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UNITED STATES COURT REPORTERS

1829

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 25, 2019

VOLUME 9

PAGES 1829-2026

SEALED PAGES 2021-2021

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

1830

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

NORTON ROSE FULBRIGHT

BY: MARC COLLIER

TALBOT HANSUM

98 SAN JACINTO BOULEVARD, SUITE 1100

AUSTIN, TEXAS 78701

BY: ERIC B. HALL

DANIEL LEVENTHAL

1301 MCKINNEY, SUITE 5100

HOUSTON, TEXAS 77010

ALSO PRESENT: MARK SNYDER

JEFF DAHM

KEN KOTARSKI

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UNITED STATES COURT REPORTERS

1831

INDEX OF WITNESSES

DEFENDANT'S

CHRISTOPHER JOHNSON

DIRECT EXAM BY MR. PETERSON P. 1834

CROSS-EXAM BY MR. HOPKIN P. 1853

REDIRECT EXAM BY MR. PETERSON P. 1856

AVIV NEVO

DIRECT EXAM BY MR. BORNSTEIN P. 1860

CROSS-EXAM BY MS. MILICI P. 1925

REDIRECT EXAM BY MR. BORNSTEIN P. 1954

RECROSS-EXAM BY MS. MILICI P. 1963

CHRISTINA PETERSSON

VIDEOTAPED DEPOSITION P. 1967

RANAE MCELVAINE

VIDEOTAPED DEPOSITION P. 1968

ILKKA RAHNASTO

VIDEOTAPED DEPOSITION P. 1969

ALEX ROGERS

DIRECT EXAM BY MR. VAN NEST P. 1970

CROSS-EXAM BY MR. MATHESON P. 1991

REDIRECT EXAM BY MR. VAN NEST P. 2015

SEUNGHO AHN

VIDEOTAPED DEPOSITION P. 2019

INJUNG LEE

VIDEOTAPED DEPOSITION P. 2021

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UNITED STATES COURT REPORTERS

1832

INDEX OF EXHIBITS

MARKED ADMITTED

PLAINTIFF'S

8195 1993

8196 1997

7122 1998

6594 2002

7618 2005

7629 2006

5185 2010

DEFENDANT'S

122 1841

123A 1846

124 1850

121A 1853

9148 1915

9180 1919

9166 1924

3502 1966

2778 1969

0551 2021

JOINT

9 1935

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UNITED STATES COURT REPORTERS

1833

SAN JOSE, CALIFORNIA JANUARY 26, 2019

P R O C E E D I N G S

(COURT CONVENED AT 9:02 A.M.)

THE COURT: GOOD MORNING AND WELCOME.

MR. VAN NEST: GOOD MORNING, YOUR HONOR.

THE COURT: PLEASE TAKE A SEAT, AND PLEASE CALL YOUR

FIRST WITNESS.

MR. PETERSON: GOOD MORNING, YOUR HONOR.

JORDAN PETERSON ON BEHALF OF QUALCOMM.

QUALCOMM CALLS CHRISTOPHER JOHNSON.

THE CLERK: RAISE YOUR RIGHT HAND.

(DEFENDANT'S WITNESS, CHRISTOPHER JOHNSON, WAS SWORN.)

THE WITNESS: I DO.

THE CLERK: THANK YOU. PLEASE BE SEATED.

MR. PETERSON: YOUR HONOR, MAY WE APPROACH WITH

BINDERS?

THE COURT: YES, PLEASE.

THE CLERK: PLEASE STATE YOUR FULL NAME AND SPELL

YOUR LAST NAME FOR THE RECORD.

THE WITNESS: CHRISTOPHER CHARLES JOHNSON.

J-O-H-N-S-O-N.

THE COURT: ALL RIGHT. TIME IS 9:04. GO AHEAD,

PLEASE.

///

///

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JOHNSON DIRECT BY MR. PETERSON

UNITED STATES COURT REPORTERS

1834

DIRECT EXAMINATION

BY MR. PETERSON:

Q. GOOD MORNING, MR. JOHNSON. YOU'RE A PARTNER OF

BAIN & COMPANY; IS THAT CORRECT?

A. CORRECT.

Q. AND BAIN PROVIDES MANAGEMENT CONSULTING SERVICES; CORRECT?

A. THAT'S CORRECT.

Q. AND YOU'VE WORKED FOR BAIN SINCE EARLY 2010; CORRECT?

A. I WAS A SUMMER INTERN IN 2008, AND I'VE BEEN AT BAIN FULL

TIME SINCE JANUARY 2010.

Q. AND AT BAIN YOU PERSONALLY HAVE A FOCUS ON THE TECH

INDUSTRY; CORRECT?

A. THAT'S CORRECT.

Q. AND DURING YOUR TENURE AT BAIN, YOU'VE AUTHORED NUMEROUS

STUDIES ON TOPICS SUCH AS SEMICONDUCTORS, MOBILE HANDSETS, AND

TECH INDUSTRY CONSOLIDATION; CORRECT?

A. THAT'S CORRECT.

Q. AND YOU WERE DEPOSED IN THIS ACTION ON MARCH 28TH, 2018;

CORRECT?

A. I DON'T REMEMBER THE EXACT DATE, BUT THAT SOUNDS RIGHT.

Q. AND AS OF THE DATE OF YOUR DEPOSITION, INTEL HAD BEEN A

BAIN CLIENT FOR ABOUT 11 YEARS; IS THAT CORRECT?

A. CORRECT.

Q. AND YOU PERSONALLY PROVIDED CONSULTING SERVICES TO INTEL

FROM EARLY 2010 UNTIL MID-2011; CORRECT?

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JOHNSON DIRECT BY MR. PETERSON

UNITED STATES COURT REPORTERS

1835

A. CORRECT.

Q. AND THEN AGAIN YOU PROVIDED CONSULTING SERVICES TO INTEL

FROM THE SUMMER OF 2014 UNTIL AT LEAST THE DATE OF YOUR

DEPOSITION; CORRECT?

A. CORRECT.

Q. NOW, BAIN PROVIDES OUTSIDE ADVICE FOR MANAGEMENT TEAMS;

CORRECT?

A. COULD YOU BE MORE SPECIFIC FOR "OUTSIDE ADVICE"?

Q. AN OUT -- BAIN PROVIDES AN OUTSIDE PERSPECTIVE, AN

UNCOLORED POSITION ON TOPICS FOR MANAGEMENT TEAMS; CORRECT?

A. THAT'S THE GOAL, YES.

Q. AND IN THE REGULAR COURSE OF PROVIDING CONSULTING SERVICES

TO ITS CLIENTS, BAIN USES A DATA DRIVEN APPROACH; CORRECT?

A. CORRECT.

Q. AND BAIN'S WRITTEN WORK PRODUCT REFLECTS THE FACTS THAT

BAIN COLLECTED AND THE OPINIONS THAT BAIN FORMED IN THE COURSE

OF ITS WORK; CORRECT?

A. IT DOES WITHIN THE SCOPE OF WHAT THE PROJECT IS AND THE

DATA AVAILABLE TO US, YES.

Q. AND BAIN STORES THIS WRITTEN WORK PRODUCT ON AN INTERNAL

FILE SYSTEM, SOME OF WHICH BAIN TURNED OVER AS PART OF THIS

LITIGATION; CORRECT?

MR. HOPKIN: OBJECTION, LEADING.

THE COURT: SUSTAINED.

MR. PETERSON: YOUR HONOR, PERMISSION TO TREAT THE

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JOHNSON DIRECT BY MR. PETERSON

UNITED STATES COURT REPORTERS

1836

WITNESS AS HOSTILE. HE JUST TESTIFIED THAT HE HAS DONE

CONSULTING WORK FOR INTEL, WHICH IS A COMPETITOR OF QUALCOMM.

THE COURT: WHAT'S YOUR RESPONSE?

MR. HOPKIN: YOUR HONOR, BAIN & COMPANY ISN'T A PARTY

OPPONENT. THEY'RE NOT A PARTY IN THIS CASE. THEY'RE NOT

ADVERSE. AND MR. JOHNSON HAS NEVER WORKED FOR INTEL AS FAR AS

WE KNOW.

THE COURT: ALL RIGHT. WELL --

MR. HOPKIN: AND INTEL IS ALSO --

THE COURT: DO YOU HAVE TO USE LEADING QUESTIONS?

MR. PETERSON: TO BE CLEAR, YOUR HONOR, THE WITNESS

ALSO MOVED TO QUASH THE SUBPOENA, SO HE'S NOT HERE VOLUNTARILY.

MR. HOPKIN: YOUR HONOR, I BELIEVE THE BASIS FOR THE

MOTION TO QUASH WAS BURDEN. THEY'RE A NON-PARTY IN THIS

MATTER.

THE COURT: ASK NON-LEADING QUESTIONS, PLEASE.

BY MR. PETERSON:

Q. NOW, MR. JOHNSON, THE DOCUMENTS THAT WERE PRODUCED IN THIS

LITIGATION, WERE YOU A PART OF COLLECTING THOSE?

A. I WAS A PART OF COLLECTING SOME DOCUMENTS BEFORE MY

DEPOSITION. BUT THERE WERE OTHER PEOPLE COLLECTING THEM. A

LOT OF THE DOCUMENTS THAT I ENDED UP SEEING WERE NOT ONES THAT

I FOUND.

Q. BUT YOU WERE INVOLVED IN THE COLLECTION PROCESS; CORRECT?

A. I WAS.

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JOHNSON DIRECT BY MR. PETERSON

UNITED STATES COURT REPORTERS

1837

Q. NOW, AT VARIOUS TIMES DURING THE COURSE OF BAIN'S

ENGAGEMENT WITH INTEL, IT'S CORRECT THAT BAIN HAS DONE

BENCHMARKING COMPARING INTEL'S MOBILE WIRELESS BUSINESS WITH

ITS COMPETITORS?

MR. HOPKIN: OBJECTION. LEADING.

THE COURT: SUSTAINED.

BY MR. PETERSON:

Q. HAS BAIN DONE BENCHMARKING BETWEEN INTEL'S MOBILE WIRELESS

BUSINESS AND ITS COMPETITORS?

A. WE HAVE.

Q. DID THAT BENCHMARKING INCLUDE MOBILE WIRELESS HEAD COUNTS?

A. YES.

Q. AND DO YOU UNDERSTAND "HEAD COUNT" TO MEAN THE NUMBER OF

FULL-TIME EMPLOYEES AND PART-TIME EMPLOYEES AT THE INTEL MOBILE

WIRELESS BUSINESS UNIT?

A. IT'LL DEPEND ON THE SPECIFIC EXERCISE. BUT THAT COULD BE

ONE WAY WE'D DO IT, AND THAT WOULD PROBABLY BE THE MOST USUAL

CASE.

MOST USUALLY THAT'S HOW WE WOULD LOOK AT IT, FULL-TIME

EMPLOYEES AND IF YOU HAD TWO PART-TIME EMPLOYEES, THAT WOULD

COUNT AS ONE FULL-TIME EMPLOYEE POTENTIALLY.

Q. AND HAS BAIN ALSO LOOKED AT INTEL MOBILE WIRELESS'S R&D

SPENDING?

A. IN CONJUNCTION WITH OUR CLIENT, YES.

Q. AND FOR BOTH OF THOSE, BAIN ADVISED INTEL THAT INTEL WAS

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JOHNSON DIRECT BY MR. PETERSON

UNITED STATES COURT REPORTERS

1838

TYPICALLY RIGHT AROUND THE RIGHT LEVEL OR SIMILAR LEVEL TO ITS

PEERS; CORRECT?

MR. HOPKIN: OBJECTION. LEADING.

MR. PETERSON: I'LL REPHRASE, YOUR HONOR.

THE COURT: THANK YOU. GO AHEAD, PLEASE.

BY MR. PETERSON:

Q. WHAT DID BAIN CONCLUDE ABOUT INTEL'S MOBILE WIRELESS R&D

SPENDING WITH RESPECT TO ITS PEERS?

A. THERE WERE PROBABLY MULTIPLE CONCLUSIONS. ARE YOU ASKING

ABOUT THE SIZE OR THE AMOUNT OR -- I'M SORRY.

Q. SURE. I'LL REPHRASE THAT. WHAT DID BAIN CONCLUDE AS WITH

RESPECT TO INTEL'S WIRELESS R&D SPENDING WITH RESPECT TO THE

TOTAL VOLUME OF SPENDING?

A. WITH RESPECT TO THE TOTAL VOLUME OF SPENDING?

Q. CORRECT.

A. VOLUME OF WHAT?

Q. OF DOLLARS SPENT.

A. I THINK WE -- IF I UNDERSTAND THE QUESTION CORRECTLY, I

THINK WE LOOKED AT THEIR TOTAL SPEND, WE UNDERSTOOD THE DOLLAR

AMOUNT AND THE HEAD COUNT, AND WE COMPARED THAT TO OTHER

COMPANIES, AND WE FOUND THEM TO BE AT ROUGHLY SIMILAR LEVELS.

I'M NOT SURE WE DREW A CONCLUSION AS TO WHETHER THAT WAS RIGHT

OR WRONG.

Q. NOW, WE GAVE YOU A BINDER, MR. JOHNSON. IF YOU COULD TURN

IN THAT BINDER TO QX 122. AND THE DOCUMENT NUMBERS ARE ON THE

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JOHNSON DIRECT BY MR. PETERSON

UNITED STATES COURT REPORTERS

1839

TABS THERE.

A. ING OKAY.

Q. DO YOU RECOGNIZE THIS DOCUMENT?

A. I RECOGNIZE IT FROM MY PREPARATION.

Q. IT'S A DOCUMENT BAIN PREPARED?

A. BAIN, IN CONJUNCTION WITH OUR CLIENT. THERE WAS PROBABLY

INPUT FROM BOTH PARTIES. INTEL, THAT WOULD BE.

Q. AND THIS REFLECTS THE FACTS THAT BAIN COLLECTED AND

OPINIONS THAT BAIN FORMED IN THE REGULAR COURSE OF PROVIDING

CONSULTING SERVICES TO INTEL; CORRECT?

MR. HOPKIN: OBJECTION, LEADING.

MR. PETERSON: YOUR HONOR, FOR THE PURPOSES OF

ESTABLISHING FOUNDATION, I THINK A LEADING QUESTION IS

APPROPRIATE HERE.

THE COURT: THAT'S FINE. OVERRULED.

MR. PETERSON: THANK YOU.

THE COURT: CAN I ASK YOU A QUICK QUESTION. IS THIS

122A OR WHAT'S 122? WHAT'S THE DIFFERENCE? I THOUGHT A'S WERE

ENGLISH TRANSLATIONS OF FOREIGN DOCUMENTS.

MR. PETERSON: IT'S 122A, YOUR HONOR. THIS WAS A

SUBSET OF WHAT WAS USED IN MR. JOHNSON'S DEPOSITION.

THE COURT: SO I'LL USE 122A AS THE NUMBER ON THE

EXHIBIT LIST. OKAY. GO AHEAD, PLEASE.

MR. PETERSON: THANK YOU, YOUR HONOR.

Q. AND THIS PRESENTATION IS TITLED QCOMM BENCHMARK

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JOHNSON DIRECT BY MR. PETERSON

UNITED STATES COURT REPORTERS

1840

PRESENTATION 2012; CORRECT?

A. ARE THAT'S CORRECT.

Q. AND IT'S DATED DECEMBER 20TH, 2012; CORRECT?

A. CORRECT.

Q. THIS DOCUMENT WAS CONSTRUCTED OVER A PERIOD OF TIME

LEADING UP TO THAT DATE AS BAIN COLLECTED THESE FACTS AND

FORMED THESE OPINIONS; CORRECT?

A. AGAIN, AS BAIN DID, IN CONJUNCTION WITH OUR CLIENT. I

THINK THE CLIENT HAD INPUT HERE.

Q. OKAY. AND BAIN PRODUCED THIS FROM ITS INTERNAL FILE

SYSTEM; CORRECT?

A. I DON'T KNOW.

Q. DO YOU -- YOU RECOGNIZE THIS DOCUMENT FROM YOUR DEPOSITION

THOUGH?

A. I DO.

Q. AND THIS IS WHAT DOCUMENT YOU TESTIFIED ABOUT AT YOUR

DEPOSITION?

A. THERE WERE A LOT OF DOCUMENTS. I BELIEVE SO. BUT THERE

WERE A LOT OF DOCUMENTS, SO I'M NOT 100 PERCENT CERTAIN.

Q. WOULD IT REFRESH YOUR RECOLLECTION IF I SHOWED YOU YOUR

DEPOSITION WHERE YOU TESTIFY ABOUT THIS DOCUMENT?

A. SURE.

Q. IN THE BINDER, THERE'S A TAB SAYS THAT DEPOSITION

TRANSCRIPT, AND IF YOU'LL TURN TO PAGE 70.

A. OKAY.

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JOHNSON DIRECT BY MR. PETERSON

UNITED STATES COURT REPORTERS

1841

Q. I'M SORRY. ACTUALLY, IF YOU LOOK AT PAGE 84 TO 85.

YOU'LL SEE THAT BEGINNING ON LINE 20, YOU TESTIFIED ABOUT THIS

DOCUMENT.

A. YES. IT LOOKS LIKE THE SAME DOCUMENT. THANK YOU.

Q. OKAY. SO YOU AGREE THAT YOU TESTIFIED ABOUT THIS DOCUMENT

AT YOUR DEPOSITION?

A. I DO.

Q. AND THE DOCUMENT YOU TESTIFIED ABOUT AT YOUR DEPOSITION

WERE PRODUCED BY BAIN; CORRECT?

A. AGAIN, I'M NOT CERTAIN IF THEY WERE PRODUCED BY BAIN OR BY

INTEL. I JUST KNOW THAT THEY WERE PRODUCED.

MR. PETERSON: OKAY. YOUR HONOR, QUALCOMM OFFERS

INTO EVIDENCE QX 122.

MR. HOPKIN: OBJECTION. HEARSAY.

MR. PETERSON: YOUR HONOR, THE FOUNDATION THAT WE'VE

LAID IS THAT THIS IS A BUSINESS RECORD.

THE COURT: IT'S ADMITTED.

(DEFENDANT'S EXHIBIT QX 122 WAS ADMITTED IN EVIDENCE.)

THE COURT: GO AHEAD, PLEASE.

MR. PETERSON: THANK YOU, YOUR HONOR.

Q. NOW, PARTS OF THIS DECK HAVE BEEN SEALED, SO I'LL PUT THE

FLAP DOWN OVER THE PROJECTOR. I'M NOT GOING TO ASK YOU

QUESTIONS THAT REQUIRE YOU TO REVEAL SPECIFIC SEALED

INFORMATION, BUT WE'LL GO SLOW TO MAKE SURE THAT THE QUESTION

AND ANSWER DON'T REVEAL ANYTHING THAT THE COURT HAS DETERMINED

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JOHNSON DIRECT BY MR. PETERSON

UNITED STATES COURT REPORTERS

1842

ARE CONFIDENTIAL?

A. UNDERSTOOD.

Q. MR. JOHNSON, DO YOU RECOGNIZE THE TERM "SYSTEM" ON A CHIP?

A. I DO.

Q. IS THAT ALSO SOMETIMES REFERRED AS TO SOC?

A. IT IS.

Q. AND IN THE MOBILE WIRELESS INDUSTRY, WHAT DOES THAT MOST

COMMONLY REFER TO?

A. A CHIP THAT'S BEING USED IN CELL PHONES WHERE THE

APPLICATIONS PROCESSOR, WHICH DOES THE COMPUTING, IS INTEGRATED

WITH THE BASEBAND, WHICH DOES THE CELLULAR CONNECTIVITY. SO

THEY'RE ON THE SAME DIE.

Q. AND ON SLIDE 3, BASED ON YOUR KNOWLEDGE, WHAT WAS THE --

WHAT WAS THE CONCLUSION THAT INTEL REACHED ABOUT INTEL'S

OVERALL SOC R&D INVESTMENT COMPARABLE TO QUALCOMM?

MR. HOPKIN: OBJECTION. FOUNDATION.

MR. PETERSON: YOUR HONOR, THE QUESTION SPECIFICALLY

ASKED FOR HIS KNOWLEDGE.

MR. HOPKIN: THE QUESTION WAS ABOUT INTEL'S

CONCLUSIONS, YOUR HONOR.

MR. PETERSON: I CAN REPHRASE TO MAKE SURE.

THE COURT: WHY DON'T YOU DO THAT. THANK YOU. GO

AHEAD, PLEASE.

BY MR. PETERSON:

Q. MR. JOHNSON, WHAT WAS BAIN'S CONCLUSION REGARDING INTEL'S

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JOHNSON DIRECT BY MR. PETERSON

UNITED STATES COURT REPORTERS

1843

OVERALL SOC R&D INVESTMENT COMPARABLE TO QUALCOMM?

A. SPECIFICALLY ON PAGE 3?

Q. YES. AND JUST TO BE CLEAR, SPEAKING AT A HIGH LEVEL ABOUT

THE MAIN CONCLUSION SO WE DON'T GET INTO SEALED INFORMATION.

A. WHAT'S WRITTEN ON THE PAGE, INTEL OVERALL SOC R&D

INVESTMENT COMPARABLE TO QUALCOMM.

Q. AND WHAT WAS THE CONCLUSION REGARDING HOW MANY MORE TIMES

OUTPUT QUALCOMM HAD FROM -- THAN INTEL?

A. THREE TIMES MORE OUTPUT.

Q. AND THAT'S WHAT'S ILLUSTRATED ON THE SLIDES WITH THE

ADDITIONAL FIGURES; CORRECT?

A. YES. THE DATA IS SHOWING THAT -- IT'S SHOWING THE SPEND

LEVELS BEING SIMILAR AND THE NUMBER OF SKUS, QUALCOMM HAVING

ABOUT THREE TIMES AS MANY. IT'S A LITTLE BIT DIFFERENT IF YOU

LOOK AT FIRST BASE DIE, BUT INCLUDING ALL DERIVATIVES, ABOUT

THREE TIMES AS MANY SKUS ON THE QUALCOMM SIDE.

Q. THANK YOU.

NOW, IF YOU COULD TURN TO SLIDE 8, PLEASE. AND THAT SLIDE

IS ALSO SEALED, SO WE'LL AGAIN GO SLOWLY TO MAKE SURE WE DON'T

REVEAL ANYTHING CONFIDENTIAL.

AT THE TOP OF THE SLIDE, IT REFERS TO WWAN. CAN YOU TELL

ME WHAT WWAN IS?

A. IT'S THE MODEM, THE BASEBAND FOR CELLULAR CONNECTIONS.

Q. AND WHAT WAS BAIN'S CONCLUSION AS TO INTEL'S R&D SPEND IN

WWAN COMPARED TO QUALCOMM? AND AGAIN, JUST SO WE DON'T GET

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JOHNSON DIRECT BY MR. PETERSON

UNITED STATES COURT REPORTERS

1844

INTO SPECIFIC NUMBERS, IF YOU COULD JUST SAY THE HIGH LEVEL

CONCLUSION.

A. YOU'RE ASKING ABOUT THE -- IN TERMS OF DOLLARS SPENT?

Q. LET'S NOT REVEAL SPECIFIC DOLLAR NUMBERS, BUT IF YOU COULD

SAY IN TERMS OF RELATIVE PROPORTIONS, THAT MIGHT BE THE EASIEST

WAY TO AVOID THE SEALED INFORMATION.

A. R&D SPEND LOWER THAN QUALCOMM FOR WWAN.

Q. AND THE SLIDE REFERS TO EM DRIVEN. WHAT DOES EM REFER TO?

A. I BELIEVE IT REFERS TO EMERGING MARKETS.

Q. AND THEN DESPITE LOWER SPEND, WHAT DID BAIN CONCLUDE

REGARDING THE HEAD COUNT THAT INTEL HAD?

A. WHAT'S WRITTEN HERE IS 25 PERCENT HIGHER TOTAL HEAD COUNT,

BLUE BADGE AND GREEN BADGE.

Q. AND WAS THAT DRIVEN BY THE LOWER COST OF INTEL'S R&D IN

EMERGING MARKETS?

A. THAT'S A FAIR INTERPRETATION, I THINK.

Q. THANK YOU.

NOW, IF YOU COULD TURN IN YOUR BINDER TO QX 123.

DO YOU RECOGNIZE THIS DOCUMENT?

A. FROM MY PREPARATION. I WASN'T -- I DIDN'T AUTHOR IT, BUT

FROM MY PREPARATION, I DO.

Q. BUT THIS IS A PRESENTATION PREPARED BY BAIN FOR INTEL;

CORRECT?

A. AGAIN, PROBABLY PREPARED BY BAIN AND MEMBERS OF THE INTEL

TEAM.

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JOHNSON DIRECT BY MR. PETERSON

UNITED STATES COURT REPORTERS

1845

Q. AND THIS DOCUMENT REFLECTS THE FACTS THAT BAIN COLLECTED

AND THE OPINIONS THAT BAIN FORMED IN THE REGULAR COURSE OF

PROVIDING CONSULTING SERVICES TO INTEL; CORRECT?

A. WITHIN THE SCOPE OF THE PROJECT AND THE INFORMATION

AVAILABLE TO US, YES.

Q. AND THIS IS TITLED MOBILE R&D BENCHMARKING; CORRECT?

A. CORRECT.

Q. AND DATED JULY 2015?

A. CORRECT.

Q. AND SO THE DOCUMENT WOULD HAVE BEEN CONSTRUCTED OVER A

PERIOD OF TIME LEADING UP TO THAT DATE AS BAIN COLLECTED ITS

FACTS AND FORMED ITS OPINIONS; CORRECT?

A. ARE THAT'S CORRECT.

Q. AND AT YOUR DEPOSITION, YOU TESTIFIED CONCERNING THIS

DOCUMENT; CORRECT?

A. I BELIEVE SO.

MR. PETERSON: YOUR HONOR, QUALCOMM MOVES TO ADMIT

QX 123 INTO EVIDENCE.

THE COURT: AND IT'S 123A THAT YOU'RE MOVING TO

ADMIT?

MR. PETERSON: I'M SORRY.

THE COURT: LET'S KEEP THAT CLEAR, BECAUSE I DON'T

WANT THE TRANSCRIPT TO LOOK LIKE WE ADMITTED THE WHOLE THING.

A IS A SUBSET OF 123; CORRECT?

