MIGHT SEE A COMPANY THAT WAS HAVING, WAS HAVING 

STABLE R&D BECAUSE THEIR MARKET SHARE -- THEY WERE NOT SELLING 

AS MANY CHIPS AS THEY WERE HOPING TO AND THE MARGINS WERE BEING 

TRIMMED, AND IF THE MARGINS HAD BEEN BIGGER, THEY WOULD HAVE 

HAD RISING R&D, THEY WOULD HAVE HAD MORE INVESTMENT. 

SO THE LEVEL -- THE PATH THAT WE SEE, WHICH WOULD REFLECT 

THE R&D FOR A GIVEN COMPANY WHICH WOULD BE AFFECTED BY MANY 

FACTORS, IT'S JUST THERE'S SO MANY VARIABLES THERE THAT LOOKING 

AT THAT IS NOT VERY INFORMATIVE. 

AND -- BUT SAYING THEY FACED HEADWINDS OR OBSTACLES OR HAD 

THEIR INCENTIVES REDUCED BECAUSE THEIR SALES WERE TRIMMED AND 

THEIR MARGINS WERE TRIMMED, THAT'S, I THINK, A VALID AND -- 

THAT'S WHAT WE CAN DO I THINK REALISTICALLY IN THIS TYPE OF 

SITUATION. 

THESE MARKETS ARE DYNAMIC, THEY'RE TURBULENT. A LOT OF 

THINGS ARE BUFFERING THEM, PLUS AND MINUS. AND TO TRY TO TEASE 

OUT THE EFFECT OF EVEN A SUBSTANTIAL ROYALTY SURCHARGE IN THAT 

ENVIRONMENT BY TRACKING THEIR FINANCIALS, I JUST DON'T THINK 

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1245

THAT WOULD WORK AS AN EMPIRICAL FORENSIC STRATEGY, AND SO THAT 

WAS WHAT I WAS TRYING TO DO.

Q. AND MR. VAN NEST ASKED YOU A NUMBER OF QUESTIONS ABOUT A 

TECHNOLOGICAL GAP BETWEEN THE OFFERINGS OF QUALCOMM AND THOSE 

OF ITS COMPETITORS; RIGHT?

A. YES, HE DID.

Q. IS THE FORTIFICATION AND PROLONGING OF THAT GAP A 

PREDICTED CONSEQUENCE OF QUALCOMM'S ROYALTY SURCHARGE? 

MR. VAN NEST: OBJECTION. IT'S LEADING. 

MR. JAMES: I'LL REPHRASE. 

THE COURT: OKAY. GO AHEAD. SUSTAINED. 

BY MR. JAMES:

Q. DO YOU HAVE A VIEW AS TO WHETHER QUALCOMM'S CONDUCT WOULD 

AFFECT A TECHNOLOGICAL GAP BETWEEN ITS PRODUCTS AND THOSE OF 

ITS COMPETITORS? 

A. SO I THINK OF IT THIS WAY: QUALCOMM SHOULD BE COMMENDED 

FOR ITS TECHNOLOGICAL ACHIEVEMENTS AND IN A NUMBER OF RESPECTS, 

THEY WERE LEADERS AND HAD SUPERIOR PRODUCTS, AS CAME OUT IN THE 

CROSS-EXAMINATION, AND THAT'S ONE OF THE REASONS THEY ACHIEVED 

AND HAD MARKET POWER, MONOPOLY POWER, NOT THE ONLY ONE. 

BUT IN THAT SITUATION, WHAT THE COMPETITIVE PROCESS, 

WHAT'S REALLY IMPORTANT, PARTICULARLY IN THESE HIGH TECH 

INDUSTRIES, IS THAT COMPANIES WHO AREN'T QUITE AS GOOD OR WHO 

DON'T HAVE THE SCALE ARE NOT IMPEDED FROM TRYING TO CATCH AND 

THREATEN AND CHALLENGE THE LEADER. 

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AND SO THAT'S MY FRAMING. 

SO IN OTHER WORDS, IF A COMPANY'S AHEAD, IT DOESN'T MEAN 

THEY'RE ALLOWED TO TRIP UP THE COMPANIES THAT ARE BEHIND THEM. 

IT MEANS THEY CAN'T DO THAT, ACTUALLY, AND MAYBE THEY'LL STAY 

AHEAD IN A FAIR RACE, MAYBE THEY WON'T. BUT WE'RE LOOKING FOR 

THE TRIPPING UP. 

AND THESE ROYALTY SURCHARGES HAVE THAT FUNCTION BECAUSE 

THEY RAISE THE COSTS OF QUALCOMM'S RIVALS.

Q. AND YOU WERE ASKED SOME QUESTIONS ABOUT WHY YOU CHOSE 

IPADS IN YOUR PROFIT SACRIFICE TEST INSTEAD OF ALL PRODUCTS 

OVER THE LIFE OF THE AGREEMENT. 

DO YOU REMEMBER THAT?

A. I DO.

Q. AND WHY DID YOU MAKE THAT CHOICE? 

A. SO, FIRST, THE IPADS WERE -- YOU KNOW, THE DOCUMENTS AT 

THE TIME AND THE TESTIMONY INDICATES THAT'S WHAT APPLE WAS 

REALLY, I THINK, ON THE VERGE OF AWARDING TO INTEL, THOSE IPADS 

IN LATE 2012 AND INTO VERY EARLY -- EARLY TO LATE 2012. 

THE WHOLE IDEA OF THIS TEST AND PROFIT SACRIFICE IS TO 

FOCUS ON THAT, THE PRODUCTS THAT WERE AVAILABLE AND WHERE THE 

ENTRANT HAD A SHOT AT, AND IF THE ENTRANT WOULD HAVE TO 

SACRIFICE -- WOULD HAVE TO LOSE A LOT OF MONEY TO GET THOSE 

PRODUCTS, EVEN IF THEY WERE JUST AS EFFICIENT AS THE INCUMBENT 

MONOPOLIST, THEN THAT RAISES CONCERNS IN MY VIEW AS AN 

ANTITRUST ECONOMIST. 

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1247

AND IF QUALCOMM IS SAYING, WELL, WE'RE MAKING ALL SORTS OF 

MONEY DOWN THE LINE, EVEN THOUGH WE'RE SACRIFICING PROFITS ON 

THIS FIRST BATCH, WELL, THAT'S A LOT LIKE PREDATORY PRICING, 

COMPANIES SAYING, OH, I'M SELLING ALL THIS STUFF BELOW COST 

NOW, BUT I'LL MAKE IT UP LATER IN RECOUPMENT. 

THAT'S EXACTLY WHAT WE WORRY ABOUT IN PREDATORY PRICING, 

AND THIS IS A COUSIN OF THAT ANALYSIS WHERE WE'VE GOT 

CONTESTABLE PRODUCTS AND THEN SUBSEQUENT PRODUCTS WITHIN THE 

SAME RELATIONSHIP AND AGREEMENT. 

Q. AND MR. VAN NEST ASKED YOU ABOUT A HYPOTHETICAL IN WHICH 

THE IMPACT OF LOSING QUALCOMM CHIPS WAS BASICALLY NIL. 

DO YOU REMEMBER THAT? 

A. I'M SORRY. COULD YOU BE MORE -- A LITTLE CLEARER ON THAT. 

Q. OH, SORRY. I THINK YOU WERE ASKED ABOUT THE CONSEQUENCES 

FOR LICENSE NEGOTIATIONS IN THE EVENT THAT THERE WASN'T MUCH 

COST TO OEM'S TO LOSING ACCESS TO QUALCOMM'S PRODUCTS. 

DO YOU REMEMBER THAT?

A. I DO.

Q. AND YOU QUALIFIED YOUR ANSWER BY SAYING THAT WHILE THE NO 

LICENSE, NO CHIPS POLICY WOULD HAVE NO BITE, YOU KNOW, THERE 

MAY BE OTHER FACTORS THAT WOULD INFLUENCE YOUR ANALYSIS OF 

ROYALTY TERMS. 

DO YOU REMEMBER THAT? 

A. WELL, I THINK I SAID -- I DON'T REMEMBER EXACTLY WHAT I 

SAID. BUT I WAS SAYING THAT WOULD TAKE AWAY THE STINK OF NO 

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1248

LICENSE, NO CHIPS ALONE. 

BUT THE OTHER POLICIES THAT WERE USED IN CONJUNCTION WITH 

IT STILL, THE INCENTIVE PAYMENTS AND THE REFUSAL TO LICENSE 

RIVALS, WOULD STILL HAVE SOME EFFECTS EVEN IN THAT SCENARIO.

Q. HOW DO YOU SEE THE INCENTIVE PAYMENTS RELATING TO 

QUALCOMM'S NO LICENSE, NO CHIPS POLICY? 

A. WELL, IT'S BASICALLY -- 

MR. VAN NEST: EXCUSE ME. OBJECTION, YOUR HONOR. 

THIS IS OUTSIDE THE SCOPE OF THE CROSS. I DIDN'T ASK A SINGLE 

QUESTION ABOUT THIS. 

MR. JAMES: I'LL JUST LIMIT IT TO WHAT YOU MEANT BY 

THE INCENTIVE PAYMENTS IN THIS PARTICULAR ANSWER THAT YOU JUST 

GAVE. 

MR. VAN NEST: SAME ANSWER. OR SAME OBJECTION, 

EXCUSE ME. 

THE COURT: OVERRULED. 

GO AHEAD. YOU CAN ANSWER. 

THE WITNESS: I JUST -- I THINK OF IT AS CARROTS AND 

STICKS, WHICH IS THE THREAT TO WITHDRAW SUPPLY OF CHIPS IS THE 

STICK, AND THEN QUALCOMM ALSO USED A CARROT TO CLOSE THE GAP, 

THAT IS, SOME INCENTIVE, SOME VALUE, SOME INCENTIVE PAYMENTS, 

ESPECIALLY WITH THEIR CHIPS, TO GET THE OEM TO AGREE TO THE 

ROYALTY RATE THAT THEY'RE SEEKING WHICH WOULD APPLY TO 

TRANSACTIONS THAT DON'T INVOLVE THEIR CHIPS. 

BY MR. JAMES:

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1249

Q. AND THE FINAL QUESTION IS MR. VAN NEST ASKED YOU TO READ 

THE FIRST SENTENCE OF PARAGRAPH 113 OF YOUR REBUTTAL REPORT. 

COULD YOU TURN AGAIN TO THAT PARAGRAPH? 

A. 113 PARAGRAPH?

Q. YES, OF THE REBUTTAL REPORT I BELIEVE. 

A. YES, I'M THERE.

Q. AND COULD YOU READ THE, THE FULL PARAGRAPH? 

A. OKAY. "5G-COMPLIANT CHIPS ARE NOT BEING INCORPORATED INTO 

COMMERCIAL HANDSETS UNTIL 2019. IT IS THUS NOT POSSIBLE 

RELIABLY TO ANALYZE THE MARKET FOR 5G CHIPS AT THIS TIME. BUT 

IF THE 5G LEAD THAT QUALCOMM EXPECTS MATERIALIZES, AND OEM'S 

ARE AS RELIANT ON QUALCOMM FOR 5G CHIPS AS THEY HAVE BEEN IN 

THE PAST FOR CDMA AND PREMIUM LTE CHIPS, THEN I WOULD EXPECT 

THE ANTICOMPETITIVE EFFECTS OF THE QUALCOMM POLICIES AT ISSUE 

IN THIS CASE TO CONTINUE INTO THE FUTURE." 

MR. JAMES: NO FURTHER QUESTIONS. 

THE COURT: OKAY. TIME IS 1:39. 

AND THAT ONE, YOUR REDIRECT STARTED AT 1:29. 

ALL RIGHT. 

MR. VAN NEST: JUST A COUPLE QUESTIONS, YOUR HONOR. 

THE COURT: ALL RIGHT. LET ME KNOW WHEN YOU'RE 

READY. YOU'RE READY? 1:39. 

GO AHEAD, PLEASE. 

MR. VAN NEST: I'M READY, YOUR HONOR. 

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UNITED STATES COURT REPORTERS

1250

RECROSS-EXAMINATION

BY MR. VAN NEST: 

Q. PROFESSOR SHAPIRO, JUST SO THE COURT IS CLEAR, YOU HAVE 

MADE NO EFFORT TO QUANTIFY THE EFFECT OF QUALCOMM'S POLICIES ON 

ANY OEM'S RESEARCH AND DEVELOPMENT EXPENSES OR THEIR PRICING OR 

THEIR MARKET SHARE; RIGHT? 

A. I HAVE NOT PROVIDED A QUANTIFICATION OF THOSE EFFECTS. 

MR. VAN NEST: I HAVE NOTHING FURTHER, YOUR HONOR. 

THE COURT: OKAY. TIME IS STILL 1:39. 

DO YOU HAVE ANY RE, REDIRECT? 

MR. JAMES: NO, I DO NOT. 

THE COURT: ALL RIGHT. IS THIS WITNESS EXCUSED, 

SUBJECT TO RECALL OR NOT SUBJECT TO RECALL? 

MR. JAMES: SUBJECT TO RECALL. 

THE COURT: OKAY. ALL RIGHT. 

THEN YOU ARE DONE FOR TODAY, BUT YOU MAY BE RECALLED. 

THE WITNESS: THANK YOU, YOUR HONOR. 

THE COURT: ALL RIGHT. AND ARE YOUR NEXT WITNESSES 

VIDEOS? 

MR. VAN NEST: YOUR HONOR, ACTUALLY, WE HAD MADE AN 

ARRANGEMENT WITH THE FTC. 

I'LL LET MS. MILICI DESCRIBE IT. 

MS. MILICI: TO ACCOMMODATE ONE OF QUALCOMM'S 

WITNESSES, WE'VE AGREED TO ALLOW THEM TO CALL ONE OF THEIR 

WITNESSES NOW. WE STILL HAVE A COUPLE OF VIDEOS LEFT TO PLAY, 

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BUT THEY HAVE A WITNESS WHO'S GOT LIMITED AVAILABILITY, SO 

THEY'RE GOING TO CALL HIM BEFORE WE'VE RESTED. 

THE COURT: OKAY, THAT'S FINE. THEN LET'S GO AHEAD 

AND BRING THAT WITNESS IN, PLEASE. 

WHAT'S THE NAME? 

MR. VAN NEST: YOUR HONOR, QUALCOMM CALLS 

DR. IRWIN JACOBS. 

THE CLERK: WOULD YOU PLEASE RAISE YOUR RIGHT HAND. 

THE WITNESS: SIT DOWN? 

THE CLERK: NO. PLEASE STAND. PLEASE STAND. 

THE WITNESS: STAND? 

THE CLERK: YES. 

THE WITNESS: OKAY. SORRY. 

THE CLERK: PLEASE RAISE YOUR RIGHT HAPPENED. 

(DEFENDANT'S WITNESS, IRWIN JACOBS, WAS SWORN.)

THE WITNESS: YES, I DO. 

THE CLERK: THANK YOU. PLEASE BE SEATED.

MR. VAN NEST: WE HAVE SOME NOTEBOOKS, YOUR HONOR. 

THE COURT: OKAY. 

THE CLERK: WOULD YOU PLEASE STATE YOUR FULL NAME AND 

SPELL YOUR LAST NAME FOR THE RECORD. 

THE WITNESS: FULL NAME, IRWIN MARK JACOBS. 

I-R-W-I-N, M-A-R-K, J-A-C-O-B-S. 

THE COURT: OKAY. TIME IS 1:41. GO AHEAD, PLEASE. 

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DIRECT EXAMINATION

BY MR. VAN NEST: 

Q. DR. JACOBS, WOULD YOU PLEASE INTRODUCE YOURSELF TO THE 

COURT? 

A. YES. I'M IRWIN JACOBS. I'M THE FOUNDING CHAIRMAN AND CEO 

EMERITUS OF QUALCOMM.

Q. CAN YOU BRIEFLY EXPLAIN YOUR ROLES AT QUALCOMM OVER THE 

YEARS, DR. JACOBS? 

A. WELL, I WAS ONE OF THE EIGHT FOUNDERS OF THE COMPANY, VERY 

INSTRUMENTAL IN BEING ABLE TO SELECT WHICH PROJECTS WE WORKED 

ON OVER THE YEARS, HAD GREAT EXCITEMENT IN GROWING THE COMPANY 

FROM SOMETHING SMALL TO SOMETHING VERY SUBSTANTIAL, AND IN 

PARTICULAR, COMING UP WITH SOME INITIAL IDEAS THAT BECAME VERY 

USEFUL TO PEOPLE WORLDWIDE. 

SO A VERY SATISFACTORY CAREER. 

Q. WAS THERE A POINT IN TIME WHEN YOU WERE THE CEO OF 

QUALCOMM? 

A. YES, I WAS CEO FROM THE BEGINNING AND UP THROUGH 2000 -- 

THROUGH THE 20TH ANNIVERSARY IN 2005.

Q. OKAY. AND THEN DID YOU REMAIN ON THE BOARD FOR SOME 

PERIOD AFTER THAT?

A. I WAS CHAIRMAN FOR ANOTHER TWO AND A HALF YEARS, I 

BELIEVE, AND THEN ON THE BOARD FOR ANOTHER COUPLE OF YEARS, AND 

THEN I DID SERVE ALSO AS A GUEST FOR ANOTHER COUPLE OF YEARS.

Q. OKAY. SO YOU'VE BEEN GONE FROM THE BOARD NOW FOR SEVERAL 

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YEARS; IS THAT RIGHT? 

A. THAT IS CORRECT.

Q. COULD YOU TELL THE COURT BRIEFLY WHAT YOUR EDUCATIONAL 

BACKGROUND IS? 

A. I HAVE A BACHELOR'S IN ELECTRICAL ENGINEERING FROM CORNELL 

UNIVERSITY; A MASTER'S IN SCIENCE AND A SCIENCE DOCTORATE FROM 

M.I.T. 

Q. AND WHAT WAS YOUR PROFESSIONAL BACKGROUND BEFORE YOU 

FOUNDED QUALCOMM? 

A. AFTER GETTING MY DOCTORATE, I REMAINED AT M.I.T. ON THE 

FACULTY FOR SEVERAL YEARS, AND I WAS THE FIRST -- CO-AUTHORED 

THE FIRST TEXTBOOK ON DIGITAL COMMUNICATIONS. 

WE DECIDED TO MOVE TO CALIFORNIA, AND I JOINED AT THE 

FACULTY AT THE UNIVERSITY OF CALIFORNIA SAN DIEGO, WAS ON THE 

FACULTY THERE FOR SIX YEARS, AND THEN ENTERED BUSINESS. 

Q. WHEN WAS QUALCOMM FOUNDED? 

A. ON JULY 1ST, 1985.

Q. AND WHERE DOES THE NAME QUALCOMM COME FROM? 

A. WELL, WE ALWAYS REFER TO QUALITY IN OUR COMMUNICATIONS, SO 

WE PUT THE TWO TOGETHER FOR QUALCOMM.

Q. AND CAN YOU TELL US, WHAT WAS THE COMPANY'S MISSION AT THE 

OUTSET? WHAT WAS YOUR BASIC GAME PLAN? 

A. WELL, FIRST OF ALL, WE KNEW THAT IT WOULD BE -- WE DIDN'T 

HAVE A PRODUCT, WE DIDN'T HAVE A PARTICULAR BUSINESS PLAN, BUT 

WE KNEW THERE WOULD BE A LOT OF EXCITEMENT IN THE WIRELESS 

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AREA, IN THE DIGITAL AREA, AND WE ALWAYS HAD THE IDEA THAT WE 

DON'T WANT TO DO SOMETHING JUST A LITTLE BETTER THAN THINGS 

THAT EXISTED. WE WERE ALWAYS LOOKING FOR A MAJOR STEP, TAKE A 

SYSTEMS APPROACH, LOOK FOR CAPABILITIES THAT WE MIGHT BE ABLE 

TO BRING THROUGH, TAKE A RISK, AND IF SUCCESSFUL, HAVE 

SOMETHING THAT COULD BE USEFUL.

Q. AND WHEN YOU SAY "SYSTEMS APPROACH," "TAKE A SYSTEMS 

APPROACH," WHAT ARE YOU TALKING ABOUT? 

A. WELL, TAKING A LITTLE BIT BROADER THAN LOOKING AT A SINGLE 

COMPONENT OR A SINGLE CAPABILITY, BUT THERE'S USUALLY SOME 

PROBLEMS, TAKE A STEP BACK, TAKE A LARGE LOOK AT THE PROBLEM, 

HOW DO YOU APPROACH IT? 

ONE OF OUR FIRST PRODUCTS, FOR EXAMPLE, WAS OMNI TRACKS, 

WHICH WAS A COMMUNICATION SYSTEM FOR THE TRUCKING INDUSTRY, BUT 

YOU JUST COULDN'T PROVIDE THE COMMUNICATIONS. YOU HAD TO 

PROVIDE POSITIONAL LOCATION. BUT YOU HAD TO GET INTO THE 

LOGISTICS. YOU HAD TO LOOK AT THE WHOLE SYSTEM.

Q. CAN YOU TELL US, WHAT WAS THE STATE OF THE CELLULAR 

INDUSTRY BACK IN THE MID-'80S WHEN QUALCOMM WAS FOUNDED? 

A. I THINK IT WAS JUST GETTING OUT OF ITS INFANCY, REALIZING 

THERE WAS GOING TO BE SOME SUBSTANTIAL GROWTH. UNTIL THEN, HAD 

LARGELY BEEN BASED, FIRST GENERATION, ON ANALOG RADIO 

COMMUNICATION, FM RADIO BASICALLY. 

BUT EVERYBODY WAS BEGINNING TO SEE THAT IT LOOKED LIKE 

THERE WAS GOING TO BE SUBSTANTIAL SUBSCRIBER GROWTH, IT WAS 

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TIME TO MOVE OVER TO DIGITAL, SO THERE WAS A LOT OF INTEREST AT 

THAT POINT, HOW DO YOU GO FROM FIRST TO A SECOND GENERATION, 

PROVIDING VOICE OVER DIGITAL TECHNOLOGY.

Q. AND WHAT WAS THE PREVAILING TECHNOLOGY IN USE FOR CELLULAR 

BACK THEN? 

A. WELL, AGAIN ABOUT '85, IT WAS STILL FM. BUT OVER THAT 

PERIOD, COMPANIES AROUND THE WORLD WERE LOOKING BASICALLY AT 

THREE CHOICES: FREQUENCY DIVISION, MULTIPLE ACCESS, TIME 

DIVISION MULTIPLE ACCESS, CODE DIVISION MULTIPLE ACCESS. 

MOST OF THE COMPANIES HAD LOOKED AT CODE DIVISION AT THAT 

PERIOD DECIDED THERE WERE TOO MANY PROBLEMS, TOO MANY 

COMPLICATIONS, MAY NEVER BE COMMERCIAL, MAY NOT PROVIDE 

PROMISE. 

SO I THINK THE FOCUS AT THAT POINT WAS ON TDMA, TIME 

DIVISION OR FREQUENCY DIVISION, FDMA.

Q. AT A VERY HIGH LEVEL, DR. JACOBS, CAN YOU DISTINGUISH FOR 

US BETWEEN THOSE TWO, TIME DIVISION MULTIPLE ACCESS AND CODE 

DIVISION? WHAT'S THE PRINCIPLE DIFFERENCE? 

A. WELL, IN TIME DIVISION YOU HAVE A RADIOFREQUENCY CARRIER 

AND YOU DIVIDE UP TIME INTO TIME SLOTS AND YOU PROVIDE 

DIFFERENT USERS A DIFFERENT TIME SLOT REPETITIVELY. 

SO YOU GOT A SLOT, SOMEBODY ELSE GETS A SLOT, AND THEN 

EVENTUALLY IT COMES BACK TO YOU, AND YOU GET ANOTHER SLOT. SO 

YOU'RE PROVIDING A TIME DIVISION OF THAT FREQUENCY USE. 

IN CODE DIVISION, EVERYBODY IS ON SIMULTANEOUSLY AND THEY 

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DISTINGUISH THEMSELVES BY HAVING A DIFFERENT CODE THEY'RE 

LISTENING FOR. IT'S LIKE BEING IN A CONVERSATION, PERHAPS, 

WITH DIFFERENT LANGUAGES AND YOU'RE LISTENING TO ENGLISH, BUT 

SOMEBODY ELSE MIGHT BE LISTENING TO FRENCH. SO EVERYBODY COULD 

BE TALKING, BUT IN A WAY OF DISTINGUISHING THE ONE THAT YOU 

WANT TO LISTEN TO FROM THE OTHERS.

Q. AND WHEN DID YOU COME UP, WHEN DID QUALCOMM, YOU AND YOUR 

COLLEAGUES, COME UP WITH THE IDEA OF USING CDMA FOR CELLULAR 

AND MAKING THAT WORK? 

A. IT ACTUALLY WAS INTERESTING. WE DIDN'T HAVE THE IDEA WHEN 

WE FIRST STARTED THE COMPANY. 

BUT WE HAD A CONSULTING CONTRACT WITH HUGHES. THEY HAD 

SUBMITTED TO THE FCC A PROPOSAL TO BUILD A MOBILE SATELLITE 

COMMUNICATION SYSTEM, SATELLITES THAT WOULD PROVIDE MOBILE 

COMMUNICATION, AND THEY ASKED US TO REVIEW THE APPROACH, WERE 

THERE ANY TECHNICAL ISSUES OR WHETHER THERE MIGHT BE SOMETHING 

BETTER. 