MR. PETERSON: I APOLOGIZE. THAT'S CORRECT, YOUR

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JOHNSON DIRECT BY MR. PETERSON

UNITED STATES COURT REPORTERS

1846

HONOR. WE MOVE TO ADMIT QX 123A.

MR. HOPKIN: NO OBJECTION.

THE COURT: IT'S ADMITTED.

(DEFENDANT'S EXHIBIT QX 123A WAS ADMITTED IN EVIDENCE.)

THE COURT: GO AHEAD, PLEASE.

BY MR. PETERSON:

Q. IF YOU COULD TURN TO SLIDE 2.

A. YES.

Q. THIS SLIDE CORRECTLY SHOWS THE FINDINGS THAT YOU REACHED

AS A PART OF THIS STUDY; CORRECT?

A. TO THE BEST OF KNOWLEDGE, IT'S A SUMMARY OF THE FINDINGS

OF THE STUDY.

Q. AND WHAT WAS THE CONCLUSION BAIN REACHED REGARDING INTEL

OVER ALL MOBILE PRODUCTIVITY?

A. PRODUCTIVITY IN TERMS OF PRODUCT'S OUTPUT, YOU NEED SKU

OUTPUT. I THINK HERE WE'RE SAYING THAT QUALCOMM WAS PRODUCING

TWO TO THREE TIMES AS MANY SKUS AS INTEL.

Q. AND THE SLIDE CONTAINS OTHER CONCLUSIONS THAT BAIN

REACHED; CORRECT? FOR EXAMPLE, I'M LOOKING AT THE SECOND TO

LAST BULLET, THERE'S ADDITIONAL CONCLUSIONS THERE THAT BAIN

REACHED, CORRECT, REGARDING PRODUCTIVITY? WHAT WAS THAT

CONCLUSION?

A. I BELIEVE IT'S THE SAME CONCLUSION, JUST INVERTING THE 2

TO 3X AND SAYING THAT INTEL PRODUCT ACTIVITY LAGGED QUALCOMM BY

50 PERCENT.

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JOHNSON DIRECT BY MR. PETERSON

UNITED STATES COURT REPORTERS

1847

Q. AND IF YOU COULD TURN TO SLIDE 4 IN THAT SAME DECK.

A. OKAY.

Q. AND THIS SLIDE ALSO ILLUSTRATES THE SAME PRINCIPLE WE WERE

JUST TALKING ABOUT, THAT INTEL WAS LAGGING IN PRODUCT OUTPUT;

CORRECT?

A. THAT INTEL WAS PRODUCING FEWER SKUS THAN QUALCOMM.

Q. THANKS. YOU CAN SET THAT DOCUMENT ASIDE. WE'RE DONE WITH

THAT FOR NOW. THANK YOU.

NOW, JUST TO LAY A FOUNDATION, IN THE 2010 TO 2011

TIMEFRAME, BAIN OBSERVED THAT INTEL -- BAIN OBSERVED, IN THE

COURSE OF ITS ENGAGEMENT WITH INTEL, THAT THERE WAS LIKELY TO

BE CONSOLIDATION IN THE BASEBAND PROCESSOR INDUSTRY; CORRECT?

MR. HOPKIN: LEADING. OBJECTION.

THE COURT: SUSTAINED.

BY MR. PETERSON:

Q. IN THE 2010 -- I'LL REPHRASE. IN THE 2010 TO 2011

TIMEFRAME, DID BAIN MAKE ANY OBSERVATIONS REGARDING

CONSOLIDATION IN THE BASEBAND PROCESSOR INDUSTRY?

A. YES, I BELIEVE WE DID MAKE OBSERVATIONS, AT LEAST

INTERNALLY. I DON'T RECALL TO WHAT EXTENT THAT WAS SHARED WITH

THE CLIENT.

Q. WAS THAT OBSERVATION THAT THERE WOULD BE CONSOLIDATION IN

THE INDUSTRY, THAT THAT WAS LIKELY?

A. MOVING AFTER 2011? OR WHAT TIME PERIOD ARE WE TALKING

ABOUT HERE?

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JOHNSON DIRECT BY MR. PETERSON

UNITED STATES COURT REPORTERS

1848

Q. YOU MADE THE OBSERVATION AROUND 2010 OR 2011 LOOKING

FORWARD?

A. LOOKING FORWARD THAT THERE WOULD BE MORE CONSOLIDATION?

FROM -- PERSONALLY, NO. FROM MY PREPARATION, I DID SEE AN

ANALYSIS THAT SUGGESTED THAT, WITH SOME ASSUMPTIONS AROUND THE

PROFIT AVAILABLE IN THE INDUSTRY AND THE COSTS FOR PLAYERS TO

PARTICIPATE IN IT, THAT THERE COULD BE OR WOULD BE

CONSOLIDATION GOING FORWARD.

Q. AND BAIN OBSERVED THAT THAT WAS ACTUALLY, IN FACT,

HAPPENING IN THE INDUSTRY; CORRECT?

MR. HOPKIN: OBJECTION. LEADING.

THE COURT: SUSTAINED.

MR. PETERSON: I'LL REPHRASE, YOUR HONOR.

Q. HAD BAIN OBSERVED THAT THAT WAS ACTUALLY HAPPENING IN THE

INDUSTRY?

A. WE'RE NOW SPEAKING RETROACTIVELY BEFORE 2010?

Q. BEGINNING IN 2010 TO 2011.

A. I'M SORRY. SO DID WE SEE EVIDENCE THAT THERE WAS ACTUALLY

CONSOLIDATION AFTER 2010 IN THE INDUSTRY?

Q. CORRECT.

A. I DON'T THINK I CAME ACROSS DATA ON THAT IN MY

PREPARATION. I BELIEVE IT TO BE TRUE.

Q. IF YOU COULD TURN IN YOUR BINDER TO QX 124. DO YOU

RECOGNIZE THIS DOCUMENT?

A. FROM MY PREPARATION, YES.

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JOHNSON DIRECT BY MR. PETERSON

UNITED STATES COURT REPORTERS

1849

Q. AND THIS IS AN OCTOBER 2010 PRESENTATION THAT WAS GIVEN

INTERNALLY AT BAIN; CORRECT?

A. THAT'S CORRECT.

Q. AND THE INTERNAL KNOWLEDGE FROM THIS PRESENTATION WAS

SHARED AT BAIN; CORRECT?

A. IT WAS SHARED WITH A SUBSET OF PEOPLE WHO WERE AT THIS

MEETING.

Q. AND THE DOCUMENT REFLECTS THE FACTS BAIN COLLECTED AND THE

OPINIONS BAIN FORMED IN THE COURSE OF ITS BUSINESS ADVISING ITS

CLIENTS?

A. THERE'S A SINGLE AUTHOR LISTED ON THE DOCUMENT, SO IT

REFLECTS HIS KNOWLEDGE EITHER FROM WORKING WITH THE CLIENTS OR

FROM WHAT HE FOUND INDIVIDUALLY ON HIS OWN TIME.

Q. OKAY. AND IT IS DATED OCTOBER 1ST, 2010; CORRECT?

A. IT IS.

Q. SO THE WORK ON THIS DOCUMENT WOULD HAVE BEEN DONE IN THE

TIME PERIOD LEADING UP TO THAT DATE; CORRECT?

A. THAT'S CORRECT.

Q. AND YOU TESTIFIED ABOUT THIS DOCUMENT AT YOUR DEPOSITION;

CORRECT?

A. I BELIEVE SO.

MR. PETERSON: YOUR HONOR, QUALCOMM OFFERS QX 124

INTO EVIDENCE.

MR. HOPKIN: NO OBJECTION.

THE COURT: IT'S ADMITTED.

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JOHNSON DIRECT BY MR. PETERSON

UNITED STATES COURT REPORTERS

1850

(DEFENDANT'S EXHIBIT QX 124 WAS ADMITTED IN EVIDENCE.)

THE COURT: GO AHEAD, PLEASE.

BY MR. PETERSON:

Q. NOW, IF YOU TURN TO PAGE 6 OF THIS DOCUMENT. AND I'M

NAVIGATING BY THE NUMBERS ON THE BOTTOM RIGHT CORNER THERE.

WHAT WAS THE MAIN CONCLUSION THAT QUALCOMM -- THAT BAIN

REACHED AS REFLECTED ON THIS SLIDE?

A. THIS IS A -- I SEE. AGAIN, IT'S BASED ON THE AUTHORSHIP,

IT'S THE CONCLUSION THAT A SPECIFIC PERSON AT BAIN REACHED. HE

WAS A NEW MANAGER AT THE TIME.

AND IT SAYS PROFIT POOL UNLIKELY TO SUPPORT TODAY'S SOC

VENDORS, ONLY A FEW WILL SURVIVE BASED ON SOME -- BASED ON R&D

INVESTMENT AND SOME ASSUMPTIONS AROUND THE PROFITS THAT WOULD

BE AVAILABLE TO SUPPORT THAT.

Q. OKAY. THE CONCLUSION WAS ALSO REACHED THAT THE

CONTRIBUTION ROI WAS LIKELY TO BE NEGATIVE; CORRECT?

MR. HOPKIN: OBJECTION, FOUNDATION. AND ALSO

LEADING. I BELIEVE THAT MR. JOHNSON TESTIFIED THAT WASN'T A

CONCLUSION THAT BAIN REACHED. THIS WAS A CONCLUSION BY A

SEPARATE BAIN EMPLOYEE WHO'S NOT HERE TODAY.

MR. PETERSON: I'LL WITHDRAW THE QUESTION, YOUR

HONOR.

THE COURT: SUSTAINED.

BY MR. PETERSON:

Q. MR. JOHNSON, IF YOU COULD TURN IN YOUR BINDER TO QX 121.

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JOHNSON DIRECT BY MR. PETERSON

UNITED STATES COURT REPORTERS

1851

COULD YOU TELL ME WHAT A CSD IS?

I APOLOGIZE, YOUR HONOR. JUST FOR THE SAKE OF THE RECORD,

THIS IS 121A TO BE CLEAR.

THE COURT: OKAY. THANK YOU. AND 124 WAS THE WHOLE

124. IT WASN'T A SUBSET; RIGHT?

MR. PETERSON: THAT'S CORRECT.

THE COURT: OKAY. THANK YOU.

THE WITNESS: I DON'T REMEMBER EXACTLY WHAT THE

ACRONYM STANDS FOR. BUT IT'S EFFECTIVELY AN INTERNAL PROJECT

TO LOOK AT A SPECIFIC TOPIC AND THEN PRESENT IT OUT TO MEMBERS

OF THE INTEL LEADERSHIP TEAM.

BY MR. PETERSON:

Q. AND THE ONE THAT WE'RE LOOKING AT HERE AT 121A, THIS IS

ONE OF THOSE PRESENTATIONS; CORRECT?

A. I CAN'T GUARANTEE THAT IT'S THE VERSION THAT WAS ACTUALLY

PRESENTED AT THE END. BUT IT'S THE WORK INVOLVED IN THAT

PRESENTATION, YES.

Q. AND BAIN PREPARED THIS DECK, POTENTIALLY WITH SOME INPUT

FROM INTEL; CORRECT?

A. ALMOST CERTAINLY WITH SOME INPUT FROM INTEL, YES.

Q. AND THE DOCUMENT REFLECTS THE FACTS THAT BAIN COLLECTED

AND THE OPINIONS THAT BAIN FORMED IN THE COURSE OF PROVIDING

CONSULTING SERVICES TO INTEL; CORRECT?

A. WITHIN THE SCOPE OF THE PROJECT AND THE INFORMATION THAT

WAS AVAILABLE TO US.

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JOHNSON DIRECT BY MR. PETERSON

UNITED STATES COURT REPORTERS

1852

Q. AND IT'S DATED AUGUST 7TH, 2012; CORRECT?

A. CORRECT.

Q. SO IT WOULD HAVE BEEN PREPARED IN THE COURSE OF TIME

LEADING UP TO THAT DATE?

A. CORRECT.

Q. AND YOU TESTIFIED ABOUT THIS DOCUMENT AT YOUR DEPOSITION;

CORRECT?

A. I BELIEVE I DID.

MR. PETERSON: YOUR HONOR, QUALCOMM MOVES QX 121A

INTO EVIDENCE.

MR. HOPKIN: NO OBJECTION.

THE COURT: IT'S ADMITTED.

(DEFENDANT'S EXHIBIT QX 121A WAS ADMITTED IN EVIDENCE.)

THE COURT: GO AHEAD, PLEASE.

MR. PETERSON: YOUR HONOR, WE HAVE NO FURTHER

QUESTIONS AT THIS TIME. THANK YOU.

THE COURT: OKAY. THE TIME IS 9:29.

THANK YOU FOR THE THIN BINDER AS WELL.

(LAUGHTER.)

THE COURT: OKAY. LET ME KNOW WHEN YOU'RE READY,

PLEASE.

MR. HOPKIN: ALL SET, YOUR HONOR.

THE COURT: OKAY. 9:30. GO AHEAD, PLEASE.

///

///

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JOHNSON CROSS BY MR. HOPKIN

UNITED STATES COURT REPORTERS

1853

CROSS-EXAMINATION

BY MR. HOPKIN:

Q. GOOD MORNING, MR. JOHNSON.

A. GOOD MORNING.

Q. ARE YOU FAMILIAR WITH THE TERM "DISCRETE" OR "THIN MODEM"

AS USED IN THE WIRELESS INDUSTRY?

A. I AM.

Q. AND BASED ON YOUR EXPERIENCE, WHO ARE THE CUSTOMERS FOR

DISCRETE MODEMS? WHAT CATEGORIES OF COMPANIES?

A. IN THE SMARTPHONE SPACE, IT TENDS TO BE THE PREMIUM

SEGMENT. SOME IPHONE USES A DISCRETE MODEM. I BELIEVE SOME OR

ALL OF THE SAMSUNG GALAXY FLAGSHIPS USE IT.

AND THEN THERE ARE APPLICATIONS IN AUTONOMOUS DRIVING AND

INTERNET OF THINGS WHERE YOU DON'T NECESSARILY NEED THE APPS

PROCESS PART OF AN SOC. YOU JUST WANT THE CONNECTIVITY.

Q. IN YOUR EXPERIENCE, MR. JOHNSON, HOW DOES A CHIP MAKER

LIKE INTEL BENEFIT FROM HAVING AN ONGOING ENGAGEMENT WITH AN

OEM CUSTOMER?

A. IN A COUPLE WAYS. ONE, AROUND JUST ACCELERATING PRODUCT

DEVELOPMENT BY WORKING WITH A CUSTOMER AND HAVING ACCESS TO

THEIR PRODUCTS AND THEIR ENGINEERING TEAMS, YOU CAN CUSTOMIZE

YOUR PRODUCTS AND BASICALLY IMPROVE YOUR PACE OF INNOVATION IN

THE FEATURES YOU'RE BRINGING OUT.

THE SECOND WOULD BE FROM A MARKET PERSPECTIVE. ASSUMING

IT'S A BIG, WELL-KNOWN CUSTOMER, THAT CAN HAVE SOME SPILLOVER

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JOHNSON CROSS BY MR. HOPKIN

UNITED STATES COURT REPORTERS

1854

EFFECTS OR HALO EFFECTS THAT OTHER, OTHER OEM'S WOULD, FOR

EXAMPLE, SEE THAT YOU HAVE -- YOU'RE WORKING WITH APPLE AND

THEN THINK, OKAY, WE'LL BUY THAT CHIP, TOO. SO IT CAN HELP

EXPAND YOUR MARKET POSITION.

Q. AND NOW IF YOU COULD PLEASE TURN IN THE BINDER THAT

COUNSEL FOR QUALCOMM HANDED YOU TO TAB FOR QX 0121A.

A. OKAY.

Q. THIS IS THE AUGUST 12, QUALCOMM CSD PRESENTATION; IS THAT

RIGHT?

A. THAT'S RIGHT.

Q. COULD YOU FLIP TO SLIDE 9 USING THE INTERNAL PAGINATION.

A. SO ALSO THIS IS A SLIDE ENTITLED QUALCOMM SUCCESSFULLY

EMPLOYS MULTIPLE IPR VALUATION STRATEGIES.

DO YOU SEE THAT?

A. VALUE GENERATION STRATEGIES, YES.

Q. SO WHAT IS THE CHART ON THE LEFT-HAND SIDE OF THE SLIDE

REGARDING GLOBAL PATENT LICENSING REVENUE DEPICTING?

A. IT'S DEPICTING THAT BY THESE ESTIMATES, IN 2011, THERE WAS

ABOUT $21 BILLION IN PATENT LICENSING WITHIN THE SCOPE, AND IT

SHOWS FOR VARIOUS I.P. BLOCKS, BASEBAND, WI-FI, BLUETOOTH, WHO

WERE THE PLAYERS IN THE INDUSTRY WHO WERE COLLECTING THAT

REVENUE.

Q. AND WHAT WAS THE PERCENTAGE OF REVENUE THAT QUALCOMM

ACCOUNTED FOR ACCORDING TO THIS CHART FOR WWAN LICENSING

REVENUE?

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JOHNSON CROSS BY MR. HOPKIN

UNITED STATES COURT REPORTERS

1855

A. THAT WOULD BE THE COLUMN, THE BOX IN RED ON THE BOTTOM

LEFT CORNER. IT LOOKS LIKE 50 TO 55 PERCENT.

Q. AND IF I COULD DIRECT YOUR ATTENTION TO THE RIGHT-HAND

SIDE OF THE SLIDE UNDER THE BLUE BOX LABELED QUALCOMM WWAN IPR

STRATEGIES?

A. UM-HUM.

Q. WHAT WAS BAIN INTENDING TO CONVEY HERE ABOUT QUALCOMM'S

LICENSING PRACTICES?

A. I THINK WE DREW A FEW CONCLUSIONS AT THE TIME. THIS

PROBABLY WASN'T SOMETHING THAT WE LOOKED AT IN DEPTH OR HAD THE

EXPERTISE TO FULLY UNDERSTAND.

THAT SAID, THE CONCLUSIONS WE WERE DRAWING WERE, FIRST,

THAT AT THE TIME WE WERE OBSERVING A TWO-TIERED LICENSING

SCHEME, MEANING THAT THEY WERE COLLECTING LICENSING REVENUE

BOTH FROM OTHER CHIP PROVIDERS, AS WELL AS FROM THE END OEM

CUSTOMERS.

ANOTHER OBSERVATION HERE IS THAT ROYALTIES WERE BEING

NEGOTIATED OUT OF COURT TO MAINTAIN AN UNDEFINED NATURE OF FAIR

AND REASONABLE WITHIN THE FRAND CONSTRUCT.

THERE'S A POINT AROUND AGGRESSIVELY LITIGATING WHEN

NECESSARY, AND A POINT AROUND PRO-ACTIVITY AND DEFENSE

LICENSING TO PROTECT AGAINST COMPETITOR ACTIONS.

Q. AND MORE GENERALLY, BASED ON YOUR EXPERIENCE, ARE YOU

AWARE OF ANOTHER COMPANY THAT USES A LICENSING MODEL LIKE

QUALCOMM'S IN THE WIRELESS INDUSTRY?

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JOHNSON REDIRECT BY MR. PETERSON

UNITED STATES COURT REPORTERS

1856

MR. PETERSON: OBJECTION, YOUR HONOR. FOUNDATION.

HE HASN'T TESTIFIED THAT HE KNOWS ANYTHING ABOUT ANYBODY ELSE'S

LICENSING PRACTICES.

THE COURT: LAY THE FOUNDATION, PLEASE.

BY MR. HOPKIN:

Q. MR. YONATAN, YOU WORKED ON CONSULTING FOR COMPANIES IN THE

WIRELESS TECHNOLOGY SPACE; IS THAT CORRECT?

A. I'VE WORKED WITH INTEL, YES.

Q. I'LL MOVE ON.

TO THE EXTENT YOU KNOW, WHAT WAS THE INTENDED

SIGNIFICANCE -- MOVING BACK TO QX 121A, SLIDE 9 -- OF THE FACT

FROM BAIN'S PERSPECTIVE THAT ROYALTIES WERE NEGOTIATED OUT OF

COURT AS MENTIONED IN THE SECOND BULLET POINT?

A. FRANKLY, IT SEEMED STRANGE TO ME, THE FACT THAT -- IF THE

INTENT WAS TO MAINTAIN UNDEFINED NATURE.

I DIDN'T AUTHOR THIS, BUT THE INTENT SEEMED STRANGE.

Q. FAIR ENOUGH. NO FURTHER QUESTIONS.

THE COURT: OKAY. TIME IS 9:36. ANY REDIRECT?

MR. PETERSON: YES, YOUR HONOR. BRIEFLY.

THE COURT: OKAY. 9:36. GO AHEAD, PLEASE.

REDIRECT EXAMINATION

BY MR. PETERSON:

Q. MR. JOHNSON, AS OF MARCH 2018, HAS INTEL ONE ANY MAJOR OEM

BUSINESS OUTSIDE OF APPLE?

MR. HOPKIN: OBJECTION. FOUNDATION.

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JOHNSON REDIRECT BY MR. PETERSON

UNITED STATES COURT REPORTERS

1857

THE COURT: LAY THE FOUNDATION, PLEASE.

BY MR. PETERSON:

Q. YOU CONTINUE TO DO WORK FOR INTEL, IS THAT CORRECT, IN

YOUR ROLE AT BAIN?

A. I HAVE.

Q. AND AS PART OF THAT, YOU'VE CONTINUED TO CONSULT ON

INTEL'S MOBILE WIRELESS BUSINESS; IS THAT CORRECT?

A. I PERSONALLY HAVE NOT.

Q. BUT BAIN HAS CONTINUED TO? LET ME REPHRASE THAT.

AS OF THE TIME OF YOUR DEPOSITION IN MARCH 2018, YOU WERE

WORKING ON THE INTEL ACCOUNT; CORRECT?

A. I WAS WORKING ON THE INTEL ACCOUNT, YES.

Q. SO AS OF THAT TIME IN MARCH 2018, HAD INTEL WON ANY MAJOR

OEM BUSINESS OUTSIDE OF APPLE?

MR. HOPKIN: OBJECTION. FOUNDATION.

THE COURT: LAY THE FOUNDATION, PLEASE. I DON'T

THINK IT'S BEEN SUFFICIENTLY LAID.

BY MR. PETERSON:

Q. YOU -- AS PART OF YOUR WORK WITH INTEL AS OF MARCH 2018,

YOU WERE FAMILIAR WITH THE CUSTOM -- WITH INTEL'S CUSTOMERS;

CORRECT?

MR. HOPKIN: OBJECTION. LEADING.

THE COURT: SUSTAINED.

BY MR. PETERSON:

Q. DID PART OF INTEL WORK, BAIN'S WORK FOR INTEL INVOLVE

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JOHNSON REDIRECT BY MR. PETERSON

UNITED STATES COURT REPORTERS

1858

LOOKING AT INTEL'S CUSTOMERS?

A. IN VARIOUS PARTS OF THEIR BUSINESS, YES.

Q. AND WHO WERE INTEL'S CUSTOMERS FOR THIN MODEMS AS OF MARCH

2018?

MR. HOPKIN: OBJECTION. FOUNDATION.

THE COURT: OVERRULED.

THE WITNESS: I KNOW APPLE WAS A MAJOR CUSTOMER. I

KNOW THAT AT LEAST BACK IN 2014 THEY HAD A DESIGN WIN WITH

SAMSUNG.

BEYOND THAT, I WOULD DEFER TO INTEL FOR THEIR CUSTOMER

LIST.

BY MR. PETERSON:

Q. WAS THE DESIGN WIN WITH SAMSUNG A THIN MODEM?

A. I BELIEVE SO FOR THEIR GALAXY NOTE 5, IF I RECALL

CORRECTLY.

Q. MR. JOHNSON, DO YOU HOLD YOURSELF OUT AS AN EXPERT ON

FRAND OBLIGATIONS?

A. I DO NOT.

Q. AND DO YOU KNOW IF INTEL AND OTHER CHIP MAKERS PAY

ROYALTIES TO QUALCOMM?

A. TODAY OR IN THE PAST?

Q. AS OF MARCH 2018.

A. AT MARCH 2018 --

Q. LOOKING BACKWARDS, YEAH.

A. MY UNDERSTANDING, AND AGAIN, WE'RE AT THE EDGE OF MY

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JOHNSON REDIRECT BY MR. PETERSON

UNITED STATES COURT REPORTERS

1859

KNOWLEDGE, WAS THAT AT THE TIME SOME OF THESE DOCUMENTS WERE

AUTHORED IN THE 2010, 2012 TIMEFRAME, SOC PROVIDERS WERE PAYING

ROYALTIES TO QUALCOMM.

MY UNDERSTANDING IS THAT IS NOT THE CASE TODAY.

Q. AND WHAT'S YOUR BASIS FOR THAT KNOWLEDGE?

A. GOOD QUESTION. IT'S KIND OF A BLUR. I DON'T THINK I CAME

ACROSS THAT -- WELL, ONE IS THE TWO-TIERED LICENSING SCHEME

THAT WE SPOKE ABOUT A MOMENT AGO FROM BOTH OEM'S AND SOC

VENDORS, SO THAT MADE IT SOUND LIKE THEY'RE CHARGING SOC

VENDORS.

MY PERSONAL UNDERSTANDING OF QUALCOMM'S LICENSING

STRUCTURE IS A BIT DIFFERENT JUST FROM WHAT I'VE READ AND WHAT

I'VE BEEN TOLD IN CONVERSATIONS.

MR. PETERSON: THANK YOU. NO FURTHER QUESTIONS.

THE COURT: ALL RIGHT. TIME IS 9:40.

IS THERE ANY RECROSS?

MR. HOPKIN: NO, YOUR HONOR.

THE COURT: OKAY. IS THIS WITNESS SUBJECT TO RECALL

OR HAS HE COMPLETED HIS TRIAL TESTIMONY?

MR. HOPKIN: NOT SUBJECT TO RECALL BY THE FTC.

MR. PETERSON: NOT FROM QUALCOMM, YOUR HONOR.

THE COURT: OKAY. THEN YOU'VE COMPLETED YOUR TRIAL

TESTIMONY AND YOU'RE FREE TO LEAVE.

NOW, WHAT ABOUT MR. THOMAS LINDNER? I FAILED TO ASK THAT

ON TUESDAY? IS HE SUBJECT TO RECALL OR NOT?

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1860

MR. VAN NEST: NO, YOUR HONOR.

MS. MILICI: NO, YOUR HONOR.

THE COURT: OKAY. SO HE'S DONE AS WELL.

THE WITNESS: THANK YOU.

THE COURT: ALL RIGHT. CALL YOUR NEXT WITNESS,

PLEASE.

MR. BORNSTEIN: YOUR HONOR, QUALCOMM CALLS PROFESSOR

AVIV NEVO.

THE COURT: OKAY.

MR. BORNSTEIN: AND WE'LL BRING UP SOME BINDERS IF WE

MAY.

THE COURT: OKAY. THANK YOU.

(PAUSE IN PROCEEDINGS.)

THE COURT: PLEASE RAISE YOUR RIGHT HAND.

(DEFENDANT'S WITNESS, AVIV NEVO, 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: AVIV NEVO. LAST NAME NEVO, N-E-V-O.

THE COURT: OKAY. TIME IS 9:41. GO AHEAD, PLEASE.

MR. BORNSTEIN: YOUR HONOR, THAT --

DIRECT EXAMINATION

BY MR. BORNSTEIN:

Q. PROFESSOR NEVO, CAN YOU PLEASE TELL THE COURT YOUR AREA OF

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1861

ACADEMIC EXPERTISE?

A. INDUSTRIAL ORGANIZATION, ANTITRUST ECONOMICS, AND

ECONOMETRICS.

Q. WHAT IS ECONOMETRICS?

A. ECONOMETRICS IS THE APPLICATION OF STATISTICAL METHODS TO

ECONOMIC MODELS, SPECIFICALLY TESTING THOSE MODELS AND

ESTIMATING THE RELEVANT PARAMETERS.

Q. AND WHAT'S YOUR EDUCATIONAL BACKGROUND, PROFESSOR?

A. I HAVE A BACHELOR'S DEGREE IN MATH AND ECONOMICS FROM

TEL AVIV UNIVERSITY. I CONTINUED MY GRADUATE STUDIES AT

HARVARD WHERE I GOT A MASTER AND A PH.D. IN ECONOMICS.

Q. WHERE DO YOU WORK NOW?

A. SINCE 2016, I'VE BEEN AT UNIVERSITY OF PENNSYLVANIA. I'M

A PENN INTEGRATED TECHNOLOGY PROFESSOR, UNIVERSITY PROFESSOR.

THAT'S THE HIGHEST PROFESSORSHIP PENN HAS.

I HAVE APPOINTMENTS AT THE DEPARTMENT OF ECONOMICS AT THE

SCHOOL OF ARTS AND SCIENCES AND AT THE MARKETING DEPARTMENT AT

WHARTON BUSINESS SCHOOL.

Q. WHERE WERE YOU BEFORE PENN?

A. I TAUGHT FOR 12 YEARS AT NORTHWESTERN AND BEFORE THAT I

TAUGHT FOR 7 YEARS AT UNIVERSITY OF CALIFORNIA BERKELEY.

Q. IT MIGHT HELP IF YOU STAY A LITTLE CLOSER TO THE

MICROPHONE.

A. THANK YOU. SURE.

Q. THANK YOU. DO YOU HAVE OTHER PROFESSIONAL AFFILIATIONS

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1862

BESIDES YOUR TEACHING POSITIONS?

A. I DO. I'M A CO-EDITOR ECONOMETRICA, WHICH IS ONE OF THE

TOP TWO ECONOMIC JOURNALS. SPECIFICALLY, I'M THE CO-EDITOR IN

CHARGE OF THE APPLIED MICROECONOMICS AREA, WHICH IS THE AREA OF

EMPIRICAL PROJECTS OR EMPIRICAL PAPERS THAT TEST ECONOMIC

MODELING.

IN ADDITION TO THAT, I'M ALSO A RESEARCH ASSOCIATE AT THE

NATIONAL BUREAU OF ECONOMIC RESEARCH.

Q. HAVE YOU PUBLISHED ANY ARTICLES IN YOUR FIELD IN PEER

REVIEWED JOURNALS?

A. YES, I HAVE, QUITE A FEW.

Q. HAVE YOU HAD ANY GOVERNMENT SERVICE POSITIONS?

A. YES. WHILE I WAS AT NORTHWESTERN, I WAS ON LEAVE FOR A

YEAR, THAT WAS 2013 AND 2014. I WAS ON LEAVE AND SERVED AS THE

CHIEF ECONOMIST AT THE ANTITRUST DIVISION OF THE DEPARTMENT OF

JUSTICE. THE OFFICIAL TITLE WAS DEPUTY ASSISTANT ATTORNEY

GENERAL FOR ECONOMIC ANALYSIS.

Q. HAVE YOU PREVIOUSLY BEEN ACCEPTED AS AN EXPERT WITNESS IN

FEDERAL COURT ON THESE SUBJECT MATTERS?

A. YES.

Q. CAN YOU GIVE EXAMPLES OF CASES IN WHICH YOU'VE PREVIOUSLY

TESTIFIED?

A. YES. SO IN MY PREVIOUS TWO TESTIMONIES WAS -- ABOUT SEVEN

OR EIGHT MONTHS AGO, I TESTIFIED ON BEHALF OF THE FTC IN A

PROPOSED MERGER BETWEEN TWO CHEMICAL SUPPLIERS TO SHIPS.

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1863

I TESTIFIED IN COURT. THE MERGER WAS BLOCKED IN PART

BASED ON MY TESTIMONY.

PRIOR TO THAT, ROUGHLY TWO YEARS AGO, I TESTIFIED ON

BEHALF OF THE D.O.J. IN AN ATTEMPTED MERGER BY TWO HEALTH

INSURANCE COMPANIES, AETNA AND HUMANA. ONCE AGAIN, I TESTIFIED

IN COURT. THE MERGER WAS BLOCKED IN PART BASED ON MY

TESTIMONY.

MR. BORNSTEIN: YOUR HONOR, QUALCOMM OFFERS

PROFESSOR NEVO AS AN EXPERT IN INDUSTRIAL ORGANIZATION,

ANTITRUST ECONOMICS, AND ECONOMETRICS.

MS. MILICI: NO OBJECTION.

THE COURT: OKAY. SO CERTIFIED AS AN EXPERT IN THOSE

AREAS.

MR. BORNSTEIN: THANK YOU, YOUR HONOR.

Q. PROFESSOR NEVO, WOULD YOU PLEASE EXPLAIN THE ASSIGNMENT

YOU WERE ASKED TO CONDUCT IN THIS CASE?

A. YES, I'D BE HAPPY TO DO SO. SO I WAS ACTUALLY ASKED TO

PROVIDE -- MY ASSIGNMENT CONSISTED OF THREE PARTS.

THE FIRST PART WAS TO EVALUATE THE FTC'S ALLEGATIONS THAT

QUALCOMM USES ITS MARKET POWER IN CERTAIN CHIP MARKETS TO

OBTAIN SUPRA-FRAND ROYALTY RATES. THAT WAS THE FIRST PART.

THE SECOND PART WAS TO EVALUATE THE FTC'S CLAIM THAT

QUALCOMM'S ALLEGED SUPRA-FRAND RATES ACTS AS A TAX THAT HARMS

COMPETITION.

AND THEN FINALLY, I WAS ASKED TO ASSESS THE

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1864

PRO-COMPETITIVE AND BUSINESS JUSTIFICATIONS FOR QUALCOMM'S

PRACTICES.

Q. LET'S START WITH THE FIRST ONE.

WHAT CONCLUSION DID YOU REACH ABOUT WHETHER QUALCOMM HAS

USED MARKET POWER TO OBTAIN SUPRA-FRAND ROYALTY RATES?

A. SO MY CONCLUSION IS THAT THE FTC'S THEORY IS JUST NOT

BORNE OUT IN ACTUAL MARKET DATA. SO THERE'S NO SUPPORT FOR THE

THEORY.

Q. HOW DID YOU REACH THAT CONCLUSION?

A. SO WHAT I DID IS THE SAME THING I DO IN MUCH OF MY

ACADEMIC WORK, I TOOK THE THEORY AS GIVEN AND LOOKED AT ITS

IMPLICATIONS, AND THERE'S VERY CLEAR IMPLICATIONS FROM THE

THEORY.

AND THEN I TOOK THOSE IMPLICATIONS AND TESTED THEM IN THE

REAL, USING REAL WORLD DATA, REAL WORLD ECONOMIC DATA AND

CHECKED WHETHER THE PREDICTIONS OF THE THEORY ARE BORNE OUT IN

THE DATA.

Q. SO WHY DID YOU DO THAT SORT OF TESTING?

A. AGAIN, IT'S A STANDARD THING THAT I DO IN MY ACADEMIC

RESEARCH. AND THE REASON WE DO THAT IS ECONOMIC MODELS ARE

SUPPOSED TO BE SIMPLIFICATIONS OF THE WORLD. THEY'RE USEFUL

WHEN THEY'RE, WHEN THEY'RE GOOD SIMPLIFICATIONS AND GIVE GOOD

PREDICTIONS.

SO BEFORE WE CAN MAKE ANY POLICY OR OTHER RECOMMENDATIONS

BASED ON THESE MODELS, WE WANT TO ACTUALLY KNOW THAT THEY HAVE

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1865

SOME VALIDITY AND THEY ACTUALLY MATCH WHAT WE SEE IN THE REAL

WORLD, AND THAT WAS THE GOAL OF WHAT I DID.

Q. SO WHAT WERE YOU LOOKING FOR IN THE TESTS THAT YOU

PERFORMED?

A. SO SPECIFICALLY WHAT I LOOKED AT WAS THE PREDICTIONS FROM

THE THEORY TO SEE IF THEY'RE ACTUALLY BORNE IN THE DATA.

SO MAYBE I CAN BEST DEMONSTRATE THAT WITH AN EXAMPLE. SO

ONE OF THE CLEAR PREDICTIONS FROM THE THEORY IS THAT DURING

PERIODS OF ALLEGED MARKET POWER, THE THEORY PREDICTS THAT WE

SHOULD SEE HIGHER ROYALTY RATES.

SO THAT'S A VERY CLEAR PREDICTION THAT YOU CAN TAKE TO

DATA. YOU CAN LOOK AT THE ALLEGED MARKET POWER PERIOD, YOU CAN

LOOK AT THE ROYALTY RATES AND THE AGREEMENTS THAT WERE SIGNED

DURING THAT PERIOD AND COMPARE TO OTHER PERIODS TO SEE WHETHER

WHETHER WE ACTUALLY SEE A DIFFERENCE IN THE RATES.

Q. AND IN PERFORMING THOSE TESTS, DID YOU MAKE ANY

ASSUMPTIONS ABOUT WHETHER QUALCOMM ACTUALLY HAS OR DOES NOT

HAVE MARKET POWER?

A. I BASICALLY TOOK THE THEORY AS GIVEN AND THE THEORY

ASSUMES THAT QUALCOMM HAS MARKET POWER DURING CERTAIN PERIODS,

AND I TOOK THAT AS GIVEN AND THEN TESTED THE IMPLICATIONS.

Q. ALL RIGHT. WHAT WAS THE FIRST STEP THAT YOU DID?

A. SO THE FIRST STEP THAT I DID WAS PRETTY MUCH LIKE THIS

EXAMPLE. I FOCUSSED ON THE RATES, THE ACTUAL CONTRACTUAL RATES

AND LOOKED AT HOW THEY, IF THERE WAS ANY VARIATION OVER TIME

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1866

THAT'S CONSISTENT WITH WHAT, WHAT THE THEORY PREDICTS.

Q. WHAT WAS YOUR CONCLUSION?

A. MY CONCLUSION WAS THAT THE DATA DO NOT SUPPORT THE

PREDICTIONS OF THE THEORY. THE DATA SAYS THAT THE PREDICTION

OF THE THEORY IS JUST NOT BORNE OUT.

Q. DID YOU PUT TOGETHER A SLIDE THAT SUMMARIZES THESE

CONCLUSIONS?

A. YES, I DID.

Q. LET'S TAKE A LOOK, PLEASE, AT SLIDE NUMBER 4. THANK YOU.

AND, YOUR HONOR, THESE HAVE BEEN MARKED WITH A QDX NUMBER.

THE COURT: OKAY. IS THAT UNDER TAB 4, OR NOT?

MR. BORNSTEIN: IT IS UNDER TAB NUMBER 1 IN THE

BINDER WHICH YOUR HONOR HAS.

THE COURT: ALL RIGHT. THANK YOU.

BY MR. BORNSTEIN:

Q. ALL RIGHT. PROFESSOR, CAN YOU EXPLAIN WHAT THIS SLIDE

SHOWS ABOUT YOUR CONCLUSIONS?

A. YES. BASICALLY THIS SLIDE DEMONSTRATES THE DATA, SO LET

ME GO THROUGH IT CAREFULLY.

ON THE X AXIS WE HAVE TIME, WE HAVE YEARS STARTING FROM

1990 GOING ALL THE WAY TO 2017.

ON THE Y AXIS, WE HAVE THE ROYALTY RATE. IN THIS

PARTICULAR CASE, IT'S THE CONTRACTUAL ROYALTY RATE FOR CDMA.

EACH DOT REPRESENTS AN AGREEMENT, IN SOME CASES IT'S

MULTIPLE AGREEMENTS THAT FALL RIGHT ON THE SAME DAY. BUT THESE

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1867

DOTS REPRESENT ROYALTY AGREEMENTS.

THE BLUE DOTS ARE THE TYPICAL, IF YOU WANT, AGREEMENTS,

CONTRACTS.

AND THEN THE PURPLE, GREEN, AND I THINK IT LOOKS LIKE HERE

RED ARE OTHER TYPES OF AGREEMENTS. IN THIS CASE THESE ARE

AGREEMENTS THAT WERE SIGNED SUBJECT TO GOVERNMENT, GOVERNMENT

SUPERVISION.

Q. AND WHY DID YOU SEPARATE OUT THE DIFFERENT COLORS?

A. BECAUSE THE GOVERNMENT, OR THE AGREEMENTS THAT WERE SIGNED

SUBJECT TO GOVERNMENT SUPERVISION ARE REALLY DIFFERENT IN

NATURE, AND INDEED IN SOME OF THE ANALYSIS THAT FOLLOWS, I'M

ACTUALLY GOING TO EXCLUDE THEM SIMPLY BECAUSE THE FTC'S THEORY

REALLY DOESN'T APPLY TO THEM. THE TERMS OF THESE AGREEMENTS

WERE NEGOTIATED WITH GOVERNMENT REGULATORS AND THEY'RE REALLY

NOT SUBJECT TO THE FTC'S THEORY.

Q. DID YOU EXCLUDE ANY OTHER AGREEMENTS FROM THIS ANALYSIS?

A. SO FROM ALL THE ANALYSIS, I ALSO EXCLUDED A NOKIA 2008

AGREEMENT THAT JUST IS VERY DIFFERENT IN NATURE.

Q. AND FOR THE RECORD, YOU MAY HAVE SAID INCLUDED, DID YOU

MEAN INCLUDED OR EXCLUDED?

A. EXCLUDED. I APOLOGIZE. EXCLUDED.

Q. AND DID YOU INCLUDE OR EXCLUDE FROM THIS ANALYSIS THE TWO

5G AGREEMENTS THAT WERE THE SUBJECT OF THE COURT'S MOTION IN

LIMINE RULING?

A. THOSE ARE NOT ANYWHERE IN MY, IN MY DATA.

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1868

Q. SO WHAT IS THE SHADED BOX ON THE RIGHT SIDE OF THE SLIDE?

A. SO WHAT WE HAVE HERE IN SHADED BOX, THAT'S THE ALLEGED

MARKET POWER PERIOD BETWEEN 2006 AND 2016. SO THAT'S THE AREA

THAT'S THE ALLEGATION OF MARKET POWER. AND WHAT I'M DOING HERE

IS LOOKING AS TO WHETHER THE RATES DURING THAT TIME, SO INSIDE

THAT SHADED BOX, ARE DIFFERENT FROM RATES OUTSIDE THAT BOX.

Q. AND WHAT CONCLUSION DID YOU DRAW?

A. SO FIRST WE CAN JUST INSPECT THIS VISUALLY, AND VISUALLY

YOU CAN SEE THAT THERE'S ACTUALLY -- - THERE ISN'T MUCH

VARIATION, AT LEAST NOT ON AVERAGE.

AND AGAIN, THE THEORY WOULD PREDICT THAT DURING THE THEORY

OF THE ALLEGED MARKET POWER, DOTS SHOULD BE HIGHER, THE RATES

SHOULD BE HIGHER, AND VISUALLY YOU CAN SEE THAT THAT PATTERN IS

NOT THERE.

I ALSO TESTED IT STATISTICALLY, NOT JUST EYEBALL IT. I

TESTED IT STATISTICALLY AND THE STATISTICAL TEST CONFIRMS THAT

THERE'S NO ECONOMIC AND MEANINGFUL DIFFERENCE BETWEEN THE RATES

DURING THAT PERIOD INSIDE THE BOX AND OUTSIDE.

Q. DID YOU PERFORM THIS TEST FOR ANY CONTRACTUAL TERMS OTHER

THAN THE RUNNING ROYALTY RATE?

A. YES. I PERFORMED THE EXACT SAME TEST ALSO FOR THE UPFRONT

RATES. IT'S IN MY -- IT'S AN EXHIBIT IN MY EXPERT REPORT.

EXACTLY THE SAME THING, JUST INSTEAD OF ROYALTY RATES, I LOOKED

AT UPFRONT RATES, COMPARED BETWEEN THE SHADED AREA AND THE

NON-SHADED AREA, AND BASICALLY CONCLUDED THE EXACT SAME THING,

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1869

THAT THERE'S NO DIFFERENCE BETWEEN THE TWO GROUPS.

Q. DID YOU ASSESS THAT UPFRONT FEE COMPARISON STATISTICALLY

AS WELL?

A. YES, I DID.

Q. THERE ARE SOME OTHER VERTICAL LINES ON THE LEFT SIDE OF

THE SLIDE. CAN YOU EXPLAIN THE SIGNIFICANCE OF THOSE?

A. YEAH. THESE ARE LINES THAT DENOTE VARIOUS DATES IN THE

PROGRESSION OF THE INDUSTRY. SO THE FIRST LINE, KIND OF MOVING

FROM THE END TO THE BEGINNING, IS OCTOBER '99. THAT'S THE

FIRST COMMERCIAL RELEASE OF CDMA 2000.

THEN IN '95, ROUGHLY SAME TIME, THERE'S THE FIRST CDMA

NETWORK COMMERCIAL LAUNCH. AND THAT'S ROUGHLY AROUND THAT TIME

IS WHEN QUALCOMM STARTED SELLING CDMA CHIPS.

AND THEN IN JULY '93 IS ACTUALLY IN THE ADOPTION OF THE 2G

CDMA STANDARD.

MS. MILICI: OBJECTION, YOUR HONOR. HIS REPORT

DOESN'T HAVE ANYTHING ABOUT THE DATE THAT QUALCOMM STARTED

SELLING CHIPS, AND THIS DOESN'T APPEAR ON THE EXHIBIT TO HIS

REPORT.

MR. BORNSTEIN: YOUR HONOR, HIS --

THE COURT: ALL RIGHT. CAN I HAVE A COPY OF HIS

REPORT? AND WHY DON'T YOU SHOW ME THE PARAGRAPH WHERE -- OR

THE EXHIBIT.

MR. BORNSTEIN: SURE.

THE COURT: OKAY. THANK YOU.

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1870

MR. BORNSTEIN: YOUR HONOR, THIS INFORMATION IS IN

EXHIBIT 2 TO PROFESSOR NEVO'S REPORT. AND IF SOMEBODY CAN TELL

ME WHAT PAGE THAT'S ON. IT'S ON PAGE 61 OF THE REPORT, YOUR

HONOR, EXHIBIT 2.

THE COURT: OKAY.

MR. BORNSTEIN: IT INDICATES FIRST CDMA NETWORK

COMMERCIAL LAUNCH ON OCTOBER 1995.

MS. MILICI: YOUR HONOR, WHAT'S NOT THERE IS THIS BIG

BLUE FLAG SAYING THAT QUALCOMM STARTED SELLING CDMA CHIPS ON A

PARTICULAR DATE.

MR. BORNSTEIN: AND THAT'S REFLECTED IN PARAGRAPH 68

OF THE REPORT, AS REFLECTED ON THE SLIDE.

MS. MILICI: YOUR HONOR, I DON'T HAVE PARAGRAPH 68 IN

FRONT OF ME, BUT MY RECOLLECTION OF PARAGRAPH 68 IS THAT IT

GIVES A DATE. IT DOES NOT GIVE THE DATE THAT QUALCOMM STARTED

SELLING CDMA CHIPS. IT'S NOT CLEAR FROM THIS SLIDE WHAT THEY

MEAN BY SELLING, WHETHER THAT'S THE DATE THAT QUALCOMM STARTED

SHIPPING CHIPS, WHETHER THAT'S THE DATE THEY STARTED ENTERING

INTO SUPPLY AGREEMENTS.

I DON'T BELIEVE THAT'S IN THE RECORD AND I DON'T BELIEVE

IT'S IN THE EXHIBIT.

THE COURT: 68 SAYS, "AS MENTIONED ABOVE, QUALCOMM

STARTED SELLING CHIPS AND HANDSETS IN ORDER TO FACILITATE THE

COMMERCIALIZATION OF THE CDMA TECHNOLOGY THAT IT DEVELOPED.

QUALCOMM FORMED ITS CHIPSET DIVISION IN OCTOBER 1995 AS THE

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1871

CDMA ASIC PRODUCTS UNIT WHICH EVOLVED INTO QUALCOMM'S CDMA

TECHNOLOGIES QCT IN 1999."

MR. BORNSTEIN: CORRECT, YOUR HONOR. COULDN'T HAVE

BEEN SELLING CHIPS BEFORE IT HAD A CHIPSET DIVISION.

MS. MILICI: YOUR HONOR, THAT'S INCORRECT. THE

REPORT ALSO SAID THAT QTL WASN'T FORMED UNTIL 1995, BUT QTL WAS

OBVIOUSLY ENTERING LICENSES BEFORE 1995. I THINK THAT'S

CORRECT.

MR. BORNSTEIN: I'M NOT SURE WHERE IT SAYS QTL WASN'T

FORMED UNTIL 1995. FIRST OF ALL, I'M HAPPY TO MOVE ON. I

THINK THE FTC HAS DECIDED THAT OBJECTING AND WASTING TIME AND

SLOWING THINGS DOWN IS A GOOD STRATEGY FOR THEM. THERE'S NO

REASON TO THINK THIS IS IMPORTANT OR RELEVANT.

I'LL MOVE ON FROM THAT ONE SPECIFIC POINT OF WHEN THEY

STARTED SELLING CHIPS IF IT'LL MAKE THE FTC HAPPY.

THE COURT: ALL RIGHT. GO AHEAD, PLEASE.

MR. BORNSTEIN: OKAY. AND AS I'VE BEEN REMINDED,

THIS IS IN PARAGRAPH 62 ANYWAY.

THE COURT: GO AHEAD, PLEASE.

MR. BORNSTEIN: OKAY.

THE COURT: OVERRULED.

MR. BORNSTEIN: THANK YOU.

Q. SO YOU WERE EXPLAINING YOUR SLIDE, PROFESSOR. WHAT IS THE

SIGNIFICANCE TO YOUR ANALYSIS OF THE DATES THAT YOU'VE

IDENTIFIED ON THE LEFT SIDE OF THE SLIDE?

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A. SO THE SIGNIFICANCE REALLY VARIES BY THESE THREE DATES,

AND MAYBE WE CAN MOVE ON TO THE NEXT SLIDE THAT KIND OF ZOOMS

IN ON THIS PERIOD.

Q. SURE. LET'S DO THAT.

A. SO I PREPARED A SLIDE THAT ZOOMS IN ON THIS SPECIFIC

PERIOD, KIND OF PRE2000, AND WHAT WE SEE HERE IS IF WE FOCUS ON

THE PRE-JULY '93 IS WE SEE THAT THERE'S ACTUALLY FIVE LICENSES

THAT WERE SIGNED THERE. AND THESE ARE LICENSES THAT SATISFY

WHAT WE WOULD CALL THE EX ANTE FRAMEWORK FOR DETERMINATION OF

FRAND.

Q. WHAT DO YOU MEAN BY "THE EX ANTE FRAMEWORK"?

A. SO IN THE ECONOMICS LITERATURE, THERE IS SOME DISCUSSION

OF HOW TO DETERMINE FRAND. BUT ONE THING THAT'S IN PRETTY

CONSENSUS AGREEMENT IS THE FACT THAT WE SHOULD BE LOOKING AT,

AT NEGOTIATIONS THAT HAPPENED EX ANTE. EX ANTE MEANS BEFORE

THE STANDARD WAS ADOPTED. THAT'S THE REFERENCE HERE.

AND USUALLY THAT'S A HYPOTHETICAL SITUATION. THIS IS A

CASE WHERE WE ACTUALLY HAVE FIVE CONTRACTS THAT ACTUALLY

SATISFY LITERALLY THAT DEFINITION OF EX ANTE.

Q. AND WHY IS THAT RELEVANT TO YOUR ANALYSIS?

A. AGAIN, THAT JUST GIVES US FIVE LICENSES THAT SATISFY WHAT

THE ECONOMICS LITERATURE WOULD ACTUALLY CALL THE FRAND RATE.

SO, AGAIN, INSTEAD OF HAVING A HYPOTHETICAL SITUATION, WE

HAVE TO THINK, WHAT WOULD THE NEGOTIATION RATE WOULD HAVE BEEN

HAD THEY HAPPENED BEFORE THE STANDARD.

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HERE WE ACTUALLY HAVE FIVE AGREEMENTS THAT WERE SIGNED

BEFORE THE STANDARD.

Q. OKAY. AND YOU TALKED ABOUT 1993. WHAT IS THE RELEVANCE

OF THE OTHER TWO DATES?

A. SO 1995, THAT'S AFTER THE STANDARD. SO THERE'S TEN

ADDITIONAL LICENSES, SOME OF WHICH ARE DEPICTED HERE. THERE'S

TEN ADDITIONAL LICENSES.