AND INTERESTINGLY, AFTER THE SECOND MEETING IN LOS ANGELES 

AND DRIVING DOWN TO SAN DIEGO AND THINKING ABOUT IT, I REALIZED 

IT WOULD BE PERHAPS ADVANTAGEOUS IF YOU COULD TAKE ADVANTAGE OF 

THE TIMES WHEN SOMEONE STOPS SPEAKING TO LISTEN TO ANOTHER OR 

STOPS SPEAKING TO THINK ABOUT WHAT THEY WANTED TO SAY NEXT, 

TAKE ADVANTAGE OF THOSE GAPS TO LET SOMEBODY ELSE USE THE 

CHANNEL. 

THE TROUBLE WITH THE STANDARD TECHNOLOGIES IS YOU CAN'T 

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GIVE UP THE CHANNEL, YOU CAN'T GIVE UP YOUR TIME SLOT AND THEN 

GET IT BACK, SO IT'S NOT PRACTICAL. 

WITH CDMA, THE NUMBER OF USERS ARE LIMITED BY THE 

INTERFERENCE OF ONLY THOSE WHO ARE ACTIVELY SPEAKING WITH 

VOICE. AND SO IF SOMEONE NOT SPEAKING AT ANY GIVEN TIME, 

THERE'S LESS INTERFERENCE AND, THEREFORE, ON AVERAGE, YOU CAN 

HAVE MORE CONVERSATIONS. 

Q. WHAT WERE THE MAIN PROBLEMS THAT YOU HAD TO OVERCOME IN 

MAKING CDMA EFFECTIVE FOR CELLULAR COMMUNICATIONS?

A. WELL, THERE WERE A LOT THAT PEOPLE HAD IDENTIFIED AND HAD 

TRIED TO FIND SOLUTIONS. 

ONE OF THE KEY ONES WAS CALLED POWER CONTROL. AGAIN, IF 

YOU'RE SPEAKING TO SOMEBODY AND YOU'RE YELLING TOO LOUD, THAT 

WOULD REDUCE THE CAPABILITY TO HEAR OTHER CONVERSATIONS. IT 

WOULD REDUCE THE CAPACITY. 

AND SO YOU HAD TO ADJUST IT SO YOU'RE JUST GETTING ENOUGH 

POWER AT YOUR RECEIVER TO RELIABLY HEAR THAT, TO RELIABLY 

RECEIVE THE DIGITAL DATA, BUT NOT SO MUCH THAT YOU'RE DROWNING 

OUT OTHERS. 

SO THE PROBLEM IS AS YOU DRIVE, YOU MAY BECOME INSIDE OF A 

PARTICULAR BASE STATION, MOVE AWAY FROM IT, SO SIGNALS GO UP 

AND DOWN FAIRLY RAPIDLY. 

THE QUESTION IS, HOW DO YOU CONTROL THAT? WE CAME UP WITH 

A VERY POWERFUL APPROACH FOR DOING POWER CONTROL. 

ANOTHER ISSUE WITH RADIO SIGNALS IS THEY BOUNCE OFF MANY 

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BUILDINGS, MANY OTHER AREAS, YOU DON'T GET JUST ONE COPY, YOU 

GET MULTIPLE COPIES. THAT REDUCES THE CAPACITY IN GENERAL. 

BUT WITH CDMA, IT HAS AN ABILITY TO LIVE WITH THOSE 

ADDITIONAL REFLECTIONS AND, IN FACT, WE CAME UP WITH A SCHEME 

WHERE YOU COULD RECEIVE EACH ONE SEPARATELY AND COMBINE THEM 

TOGETHER TO GET A BETTER RESULT. SO THAT WAS ANOTHER MAJOR 

STEP AHEAD. 

ANOTHER WAS HOW DO YOU DO HANDOFFS AS YOU'RE MOVING FROM 

CELL SITE TO CELL SITE, YOU HAVE TO HAND OFF YOUR SIGNAL. THE 

MORE TRADITIONAL APPROACHES, THE TDMA, YOU DROP ONE BASE 

STATION AND LOOK FOR THE NEXT ONE AND CONNECT TO IT AND THERE'S 

A LITTLE BIT OF A GAP AND YOU COULD HAVE A DROP. 

WITH CDMA, YOU COULD LISTEN TO THE NEXT ONE WHILE YOU WERE 

LISTENING TO THE FIRST ONE AND THEN GRADUALLY TRANSFER MORE AND 

MORE ATTENTION TO THE SECOND ONE. 

SO IT WAS NOT -- IT'S A SOFT HANDOFF. 

AND AS PART OF THAT, IN THE -- AGAIN, TDMA SO THAT YOU 

WOULD KEEP DOWN THE INTERFERENCE, YOU COULDN'T USE THE SAME 

FREQUENCIES ON NEIGHBORING BASE STATIONS OR EVEN ON MULTIPLE 

ANTENNAS ON THE SAME BASE STATIONS. 

SO YOU HAD TO DIVIDE UP THE FREQUENCY SPECTRUM. YOU 

DIDN'T HAVE FOR ANY GIVEN USER THE FULL SPECTRUM, THEREFORE, SO 

THAT REDUCED CAPACITY. 

WITH CDMA, YOU COULD USE THE SAME FREQUENCIES EVERYWHERE. 

Q. ONCE QUALCOMM FLOATED THIS IDEA OF USING CDMA, WAS IT 

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WELCOMED BY THE INDUSTRY OVERALL? 

A. I DON'T THINK I'D PUT IT THAT WAY, NO.

(LAUGHTER.)

THE WITNESS: THERE WAS A LOT OF NEGATIVE FEELINGS 

ABOUT -- SOME PEOPLE HAD WORKED ON IT AND HAD PROBLEMS, SO THEY 

DIDN'T BELIEVE WE HAD SOLUTIONS. 

BUT THE INDUSTRY, IN JANUARY OF 19 -- I'LL HAVE TO KEEP 

CAREFUL ON MY YEARS HERE -- IN JANUARY OF 1989 HAD ACTUALLY A 

VOTE WHETHER TO GO WITH EITHER TDMA OR FDMA, AND IT WAS A VERY 

BIG BATTLE UP TO THAT POINT. TDMA WON BY A NARROW EDGE. 

PEOPLE WERE TIRED OF FIGHTING ABOUT TECHNOLOGIES, SO PEOPLE HAD 

SAID, OKAY, WE'RE GOING AHEAD WITH TDMA.

BY MR. VAN NEST: 

Q. DID YOU GIVE UP? 

A. WE, OURSELVES, HAD JUST BEGUN TO LOOK AT CDMA AGAIN. WE 

HAD TO TELL OUR OMNI TRACKS, THE TRUCK COMMUNICATION PRODUCT 

FIRST, SO WE HAD ONLY STARTED LOOKING AT IT AGAIN IN ABOUT 

NOVEMBER OF '88. 

SO WE DIDN'T GO TO THE INDUSTRY UNTIL '89, AND NOBODY 

WANTED TO HEAR ABOUT SOMETHING NEW. 

OUR APPROACH THEN WAS WE HAD TO BUILD A DEMONSTRATION TO 

SHOW THAT WE HAD SOLVED THE PROBLEMS, AND THAT YOU COULD GET 

BOTH BETTER QUALITY, AS WELL AS MANY MORE USERS IN THE SAME 

AMOUNT OF RADIO SPECTRUM. SO WE PROCEEDED TO DO THAT.

Q. I'M GOING TO ASK YOU, DR. JACOBS, TO SLOW DOWN JUST A 

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LITTLE BIT. WE'RE TRYING TO TAKE DOWN EVERY WORD, AND I WANT 

TO BE SURE WE DO THAT. 

A. I'M AFRAID MY NEW ENGLAND ACCENT DOESN'T HELP.

Q. NO, YOU'RE COMING THROUGH FINE. 

WERE THERE EXISTING HANDSET MAKERS OR INFRASTRUCTURE FOLKS 

BACK THEN WILLING TO JUMP INTO THE CDMA MARKET AT THAT POINT? 

A. WELL, AT THAT POINT, NO. NO MANUFACTURERS WERE 

INTERESTED. 

AFTER WE DID THE DEMONSTRATION, HOWEVER, THERE WAS MORE 

INTEREST, AND IN PARTICULAR, THE CARRIERS, THE OPERATORS, SAW 

THAT WITH THIS TECHNOLOGY, IF INDEED IT COULD WORK AND BECOME 

AVAILABLE COMMERCIALLY, THAT THEY'D HAVE A -- THEY WOULD HAVE 

MANY MORE SUBSCRIBERS, IT WOULD HAVE A POSITIVE ECONOMIC EFFECT 

FOR THEM.

Q. OKAY. 

A. AND SO THE CARRIERS WERE SUPPORTIVE. 

Q. LET ME PLACE ON THE SCREEN QX 9310. 

THIS IS A PICTURE, YOUR HONOR. IT'S A DEMONSTRATIVE. 

THE COURT: OKAY. 

MR. VAN NEST: IT'S BEEN DISCLOSED. 

Q. DR. JACOBS, YOU HAVE IT HERE AND YOU HAVE IT TO THE RIGHT. 

WHAT IS DEPICTED IN THE PICTURE? WHAT ARE WE SEEING HERE? 

A. THAT WAS -- WE HAD A MOBILE PHONE THAT WE WERE USING FOR 

THIS DEMONSTRATION IN NOVEMBER OF 1989. OF COURSE, THAT MOBILE 

PHONE REQUIRED A VAN TO DRIVE IT AROUND, SO THAT WAS THE VAN. 

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WE ALSO HAD OTHER CAPABILITIES THAT WE COULD SHOW OFF IN 

THE VAN AND HAVE OTHERS BE ABLE TO SEE WHERE THE HANDOFFS WERE 

OCCURRING BETWEEN CELL SITES AND WHETHER THERE WAS A LOT OF 

INTERFERENCE AND, YET, WE WERE HEARING A VERY GOOD TELEPHONE 

CALL. 

Q. SO IS THAT YOU PICTURED ON THE RIGHT IN THE VAN? 

A. ON THE LEFT SIDE, MY LEFT SIDE. 

Q. OKAY. 

A. ON THE RIGHT PICTURE ON THE LEFT SIDE.

Q. OKAY, VERY GOOD. 

AND TELL THE COURT, WHAT -- WHY DID YOU HAVE THE PHONE OR 

A PHONE IN A VAN? WHAT WAS THE POINT OF THIS?

A. WELL, AGAIN, THAT VERY FIRST DEMONSTRATION UNIT WAS A VERY 

LARGE DEVICE. WE HAD NOT MADE INTEGRATED CIRCUITS AT THAT 

POINT, AND SO IT REQUIRED THE VAN TO DRIVE IT AROUND. 

Q. AND WHAT WERE YOU -- 

A. ON THE OTHER HAND, THAT WAS A WAY TO FULLY DEMONSTRATE THE 

QUALITY.

Q. FAIR ENOUGH. 

WAS ALL THIS DRIVING DONE IN SAN DIEGO? 

A. INITIALLY THE DEMONSTRATION WAS IN SAN DIEGO. 

Q. AND WHERE ELSE WERE YOU ABLE TO DEMONSTRATE THE PRODUCT? 

A. WELL, OF COURSE WE IMMEDIATELY HAD SKEPTICS WHO SAID THAT, 

WELL, IT MIGHT WORK IN SAN DIEGO, THERE AREN'T VERY MANY HIGH 

RISES AROUND, LET'S GO TRY MANHATTAN. 

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AND SO WITH THE HELP OF AN OPERATOR IN MANHATTAN, WE DID 

GET SOME SPECTRUM WE COULD USE IN THE MIDDLE OF THE NIGHT AND 

SET UP A DEMONSTRATION, AND WE CARRIED THAT OUT IN FEBRUARY OF 

'90 -- 

Q. 1990? 

A. IN 1990. 

Q. OKAY.

A. AND THAT WORKED VERY, VERY WELL. AND, AGAIN, THAT HELPED 

BUILD UP SUPPORT.

Q. SO HOW DID -- WELL, WHEN DID QUALCOMM FIRST DEPLOY CDMA IN 

A COMMERCIAL NETWORK? 

A. WELL, AFTER THAT DEMONSTRATION, WE HAD TO DEVELOP CHIPS. 

WE THEN HAD TO GO THROUGH A STANDARDS PROCESS, AND THEN INTO 

COMMERCIAL MANUFACTURING. 

THE VERY FIRST COMMERCIAL NETWORK WAS IN HONG KONG IN 

1995. SO IT WAS SEVEN YEARS AFTER WE CAME BACK AND BEGAN TO 

SERIOUSLY WORK ON CDMA TO GO TO THE VERY FIRST COMMERCIAL 

NETWORK.

Q. AND WHO BUILT -- 

A. THE REASON IT WAS HONG KONG WAS THAT A LOT OF PEOPLE 

WORKED ON THE STREETS THERE, THEY WOULDN'T AFFORD OFFICES, THEY 

USED THE CELL PHONES FOR A LOT OF THEIR BUSINESS 

COMMUNICATIONS. THAT TIED UP THE SPECTRUM. 

WITH CDMA, YOU COULD GET A LOT MORE USE IN THAT GIVEN 

AMOUNT OF SPECTRUM.

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Q. WHO WAS BUILDING THE CHIPS AND THE HANDSETS AND THE 

INFRASTRUCTURE TO MAKE SURE THAT CDMA COULD ACTUALLY WORK IN A 

COMMERCIAL SETTING? 

A. ON THAT VERY FIRST DEMONSTRATION, THE INFRASTRUCTURE WAS 

PROVIDED BY MOTOROLA. THEY HAD HAD THE TDMA AND THEN THEY 

CONVERTED TDMA OVER TO CDMA FOR THAT. 

ALL THE HANDSETS WERE PROVIDED BY QUALCOMM, MANUFACTURED 

IN SAN DIEGO, AND SHIPPED TO HONG KONG. 

BY THE WAY, THE NEXT TWO NETWORKS TO COME UP WERE IN SOUTH 

KOREA, AGAIN, BECAUSE NOBODY HAD ENOUGH CONFIDENCE AT THAT 

POINT TO BUILD CDMA HANDSETS, NOBODY HAD ALREADY -- HAD 

STARTED. 

AND SO EVEN IN SOUTH KOREA, ALL THE HANDSETS WERE MADE IN 

SAN DIEGO AND SHIPPED TO SOUTH KOREA. 

Q. SO DID CDMA EVENTUALLY CATCH ON WORLDWIDE? 

A. THERE WAS A LONG BATTLE IN WHAT'S CALLED THE SECOND 

GENERATION, WHICH WAS MOSTLY FOCUSSED ON VOICE, AND THERE WAS 

AN AGREEMENT AMONG GOVERNMENTS IN EUROPE THAT THEY WOULD ONLY 

USE GSM, WHICH WAS A TDMA TECHNOLOGY. SO THERE WAS NO OPENING 

FOR CDMA IN EUROPE. 

AND THERE WERE BATTLES IN OTHER PARTS OF THE WORLD OVER 

CDMA. 

HOWEVER, THE INDUSTRY BEGAN TO REALIZE THAT IT WOULD BE 

IMPORTANT TO PROVIDE MOBILE INTERNET ACCESS, DATA 

COMMUNICATIONS, AND SO A THIRD GENERATION WAS PROPOSED THAT 

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WOULD SUPPORT BOTH VOICE AND DATA. 

Q. OKAY. 

A. THE INDUSTRY LOOKED, HOW MIGHT THEY DO THAT WELL? AND 

BASICALLY ALL THIRD GENERATIONS ARE BASED ON CDMA.

Q. OKAY. LET'S -- WE'LL GET TO 3G IN JUST A MOMENT, 

DR. JACOBS. 

BUT LET'S GO BACK TO CDMA AND THE '90S. 

WHAT HAPPENED WITH THE STANDARDS SETTING ORGANIZATIONS? 

DID THEY IMMEDIATELY ADOPT CDMA? OR WERE THERE DISCUSSIONS AND 

DEBATES THERE BEFORE CDMA WAS ADOPTED AS A STANDARD? 

A. WELL, AFTER THE DEMONSTRATION REQUIRING THE VAN, WE HAD TO 

DEVELOP THE CHIPS TO BUILD A COMMERCIAL HANDSET AND TO BUILD A 

COMMERCIAL BASE STATION, AND THAT TOOK US TWO YEARS. 

WE HAD ANOTHER DEMONSTRATION THEN IN NOVEMBER OF '91 -- 

LET ME GET MY DECADES STRAIGHT HERE -- 

Q. THAT'S ALL RIGHT. 

A. -- WHERE WE DEMONSTRATED COMMERCIAL HANDSETS. 

THAT CONVINCED A NUMBER OF THE OPERATORS, ALTHOUGH THERE 

WAS STILL A LOT OF CONTROVERSY, TO SET UP A COMPETITION IN THE 

SPRING OF '92 AMONG OTHERS THAT MIGHT WANT TO PROVIDE A WIDE 

BAND SOLUTION RATHER THAN THE TDMA, WHICH IS A NARROW BAND 

SOLUTION. 

THERE WAS COMPETITION, QUALCOMM'S APPROACH WAS SELECTED, 

ENTERED THE STANDARDS PROCESS WITH THE TIA, TELECOMMUNICATIONS 

INDUSTRY OF AMERICA, I THINK IT IS, OR ASSOCIATION -- WITH THE 

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TIA IN ABOUT JUNE OF '91. THAT TOOK A YEAR -- OF '92, EXCUSE 

ME, I SKIPPED A YEAR THERE. 

THAT TOOK A YEAR AND A HALF AND IN JULY OF '93, THE 

STANDARD WAS COMPLETE. 

Q. AND WHAT ROLE, IF ANY, DID QUALCOMM PLAY IN THE DRAFTING 

OF THE FIRST CDMA STANDARD? 

A. WELL, QUALCOMM HAD BEEN LOOKING AHEAD TO THE STANDARDS 

PROCESS AND SO WE HAD DRAFTED THE TEXT FOR SOMETHING THAT COULD 

PROVIDE THE BASIS FOR A STANDARD. 

WE ALSO, BECAUSE OF ALL THE SKEPTICISM OF SO MANY 

MANUFACTURERS, INVITED THEM TO COME TO SAN DIEGO. THEY EACH 

HAD ONE OR TWO OR THREE REASONS WHY CDMA WAS NOT GOING TO WORK. 

WE SET UP EXPERIMENTS WITH THEM TO CHECK OUT WHETHER IT WOULD 

WORK DESPITE THEIR CONCERNS. 

AND SO WE BUILT UP A LARGE AMOUNT OF DATA THAT DID HELP US 

THROUGH THE STANDARDS PROCESS. 

Q. NOW, HOW DID QUALCOMM FUND THIS EARLY RESEARCH TO 

ESTABLISH THE VIABILITY OF CDMA?

A. WELL, THE BIG PROBLEM WAS AFTER WE HAD DONE THE FIRST 

DEMONSTRATION WITH THE VAN-SIZED UNIT, WE NEEDED TO THEN MOVE 

ON AND DEVELOP THE THREE CHIPS FOR THE HANDSET AND TWO MORE 

UNIQUE ONES FOR THE INFRASTRUCTURE. THAT WAS A VERY EXPENSIVE 

UNDERTAKING. 

AND SO WE CAME UP WITH THE IDEA THAT, WITH SUPPORT FROM 

THE OPERATORS, THAT WE WOULD LICENSE MANUFACTURERS WHO WERE 

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INTERESTED IN THE POSSIBILITY OF CDMA -- IT STILL WASN'T 

OBVIOUSLY SURE THAT THIS WOULD EVER BECOME COMMERCIAL -- BUT 

THEY WOULD TAKE A LICENSE. THAT WOULD PROVIDE US WITH SOME UP 

FRONT FUNDING AS PART OF THE LICENSE THAT WOULD GIVE US THE 

MONEY FOR CONTINUING THE R&D. 

AND THEN SHOULD IT BECOME COMMERCIAL, A ROYALTY ON UNITS 

SOLD IN THE FUTURE AS PART OF THAT LICENSE. THE INITIAL 

LICENSE, AS I RECALL, WAS NEGOTIATED WITH AT&T, LUCENT HAD NOT 

YET SPLIT OUT FROM AT&T. LONG NEGOTIATION DISCUSSION BACK AND 

FORTH. 

AND THEN OTHERS, MOTOROLA, NOKIA AND -- 

Q. MOTOROLA? 

A. MOTOROLA, NOKIA, AND MANY OTHERS. 

Q. NOW, HOW WERE THE ROYALTIES -- YOU MENTIONED AN UPFRONT 

PAYMENT. I TAKE IT THAT WAS NEGOTIATED? 

A. YES.

Q. AND THEN A RUNNING RATE ON SALES? 

A. YES.

Q. HOW WAS THE ROYALTY RATE ARRIVED AT IN THESE EARLY 

AGREEMENTS? 

A. WELL, EVERYTHING WAS NEGOTIATED, ALL THE TERMS, AND 

CERTAINLY THE ROYALTY RATE WAS DISCUSSED QUITE A BIT. 

WE HAD THE FEELING WE WANTED TO HAVE SOMETHING THAT WAS 

LOW ENOUGH THAT WE WERE NOT GOING TO IMPEDE THE PROGRESS SHOULD 

THIS BECOME A COMMERCIAL PRODUCT. WE WANTED TO SEE IT BE USED 

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AS BROADLY AS POSSIBLE WORLDWIDE WITH AS MANY MANUFACTURERS. 

SO WE LOOKED AT A -- WE CALLED IT LOW SINGLE DIGIT ROYALTY 

RATE, NEGOTIATED THAT BACK AND FORTH WITH INITIALLY AT&T, AND 

THEN WITH EACH OTHER MANUFACTURER. BUT IT WAS ALWAYS A 

BILATERAL, A COMPANY-BY-COMPANY NEGOTIATION. 

Q. NOW, WHEN DID QUALCOMM START SELLING CDMA CHIPS 

COMMERCIALLY? 

A. I'M NOT SURE I HAVE THE EXACT DATE, BUT IT WAS PROBABLY A 

YEAR AND A HALF OR SO AFTER THE -- MAYBE LESS THAN THAT -- 

AFTER THAT FIRST COMMERCIAL OPERATION IN HONG KONG. OTHERS SAW 

THERE WAS A COMMERCIAL NETWORK AND SAID PERHAPS WE SHOULD START 

BUILDING HANDSETS. AND WE HAD THE CHIPS AVAILABLE AT THAT TIME 

AND SO SOME BEGAN TO BUY THOSE CHIPS FROM US.

Q. NOW, WHAT IS CDMA 2000? 

A. CDMA 2000, WE BEGAN TO THINK AGAIN ABOUT THE NEED TO HAVE 

HIGHER DATA RATES, AS WELL AS VOICE. AND SO BECAUSE IN LOOKING 

TO THE THIRD GENERATION, THE REST OF THE INDUSTRY WAS STILL 

TRYING TO CATCH UP ON THE VOICE CDMA ASPECTS, WE FOCUSSED IN ON 

AS WELL ON THE DATA. 

AND CDMA 2000 WAS PROVIDING HIGHER DATA RATES, ALONG WITH 

VOICE. 

Q. AND APPROXIMATELY WHEN WAS CDMA 2000 RELEASED 

COMMERCIALLY, BALLPARK? 

A. I THINK IT WAS AROUND THE YEAR 2000. I DON'T HAVE IT 

EXACTLY.

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Q. OKAY. 

A. MAYBE AFTER.

Q. AND WHAT ROLE DID QUALCOMM PLAY IN CDMA 2000, THE 3G 

VERSION? 

A. WELL, WE PLAYED THE ROLE OF DEVELOPING THE TECHNOLOGY, 

BRINGING IT TO THE STANDARDS GROUPS, OTHERS COULD THEN COMMENT 

BACK AND FORTH, AND WENT THROUGH THE DEVELOPMENT CYCLE. 

OF COURSE, IN THE STANDARDS PROCESS, YOU START WITH ONE 

STANDARD AND THEN ADDITIONAL IMPROVEMENTS GET MADE OVER TIME AS 

YOU GET MORE EXPERIENCE, SO IT'S REALLY NOT JUST ONE STANDARD, 

BUT A SEQUENCE OF STANDARDS. 

Q. DOES QUALCOMM HAVE AN INFRASTRUCTURE BUSINESS TODAY?

A. WE DO NOT.

Q. DOES QUALCOMM HAVE A HANDSET BUSINESS TODAY? 

A. NOT TODAY, NO.

Q. CAN YOU TELL THE COURT WHAT HAPPENED WITH THE 

INFRASTRUCTURE AND THE HANDSET BUSINESSES THAT QUALCOMM 

DEVELOPED? 

A. YES. BECAUSE IN ORDER TO GET CDMA LAUNCHED AND IN THE 

FIRST FEW COMMERCIAL NETWORKS, QUALCOMM HAD NO CHOICE BUT TO 

BUILD BOTH INFRASTRUCTURE AND HANDSETS, AS WELL AS THE CHIPS 

THAT WENT INTO THEM. 