AND THESE LICENSES ARE AFTER THE STANDARD, BUT THEY'RE

REALLY BEFORE THERE'S ANY CDMA NETWORK AND BEFORE QUALCOMM

STARTED SELLING CDMA CHIPS.

SO IN TERMS OF THINKING OF ANY TYPE OF REQUIREMENT FOR

CHIPS, THESE ARE KIND OF BEFORE THAT REQUIREMENT EXISTED.

Q. OKAY. HAVE YOU DONE A SIMILAR TEST FOR PREMIUM LTE?

A. YES, I HAVE.

Q. OKAY. AND WHAT DID YOU DO THERE?

A. SO I BASICALLY DID A VERY SIMILAR EXERCISE, WHICH IS TO

LOOK AT CONTRACTUAL RATES AND COMPARE THEM BETWEEN PERIODS OF

ALLEGED MARKET POWER AND PERIODS OUTSIDE THE ALLEGED MARKET

POWER PERIOD.

Q. WHICH AGREEMENTS DID YOU LOOK AT?

A. SO IN THAT CASE, I FOCUSSED ON WCDMA ONLY RATES.

Q. HOW COME?

A. SO IN ORDER TO USE LTE PREMIUM CHIPS, AN OEM WOULD NEED

ONE OF TWO LICENSES. IT WOULD EITHER NEED A CDMA LICENSE, AND

THEN IT WOULD BE COVERED IN THE PREVIOUS ANALYSIS THAT WE

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LOOKED AT OR THEY WOULD NEED A WCDMA LICENSE.

SO WHAT I'M DOING HERE IS I'M LOOKING AT THE ADDITIONAL

LICENSES, THOSE THAT ARE ONLY FOR WCDMA AND THAT COULD HAVE

POTENTIALLY BEEN AFFECTED BY A REQUIREMENT FOR LTE PREMIUM

CHIPS.

Q. SO WHAT WAS THE TEST THAT YOU RAN FOR PREMIUM LTE?

A. SO, AGAIN, VERY SIMILAR TO THE TEST THAT I RAN BEFORE

LOOKING BETWEEN THE ALLEGED MARKET POWER PERIOD, HERE'S A

DIFFERENT PERIOD OF 2011 TO 2016, SO IT'S A DIFFERENT PERIOD.

AND LOOKING AT THE CONTRACTUAL RATE FOR WCDMA ONLY

CONTRACTS.

Q. WHAT DID YOU FIND?

A. I PREPARED A SLIDE TO SHOW YOU US THAT. MAYBE WE CAN --

Q. TAKE A LOOK AT SLIDE 6, PLEASE.

A. SO THIS SLIDE FOLLOWS ESSENTIALLY THE SAME FORMAT AS THE

PREVIOUS SLIDE. AGAIN, THE TIME ON THE X AXIS, ROYALTY ON THE

Y AXIS. CONTRACTUAL RATES ARE DOTS. AGAIN, DIFFERENT COLORS

DENOTE DIFFERENT TYPES OF AGREEMENTS.

SHADED AREA IS THE ALLEGED MARKET POWER PERIOD, AND I'M

TESTING THE DIFFERENCE BETWEEN THE AGREEMENTS IN THE SHADED

AREA TO THOSE OUTSIDE.

Q. AND WHAT DO YOU CONCLUDE?

A. WHAT I CONCLUDE, AGAIN VERY SIMILAR TO BEFORE, IS VISUALLY

IT'S VERY CLEAR. WE DO NOT SEE WHAT THE THEORY WOULD PREDICT,

WHICH WOULD BE HIGHER RATES DURING THE ALLEGED MARKET POWER

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PERIOD.

I ALSO TESTED IT STATISTICALLY AND AGAIN IT CONFIRMS

THERE'S NO ECONOMIC AND MEANINGFUL DIFFERENCE BETWEEN THE

AGREEMENTS IN THE TWO PERIODS.

Q. SO WHAT CONCLUSIONS CAN YOU DREW FROM THESE TWO TESTS

ABOUT THE FTC'S THEORY?

A. SO JUST FOCUSSING ON THESE TWO TESTS, THEIR PREDICTIONS

THAT -- THE FTC'S THEORY PREDICTION THAT THERE WOULD BE

DIFFERENT RATES DURING PERIODS OF HIGH MARKET POWER IS JUST NOT

BORNE OUT IN THE DATA.

Q. DOES YOUR CONCLUSION YOU JUST DESCRIBED DEPEND ON ASSUMING

THAT NOTHING RELEVANT HAS CHANGED IN THE INDUSTRY FROM THE

BEGINNING OF THE PERIOD THAT YOU LOOKED AT UNTIL THE END?

A. NO. FUNDAMENTALLY THE CHANGE -- THE BASIC IDEA OF THE

TEST IS TO REALLY COMPARE WITHIN THE SHADED AREA AND OUTSIDE

THE SHADED AREA.

OUTSIDE THE SHADED AREA DOES INCLUDE SOME OF THE EARLIER

AGREEMENTS, ESSENTIALLY CDMA GOING BACK TO THE EARLY 90S, BUT

IT INCLUDES THE WHOLE RANGE.

THE EARLY AGREEMENTS THAT WERE THEN VALIDATED BY SIMILAR

RATES IN KIND OF THE MID-90S AND THEN A SIMILAR RATE FOR LATE

90S AND 2000S AND AFTERWARDS. SO I'M COMPARING THE WHOLE AREA.

Q. WHAT DO YOU MEAN WHEN YOU SAY THAT THE RATES WERE

VALIDATED?

A. I MEAN, THERE'S THE INITIAL RATES THAT WERE SIGNED PRE-93,

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AND THEN THERE WERE ADDITIONAL RATES THAT WERE SIGNED, AND AS

WE LOOKED AT THE GRAPH BEFORE, YOU COULD REALLY SEE THAT WE SEE

CONSISTENTLY THE 5 PERCENT APPEARING OVER AND OVER AGAIN. WE

CAN SEE THIS HERE LOOKING FROM 99 ONWARDS. WE CAN SEE KIND OF

THE REVALIDATION IN THIS CASE FOR WCDMA, AND THE PREVIOUS GRAPH

FOR CDMA.

Q. AND DOES THE FACT THAT QUALCOMM HAS MOST FAVORED ROYALTY

RATE PROVISIONS IN SOME OF ITS AGREEMENTS AFFECT YOUR

CONCLUSION IN ANY WAY?

A. NO, IT DOESN'T. THE MOST FAVORED ROYALTY RATES

PROVISIONS, IF THEY INDEED HAVE BITE, WOULD EXPLAIN CONSISTENCY

OF THE RATE, BUT THEY WON'T EXPLAIN THE LEVEL.

AND IN PARTICULAR, WHAT THEY WOULD IMPLY IS IF YOU ARE

GOING TO LINE UP ALL THE RATES, SO I'M ASSUMING THAT THEY HAVE

BITE, YOU WOULD LINE UP BASICALLY AT THE, THE LOWEST RATE THAT,

YOU KNOW, ANY LEVERAGE THAT YOU CAN GET. IT WOULD BE WHAT I

CALL A RATCHETING DOWN EFFECT, NOT RATCHETING UP. IT WOULD NOT

EXPLAIN WHY YOU WOULD RATCHET UP EVERYONE TO A SUPRA-FRAND RATE

AND EXPLAIN WHY YOU WOULD GO DOWN TO THE LOWEST, SOME SAY THE

LOWEST COMMON DENOMINATOR IN TERMS OF YOUR BUILT TO LEVERAGE.

SO YOU COULD NOT GET ANY MORE THAN YOUR LOWEST LEVERAGE

ACCORDING TO THE THEORY.

Q. AND DOES QUALCOMM'S NONDISCRIMINATION OBLIGATIONS UNDER

ITS FRAND COMMITMENTS AFFECT YOUR CONCLUSION?

A. AGAIN, TO THE EXTENT THAT THEY BITE, AND NOT TAKING A

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STAND ON THE SIMILARLY SITUATED PART OF THAT CONDITION, THEY

WOULD EXPLAIN CONSISTENTLY, BUT NOT THE LEVELS. SO THE SAME

ANSWER.

Q. DID YOU PERFORM ANY OTHER TESTS?

A. YES, I DID.

Q. OKAY. WHAT WAS THE NEXT ONE THAT YOU DID?

A. SO THE NEXT THING THAT I DID WAS I ACTUALLY COMPARED THE

RATES BETWEEN THE CDMA AGREEMENTS AND THE WCDMA ONLY

AGREEMENTS.

Q.

+WHY DID YOU DO THAT?

A. BECAUSE HERE AGAIN IT GIVES US A WAY TO TEST THE THEORY,

OR THE PREDICTIONS OF THE THEORY BY COMPARING TWO DIFFERENT

TECHNOLOGIES WHERE THERE'S DIFFERENT ALLEGATIONS OF MARKET

POWER.

Q. AND CAN YOU EXPLAIN WHAT, WHAT THE CONCLUSION WAS FROM

YOUR TEST?

A. SO THE CONCLUSION BASICALLY IS THE SAME AS THE PREVIOUS

TWO TESTS. THE THEORY WOULD PREDICT THAT WE SHOULD SEE HIGH

RATES IN CDMA BECAUSE THERE'S AN ALLEGATION OF MARKET POWER,

ESPECIALLY IN A PARTICULAR TIME PERIOD WHERE THERE IS NO

ALLEGATION FOR THAT IN WCDMA, IN THE WCDMA ONLY AGREEMENTS.

SO THE THEORY PREDICTS WE SHOULD SEE HIGHER RATES IN THE

CDMA, AND THAT'S NOT WHAT WE SEE.

Q. AND DID YOU PUT A SLIDE TOGETHER THAT SHOWS THE RESULTS OF

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YOUR TESTS?

A. YES, I DID.

Q. CAN WE TAKE A LOOK AT THAT, PLEASE. IT'S SLIDE 7.

A. SO WHAT I DID HERE IS REALLY A COMBINATION OF THE PREVIOUS

TWO SLIDES. THE RED DOTS HERE ARE THE CDMA AGREEMENTS THAT WE

PREVIOUSLY SAW, AND THE BLUE DOTS ARE THE WCDMA ONLY

AGREEMENTS. AND JUST PUTTING THEM NOW IN ONE TIMELINE.

AND VISUALLY, AGAIN, WE CAN SEE WHAT I ALLUDED TO BEFORE,

IS THE FACT THAT WE DON'T SEE A JUMP IN THE RATES IN WCDMA,

WHETHER IT'S DURING THE 2006 TO 2011 PERIOD, OR WHETHER IT'S

ANY OTHER -- DURING ANY OTHER PERIOD.

Q. AND DID YOU TEST THIS STATISTICALLY?

A. I ALSO CONFIRMED THAT RESULT WITH A STATISTICAL TEST.

Q. DID YOU CONSIDER THE POSSIBILITY THAT QUALCOMM COULD HAVE

USED MARKET POWER IN CDMA TO OBTAIN HIGHER RATES IN WCDMA?

A. I CONSIDERED -- I CONSIDERED THAT POSSIBILITY.

AS A MATTER OF POLICY, I THINK WE HAVE PRETTY -- A LOT OF

TESTIMONY ON THE RECORD SAYING THAT THE POLICY IS STANDARD

SPECIFIC. SO THE THEORY BEHIND THAT DOESN'T MATCH WHAT THE

ACTUAL POLICY IS.

BUT FOR THE SAKE OF THIS TEST, I ACTUALLY PUT THAT ASIDE

AND ASKED MYSELF, WOULD THAT ADD UP AS A POSSIBILITY, AS A

THREAT, EVEN THOUGH THAT'S NOT THE ACTUAL POLICY?

Q. WHAT DID YOU CONCLUDE?

A. WHAT I CONCLUDED WAS THAT MATH DOESN'T JUST -- DOESN'T ADD

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UP.

Q. WHY IS THAT?

A. BECAUSE WE CAN LOOK AND SEE WHAT IS THE THREAT, RIGHT? BY

THREATENING TO WITHHOLD WCDMA, YOU CAN SEE WHAT'S THE COST TO

THE OEM OF THAT HAPPENING, OR IT'S A MEASURE OF THAT COST, AND

I HAVE A VERY CONSERVATIVE MEASURE OF THAT, WHICH WOULD BE THE

REVENUES OVER A CERTAIN NUMBER OF YEARS.

AND I COMPARED THAT TO THE ACTUAL EXTRA ROYALTIES THAT ARE

BEING ALLEGEDLY PAID.

Q. LET'S DISCUSS THIS IN THE CONTEXT OF SOME CONCRETE

NUMBERS. DID YOU PUT A SLIDE TOGETHER ON THIS?

A. YES, I PUT A SLIDE TOGETHER.

Q. OKAY. I'M JUST GOING TO FLIP THE CARDBOARD, YOUR HONOR,

BECAUSE YOU'VE SEALED THIS PARTICULAR SLIDE, WHICH IS SLIDE 8.

IF WE CAN PUT THAT UP, THOUGH, FOR THE PROFESSOR AND THE

COURT, PLEASE.

A. SO WHAT THIS SLIDE IS, IS VISUAL REPRESENTATION OF MY

EXHIBIT 1. EXHIBIT 1 IS A TABLE. THIS IS A VISUAL

REPRESENTATION, BUT I HAVE THE EXACT SAME NUMBERS IN IT.

WHAT WE SEE HERE ARE SEVEN OEM'S, AND FOR EACH OF THEM, IN

THE RED BAR -- AND I'LL TRY TO MAKE SURE I AVOID SAYING

NUMBERS -- IN THE RED BAR WE SEE THIS IS THE ALLEGED

SUPRA-FRAND RATE THAT THEY'RE PAYING, SURCHARGE THAT THEY'RE

PAYING USING MR. LASINSKI'S NUMBERS OF HOW MUCH THE

OVERESTIMATE IS. AND THIS IS FOR WCDMA.

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Q. SO TO BE CLEAR, DO RED NUMBERS, WHERE DO THEY COME FROM?

A. THEY'RE BASICALLY BASED ON THE, THE ESTIMATES OF SURCHARGE

FROM MR. LASINSKI MULTIPLIED BY THE NUMBER OF UNITS THAT WE

ACTUALLY SEE IN THE DATA THAT ARE ACTUALLY SOLD.

Q. OKAY. SO WHAT ARE GREY BARS?

A. THE GREY BARS, THAT IS THE TOTAL REVENUE THAT THE OEM GOT

FROM SELLING CDMA. AND THAT'S SUPPOSED TO BE A PROXY -- CDMA

DEVICES.

THAT'S SUPPOSED TO BE A PROXY FOR THE PROFITS, AND IT'S

OBVIOUSLY VERY CONSERVATIVE FROM THE POINT OF THIS GRAPH. AND

THE REASON I USE REVENUE IS I DON'T ACTUALLY KNOW THE PROFIT.

I SAY LET'S ASSUME THAT THEY HAVE NO COST AND THE WHOLE REVENUE

IS PROFIT, THAT THEY WOULD LOSE THAT WHOLE REVENUE.

AND I COMPARED THAT TO THE OVERCHARGE THAT THEY PAID, AND

THIS REVENUE, AS I SAID, IT'S ACTUALLY MEASURED FOR TWO YEARS

FOLLOWING THE LICENSE AGREEMENT.

Q. OKAY. SO JUST TO TAKE A SPECIFIC EXAMPLE, LEST NOT SAY A

NAME, BUT THE SECOND OEM THAT'S LISTED THERE, HOW WOULD YOU

ANALYZE WHAT YOU FOUND HERE?

A. SO I COMPARED THE NUMBER IN THE GREY AREA, WHICH I'M NOT

GOING TO SAY WHAT IT IS, AND COMPARED TO THE RED, AND THE

NUMBER IN RED IS ALMOST, NOT QUITE, ALMOST 40 TIMES BIGGER THAN

THE NUMBER IN GREY.

Q. AND WHAT DO YOU CONCLUDE BASED ON THAT?

A. WELL, FROM THAT YOU CAN CONCLUDE THAT THE MATH DOESN'T

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JUST ADD UP OF SAYING, IF THERE WAS A THREAT TO WITHHOLD THE

GREY, THIS IS A VERY CONSERVATIVE ESTIMATE OF HOW MUCH WOULD BE

LOST IN ORDER TO GET THAT RED AREA. IT JUST DOESN'T LINE UP.

Q. WHAT WAS THE NEXT TEST THAT YOU DID?

A. SO THE NEXT TEST THAT I DID WAS ESSENTIALLY TRYING TO USE

THAT SAME IDEAS THAT WE LOOKED AT BEFORE AND NOW COMPARING

ACROSS OEM'S AND LOOKING AT THE RATES THAT THEY PAID AS A

FUNCTION OF HOW DEPENDENT, OR HOW MUCH NEAR TERM DEMAND THEY

MIGHT ACTUALLY HAVE FOR QUALCOMM CHIPS.

Q. WHAT DO YOU MEAN BY "NEAR TERM DEMAND"?

A. SO THE FTC'S THEORY IS THAT QUALCOMM HAD MARKET POWER AND

THEN USED THAT AS A BARGAINING CHIP.

NOW -- OR BARGAINING LEVERAGE, I SHOULD SAY.

FOR THAT TO HOLD, IT MEANS THAT THE OEM NEEDS TO HAVE A

NEAR TERM REQUIREMENT, OR REALLY A NEED FOR CHIPS, YOU KNOW,

RIGHT NOW, RIGHT AWAY, AND, THEREFORE, BE DEPENDENT ON

QUALCOMM.

IF THE OEM DOES NOT HAVE THAT NEED, THEY CAN ACTUALLY

WAIT, THEY CAN ACTUALLY GET A FRAND DETERMINATION IF THEY

BELIEVE THAT THE RATE THAT THEY'RE OFFERED IS NOT FRAND.

Q. WELL, IF QUALCOMM HAS MARKET POWER, WHICH IS THE

ASSUMPTION YOU'RE USING HERE, DOESN'T EVERY OEM WHO WANTS TO

MAKE A CDMA PHONE HAVE A NEAR TERM DEMAND FROM QUALCOMM?

A. NO, NOT IF THEY ARE -- IF THEY DON'T NEED TO MAKE -- DON'T

NEED THE QUALCOMM CHIPS RIGHT AWAY. IF THEY ACTUALLY HAVE

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SUFFICIENT TIME, THEY CAN, THEY CAN SEEK A FRAND DETERMINATION.

Q. SO CAN YOU GIVE A REAL WORLD EXAMPLE OF AN OEM THAT DID

NOT HAVE A NEAR TERM DEMAND FOR QUALCOMM CHIPS?

A. I THINK APPLE IS A GOOD EXAMPLE. IN 2005, I BELIEVE IT

DECIDED TO ENTER THE IPHONE MARKET AND INTRODUCE ITS FIRST

PHONE TWO YEARS LATER IN 2007, NOT USING QUALCOMM CHIPS.

IT ONLY USED QUALCOMM CHIPS IN 2011, SO SIX YEARS AFTER

THE DECISION. SO DURING THAT TIME PERIOD, IT REALLY DID NOT

HAVE A NEAR TERM DEMAND. IT HAD A LONG ENOUGH TIME TO

NEGOTIATE AN AGREEMENT AND SEEK FRAND DETERMINATION IF IT

THOUGHT IT WASN'T BEING OFFERED A FRAND RATE.

Q. SO IN THIS TEST THAT YOU DID, HOW DID YOU DECIDE WHICH

OEM'S HAD A NEAR TERM DEMAND AND WHICH ONES DIDN'T?

A. SO I NEEDED TO COME UP WITH A PROXY FOR THAT, AND WHAT I

LOOKED AT IS I LOOKED AT THE TWO YEARS FOLLOWING THE SIGNING OF

AN AGREEMENT AND LOOKED AT THE ACTUAL DATA TO SEE WHAT FRACTION

OF THE RELEVANT CHIPS WERE BOUGHT FROM QUALCOMM.

Q. OKAY. AND WHAT DID YOU DO THEN WITH THAT DATA?

A. SO WHAT I DID IS I THEN LOOKED IF THAT RELIANCE MEASURE

THAT I'M LOOKING AT IS CORRELATED WITH ROYALTY RATES, HERE THE

ROYALTY RATES I'M LOOKING AT ARE A SLIGHTLY DIFFERENT MEASURE

OF ROYALTY RATES, I'M ACTUALLY LOOKING AT WHAT I CALL THE

EFFECTIVE ROYALTY RATE, SO HOW MUCH THEY ACTUALLY PAID IN

PRACTICE AS OPPOSED TO WHAT THE CONTRACT SAID.

Q. WHAT DID YOU FIND?

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A. SO I HAVE A SLIDE DEPICTING THAT.

Q. LET'S LOOK AT SLIDE 9, PLEASE.

A. SO WHAT WE HAVE HERE ON THE X AXIS IS THIS MEASURE OF

RELIANCE, WHICH IS THE SHARE OF CDMA CHIPS PURCHASED FROM

QUALCOMM.

AND ON THE Y AXIS WE HAVE THE EFFECTIVE OF ROYALTY RATE.

AND WHAT THE THEORY PREDICTS IS THAT WE SHOULD SEE AN UPWARD

SLOPING LINE.

AS THE RELIANCE GETS HIGHER, THE EFFECTIVE RATES WOULD BE

HIGHER. IF THERE'S MORE OF A NEAR TERM DEMAND, QUALCOMM HAS

MORE LEVERAGE, AND, THEREFORE, THE RATES SHOULD BE HIGHER.

THAT'S THE PREDICTION.

LOOKING AT THIS PREDICTION, YOU DON'T SEE ANY UPWARD TREND

IN THIS GROUP.

Q. DID YOU EXCLUDE ANY AGREEMENTS FROM THIS TEST?

A. YES. I EXCLUDED, JUST LIKE BEFORE, THE GOVERNMENT

AGREEMENT FOR THE REASONS THAT I MENTIONED BEFORE.

I ALSO EXCLUDED FOUR, FOUR OTHER AGREEMENTS WITH SAMSUNG,

WITH BLACKBERRY, WITH NOKIA, AND WITH SONY-ERICSSON.

Q. AND WHY DID YOU EXCLUDE THOSE?

A. THOSE AGREEMENTS ARE VERY DIFFERENT IN THEIR NATURE AND

INCLUDE A LOT OF KIND OF NON-STANDARD COMPONENTS THAT MAKES

IT -- FOR EXAMPLE, THEY HAVE -- SEVERAL OF THESE HAVE VERY

DIFFERENT RISK SPLITTING OR RISK SHARING AGREEMENTS, AND AS A

RESULT, IT MAKES THIS A NOT AN APPLES-TO-APPLES COMPARISON.

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THEY'RE NOT REALLY COMPARABLE TO WHAT WE SEE.

Q. YOU SAID YOU HAD DETERMINED WHICH OEM'S HAD NEAR TERM

DEMAND BASED ON A TWO YEAR WINDOW. WHY DID YOU PICK TWO YEARS?

A. I PICKED TWO YEARS BECAUSE MY READING OF THE RECORD SEEMED

LIKE THAT'S A REASONABLE TIME TO ALLOW THE OEM TO SEEK A FRAND

DETERMINATION IF IT THOUGHT THAT IT NEEDED ONE.

Q. DID YOU TRY IT WITH ANY OTHER PERIODS?

A. I DID. I ALSO TRIED IT WITH THREE AND FOUR YEAR RELIANCE.

Q. WHAT DID YOU FIND WITH THOSE OTHER PERIODS?

A. BASICALLY THE SAME RESULT THAT I DID HERE. YOU KNOW,

VISUALLY THERE'S REALLY NO EFFECT, AND THE STATISTICAL TEST

THAT I RAN FOR ALL OF THESE THREE CONFIRMED THAT THERE IS NO

UPWARD SLOPE OR UPWARD -- THERE'S NO CORRELATION BETWEEN THE

EFFECTIVE RATE AND THIS RELIANCE MEASURE.

Q. ARE YOU AWARE OF ANY CRITICISMS THAT PROFESSOR SHAPIRO HAS

LEVELED AGAINST THIS ANALYSIS?

A. YES, I AM.

Q. CAN YOU TELL ME WHAT THOSE ARE AND WHAT YOU THINK OF THEM?

A. YES. SO HE BASICALLY HAD TWO CRITICISMS OF THIS ANALYSIS.

THE FIRST ONE IS OF MY RELIANCE MEASURE. HE LOOKED AT THESE

ARE THE SHARE OF CDMA CHIPS PURCHASED FROM QUALCOMM.

PROFESSOR SHAPIRO ALLUDED TO AN AGREEMENT BETWEEN VIA AND

QUALCOMM THAT RESTRICTED -- AT LEAST, THAT'S HIS DESCRIPTION --

RESTRICTED VIA FROM SELLING TO UNLICENSED OEM'S.

AND THEN ACCORDING TO HIM, WHAT I SHOULD BE LOOKING AT

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HERE IS THAT THE SHARES ARE NOT JUST SHIFTING FROM QUALCOMM,

BUT QUALCOMM AND VIA JOINTLY.

Q. AND IF YOU ACCEPT HIS VIEW OF WHAT SHOULD BE DONE, DOES IT

CHANGE YOUR ANALYSIS IN ANY WAY?

A. I MEAN, IT CHANGES THE NUMBERS HERE, SO A LOT OF THE

POINTS, THEY'RE KIND OF IN THE MIDDLE, NOT 0 OR 100, WOULD

INCREASE. A LOT OF THEM WOULD ACTUALLY GO TO 100, AND MAYBE

SOME OF THE 0'S WOULD MOVE TO 100 AS WELL. BUT THE CHANGE IS

OF THE NUMBERS HERE, BUT NOT THE FUNDAMENTAL CONCLUSION. THAT

STAYS THE SAME.

Q. WAS WHAT THE OTHER CRITICISM THAT PROFESSOR SHAPIRO HAD?

A. THE OTHER CRITICISM WAS PROFESSOR SHAPIRO THOUGHT THAT I

INCLUDED TOO MANY AGREEMENTS THAT WERE TOO OLD AND, THEREFORE,

HE EXCLUDED ANYTHING, I THINK, THAT WAS BEFORE 2002, IF I HAVE

THE DATE RIGHT.

Q. AND WHAT'S YOUR RESPONSE TO THAT CRITICISM?

A. WELL, TWO THINGS. FIRST, EVEN TAKING HIS ANALYSIS AS

GIVEN, IT DID NOT FUNDAMENTALLY CHANGE THE RESULT.