AND WE PROVIDED THE INITIAL STEPS OF GETTING THE INDUSTRY 

ESTABLISHED. BUT WE WANTED ALWAYS TO SEE MANY, MANY 

MANUFACTURERS. WE WANTED WHAT'S CALLED A HORIZONTAL BUSINESS 

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MODEL WITH NOT JUST A FEW VERTICALS THAT DID EVERYTHING, BUT 

MANUFACTURERS THAT COULD PROVIDE THE PRODUCTS AND BE LOCATED IN 

MANY PARTS OF THE WORLD. 

AND SO INITIALLY WHEN WE SPOKE TO HANDSET MANUFACTURERS, 

THEY SAID IF WE'RE DEPENDENT ON YOU FOR THE CHIPS, HOW DO WE 

KNOW YOU'RE NOT GOING TO PROVIDE THEM TO YOUR OWN HANDSET 

DIVISION BEFORE YOU PROVIDE THEM TO US? 

SO EVEN THOUGH WE SAID WE WOULD NOT DO THAT, IT WAS HARD 

TO CONVINCE ANYBODY. SO WE DECIDED WE REALLY HAD TO SELL OFF 

OUR HANDSET DIVISION. 

AND A SIMILAR ISSUE WITH THE INFRASTRUCTURE DIVISION. SO 

WE DID THAT IN 1999. 

WE DECIDED TO FOCUS IN ON THE TECHNOLOGY SIDE SO THAT WE 

COULD DEVELOP TECHNOLOGY, BRING IT AS QUICKLY AS POSSIBLE TO 

THE INDUSTRY, AND WE DID THAT PARTLY BY THEN ALSO PROVIDING 

CHIPS FOR THOSE WHO WISHED TO BUY THEM. WE VERY QUICKLY RAN 

WITH TECHNOLOGY, GOT THEM INTO THE CHIP, GOT THEM INTO 

SOFTWARE, AND MADE THOSE AVAILABLE TO MANY MANUFACTURERS. 

Q. I THINK WE HAVE -- OH, LET ME MOVE ON TO HDR. 

WHAT'S HIGH DATA RATE TECHNOLOGY, DR. JACOBS? 

A. WELL, AGAIN, IN THE LATE '90S, WE HAD BEGUN TO FOCUS IN ON 

DATA. AND ONE DAY, I STILL REMEMBER IN MY OFFICE, ONE OF OUR 

ENGINEERS, ROBERTO PADOVANI, CAME TO SEE ME AND SAID THAT HE 

HAD A GREAT IDEA FOR IMPROVING EVEN FURTHER OVER CDMA 2000 

IMPROVING EVEN FURTHER THE DATA CAPABILITIES AND CALLED IT HDR 

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FOR HIGH DATA RATE. 

AND SO IT HAD A NUMBER OF UNIQUE FEATURES. I GOT VERY 

EXCITED WHEN I SAW IT. WE SUPPORTED THAT AND MOVED ON TO 

DEVELOPING HDR IN THE LATE '90S.

Q. AND WHEN DID YOU DEBUT YOUR HDR TECHNOLOGY? 

A. I THINK IT WAS ABOUT '98. WE CALLED IN A NUMBER OF PEOPLE 

TO VIEW THE TECHNOLOGY, TO SEE THAT YOU COULD HAVE OFFICIALLY A 

MOBILE HIGH DATA RATE. INDEED, YOU COULD EVEN SHOW VIDEO OVER 

THIS MOBILE CAPABILITY. 

Q. COULD WE HAVE QX 9324 ON THE SCREEN. 

IT'S ANOTHER DEMONSTRATIVE, YOUR HONOR. 

DR. JACOBS, CAN YOU TELL THE COURT WHAT IS DEPICTED HERE 

IN 9324? 

A. I THINK THAT WAS A VAN DEMONSTRATION OF HDR BEING 

DEMONSTRATED AND SHOWING THAT, ON THE LEFT SCREEN, THAT 

DIFFERENT PAGES COULD BE PULLED UP SIMULTANEOUSLY WITH THIS ONE 

DATA STREAM, AND THE CHARACTERISTICS I THINK WERE ON THE OTHER 

SCREEN. THAT WAS THE VAN WE WERE USING TO SHOW THAT YOU COULD 

HAVE HIGH DATA RATES AT MOBILE SPEEDS.

Q. AND AT THIS TIME IN THE LATE '90S, WAS ANYBODY SENDING 

DATA BACK AND FORTH ON MOBILE PHONES LIKE WE DO SO MUCH TODAY? 

A. NOT AT ALL. 

Q. AND WHAT CONTRIBUTION DID DR. PADOVANI MAKE TO HDR? 

A. HE CAME UP WITH THE INITIAL IDEAS AND THEN LED A GROUP 

THAT DEVELOPED THE HDR, THEN HELPED TRANSFER THAT TO OUR CHIPS 

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SO THAT WE COULD BEGIN TO SELL THIS TECHNOLOGY.

Q. HAS HE BECOME KNOWN AS THE FATHER OF HDR, PADOVANI? 

A. I WOULD CERTAINLY VIEW HIM THAT WAY.

Q. WOULD YOU TURN IN YOUR BINDER, THE ONE THAT IS IN FRONT OF 

YOU, DR. JACOBS, TO QX 9276. AND OPEN IT UP AND TELL US IF YOU 

RECOGNIZE IT? 

A. 9276. 

Q. YES, SIR. 

A. YES. THAT LOOKS -- THAT IS THE WHITE PAPER THAT ROBERTO 

USED TO DOCUMENT HIS -- THIS TECHNOLOGY AFTER IT HAD BEEN 

WORKED ON FURTHER. 

MR. VAN NEST: ALL RIGHT. YOUR HONOR, I'D OFFER 

QX 9276 INTO EVIDENCE. 

MR. MATHESON: NO OBJECTION. 

THE COURT: IT'S ADMITTED. 

(DEFENDANT'S EXHIBIT QX 9276 WAS ADMITTED IN EVIDENCE.) 

THE COURT: GO AHEAD, PLEASE. 

MR. VAN NEST: COULD I HAVE PAGE 9 ON THE SCREEN, 

PLEASE.

Q. AND I'M GOING TO HIGHLIGHT SOMETHING IN THE MIDDLE OF THE 

PAGE. CAN YOU JUST GIVE THE COURT A BRIEF KIND OF HIGH-LEVEL 

DESCRIPTION OF WHAT WERE THE KEY FACTORS THAT MADE HDR SO 

GREAT? 

A. RIGHT. IN ALL OF THE VARIOUS MOBILE TECHNOLOGIES TO DATE, 

ONE SHARED THE SPECTRUM AND HAD SEVERAL USERS TRANSMITTING 

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SIMULTANEOUSLY. 

THE GREAT BREAKTHROUGH HERE WITH DATA IS THAT YOU COULD 

SEND DATA A PACKET AT A TIME, AND THE IDEA HERE WAS TO PUT ALL 

THE ENERGY IN THE TRANSMITTER INTO SENDING A SINGLE PACKET AT 

THE HIGHEST DATA RATE. 

AND THE IDEA ABOVE AND BEYOND THAT WAS TO JUDGE THE 

CHANNEL AND PICK THAT USER WHO, TO WHOM -- ONE OF THE USERS TO 

WHOM A PACKET WAS TO BE DELIVERED, PICK THE ONE WITH THE 

HIGHEST POSSIBLE SIGNAL TO NOISE RATIO SO YOU COULD GET THAT 

WITH THE LEAST AMOUNT OF ENERGY AND AT THE HIGHEST DATA RATE. 

AND SO IT WAS COMPLETELY UNIQUE IN THE SENSE OF FOCUSSING 

ON ONLY ONE USER AT A TIME AND GIVING THEM FULL POWER, BUT 

PICKING THE ONES THAT WOULD ALLOW YOU TO GET BY WITH THE LEAST 

TOTAL AMOUNT OF ENERGY TO BE USED.

Q. AND WHY WAS THAT SO IMPORTANT? 

A. WELL, OF COURSE, WITH MOBILE COMMUNICATIONS -- FIRST OF 

ALL, HIGH DATA RATES IN MOBILE. IN MOBILE YOU CAN DOWNLOAD 

DATA, YOU CAN WATCH VIDEOS, THAT ASPECT IS IMPORTANT. 

BUT BEING ABLE TO DO IT WITH LOW ENERGY, LOW TOTAL ENERGY 

IS ALSO VERY IMPORTANT. 

Q. AND DOES HDR TECHNOLOGY -- WELL, LET ME BACK UP. WAS 

QUALCOMM THE FIRST COMPANY TO MARKET HDR COMMERCIALLY? 

A. YES. WE WERE WELL AHEAD OF OTHERS ON THIS TECHNOLOGY.

Q. AND IS HDR LIMITED TO CDMA OR DOES IT APPLY TO OTHER 

STANDARDS AS WELL? 

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A. THE HDR WE INITIALLY USED WITH CDMA, BUT THEN AS WCDMA 

BEGAN TO DEVELOP, THEN LATER VERSIONS OF THE STANDARD PICKED UP 

THE SAME TECHNOLOGY THAT WE USED IN HDR. QUALCOMM MADE 

SUBMISSIONS, THEY WERE ACCEPTED, AND SO WCDMA USED THAT. 

AND, INDEED, YOU COULD GO ON TO THE FOURTH GENERATION, 

LTE, AND SOME OF THE SAME TECHNIQUES ARE NOW IN LTE. 

AND I GUESS I COULD GO FURTHER. WE'RE NOW LOOKING AT A 

FIFTH GENERATION WHICH HAS MANY DIFFERENT FREQUENCY BANDS AND 

TYPES OF MODELS. THE SAME IDEAS ARE BEING CARRIED ON FURTHER. 

Q. SO DR. PADOVANI'S IDEA, QUALCOMM'S IDEAS, HAVE EXTENDED 

ACROSS GENERATIONS? 

A. THAT'S CORRECT. 

Q. OKAY. I WANT TO DISCUSS ONE LICENSING DISPUTE WITH YOU, 

DR. JACOBS, AND IT OCCURRED BACK IN THE EARLY -- WELL, 2003, 

2004. 

DO YOU REMEMBER A LICENSING DISPUTE ARRIVING BETWEEN 

QUALCOMM AND LG? 

A. I REMEMBER THERE WAS A -- THERE WERE A NUMBER OF DISPUTES 

EACH TIME WE DID A NEGOTIATION. THERE WAS ONE WITH LG, YES.

Q. OKAY. AND DO YOU REMEMBER WHAT THE GENESIS OR THE BASIS 

OF THE DISPUTE WAS? 

A. I THINK AT THAT TIME, AGAIN, WE HAD BEEN WORKING WITH THEM 

ON CDMA. THEN THE QUESTION WAS OF GOING TO -- I THINK IT WAS 

1X. DO YOU -- 

Q. WELL, LET ME ASK YOU, OPEN YOUR BINDER, IF YOU WOULD, TO 

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CX 6814. 

DO YOU HAVE IT THERE?

A. I DO. 

Q. AND IS THAT A SERIES OF CORRESPONDENCE BETWEEN YOU AND 

OTHERS AT LG? 

A. YES. 

Q. COULD YOU TURN TO PAGE 21 IN THE DOCUMENT? AND TELL US IF 

THAT'S A LETTER THAT YOU SENT TO LG IN 2004. 

A. YES. IT'S A LETTER I SENT TO S.S. KIM, WHO WAS VICE CHAIR 

AND CEO OF LG ELECTRONICS AT THE TIME. 

MR. VAN NEST: YOUR HONOR, WE'D OFFER PAGES 21 

THROUGH 23 OF CX 6814 IN EVIDENCE. 

MR. MATHESON: OBJECTION, YOUR HONOR. WE SHOULD 

ADMIT THE ENTIRE THING. IT'S ONE EXHIBIT. 

MR. VAN NEST: WELL, THAT'S FINE. THAT'S FINE. 

THE PART -- SOME OF IT HAS BEEN ADMITTED PREVIOUSLY, I 

THINK, AND IT'S PARTIALLY SEALED. BUT I'M FINE WITH THAT AS 

WELL, YOUR HONOR. 

MR. MATHESON: IT IS PARTIALLY SEALED, YOUR HONOR. 

THE COURT: SO JUST ADMIT THE WHOLE THING, CX 6814? 

MR. VAN NEST: 6814, YEAH. 

THE COURT: ANY OBJECTION TO THAT? 

MR. MATHESON: THE ONLY OBJECTION THAT'S BEEN RAISED 

WAS RAISED BY QUALCOMM, THIS IS ON OUR LIST, TO THE HEARSAY 

STATEMENTS IN THIRD PARTY LETTERS, QUALCOMM'S STATEMENTS OR 

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STATEMENTS OF A PARTY OPPONENT FROM THE FTC'S POINT OF VIEW, SO 

THEY'RE ADMISSIBLE FOR THE TRUTH. 

QUALCOMM HAS OBJECTED TO THE HEARSAY STATEMENTS IN THIRD 

PARTY CORRESPONDENCE. 

I DON'T KNOW IF YOU WANT TO WAIVE THAT OBJECTION OR NOT? 

MR. VAN NEST: WE DO. 

MR. MATHESON: OKAY. NO OBJECTION, YOUR HONOR. 

THE COURT: ALL RIGHT. SO THEY'RE ALL ADMITTED THEN, 

THE WHOLE THING. 

MR. VAN NEST: THAT'S FINE. 

THE COURT: PARTS ARE SEALED. 

(PLAINTIFF'S EXHIBIT CX 6814 WAS ADMITTED IN EVIDENCE.) 

MR. VAN NEST: AND WE'RE GOING TO BE DISCUSSING 

PAGES, YOUR HONOR, THAT HAVE NOT BEEN SEALED, SO I'LL STAY ON 

THE PUBLIC RECORD. 

Q. MR. JACOBS, WITH REFERENCE TO THIS LETTER -- LET'S BACK UP 

A MINUTE. 

WAS LG PURCHASING CDMA CHIPS IN COMMERCIAL QUANTITIES AT 

THIS TIME FROM QUALCOMM? 

A. YES, THEY WERE.

Q. OKAY. WERE THEY SELLING PHONES WITH QUALCOMM CDMA CHIPS 

IN THEM? 

A. YES, THEY WERE.

Q. DID THIS DISPUTE WITH LG INVOLVE CDMA OR WCDMA? 

A. THIS WAS STRICTLY A DISPUTE OVER WCDMA. 

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Q. AND WHAT WAS THE NATURE OF THE DISPUTE AS YOU UNDERSTOOD 

IT? 

A. WELL, WE HAD RECEIVED A -- INFORMATION THAT ONE OF THEIR 

ATTORNEYS CLAIMED THAT IF QUALCOMM SELLS WCDMA ASICS TO LG, 

THAT WE WERE, JUST BY SELLING THEM ASICS, GRANTING ROYALTY FREE 

RIGHTS TO LG AND WE WAIVED THE RIGHTS TO COLLECT ROYALTIES ON 

ANY WCDMA SUBSCRIBER UNITS. 

Q. WAS THAT A PROBLEM?

A. THAT WAS QUITE A PROBLEM, YES.

Q. AND WHAT WAS THE NATURE OF WCDMA CHIPS YOU WERE SELLING TO 

LG AT THE TIME? WERE THEY COMMERCIAL CHIPS? 

A. AT THE TIME WE WERE JUST IN DISCUSSION OF PROVIDING THEM 

WITH SOME EARLY CHIPS FOR THEM TO BE ABLE TO DEVELOP THEIR 

WCDMA PHONES WITH OUR CHIPS. 

Q. SO THEY WEREN'T SELLING ANY WCDMA PHONES WITH QUALCOMM 

CHIPS IN THEM AT THAT TIME? 

A. THAT'S CORRECT. 

Q. BUT WERE THEY SELLING WCDMA PHONES USING OTHER CHIPS? 

A. I BELIEVE THEY WERE. 

Q. OKAY. AND DID YOU GIVE THEM SOME ASSURANCE THAT THERE 

WOULD BE NO INTERRUPTION IN CDMA CHIP SUPPLY? 

A. THAT WAS ALWAYS OUR POLICY, THAT WE DON'T INTERRUPT OUR 

DELIVERY OF CHIPS. 

Q. OKAY. 

A. AND CERTAINLY NOT WITH A WCDMA DISPUTE.

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Q. OKAY. LET'S TAKE A LOOK AT PAGE 2, THE VERY BOTTOM 

PARAGRAPH. YOU CAN LOOK AT IT IN YOUR BINDER THERE, 

MR. JACOBS. 

IT'S ON PAGE 2. I HAVE IT ON THE SCREEN. 

A. UM-HUM. 

Q. COULD WE HIGHLIGHT THE LAST SENTENCE. 

AND CAN YOU READ THAT TO YOURSELF AND TELL US, WHAT WERE 

YOU COMMUNICATING TO LG IN CONNECTION WITH THIS DISPUTE? 

A. WELL, I WAS HOPING THAT WE WOULD QUICKLY SETTLE THE 

DISPUTE, RESUME A VERY CLOSE RELATIONSHIP, AND I MUST SAY GOING 

BACK, THEY WERE JUST ENTERING THE CELLULAR BUSINESS WITH THE 

HELP OF CDMA, THAT IT WOULD CONTINUE TO BE BENEFICIAL AND THAT 

WE WOULD CERTAINLY CONTINUE TO SUPPLY THEM, DESPITE THE 

DISPUTE, WITH CDMA 2000 PRODUCTS. 

Q. AND DID QUALCOMM CONTINUE TO SUPPLY LG WITH CDMA CHIPS, 

NOTWITHSTANDING THE DISPUTE? 

A. THAT IS CORRECT. 

Q. WAS THERE ANY DISRUPTION IN CHIP SUPPLY AS FAR AS YOU'RE 

AWARE? 

A. NOT THAT I'M AWARE. 

Q. OKAY. LET'S GO BACK TO WHERE WE WERE VERY BRIEFLY. YOU 

MENTIONED THAT HDR HAS CONTINUED ON. 

ARE THERE FEATURES TODAY THAT ARE STILL BENEFITING FROM 

THE HDR TECHNOLOGY THAT DR. PADOVANI AND QUALCOMM CAME UP WITH 

IN THE EARLY '90S? 

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A. YES. AS I MENTIONED, IT BECAME VERY IMPORTANT WITH CDMA 

AND WCDMA IN THE THIRD GENERATION AND SOME OF THE TECHNOLOGY 

HAS EXTENDED TO THE FOURTH AND NOW INTO THE FIFTH GENERATION.

Q. DR. JACOBS, ARE YOU PROUD OF WHAT YOU'VE CREATED AT 

QUALCOMM?

A. IT'S ALWAYS EXCITING TO, IN THIS PARTICULAR CASE, SEE 

SOMETHING GO FROM AN IDEA TO A PRODUCT THAT'S VERY USEFUL TO 

PEOPLE EVERYWHERE AROUND THE WORLD. 

AND I STILL MUST SAY, I GET A KICK WHEN I EVEN GO INTO A 

RESTAURANT AND YOU LOOK AROUND AND EVERYBODY HAS THEIR CELL 

PHONE OUT. 

(LAUGHTER.) 

MR. VAN NEST: THANK YOU, DR. JACOBS. 

I PASS THE WITNESS, YOUR HONOR. 

THE COURT: OKAY. TIME IS 2:20. 

LET'S TAKE A BREAK -- WE CAN TAKE A BREAK NOW OR TAKE IT 

AT 2:30. IT DOESN'T MATTER TO ME. 

MR. MATHESON: IT'S FINE TO TAKE IT NOW, YOUR HONOR, 

IF THAT'S CONVENIENT TO THE COURT. 

THE COURT: ALL RIGHT. LET'S TAKE JUST A TEN MINUTE 

BREAK TO 2:30, PLEASE. 

ALL RIGHT. WE'RE IN RECESS. THANK YOU. 

(RECESS FROM 2:20 P.M. UNTIL 2:38 P.M.) 

THE CLERK: PLEASE COME TO ORDER. 

THE COURT: WELCOME BACK. PLEASE TAKE A SEAT. 

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SO I HAVE ACTUALLY RECONSIDERED. I ACTUALLY DON'T WANT A 

CHART. WE'LL ONLY DO CLOSING ARGUMENTS. OKAY? AND WE'LL 

STILL DO THAT ON FEBRUARY THE 1ST, ONE HOUR EACH SIDE. THE FTC 

CAN SAVE REBUTTAL TIME. OKAY? 

BUT NO NEED -- YOU KNOW, YOU ALL HAVE BRIEFED SO MUCH, I 

THINK IT'S FINE NOT TO HAVE THAT. 

OKAY. GO AHEAD, PLEASE. 2:38. 

MR. MATHESON: THANK YOU, YOUR HONOR. 

CROSS-EXAMINATION

BY MR. MATHESON: 

Q. GOOD AFTERNOON, SIR. 

A. GOOD AFTERNOON. 

Q. IT'S FAIR TO SAY THAT IN THE 1990S, QUALCOMM WANTED 

WIRELESS NETWORK OPERATORS TO DEPLOY CDMA NETWORKS WORLDWIDE; 

RIGHT? 

A. COULD YOU SPEAK JUST A LITTLE -- MY HEARING COULD BE 

BETTER.

Q. NO WORRIES. 

IT'S FAIR TO SAY THAT IN THE 1990S, QUALCOMM WANTED CDMA 

NETWORK OPERATORS TO DEPLOY CDMA NETWORKS WORLDWIDE; RIGHT? 

A. CDMA NETWORKS? YES. 

Q. CORRECT, SIR. 

A. YES. 

Q. QUALCOMM BELIEVED THAT ENCOURAGING NUMEROUS MANUFACTURERS 

OF CDMA PRODUCTS WOULD ENCOURAGE OPERATORS TO WIDELY DEPLOY 

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CDMA NETWORKS; RIGHT? 

A. WE BELIEVED THE MORE MANUFACTURERS, THAT'S CORRECT, MORE 

PRODUCTS AVAILABLE, THE LOWER THE COST, THE BETTER THE PRODUCT. 

Q. AND IN ORDER TO ALLOW THAT TO HAPPEN WORLDWIDE, THERE HAD 

TO BE A STANDARD; RIGHT?

A. YES. 

Q. NOW, IT'S FAIR TO SAY THAT YOU CONSIDERED THE POSSIBILITY 

OF RETAINING CDMA AS A PROPRIETARY STANDARD; RIGHT? 

A. WE THOUGHT ABOUT HAVING IT AS A, I DON'T KNOW IF YOU'D 

CALL IT DE JURE, BUT NOT GO TO A STANDARDS BODY. WE DID THINK 

ABOUT THAT.

Q. BUT QUALCOMM DETERMINED THAT THERE WAS A COMMERCIAL 

BENEFIT IN GOING THROUGH A STANDARD SETTING ORGANIZATION, SUCH 

AS THE TIA; RIGHT? 

A. WELL, A NUMBER OF THE OPERATORS ALSO URGED US TO GO 

THROUGH THE STANDARDS PROCESS, AND SO, YES, WE DECIDED THAT 

THAT WOULD BE APPROPRIATE. 

Q. WHEN YOU SAY APPROPRIATE, YOU BELIEVE THAT IT WAS 

IMPORTANT, FROM A COMMERCIAL POINT OF VIEW, THAT QUALCOMM GO 

THROUGH A PUBLIC STANDARD SETTING ORGANIZATION RATHER THAN 

MAINTAIN CDMA AS A PROPRIETARY STANDARD; RIGHT?

A. WE DID BELIEVE THAT IT WOULD BE BENEFICIAL TO HAVE AS MANY 

MANUFACTURERS AS POSSIBLE, AND THAT REQUIRED GOING THROUGH A 

STANDARDS PROCESS, YES.

Q. AND IN ORDER TO DEVELOP A STANDARD CERTIFIED BY TIA, 

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QUALCOMM KNEW THAT IT HAD TO MAKE A FRAND COMMITMENT; RIGHT? 

A. THAT'S CORRECT. 

Q. AND THAT'S BECAUSE TIA WILL NOT ADOPT AN INDUSTRY STANDARD 

UNLESS ALL PARTICIPANTS HOLDING ESSENTIAL PATENTS MAKE A FRAND 

COMMITMENT; RIGHT?

A. I BELIEVE THAT'S CORRECT. 

Q. NOW, ONE COMMERCIAL BENEFIT THAT QUALCOMM RECEIVED FROM 

WIDESPREAD ADOPTION OF CDMA IS A LARGER BASE OF LICENSEES FROM 

WHICH QUALCOMM -- 

A. A LARGER BASE?

Q. -- OF LICENSEES FROM WHICH QUALCOMM COULD POTENTIALLY 

COLLECT ROYALTIES; RIGHT? 

A. THAT IS CORRECT. 

Q. AND ANOTHER BENEFIT QUALCOMM ANTICIPATED FROM WIDESPREAD 

ADOPTION OF CDMA WERE A LARGER NUMBER OF HANDSET MAKERS WHO 

WERE POTENTIAL CUSTOMERS FOR QUALCOMM'S CHIPS? IS THAT FAIR? 

A. THEY COULD BE CUSTOMERS FOR OUR CHIPS. THEY COULD BE 

CUSTOMERS FOR OTHER CHIPS. 

BUT, AGAIN, OUR INTENT WAS TO HAVE THIS AS WIDELY 

AVAILABLE WORLDWIDE AS POSSIBLE TO GO TO A HORIZONTAL APPROACH 

WHERE YOU HAD MANY MANUFACTURERS ABLE TO MANUFACTURE THE 

PRODUCT RATHER THAN JUST A FEW. 