THE MAIN THING THAT HE DID WAS IT LEFT VERY FEW AGREEMENTS

AT THE 0 PERCENT. I BELIEVE IT WAS JUST TWO OF THEM.

SO FUNDAMENTALLY, IT MAKES THIS TEST WEAKER BECAUSE

THERE'S ONLY TWO. BUT IT STILL DOESN'T FUNDAMENTALLY CHANGE

THE RESULT. SO THAT'S THE FIRST PART.

THE OTHER IS THAT THE RESTRICTION OF JUST THE PRE-2002 IS

TOTALLY ARBITRARY. I MEAN, I DON'T REALLY KNOW WHAT THE

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JUSTIFICATION IS FOR THAT PARTICULAR DATE, AND AS A RESULT, WE

LOSE AT LEAST ABOUT A DOZEN AGREEMENTS OR SO JUST BASED ON

THAT, BASED ON THAT RESTRICTION. AND THERE'S REALLY NO, NO

REASON TO CUT IT THAT PARTICULAR DATE.

Q. SO WHAT WE SEE ON THE SLIDE RELATES TO CDMA. DID YOU DO

THIS ANALYSIS FOR LTE AS WELL?

A. YES, I DID.

Q. OKAY. AND WHAT DID YOU FIND THERE?

A. BASICALLY SIMILAR RESULTS. THERE'S NO CORRELATION BETWEEN

THE EFFECTIVE ROYALTY RATES PAID ON WCDMA ONLY LICENSES AND THE

RELEVANT SHARE. THERE THE RELEVANT SHARE THAT I MEASURED ARE

THE RELEVANT SHARE OF QUALCOMM OF -- RELEVANT SHARE OF CHIPS

PURCHASED FROM QUALCOMM OF LTE CHIPS.

Q. DO WE HAVE A SLIDE FOR THIS, TOO?

A. YES, WE DO.

Q. LET'S TAKE A LOOK AT SLIDE 10 PLEASE. CAN YOU EXPLAIN

WHAT WE SEE?

A. OKAY. SO VERY SIMILAR STRUCTURE TO THE PREVIOUS SLIDE.

WHAT WE HAVE HERE IS THE SHARE OF LTE CHIPS PURCHASED FROM

QUALCOMM. THAT'S ON THE X AXIS.

THE Y AXIS IS THE EFFECTIVE ROYALTY RATE, AND, AGAIN,

WE -- WE'RE LOOKING FOR SOME SORT OF A POSITIVE CORRELATION AND

STATISTICAL TESTS THAT THERE IS NO POSITIVE CORRELATION.

Q. OKAY. WERE THERE CRITIQUES THAT PROFESSOR SHAPIRO LEVELED

AGAINST THE LTE VERSION OF THE ANALYSIS?

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A. YES.

Q. WHAT WERE THEY?

A. HERE AGAIN YOU HAVE TWO CRITIQUES. ONE OF THEM WAS ABOUT

THE EXCLUSION OF CERTAIN AGREEMENTS. SO AS I SAID BEFORE, I

EXCLUDED SOME AGREEMENTS FROM THIS ANALYSIS. SO HE CRITICIZED

THAT.

BUT AT THE END, ONCE YOU DO HIS CORRECTIONS, REALLY WHAT

THAT ADDS UP IS ADDING ONE MORE AGREEMENT INTO HERE, WHICH IS

THE SONY AGREEMENT, WHICH IS AT 5 PERCENT.

SO THAT REALLY HAS NO MATERIAL EFFECT.

Q. OKAY. WHAT WAS HIS OTHER CRITICISM?

A. THE OTHER CRITICISM AGAIN WAS ABOUT CUTOFF DATE. AND HE

CLAIMED THAT, AGAIN, WE SHOULDN'T INCLUDE AGREEMENTS THAT WERE

TOO OLD, AND HE USED A CUTOFF DATE OF THE THIRD QUARTER OF

2011. SO HE SAID WE SHOULD ONLY INCLUDE AGREEMENTS AFTER THAT

PERIOD. I THINK BEFORE THAT, IT SHOULD BE THROWN OUT.

Q. WHAT'S YOUR VIEW OF THAT CUTOFF DATE?

A. SO TWO THINGS. FIRST, ON A CONCEPTUAL LEVEL, I JUST DON'T

AGREE WITH THE IDEA THAT WE SHOULD IGNORE THE PREVIOUS

AGREEMENTS. HIS ARGUMENT FOR TAKING THAT DATE WAS TO FOCUS ON

THE PERIOD WHERE THERE WERE SALES OF LTE CHIPS. OKAY?

SO FIRST, ON A FUNDAMENTAL LEVEL, I THINK THERE'S

INFORMATION CONTAINED IN THE EARLIER WCDMA ONLY AGREEMENTS EVEN

BEFORE THE LTE PERIOD BECAUSE THEY DO GIVE US SOME INFORMATION.

SO JUST AS A MATTER OF PRINCIPLE, I DON'T AGREE THAT THOSE

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SHOULD BE THROWN OUT.

BUT EVEN TAKING HIS ARGUMENT AS GIVEN, SAYING WE SHOULD

REALLY FOCUS ON THE PERIOD WHERE THE RELEVANT WAS FOCUSSING ON

LTE, HIS CUTOFF DOESN'T MAKE ANY SENSE.

FOR ONE THING, IF WE'RE LOOKING AT RELIANCE IN TERMS OF A

TIME PERIOD, RIGHT, IF WE THINK THAT CUTOFF DATE WAS, LET'S

SAY, 2011 -- LET ME EVEN SAY THE BEGINNING OF 2011, NOT THE

THIRD QUARTER, THE BEGINNING OF 2011 -- THEN YOU SHOULD HAVE

THE CUTOFF TWO YEARS BEFORE THAT, BECAUSE THAT'S WHEN THE

AGREEMENTS, THAT'S WHEN THE FORWARD LOOK IN TERMS OF WHEN THE

NEED WILL BE IF YOU LOOK AT TWO YEARS RELIANCE.

IF YOU LOOK AT THREE YEARS RELIANCE, IT'S THREE YEARS

BEFORE THAT, 2008. FOUR YEAR RELIANCE, 2007. THOSE ARE THE

AGREEMENTS YOU WANT TO LOOK AT.

AND THEN IN ADDITION, THE CUTOFF DATE HE TOOK IN THE THIRD

QUARTER OF 2011 IS NOT THE RELEVANT ONE. QUALCOMM ACTUALLY

STARTED SELLING CHIPS IN THE THIRD QUARTER OF 2010. SO HE

ACTUALLY SHOULD PUSH THAT EVEN EARLIER IN TERMS OF THE DATES.

THE COURT: CAN I ASK YOU A QUESTION? I'M SORRY.

I'M TRYING TO TAKE NOTES HERE.

WHAT WERE THE AGREEMENTS THAT WERE EXCLUDED FROM THIS LTE

CHART? WAS IT ALSO THE GOVERNMENT AGREEMENTS, THE SAMSUNG,

BLACKBERRY, NOKIA, SONY-ERICSSON AGREEMENTS?

THE WITNESS: THAT'S CORRECT, YOUR HONOR.

THE COURT: OKAY. THANK YOU.

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GO AHEAD, PLEASE.

BY MR. BORNSTEIN:

Q. SO TAKING ALL OF THESE TESTS THAT WE'VE LOOKED AT

TOGETHER, WHAT CONCLUSION HAVE YOU DRAWN ABOUT THE FTC'S THEORY

OF MARKET POWER LEADING TO SUPRA-FRAND ROYALTY RATES?

A. SO TAKING THESE BATTERY OF TESTS TOGETHER AS A SEQUENCE

AND ALL OF THEM AS A GROUP, I CONCLUDED THAT THE DATA JUST DOES

NOT SUPPORT THE THEORETICAL CLAIMS MADE BY THE THEORY.

Q. ALL RIGHT. LET'S TURN TO THE NEXT PART OF YOUR ASSIGNMENT

THEN, WHICH RELATED TO THE FTC'S TAX THEORY.

CAN YOU EXPLAIN WHAT YOU EVALUATED THERE?

A. YEAH. SO WHAT I EVALUATED THERE IS I TOOK THE ARGUMENTS

OF A SUPRA-FRAND TAX, A SURCHARGE, AS GIVEN, EVEN THOUGH I JUST

SUMMARIZED ALL THE EVIDENCE WHY I DON'T BELIEVE THAT'S THE

CASE. BUT I SAID LET'S PUT THAT ASIDE AND LET'S TAKE THAT AS

GIVEN, THAT PART OF THE THEORY AS GIVEN, AND ASK, ARE THERE --

AS THE FTC, OR AS PROFESSOR SHAPIRO CLAIMS, HAVE THEY PROVEN

THE CLAIMS OF ANTICOMPETITIVE BEHAVIOR?

Q. AND YOU WERE LOOKING AT ANTICOMPETITIVE EFFECTS WHERE?

A. SO THE ANTICOMPETITIVE BEHAVIOR I WAS LOOKING FOR IS WHERE

THEY ALLEGED, WHICH IS IN THE CHIP MARKET. SO I WAS LOOKING AT

THE COMPETITION OF THE ANTICOMPETITIVE BEHAVIOR IN THE CHIP

MARKET.

Q. HAVE YOU IDENTIFIED ANY FLAWS IN THE THEORY?

A. YES. SO I'VE IDENTIFIED SEVERAL FLAWS, AND I WOULD BUNCH

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THEM INTO TWO GROUPS. ONE IS I WOULD SAY SEVERAL THEORETICAL

FLAWS IN TERMS OF THE MODEL. AND KIND OF AT A HIGH LEVEL, THE

MODEL REALLY IS OVERSIMPLISTIC, IGNORES SOME OF THE MARKET

REALITIES OF HOW THINGS ACTUALLY HAPPEN, AND REALLY DOESN'T

GIVE SHARP PREDICTIONS AS TO WHAT WOULD HAPPEN. SO I WOULD

CALL THOSE ALL THEORETICAL.

AND THEN THE OTHER GROUP WOULD BE MORE ON THE PRACTICAL,

EMPIRICAL, AND THERE WHAT I DID WAS I LOOKED AT JUST GENERALLY

INDUSTRY MARKET LEVEL OUTCOMES TO SEE IF THEY'RE ACTUALLY

CONSISTENT WITH SOME OF THE ALLEGATIONS.

Q. OKAY. LET'S START WITH THE THEORY SINCE YOU STARTED WITH

THE THEORY.

YOU REFERENCED HOW THINGS TYPICALLY OPERATE IN THE MARKET.

WHAT'S YOUR STARTING POINT FOR HOW A ROYALTY WOULD AFFECT

COMPETITION AMONG CHIP SUPPLIERS?

A. SO TO UNDERSTAND HOW A ROYALTY AFFECTS COMPETITION, I

THINK WE HAVE TO GO BACK AND LOOK AT THE SOURCING OF CHIPS, THE

DECISION THAT THE OEM IS MAKING AND THE TIMING OF IT.

SO A TYPICAL DECISION IS MADE WHEN THE OEM WILL HAVE

SEVERAL OPTIONS, OKAY? FOR SIMPLICITY, LET ME ASSUME IT HAS

TWO, IT HAS A RIVAL CHIP MAKER AND IT HAS QUALCOMM. OKAY?

AND THAT DECISION IS BEING MADE IN THE CONTEXT OF A

ROYALTY THAT HAS ALREADY BEEN SET EARLIER, SOME EARLIER

LICENSING STAGE OR TIME, RIGHT, BECAUSE THE LICENSES AGREEMENTS

ARE ACTUALLY TYPICALLY MADE EARLIER IN MOST OF THESE SOURCING

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DECISIONS.

AND THE LICENSE TERMS AND THE ROYALTY RATE IS FIXED AT

THAT POINT, AT A FIXED AMOUNT, WHATEVER IT IS. AND THE WAY

IT'S SET IN THIS INDUSTRY, IT'S ACTUALLY -- IT'S NOT CHIP

SPECIFIC. SO IT'S ACTUALLY THE SAME ROYALTY RATE REGARDLESS OF

WHICH CHIP THE OEM DECIDES TO USE.

Q. SO TO BE CLEAR, WHY DO YOU SAY IN THIS TYPICAL

CIRCUMSTANCE A ROYALTY HAS ALREADY BEEN DETERMINED WHEN THE OEM

IS MAKING ITS CHOICE OF CHIP?

A. JUST BECAUSE OF THE TIMING. SO WE HAVE EVIDENCE ON THE

RECORD THAT THE CHIP PRICES ARE TYPICALLY NEGOTIATED AND SET AT

A MUCH HIGHER FREQUENCY, ANNUAL SEEMS TO BE SOMETHING THAT'S

BEEN DISCUSSED A LOT, A HIGHER FREQUENCY THAN LICENSE

AGREEMENTS THAT ARE TYPICALLY FOR LONGER TERMS, 10, 15 YEARS,

SOMETIMES EVEN LONGER. BUT DEFINITELY LONGER. THEY'RE NOT

NEGOTIATED ANNUALLY.

Q. WHY IS IT IMPORTANT TO YOU THAT THAT ROYALTY IS, I THINK

YOU SAID, CHIP NEUTRAL?

A. YEAH. SO THE ROYALTY IS THE SAME ROYALTY REGARDLESS OF

WHICH CHIP THE OEM USES, AND IN THAT SENSE, IT CANCELS OUT, IF

YOU WILL, THE DECISION OF WHICH CHIP TO USE BECAUSE REGARDLESS

OF -- YOU KNOW, IF I'M AN OEM, I'M THINKING I'M GOING TO USE

CHIP A OR CHIP B, EITHER WAY, THE ROYALTY IS BEING PAID. SO IT

SHOULD NOT AFFECT THE DECISION OF WHICH CHIP TO USE. SO IN

THAT SENSE I CALL IT CHIP NEUTRAL.

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Q. SO LET'S SUPPOSE THAT THE ROYALTY IS ABOVE FRAND. DOES

THAT CHANGE THE ANALYSIS THAT YOU JUST ARTICULATED?

A. NO. EITHER WAY, FROM AN OEM'S PERSPECTIVE, THEY'RE GOING

TO PAY THE ROYALTY, IF IT'S FRAND, SUPRA-FRAND, SUBFRAND,

WHATEVER IT IS. IT'S JUST A NUMBER, WHATEVER THAT IS, AND THE

OEM IS GOING TO HAVE TO PAY IT REGARDLESS OF WHICH CHIP IT

USES, AND IN THAT SENSE IT DOESN'T MATTER IF IT'S SUPRA-FRAND

OR NOT SUPRA-FRAND.

Q. SO DOES IT HAVE ANY EFFECT ON THE CHOICE OF CHIP BY THE

OEM?

A. SO THE CHOICE OF CHIP BY THE OEM SHOULD BE BASED ON THE

PRICE OF THE CHIP AND QUALITY, WHICH INCLUDES ALL THE VARIOUS

CHARACTERISTICS AND ATTRIBUTES. THAT'S WHAT IT SHOULD BE BASED

ON.

AND FROM THE OEM'S PERSPECTIVE, THEY'RE SAYING EITHER WAY,

THEY ARE GOING TO PAY THE ROYALTY, AND THAT DOESN'T AFFECT THE

CHOICE BETWEEN THE TWO.

Q. SO HOW WAS PROFESSOR SHAPIRO'S VIEW DIFFERENT?

A. SO PROFESSOR SHAPIRO'S VIEW IS HE STARTS FROM A MODEL THAT

REALLY IS NOT BASED IN THE REALITIES OF HOW DECISIONS ARE

ACTUALLY, ARE ACTUALLY MADE IN THIS MARKET.

Q. HOW SO?

A. IN TWO, I THINK, PRINCIPLE WAYS. ONE IS HE DOESN'T TREAT

THE ROYALTY AS FIXED, AND I THINK HE KIND OF WENT ON A VERY

LONG TIME IN HIS TESTIMONY TO KIND OF EXPLICITLY SEPARATE THAT

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1893

HE DOES NOT BELIEVE THE CHIP AGNOSTIC, SO HE DOES NOT BELIEVE

THIS LOGIC THAT I JUST EXPLAINED THAT ONCE THE ROYALTY IS

FIXED, YOU'RE GOING TO PAY IT EITHER WAY. THAT'S ONE.

THE OTHER IS WHEN HE ARTICULATED HIS VIEWS, HE REALLY

LOOKED AT EACH TRANSACTION IN ISOLATION, IGNORING THE FACT THAT

THERE'S COMPETITION. IF WE WANT TO SEE OR WANT TO STUDY THE

ANTICOMPETITIVE EFFECT, WE HAVE TO HAVE A MODEL OF COMPETITION,

WHICH HE REALLY DID NOT DO.

Q. OKAY. WE'LL WALK THROUGH THEN IN A MINUTE HOW YOU GET TO

THIS CONCLUSION. BUT BASED ON THOSE TWO FLAWS, WHAT CONCLUSION

DO YOU REACH ABOUT PROFESSOR SHAPIRO'S THEORY?

A. SO FUNDAMENTALLY, HIS THEORY IS JUST NOT THERE TO SUPPORT

HIS CONCLUSIONS. A, IT'S NOT BASED IN MARKET REALITY, IT

DOESN'T FIT HOW THINGS ACTUALLY HAPPEN IN THIS INDUSTRY.

AND AS A RESULT, ITS PREDICTIONS, THE PREDICTIONS THAT HE

GAVE REALLY CAN'T BE TRUSTED.

Q. IS IT ABLE TO DISTINGUISH BETWEEN ROYALTIES THAT HAVE

ANTICOMPETITIVE EFFECTS AND ROYALTIES THAT DON'T?

A. NO. IN HIS -- IN HIS SETUP, BASICALLY ANY ROYALTY,

WHETHER IT'S FRAND, ARE SUPRA-FRAND OR EVEN SUBFRAND YOU WILL

ACTUALLY HAS THIS KIND OF WHAT HE CALLED THE TAX EFFECT ON THE

TRANSACTION OF RIVALS.

Q. OKAY. LET'S SEE HOW YOU GET THERE.

YOUR HONOR, WE'RE GOING TO TAKE A LOOK AT SOME SLIDES THAT

WERE PROFESSOR SHAPIRO'S AND PUT THOSE UP. THESE ARE SLIDES 6

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1894

AND 21 FROM THE VERSION OF PROFESSOR SHAPIRO'S DEMONSTRATIVES

THAT WERE IN THE BINDER PROVIDED TO THE COURT, AND THEY'RE ALSO

IN TAB 2 OF THE BINDER THAT WE GAVE YOU TODAY.

SO, PROFESSOR, CAN YOU, USING PROFESSOR SHAPIRO'S SLIDES,

EXPLAIN WHAT YOU WERE JUST DESCRIBING?

A. YES. SO WHAT WE HAVE HERE IS WE HAVE TWO OF

PROFESSOR SHAPIRO'S SLIDES. ON THE LEFT WE KIND OF ZOOMED IN

ON THE PARTICULAR, THE VERTICALS HE HAD. ON HIS LEFT WAS THE

SITUATION THAT HE DEPICTED WHEN THE ROYALTY IS FRAND.

ON THE RIGHT SLIDE WE HAVE THERE AND SLIDE THAT NOW WE'RE

ZOOMING IN ON IS FROM A SLIDE THAT WAS IN HIS DECK BUT HE

DIDN'T PRESENT. THIS IS SUPPOSEDLY WHAT THE NEGOTIABLE -- WHAT

THE PROCESS LOOKS LIKE FOR NEGOTIATION BETWEEN AN OEM AND

QUALCOMM.

Q. AND SO ON LEFT IS NEGOTIATION BETWEEN WHO?

A. SORRY, THE OEM AND THE RIVAL. AND ON THE RIGHT IS THE OEM

AND QUALCOMM.

Q. OKAY. AND DO YOU AGREE WITH THESE DEPICTIONS?

A. SO, I MEAN, I AGREE IN THE SENSE THAT THESE ARE DEPICTIONS

UNDER HIS THEORY. BUT I DON'T AGREE WITH HIS THEORY.

SO WHAT THESE DEPICTIONS SHOW, AND I THINK THEY SHOW THE

PROBLEMS IN HIS ANALYSIS, SO FIRST THEY SHOW THAT ON THE ONE ON

THE RIGHT, EVEN THOUGH THE ROYALTY HAS BEEN FIXED PREVIOUSLY

AND APPLIES SORT OF EITHER WAY REGARDLESS OF THE CHOICE THAT'S

BEING MADE, IT'S NOT PART OF THE ANALYSIS. HE KIND OF TAKES

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1895

THAT OUT OF THE ANALYSIS. IN SOME SENSE, THE WAY THAT HE LOOKS

AT IT IS PART OF WHAT'S BEING NEGOTIATED EACH AND EVERY PERIOD.

Q. WITH QUALCOMM?

A. WITH QUALCOMM.

Q. WHAT'S THE PROBLEM WITH THAT?

A. THE PROBLEM WITH THAT IS, AGAIN, THAT'S EXACTLY NOT HOW

THINGS HAPPEN AND NOT -- AGAIN, WE HAVE EVIDENCE IN THE RECORD

THAT WHEN PRICING HAPPENS, THE ROYALTIES -- I MEAN, FOLKS FROM

QUALCOMM MIGHT NOT EVEN KNOW THE ROYALTIES AND WE HAVE

EVIDENCE -- WE HAVE TESTIMONY SAYING THAT DOES NOT AFFECT THEIR

PRICING DECISIONS.

SO THE PRICING IN THAT POINT IS NOT PART OF WHAT'S BEING

TRIED TO BE NEGOTIATED. IT'S BEEN FIXED AND DETERMINED AT AN

EARLIER DATE WHEN THE LICENSE WAS SIGNED.

Q. AND HOW DOES THIS MISTAKE AFFECT HIS CONCLUSIONS?

A. SO IT AFFECTS HIS CONCLUSIONS IN A COUPLE OF WAYS. THE

OTHER THING, BY THE WAY, BEFORE WE GO ON, THE OTHER THING WE

CAN SEE IN THE SLIDE, IT'S THE SECOND MISTAKE I'LL REFER TO,

PROFESSOR SHAPIRO WHEN HE ANALYZED HIS SLIDES, HE PUT EACH OF

THESE UP INDIVIDUALLY, IN ISOLATION.

SO HE LOOKED AT THE QUALCOMM AND RIVAL IN ISOLATION, NOT

TAKING INTO ACCOUNT THAT THESE IN SOME SENSE HAPPEN

SIMULTANEOUSLY, AND THAT'S THE ESSENCE OF COMPETITION. WHAT

HAPPENS ON THE RIGHT EFFECTS WHAT HAPPENS ON THE LEFT AND

VICE-VERSA. THESE ARE NOT TWO THINGS THAT HANDED INDEPENDENT

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1896

IN TWO PLACES. ONE HAS TO TAKE INTO ACCOUNT THE INTERACTION

BETWEEN THEM.

Q. WHY DOES THAT MATTER?

A. WELL, THAT MATTERS BECAUSE IF WE WANT TO HAVE A MODEL

EXPLAINING AN ANTITRUST OR ANTICOMPETITIVE EFFECT, WE HAVE TO

HAVE A MODEL OF COMPETITION.

INSTEAD, WHAT PROFESSOR SHAPIRO HAD WAS LET'S LOOK AT

ISOLATION IN THIS TRANSACTION, AND I'M GOING TO SORT OF LAND

SOMETHING IN THIS TRANSACTION AND SAY THERE'S A WEDGE, RIGHT,

THAT CREATES THAT WEDGE, AND THAT WEDGE CREATES HARM TO THAT

TRANSACTION, INSTEAD OF LOOKING WHERE IS THE MODEL OF

COMPETITION WHICH WE NEED TO ESTABLISH ANY ANTICOMPETITIVE

HARM.

Q. AND WHAT DO YOU MEAN BY A WEDGE?

A. SO YOU CAN SEE HERE, FOCUSSING ON THE LEFT, FOCUSSING ON

THE NEGOTIATION BETWEEN THE RIVAL, THERE'S THAT BLUE AREA, THE

FRAND ROYALTY.

PROFESSOR SHAPIRO, WHEN EXPLAINING HIS ROYALTY, HAD A

SIMILAR PICTURE WITH A RED AREA OF THE SUPRA-FRAND, AND HE

TALKED ABOUT HOW THAT RED AREA, THE SUPRA-FRAND, TAKES AWAY

MANY SO OF THE GAINS FROM TRADE. IT REDUCES THE GAINS FROM

TRADE AND THAT ACTS AS A TAX.

BUT THAT SAME LOGIC WOULD ALSO APPLY HERE FOR THE FRAND

ROYALTY IF YOU TAKE HIS THEORY AS GIVEN. IT WOULD BASICALLY

SAY THAT EVEN A FRAND ROYALTY -- HE DEPICTED IT WITH THE RED,

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BUT THAT SAME LOGIC HOLDS HERE EVEN WITH BLUE. THE FRAND

ROYALTY, ACCORDING TO HIS THEORY, IS ALSO A TAX.

Q. AND SO WHAT CONCLUSIONS DO YOU DRAW FROM THAT ABOUT HIS

THEORY?

A. WELL, SO TO ME, A, AS I SAID BEFORE, THE THEORY IS BASED

ON UNREALISTIC ASSUMPTIONS OF HOW THE MARKET WORKS. IT GIVES

THIS COUNTERINTUITIVE, MAYBE AN ABSURD PREDICTION THAT A FRAND

RATE ITSELF IS ANTICOMPETITIVE, AND AS A RESULT, I DON'T

BELIEVE THAT WE SHOULD -- THAT IT SHOULD BE TRUSTED AND

ESTABLISHES THE CONCLUSIONS THAT HE WOULD LIKE TO REACH.

Q. WERE YOU IN THE COURTROOM WHEN PROFESSOR SHAPIRO TESTIFIED

LAST WEEK?

A. YES, I WAS.

Q. DID YOU HEAR HIS TESTIMONY ABOUT THE MICROSOFT CASE?

A. YES, I DID.

Q. AND DO YOU AGREE WITH HIM THAT THE ECONOMICS OF THE

SITUATION IN MICROSOFT ARE SIMILAR TO THE ECONOMICS THAT ARE

PRESENT HERE?

A. NO, I DON'T. ON A SUPERFICIAL LEVEL, IT MIGHT SEEM LIKE

THEY ARE, BUT THEY REALLY AREN'T.