Q. AND QUALCOMM WANTED TO SELL AS MANY CHIPS AS IT COULD; 

RIGHT? 

A. WE CERTAINLY DID WANT TO BUILD OUR CHIP BUSINESS, YES. 

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Q. NOW, YOU RECALL THAT AT SOME POINT QUALCOMM AND CHINA 

UNICOM REACHED A FRAMEWORK AGREEMENT? 

DO YOU RECALL THAT, SIR?

A. YES, I DO.

Q. DO YOU RECALL THAT AS PART OF THE FRAMEWORK AGREEMENT, 

CHINESE HANDSET MAKERS WERE PROVIDED WITH A REDUCED ROYALTY IF 

THEY MADE A WORLDWIDE COMMITMENT TO PURCHASE QUALCOMM'S CDMA 

CHIPS? 

A. I DON'T REMEMBER THE DETAILS, FULL DETAILS OF THE 

AGREEMENT. 

I WILL -- I DO RECALL IT TOOK US EIGHT YEARS TO GET TO 

THAT POINT. SO IT WAS A LONG PERIOD. 

I REMEMBER THAT THEY HAD A REDUCED RATE WITHIN CHINA -- 

AGAIN, HOPEFULLY MY RECALL IS SOMEWHAT CORRECT -- AND A HIGHER 

RATE OUTSIDE. 

BUT THAT'S MY CURRENT RECALL. 

Q. COULD YOU DIRECT YOUR ATTENTION, SIR, I LEFT TWO WHITE 

BINDERS UP THERE, TO YOUR DEPOSITION TRANSCRIPT AT PAGE 268. 

NOW, THIS IS QUOTING A DOCUMENT, AND I JUST WANT TO KNOW, 

DOES THIS REFRESH YOUR RECOLLECTION THAT THE CHINA FRAMEWORK 

AGREEMENT -- THIS IS, I GUESS, 265, ACCORDING TO THIS, OR 266, 

ACCORDING TO THIS, LINES 4 TO 6. 

ONE OF THE CONDITIONS OF THE CHINA FRAMEWORK AGREEMENT WAS 

THAT OEM'S, IN ORDER TO BENEFIT FROM A REDUCED ROYALTY RATE, 

MADE A WORLDWIDE COMMITMENT TO PURCHASE QUALCOMM'S CDMA AND 

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RELATED COMPONENTS? 

A. YES, I DO SEE THAT.

Q. DOES THAT REFRESH YOUR RECOLLECTION, SIR, THAT THAT WAS 

ONE OF THE REQUIREMENTS OF THAT AGREEMENT? 

A. ASSUMING THIS IS A CORRECT TRANSCRIPT, IT DOES REFRESH MY 

MEMORY. I DON'T RECALL THAT DETAIL.

Q. NOW, YOU RECALL THAT WIMAX WAS AT ONE POINT A PROPOSED 

NEXT GENERATION STANDARD LED BY INTEL; RIGHT?

A. THAT'S CORRECT. 

Q. AND IF WIMAX HAD ENDED UP AS THE STANDARD, QUALCOMM WOULD 

HAVE BEEN FAR BEHIND IN ITS ABILITY TO PROVIDE CHIPS; IS THAT 

RIGHT? 

A. WE DID NOT PURSUE WIMAX BECAUSE I THOUGHT IT WAS AN 

INFERIOR TECHNOLOGY. AND SO, YES, IF THAT BECAME THE WORLDWIDE 

STANDARD, WE CERTAINLY WOULD HAVE PURSUED IT. BUT WE COULD 

HAVE BEEN LATER.

Q. AND IF YOU WOULD TURN YOUR ATTENTION, SIR, TO YOUR 

DEPOSITION TRANSCRIPT AT 124, LINES 17 TO 25. YOU DID 

PREVIOUSLY TESTIFY THAT QUALCOMM WOULD HAVE BEEN FAR BEHIND IN 

ITS ABILITY TO PROVIDE CHIPS; IS THAT RIGHT? 

MR. VAN NEST: OBJECTION, YOUR HONOR. THAT'S NOT 

IMPEACHING. THAT'S WHAT THE WITNESS JUST SAID. 

MR. MATHESON: I HEARD COULD HAVE RATHER THAN WOULD 

HAVE, YOUR HONOR. THAT'S THE DISTINCTION I WAS TRYING TO DRAW. 

THE COURT: ALL RIGHT. GO AHEAD, PLEASE. 

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BY MR. MATHESON: 

Q. CAN YOU TURN YOUR ATTENTION -- 

A. CAN YOU REPEAT THAT, PLEASE.

Q. CAN YOU TURN YOUR ATTENTION TO THAT PAGE OF THE DEPOSITION 

TRANSCRIPT? 

A. WHICH PAGE? 

Q. PAGE 124, LINES 17 TO 25. 

A. OH, IT'S HERE. 

WIMAX -- 

Q. IT'S ACCURATE TO STATE, SIR, THAT IF WIMAX HAD ENDED UP AS 

THE STANDARD, QUALCOMM WOULD HAVE BEEN FAR BEHIND; IS THAT 

RIGHT? 

A. THAT'S FINE. 

Q. AND IN LATE 2006, IT'S FAIR TO SAY THAT QUALCOMM WAS 

INTERESTED IN GETTING APPLE TO MAKE A PUBLIC COMMITMENT TO NOT 

PURSUE WIMAX IN ITS NEXT GENERATION OF PHONES; RIGHT?

A. WHAT YEAR WAS THAT?

Q. 2006. 

A. I RETIRED IN 2005 AS CTO -- AS CEO. IF THAT WAS 2006, I'M 

NOT SURE I WAS IN THE MIDDLE OF THOSE DETAILS. BUT I WOULD 

IMAGINE THAT WE WOULD BE INTERESTED IN GAINING SUPPORT FOR LTE. 

Q. DO YOU RECALL ONE WAY OR THE OTHER WHETHER THE -- 

A. I DO NOT RECALL.

Q. DO YOU RECALL ONE WAY OR THE OTHER WHETHER THE ORIGINAL 

2007 AGREEMENT BETWEEN QUALCOMM AND APPLE REQUIRED APPLE TO NOT 

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LAUNCH PRODUCTS CONTAINING WIMAX COMPATIBLE CHIPS? 

A. I DO NOT RECALL. 

Q. COULD YOU TURN, SIR, TO TAB 3 OF THE OTHER WHITE BINDER I 

HANDED YOU. 

CAN YOU IDENTIFY THIS, SIR, AS A -- LOOKING AT THE MIDDLE 

OF THE PAGE -- AS A COMMUNICATION THAT YOU SENT TO MR. K.T. LEE 

OF SAMSUNG IN OCTOBER OF 2003? 

A. YES. 

MR. MATHESON: YOUR HONOR, MOVE TO ADMIT CX 6719, 

CERTAIN MATERIAL IS SEALED ON THE SECOND PAGE OF THE DOCUMENT. 

WE HAVE PUT IT IN YOUR HONOR'S BINDER IN UNREDACTED FORM. 

WE'LL DISPLAY IT ON THE SCREEN IN REDACTED FORM. 

MR. VAN NEST: NO OBJECTION, YOUR HONOR. 

THE COURT: IT'S ADMITTED. 

(PLAINTIFF'S EXHIBIT CX 6719 WAS ADMITTED IN EVIDENCE.) 

THE COURT: GO AHEAD, PLEASE. 

BY MR. MATHESON: 

Q. TURNING YOUR ATTENTION TO PAGE 2 OF THE DOCUMENT 

CX 6719-002, THE SECOND FULL PARAGRAPH BEGINS, "YOU ALSO 

REQUESTED THAT SAMSUNG'S ROYALTY RATE FOR WCDMA," AND I'M NOT 

GOING TO READ THE EXACT NUMBERS THERE, SIR, THEY'VE BEEN 

BLACKED OUT, "BE DECREASED SO THAT SAMSUNG IS NOT COMPETITIVELY 

DISADVANTAGED." 

NOW, IT'S A TRUE STATEMENT THAT IN OCTOBER OF 2003, 

SAMSUNG ASKED QUALCOMM TO REDUCE THE RATES IT PAID ON WCDMA 

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HANDSET SALES; RIGHT? 

A. I BELIEVE THAT'S THE CASE. 

Q. NOW, QUALCOMM RESPONDED WITH A PROPOSAL LATER IN THE 

PARAGRAPH, THAT IF SAMSUNG PURCHASED AT LEAST -- OR CONTINUED 

TO PURCHASE AT LEAST BLANK PERCENT OF ITS ASICS FROM QUALCOMM, 

THEN SAMSUNG WOULD RECEIVE THE BENEFITS OF A ROYALTY REDUCTION. 

IS THAT FAIR? 

A. YES. 

Q. NOW, IT'S CLEAR THAT THE BUSINESS PURPOSE OF THIS PROPOSAL 

WAS TO ENCOURAGE SAMSUNG TO CONTINUE PURCHASING A LARGE NUMBER 

OF CHIPS FROM QUALCOMM; RIGHT? 

A. THEY WERE -- THEY HAD BEEN A GOOD CUSTOMER. THEY WERE 

PURCHASING A LARGE PERCENTAGE OF CHIPS AND, YES, WE CERTAINLY 

WANTED TO ENCOURAGE THAT. 

Q. NOW, TURNING YOUR ATTENTION TO THE NEXT PARAGRAPH, IT 

BEGINS, "IN YOUR E-MAIL, YOU ASKED WHETHER WE INTEND TO OFFER 

THIS ROYALTY REDUCTION TO OTHERS," AND IT'S FAIR TO SAY THAT IN 

SUBSTANCE, YOU COMMUNICATED TO MR. LEE THAT QUALCOMM INTENDED 

TO OFFER THIS SAME PROPOSAL TO OTHERS BECAUSE, AS IT SAYS IN 

THE SECOND TO LAST SENTENCE, "WE ARE ALSO COUNTING ON THEM TO 

TAKE MARKET SHARE FROM MANUFACTURERS THAT DO NOT USE OUR 

ASICS." 

IS THAT FAIR? 

A. I SEE THE SENTENCE, YES. 

Q. TURNING YOUR ATTENTION, SIR, TO TAB 4 OF YOUR BINDER, THIS 

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IS CX 6722. CAN YOU IDENTIFY THIS AS AN E-MAIL, LOOKING AT THE 

SECOND E-MAIL IN THE CHAIN, THAT YOU RECEIVED FROM MR. ALTMAN, 

SORRY, FROM MR. ALTMAN IN JANUARY OF 2007? 

A. JANUARY 2008. LET'S SEE. 

Q. I SEE MONDAY, JANUARY 8TH, 2007? 

A. YES. 

Q. OKAY. SO THIS WAS JANUARY 2007; IS THAT FAIR? 

A. RIGHT. HE WROTE THAT, YES.

Q. NOW, MR. ALTMAN SENT YOU THIS E-MAIL DURING NEGOTIATIONS 

WITH LG? IS THAT THE CONTEXT? 

A. YES. 

Q. NOW, LOOKING AT THE FIRST -- 

OH, YOUR HONOR, MOVE TO ADMIT CX 6722. 

MR. VAN NEST: NO OBJECTION, YOUR HONOR. 

THE COURT: IT'S ADMITTED. 

(PLAINTIFF'S EXHIBIT CX 6722 WAS ADMITTED IN EVIDENCE.) 

THE COURT: GO AHEAD, PLEASE. 

BY MR. MATHESON: 

Q. LOOKING AT THE FIRST ARABIC NUMERAL, MR. ALTMAN STATES 

"THEY CURRENTLY PAY 5 PERCENT WHEN THEY USE OUR CHIP AND 5.75 

PERCENT WHEN THEY DON'T." 

NOW, THAT ACCURATELY STATES THE ROYALTY RATE THAT IS LG 

PAID QUALCOMM AT THIS TIME; RIGHT?

A. I BELIEVE THAT'S THE CASE.

Q. NOW, THIS ROYALTY RATE DIFFERENCE BASED ON WHETHER LG 

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PURCHASED QUALCOMM'S CHIPSETS OR A COMPETITOR'S CHIPSETS 

PROVIDED LG WITH AN INCENTIVE TO PURCHASE QUALCOMM'S CHIPSETS; 

IS THAT RIGHT? 

A. I DON'T KNOW WHAT ALL THE OTHER TERMS INVOLVED WERE, BUT 

THAT BY ITSELF WOULD BE AN INCENTIVE. 

Q. SO ANYBODY WHO SAID THAT THIS PROVISION PROVIDED LG WITH 

MORE FAVORABLE ROYALTY RATES WHEN THEY PURCHASED QUALCOMM 

CHIPSETS WAS INTENDED TO MAKE SURE IT'S A LEVEL PLAYING FIELD 

ON THE CHIP SIDE WOULD JUST BE WRONG? IS THAT FAIR? 

A. I'M SORRY. WHERE ARE YOU READING?

Q. I'M JUST ASKING YOU. 

A. OH, GO AHEAD.

Q. IF SOMEONE WALKED INTO THIS COURTROOM AND SAID THAT THAT 

PROVISION WAS INTENDED TO MAKE SURE IT'S A LEVEL PLAYING FIELD 

ON THE CHIP SIDE, THAT PERSON WOULD BE WRONG WITH RESPECT TO 

THAT PROVISION; RIGHT? 

A. WELL, IT GOES ON TO SAY THAT WE ARE WILLING TO TAKE AND 

PROVIDE THE SAME RATE, I BELIEVE HERE, THE 5 PERCENT REGARDLESS 

OF WHOSE CHIP THAT THEY USE. 

SO WE WERE WILLING TO GO AHEAD AND DO THAT AT THAT TIME. 

Q. WELL, THAT'S THE OFFER THAT WAS MADE -- PARDON ME, SIR? 

A. IT WAS BEING PROPOSED.

Q. THAT WAS THE PROPOSAL. 

BUT AT THIS TIME, IN JANUARY OF 2007, IT WAS THE CASE THAT 

LG PAID A LOWER ROYALTY RATE WHEN THEY USED A QUALCOMM CHIP 

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THAN WHEN THEY USED A COMPETITOR CHIP; RIGHT?

A. WELL, BASED ON THIS STATEMENT, I WOULD TAKE THAT TO BE 

CORRECT. 

Q. CAN YOU TURN YOUR ATTENTION TO TAB 1 OF YOUR BINDER, SIR. 

A. TAB 1?

Q. YES, TAB 1. AND THIS HAS BEEN ADMITTED ALREADY. 

AND THIS IS AN E-MAIL -- OH, STRIKE THAT.

A. YES.

Q. DO YOU SEE THIS, SIR, IS AN E-MAIL THAT YOU SENT TO A 

SAMSUNG EXECUTIVE ON AUGUST 24TH, 2001? 

A. YES, TO K.T. LEE, WHO WAS PRESIDENT OF THE INFORMATION 

COMMUNICATIONS SECTION OF SAMSUNG. 

Q. CAN YOU TURN YOUR ATTENTION TO THE SECOND PAGE OF THE 

DOCUMENT, SIR, THE FIRST FULL PARAGRAPH. 

THIS HAS ALREADY BEEN ADMITTED, KEN. YOU CAN CALL IT UP. 

MR. KOTARSKI: WHAT'S THE EXHIBIT NUMBER? YOU JUST 

SAID THE TAB. 

MR. MATHESON: 6729. 

Q. THE FIRST FULL PARAGRAPH ON THE SECOND PAGE OF THE 

DOCUMENT STATES "AS FOR SAMSUNG'S POSITION THAT 1X IS NOT 

LICENSED," NOW, IN THE FINAL TWO SENTENCES OF THIS AGREEMENT, 

YOU INFORMED MR. LEE THAT UNDER YOUR AGREEMENTS, QUALCOMM DID 

NOT SHIP ASICS TO NON-LICENSEES OR TO LICENSEES WHO WERE NOT 

PERFORMING THEIR OBLIGATIONS. 

DO YOU SEE THAT, SIR? 

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A. I DO SEE THAT.

Q. AND THE REASON YOU INFORMED MR. LEE OF THAT IS THAT YOU 

ASSUMED MR. LEE WAS CONCERNED ABOUT THE PROSPECT OF HAVING 

SAMSUNG'S CHIP SUPPLY INTERRUPTED; RIGHT? 

A. I BELIEVE THAT WE HAD THIS DISPUTE OVER 1X WAS INCLUDED IN 

AN AGREEMENT THAT HE HAD SIGNED AND THAT WE WERE TRYING TO 

RESOLVE, AND THAT WE ALSO WERE AWARE THAT IN THAT AGREEMENT, 

THAT WITHOUT THE AGREEMENT, WE DID NOT SHIP ASICS.

Q. RIGHT. BUT THE REASON YOU REMINDED HIM OF THAT WAS THAT 

YOU ASSUMED HE WOULD BE CONCERNED WITH THE PROSPECT OF HAVING 

HIS CHIP SUPPLY INTERRUPTED; RIGHT? 

A. THE MAIN ISSUE WAS A NEED TO REMIND HIM OF THAT AND ASK 

HIM TO LET'S GO AHEAD AND GET THIS RESOLVED.

Q. WELL, BUT YOU WERE DOING IT, YOU WERE TELLING HIM THAT 

BECAUSE YOU ASSUMED HE WOULD BE CONCERNED WITH HAVING HIS CHIP 

SUPPLY INTERRUPTED; RIGHT? 

A. I WASN'T SURE EXACTLY HOW FAMILIAR HE WAS WITH THE 

DISPUTE, AND I WANTED TO AGAIN REMIND HIM OF THE CONTENT OF OUR 

AGREEMENT THAT HE HAD SIGNED. 

Q. CAN YOU TURN YOUR ATTENTION, SIR, TO YOUR DEPOSITION 

TRANSCRIPT, PAGES 206 AND 207. AND IN PARTICULAR, PAGE 207, 

LINES 7 TO 9. 

A. GO BACK TO THE OTHER BOOK. 

Q. YES. 

A. YOU WERE ASKED WHY YOU INFORMED HIM OF THIS PROVISION, AND 

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YOU SAID "BECAUSE I WOULD ASSUME THAT HE IS CONCERNED WITH NOT 

INTERRUPTING HIS OWN SUPPLY OF CHIPS." 

RIGHT? 

A. I'M SORRY, WHICH LINE ARE YOU LOOKING AT?

Q. 207, LINES 7 TO 9. 

THAT WAS YOUR TESTIMONY AT YOUR DEPOSITION; RIGHT, SIR? 

A. YES, I SAID THAT.

Q. TURN TO THE NEXT TAB IN YOUR BINDER, SIR. CAN YOU 

IDENTIFY THIS AS -- THIS IS JX 0014 -- AS AN E-MAIL SENT BY 

MR. LEE OF SAMSUNG TO YOURSELF ON AUGUST 31ST? 

A. I'M SORRY. WHICH TAB?

Q. THE SECOND TAB OF YOUR BINDER, SIR, TAB 2. 

AND THIS IS ONE WEEK AFTER THE E-MAIL WE JUST LOOKED AT ON 

AUGUST 24TH; RIGHT? 

A. YES. 

MR. MATHESON: YOUR HONOR, MOVE TO ADMIT JX 0014. 

MR. VAN NEST: NO OBJECTION, YOUR HONOR. 

THE COURT: IT'S ADMITTED. 

(JOINT EXHIBIT JX 0014 WAS ADMITTED IN EVIDENCE.) 

THE COURT: GO AHEAD, PLEASE. 

BY MR. MATHESON: 

Q. TURNING YOUR ATTENTION TO THE PARAGRAPH THAT BEGINS, 

"REGARDING THE 1X ROYALTY ISSUE," THE SECOND SENTENCE OF 

MR. LEE'S E-MAIL TO YOU READS, "I WILL REMIT THE 1X ROYALTY 

PAYMENT IMMEDIATELY UPON COMPLETION OF THE NECESSARY 

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CALCULATIONS." 

NOW, THAT'S WHAT YOU ASKED HIM TO DO IN THE COMMUNICATION 

YOU SENT HIM ONE WEEK BEFORE; RIGHT? 

A. YES, UM-HUM. 

Q. TURN TO TAB 5 IN THE BINDER YOU HAVE IN FRONT OF YOU. 

THIS IS CX 6814 WHICH WE JUST ADMITTED. 

NOW, TURNING TO CX 6814-022, THIS IS THE SAME LETTER THAT 

YOU DISCUSSED WITH YOUR COUNSEL DURING YOUR DIRECT EXAM; RIGHT? 

A. I'M SORRY. AGAIN, WHICH?

Q. PAGE 022, CX 6814-022. 

A. OH, 022. I'M THERE. I HAVE 022.

Q. AND AT THE TOP OF THE PAGE, THE SECOND SENTENCE, "REQUEST 

THAT LG PROMPTLY," LITTLE I, "RETRACT AND WAIVE MR. HAM'S CLAIM 

THAT QUALCOMM HAS WAIVED ITS RIGHTS UNDER OUR EXISTING SUPPLY 

AGREEMENT," AND LITTLE II, "WITHOUT PREJUDICE TO EITHER PARTY'S 

POSITION IN THE PRESENT ARBITRATION, AGREE TO REPORT AND PAY 

ROYALTIES ON ALL OF ITS SALES OF PAST AND FUTURE WCDMA UNITS." 

NOW, THOSE WERE THE TWO DEMANDS YOU WERE MAKING OF, OR 

REQUESTS -- THOSE WERE THE TWO REQUESTS YOU WERE MAKING OF LG 

IN THIS LETTER; RIGHT? 

A. TWO REQUESTS, YES. 

Q. AND CONTINUING DOWN, YOU STATE, "OTHERWISE, QUALCOMM IS 

LEFT WITH NO CHOICE BUT TO TAKE THE FOLLOWING" TWO STEPS, OR 

"THE FOLLOWING STEP," AND LET'S LOOK AT THE FIRST TWO. 

FIRST, QUALCOMM WILL STOP ACCEPTING LGE PURCHASE ORDERS 

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FOR WCDMA ASICS; AND, 2, QUALCOMM WILL CEASE ALL SHIPMENTS OF 

WCDMA ASICS TO LGE. 

DO YOU SEE THOSE TWO PROVISIONS, SIR?

A. I DO. 

Q. NOW, AFTER THIS COMMUNICATION, LG, IN FACT, RETRACTED AND 

WAIVED THE CLAIM THAT IT HAD NO OBLIGATION TO PAY QUALCOMM 

ROYALTIES ON WCDMA SUBSCRIBER UNITS; IS THAT RIGHT? 

A. I -- I KNOW THE ISSUE WAS RESOLVED. I DON'T REMEMBER THE 

EXACT DETAIL AND TIMING.

Q. WELL, YOU CERTAINLY NEVER CUT OFF THEIR SUPPLY OF WCDMA 

ASICS, DID YOU? 

A. THIS WAS ACTUALLY A SUPPLY OF 500 UNITS ON JUNE 30TH AND 

6,000 UNITS. IT WASN'T REALLY PRODUCTION QUANTITIES. IT WAS 

START-UP QUANTITIES OF WCDMA CHIPS. 

THEY MIGHT HAVE BEEN DELAYED. I'M NOT SURE WHEN THEY WERE 

SHIPPED.

Q. WELL, MY QUESTION, SIR, WAS YOU DID NOT CUT OFF -- YOU DID 

NOT CEASE ALL SHIPMENTS OF WCDMA ASICS AS YOU TOLD THEM YOU 

WOULD DO IN THIS LETTER; ISN'T THAT RIGHT? 

A. I -- AFTER MY FIRST LETTER, WE SAID WE COULD NOT SHIP THE 

CHIPS, AND THEN AS FAR AS I KNOW, WE DIDN'T. 

I'M NOT SURE NOW WHAT YOU'RE ASKING. 

Q. WELL, I'M ASKING YOU, SIR, DO YOU RECALL ONE WAY OR THE 

OTHER, DID QUALCOMM CUT OFF LG'S SUPPLY OF WCDMA ASICS? 

A. WE DID NOT SHIP TO THEM THE CHIPS THAT WERE SPECIFIED 

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JACOBS CROSS BY MR. MATHESON

UNITED STATES COURT REPORTERS

1294

HERE, THE 500 AND THEN 6,000 CHIPS AS FAR AS I KNOW AT THIS 

TIME.

Q. SO ANYBODY WHO SAYS THAT QUALCOMM HAS NEVER CUT OFF CHIP 

SHIPMENTS IS WRONG ACCORDING TO WHAT YOU JUST SAID; ISN'T THAT 

RIGHT? 

A. THIS IS WCDMA CHIP SHIPMENTS, NOT CDMA CHIP SHIPMENTS, AND 

IT WAS SMALL NUMBERS OF PARTS. 

WE MAY HAVE CUT THEM OFF. AGAIN, I DON'T KNOW. I DON'T 

RECALL THE DETAILS.

Q. AND SOME WCDMA CHIPS AT THIS TIME WERE BACKWARDS 

COMPATIBLE WITH 2G CDMA STANDARDS; RIGHT? 

A. THEY MIGHT HAVE BEEN DUAL CAPABILITY.

Q. AND SO THAT MEANS, IF QUALCOMM CUT OFF THESE CHIPS LIKE 

YOU JUST SAID, THEY CUT OFF 2G CDMA CHIPS TO LG IN THE CONTEXT 

OF AN ARBITRATION DISPUTE IN 2004; RIGHT? 