IN MICROSOFT, WHAT HAPPENED IS MICROSOFT WAS CHARGING AN

ACCESS FEE FROM OEM'S FROM EACH AND EVERY COMPUTER THEY

PRODUCED REGARDLESS OF WHICH OPERATING SYSTEM WAS USED. YOU

MIGHT THINK THAT'S KIND OF LIKE A LICENSE.

BUT THE BIG DIFFERENCE IS MICROSOFT WAS GIVING AWAY ITS

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1898

OPERATING SYSTEM FOR FREE. OKAY? AND THAT'S CLEARLY NOT THE

CASE HERE. CHIPS ARE NOT GIVEN AWAY FOR FREE.

ACTUALLY, THERE'S PLENTY OF EVIDENCE IN THE RECORD

SUPPORTING THAT QUALCOMM'S CHIPS ACTUALLY HAVE A PRETTY NICE

MARGIN, AND THEY'RE DEFINITELY NOT GIVEN OUT FOR FREE. I

HAVEN'T HEARD ANY ALLEGATION OF THEM BEING GIVEN OUT FOR FREE.

Q. ALL RIGHT. LET'S TURN TO ANOTHER THEORETICAL PROBLEM.

WERE THERE OTHER THEORETICAL ISSUES THAT YOU IDENTIFIED

WITH PROFESSOR SHAPIRO'S APPROACH?

A. YES. SO UP TO NOW, IN MY DISCUSSION I'VE REALLY FOCUSSED

ON LET'S TAKE THE ROYALTY AS GIVEN, NOT DISCUSSING OF HOW IT

WAS DETERMINED.

SO NOW WE CAN TALK A LITTLE BIT ABOUT HOW THAT ROYALTY WAS

DETERMINED AND WHETHER OR NOT THERE REALLY IS, ACCORDING TO

PROFESSOR SHAPIRO'S OWN THEORY, THERE REALLY IS AN ABILITY TO

CREATE A SIGNIFICANT SURCHARGE OR SIGNIFICANT TAX AS HE WOULD

CALL IT.

AND MY CONCLUSION IS THAT HIS OWN THEORY, ONCE APPLIED

REALISTICALLY TO THE MARKET, DOES NOT SUPPORT A SIGNIFICANT

SURCHARGE.

Q. WOULD YOU EXPLAIN HOW YOU REACHED THAT CONCLUSION?

A. YES. SO IN ORDER TO ESTABLISH A SURCHARGE, QUALCOMM IS

NEGOTIATING WITH SOPHISTICATED OEM'S. EVEN IF IT'S TRYING TO

USE ITS LEVERAGE AND MARKET POWER IN CHIPS, THERE'S A GIVE AND

TAKE.

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1899

SO IF IT IS GOING TO ASK FOR A HIGHER ROYALTY RATE THAN

WHAT THEY BELIEVE QUALCOMM SHOULD GET, IT HAS TO GIVE

SOMETHING.

AND ACCORDING TO PROFESSOR SHAPIRO, THE WAY THEY GIVE THAT

IS THROUGH THE PRICE OF THE CHIP. OKAY?

BUT HERE'S WHERE THE PROBLEM IS. THE PROBLEM IS THE

LICENSES, THE ROYALTY NEGOTIATION IS FOR A LONG TERM, LET'S

SAY, FOR EXAMPLE, TEN YEARS. OKAY? SO IT'S FOR A LONG TERM.

THE PRICING, THOUGH, IS DONE AT MUCH HIGHER FREQUENCY,

AGAIN, LET'S ASSUME IT'S DONE ANNUALLY.

SO FOR EVERY, LET'S SAY, DOLLAR IN REDUCTION IN CHIP

PRICE, AT MOST WHAT YOU'RE GOING TO GET IS A 0.10 INCREASE IN

SURCHARGE THAT BASICALLY KEEP THE OEM WHOLE, AND JUST THAT --

YOU KNOW, THE MATH OF THAT JUST DOESN'T ADD UP TO HAVING AN

ABILITY TO GET OEM'S TO AGREE TO A VERY HIGH SURCHARGE OVER A

LONG TIME PERIOD OF THE CONTRACT.

Q. WHY COULDN'T QUALCOMM JUST PROMISE A LOWER PRICE FOR THE

FULL DURATION OF THE LICENSE AGREEMENT AND MAKE IT MORE ONE FOR

ONE?

A. THESE NEGOTIATIONS HAPPEN QUITE FREQUENTLY. THESE ARE

HIGHLY SOPHISTICATED FIRMS AND REALLY ONCE THE AGREEMENT IS

SIGNED, THERE'S REALLY NO WAY FOR QUALCOMM TO COMMIT, RIGHT?

SO THIS WOULD BE BASICALLY A CEO OF A VERY LARGE, LARGE

OEM, OR WHOEVER IS NEGOTIATING, BASICALLY SAYING, OKAY,

QUALCOMM, I WILL TAKE YOU AT YOUR WORD THAT YOU'RE GOING TO

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GIVE ME THESE VERY LARGE NUMBERS, YOU KNOW, MILLIONS AND

BILLIONS, IN THE FUTURE JUST BASED ON A HAND SHAKE.

THAT JUST SEEMS, YOU KNOW, NOT SOMETHING THAT, YOU KNOW, A

CEO OF A SOPHISTICATED COMPANY WOULD ACTUALLY AGREE TO.

Q. SO WHAT DOES THIS ANALYSIS LEAD YOU TO BELIEVE ABOUT

PROFESSOR SHAPIRO'S THEORY?

A. SO WHAT THAT LEADS ME TO BELIEVE IS EVEN IF YOU BELIEVE

HIS THEORY, AND EVEN IF YOU BELIEVE THE CLAIMS HE SUPPORTED,

THE REASON HE BELIEVES IT WAS SIGNIFICANT HARM IS BECAUSE HE'S

READ ALL THIS TESTIMONY AND THAT SUGGESTS TO HIM THAT THERE'S

SIGNIFICANT LEVERAGE.

EVEN IF YOU TAKE THAT AS GIVEN, EVEN IF YOU TAKE HIS

THEORY AS GIVEN, THE ABILITY TO HAVE A -- TRANSLATE THE

SIGNIFICANT LEVERAGE INTO A SIGNIFICANT SURCHARGE IS EXTREMELY

LIMITED.

Q. AND WHAT ARE THE IMPLICATIONS OF THE FACT THAT THE

POTENTIAL SURCHARGE IS LIMITED?

A. THE IMPLICATIONS OF THAT IS YOU REALLY NEED, WELL, FIRST

TO HAVE A COMPLETE MODEL OF THE COMPETITIVE PROCESS. BUT YOU

ALSO HAVE TO HAVE WHAT I CALL A QUANTITATIVE MODEL. YOU HAVE

TO ACTUALLY QUANTIFY THE EFFECTS BASED ON NOT JUST THEORETICAL

ARGUMENTS, BUT ACTUALLY GO AND LOOK AT WHAT ACTUALLY HAPPENS IN

THIS INDUSTRY GIVEN ACTUAL DATA, ACTUAL ESTIMATES, AND THE

PARAMETERS.

YOU NEED SOMETHING THAT FITS THE MARKET REALITIES IN TERMS

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OF THE PROCESS, BUT THEN THE MODEL ITSELF IS BASED ON DATA AND

INFORMATION FROM THE INDUSTRY, REAL, REAL MARKET OUTCOMES, REAL

INFORMATION, AND THEN USE THAT FOR QUANTIFICATION OF THE

EXERCISE.

Q. CAN YOU TELL ANYTHING FROM PROFESSOR SHAPIRO'S THEORY

ABOUT WHAT THE EFFECT OF HIS SURCHARGE, IF IT EXISTS, WOULD BE

ON CONSUMER PRICES?

A. NOT BASED ON PROFESSOR SHAPIRO'S -- PROFESSOR SHAPIRO'S

NOT REALLY PROVIDED EITHER COMPLETE THEORETICAL ANALYSIS OR ANY

EMPIRICAL ANALYSIS, BECAUSE THE THEORY ITSELF, TO A VERY SMALL

SURCHARGE, IT'S NOT CLEAR, AGAIN, IF YOU BELIEVE THAT THEORY

AND YOU BELIEVE THE IMPLICATIONS, I HAVE PLENTY OF EVIDENCE

THAT IS INCORRECT, BUT EVEN IF YOU BELIEVE, VERY SMALL

SURCHARGE, NOT CLEAR AT ALL WHERE THAT SURCHARGE WOULD END UP

AND IF ANY OF IT WOULD BE PASSED ON TO MANY CONSUMERS.

THE COURT: I'M REALLY SORRY, THIS IS VERY

INTERESTING TESTIMONY, BUT WE SHOULD PROBABLY TAKE OUR BREAK

NOW.

MR. BORNSTEIN: OF COURSE, YOUR HONOR.

THE COURT: SO IT'S 10:40 RIGHT NOW. LET'S TAKE OUR

MORNING 15 MINUTE BREAK AND WE'LL BE BACK. OKAY?

THANK YOU.

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

THE COURT: OKAY. WELCOME BACK. GOOD MORNING.

PLEASE TAKE A SEAT.

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FOR THE HIGH PRIORITY OBJECTIONS, THE DEPOSITION BINDERS

DID NOT INCLUDE THE DEPOSITION TRANSCRIPT FOR MR. AHN, SO IF

THAT COULD BE PROVIDED SO I COULD RULE ON QUALCOMM'S HIGH

PRIORITY OBJECTION NUMBER 2.

THERE'S ALSO A LETTER REFERENCED IN THAT TESTIMONY TO

DEREK ABERLE, AND WE DON'T HAVE THE LETTER. I DON'T KNOW IF

IT'S NECESSARY FOR US TO HAVE THE LETTER TO RULE ON THE HIGH

PRIORITY OBJECTION. BUT --

MR. EVEN: WE WILL PROVIDE THEM, YOUR HONOR.

THE COURT: OKAY. PERFECT. THANK YOU.

OKAY. TIME IS 10:57. GO AHEAD, PLEASE.

MR. BORNSTEIN: THANK YOU, YOUR HONOR.

Q. SO WE HAD A DISCUSSION OF THEORY BEFORE THE BREAK,

PROFESSOR. YOU HAD SAID THAT YOU HAD ALSO SOME EMPIRICAL AND

PRACTICAL ASSESSMENTS OF PROFESSOR SHAPIRO'S THEORY. LET'S DO

THAT NOW.

WHAT ASSESSMENTS DID YOU DO OF INDUSTRY PERFORMANCE AS IT

RELATES TO THIS THEORY.

A. SO WHAT I LOOKED AT WAS I LOOKED AT OVERALL THE INDUSTRY

AND MARKET PERFORMANCE. I DID THAT IN A VARIETY OF WAYS AND I

PRESENTED -- I PREPARED A FEW EXHIBITS HERE TO TALK ABOUT SOME

OF THE EFFECT, BUT THERE'S ACTUALLY A LOT MORE IN MY REPORT.

Q. OKAY. FIRST, JUST WHY DID YOU LOOK AT THIS INFORMATION?

A. SO AT A HIGH LEVEL, WHAT WE WANT TO LOOK AT IS IF WE HAVE

AN ALLEGATION OF A CONDUCT THAT'S BEEN GOING ON FOR A VERY LONG

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TIME, YOU WANT TO SEE HOW IS THE INDUSTRY PERFORMING?

SO WE WANT TO LOOK TO SEE, IS THIS SOMETHING THAT LOOKS

LIKE IT'S REALLY SLOWING DOWN IN THE INDUSTRY, AND THERE'S KIND

OF CLEAR EVIDENCE OF HARM AND SLOW DOWN IN THE INDUSTRY? THAT

WAS REALLY MY, ONE OF MY MAIN GOALS, ALTHOUGH THERE WAS OTHERS

THAT I CAN TALK ABOUT LATER.

Q. WELL, WHAT DID YOU FIND?

A. WHAT I FOUND IS THAT, AT A HIGH LEVEL, THIS IS A THRIVING

INDUSTRY. PRICES ARE DECLINING, QUANTITIES ARE SKYROCKETING.

QUALITY OF PRODUCT IS MEASURED BY SPEED AND OTHER MEASURES ARE

JUST THRIVING. YOU CAN LOOK AT THE ECONOMIC DATA, BUT JUST OUR

DAY-TO-DAY EXPERIENCE I THINK TELLS US THAT.

Q. WELL, CAN YOU GIVE SOME EXAMPLES OF THE INDICATORS THAT

YOU REVIEWED?

A. SO IF WE MOVE ON TO THE NEXT, I PREPARED A SLIDE.

Q. SURE. LET'S LOOK AT SLIDE 11?

A. SO THIS IS A SLIDE LOOKING AT THE NOMINAL SMARTPHONE

PRICES BETWEEN 2010 AND 2017.

Q. AND FOR CLARITY, WHAT DO YOU MEAN BY "NOMINAL PRICES"?

A. SO THESE ARE THE ACTUAL, YOU KNOW, AVERAGE PRICES, DOLLAR

AMOUNTS THAT WERE PAID.

IF WE LOOK AT 2010, WE CAN SEE THAT THE AVERAGE PRICE WAS

427, AND IT DROPPED DOWN TO 283 IN 2016. IT WENT UP ACTUALLY A

LITTLE BIT IN 2017, MOSTLY DRIVEN BY AN INCREASE IN APPLE'S

PHONES. INTERESTING, AT A TIME WHEN THEY WEREN'T PAYING

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ROYALTIES.

Q. DID YOU LOOK AT ANY OTHER INDICATORS OF PERFORMANCE?

A. YES. SO LOOKING AT THE NOMINAL PRICES GIVES US A CLEAR

PICTURE, BUT IT UNDERESTIMATES HOW MUCH BETTER CONSUMERS ARE

BECAUSE IT DOESN'T ACCOUNT FOR THE FACT THAT PHONES ARE GETTING

BETTER.

SO THE NEXT SLIDE PRESENTS WHAT I CALL QUALITY ADJUSTED

SMARTPHONE PRICES, AND HERE WE'RE TALKING NOW IN AN INDEX. SO

WE INDEXED 2010 TO BE 100, AND WE CAN SEE THAT THE DECLINE IN A

QUALITY ADJUSTED PRICE -- I'M NOT GOING TO GO INTO THE

TECHNICAL DETAILS, BUT THIS IS A MEASURE -- THIS IS A

STATISTICAL APPROACH TAKEN BY THE BUREAU OF LABOR STATISTICS TO

MEASURE QUALITY ADJUSTED PRICES.

AND WHAT WE SEE HERE IS A DECLINE, WE START AT AN INDEX OF

100 IN 2010, IT DECLINED TO ALMOST 20 IN 2017. SO REALLY A, A

DECLINE OF, YOU KNOW, A HUGE AMOUNT, 80 PERCENT DECLINE, ALMOST

80 PERCENT DECLINE.

Q. WHAT OTHER INDICATORS DID YOU REVIEW?

A. THE NEXT THING THAT I PRESENTED A SLIDE HERE IS I LOOKED

AT THE COST OF DATA, THE COST OF USING DATA.

SO THIS SLIDE DEPICTS THE PRICES GOING FROM 2006 NOW TO

2016 AND DECLINE IN THE PRICE, THIS IS DOLLARS PER MEGABYTE OF

CELLULAR PHONE DATA, WENT DOWN FROM JUST UNDER $8 TO LESS THAN

0.01. OR AT 0.01, I SHOULD SAY, NOT LESS. IT WENT DOWN TO

0.01. A VERY LARGE DECLINE OVER THIS PERIOD.

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Q. DID YOU LOOK AT OTHER INDICATORS?

A. I LOOKED AT A VARIETY OF OTHER INDICATORS IN MY REPORT,

LOOKING IN TERMS OF ENTRY, EXIT, MARKET SHARES, QUANTITY USES,

ALL OF THEM REALLY INDICATORS OF A THRIVING INDUSTRY.

Q. WELL, CAN YOU RULE OUT THE POSSIBILITY THAT THINGS WOULD

HAVE BEEN BETTER WERE IT NOT FOR CONDUCT THAT'S BEEN ALLEGED?

A. NO, I CAN'T RULE THAT OUT, AND THAT'S NOT WHAT I'M

CLAIMING HERE.

SO, FOR EXAMPLE, IF WE LOOK AND WE SAY, I BELIEVE IT'S A

NUMBER IN MY REPORT, THAT ANNUAL PRICE, QUALITY ADJUSTED PRICE

DECLINE WAS SOMETHING LIKE 17 PERCENT, I CAN'T RULE OUT THAT

BUT FOR THE CONDUCT, IT MIGHT HAVE BEEN EVEN HIGHER.

BUT WHAT I'M SAYING HERE IS TWO THINGS. THE FIRST IS WE

HAVE A VERY HIGH DECLINE. YES, IT MIGHT HAVE THEORETICALLY

BEEN HIGHER, BUT WE HAVE TO AT SOME POINT ASK OURS, HOW MUCH

HIGHER? HOW MUCH OF AN UPSIDE POTENTIAL IS THERE TO HAVE BEEN

EVEN BETTER PERFORMANCE THAN WHAT WE SEE, AND I CAN'T RULE OUT

THE POSSIBILITY THAT THERE MIGHT HAVE BEEN EVEN BETTER

PERFORMANCE. THAT'S NOT WHAT I'M CLAIMING.

ON THE OTHER HAND, BECAUSE THE INDUSTRY IS THRIVING, IT

ALSO MEANS THAT THERE'S A HUGE DOWNSIDE RISK. AND I THINK

THERE'S MORE OF A DOWNSIDE RISK THAN POTENTIAL FOR UPSIDE, AND

DOWNSIDE RISK WOULD BE TAKING AN INDUSTRY THAT'S ROLLING ALONG,

FUNCTIONING WELL BY ANY POSSIBLE INDICATOR, AND REALLY THROWING

IT INTO CHAOS AND REALLY COMPLETELY DISRUPTING IT. SO THERE'S

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1906

A REAL DOWNSIDE RISK IN TERMS OF ANY INTERVENTION IN THIS

INDUSTRY.

Q. LET ME SWITCH TOPICS AND ASK WHETHER YOU DID ANYTHING TO

ASSESS THE FTC'S THEORY REGARDING STRATEGIC FUNDS?

A. YES, I DID.

Q. WHAT DID YOU DO?

A. SO VERY MUCH LIKE WHAT I DID BEFORE TO LOOK AT THE

SUPRA-FRAND COMPONENT. I LOOKED AT THE THEORY, ASKED WHAT ARE

THE IMPLICATIONS OF THE THEORY, AND THEN TOOK THOSE

IMPLICATIONS TO DATA AND ASKED, ARE THE IMPLICATIONS BORNE OUT

IN THE DATA?

Q. HOW DID YOU DO THAT TEST FOR STRAT FUNDS?

A. SO THE STRAT FUNDS, THE THEORY IS AS FOLLOWS: THE THEORY

IS THAT THE STRAT FUNDS ARE USED TO, YOU KNOW, CLOSE THE GAP OR

OFFER CARROTS TO OEM'S OVER WHICH QUALCOMM DOES NOT HAVE ENOUGH

LEVERAGE TO GET THEM TO AGREE TO THE ALLEGED SUPRA-FRAND RATE.

SO THE IDEA IS THAT THERE ISN'T ENOUGH LEVERAGE, YOU HAVE

TO SOMEHOW CLOSE THE GAP, OFFER A CARROT, OR SWEETEN THE DEAL,

ANY OF THE ABOVE. CALL IT WHATEVER YOU WANT. THAT'S THE

THEORY.

SO THAT'S SOMETHING WE CAN TEST IN THE DATA. WE CAN GO

AND LOOK AT ACTUAL SITUATIONS WHERE A STRAT FUND WAS OFFERED

AND ASK, ARE THESE CASES WHERE THESE PARTICULAR OEM'S, QUALCOMM

HAD LESS LEVERAGE OVER THEM? AND THAT'S WHAT I'M TESTING.

Q. OKAY. WHAT DID YOU FIND?

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A. I FOUND THAT THAT'S NOT THE CASE.

Q. DID YOU PREPARE A SLIDE THAT SHOWS THIS?

A. YES, I DID.

MR. BORNSTEIN: YOUR HONOR, I'M CLOSING THE

PROJECTOR, THIS PARTICULAR SLIDE HAS BEEN SEALED. WE CAN PUT

IT UP ON THE SCREEN FOR THE COURT AND FOR PROFESSOR NEVO.

THE WITNESS: SO WHAT I DID HERE IS I STARTED WITH 13

AGREEMENTS THAT WERE MENTIONED BY THE FTC OR BY

PROFESSOR SHAPIRO -- SORRY, I SHOULDN'T SAY AGREEMENTS -- 13

OEM'S THAT HAD AGREEMENTS, OR STRAT FUNDS THAT WERE MENTIONED.

OUT OF THE 13, ONE OF THEM WAS APPLE, WHICH I DID NOT

STUDY HERE. PROFESSOR -- SORRY, DR. CHIPTY STUDIED THAT

SEPARATELY, SO I DID NOT STUDY APPLE.

OUT OF THE REMAINING 12, I LOOKED FOR STRAT FUNDS THAT

WERE SIGNED DURING THE SAME TIME AS A LICENSE NEGOTIATION.

BY MR. BORNSTEIN:

Q. OKAY. ARE THESE 12 DIFFERENT OEM'S OR 12 DIFFERENT STRAT

FUND AGREEMENTS?

A. SO THESE ARE 12 DIFFERENT AGREEMENTS. SO I FOUND NINE

OEM'S THAT HAD AN AGREEMENT, A STRAT FUND AGREEMENT THAT WAS

SIGNED AT THE SAME TIME AS A LICENSING AGREEMENT.

AND SOME OF THEM HAD MULTIPLE ONES, SO I ENDED UP WITH 12

AGREEMENTS FROM 9 OEM'S.

Q. AND WHAT DO THESE BLUE AND ORANGE BARS HERE SHOW?

A. SO WHAT I LOOKED AT IS IN EACH OF THESE CASES, WHAT SORT

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1908

OF RELIANCE DID THE OEM'S HAVE ON QUALCOMM CHIPS?

AND WHAT I FOUND HERE, WHAT THE BARS DEPICT -- AND AGAIN,

THIS IS A GRAPHICAL REPRESENTATION OF A TABLE THAT I HAVE IN MY

REPORT -- WHAT THEY SHOW IS THE RELIANCE AS MEASURED BY THE

CHIP SHARE IN THE YEAR JUST BEFORE THE AGREEMENT, AND THE BLUE

BARS ARE CDMA CHIP SHARES AND THE ORANGE BARS ARE LTE CHIP

SHARES.

AND WHAT YOU SEE IS THAT IN ALL BUT ONE OF THEM, ALL BUT

PANASONIC -- I GUESS I SHOULDN'T SAY THAT, ALL BUT ONE, THE

FOURTH, THE SHARES WERE HIGH.

Q. AND WHAT CONCLUSION DO YOU DRAW FROM THAT?

A. THAT'S EXACTLY IN CONTRADICTION TO THE FTC'S THEORY WHERE

THESE, THESE STRAT FUNDS SHOULD BE HIGHER, IT SHOULD BE OFFERED

TO THOSE OEM'S THAT HAVE A LOW RELIANCE, OR OVER WHICH QUALCOMM

WOULD NOT HAVE LEVERAGE. SO THIS CONTRADICTS THE THEORY.

Q. OKAY. LET'S MOVE TO THE THIRD PART OF YOUR ASSIGNMENT,

WHICH IS WHETHER THERE WERE LEGITIMATE BUSINESS JUSTIFICATIONS

OR PROCOMPETITIVE BENEFITS.

DID YOU LOOK INTO THAT QUESTION?

A. I DID.

Q. AND WHAT DO YOU MEAN, OR WHAT DOES AN ECONOMIST MEAN WHEN

AN ECONOMIST TALKS ABOUT LEGITIMATE BUSINESS JUSTIFICATIONS FOR

CONDUCT?

A. SO ONE OF THE WAYS IN WHICH YOU LOOK AT WHETHER THERE'S

LEGITIMATE BUSINESS JUSTIFICATION IS TO ASK, DO WE SEE THAT

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1909

SAME CONDUCT, OR ARE THERE JUSTIFICATION -- LET ME STEP BACK.

ARE THERE JUSTIFICATIONS FOR THAT CONDUCT THAT HAVE NOTHING TO

DO WITH ANY OF THE EXCLUSIONARY MOTIVES?

AND THE WAY WE LOOK AT IS THAT WE ASK, DO WE SEE THAT SAME

CONDUCT TAKING PLACE EITHER AT A TIME WHERE THE FIRM IN

QUESTION USED THE CONDUCT AND DID NOT HAVE MARKET POWER, OR IF

WE LOOK AT OTHER FIRMS THAT DON'T HAVE MARKET POWER, DO THEY

ACTUALLY USE THAT SAME, THE SAME CONDUCT?

AND IN BOTH CASES, IF THAT'S THE CASE, YOU COULD, YOU

KNOW, CONCLUDE FROM THAT, OR DEDUCT FROM THAT THAT THERE'S

OTHER JUSTIFICATION THAT HAVE NOTHING TO DO WITH EXCLUSIONARY

MOTIVES THAT JUSTIFY THE CONDUCT.

Q. SO WHAT TWO -- OR WHICH PRACTICES OF QUALCOMM'S DID YOU

CONSIDER IN THIS PART OF YOUR ANALYSIS?

A. SO I LOOKED AT TWO, I LOOKED AT DEVICE LEVEL LICENSING AND

I LOOKED AT THE PRACTICE OF SELLING ONLY TO LICENSED OEM'S, AND

I REFERRED TO IT AS SOLO.

Q. SO WITH RESPECT TO DEVICE LEVEL LICENSING, WHAT CONCLUSION

DID YOU REACH?

A. SO IN TERMS OF DEVICE LEVEL LICENSING, USING THE TWO

CRITERIA THAT I USED BEFORE, THAT I LISTED BEFORE, I CONCLUDE

THAT THERE'S, THERE'S EVIDENCE, OR THERE'S BUSINESS

JUSTIFICATIONS FOR DOING THAT THAT HAVE NOTHING TO DO WITH

EXCLUSIONARY MOTIVES.

Q. HOW DID YOU REACH THAT CONCLUSION?

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1910

A. SO DEVICE LEVEL LICENSING, THERE'S EVIDENCE IN THE RECORD

THAT IT'S AN INDUSTRY WIDE PRACTICE, WHICH MEANS THAT IT IS

USED BY FIRMS THAT DO NOT HAVE MARKET POWER. SO IT'S

CONSISTENT WITH THAT CRITERIA.

ALSO, IT'S MY UNDERSTANDING THAT DEVICE LEVEL LICENSING

WAS USED BY QUALCOMM LONG BEFORE IT HAD ANY, BEFORE IT EVEN

PRODUCED CHIPS AND HAD ANY MARKET POWER IN CHIPS.

SO, AGAIN, THAT'S CONSISTENT WITH THE OTHER CRITERIA THAT

I TALKED ABOUT.

Q. DID YOU IDENTIFY ANY PROCOMPETITIVE EFFICIENCIES FROM

LICENSING ONLY AT THE DEVICE LEVEL?

A. YES, TWO OF THEM. ONE IS A REDUCTION IN TRANSACTION COST.

THE OTHER IS ALLOWING RIVAL CHIP MAKERS TO OPERATE FREELY WITH

ACCESS TO THE TECHNOLOGY WITHOUT A NEED FOR A LICENSE.

Q. HOW DOES THIS PRACTICE REDUCE TRANSACTION COSTS?

A. SO IF WE THINK OF DEVICE LEVEL LICENSING, OFTEN THE

ALTERNATIVE THAT PEOPLE DISCUSS IS COMPONENT LEVEL LICENSING,

IN THIS CASE LICENSING AT CHIP LEVEL.

IT'S NOT REALLY AN EITHER/OR. IF WE SWITCH AWAY FROM

DEVICE LEVEL LICENSING, IT WOULD PROBABLY HAVE TO SWITCH INTO

MULTI LEVEL LICENSING WHERE SOME OF QUALCOMM'S PORTFOLIO WOULD

BE LICENSED AT THE CHIP LEVEL AND SOME WOULD STILL HAVE TO BE

LICENSED AT THE DEVICE LEVEL, BECAUSE MY UNDERSTANDING IS THAT

THE PORTFOLIO, OR SOME OF THE PATENTS THAT PRACTICE IT AT

DIFFERENT LEVELS.

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1911

WHAT THAT WOULD MEAN IS TWO THINGS. FIRST, THE NUMBER OF

LICENSE AGREEMENTS WOULD BE LARGER BECAUSE WE STILL HAVE TO

HAVE IT WITH ALL OEM'S, BUT ALSO WITH RIVAL CHIP MAKERS.

BUT THAT'S NOT REALLY A BIG ISSUE. THAT'S JUST A SLIGHTLY

HIGHER NUMBER.

THE REAL ISSUE IS THE FACT THAT EACH OF THE NEGOTIATIONS

NOW WILL BECOME A LOT MORE COMPLEX BECAUSE EACH OF THE PARTIES,

NAMELY, THE CHIP MAKERS AND THE OEM'S, WOULD HAVE INCENTIVES TO

POINT TOWARDS THE OTHER PARTY AS THE ONE THAT ACTUALLY IS

PRACTICING ON THE LICENSE. THERE WOULD HAVE TO BE A SPLIT OF

THE PORTFOLIO AND THE DECISION WHICH IS PRACTICED BY WHICH

ENTITY, AND THAT'S GOING TO CREATE, I SUSPECT, QUITE A HECTIC

SITUATION.

AND THIS IS NOT SOMETHING THAT HAS TO BE DONE ONE TIME.

IT'S AN ONGOING DYNAMIC AS THE PORTFOLIO EVOLVES, AND MAYBE --

THIS WOULD HAVE TO BE REDONE --

Q. I THINK YOU SAID AS THE PRODUCTS EVOLVE.

A. AS THE PRODUCTS EVOLVE, AS THE PORTFOLIO EVOLVES, THIS

WOULD HAVE THE -- THE SPLIT WOULD HAVE TO BE REDONE, AN

ALLOCATION BETWEEN CHIPS AND OEM'S WOULD HAVE TO BE REDONE.

AND IT MIGHT ALSO BE VERY PRODUCT OR CASE SPECIFIC. SOME OEM'S

WOULD HAVE DIFFERENT PRACTICES THAN OTHERS.

Q. WHAT WAS THE OTHER PROCOMPETITIVE EFFICIENCY THAT YOU

IDENTIFIED?

A. SO THE OTHER EFFICIENCY I MENTIONED IS CURRENTLY CHIP

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1912

MAKERS ARE FREE TO OPERATE, THEY HAVE ACCESS TO THE TECHNOLOGY

AND THEY DON'T NEED A LICENSE.

SO TO PUT IT KIND OF, MAYBE BLUNTLY, IF WE'RE WORRIED

ABOUT RAISING RIVALS' COSTS, IT SEEMS VERY COUNTERINTUITIVE TO

ME TO SOLVE THAT BY SAYING, WE WANT TO HAVE LICENSING DIRECTLY

TO RIVALS.

SO INSTEAD OF HAVING KIND OF A BACKWARD CHANNEL IN WHICH

MAYBE, OR MAYBE NOT, THERE'S RAISING RIVALS' COSTS, WE'RE

CREATING A DIRECT CHANNEL WHERE QUALCOMM WOULD BE SETTING THE

PRICE DIRECTLY TO ITS RIVALS. THAT, TO ME, IS COUNTERINTUITIVE

AS A WAY TO SOLVE A CONCERN OF RAISING RIVALS' COST.

Q. ASSUME WITH ME FOR A MOMENT THAT COMPONENT LEVEL LICENSING

WERE REQUIRED BY THE LAW OR BY CONTRACT. WOULD THAT CHANGE ANY

OF THE ECONOMIC ANALYSIS THAT YOU JUST DESCRIBED?

A. NO. I'M NOT OFFERING A LEGAL OPINION AS TO WHAT IS

REQUIRED BY THE LAW. I'M JUST LOOKING AT THE ECONOMICS OF THE

ISSUE.

Q. OKAY. LET'S TURN TO THE OTHER PRACTICE THAT YOU

MENTIONED, SELLING ONLY TO LICENSING OEM'S.

DID YOU IDENTIFY ANY LEGITIMATE BUSINESS JUSTIFICATION FOR

THAT, USING THE TESTS YOU DESCRIBED?

A. YES. SO THE TESTS THAT I DESCRIBED HERE, WE JUST LOOK

OVER TIME AT QUALCOMM, AND THIS HAS BEEN QUALCOMM'S PRACTICE

LONG BEFORE THERE'S BEEN ANY ALLEGED MARKET POWER. AND AGAIN,

THAT'S CONSISTENT WITH THE CRITERIA THAT I MENTIONED BEFORE.

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1913

Q. AND HAVE YOU ALSO LOOKED TO SEE WHETHER THERE ARE

PROCOMPETITIVE EFFICIENCIES FOR THE PRACTICE?

A. YES, I HAVE. IN THIS CASE, THE PROCOMPETITIVE

JUSTIFICATIONS ARE REALLY THE FACT THAT CURRENTLY, AS WE

TALKED, I TALKED EARLIER ABOUT AN HOUR AGO, CURRENT PRACTICE

REALLY HAS THE -- THE ROYALTY IS CHIP AGNOSTIC AND APPLIES

EQUALLY TO QUALCOMM AND TO RIVALS.

UNDER THE ALTERNATIVES THAT HAVE BEEN PROPOSED WHERE

EITHER THE ROYALTY IS BAKED INTO THE -- INCLUDED IN THE PRICE

OF THE CHIP, OR THERE'S A SEPARATE ROYALTY FOR QUALCOMM CHIPS

AND NON-QUALCOMM CHIPS, ONE WAY OR THE OTHER WOULD CREATE,

BASICALLY WOULD TAKE AWAY FROM THIS IDEA THAT THE ROYALTY IS

CHIP NEUTRAL OR CHIP AGNOSTIC AND EXACTLY WOULD CREATE THE

SITUATION THAT PROFESSOR SHAPIRO WAS WORRIED ABOUT.

SO RATHER THAN SOLVE IT, IT WOULD ACTUALLY CREATE, CREATE

EXACTLY THE SITUATION THAT HE WAS WORRIED ABOUT.

Q. OKAY. HAVE YOU PUT TOGETHER A SLIDE THAT SUMMARIZES YOUR

CONCLUSIONS IN THIS CASE?

A. YES, I HAVE.

Q. LET'S TAKE A LOOK AT IT.

A. OKAY.

Q. CAN YOU JUST QUICKLY RECAP SLIDE 15?

A. YEP. WHEN I STARTED I SAID THERE WERE THREE TASKS. THE

FIRST, WAS TO TEST THE FTC'S THEORY ABOUT THE USE OF ALLEGED

MARKET POWER AS LEVERAGED AGAINST SUPRA-FRAND. WHAT I DID

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NEVO DIRECT BY MR. BORNSTEIN

UNITED STATES COURT REPORTERS

1914

THERE IS I TESTED IT. I BASICALLY CONFRONTED THE THEORY WITH

THE DATA, AND I FOUND THAT THE DATA DO NOT SUPPORT THE CLAIMS

OF THE THEORY.

THEN I WENT AND EVALUATED THE SECOND PART OF THE FTC'S

THEORY, WHICH IS WHAT I CALL THE TAX THEORY, THE FACT THAT THIS

ALLEGED SUPER CHARGE, SUPRA-FRAND RATE CREATES ANTICOMPETITIVE

HARM. AND WHAT I CONCLUDE THERE IS THAT THE MODEL AND THE

THEORY OFFERED BY PROFESSOR SHAPIRO AND THE FTC IS

OVERSIMPLISTIC, DOES NOT MATCH UP WITH MARKET REALITIES, AND

REALLY DOES NOT ESTABLISH THE CONCLUSIONS THAT HE CLAIMS.

AND FURTHERMORE, LOOKING AT OVERALL PERFORMANCE, I FIND

THAT IT'S ACTUALLY -- THE INDUSTRY IS DOING WELL.

AND FINALLY, AS WE JUST DISCUSSED, THERE ARE

PROCOMPETITIVE JUSTIFICATIONS FOR QUALCOMM'S CONDUCT.

Q. ALL RIGHT. PROFESSOR, BEFORE I LET YOU OFF THE STAND, WE

HAVE A LITTLE BIT OF HOUSEKEEPING TO DO.

CAN I ASK YOU TO TAKE A LOOK AT TAB 3 IN YOUR BINDER AND

TELL US WHAT THIS IS. IT'S QX 9148.

A. YES. SO THIS IS A SUMMARY OF DATA OR ANALYSIS THAT WAS

PUT TOGETHER BY MY TEAM AT MY SUPERVISION. THIS IS BASICALLY A

LIST OF CDMA AND WCDMA LICENSE AGREEMENTS SIGNED BETWEEN OEM'S

AND QUALCOMM. IT LISTS THE COMPANY NAME AND VARIOUS

CHARACTERISTICS AND DATES OF EACH AGREEMENT.

Q. OKAY.

AND, YOUR HONOR, THE REDACTIONS THAT YOU CAN SEE ON THE

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NEVO DIRECT BY MR. BORNSTEIN

UNITED STATES COURT REPORTERS

1915

EXHIBIT ARE ONES THAT WE'VE DONE PURSUANT TO AGREEMENT WITH THE

FTC IN ORDER TO OVERCOME SOME OBJECTIONS THAT THEY'VE

IDENTIFIED, AND ALSO TO COMPLY WITH THE COWER'S ORDER REGARDING

THE MARCH 2018 CUTOFF.

AND SO WITH THAT, I'D OFFER QX 9148 INTO EVIDENCE, YOUR

HONOR.

THE COURT: ANY OBJECTION?

MS. MILICI: YOUR HONOR, WE DON'T OBJECT.

THE COURT: OKAY. IT'S ADMITTED.

(DEFENDANT'S EXHIBIT QX 9148 WAS ADMITTED IN EVIDENCE.)

THE COURT: GO AHEAD, PLEASE.

BY MR. BORNSTEIN:

Q. PROFESSOR, CAN YOU TURN TO TAB 4 IN THE BINDER, PLEASE.

THIS IS QX 9180. AND TELL US WHAT THIS EXHIBIT IS, PLEASE.

A. THIS IS A SIMILAR EXHIBIT, BUT NOW IT'S, IT'S BEEN BLACKED

OUT FOR LICENSING AGREEMENTS FOR DIFFERENT TECHNOLOGY.

Q. OKAY. AND WAS THIS SOMETHING THAT WAS PREPARED BY YOU AND

YOUR TEAM?

A. YES, JUST LIKE THE PREVIOUS ONE.

MR. BORNSTEIN: YOUR HONOR, WE'D OFFER EXHIBIT QX

9180 INTO EVIDENCE.

MS. MILICI: YOUR HONOR, THE FTC OBJECTS. WE JUST

HEARD TESTIMONY THAT THIS WAS DONE AS A RESULT OF ANALYSIS BY

HIS TEAM. BUT THIS WASN'T SOMETHING THAT WAS DISCLOSED WITH

HIS REPORT.

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UNITED STATES COURT REPORTERS

1916

MR. BORNSTEIN: YOUR HONOR, WE'RE NOT OFFERING THIS

AS PART OF PROFESSOR NEVO'S ANALYSIS IN ANY WAY. WE'RE

OFFERING THIS AS A FACTUAL SUMMARY OF THE CONTRACTS. HE'S NOT

TESTIFYING TO THE SUBSTANCE, AND IT'S NOT SOMETHING THAT

RELATES TO HIS OPINIONS. WE'RE JUST OFFERING IT BECAUSE WE HAD

THE SUMMARY PERFORMED, AND WE HAVE SOME SUMMARIES OF THE

CONTRACT THAT WE WANT TO PUT INTO EVIDENCE. IT'S A SUMMARY

UNDER RULE 1006.

THE COURT: WHAT IS THE FTC'S OBJECTION? YOU'RE

SAYING IT WASN'T PART OF HIS EXPERT REPORT?

MS. MILICI: IT WASN'T PART OF HIS EXPERT REPORT, AND

HE JUST SAID THIS WAS DONE AS A RESULT OF ANALYSIS. I WOULD

JUST SAY THAT THEY ARE VERY COMPLICATED CONTRACTS WITH LOTS OF

TERMS, AND THIS IS AN EXTRACT OF A VERY SMALL NUMBER OF THOSE

TERMS, AND HE JUST TESTIFIED THAT HE DID AN ANALYSIS TO DO

THIS, AND WE SHOULD HAVE BEEN ABLE TO DEPOSE HIM ABOUT THAT

ANALYSIS.

MR. BORNSTEIN: YOUR HONOR, WE HAD A BACK AND FORTH

ABOUT AN HPO. WE RESOLVED THE OBJECTIONS. THE FTC WITHDREW

THEIR OBJECTION. WE DID REDACTIONS AT THEIR REQUEST. I DON'T

UNDERSTAND WHY THIS IS COMING UP NOW OTHER THAN TRYING TO USE

UP OUR TIME.

MS. MILICI: YOUR HONOR, WE DID NOT WITHDRAW OUR

OBJECTIONS. WE MAINTAINED THE ABILITY TO INSIST ON A

FOUNDATION AND THE FOUNDATION THAT HE JUST LAID WAS THAT THIS

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UNITED STATES COURT REPORTERS

1917

WAS DONE THROUGH ANALYSIS BY HIS EXPERT TEAM.

MR. BORNSTEIN: AND THE RULE DOES NOT REQUIRE AN

OPPORTUNITY FOR DISCLOSURE, FOR DEPOSITION WITH RESPECT TO A

RULE 106 -- RULE 1006 SUMMARIES. IT REQUIRES THE DATA TO HAVE

BEEN MADE AVAILABLE, AND THAT'S WHAT WE DID. THERE'S NOTHING

THAT REQUIRES A DEPOSITION FOR A RULE 1006 SUMMARY. THAT'S

JUST NOT THE LAW.

THE COURT: WHEN WAS THIS DISCLOSED? I MEAN, I HAVE

TO SAY, WE'VE BEEN REVIEWING A LOT OF THESE AGREEMENTS FOR ALL

THE SEALING, AND THEY ARE MUCH MORE COMPLICATED THAN WHAT'S

BEEN REDUCED IN THESE CHARTS.

MR. BORNSTEIN: THIS WAS DISCLOSED IN CONNECTION WITH

THE EXHIBIT LIST IN NOVEMBER, YOUR HONOR, PURSUANT TO THE

SCHEDULE THAT THE PARTIES HAD AGREED ON AND THE COURT ORDERED.

THE COURT: ALL RIGHT. SO WHAT'S YOUR OBJECTION,

THAT IT WASN'T DISCLOSED IN HIS EXPERT REPORT AND YOU THINK

THAT THE REPRESENTATION OF WHAT'S IN THESE CONTRACTS SHOULD BE

MORE COMPLETE? IS THAT YOUR OBJECTION?

MS. MILICI: YES, YOUR HONOR. AND TO BE CLEAR, THE

LAST EXHIBIT THAT WE JUST ENTERED WHERE WE HAVE THE SAME VIEW

OF AND I HAVE SOME QUESTIONS FOR PROFESSOR NEVO ABOUT THAT.

BUT FOR THIS ONE, THIS WASN'T DISCLOSED AS PART OF HIS REPORT,

IT'S NOT IN HIS BACKUP MATERIAL. IN FACT, HIS REPORT SAYS THAT

HE DID NOT CONDUCT ANY ANALYSIS FOR LTE ONLY LICENSES.

MR. BORNSTEIN: YOUR HONOR, IT'S JUST A SUMMARY OF

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NEVO DIRECT BY MR. BORNSTEIN

UNITED STATES COURT REPORTERS

1918

THE LICENSES. IT HAS NOTHING TO DO WITH PROFESSOR NEVO'S

OPINIONS, SO I DON'T UNDERSTAND THAT OBJECTION.

IF YOU'RE OBJECTING TO THE SCOPE OF HIS TESTIMONY, I WOULD

SAY FINE. BUT WE'RE NOT OFFERING THIS AS PART OF

PROFESSOR NEVO'S SUBSTANTIVE OPINIONS IN THE CASE. WE'RE JUST

SUBMITTING A SUMMARY UNDER RULE 1006. THAT'S ALL THIS IS.

THE COURT: OKAY. WHAT WAS THE ANALYSIS THAT HE SAID

RESULTED IN THIS CHART? WHAT ANALYSIS WAS THAT?

MR. BORNSTEIN: WELL, IT'S -- IT'S A MECHANICAL

PICKING OF THE INFORMATION FROM A DATABASE. BUT I CAN LET

PROFESSOR NEVO ANSWER THAT RATHER THAN TESTIFY MYSELF.

THE COURT: I WOULD PREFER THAT.

MR. BORNSTEIN: I FIGURED.

THE COURT: THANK YOU.

THE WITNESS: SO SHOULD I --

BY MR. BORNSTEIN:

Q. PLEASE, CAN YOU ANSWER THE JUDGE'S QUESTION?

A. I PROBABLY MISSPOKE AND SAID ANALYSIS. WHAT I MEANT WAS

THIS WAS PUT TOGETHER BY MY TEAM, SO THIS WAS COLLECTED BY MY

TEAM AND PUT TOGETHER. THERE WASN'T ANY ANALYSIS IN THE SENSE

OF ANYTHING BEYOND THAT.

THE COURT: ALL RIGHT. GO AHEAD.

BY MR. BORNSTEIN:

Q. I WAS JUST GOING TO ASK, WHERE DID THE INFORMATION COME

FROM, PROFESSOR?

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NEVO DIRECT BY MR. BORNSTEIN

UNITED STATES COURT REPORTERS

1919

A. I'D HAVE TO LOOK SPECIFICALLY HERE, BUT IT WAS FROM EITHER

THE CONTRACTS THEMSELVES OR A COMBINATION OF OTHER DATA SETS

THAT WERE AVAILABLE.

THE COURT: WHAT WERE THOSE COMBINATIONS OF DATA SETS

THAT WERE AVAILABLE, OTHER THAN THE CONTRACTS THEMSELVES?

THE WITNESS: I'D HAVE TO LOOK SPECIFICALLY. I MEAN,

THE DETAILS --

BY MR. BORNSTEIN:

Q. PROFESSOR, ARE YOU FAMILIAR WITH SOMETHING CALLED THE LMS,

OR LICENSE MANAGEMENT SYSTEM, AT QUALCOMM?

A. YES, I AM.

Q. DO YOU KNOW WHETHER THAT WAS A SOURCE OF THIS INFORMATION?

A. I KNOW FOR A LOT OF THE DATA SETS THAT WE CONSTRUCTED, WE

STARTED FROM THE LMS. BUT I WASN'T SURE IF THIS DIRECTLY FITS

INTO IT. IT PROBABLY DOES, BECAUSE IT HAS THE CONTRACT NUMBER,

WHICH I BELIEVE WE TYPICALLY GOT FROM THE LMS.

MR. BORNSTEIN: THANK YOU, PROFESSOR.

THE COURT: ALL RIGHT. THE OBJECTION'S OVERRULED.

IT'S ADMITTED.

(DEFENDANT'S EXHIBIT 9180 WAS ADMITTED IN EVIDENCE.)

THE COURT: GO AHEAD. DO YOU HAVE ANY OTHER

EXHIBITS.

MR. BORNSTEIN: I'VE GOT ONE MORE, YOUR HONOR.

THE COURT: OKAY.

MR. BORNSTEIN: APOLOGIES. THIS IS TAB 4 IN THE

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NEVO DIRECT BY MR. BORNSTEIN

UNITED STATES COURT REPORTERS

1920

BINDER.

Q. THIS IS QX 9166. CAN YOU TELL US WHAT THIS IS, PROFESSOR?

A. SO THIS IS ALSO A SUMMARY THAT WAS PREPARED BY MY TEAM.

MR. BORNSTEIN: YOUR HONOR, I'D MOVE QX 9166 INTO

EVIDENCE AS A SUMMARY UNDER RULE 1006.

MS. MILICI: YOUR HONOR, THE FTC AGAIN OBJECTS. WE

HAVE NOT HEARD ANY TESTIMONY ABOUT HOW THIS WAS CREATED. THIS

NOW INCLUDES INFORMATION FROM MULTIPLE SOURCES. THERE ARE --

THERE IS, IN OUR VIEW, THIS INFORMATION IS INCOMPLETE. AND

I -- I DON'T THINK THEY'VE LAID A PROPER FOUNDATION FOR IT.

AND THIS IS NOT PART OF PROFESSOR NEVO'S REPORT.

THE COURT: MAY WE PLEASE JUST HAVE SOME TESTIMONY

ABOUT WHO CREATED THIS AND HOW IT WAS CREATED.

MR. BORNSTEIN: SURE, OF COURSE.

THE COURT: THANK YOU.

BY MR. BORNSTEIN:

Q. I'LL START. PROFESSOR NEVO, CAN YOU TURN TO THE LAST PAGE

OF THE EXHIBIT, PLEASE?

A. YES.

Q. DO YOU SEE WHERE IT SAYS "SOURCES"?

A. YES, I DO. AT THE VERY BOTTOM.

Q. AND WERE THESE THE SOURCES OF THE INFORMATION APPEARING IN

THIS SUMMARY?

A. I BELIEVE THAT'S CORRECT, YES.

Q. OKAY. DO THE NOTES EXPLAIN HOW PORTIONS OF THE SUMMARY

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NEVO DIRECT BY MR. BORNSTEIN

UNITED STATES COURT REPORTERS

1921

WERE CREATED?

A. YES, THEY DO.

Q. AND WHO DID THE WORK TO CREATE THE SUMMARY?

A. THIS WOULD BE MEMBERS OF, MEMBERS OF MY TEAM FROM THESE

SOURCES.

MR. BORNSTEIN: OKAY. AGAIN, WE'D MOVE THIS INTO

EVIDENCE, YOUR HONOR.

MS. MILICI: YOUR HONOR, DOES HE KNOW WHETHER THERE

ARE -- WHETHER THIS INCLUDES ALL OF THE CONTRACTS? DOES IT

INCLUDE AMENDMENTS TO THE CONTRACTS? WHAT ARE THE LIMITATIONS

OF THIS DATA SET?

THE COURT: THAT'S A FAIR QUESTION.

WHAT'S THE ANSWER?

THE WITNESS: I WOULD HAVE --

BY MR. BORNSTEIN:

Q. IN DOING THE WORK THAT YOU DID, PROFESSOR, DID YOU

GENERALLY INCLUDE AMENDMENTS, OR NOT? OR DID IT DEPEND ON THE

CIRCUMSTANCE?

A. SO IN THESE STATISTICAL ANALYSIS THAT WE DID, WE

DEFINITELY -- WE GENERALLY DID NOT LOOK AT AMENDMENTS. WE JUST

LOOKED AT ORIGINAL CONTRACTS.

THE COURT: IS THAT TRUE FOR ALL OF YOUR EXHIBITS

TODAY?

THE WITNESS: YES. WE FOCUSSED ON THE ORIGINAL

CONTRACTS.

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NEVO DIRECT BY MR. BORNSTEIN

UNITED STATES COURT REPORTERS

1922

MS. MILICI: YOUR HONOR, THIS ISN'T PART OF HIS

STATISTICAL ANALYSIS. THAT'S THE POINT.

THE COURT: I'M SORRY. SAY THAT AGAIN.

MS. MILICI: THIS ISN'T PART OF HIS -- HE'S

TESTIFYING ABOUT AND HE'S BEING ASKED QUESTIONS ABOUT WHAT HE

DID FOR HIS STATISTICAL ANALYSIS. THIS IS NOT PART OF HIS

STATISTICAL ANALYSIS. THIS WAS A DOCUMENT THAT WAS CREATED

AFTER THE CLOSE OF DISCOVERY THAT DOESN'T APPEAR IN HIS REPORT,

AND IT'S NOT CLEAR TO ME WHAT IT INCLUDES OR DOESN'T INCLUDE.

THE COURT: WELL, HE SAID IT JUST DOESN'T INCLUDE ANY

AMENDMENTS. NONE OF HIS ANALYSIS TODAY INCLUDES ANY

AMENDMENTS.

MS. MILICI: I'M SORRY, YOUR HONOR. I GUESS MY POINT

IS THIS IS NOT PART OF HIS ANALYSIS. SO WHEN THE TESTIMONY IS

THAT NONE OF MY ANALYSIS INCLUDES AMENDMENTS, IS THIS A SUMMARY

OR IS THIS HIS ANALYSIS?