A. I THINK YOU'RE CUTTING A VERY FINE POINT. 

THE CHIPS FOR CDMA 2000 FOR LG CONTINUED TO BE SHIPPED 

DURING THIS DISPUTE WITHOUT ANY INTERRUPTION. 

Q. OKAY, SIR. I UNDERSTAND THAT. AND I'M NOT ASKING -- 

A. THESE WERE CHIPS THAT THEY WERE GOING TO BE USING IN 

TESTING SOME PHONES, A VERY SMALL NUMBER, AND AS I SAY, I DON'T 

KNOW IF THEY WERE CUT OFF OR NOT. 

BUT THEIR CLAIM WAS THAT IF WE DID SHIP THEM, THEY WOULD 

HAVE NO RESPONSIBILITY TO PAY ROYALTIES ON PHONES WITH OUR 

CHIPS, THESE CHIPS OR FUTURE CHIPS.

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JACOBS CROSS BY MR. MATHESON

UNITED STATES COURT REPORTERS

1295

Q. AND YOU TESTIFIED THIS ARBITRATION WAS RESOLVED AT SOME 

POINT; RIGHT?

A. I BELIEVE IT WAS.

Q. AND THERE WAS NO DETERMINATION BY THE ARBITRATOR ABOUT WHO 

WAS RIGHT AND WHO WAS WRONG REGARDING WHETHER LG WAS REQUIRED 

TO PAY ROYALTIES TO QUALCOMM ON WCDMA CHIPS; ISN'T THAT RIGHT? 

A. AT THIS TIME, I DON'T KNOW WHAT THE RESOLUTION WAS -- 

Q. SO IF IT -- 

A. -- OTHER THAN WE DID CONTINUE TO DO BUSINESS WITH LG. 

Q. OKAY. AND SO IF YOU HAD NOT BEEN IN THE POSITION TO 

THREATEN TO CUT OFF LG'S CHIP SUPPLY, YOU WOULD HAVE HAD TO 

HAVE ALLOWED AN ARBITRATOR TO DETERMINE WHETHER OR NOT LG OWED 

QUALCOMM ROYALTIES ON UNITS CONTAINING QUALCOMM'S CHIPS; RIGHT? 

A. WE DID NOT THREATEN ANYBODY WITH DOING ONE THING OR 

ANOTHER. 

WE DID NOTE THAT THEIR CLAIM WAS SOMETHING WE DID NOT 

AGREE WITH AND, AS A RESULT OF THAT CLAIM, WE COULD NOT SHIP 

THEM THOSE CHIPS. 

Q. SIR, WHEN -- I MEAN, I JUST WANT TO LOOK AT YOUR LANGUAGE 

HERE. YOU SAID, "WE DID NOT THREATEN ANYONE WITH ONE THING OR 

ANOTHER." RIGHT THERE YOU SAY "QUALCOMM IS LEFT WITH NO CHOICE 

BUT TO TAKE THE FOLLOWING STEPS, UNLESS LG RETRACTS AND WAIVES 

THE CLAIM THAT QUALCOMM IS NOT OWED ROYALTIES AND AGREES TO PAY 

ROYALTIES." 

IS THAT NOT A THREAT? 

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JACOBS CROSS BY MR. MATHESON

UNITED STATES COURT REPORTERS

1296

A. AGAIN, IT WAS REMINDING THEM OF THE AGREEMENTS THAT THEY 

HAD SIGNED WITH US AND THAT THEY SHOULD LIVE UP TO.

Q. AND IF THEY DIDN'T LIVE UP TO THEM, QUALCOMM WAS GOING TO 

CUT OFF THEIR CHIP SUPPLY RATHER THAN PURSUE ROYALTIES IN THE 

ALREADY ONGOING ARBITRATION; ISN'T THAT RIGHT?

A. THEY DIDN'T HAVE -- EXCUSE ME. THEY DIDN'T HAVE A CHIP 

SUPPLY ON WCDMA AT THAT POINT. AGAIN, RECALL THAT THESE WERE 

INITIAL QUANTITIES OF CHIPS THAT WERE BEING DISCUSSED. 

Q. WELL, THAT'S 6,000 UNITS OF THE MSM 6200 THAT WERE BEING 

PLACED UNDER THE PURCHASE ORDER; RIGHT?

A. THAT'S CORRECT.

MR. MATHESON: OKAY. NO FURTHER QUESTIONS. 

THANK YOU VERY MUCH FOR YOUR TIME, SIR. 

THE WITNESS: THANK YOU. 

THE COURT: OKAY. 3:03. 

MR. VAN NEST: NO QUESTIONS, YOUR HONOR. 

THE COURT: ALL RIGHT. MAY THIS WITNESS BE EXCUSED, 

AND IS IT SUBJECT TO RECALL OR NOT SUBJECT TO RECALL? 

MR. MATHESON: NOT SUBJECT TO RECALL, YOUR HONOR. 

MR. VAN NEST: NOT SUBJECT TO RECALL. 

THE COURT: OKAY. THEN YOU HAVE COMPLETED YOUR TRIAL 

TESTIMONY AND YOU'RE FREE TO LEAVE. 

THE WITNESS: THANK YOU. 

THE COURT: ALL RIGHT. WE'LL GO TO 3:30 AND THEN 

TAKE ANOTHER TEN MINUTE BREAK AT THAT TIME. 

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UNITED STATES COURT REPORTERS

1297

I ASSUME YOU HAVE VIDEOS TO SHOW. IS THAT CORRECT? 

MR. BAKER: THAT'S RIGHT, YOUR HONOR. 

THE COURT: ALL RIGHT. ARE ANY OF THEM SEALED, OR 

NOT? 

MR. BAKER: NO, YOUR HONOR. 

THE COURT: THEY'RE NOT. OKAY. SO THOSE WILL ALL 

REMAIN OPEN. 

(PAUSE IN PROCEEDINGS.) 

THE COURT: OKAY. ALL RIGHT. GIVE ME JUST A MOMENT, 

PLEASE. 

OKAY. SO DO WE HAVE MONICA YANG? 

MR. BAKER: THAT'S RIGHT. THE FTC CALLS MONICA YANG 

BY VIDEO DEPOSITION. 

THE COURT: OKAY. AND WHAT'S THE -- I MEAN, I'M 

GOING TO CHARGE THE TIME, BUT WHAT'S THE TIME ALLOCATIONS? 

MR. BAKER: IT'S APPROXIMATELY SEVEN MINUTES, AND I 

BELIEVE ONE MINUTE OF THAT IS COUNTER-DESIGNATIONS FROM 

QUALCOMM. 

THE COURT: OKAY. SO GIVE ME JUST ONE MINUTE, 

PLEASE. 

(PAUSE IN PROCEEDINGS.) 

THE COURT: ALL RIGHT. GO AHEAD, PLEASE. 

MR. BAKER: THE FTC WOULD LIKE TO ADMIT JX 0053. 

THE COURT: OKAY, WAIT. I'M SORRY. I'VE GOT TO 

CHARGE YOU TIME. 

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YANG DEPOSITION

UNITED STATES COURT REPORTERS

1298

3:05. GO AHEAD, PLEASE. 

MR. BAKER: THE FTC WOULD LIKE TO MOVE TO ADMIT 

JX 0053. IT IS SEALED IN PART. WE DO NOT INTEND TO SHOW IT 

DURING THE PLAYING OF THE VIDEO. 

THE COURT: THAT'S FINE. 

MR. BORNSTEIN: NO OBJECTION TO A JX, YOUR HONOR. 

THE COURT: IS THAT THE ONLY EXHIBIT? 

MR. BAKER: THAT'S THE ONLY ONE. 

THE COURT: ALL RIGHT. IT'S ADMITTED. 

(JOINT EXHIBIT 0053 WAS ADMITTED IN EVIDENCE.) 

THE COURT: GO AHEAD, PLEASE. 

(THE VIDEOTAPED DEPOSITION OF MONICA YANG WAS PLAYED IN 

OPEN COURT OFF THE RECORD.)

THE COURT: OKAY. TIME IS 3:13. 

NOW, IS THIS WITNESS EXCUSED SUBJECT TO RECALL OR NOT 

SUBJECT TO RECALL? 

MR. BAKER: NOT SUBJECT TO RECALL, YOUR HONOR. 

THE COURT: DO YOU AGREE WITH THAT? 

MR. BORNSTEIN: MS. YANG IS IN TAIWAN, SO YES. 

THE COURT: OKAY. SHE IS DONE. 

WHO IS YOUR -- WHO IS YOUR NEXT WITNESS? 

MR. CARSON: THE FTC WILL PLAY THE DEPOSITION OF 

FORMER QUALCOMM EMPLOYEE MARV BLECKER, YOUR HONOR. 

THE COURT: OKAY. JUST GIVE ME ONE MINUTE TO UPDATE 

MY NOTES, PLEASE. 

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UNITED STATES COURT REPORTERS

1299

AND HOW LONG IS THIS ONE? 

MR. CARSON: IT'S APPROXIMATELY 11 MINUTES. 

THE COURT: OKAY. AND WHAT'S THE BREAKDOWN? 

MR. CARSON: ALL FTC AND NO QUALCOMM. 

THE COURT: OKAY. ALL RIGHT. ARE YOU GOING TO SEEK 

TO ADMIT ANY EXHIBITS? 

MR. CARSON: YES, YOUR HONOR, THREE EXHIBITS. 

THE COURT: OKAY. THEN GO AHEAD. IT'S 3:14. 

MR. CARSON: THE FTC SEEKS TO ADMIT CX 8260, WHICH IS 

SEALED IN PART AND WE'LL COVER THE SCREEN WHEN IT'S SHOWN ON 

THE SCREEN. 

THE COURT: OKAY.

MR. CARSON: CX 8285, AND CX 8286. 

THE COURT: ALL RIGHT. 

ANY OBJECTION? 

MR. PETERSON: JORDAN PETERSON ON BEHALF OF QUALCOMM. 

WE HAVE NO OBJECTION SUBJECT TO PUTTING ON THE RECORD ONE 

CLARIFICATION THAT THE PARTIES REACHED DURING THE HPO PROCESS. 

THE COURT: WHAT IS THAT? 

MR. PETERSON: THAT IS THAT CX 8260, WHICH CONTAINS 

STATEMENTS -- 

THE COURT: OKAY. I'M GOING TO CHARGE YOU YOUR TIME. 

MR. PETERSON: CX 8260, WHICH INCLUDES STATEMENTS BY 

MR. JEFF WILLIAMS, THOSE STATEMENTS WILL NOT BE ADMITTED FOR 

THE TRUTH OF THE MATTER. 

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BLECKER DEPOSITION

UNITED STATES COURT REPORTERS

1300

MR. CARSON: THAT'S CORRECT, YOUR HONOR, WE AGREE. 

MR. PETERSON: SUBJECT TO THAT LIMITATION, NO OTHER 

OBJECTIONS. 

THE COURT: IS THAT AN E-MAIL? 

MR. CARSON: IT IS, YOUR HONOR. 

THE COURT: OKAY. SO FOR JEFF WILLIAMS, NOT FOR THE 

TRUTH ASSERTED. 

MR. CARSON: YES. BUT THE REST I BELIEVE IS A PARTY 

ADMISSION, SO THE REST OF THE E-MAIL WOULD COME INTO EVIDENCE 

FOR THE TRUTH. 

THE COURT: OKAY. THOSE ARE ADMITTED. 

(PLAINTIFF'S EXHIBITS CX 8260, 8285 AND 8286 WERE ADMITTED 

IN EVIDENCE.) 

MR. CARSON: THANK YOU, YOUR HONOR. 

THE COURT: GO AHEAD, PLEASE. TIME IS 3:15. 

(THE VIDEOTAPED DEPOSITION OF MARVIN BLECKER WAS PLAYED IN 

OPEN COURT OFF THE RECORD.)

THE COURT: OKAY. TIME IS 3:26. 

WHO DO YOU HAVE NEXT? 

MS. MILICI: YOUR HONOR, THE FTC RESTS ITS 

CASE-IN-CHIEF. 

THE COURT: OH, YOU DO. OKAY. 

ALL RIGHT. WE CAN TAKE -- IT'S 3:26. WE CAN TAKE OUR TEN 

MINUTE BREAK NOW IF YOU PREFER OR WE COULD GET STARTED A LITTLE 

BIT. WHAT'S YOUR PREFERENCE? 

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UNITED STATES COURT REPORTERS

1301

MR. VAN NEST: THAT'S FINE. IT'S WHATEVER THE COURT 

PREFERS. WE'LL BRING THE WITNESS IN -- TAKE A BREAK AND WE'LL 

START AFTER THE BREAK. THAT'S FINE. 

THE COURT: OKAY. THAT'S FINE. LET'S TAKE A TEN 

MINUTE BREAK THEN. WE'LL GO UNTIL 4:30. 

OKAY. THANK YOU.

OH, I'M SORRY, I FORGOT. IS MARV BLECKER SUBJECT TO 

RECALL? 

MR. CARSON: NOT FOR THE FTC, YOUR HONOR. 

MR. EVEN: NOT FOR QUALCOMM, YOUR HONOR.

THE COURT: ALL RIGHT. THANK YOU.

(RECESS FROM 3:27 P.M. UNTIL 3:40 P.M.) 

THE COURT: OKAY. WELCOME BACK. GOOD AFTERNOON. 

ALL RIGHT. PLEASE TAKE A SEAT. 

SO PLEASE CALL YOUR FIRST WITNESS. 

MR. VAN NEST: OUR SECOND WITNESS, YOUR HONOR. 

THE COURT: OH, YOUR SECOND WITNESS, THAT'S RIGHT. 

I'M SORRY. 

FIRST WITNESS IN YOUR CASE OFFICIALLY. 

MS. SESSIONS: GOOD AFTERNOON, YOUR HONOR. 

QUALCOMM CALLS DR. DURGA MALLADI. 

THE CLERK: PLEASE STAND. 

THE WITNESS: YES. 

THE CLERK: PLEASE RAISE YOUR RIGHT HAND. 

(DEFENDANT'S WITNESS, DURGA MALLADI, WAS SWORN.)

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MALLADI DIRECT BY MS. SESSIONS

UNITED STATES COURT REPORTERS

1302

THE WITNESS: YES. 

THE CLERK: THANK YOU. PLEASE BE SEATED. 

WOULD YOU PLEASE STATE YOUR FULL NAME AND SPELL YOUR LAST 

NAME FOR THE RECORD. 

THE WITNESS: DURGA PRASAD, P-R-A-S-A-D, MALLADI. 

THE COURT: ALL RIGHT. TIME IS 3:41. 

GO AHEAD, PLEASE. 

MS. SESSIONS: THANK YOU, YOUR HONOR. 

MAY I APPROACH WITH BINDERS? 

THE COURT: PLEASE. 

AND CAN YOU SPELL YOUR LAST NAME FOR THE RECORD? 

THE WITNESS: MALLADI, M-A-L-L-A-D-I. 

THE COURT: THANK YOU. 

DIRECT EXAMINATION

BY MS. SESSIONS: 

Q. GOOD AFTERNOON. 

A. GOOD AFTERNOON.

Q. PLEASE INTRODUCE YOURSELF. 

A. MY NAME IS DURGA MALLADI. I'M AN EMPLOYEE AT QUALCOMM.

Q. PLEASE DESCRIBE YOUR EDUCATIONAL BACKGROUND. 

A. I HAVE A BACHELOR'S DEGREE FROM INDIAN INSTITUTE OF 

TECHNOLOGY, MADRAS, THAT'S IN INDIA, M-A-D-R-A-S, IT'S A CITY 

IN INDIA; I HAVE A MASTER'S AND PH.D. FROM UCLA; AND MY 

DISSERTATION TOPIC WAS IN ADAPTIVE FILTERING TECHNIQUES. 

Q. HOW LONG HAVE YOU WORKED AT QUALCOMM? 

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MALLADI DIRECT BY MS. SESSIONS

UNITED STATES COURT REPORTERS

1303

A. JUST ABOUT 21 YEARS. 

Q. HOW DID YOU COME TO WORK AT QUALCOMM? 

A. BACK IN THE LATE '90S WHEN I WAS GRADUATING WIRELESS 

RESEARCH, QUALCOMM WAS THE PLACE TO WORK AT THAT POINT IN TIME, 

HIGHLY RECOMMENDED, AND THAT'S THE PLACE THAT I CHOSE. 

Q. WHAT IS YOUR CURRENT JOB TITLE? 

A. I'M A SENIOR VICE PRESIDENT AND GENERAL MANAGER OF 4G AND 

5G IN QUALCOMM.

Q. AND WHEN DID YOU TAKE THAT TITLE? 

A. JUST ABOUT SIX MONTHS BACK. 

Q. PRIOR TO TAKING THAT TITLE, WHAT WAS YOUR ROLE? 

A. I WAS THE SENIOR VICE PRESIDENT OF ENGINEERING AT 

QUALCOMM, RESPONSIBLE FOR ALL OF OUR WIRELESS RESEARCH. SO 

THAT INCLUDES 4G, 5G, AND WI-FI TECHNOLOGIES.

Q. AND FOR HOW LONG WERE YOU RESPONSIBLE FOR WIRELESS 

RESEARCH AT QUALCOMM? 

A. I WAS RESPONSIBLE FOR THAT FOR A VERY LONG TIME. I'VE 

BEEN IN WIRELESS RESEARCH SINCE 2001, AND OVER THE COURSE OF 

TIME I HAVE TAKEN MORE LEADERSHIP POSITIONS. 

Q. HAVE YOU PARTICIPATED IN WORK RELATED TO STANDARDS 

SETTING? 

A. YES, I HAVE.

Q. WHAT IS THAT WORK? 

A. FOR A LONG TIME I PERSONALLY USED TO ATTEND STANDARDS 

MEETINGS, IN ADDITION TO DOING ALL THE DESIGN AND RESEARCH 

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MALLADI DIRECT BY MS. SESSIONS

UNITED STATES COURT REPORTERS

1304

ACTIVITIES. 

AND AFTER 2007 OR SO, I STARTED NOT ATTENDING STANDARDS 

MEETINGS, BUT MY TEAMS WERE GOING TO STANDARDS MEETINGS. 

SO I WOULD BE RESPONSIBLE IN TERMS OF WHAT GOES INTO THE 

MEETINGS, WHAT ARE THE INPUT THAT WE NEED TO PROVIDE, AND THEN 

DEBRIEFING AFTER THE MEETINGS.

Q. SO AS A PART OF YOUR WORK, DID YOU RECEIVE REPORTS FROM 

THE STANDARDS MEETINGS? 

A. YES, I DID. 

Q. AS OF MARCH 2018, DID YOU HAVE ANY PATENTS? 

A. YES, I DID. 

Q. HOW MANY? 

A. CLOSE TO ABOUT 400 PATENTS.

Q. IS THAT U.S. PATENTS? 

A. THESE ARE ALL U.S. PATENTS.

Q. AND WHAT PROPORTION OF THOSE PATENTS BELONGED TO QUALCOMM?

A. ALL OF THEM. 

Q. DR. MALLADI, COULD YOU BRIEFLY TELL THE COURT ABOUT 

QUALCOMM'S APPROACH TO WIRELESS RESEARCH? 

A. SURE. SO WIRELESS RESEARCH, WHEN YOU THINK ABOUT THE 

OVERALL COMMUNICATION SYSTEM, IN QUALCOMM WE HAVE A DIVISION, 

CORPORATE RESEARCH AND DEVELOPMENT, THIS IS ONE OF THE 

DIVISIONS INSIDE QUALCOMM. 

WE LOOK AT -- WE ARE INTERESTED IN MOVING THE NEEDLE QUITE 

SIGNIFICANTLY WHEN IT COMES TO A LOT OF THE COMMUNICATION 

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MALLADI DIRECT BY MS. SESSIONS

UNITED STATES COURT REPORTERS

1305

PROBLEMS THAT WE WANT TO SOLVE. 

SO WE LOOK AT IT FROM AN END-TO-END SYSTEMS PERSPECTIVE, 

AND LET ME JUST BRIEFLY EXPLAIN WHAT THAT MEANS. 

TYPICALLY WHEN WE THINK OF WIRELESS COMMUNICATIONS, WE 

HAVE OUR CELL PHONES WITH US AND WE HAPPEN TO COMMUNICATE WITH 

IT, WHETHER IT'S A FILE DOWNLOAD TODAY OR WATCHING A VIDEO OR 

WE ARE TALKING TO SOMEONE. 

BUT THE COMMUNICATION SYSTEM CONSISTS OF NOT JUST THE 

DEVICE, BUT IN ADDITION TO THE DEVICE, THERE IS -- THERE ARE 

BASE STATIONS, TYPICALLY THEY ARE PUT ON TOP OF CELL TOWERS -- 

FOR THE PURPOSE OF THIS CONVERSATION, WE JUST CALL THEM AS CELL 

TOWERS -- AND THEN THESE IN TURN COMMUNICATE WITH WHAT IS KNOWN 

AS A CORE NETWORK. THAT'S THE NETWORK THAT EVENTUALLY 

INTERFACES WITH THE REST OF THE INTERNET. 

SO YOU HAVE MULTIPLE ELEMENTS OF AN OVERALL WIRELESS 

COMMUNICATION SYSTEM, AND THAT'S WHAT WE MEAN BY AN END-TO-END 

SYSTEM DESIGN. THAT'S WHAT OUR R&D WORK ENTAILS. 

AND SO WHENEVER WE TAKE A LOOK AT A SPECIFIC PROBLEM, WE 

LOOK AT ALL THE SOLUTIONS THAT ARE NECESSARY IN EACH OF THESE 

DIFFERENT ELEMENTS. 

Q. IS THERE A TARGET TIMEFRAME FOR QUALCOMM'S WIRELESS 

RESEARCH?

A. THERE'S NO SPECIFIC TIMEFRAME. WE ARE INTERESTED IN 

LONG-TERM PROBLEMS AND THERE IS NO SPECIFIC TIMEFRAME 

ASSOCIATED WITH THAT. 

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MALLADI DIRECT BY MS. SESSIONS

UNITED STATES COURT REPORTERS

1306

THERE ARE PROBLEMS THAT WE WORKED ON FOR CLOSE TO A DECADE 

SOMETIMES, AND SOMETIMES THERE ARE PROBLEMS THAT ARE PROBABLY 

MAYBE THREE TO FIVE YEARS TIME HORIZON FROM THE TIME WE STARTED 

WORKING ON IT TO THE TIME THAT THEY BECAME COMMERCIAL. 

THERE'S NO FIXED TIMEFRAME, BUT IT'S CERTAINLY NOT WHAT I 

WOULD CLASSIFY AS SHORT-TERM.

Q. DOES QUALCOMM'S CORPORATE WIRELESS RESEARCH FOCUS ON MODEM 

CHIPS? 

A. WE DO, BUT IT'S A SMALL PART OF THE ENTIRE SYSTEM DESIGN. 

AS I EXPLAINED BEFORE, THERE ARE LOTS OF ELEMENTS IN THE WHOLE 

SYSTEM AND, THEREFORE, WE WORK ON ALL THE PROTOCOLS AND SO ON. 

BUT, YES, WE DO WORK ON THAT AS WELL.

Q. WHAT HAPPENS AFTER SOMEONE COMES UP WITH A PROMISING IDEA 

IN WIRELESS RESEARCH?

A. OKAY. SO USUALLY INSIDE OUR R&D ORGANIZATION, IT'S NOT 

LIKE ONE SINGLE IDEA. WE HAVE A PROBLEM STATEMENT, SOMETHING 

THAT NEEDS TO BE SOLVED. AND IT'S NOT ONE SINGLE IDEA, BUT 

SEVERAL IDEAS COME IN. 

AND THEN THERE IS AN EXTENSIVE VETTING PROCESS AT THAT 

POINT IN TIME. WE GO THROUGH IT, LOTS OF ANALYSIS, LOTS OF 

DEBATES ON WHAT IS THE RIGHT WAY OF SOLVING THE PROBLEM. 

EVENTUALLY WE REACH A POINT IN TIME WHEN WE THINK, OKAY, 

WE THINK WE KNOW WHAT NEEDS TO BE DONE, BACKED UP BY ANALYSIS 

AND SIMULATIONS, THE IDEA SEEMS TO HAVE MERIT AT THAT POINT IN 

TIME. 

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MALLADI DIRECT BY MS. SESSIONS

UNITED STATES COURT REPORTERS

1307

AND THAT'S THE POINT THAT WE DECIDE, OKAY, LOOK, THIS IS 

SOMETHING THAT'S STILL ON PAPER, WE HAVE TO PROVE IT TO 

OURSELVES. WE HAVE TO PROVE IT BY BUILDING EQUIPMENT TOWARDS 

IT. 

AND THAT'S WHEN WE BEGIN WHAT IS KNOWN AS A PROTOTYPING 

ACTIVITY. THAT'S THE FIRST TIME WE ARE TRYING TO BUILD UP AN 

ENTIRE SYSTEM TO PROVE UP THE CONCEPT FOR OURSELVES FIRST 

BEFORE WE START AWARDING IT TO OTHERS.

Q. MR. DAHM, COULD WE HAVE DEMONSTRATIVE 1 UP ON THE SCREEN, 

PLEASE. 

AND, DR. MALLADI, IT'S ALSO IN YOUR BINDER IF YOU NEED TO 

LOOK AT IT. 

A. SURE.

Q. AND THIS IS ACTUALLY PAGE 2 OF THE DEMONSTRATIVES. 

THANK YOU, MR. DAHM. 

DR. MALLADI, DO YOU RECOGNIZE WHAT'S BEING SHOWN IN THE 

PHOTOS HERE? 

A. YES.

Q. AND COULD YOU EXPLAIN TO THE COURT WHAT THESE PHOTOS ARE? 

A. SO OUTSIDE OF OUR R&D BUILDING, WE HAVE A CONCRETE PLAQUE 

THAT WAS VERY RECENTLY INSTALLED, AND THIS IS WHAT IS -- THESE 

TWO PICTURES ARE FROM THAT CONCRETE PLAQUE. 

KLEIN WAS ONE OF OUR FOUNDERS, ALONG WITH OTHERS, FROM THE 

MID-'80S, AND HE HAD A STATEMENT. HE WAS PRETTY PRACTICAL, A 

STRAIGHT SHOOTER WHEN IT CAME TO IT, AND HE SAID "IF IT'S NOT 

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TESTED, IT DOESN'T WORK." YOU CAN TALK ABOUT IT ALL YOU WANT, 

YOU CAN SIMULATE AND ANALYZE IT. 

BUT THAT'S WHAT IT MEANS.

Q. AND HOW, IF AT ALL, DOES THIS PHILOSOPHY FACTOR INTO 

QUALCOMM'S RESEARCH AND DEVELOPMENT EFFORTS? 

A. THIS SPECIFIC STATEMENT IS INGRAINED INTO EVERY SINGLE R&D 

ENGINEER. I WENT THROUGH IT WHEN I JOINED QUALCOMM. AND WHEN 

IT WAS MY TURN, I STARTED EDUCATING PEOPLE, THIS IS HOW WE DO 

THINGS HERE. WE HAVE TO BUILD IT, WE HAVE TO TEST IT, AND ONLY 

THEN WE CAN PROVE, OR NOT, THE VARIABLES.

Q. AFTER YOU GO THROUGH THE TESTING PROCESS, WHAT HAPPENS 

AFTER THAT? 

A. SO THERE COMES A POINT IN TIME WHEN WE THINK THAT THIS 

IDEA INDEED HAS MERIT, WE HAVE GONE THROUGH THE VALIDATION OF 

IT IN THE FIELD, AS IN WE NOW HAVE A PRETTY GOOD SENSE THAT 

THIS WILL WORK EVENTUALLY IN THE COMMERCIAL DOMAIN. 

THAT'S THE POINT IN TIME WHEN WE START TALKING ABOUT IT 

EXTERNALLY AS WELL, ESPECIALLY IF THE IDEA IS REALLY BIG. 

WE WORK WITH A LOT OF OUR PARTNERS IN THE OVERALL WIRELESS 

ECOSYSTEM. SOME OF THEM ARE EVENTUALLY CUSTOMERS, LIKE 

WIRELESS OPERATORS. THINK OF VERIZON OR T-MOBILE OR AT&T JUST 

TO GIVE SOME EXAMPLES. 

OF COURSE, THESE ARE GLOBAL OPERATORS THAT WE TALK TO, SO 

IT'S AROUND THE WORLD. 

OUR PARTNERS INCLUDE INFRASTRUCTURE VENDORS, THE LIKES OF 

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ERICSSON AND NOKIA AND OTHERS; DEVICE MANUFACTURERS, PHONE 

MANUFACTURERS, BUT NOT JUST PHONES, ALL SORTS OF DEVICES; 

REGULATORS, WE WORK VERY CLOSELY WITH GOVERNMENT REGULATORS. 

THESE ARE USUALLY THE LIKES OF FCC IS ONE EXAMPLE. THERE ARE 

SEVERAL OTHER EXAMPLES OF THOSE ACROSS THE WORLD. 

AND WHAT HAVE YOU. SO THESE ARE, LIKE, JUST A -- AND IN 

ADDITION TO THAT, ANALYSTS AND THE MEDIA WHO MIGHT BE CURIOUS 

TO SEE, OKAY, HOW DOES THIS REALLY WORK? THIS SEEMS LIKE 

SOMETHING INTERESTING, HOW DOES IT WORK?

Q. COULD WE PLEASE HAVE DEMONSTRATIVE 7 UP. 

DR. MALLADI, DO YOU RECOGNIZE THE PHOTOGRAPHS HERE IN 

DEMONSTRATIVE NUMBER 7? 

A. YES, I DO.

Q. AND WHAT DO THESE PHOTOGRAPHS SHOW? 

A. SO THESE TWO PICTURES WERE TAKEN AT A TRADE SHOW, IT'S A 

PREMIER TRADE SHOW THAT'S HELD IN EUROPE, IT'S CALLED MOBILE 

WORLD CONGRESS, IT'S HELD ANNUALLY IN BARCELONA. 

ON THE LEFT-HAND SIDE, MY LEFT-HAND SIDE, YOU SEE A 

PICTURE IN WHICH WE ARE SHOWCASING A SPECIFIC TECHNOLOGY TO ONE 

OF THE REGULATORS. ACTUALLY, THIS IS ONE OF THE CHAIRMEN FROM 

THE FCC, IF I REMEMBER, ONE OF THE COMMISSIONERS, ACTUALLY, OF 

FCC. 

AND ON THE RIGHT-HAND SIDE, THERE'S A PICTURE THAT DEPICTS 

WHAT'S COMING UP NOW, IT'S GOING TO BE COMMERCIALLY DEPLOYED 

THIS YEAR, BUT 5G TECHNOLOGY. 

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1310

BUT THERE WERE A LOT OF QUESTIONS IN TERMS OF 5G 

MILLIMETER WAVE, DOES IT EVEN WORK? AND CAN IT WORK IN A 

DENSE, URBAN AREA? 

AND WE SAID, OKAY, WELL, WE'RE GOING TO PROVE A LOT OF THE 

ANALYSIS IN THE CITY OF SAN FRANCISCO, AND THAT'S EXACTLY WHAT 

THAT IS. IT SHOWCASES ALL THE BENEFITS OF 5G MOBILE BROADBAND. 

Q. DOES QUALCOMM ATTEMPT TO HAVE ITS IDEAS INCORPORATED INTO 

STANDARDS? 

A. YES. 

Q. ARE ALL OF QUALCOMM'S IDEAS INCORPORATED INTO STANDARDS? 

A. NOT NECESSARILY. A LARGE FRACTION OF THEM DO END UP BEING 

STANDARDIZED, BUT SOME OF THEM DON'T NECESSARILY HAVE TO GO 

THROUGH ANY STANDARDIZATION PROCESS. THIS IS JUST IMPROVEMENT 

IN TECHNOLOGY ITSELF, BUT IT DOESN'T HAVE TO BE STANDARDIZED.

Q. DOES QUALCOMM'S APPROACH TO RESEARCH AND DEVELOPMENT 

DIFFER FROM OTHER COMPANIES THAT PARTICIPATE IN THE STANDARDS 

PROCESSES? 

A. SO I'LL GIVE YOU MY PERSPECTIVE ON THINGS, AND, YOU KNOW, 

JUST BEING IN THE STANDARDIZATION PROCESS FOR SUCH A LONG TIME, 

I HAVE A CERTAIN VIEW. 

I MENTIONED EARLIER THAT WE GO THROUGH A FULL-BLOWN 

END-TO-END SYSTEM DESIGN, AND WHAT THAT MEANS IS THAT WE, WE 

KNOW WHAT THE END GOAL IS. WE KNOW WHAT THE SOLUTION -- WHAT 

THE PROBLEM IS, WHAT ARE WE REALLY TRYING TO SOLVE? 

AND WE HAVE A CONSISTENT AND COHERENT PICTURE OF 

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EVERYTHING, OF THIS IS THE SOLUTION THAT NEEDS TO BE ADOPTED IN 

THIS ELEMENT IN THE NETWORK, AND SO ON. 

IN STANDARDIZATION PROCESS, USUALLY WHAT HAPPENS IS THAT 

THERE ARE DIFFERENT WORKING GROUPS AND IN EACH OF THESE WORKING 

GROUPS THERE ARE DOMAIN EXPERTS THAT GO IN. 

AND QUITE OFTEN, IN FACT, MORE OFTEN THAN NOT, WE SEE A 

VERY PIECEMEAL WAY OF SOLVING THIS PROBLEM FROM OTHERS. 

NOW, THIS IS MY PERSPECTIVE, BUT THIS IS WHAT I'VE SEEN. 

AND THAT'S NOT A VERY COHERENT OR A CONSISTENT PICTURE. 

WHEN YOU ASK QUESTIONS LIKE, OKAY, WHERE ARE YOU GOING WITH 

THIS? I KNOW YOU ARE TRYING TO SOLVE THIS PROBLEM HERE, BUT I 

DON'T QUITE UNDERSTAND, BECAUSE YOU DO REALIZE IT CREATES A 

PROBLEM ELSEWHERE? IT MIGHT SOLVE THE PROBLEM HERE. 

SO IN THAT SENSE, I WOULD SAY THAT OUR APPROACH TO IT IS 

QUITE UNIQUE. WE MIGHT NOT BE THE ONLY ONES, BUT IT'S 

RATHER -- IT'S VERY FEW, IT'S QUITE RARE, ACTUALLY, TO SEE THAT 

SORT OF AN END-TO-END SYSTEMS APPROACH TO SOLVING PROBLEMS.

Q. IS QUALCOMM A LEADER IN THE STANDARDS BODIES? 

MR. HOPKIN: OBJECTION, YOUR HONOR.

THE WITNESS: MY PERSPECTIVE, YES.

MR. HOPKIN: NATE HOPKIN. 

THIS QUESTION CALLS FOR EXPERT TESTIMONY AND DR. MALLADI 

HAS NOT BEEN QUALIFIED AS AN EXPERT IN THIS CASE. 

MS. SESSIONS: YOUR HONOR, DR. MALLADI IS TESTIFYING 

BASED ON HIS PERSONAL EXPERIENCE AND THE KNOWLEDGE THAT HE HAS 

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GAINED DURING HIS YEARS WORKING AT QUALCOMM, AND SO HE'S GOING 

TO SPEAK BASED ON HIS PERSONAL KNOWLEDGE OF WHAT HAPPENS IN THE 

STANDARDS BODIES BASED ON HIS WORK. 

AND I BELIEVE THIS FALLS WITHIN YOUR HONOR'S RULING ON THE 

MOTION IN LIMINE CONCERNING LAY EXPERT -- LAY TESTIMONY ON 

TECHNICAL MATTERS. 

THE COURT: SO LET ME UNDERSTAND MR. HOPKIN'S 

OBJECTION. IS IT JUST TO THAT QUESTION, OR IS IT INTO -- AN 

OBJECTION AS TO ANY TESTIMONY ABOUT QUALCOMM'S PARTICIPATION IN 

THE STANDARDS BODY? 

I'M NOT SURE WHAT YOU'RE OBJECTING TO. 

MR. HOPKIN: YOUR HONOR, THE OBJECTION IS TO THE 

QUESTION ABOUT -- ELICITING TESTIMONY REGARDING WHETHER 

QUALCOMM IS A LEADING CONTRIBUTOR TO STANDARDS BODIES OR 

TECHNOLOGIES. 

THE COURT: ALL RIGHT. IF THAT'S THE OBJECTION, I'M 

GOING TO OVERRULE IT. 

AND YOU MAY ANSWER THE QUESTION. 

MR. HOPKIN: THANK YOU, YOUR HONOR. 

THE WITNESS: OKAY. SO THE QUESTION WAS, DO I 

CONSIDER QUALCOMM AS A LEADER IN STANDARDS? 

MY ANSWER IS YES, I CONSIDER QUALCOMM AS A LEADER IN 

STANDARDS. 

BY MS. SESSIONS: 

Q. WHY IS THAT? 

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1313

A. AS I MENTIONED BEFORE, THIS SORT OF AN END-TO-END 

SOLUTION, END-TO-END SYSTEM PERSPECTIVE IS SOMETHING THAT I 

CONSIDER THAT, AND I'M QUITE PROUD OF THE FACT THAT WE BRING 

THOSE SORTS OF SOLUTIONS INTO THE STANDARDS PICTURE. 

AND WE -- THAT'S PRETTY MUCH WHAT I CAN SAY. I MEAN, 

THERE'S A LOT MORE TO THIS FROM A LEADERSHIP STANDPOINT, BUT 

THAT'S ONE WAY OF PUTTING IT. 

Q. ARE THE STANDARDS A CONSENSUS-BASED PROCESS? 

A. YES, IT IS A CONSENSUS-BASED PROCESS. 

Q. DOES QUALCOMM ATTEMPT TO PATENT THE IDEAS THAT COME OUT OF 

WIRELESS RESEARCH? 

A. YES, WE DO. 

Q. DR. MALLADI, COULD YOU PLEASE TURN TO THE FIRST PAGE, 

FIRST TAB IN YOUR BINDER, WHICH HAS A DOCUMENT LABELED QX 9302. 

A. YEAH. 

Q. OKAY. TURNING TO THE ATTACHMENT, DO YOU RECOGNIZE THIS 

DOCUMENT? 

A. YES, I DO.

Q. WHAT IS IT? 

A. THIS IS A DOCUMENT FROM JUST ABOUT TEN YEARS BACK. IT'S 

FROM 2009. IT'S A SYSTEMS PLANNING DOCUMENT FOR A SPECIFIC 

PROJECT INSIDE OUR R&D ORGANIZATION. THE PROJECT NAME WAS 

ESPRESSO.

Q. WHAT WAS THE ESPRESSO PROJECT? 

A. ESPRESSO PROJECT WAS THE PROJECT RESPONSIBLE FOR THE 4G 

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1314

AND 4G ADVANCED RESEARCH AND DEVELOPMENT.

Q. WHEN DID PROJECT ESPRESSO START? 

A. THE SPECIFIC NAME ESPRESSO WAS DENOTED SOMETIME AROUND 

2006. THE ACTUAL WORK ON 4G BEGAN A LONG TIME BEFORE THAT.

Q. WHAT WAS YOUR ROLE IN PROJECT ESPRESSO?

A. I STARTED OFF AS THE SYSTEMS LEAD FOR THAT PROJECT, AND 

THEN IN A SHORT COURSE OF TIME I BECAME THE OVERALL HEAD OF THE 

ESPRESSO PROJECT.

Q. DID QUALCOMM HAVE REGULAR STATUS OR PLANNING MEETINGS FOR 

THE ESPRESSO PROJECT?

A. YES, WE DID.

Q. AND DID THIS POWERPOINT ACCURATELY REFLECT THE STATUS OF 

THE ESPRESSO PROJECT AT THE TIME THAT IT WAS MADE?

A. YES, IT DID.

Q. DID THIS POWERPOINT COME FROM QUALCOMM'S FILES? 

A. YES.

Q. AND DID THE AUTHORS OF THIS POWERPOINT KNOW OF THE STATUS 

OF THE ESPRESSO PROJECT? 

A. YES. 

MS. SESSIONS: YOUR HONOR, I'D OFFER QX 9302 INTO 

EVIDENCE, PLEASE. 

MR. HOPKIN: NO OBJECTION. 

THE COURT: IT'S ADMITTED. 

(DEFENDANT'S EXHIBIT QX 9302 WAS ADMITTED IN EVIDENCE.) 

THE COURT: GO AHEAD, PLEASE. 

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1315

BY MS. SESSIONS: 

Q. DR. MALLADI, PLEASE TURN TO PAGE 2 OF THE POWERPOINT. 

A. YES. 

Q. WHAT DOES THIS SLIDE SHOW? 

A. SO THIS SLIDE SHOWS THE OVERALL RESPONSIBILITIES FOR THE 

ESPRESSO SYSTEMS TEAM, IN ADDITION TO THE DELIVERABLES TO 

DIFFERENT STAKEHOLDERS INSIDE AND OUTSIDE OF QUALCOMM. 

Q. THE FIRST BULLET IS SYSTEM DESIGN. WHAT DOES THAT MEAN? 

A. SYSTEM DESIGN IS WHAT I MENTIONED BRIEFLY EARLIER ABOUT 

THE END-TO-END SYSTEM CONCEPT, ALL THE ELEMENTS, THE DEVICES, 

THE BASE STATIONS, THE CORE NETWORK, ET CETERA. SO THAT'S THE 

END-TO-END SYSTEMS DESIGN.

Q. AND THE SECOND BULLET IS PROTOTYPE. WHAT DOES THAT MEAN?

A. PROTOTYPING IS THE IDEA OF BUILDING EQUIPMENT TO PROVE 

THAT IT WORKS, SO YOU'RE GOING BEYOND JUST SLIDEWARE AND 

POWERPOINT. YOU'RE GOING INTO ACTUAL EQUIPMENT THAT'S BEING 

BUILT OUT. 

SO IT'S NOT JUST THE SYSTEMS TEAM INVOLVED AT THAT POINT 

IN TIME. THERE'S A HARDWARE TEAM THAT BUILDS THE HARDWARE; THE 

SOFTWARE TEAM THAT WRITES SOFTWARE ON TOP OF IT; THE 

INTEGRATION AND TESTING THAT KIND OF PUT IT ALL TOGETHER, 

INTEGRATE ALL THIS EQUIPMENT; AND WHAT IS KNOWN AS AN OTA TEAM, 

AND THIS IS THE OVER THE AIR TEST TEAM. 

THIS IS WIRELESS COMMUNICATIONS, SO IT IS DONE OVER THE 

AIR, AND THAT'S THE TESTBED ACTIVITY. SO THERE'S A TEAM 

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ASSOCIATED WITH THAT, TOO.

Q. COULD WE PLEASE GO TO PAGE 8 OF THE POWERPOINT? 

A. YEAH. 

Q. DR. MALLADI, WHAT'S SHOWN ON PAGE 8? 

A. ON PAGE 8, BELIEVE IT OR NOT, THIS IS ACTUALLY WHAT ONE OF 

OUR CELL PHONES WOULD LOOK LIKE BEFORE WE EVER SEE ANY 

COMMERCIALIZATION. THIS IS KNOWN AS A PROTOTYPE U.E. U.E. 

STANDS FOR USER EQUIPMENT. SO IT'S NOTHING BUT THE -- IT'S 

USER EQUIPMENT. 

AND THIS IS SOMETHING THAT YOU SEE SQUARELY IN THE MIDDLE 

THAT KIND OF LIKE A TOASTER OVEN, THAT BOX, THAT'S WHAT THAT 

IS. 

THE BASE STATION, WHAT WE USUALLY END UP PUTTING ON CELL 

TOWERS OR SOMETHING BEHIND IT, THAT'S ALSO, IN FACT, EXACTLY 

THE TOASTER OVEN IS ONE MORE ON TOP OF IT. 

AND THERE'S A LOT OF OTHER EQUIPMENT THAT IS USED TO PUT 

IT ALL TOGETHER, PROCESS IT, ET CETERA. 

SO THIS IS OUR PROTOTYPE PLATFORM THAT WE USED.

Q. DID IT HAVE A NAME? 

A. YES, IT DID. WE CALLED IT A SLIMCAT PLATFORM. 

Q. COULD YOU PLEASE TURN TO PAGE 11 OF THE POWERPOINT? 

A. YEAH. 

Q. WHAT'S SHOWN ON PAGE 11? 

A. SO THIS IS -- SO WHEN WE DO A LOT OF TESTING, WE HAVE TO 

PROVE THAT AS WE -- IF YOU JUST THINK ABOUT THE WAY WE USE OUR 

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1317

PHONE, WE WALK AROUND, WE DRIVE AROUND WITH IT, WE EXPECT IT TO 

WORK ALL THE TIME, WE DON'T WANT ANY DROPPED CALLS, WE WANT THE 

VIDEO TO BE ALWAYS PICTURE PERFECT, NO GLITCHES, ET CETERA. 

SO IN THAT SENSE, THIS IS A PLACE WHERE WE HAVE TO TEST IT 

OUT THOROUGHLY, AND THIS IS A DRIVE ROUTE. WE PUT THAT WHOLE 

THING THAT YOU SAW BEFORE, THE USER EQUIPMENT AND SO ON, THAT 

GETS PUT IN A VAN AND WE TAKE THE VAN AND WE DRIVE IT AROUND 

AND WE HAVE -- THIS IS A MAP OF SORRENTO VALLEY IN SAN DIEGO. 

THESE ARE SOME OF OUR BUILDINGS AND YOU SEE SOME NAMES 

THERE. IF YOU CAN SEE CAREFULLY, IT SAYS NWT AA. THESE ARE 

ALL OUR BUILDINGS, AND WE USUALLY PUT UP OUR BASE STATIONS ON 

TOP OF THOSE, AND THEN WE DRIVE IT AROUND, BOTH ON REGULAR 

STREETS AND OCCASIONALLY ON FREEWAYS. 

Q. COULD YOU PLEASE TURN TO PAGE 12? 

A. YEAH. 

Q. PAGE 12 MENTIONS VERIZON WIRELESS AND A LAB DEMO. COULD 

YOU EXPLAIN WHAT THAT WAS? 

A. YEAH. SO THIS WAS BACK IN 2009 WHEN 4G -- THE VERY FIRST 

RELEASE OF 4G STANDARDIZATIONS JUST WERE GETTING COMPLETE. WE 

HAD BUILT UP OUR OVERALL, YOU KNOW, TESTBED, THE ONES WITH BASE 

STATIONS AND THE USER EQUIPMENT INSIDE A VAN. 

AND VERIZON WAS INTERESTED IN DEPLOYING 4G, COMMERCIAL 

DEPLOYMENTS, BUT THEY WANTED TO SEE IT WORK IN ACTION. THEY 

WANTED TO SEE, OKAY, CAN I ACTUALLY -- WE TAKE IT FOR GRANTED 

TODAY, BUT BACK THEN IT WAS QUITE UNIQUE. 

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1318

YOU WOULD SIT IN A VAN AND YOU HAD THIS GIGANTIC MONITOR 

ON WHICH YOU'RE WATCHING VIDEO, OR YOU WANT TO MAKE SURE THAT 

THERE'S NO GLITCHES ON IT WHATSOEVER. 

AND THEY HADN'T SEEN ANYTHING OF THIS SORT. SO THEY SAID, 

HEY, WE WANT TO COME AND TAKE A LOOK. 

WE SAY SAID, YEAH, SURE, COME ON IN. 

AND THESE WERE A FEW MILESTONES THAT WE HAD ESTABLISHED 

FOR VERIZON BACK THEN. THIS WAS ABOUT A YEAR BEFORE THE ACTUAL 

COMMERCIALIZATION BEGAN.

Q. COULD YOU PLEASE TURN TO PAGE 26 OF THE POWERPOINT? 

A. YEAH. 

Q. THE HEADING HERE IS STANDARDS ATTENDANCE BY ESPRESSO 

SYSTEMS. DID ESPRESSO ENGINEERS GO TO STANDARDS MEETINGS? 

A. YES, THEY DID. 

Q. WAS THAT UNIQUE TO PROJECT ESPRESSO? 

A. NO. MULTIPLE R&D PROJECTS HAD PEOPLE WHO WOULD ATTEND 

STANDARDS MEETINGS.

Q. COULD YOU PLEASE TURN BACK TO PAGE 14 OF THE POWERPOINT? 

A. YEAH. 

Q. PAGE 14 MENTIONS SOMETHING CALLED FRAPPUCCINO. WHAT WAS 

THAT? 

A. OKAY. SO FRAPPUCCINO WAS A SUBPROJECT. AN UMBRELLA 

PROJECT WAS ESPRESSO, BUT FRAPPUCCINO WAS A SUB PROJECT WHICH 

WE WANTED TO MAKE SURE THAT WHILE WE ARE GOING THROUGH IRONING 

OUT ALL THE DETAILS OF 4G COMMERCIAL TECHNOLOGY, WE WANTED TO 

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MAKE SURE THAT WE HAVE A FAR MORE FORWARD-LOOKING DESIGN, AND 

WHAT WE EVENTUALLY BECAME CALLED AS 4G ADVANCED. 

THESE WERE A LARGE NUMBER OF THE TOPICS. THIS IS A FEW OF 

THE TOPICS THAT WE WERE WORKING ON AS A PART OF THAT PROJECT. 

IT LASTED MAYBE JUST A FEW MONTHS AND THEN WE SUBSUMED IT 

BOOK INTO ESPRESSO, INTO THE FORMER PROJECT.

Q. ARE ANY OF THE RESEARCH AREAS FROM FRAPPUCCINO 

PARTICULARLY RELEVANT TODAY? 

A. YES. IN FACT, IF YOU -- I'M GOING TO JUST MAYBE SAY A FEW 

TECHNICAL THINGS OVER HERE. 

THE WORDS, IT SAYS ON SLIDE 14, PICO AND FEMTO. THIS IS 

WHAT WE CALL AS SMALL CELLS TODAY. THESE ARE -- WHEN YOU THINK 

OF -- MAYBE I SHOULD EXPLAIN WHAT A LARGE CELL IS. 

A LARGE CELL IS SOMETHING THAT YOU ENVISION AS ON TOP OF A 

BUILDING. IT'S CALLED AS A MACRO CELL SITE. IT'S KIND OF BIG 

AND REASONABLY LARGE IN TERMS OF THE SIZE. 

SMALL CELLS ARE REALLY, REALLY SMALL. THINK OF MIGHT BE 

WI-FI ACCESS POINTS. IT'S JUST ABOUT THIS BIG OR SO 

(INDICATING). 

SO WE DID A LOT OF WORK BACK THEN TO SEE, HOW DO THESE 4G 

SMALL CELLS, HOW CAN WE ACTUALLY DEPLOY THEM TO MAKE SURE THAT 

WE GET REALLY HIGH DATA RATES IN THE HANDS OF USERS? 

THIS WAS PRETTY NEW BACK THEN. 4G SMALL CELLS DIDN'T 

EXIST. THEY ARE MAINSTREAM TODAY, WE USE THEM ALL THE TIME, 

BUT THEY DIDN'T EXIST BACK THEN. 

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AND SIMILARLY, THERE IS A LITTLE FURTHER, IF YOU TAKE A 

LOOK AT -- I HAVE SLIDE 15 IN FRONT OF ME, PAGE 15. ONE MORE 

EXAMPLE OF THAT IS SOMETHING THAT'S IN A VERY ABBREVIATED 

MANNER RECOGNIZED AS P2P. IT ACTUALLY STANDS FOR PEER TO PEER. 

AND THIS IS TWO DEVICES THAT ARE COMMUNICATING WITH EACH OTHER 

WITH OR WITHOUT ANY NETWORK PRESENT AT ALL. IT TOOK A LONG 

TIME FOR THIS. WE HAD TO SOLVE A LOT OF PROBLEMS TO GET TO 

THIS POINT. 

BUT TODAY, IF YOU TAKE A LOOK AROUND, WE TALK A LOT OF 

CARS COMMUNICATING WITH EACH OTHER. THIS IS FOR VEHICULAR 

COMMUNICATIONS, TWO VEHICLES COMMUNICATING WITH EACH OTHER, 

WHETHER IT'S CARS OR ANY OTHER VEHICLES. 

SO THIS IS JUST A GLIMPSE OF SOME OF THE CUTTING EDGE WORK 

THAT WAS GOING ON BACK THEN.

Q. WHY WAS QUALCOMM STILL WORKING ON LTE IN 2009? 

A. SO THIS NEEDS A LITTLE BIT OF EXPLANATION IN TERMS OF HOW 

ANY NEW GENERATION OF CELLULAR COMMUNICATION TECHNOLOGY IS 

STANDARDIZED. 

THERE'S NO SUCH THING AS A ONE AND DONE DEAL. IT'S NOT 

LIKE 4G WAS DONE OR LTE WAS DONE IN 2008 AND THAT'S PRETTY MUCH 

IT. 

EVERY 18 TO 24 MONTHS, GIVE OR TAKE, THERE'S USUALLY A NEW 

RELEASE OF THE TECHNOLOGY, SO NEW FEATURES GET ADDED AND 

WHETHER IT'S -- SOMETIMES THEY'RE BUG FIXES FROM A PREVIOUS 

FEATURE, BUT NEW FEATURES KEEP GETTING ADDED. 

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2008 WAS THE VERY FIRST GENERATION OF LTE. THERE ARE HAVE 

BEEN SEVERAL RELEASES SINCE THEN. 

Q. WAS THAT TRUE OF 3G STANDARDS AS WELL? 

A. THAT IS TRUE OF 3G AS WELL. FEWER RELEASES IN 3G, BUT 

YEAH, IT STILL EXISTED. 

Q. DR. MALLADI, I'M GOING TO SHIFT GEARS A MINUTE AND TALK 

ABOUT SOME SPECIFIC TECHNOLOGY AREAS. 

A. SURE.

Q. HAS QUALCOMM DONE RESEARCH ON CARRIER AGGREGATION? 

A. YES, WE HAVE. 

Q. OKAY. COULD WE PLEASE HAVE DEMONSTRATIVE NUMBER 4 UP ON 

THE SCREEN? 

DR. MALLADI, DOES DEMONSTRATIVE 4 ILLUSTRATE THE BASIC 

CONCEPT OF CARRIER AGGREGATION. 

A. IT DOES AT A VERY HIGH LEVEL.

Q. COULD YOU PLEASE EXPLAIN TO THE COURT WHAT CARRIER 

AGGREGATION IS? 

A. SURE. SO IT SAYS AGGREGATED DATA PIPE ON THE PICTURE. SO 

LET ME TRY TO KEEP IT AS SIMPLE -- THERE'S A LOT OF TECHNICAL 

DETAIL, BUT I WANT TO KEEP IT AS SIMPLE AS POSSIBLE. 

LET'S SAY THAT YOU HAVE A PIPE AND THAT'S HOW YOU'RE 

GETTING ALL YOUR BITS, THAT'S HOW YOU'RE GETTING DATA, YOUR 

FILE DOWNLOAD, YOU'RE WATCHING A VIDEO. YOU WANT TO WATCH THE 

VIDEO AT A MUCH HIGHER DATA RATE, A 4K VIDEO, SOMETHING WHICH 

IS A HIGHER QUALITY WHICH NEEDS HIGHER DATA RATES. 

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1322

THERE ARE TWO WAYS OF DOING IT. EITHER YOU CAN INCREASE 

THE SIZE OF THE PIPE OR YOU CAN ADD MORE PIPES. EACH OF THEM 

IS NARROW ENOUGH, BUT YOU'RE ACTUALLY KIND OF AGGREGATING THAT.

WE FELT THE NEED TO HAVE A SOLUTION WHEREIN WE WOULD START 

AGGREGATING THESE PIPES NOW SWITCHING GEARS BACKWARDS IN 

WIRELESS COMMUNICATIONS, EVERY WIRELESS OPERATOR, WHETHER IT'S 

VERIZON OR AT&T, I'M GOING TO PICK THOSE NAMES JUST TO SIMPLIFY 

THINGS, THEY ALL HAVE THE SPECTRUM HOLDINGS AND THEY'RE NOT ALL 

CONTIGUOUS. THEY ALL HAPPEN TO BE IN DIFFERENT PORTIONS OF THE 

SPECTRUM. 

SO YOU HAVE TO HAVE A WAY OF TRYING TO AGGREGATE THE 

DIFFERENT PIPES. THEY WEREN'T CONTIGUOUS TOGETHER. THEREFORE, 

IT WAS VERY IMPORTANT FOR US TO MAKE SURE THAT THAT HAPPENS IN 

THE RIGHT WAY SO THAT ONE CAN GET TO VERY HIGH DATA RATES. 

TODAY WE TALK OF GIGABIT DATA RATE DEVICES AS WE WALK AROUND. 

WE GET GIGABIT SPEEDS ON OUR DEVICES. 

BUT THIS WAS A STEPPING STONE IN THAT DIRECTION. AND 

THERE'S SO MANY DIFFERENT NUANCES ON TOP OF THAT. SOME OF 

THESE PIPES MAYBE YOU ONLY WANT TO DOWNLOAD, YOU DON'T WANT TO 

UPLOAD ON THAT AT ALL, ONLY DOWNLOAD. AND IN SOME OF THEM YOU 

WANT TO DO BOTH. 

IN SOME OF THEM, DEPENDING ON THE TIME FOR A CERTAIN 

FRACTION OF THE TIME YOU DO DOWNLOAD AND A CERTAIN OTHER 

FRACTION OF THE TIME YOU DO UPLOAD. SO THERE ARE DIFFERENT 

VARIANTS OF CARRIER AGGREGATION.

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UNITED STATES COURT REPORTERS

1323

Q. WHEN DID QUALCOMM START WORKING ON CARRIER AGGREGATION? 

A. CARRIER AGGREGATION, AS A VERY PRIMITIVE LEVEL, WAS A 

CONCEPT THAT WAS INTRODUCED IN 3G. 

BUT EVERY SINGLE GENERATION OF TECHNOLOGY, WHETHER IT IS 

4G AND EVEN TODAY IN 5G, WE'VE HAD TO REINVENT IT IN A VERY 

SIGNIFICANT MANNER, ADDING A LOT OF NEW ELEMENTS TO IT, A LOT 

OF NEW TECHNOLOGY, BECAUSE THE GENERATIONAL TECHNOLOGY IS 

ALWAYS CHANGING AND YOU WANT TO MAKE SURE THAT YOU TRACK THAT, 

BUT ON TOP OF THAT, ADD NEW CAPABILITIES AS TECHNOLOGY MATURES. 

AND TODAY, BY THE WAY, WE TALK OF 5G. IN FACT, YOU CAN EVEN 

THINK OF TWO PIPES, ONE PIPE IS 4G, THE OTHER PIPE IS 5G, AND 

WE AGGREGATE BOTH OF THEM TOGETHER. THAT IS WHAT WE ANTICIPATE 

IS GOING TO COME UP NOW.

Q. WERE QUALCOMM'S IDEAS ABOUT CARRIER AGGREGATION 

INCORPORATED INTO STANDARDS?

A. YES, THEY WERE. 

Q. WHICH ONES? 

A. IN 3G AND IN 4G. NOW AS WE HEAD INTO 5G, THEY'VE BEEN 

INCORPORATED THERE AS WELL.

Q. IS THERE A PARTICULAR RELEASE OF THE LTE STANDARD THAT 

QUALCOMM'S IDEAS WERE INCORPORATED INTO? 

A. THE VERY FIRST RELEASE IN WHICH LTE CARRIER AGGREGATION, 

OR 4G CARRIER AGGREGATION WAS INTRODUCED WAS RELEASE 10. THIS 

WAS, I BELIEVE, IN THE 2011 TIMEFRAME GIVE OR TAKE.

Q. AND WHAT WAS QUALCOMM'S ROLE IN CARRIER AGGREGATION IN 

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MALLADI DIRECT BY MS. SESSIONS

UNITED STATES COURT REPORTERS

1324

RELEASE 10 AS COMPARED TO OTHERS? 

A. FROM MY PERSPECTIVE, I THOUGHT THAT WE HAD FOUNDATIONAL 

IDEAS, EVERY SINGLE RELEASE AFTER THAT, RELEASE 10, RELEASE 11, 

RELEASE 12, THERE HAVE BEEN NEW VARIANTS OF CARRIER AGGREGATION 

THAT WERE INTRODUCED, AND WE BROUGHT IN ALL THESE CONCEPTS 

EARLY ON. 

Q. DR. MALLADI -- 

THE COURT: CAN I ASK YOU, I DON'T THINK THIS IS AN 

EXHIBIT THAT'S BEEN ADMITTED. 

MS. SESSIONS: IT'S NOT. THESE ARE JUST 

DEMONSTRATIVES, YOUR HONOR. 

THE COURT: OH, THAT'S A QDX. 

MS. SESSIONS: YES, I'M SORRY, THAT PARTICULAR SLIDE 

DOESN'T SEEM TO HAVE THE QDX STAMPED ON IT, BUT THESE ARE ALL 

DEMONSTRATIVES. 

THE COURT: ALL RIGHT. THANK YOU. 

BY MS. SESSIONS: 

Q. DR. MALLADI, HAS QUALCOMM DONE RESEARCH INTO USING 

UNLICENSED SPECTRUM FOR CELLULAR? 

A. YES, WE HAVE. 

Q. WHAT IS UNLICENSED SPECTRUM? 

A. OKAY. SO MAYBE I SHOULD FIRST EXPLAIN WHAT A LICENSED 

SPECTRUM IS.

Q. AND YOU SHOULD PLEASE SLOW DOWN. THANK YOU. 

A. OKAY. LICENSED SPECTRUM IS IF YOU ARE A WIRELESS CARRIER, 

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UNITED STATES COURT REPORTERS

1325

LIKE VERIZON, YOU PARTICIPATE IN OPTIONS, YOU GET SPECTRUM, YOU 

GET IT, AND I PAID FOR IT. NOW IT'S YOURS. IT'S YOUR SANDBOX. 

YOU GET TO SERVE USERS USING THAT. 

UNLICENSED SPECTRUM, ON THE OTHER HAND, DOESN'T GO THROUGH 

ANY AUCTION PROCESS. IT'S ACTUALLY AVAILABLE FOR EVERYONE TO 

USE. THERE ARE CERTAIN NICETY RULES, BECAUSE EVERYONE GETS TO 

USE IT, SO YOU HAVE TO PLAY NICE WITH EACH OTHER AND TAKE 

TURNS, IF YOU WILL, AT A HIGH LEVEL. 

AND IN ADDITION TO THOSE HIGH LEVEL RULES, THERE ARE NO 

OTHER RULES AND REGULATIONS ASSOCIATED WITH THAT. SO THIS IS 

UNLICENSED SPECTRUM.

Q. WHAT TYPES OF DEVICES TYPICALLY USE UNLICENSED SPECTRUM? 

A. HISTORICALLY THE DEVICES THAT HAVE USED UNLICENSED 

SPECTRUM INCLUDE WI-FI DEVICES, BLUETOOTH DEVICES, AND EVEN 

WIRELESS MICROPHONES, SOME OF THEM USE UNLICENSED SPECTRUM. 

Q. WHY HAVEN'T CELL PHONES TRADITIONALLY USED UNLICENSED 

SPECTRUM? 

A. FOR A LONG TIME, FOR WIRELESS CARRIERS, THERE WERE -- 

THEY'VE BEEN VERY CONCERNED ABOUT A PREDICTABLE QUALITY OF 

SERVICE FOR THEIR USERS. IF I'M A WIRELESS OPERATOR AND I HAVE 

A CUSTOMER, I WANT TO GUARANTEE A CERTAIN QUALITY OF SERVICE 

FOR THE USER. I WANT TO SAY, LOOK, WHEREVER YOU GO, YOU'RE 

GOING TO GET THIS KIND OF A DOWNLOAD SPEED OR UPLOAD SPEED. 

AND IT WASN'T CLEAR WHETHER YOU COULD DO SOMETHING OF THAT 

SORT WHEN YOU USE UNLICENSED SPECTRUM, WHERE IT'S NOT JUST YOUR 

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MALLADI DIRECT BY MS. SESSIONS

UNITED STATES COURT REPORTERS

1326

SANDBOX. EVERYONE GETS TO USE IT. SO THERE'S A LOT MORE TO 

IT. BUT THERE'S PLENTY OF UNLICENSED SPECTRUM. 

SO THERE HAVE BEEN -- THERE WERE HISTORICALLY NERVOUS 

ABOUT USING IT. 

Q. WHEN DID QUALCOMM START WORKING ON UNLICENSED SPECTRUM 

RESEARCH? 

A. WE STARTED WORKING ON IT SOMETIME AROUND 2007 TIMEFRAME, 

AND AS WE STARTED WORKING ON IT, WE REALIZED THAT THERE WERE 

OTHER PIECES OF THE PUZZLE THAT HAD TO BE PUT TOGETHER. 

UNLICENSED SPECTRUM WAS GOING TO COMPLEMENT LICENSED 

SPECTRUM, SO WE HAD TO MAKE SURE THAT, FIRST OF ALL, CARRIER 

AGGREGATION COMES INTO THE PICTURE. SO THAT WAS IMPORTANT. 

AND THEN WE ALSO HAD TO MAKE SURE THAT SMALL CELLS WERE 

INTRODUCED INTO 4G BECAUSE USUALLY WHEN YOU USE UNLICENSED 

SPECTRUM, YOU HAVE TO TRANSMIT AT VERY LOW POWER, LIKE 1 

MILLIWATTS, OR SOMETHING OF THAT SORT. SO WE HAD TO WORK ON 

OTHER THINGS. SO WE WORKED ON THAT AND THEN WE CAME BACK TO IT 

IN A MUCH MORE SIGNIFICANT MANNER SOMEWHERE AROUND 2010. 

Q. COULD WE PLEASE HAVE DEMONSTRATIVE NUMBER 5 UP ON THE 

SCREEN, MR. DAHM. 

DR. MALLADI, DO YOU RECOGNIZE THE PHOTOGRAPH IN 

DEMONSTRATIVE NUMBER 5? 

A. YES. 

Q. WHAT'S SHOWN IN THIS PHOTOGRAPH? 

A. SO WE CALLED THIS AS OUR TORTURE CHAMBER. THERE WAS A LOT 

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MALLADI DIRECT BY MS. SESSIONS

UNITED STATES COURT REPORTERS

1327

OF SKEPTICISM IN THE INDUSTRY SAYING THERE IS NO WAY LTE WILL 

WORK IN UNLICENSED SPECTRUM. IT'S GOING TO CREATE ALL SORTS OF 

HAVOC WITH WI-FI DEVICES, AND THIS IS NEVER GOING TO WORK. 

SO WE HAD TO NOT JUST BUILD IT, BUT WE HAD TO BUILD A 

SPECIFIC CHAMBER WHEREIN, IT'S KIND OF HARD TO READ, BUT YOU 

CAN SEE SOME WI-FI ACCESS PLANS, YOU SEE SOME DEVICES WHICH ARE 

ON THE, ON THE BENCH THERE. THOSE WERE ALL WI-FI DEVICES. 

AND, IN FACT, SQUARELY OPPOSITE THEM, YOU COULD SEE SOME 

DEVICES, THOSE ARE ALL LTE DEVICES, LTE IN UNLICENSED SPECTRUM. 

WE HAD MADE A LOT OF MODIFICATIONS ON LTE IN UNLICENSED TO 

MAKE SURE IT WORKS PROPERLY. 

AND THERE IS AN ORANGE GLOW IN THE BACKGROUND. IN 

WIRELESS TERMINOLOGY, IT'S KNOWN AS A FARADAY CAGE, FARADAY IS 

AFTER MICHAEL FARADAY, ONE OF THE SCIENTISTS. IT MEANS IT'S 

ISOLATED. WHATEVER YOU DO INSIDE DOESN'T AFFECT OUTSIDE. 

WHATEVER YOU DO OUTSIDE DOESN'T AFFECT INSIDE. 

SO THIS WAS A PLACE WHERE WE DID A LOT OF THE TESTING TO 

PROVE THAT EVEN THOUGH THERE ARE SO MANY OF THESE WI-FI DEVICES 

ALONG WITH 4G LTE DEVICES, THEY WOULD ALL ACTUALLY COEXIST IN A 

VERY REASONABLE MANNER, ALL IN THE SAME CHANNEL. SO THEY'RE 

ALL SHARING THE RESOURCE IN A REASONABLE MANNER. THIS IS WHAT 

WE TALKED ABOUT EARLIER AS A NICETY KIND OF THING. 

Q. ARE QUALCOMM'S IDEAS IN UNLICENSED SPECTRUM BEING 

INCORPORATED INTO STANDARDS? 

A. YES.

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MALLADI DIRECT BY MS. SESSIONS

UNITED STATES COURT REPORTERS

1328

Q. WHICH STANDARDS? 

A. SO THE EARLIEST VERSION OF THAT WAS IN RELEASE 13 OF 4G 

STANDARDS. THIS WAS COMPLETED APPROXIMATELY AROUND 2015 GIVE 

OR TAKE. 

Q. DID THAT HAVE A NAME? 

A. YES. IT WAS CALLED LAA. LAA STANDS FOR LICENSED ASSISTED 

ACCESS. 

Q. HOW DID QUALCOMM'S CONTRIBUTIONS ON UNLICENSED SPECTRUM 

COMPARE TO THOSE OF OTHER COMPANIES? 

A. FROM MY PERSPECTIVE, I THOUGHT WE HAD A PIONEERING ROLE ON 

THIS. THERE WERE A LOT OF SKEPTICISM IN THE INDUSTRY, NOT JUST 

FROM THE CELLULAR INDUSTRY WHO HAVE BEEN TRADITIONALLY USING 

4G, BUT THERE WAS CONCERN COMING IN FROM EVERYONE WHO HAS BEEN 

USING WI-FI TECHNOLOGY. OF COURSE WE, OURSELVES, HAVE OUR OWN 

WI-FI RESEARCH, BUT THERE'S A LOT OF SKEPTICISM. 

REGULATORS WERE ALSO QUESTIONING, OKAY, HOW WOULD IT WORK? 

SO WE HAD TO SIT DOWN AND AS WE WERE PROVING UP THE TECHNOLOGY, 

WE SHOWED THIS TO REGULATORS, WE SAT DOWN WITH THEM AND DEFINED 

TEST CASES TO PROVE THAT, HEY, WHEN YOU DO THE CERTIFICATION OF 

ANY DEVICE FOR LAA, THIS IS HOW YOU OUGHT TO BE DOING IT. WE 

WORKED WITH THEM ON THAT, IN ADDITIONAL TO MOBILE OPERATORS 

LIKE VERIZON, AT&T, ET CETERA. AND ALL THE OTHER VENDORS, 

WHETHER IT'S INFRASTRUCTURE VENDORS LIKE ERICSSON OR WHETHER IT 

IS DEVICE MANUFACTURERS, ALONG WITH ANALYSTS AND MEDIA WHO 

WANTED TO SEE THIS IN ACTION. 

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MALLADI DIRECT BY MS. SESSIONS

UNITED STATES COURT REPORTERS

1329

SO, YEAH, WE DID A LOT OF THAT. I WOULD CATEGORIZE THAT 

ENTIRE THING AS THE EVANGELIZATION OF THE TECHNOLOGY.

Q. WHAT ARE THE BENEFITS OF USING UNLICENSED SPECTRUM FOR 

CELLULAR COMMUNICATIONS?

A. WELL, FIRST OF ALL, I WOULD ARGUE THAT THIS IS WHAT 

UNLEASHED GIGABIT LTE DATA RATES IN NORTH AMERICA. SO WHEN YOU 

WALK INTO A STORE, YOU BUY YOURSELF A DEVICE AND IT SAYS, YEP, 

I CAN DO ONE GIGABIT PER SECOND ON MY PHONE. THIS IS THE 

BACKBONE. THIS IS THE TECHNOLOGY THAT'S THE BACKBONE FOR THAT.

Q. IS THE USE OF UNLICENSED SPECTRUM IMPORTANT TO 5G? 

A. YES, IT IS. JUST RECENTLY NOW, UNLICENSED SPECTRUM IN THE 

SECOND RELEASE OF 5G, IT JUST GOT APPROVED AS A NEW WORK ITEM. 

SO WORK IS GOING TO BE COMMENCING AS A PART OF 5G STANDARDS. 

Q. AND, DR. MALLADI, I'M SORRY, I SHOULD HAVE GIVEN YOU THIS 

INSTRUCTION AT THE BEGINNING. IF YOU COULD CONFINE YOUR 

ANSWERS WITH RESPECT TO 5G TO ANYTHING THAT HAPPENED BEFORE 

MARCH OF 2018. 

A. SURE. BEFORE MARCH OF 2018, IT GOT APPROVED AS A STUDY AS 

A PART OF 5G STUDIES.

Q. OKAY. IS QUALCOMM WORKING ON MILLIMETER WAVE TECHNOLOGY? 

A. YES, WE ARE.

Q. WHAT IS MILLIMETER WAVE TECHNOLOGY? 

A. OKAY. WITHOUT GETTING TOO TECHNICAL ABOUT IT, I'LL KEEP 

IT AT A VERY HIGH LEVEL. MILLIMETER WAVE TECHNOLOGY STANDS FOR 

TECHNOLOGY WHEREIN WE USE FREQUENCIES WHERE THE WAVELENGTH IS 

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MALLADI DIRECT BY MS. SESSIONS

UNITED STATES COURT REPORTERS

1330

ONE MILLIMETER, OR IN THE ORDER OF A MILLIMETER. 

THESE HAPPEN TO BE WHAT IS KNOWN AS VERY HIGH BANDS, THE 

24 GIGAHERTZ BANDS, THE 28 GIGAHERTZ BANDS. 

THERE'S PLENTY OF SPECTRUM THERE, LOTS OF BANDWIDTH. SO 

YOU CAN GET TO MULTIPLE GIGABIT SPEEDS WITH MOBILE BROAD BAND, 

VERY HIGH DATA RATES. 

BUT PHYSICS WORKS AGAINST YOU. THE PROPAGATION IS NOT 

VERY GOOD. IF I HAVE SOMETHING THAT'S TRANSMITTING HERE, YOU 

CAN'T EASILY PENETRATE THROUGH WALLS, AND IF YOU BLOCK YOUR 

CELL PHONE WITH YOUR FINISHER, MAYBE THE COMMUNICATION WOULDN'T 

WORK. SO WE HAD TO WORK A LOT IN IT TO MAKE SURE THAT IT WORKS 

PROPERLY.

Q. HAD MILLIMETER WAVE TECHNOLOGY BEEN USED BEFORE? 

A. HISTORICALLY, IT'S BEEN USED FOR WHAT IS KNOWN AS A FIXED 

WIRELESS BACKHAUL. IMAGINE IF YOU HAVE, SAY, TWO BUILDINGS AND 

INSTEAD OF LAYING A FIBER BETWEEN THE TWO BUILDINGS TO 

COMMUNICATE BETWEEN THOSE TWO BUILDINGS, YOU ACTUALLY END UP 

PUTTING UP TWO CELL SITES ON TOP OF THE BUILDINGS, REASONABLY 

HIGH, AND THEY HAVE TO BE IN LINE OF SIGHT. 

WHAT IT MEANS IS THEY'VE GOT TO BE ABLE TO SEE EACH OTHER, 

AND THEN YOU CAN COMMUNICATE. SO THAT'S WHAT IT'S BEEN 

TRADITIONALLY USED FOR. 

FOR US, WE WERE NOT INTERESTED IN THAT. IN FACT, WE WERE 

VERY SKEPTICAL ABOUT USING MILLIMETER WAVE IN GENERAL FOR A 

WHILE BECAUSE WE HADN'T SOLVED HOW YOU AND I ACTUALLY USE 

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MALLADI DIRECT BY MS. SESSIONS

UNITED STATES COURT REPORTERS

1331

MILLIMETER WAVE OR WE USE OUR CELL PHONES. WE WALK AROUND WITH 

THEM. WE PUT THEM ON ONE SIDE OF THE HEAD AND MAYBE WE USE 

THEM ON THE OTHER SIDE OF THE HEAD. SO MY HEAD COULD BE 

BLOCKING THE COMMUNICATION AND THINGS WOULD FADE. OR MAYBE MY 

FINGER IS PROBABLY RIGHT ON TOP OF A SPECIFIC AREA ON THE CELL 

PHONE AND THINGS WON'T WORK. WE DRIVE AROUND WITH IT. WE GO 

IN AND OUT OF BUILDINGS. 

A LOT OF CHALLENGES, AND MILLIMETER WAVE HAD NEVER BEEN 

SHOWN TO WORK IN THIS SORT OF AN ENVIRONMENT. FOR US, THAT WAS 

IT. IF WE COULD PROVE SOMEHOW, IF WE HAD, IF WE COULD CRACK 

THE PROBLEM AND SAY THAT WE CAN MAKE IT WORK IN THAT 

ENVIRONMENT, THAT WAS KEY FOR US. 

SO THAT'S WHAT WE MEAN BY MOBILIZING MILLIMETER WAVE FOR 

5G.

Q. WHICH DID QUALCOMM START WORKING ON MILLIMETER WAVE 

TECHNOLOGY? 

A. IT'S BEEN A FEW YEARS, BUT WE WERE STILL WORK LOOKING AT 

SOME VERY CHALLENGING PROBLEMS WHEN IT CAME TO 5G MILLIMETER 

WAVE. 

SOMETIME AROUND 2014 IS WHEN WE STARTED SEEING THE RESULTS 

THAT WE WANTED TO SEE. UNTIL THEN WE WERE STILL TRYING TO 

SOLVE THE PROBLEMS. IT TOOK ONE AFTER THE OTHER, WE TOOK ONE 

STEP AFTER THE OTHER, AND WE STARTED SOLVING THE PROBLEMS. 

BY 2014, END OF BETWEEN 14, MAYBE BEGINNING OF 2015, IT 

BECAME CLEAR, YEP, THIS MIGHT WORK ACTUALLY. SO WE STARTED 

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MALLADI DIRECT BY MS. SESSIONS

UNITED STATES COURT REPORTERS

1332

BUILDING IT AND WE, WE CALLED A LOT OF OUR -- WE WENT THROUGH 

THE SAME STEPS AGAIN, CALLING IN MOBILE OPERATORS, VENDORS AND 

SO ON, AND PRIVATE DEMOS JUST TO SHOW, HEY, THIS IS HOW IT 

WORKS AND THEN EVENTUALLY SHOWED IT PUBLICLY AS WELL.

Q. TO YOUR KNOWLEDGE, AS OF MARCH 2018, HAD ANY OTHER COMPANY 

DEMONSTRATED MILLIMETER WAVE FOR A MOBILE APPLICATION? 

A. IN A -- FROM A HANDSET, LIKE IN OUR CELL PHONE, IN A 

HANDSET KIND OF A DEVICE WITH MILLIMETER WAVE EMBEDDED IN IT 

AND MOBILE ENVIRONMENT, THE ANSWER IS, NO, I HAVE NOT SEEN IT. 

Q. AS OF MARCH 2018, WHAT ROLE WAS MILLIMETER WAVE GOING TO 

BE PLAY IN 5G? 

A. I THINK 5G MILLIMETER WAVE IS GOING TO BE VERY IMPORTANT. 

THE MULTIPLE GIGABIT DATA RATES THAT WE ARE TALKING OF AT 5G, 

THERE'S GREAT ANTICIPATION FOR THAT, IT'S GOING TO BE ENABLED 

USING MILLIMETER WAVE. IN FACT, IN NORTH AMERICA RIGHT HERE IN 

THE U.S., WE ARE LEADING THE WORLD IN THAT SENSE. 

THE FIRST 5G MILLIMETER WAVE DEPLOYMENT ANYWHERE IN THE 

WORLD ARE GOING TO COME UP RIGHT HERE IN NORTH AMERICA IN THE 

U.S. SO IT'S GOING TO BE A VERY IMPORTANT STEP FOR US. 

MS. SESSIONS: THANK YOU, DR. MALLADI. I HAVE NO 

FURTHER QUESTIONS. 

THE WITNESS: THANKS. 

THE COURT: OKAY. TIME IS 4:21. 

(PAUSE IN PROCEEDINGS.) 

MR. HOPKIN: YOUR HONOR, MAY I APPROACH. I HAVE A 

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MALLADI CROSS BY MR. HOPKIN

UNITED STATES COURT REPORTERS

1333

BINDER FOR THE WITNESS. 

THE COURT: YES, GO AHEAD, PLEASE. 

ARE YOU READY? 

MR. HOPKIN: YES. 

THE COURT: OKAY. 4:22. GO AHEAD, PLEASE. 

CROSS-EXAMINATION

BY MR. HOPKIN: 

Q. GOOD AFTERNOON, DR. MALLADI. I'M NATE HOPKIN FOR THE 

FEDERAL TRADE COMMISSION. 

NOW, YOU'RE NOT PERSONALLY RESPONSIBLE FOR OR 

KNOWLEDGEABLE ABOUT THE BUSINESS PRACTICES OF QCT; CORRECT?

A. THAT'S CORRECT.

Q. AND YOU'RE NOT PERSONALLY INVOLVED WITH DEVELOPING THE QCT 

ROADMAP, FOR INSTANCE; RIGHT? 

A. WELL, MY VERY RECENT ROLE HAS ENTAILED THAT, BUT NOT 

BEFORE MARCH OF 2018.

Q. OKAY. THANK YOU FOR THAT CLARIFICATION. 

AND AS FAR AS YOU'RE AWARE, THE CORPORATE R&D GROUP HAS 

NOT WORKED WITH QCT ON DESIGNING SPECIFIC CHIPS FOR SPECIFIC 

OEM'S; IS THAT RIGHT? 

A. NOT FOR SPECIFIC CHIPS FOR SPECIFIC OEM'S. 

BUT THERE IS, OF COURSE, SOME KNOWLEDGE TRANSFER THAT 

HAPPENS AS THERE IS A HAND OVER OF ALL THE TECHNOLOGY THAT WE 

HAVE DEVELOPED. 

Q. AND COMMERCIAL DEVELOPMENT OF QUALCOMM'S TECHNOLOGIES IS 

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1334

DONE WITHIN QCT, NOT THE CORPORATE R&D GROUP; RIGHT?

A. PRIMARILY, THAT'S CORRECT. 

Q. AND YOU DON'T HAVE ANY DIRECT ROLE IN ANALYZING QCT'S 

COMPETITIVE POSITION IN MARKETS FOR QCT'S COMMERCIAL PRODUCTS; 

RIGHT? 

A. NOT A DIRECT ROLE, THAT WAS THE QUESTION. BUT I DO GET TO 

REVIEW HOW THINGS ARE SHAPING UP BECAUSE WE KEEP DEVELOPING 

ALGORITHMS ALL THE TIME. 

Q. SO IT'S FAIR TO SAY THAT THE R&D GROUP DEVELOPED WIRELESS 

TECHNOLOGY AND SOME OF THAT TECHNOLOGY GETS COMMERCIALIZED IN 

QCT PRODUCTS; RIGHT? 

A. THAT IS CORRECT. 

Q. AND AS FAR AS YOU'RE AWARE, NOBODY IN THE CORPORATE R&D 

GROUP HAS ANY INVOLVEMENT INTO HOW QCT PRICES ITS COMMERCIAL 

PRODUCTS THAT INCORPORATE TECHNOLOGY DEVELOPED BY R&D; RIGHT? 

A. YES, THAT'S CORRECT. 

Q. SO QUALCOMM'S R&D GROUP IS DOES NOT WORK WITH QCT ON 

PRICING COMMERCIAL PRODUCTS THAT INCORPORATE TECHNOLOGIES 

DEVELOPED WITHIN THE R&D GROUP; RIGHT? 

A. NOT FOR PRICING, NO. 

Q. YOU'RE NOT PERSONALLY RESPONSIBLE FOR OR KNOWLEDGEABLE 

ABOUT QTL'S BUSINESS PRACTICES; RIGHT?

A. NO. 

Q. YOU'RE NOT RESPONSIBLE FOR NEGOTIATING CELLULAR PATENT 

LICENSES? 

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MALLADI CROSS BY MR. HOPKIN

UNITED STATES COURT REPORTERS

1335

A. NO, I'M NOT. 

Q. YOU'VE NEVER PERSONALLY OFFERED ADVICE TO QTL ON LICENSING 

RATES; RIGHT? 

A. NO. 

Q. AND, IN FACT, QUALCOMM'S CORPORATE R&D GROUP IN GENERAL 

DOES NOT ADVISE QTL ON LICENSING RATES FOR THE TECHNOLOGY THAT 

THE R&D GROUP RESEARCHES; RIGHT? 

A. NO. WE ARE IN THE BUSINESS OF EXPLAINING THE TECHNOLOGY, 

BUT WE DON'T GO BEYOND THAT. 

Q. SO R&D RESEARCHES WIRELESS TECHNOLOGY AND SOME OF THAT 

TECHNOLOGY BECOMES PATENTED AND LICENSED BY QTL; IS THAT FAIR? 

A. THAT'S A FAIR STATEMENT. I WOULD SAY MORE THAN SOME OF 

IT. IT'S A GOOD FRACTION OF IT I WOULD SAY.

Q. AND THAT WOULD INCLUDE, FOR EXAMPLE, 5G TECHNOLOGY?

A. THAT IS CORRECT. 

Q. BUT YOU DON'T KNOW HOW ONE WOULD JUSTIFY THE VALUE OF 5G 

TECHNOLOGY FOR PURPOSES OF A PATENT LICENSE ROYALTY RATE; 

RIGHT? 

A. NOT, NOT FROM A ROYALTY RATE STANDPOINT. 

BUT WE DO EXPLAIN THE TECHNOLOGY AND, LIKE, MAKING SURE 

THAT THE LEGAL GROUP, QTL IN PARTICULAR, GETS TO KNOW EXACTLY 

THE FULL BREADTH OF THE ENTIRE TECHNOLOGY. 

Q. OKAY. BUT THE CORPORATE R&D GROUP DOES NOT WORK WITH QTL 

TO DETERMINE LICENSING RATES FOR TECHNOLOGIES, THE TECHNOLOGIES 

DEVELOPED WITHIN THE R&D GROUP; RIGHT? 

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MALLADI CROSS BY MR. HOPKIN

UNITED STATES COURT REPORTERS

1336

A. NO, WE DON'T WORK ON LICENSING RATES, NO.

Q. AND IT'S NOT PART OF YOUR JOB TO DETERMINE A FINANCIAL 

VALUE OF THE QUALCOMM INTELLECTUAL PROPERTY THAT HAS BEEN 

CONTRIBUTED TO A STANDARD; RIGHT? 

A. THAT'S CORRECT. 

Q. YOU DON'T KNOW WHAT MAKES ONE QUALCOMM PATENT MORE OR LESS 

VALUABLE THAN ANOTHER, DO YOU? 

A. I WOULDN'T GO THAT FAR. I WOULD ACTUALLY SAY THAT GIVEN 

THAT WE KNOW WHAT'S THE TECHNOLOGY THAT'S GOING INTO EACH OF 

THE PATENTS, THERE IS, FROM A TECHNICAL PERSPECTIVE, YOU KNOW, 

I WOULD HAVE MY PREFERENCE IN TERMS OF SAYING, HEY, THIS ONE IS 

REALLY VALUABLE COMPARED TO THE OTHERS. 

SO THE TECHNICAL VALUATION, I WOULD SAY, YEAH, THIS IDEA 

REALLY IS GOOD. THE OTHER ONE, NOT BAD, BUT THIS ONE IS 

BETTER.

Q. IF YOU COULD TAKE A LOOK AT YOUR DEPOSITION TRANSCRIPT, 

DR. MALLADI, PAGE 402, LINES 9 THROUGH 15. 

SO YOU WERE ASKED, "DO YOU KNOW WHAT MAKES ONE PATENT MORE 

VALUABLE THAN ANOTHER?"

AND YOUR TESTIMONY AT YOUR DEPOSITION WAS, "NO." 

DO YOU SEE THAT? 

A. YEAH, I SEE THAT. 

Q. THANK YOU. 

A. I -- 

Q. SO YOU DON'T HAVE ANY PERSONAL KNOWLEDGE, BASED ON YOUR 

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MALLADI CROSS BY MR. HOPKIN

UNITED STATES COURT REPORTERS

1337

OWN WORK, ABOUT THE STRENGTH OF QUALCOMM'S PATENT PORTFOLIO 

RELATIVE TO OTHERS; CORRECT?

A. RELATIVE TO OTHERS, NO. JUST I CAN ONLY SPEAK FROM OUR 

TECHNICAL CONTRIBUTIONS. 

Q. SO IT'S FAIR TO -- IT'S FAIR TO SAY THAT ANY KNOWLEDGE YOU 

HAVE ABOUT THE STRENGTH OF QUALCOMM'S PATENT PORTFOLIO RELATIVE 

TO OTHERS IS SECOND HAND INFORMATION? 

A. I DON'T ACTUALLY LOOK AT WHAT OTHERS ARE DOING. I ONLY 

LOOK AT WHAT WE ARE DOING. 

Q. AND YOU DON'T HAVE ANY PERSONAL KNOWLEDGE ABOUT WHAT 

PERCENTAGE OF QUALCOMM'S PATENTS ARE ESSENTIAL TO A STANDARD; 

RIGHT? 

A. NOT FROM A PERCENTAGE STANDPOINT.

Q. THANK YOU. 

A. YEAH. 

Q. AND YOU'RE NOT RESPONSIBLE FOR DETERMINING WHETHER A 

PATENT IS ESSENTIAL FOR COMMERCIAL DEPLOYMENT; CORRECT? 

A. I'M NOT RESPONSIBLE FOR THE FINAL DECISION. BUT I DO GET 

TO HAVE A SAY IN TERMS OF THE TECHNOLOGY THAT WENT INTO THE 

STANDARDS PROCESS. SO THERE IS INPUT THAT I PROVIDE TO THE 

LEGAL DEPARTMENT. BUT THEY MAKE THE FINAL CALL. 

Q. AND I THINK EARLIER YOU TESTIFIED THAT YOU'RE A NAMED 

INVENTOR ON OVER 400 PATENTS; CORRECT? 

A. CLOSE TO 400 BEFORE MARCH 2018, THAT'S CORRECT.

Q. AND YOU DON'T KNOW WHETHER ANY OF THOSE PATENTS IS 

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MALLADI REDIRECT BY MS. SESSIONS

UNITED STATES COURT REPORTERS

1338

ESSENTIAL TO A WIRELESS STANDARD; RIGHT? 

A. I HAVE A FAIRLY GOOD UNDERSTANDING OF WHICH ONES ARE 

LIKELY ESSENTIAL OR NOT. I DON'T HAVE THE FINAL SAY ON IT, BUT 

I HAVE A FAIRLY GOOD UNDERSTANDING OF THAT PART OF IT. 

MR. HOPKIN: OKAY. THANK YOU. NO FURTHER QUESTIONS. 

THE COURT: OKAY. TIME IS 4:27. IS THERE ANY 

REDIRECT? 

MS. SESSIONS: VERY BRIEFLY, YOUR HONOR. 

THE COURT: OKAY. GO AHEAD SO THIS WITNESS DOESN'T 

HAVE TO FLY BACK ON FRIDAY. 

MS. SESSIONS: VERY. I'M VERY MINDFUL OF THE TIME. 

REDIRECT EXAMINATION

BY MS. SESSIONS: 

Q. DR. MALLADI, COULD YOU PLEASE TURN BACK TO PAGE 402 OF 

YOUR DEPOSITION. 

A. YEAH. 

THE COURT: IT'S 4:28. GO AHEAD, PLEASE. 

BY MS. SESSIONS: 

Q. AND YOU WERE ASKED A QUESTION ABOUT THE QUESTION THAT 

APPEARS STARTING AT LINE 9 OF PAGE 402 OF YOUR DEPOSITION. 

A. YES. 

Q. ARE YOU THERE? 

A. YEAH. YEAH. 

Q. OKAY. COULD YOU PLEASE READ THE FULL ANSWER THAT YOU GAVE 

TO THE QUESTION THAT COUNSEL FOR THE FTC ASKED YOU ABOUT?

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UNITED STATES COURT REPORTERS

1339

A. THAT'S WHAT I WAS TRYING TO SAY. I MEAN, I KNOW THE 

TECHNOLOGY THAT GOES INTO IT, SO IN THAT SENSE, DO I KNOW 

WHETHER ONE PATENT IS MORE VALUABLE THAN THE OTHER? I KNOW 

FROM A TECHNOLOGY STANDPOINT WHICH ONE SEEMS LIKE A MORE 

VALUABLE IDEA BECAUSE IT'S CENTRAL TO THE WHOLE CONCEPT. TO 

THAT EXTENT, YES. 

BUT THE FULL ANSWER, IF I READ IT OUT, "I KNOW IT IS IDEAL 

WITH THE TECHNOLOGY THAT GOES INTO THE PATENTS PER SE, BUT THAT 

IS A QUESTION THAT IS REALLY MEANT FOR SOMEONE FROM OUR LEGAL 

DEPARTMENT TO ANSWER." 

MS. SESSIONS: THANK YOU, DR. MALLADI. 

NO FURTHER QUESTIONS. 

THE COURT: OKAY. THE TIME IS 4:29. 

IS THIS WITNESS SUBJECT TO RECALL OR NOT? 

MS. SESSIONS: NO, YOUR HONOR. 

THE COURT: DO YOU AGREE? 

MR. HOPKIN: NOT FROM US. 

THE COURT: OKAY. THEN YOU HAVE COMPLETED YOUR TRIAL 

TESTIMONY, AND YOU'RE FREE TO LEAVE. I THINK THE TIME IS TOO 

LATE TO CALL A NEW WITNESS, SO LET'S GO AHEAD AND END FOR THE 

DAY. IT'S 4:29. 

YOU'RE FREE TO STEP DOWN. 

LET ME GIVE YOU YOUR TIME TOTALS. WE'LL BE BACK IN 

SESSION ON FRIDAY MORNING AT 9:00 A.M. 

WHAT THIRD PARTY SEALING MOTIONS DO YOU ANTICIPATE, IF 

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UNITED STATES COURT REPORTERS

1340

ANY? OR ARE WE THROUGH THAT NIGHTMARE PROCESS AT THIS POINT? 

ANYONE -- 

MS. MILICI: YOUR HONOR, THE FTC DOESN'T KNOW WHO 

QUALCOMM'S WITNESSES ARE, SO WE DON'T KNOW WHAT -- WE DON'T 

KNOW WHAT THIRD PARTY SEALING MOTIONS MIGHT BE COMING. 

THE COURT: OH, OKAY. WHEN WILL YOU GET THE LIST OF 

THEIR WITNESSES? 

MR. BYARS: 6:00 O'CLOCK TONIGHT IS WHEN WE DISCLOSE 

LIVE WITNESSES. 

THE COURT: OKAY. 

MR. BYARS: WE HAVE, HOWEVER, DISCLOSED A GOOD NUMBER 

OF DEPOSITION VIDEOS. WE'VE GIVEN NOTICE TO THIRD PARTIES. 

YOUR HONOR HAS ALREADY DEALT WITH A LOT OF THE SEALING MOTIONS 

WITH RESPECT TO THE DEPOSITIONS, SO THOSE WILL BE READY TO GO 

IF WE NEED TO PLAY THOSE ON FRIDAY. 

THE COURT: OKAY. SO YOU DON'T ANTICIPATE ANYONE 

ELSE OTHER THAN THOSE VIDEOS THAT ELICIT. I CAN'T IMAGINE 

THAT'S GOING TO BE FIVE AND A HALF HOURS WORTH. 

MR. BYARS: WE ALSO HAVE LIVE WITNESSES WE'LL 

DISCLOSE AT 6:00. WE'LL THEN EXCHANGE THE EVIDENCE THAT WE'LL 

USE WITH THOSE, AND WE'LL EVALUATE WHETHER THERE NEEDS TO BE 

SEALING MOTIONS ON THAT. 

THE COURT: YOU DON'T KNOW WHETHER THOSE ARE THIRD 

PARTIES, OR YOU DON'T WANT TO COMMIT AN HOUR AND A HALF EARLY. 

MR. BYARS: I DON'T BELIEVE IT'S THIRD PARTY -- IT'LL 

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UNITED STATES COURT REPORTERS

1341

BE QUALCOMM -- ONE-THIRD PARTY. ONE THIRD PARTY. 

THE COURT: OKAY. SO THERE MIGHT BE. THERE MIGHT 

BE. 

MR. BYARS: MAYBE. 

THE COURT: OKAY. WELL, IF YOU CAN LET EVERYONE KNOW 

THAT THEY HAVE TO, FOR THE THIRD PARTIES, THEY HAVE TO FILE 

THEIR SEALING MOTIONS BY 10:00 A.M. ON THURSDAY. 

MR. BYARS: OKAY. 

THE COURT: AND FOR THE PARTIES, IT'S 8:00 A.M. ON 

THURSDAY FOR YOUR HIGH PRIORITY OBJECTIONS. OKAY? 

MR. BYARS: WE'LL DO THAT. 

THE COURT: OKAY. LET ME GIVE YOU YOUR TIME TOTALS. 

(PAUSE IN PROCEEDINGS.) 

THE COURT: OKAY. SO FOR QUALCOMM TODAY IT WAS 2 

HOURS AND 50 MINUTES. YOUR OVERALL TOTAL, WITH THE 9 HOURS AND 

22 MINUTES FROM YESTERDAY, SO THAT'S 12 HOURS AND 12 MINUTES 

USED. 

YOU HAVE 12 HOURS AND, WHAT, 48 MINUTES LEFT? 

MR. VAN NEST: SOUNDS RIGHT, YOUR HONOR. 

THE COURT: OKAY. AND THEN FOR FTC, AS OF YESTERDAY 

THEY HAD USED 17 HOURS AND 56 MINUTES, AND TODAY -- TODAY THEY 

USED 2 HOURS -- TODAY IS JANUARY 15. THEY USED 2 HOURS AND 37 

MINUTES -- BLESS YOU -- WHICH IS 20 HOURS AND 33 MINUTES, I 

BELIEVE. I'LL JUST DOUBLE-CHECK THAT. 

YOU HAVE LESS THAN 4 AND A HALF HOURS LEFT. 

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UNITED STATES COURT REPORTERS

1342

OKAY. WHAT ELSE? ANYTHING ELSE FOR TODAY? 

SO I WON'T NEED THE CHART. I'LL JUST HAVE THE ONE HOUR OF 

CLOSING ARGUMENTS. I'VE, YOU KNOW, BEEN REVIEWING AND 

RE-REVIEWING WHAT YOU'VE ALREADY FILED AND I THINK THAT'S -- I 

THINK IT'S SUFFICIENT, YOUR FINDINGS OF FACT AND CONCLUSIONS OF 

LAW. IT PRETTY MUCH TRACKS A LOT OF -- IT PRETTY MUCH TRACKS 

ALL THE EVIDENCE THAT'S BEEN COMING IN, SO I THINK THAT WILL BE 

SUFFICIENT. 

OKAY. WHAT ELSE? ANYTHING ELSE FOR TODAY? 

MR. VAN NEST: NOTHING QUALCOMM, YOUR HONOR. 

THE COURT: OKAY. 

MS. MILICI: NOTHING FOR THE FTC. 

THE COURT: OKAY. THEN THANK YOU. 

DO I HAVE A CALENDAR IN HERE? SO I WOULD RECOMMEND YOU 

PLEASE REMOVE EVERYTHING TODAY. 

THANK YOU. 

MR. VAN NEST: THANK YOU, YOUR HONOR. 

MS. MILICI: THANK YOU, YOUR HONOR. 

(THE EVENING RECESS WAS TAKEN AT 4:34 P.M.)

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UNITED STATES COURT REPORTERS

CERTIFICATE OF REPORTERS

WE, THE UNDERSIGNED OFFICIAL COURT REPORTERS OF THE 

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF 

CALIFORNIA, 280 SOUTH FIRST STREET, SAN JOSE, CALIFORNIA, DO 

HEREBY CERTIFY: 

THAT THE FOREGOING TRANSCRIPT, CERTIFICATE INCLUSIVE, IS 

A CORRECT TRANSCRIPT FROM THE RECORD OF PROCEEDINGS IN THE 

ABOVE-ENTITLED MATTER. 

______________________________

IRENE RODRIGUEZ, CSR, CRR

CERTIFICATE NUMBER 8076

_______________________________

LEE-ANNE SHORTRIDGE, CSR, CRR 

CERTIFICATE NUMBER 9595

DATED: JANUARY 15, 2019

Case 5:17-cv-00220-LHK Document 1514 Filed 07/02/19 Page 232 of 232