THE COURT: OKAY. I'M SORRY. CAN YOU CLEAR THIS UP,

MR. BORNSTEIN, PLEASE?

MR. BORNSTEIN: I WILL TRY ONE MORE TIME, YOUR HONOR.

THE COURT: YEAH.

BY MR. BORNSTEIN:

Q. PROFESSOR, HOW WAS THIS DOCUMENT PUT TOGETHER? AND WHAT

DOES IT PURPORT TO SHOW?

A. SO MEMBERS OF MY TEAM TOOK THE INFORMATION FROM THE

SOURCES THAT ARE LISTED AT THE VERY END, AND WHAT IT SHOWS, AS

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NEVO DIRECT BY MR. BORNSTEIN

UNITED STATES COURT REPORTERS

1923

THE TITLE SAYS, THE FIRST QUARTERS OF ROYALTIES REPORTED FOR

HANDSETS BY OEM'S AND CONTRACT NUMBERS.

Q. AND WHAT ARE THE CONTRACT NUMBERS?

A. SO THE CONTRACT NUMBERS ARE THE INFORMATION THAT'S, THAT'S

IN SOME OF QUALCOMM'S DATABASE, SO IT BASICALLY TALKS ABOUT AN

ORIGINAL CONTRACT NUMBER, AND UNDER THIS CONTRACT NUMBER, THERE

ARE THE VARIOUS CHARACTERISTICS OF THE CONTRACT AND THEN

VARIOUS, VARIOUS OTHER MEASURES, INCLUDING THE ROYALTIES

REPORTED.

Q. AND DID ALL THE INFORMATION APPEARING ON THIS CHART COME

FROM THE SOURCES IDENTIFIED ON THE BOTTOM OF THE LAST PAGE?

A. I BELIEVE THAT'S THE CASE, YES.

MR. BORNSTEIN: YOUR HONOR, I'LL TRY ONCE MORE TO

MOVE IT INTO EVIDENCE AGAIN.

THE COURT: OKAY. THE OBJECTION WAS OVERRULED

WITHOUT PREJUDICE YESTERDAY AS TO WHETHER THE ANALYSIS WAS

DISCLOSED IN PROFESSOR NEVO'S EXPERT REPORT BECAUSE I DIDN'T

KNOW WHAT OPINION WOULD BE OFFERED AS TO QX 9166.

IS THERE ACTUALLY AN ANNE OPINION OFFERED WITH REGARD TO

THIS DOCUMENT?

MR. BORNSTEIN: NO, YOUR HONOR. IT'S JUST A FACTUAL

SUMMARY.

THE COURT: ALL RIGHT. I DO WANT TO CLARIFY, FOR THE

DEMONSTRATIVES, QDX 9155, WHICH YOU USED FOR YOUR ANALYSIS,

YOU'RE SAYING NO AMENDMENTS WERE CONSIDERED FOR THIS QDX 9251;

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NEVO DIRECT BY MR. BORNSTEIN

UNITED STATES COURT REPORTERS

1924

IS THAT CORRECT?

THE WITNESS: I'M NOT SURE, BUT THE SLIDES THAT I

SHOWED, IF THAT'S -- I'M SORRY, I'M NOT SURE. FOR THOSE

SLIDES, IT WAS ALL ORIGINAL CONTRACTS, NO AMENDMENTS.

THE COURT: GOT IT.

BY MR. BORNSTEIN:

Q. PROFESSOR, CAN YOU EXPLAIN WHY YOU DID IT THAT WAY?

A. YES. THE REASON I DID IT THAT WAY IS BECAUSE THE --

THAT'S BASICALLY THE HEART OF THE FTC'S THEORY AND THAT'S THE

WAY THAT I, THAT I TESTED IT. IT WAS A DELIBERATE CHOICE TO

FOCUS ON THAT IMPLICATION OF THE FTC'S THEORY. IT WAS JUST TO

CHECK THE, THE PREDICTIONS REGARDING THE ORIGINAL CONTRACT.

THE COURT: OKAY. 9166 IS ADMITTED.

(DEFENDANT'S EXHIBIT QX 9166 WAS ADMITTED IN EVIDENCE.)

MR. BORNSTEIN: THANK YOU, YOUR HONOR.

I HAVE NO FURTHER QUESTIONS.

THE COURT: OKAY. TIME IS 11:27.

MR. MATHESON: MAY I APPROACH, YOUR HONOR?

THE COURT: GO AHEAD, PLEASE.

(PAUSE IN PROCEEDINGS.)

THE COURT: DOES THE FTC WANT TO JUST TAKE A QUICK

LOOK AT THIS? I'M GOING TO USE THAT TO RULE ON HPO NUMBER 2.

MR. MATHESON: SIR, HERE'S YOUR DEPOSITION TRANSCRIPT

BINDER AND YOUR REPORT.

(PAUSE IN PROCEEDINGS.)

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NEVO CROSS BY MS. MILICI

UNITED STATES COURT REPORTERS

1925

THE COURT: IS THAT FINE?

MS. IKEDA: I DON'T THINK WE HAVE THE CX NUMBER ON

THIS DOCUMENT.

THE COURT: YOU KNOW, YOU ALL CAN LOOK AT THAT. AND

THEN I JUST WANT TO MAKE SURE THAT ANYTHING I TAKE BACK HAS

BEEN APPROVED BY BOTH PARTIES.

I WOULD LIKE IT BEFORE LUNCH BECAUSE I'M HOPING TO RULE ON

THE HIGH PRIORITY OBJECTIONS OVER LUNCH. I RULED ON THE TWO

SEALING MOTIONS ON THE LAST BREAK. I'M HOPING TO GET THINGS

OUT QUICKLY.

IF YOU COULD JUST GIVE THAT TO ME BEFORE LUNCH, THAT WOULD

BE GREAT.

ALL RIGHT. WHAT ELSE IS THERE TO DISTRIBUTE? THIS IS IT?

THE CLERK: YES.

(PAUSE IN PROCEEDINGS.)

THE COURT: OKAY. ARE YOU READY?

MS. MILICI: I AM.

THE COURT: 11:29. GO AHEAD, PLEASE.

CROSS-EXAMINATION

BY MS. MILICI:

Q. GOOD MORNING.

A. GOOD MORNING.

Q. YOU HAVE NOT DONE ANY ANALYSIS OF MARKET DEFINITION OR

MARKET POWER IN THIS CASE, HAVE YOU?

A. I AM NOT OFFERING THAT OPINION, NO.

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NEVO CROSS BY MS. MILICI

UNITED STATES COURT REPORTERS

1926

Q. YOU HAVE NOT DONE ANY ANALYSIS FOR MARKET DEFINITION OR

MARKET POWER, HAVE YOU?

A. NO.

Q. AND YOU AGREE THAT QUALCOMM BEGAN SELLING CDMA MODEM CHIPS

FIVE YEARS BEFORE COMPETING CHIPS WERE COMMERCIALIZED; RIGHT?

A. I'D HAVE TO LOOK AT THE EXACT DATE, BUT THAT SOUNDS ABOUT

RIGHT.

Q. AND YOU AGREE THAT QUALCOMM WAS ALSO THE FIRST SUPPLIER OF

3G CDMA CHIPS; RIGHT?

A. AGAIN, THAT SOUNDS RIGHT.

Q. AND YOU AGREE THAT QUALCOMM HAD A TIME ADVANTAGE IN LTE;

CORRECT?

A. THAT SOUNDS RIGHT. I'M TRYING TO REMEMBER IF I USED

SPECIFICALLY THE TIME ADVANTAGE. I ASSUME, SINCE YOU'RE USING

IT, I PROBABLY HAVE IT IN MY REPORT, SO THAT'S FINE.

Q. AND YOU AGREE THAT QUALCOMM HAD MORE THAN AN 80 PERCENT

SHARE OF THE ENTIRE LTE MARKET FOR AT LEAST THREE YEARS;

CORRECT? THIS IS AN EXHIBIT TO YOUR REPORT; RIGHT?

A. AGAIN, I'LL TAKE YOUR REPRESENTATION AS GIVEN. I DON'T

REMEMBER THE MARKET SHARES.

Q. AND IN ONE OF THOSE LAST SLIDES THAT YOU WERE SHOWN ABOUT

THE STRATEGIC FUNDS, THAT SHOWS THAT SOME OEM'S, SOME VERY

LARGE OEM'S, HAVE RELIED UPON QUALCOMM FOR 100 PERCENT OF CDMA

AND/OR LTE CHIPSETS AT THE TIME THAT THEY NEGOTIATED THEIR

LICENSES; RIGHT?

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NEVO CROSS BY MS. MILICI

UNITED STATES COURT REPORTERS

1927

A. THAT WAS DEFINITELY IN THE SLIDE, YES.

Q. AND YOU HAVE BEEN HERE IN COURT THROUGH -- FOR PARTS OF

THIS TRIAL; CORRECT?

A. YES, I HAVE, YES.

Q. AND YOU'VE HEARD TESTIMONY FROM OEM'S THAT THEY PAID

HIGHER ROYALTIES BECAUSE OF THE CHIP LEVERAGE EXERTED BY

QUALCOMM, HAVE YOU NOT?

A. I MIGHT NOT HAVE BEEN HERE FOR THAT. I MIGHT HAVE READ IT

IN THE TRANSCRIPT. BUT, YES, I KNOW THAT I READ IT, YES.

Q. AND YOU'RE AWARE THAT MULTIPLE OEM'S HAVE OFFERED THAT

TESTIMONY UNDER OATH, AREN'T YOU?

A. SEVERAL, I BELIEVE, HAVE, YES.

Q. AND IT'S YOUR TESTIMONY THAT THE EMPIRICAL TESTS THAT YOU

DID DOES PROVE THAT TESTIMONY; CORRECT?

A. IT IS MY TESTIMONY THAT THE DATA SHOWS WHAT THEY SHOW.

Q. AND IT'S YOUR TESTIMONY THAT THE DATA SHOWS THAT THE

PARTICIPANTS IN THE NEGOTIATIONS WHO SAY THAT THEY PAID MORE

BECAUSE OF CHIP LEVERAGE ARE WRONG; CORRECT?

A. WELL, IT'S MY TESTIMONY THAT THE DATA SHOWS WHAT THEY

SHOW, AND YOU CAN DRAW THE IMPLICATIONS FROM THAT. BUT I'M

STANDING BY MY ANALYSIS.

Q. OKAY. WELL, LET'S LOOK AT THE DATA THAT YOU LOOKED AT.

CAN YOU PLEASE LOOK AT APPENDIX D1 TO YOUR REPORT.

A. I HAVE A LOT OF FOLDERS HERE. I'M GOING TO BE A LITTLE

BIT SLOWER.

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UNITED STATES COURT REPORTERS

1928

Q. I THINK WE TRIED TO PUT A TAB ON WHERE D1 IS SO THAT WE

COULD HELP YOU.

A. OKAY. I HAVE APPENDIX D IN FRONT OF ME.

Q. AND APPENDIX D SAYS WHAT YOU DID TO CREATE THE DATA SET

THAT YOU USED IN YOUR CONTRACTUAL RATE ANALYSIS; CORRECT?

A. THAT'S CORRECT, YES.

Q. AND THIS SAYS THAT WHAT YOUR TEAM DID WAS TO LOOK AT

LICENSES, CATEGORIZE THEM AS FRAMEWORK AGREEMENT, KOREAN

AGREEMENTS, CHINESE PATENT LICENSE AGREEMENTS, OR

NON-GOVERNMENT, AND THEN TO RECORD THE ROYALTY RATE. AND YOU

SAID -- IN THIS IT SAYS THAT NOTED THE HIGHEST AND LOWEST

ROYALTY RATES IDENTIFIED IN A REVIEW OF THE CONTRACT ROYALTY

SECTION, ACROSS ALL GEOGRAPHIES, FOR ALL POSSIBLE QUANTITIES

SOLD, AND AT ANY TIME DURING THE LIFE OF THE CONTRACT.

DO YOU SEE?

A. YES.

Q. IS THAT YOUR UNDERSTANDING OF WHAT YOUR TEAM DID?

A. YES, I BELIEVE SO.

Q. AND THAT'S YOUR UNDERSTANDING OF WHAT THE BACK UP DATA IN

YOUR REPORT AND THE SUMMARY EXHIBIT WE'VE JUST SEEN SAY?

A. I BELIEVE THAT THAT'S A DESCRIPTION OF THE PROCESS THAT WE

FOLLOWED, YES.

Q. AND THEN FURTHER DOWN, IT SAYS AMENDMENT INFORMATION.

DO YOU SEE?

A. YES.

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UNITED STATES COURT REPORTERS

1929

Q. AND WHAT YOU DID WHEN YOU WERE CREATING THIS DATABASE WAS

TO RECORD ONLY THE EFFECTIVE DATE OF THE FIRST AMENDMENT THAT

CHANGES THE ROYALTY RATES IN THE INITIAL AGREEMENT, BUT YOU

DON'T RECORD THE ACTUAL NEW RATE; CORRECT?

A. I BELIEVE THAT'S CORRECT, WE DIDN'T USE THAT IN THE

ANALYSIS.

Q. AND YOU DIDN'T EVEN IDENTIFY THE EXISTENCE OF SECOND AND

THIRD AND FOURTH AMENDMENTS; CORRECT?

A. IN THE DATA SET THAT WE USED, WE DIDN'T IDENTIFY THAT.

Q. AND IN YOUR DATA SET, YOU DON'T INCLUDE TERMS RELATING TO

CROSS-LICENSES, DO YOU --

A. WE DID NOT INCLUDE THOSE TERMS, NO.

Q. -- AND YOU DON'T INCLUDE ANYTHING ABOUT THE VALUE OF THE

CROSS-LICENSES TO QUALCOMM; RIGHT?

A. WE DID NOT INCLUDE CROSS-LICENSES.

Q. AND YOUR DATA SET DOESN'T INCLUDE ANY INFORMATION ABOUT

THE ROYALTY BASE, DOES IT?

A. I DO NOT BELIEVE THAT WE COLLECTED THAT, NO.

Q. SO YOU CAN'T TELL FROM LOOKING AT YOUR DATA SET HOW THE

ROYALTY IN A CONTRACT WOULD BE CALCULATED; RIGHT?

A. WE WITH -- WELL, THIS IS THE DATA THAT WE COLLECTED AND

WHAT WE HAVE HERE, YES.

Q. AND THE DATA THAT YOU COLLECTED WOULDN'T ALLOW YOU TO

FIGURE OUT HOW THE RATE WAS CALCULATED; RIGHT?

A. IT WOULD ALLOW US TO CALCULATE THE RATE THAT WE NEEDED FOR

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UNITED STATES COURT REPORTERS

1930

ANALYSIS.

Q. WHICH WASN'T -- WHICH DIDN'T INCLUDE THE RATE BASE? IT

DIDN'T INCLUDE ADJUSTMENTS TO THE NET SELLING PRICE; CORRECT?

A. WELL, IT INCLUDED THE ROYALTY, WHAT WE CALLED IT THE

CONTRACTUAL ROYALTY RATE IS WHAT IT HAS HERE.

Q. BUT IT DOESN'T INCLUDE THE ROYALTY BASE, DOES IT?

A. NO. IT INCLUDES A CONTRACTUAL ROYALTY RATE.

Q. AND A LOT OF THE LICENSES THAT WERE REVIEWED, THERE ARE A

LOT OF OTHER TERMS; CORRECT?

A. THEY'RE GENERALLY LONG LICENSES, YES.

Q. AND YOU DON'T TAKE ACCOUNT FOR IN ANY OF THOSE TERMS IN

YOUR DATA SET, DO YOU?

A. I FOCUSSED, AS I THINK I WAS VERY CLEAR, ON THE

CONTRACTUAL ROYALTY RATES.

Q. OKAY. CAN YOU PLEASE LOOK AT CDX 0204, WHICH IS TAB 1 IN

YOUR BINDER. AND I BELIEVE PARTS OF THIS ARE UNDER SEAL, SO

I'M GOING TO JUST NOT SHOW IT TO THE COURTROOM RIGHT NOW.

A. OKAY. SO TAB 1?

Q. UM-HUM. AND THIS IS THE BACKUP MATERIAL TO YOUR EXHIBIT

13, WHICH IS SOMETHING THAT WE LOOKED AT EARLIER TODAY.

AND IF YOU LOOK ON THIS LIST, AND I THINK WE HAVE IT ON

THE SCREEN, THERE'S A LICENSE, THERE'S AN ERICSSON LICENSE

THERE.

MR. BORNSTEIN: EXCUSE ME, YOUR HONOR. I DIDN'T GET

A BINDER.

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UNITED STATES COURT REPORTERS

1931

MS. MILICI: OH.

THE COURT: PLEASE GIVE MR. BORNSTEIN ALL THE

BINDERS. I THINK THERE ARE MULTIPLE.

MR. BORNSTEIN: THANK YOU. YOUR HONOR, I HAVE THE

DEPOSITION TRANSCRIPT AND THE EXPERT REPORT.

MS. MILICI: AND MY APOLOGIES TO EVERYONE FOR THE

SIZE OF THE BINDERS.

Q. THERE'S A LICENSE LISTED FOR ERICSSON.

DO YOU SEE THAT?

A. SORRY. I'M JUST --

Q. IT'S UNDER T.

A. UNDER T?

Q. UM-HUM.

A. SORRY. I APOLOGIZE. IT'S SMALL FONT, HARD TO SEE HERE.

Q. IT'S ON YOUR SCREEN, SIR?

A. OKAY.

Q. AND THIS DATA SET PURPORTS TO IDENTIFY THE LOWEST RATE AT

ANY TIME DURING THE LIFE OF THE CONTRACT; RIGHT? THAT'S WHAT

WE JUST LOOKED AT IN APPENDIX D?

A. I BELIEVE THAT'S CORRECT. I CAN'T QUITE SEE THE COLUMNS

THAT THIS CORRESPONDS TO, BUT THAT SHOULD BE.

Q. THAT'S WHAT THIS IS SUPPOSED TO REPRESENT; RIGHT?

A. YES.

Q. OKAY. CAN YOU PLEASE TURN TO TAB 2 IN YOUR BINDER. AND

THIS IS, AGAIN, PARTIALLY SEALED.

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UNITED STATES COURT REPORTERS

1932

THIS IS THE MARCH 1999 LICENSE WITH ERICSSON THAT'S

REFERENCED IN YOUR DATA; CORRECT?

A. IT'S A MARCH '99 AGREEMENT WITH ERICSSON. YES, THAT LOOKS

RIGHT, YES.

Q. OKAY. AND IF WE LOOK ON PAGE 9 IN SECTION 3.2, THERE'S A

SECTION ON ROYALTIES.

DO YOU SEE?

A. PAGE 9, ROYALTIES, YES, 3.2.

Q. AND IN 3.2, IT PROVIDES FOR ONE ROYALTY RATE FOR SALES

PRIOR TO 2004, AND THEN A SIGNIFICANTLY LOWER RATE FOR AFTER

2004, DOESN'T IT?

A. I'D HAVE TO READ IT, BUT I'LL TAKE YOUR REPRESENTATION AS

GIVEN JUST TO SAVE TIME.

Q. WELL, IT DOES SAY THAT ON THE SCREEN THERE?

A. I'D HAVE TO READ IT TO UNDERSTAND IT, BUT I'LL TAKE YOUR

REPRESENTATION OF THAT.

Q. AND THAT LOWER ROYALTY RATE, IT DOESN'T APPEAR ANYWHERE IN

YOUR DATA, DOES IT?

A. THAT -- YOU MEAN THE 2 AND A HALF PERCENT UNDER 2?

Q. SIR, I BELIEVE THAT'S CONFIDENTIAL INFORMATION.

A. I'M SORRY.

Q. YOU'RE NOT SUPPOSED TO READ THE NUMBERS OUT LOUD.

A. I APOLOGIZE. YEAH, I BELIEVE THAT'S DIFFERENT FROM THE

NUMBER YOU SHOWED ME BEFORE.

Q. OKAY. AND THAT DOESN'T APPEAR IN YOUR DATA; RIGHT?

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UNITED STATES COURT REPORTERS

1933

A. IT DIDN'T APPEAR ON THAT SPREADSHEET THAT YOU SHOWED ME.

Q. AND IF WE LOOK AT THE SUMMARY EXHIBIT THAT WAS JUST

ADMITTED, IT WOULDN'T APPEAR THERE, EITHER, WOULD IT?

A. THE SUMMARY EXHIBIT WAS, IT WAS WHAT IT WAS, YES.

Q. OKAY. AND YOU CREATED THEM BOTH THE SAME WAY. SO IF IT'S

NOT IN YOUR BACKUP MATERIAL, IT'S ALSO NOT IN THE SUMMARY

EXHIBIT; CORRECT?

A. I'D HAVE TO VERIFY, BUT THAT SOUNDS RIGHT, YES.

Q. SO THAT SUMMARY EXHIBIT AND YOUR BACKUP MATERIALS DON'T

CONTAIN ALL OF THE ROYALTY INFORMATION, EVEN FROM THE INITIAL

CONTRACTS; CORRECT?

A. IT CREATES AN ADDITIONAL -- THERE'S AN ADDITIONAL NUMBER

HERE THAT'S NOT INCLUDED IN THAT.

Q. OKAY. THANK YOU.

AND YOU UNDERSTAND THAT AT THE TIME OF THIS 1999 LICENSE

AGREEMENT, ERICSSON ENTERED INTO A SERIES OF AGREEMENTS WITH

QUALCOMM THAT INVOLVED THE EXCHANGE OF AN INFRASTRUCTURE

BUSINESS AND PATENT LICENSE RIGHTS, A LOT OF TERMS; RIGHT?

A. I AGREE. AND I THINK FOR THAT REASON I EXCLUDED IT FOR

MUCH OF MY ANALYSIS.

Q. YOU DID EXCLUDE ERICSSON FROM YOUR ANALYSIS, DIDN'T YOU?

A. YES.

Q. AND NOWHERE IN YOUR DATA DID YOU ACCOUNT FOR THESE VARIOUS

OTHER TERMS, IN THE ERICSSON CONTRACT OR IN ANY OTHER CONTRACT;

RIGHT?

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UNITED STATES COURT REPORTERS

1934

A. I'M NOT SURE WHAT YOU MEAN BY "ACCOUNT." WE DIDN'T RECORD

IT IN A CONSISTENT MANNER, NO.

Q. AND HOW YOU RAN YOUR ANALYSIS, THE SLIDE THAT WE SAW

EARLIER, WAS BASED ON THIS DATA; CORRECT?

A. WAS BASED ON THE CONTRACTUAL DATA, YES.

Q. BUT ONLY PARTS OF THE CONTRACTUAL INFORMATION; RIGHT?

A. WELL, IT WAS BASED ON THE DATA WE HAD, WHICH WAS THE

CONTRACTUAL DATA.

Q. WELL, YOU HAD OTHER DATA AVAILABLE, DIDN'T YOU? I MEAN,

YOU HAD THE WHOLE CONTRACT?

A. I FOCUSSED ON THE CONTRACTUAL DATA, YES.

Q. OKAY. IF WE COULD LOOK BACK AT YOUR BACKUP DATA THERE,

THE CDX 0204?

A. SO BACK TO TAB 1?

Q. YES. AND THIS LINE IS NOT SEALED, AND WE'RE LOOKING AT

MOTOROLA RIGHT NOW.

DO YOU SEE THERE'S AN ENTRY THERE FOR MOTOROLA, AND THE

NUMBER ON THE RIGHT-HAND SIDE, THE .04, THAT'S THE LOWER BOUND

CDMA RATE; CORRECT?

A. THAT'S CORRECT, YES.

Q. AND IF YOU READ ACROSS, THIS IS SAYING THAT THERE WAS A

LOWER BOUND RATE OF 4 PERCENT FOR MOTOROLA FROM A 1990 LICENSE;

CORRECT?

A. THAT LOOKS CORRECT, YES.

Q. AND THERE'S NO OTHER CDMA RATE INDICATED HERE; RIGHT?

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UNITED STATES COURT REPORTERS

1935

A. NOT THAT I CAN SEE.

Q. AND THERE'S NO OTHER CDMA RATE INDICATED IN THE SUMMARY

EXHIBIT THAT WAS JUST INTRODUCED; RIGHT?

A. I'LL TAKE YOUR REPRESENTATION FOR IT. I HAVEN'T CHECKED.

Q. CAN WE PLEASE LOOK AT JX 4, PLEASE, WHICH IS TAB 5.

AND, YOUR HONOR, IT JUST OCCURRED TO ME THAT I DID NOT

MOVE TO ADMIT THE PRIOR ERICSSON CONTRACT.

THE COURT: YOU MEAN JX 9?

MS. MILICI: YES. I MOVE TO ADMIT JX 9.

MR. BORNSTEIN: THERE'S NO OBJECTION, YOUR HONOR.

THE COURT: IT'S ADMITTED.

(JOINT EXHIBIT JX 9 WAS ADMITTED IN EVIDENCE.)

THE COURT: GO AHEAD, PLEASE.

BY MS. MILICI:

Q. SO LET'S LOOK AT JX 004, WHICH IS TAB 5. AND THIS HAS

BEEN PREVIOUSLY ADMITTED AND IS NOT SEALED.

AND LET'S LOOK AT PAGE, I BELIEVE IT'S PAGE 20. NOW, PAGE

20 HERE, THIS IS THE PROVISION OF THE AGREEMENT HAVING TO DO

WITH ROYALTIES.

AND IT SAYS HERE THAT MOTOROLA'S ROYALTY RATE SHALL NOT

EXCEED 80 PERCENT OF THE LOWEST ROYALTY RATE THAT'S PAID BY

OTHER COMPANIES TO QUALCOMM; RIGHT?

A. THAT'S CORRECT, YES, THAT'S WHAT IT SAYS.

Q. AND THAT DOESN'T -- THAT INFORMATION DOESN'T APPEAR

ANYWHERE IN YOUR CONTRACTUAL SUMMARY, DOES IT?

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NEVO CROSS BY MS. MILICI

UNITED STATES COURT REPORTERS

1936

A. I BELIEVE IT ACTUALLY APPEARS IN MY REPORT.

Q. BUT IT'S NOT ANYWHERE IN YOUR ANALYSIS, IS IT?

A. I'M NOT SURE WHAT YOU MEAN "IN MY ANALYSIS." I MEAN --

Q. WELL, YOU RAN TESTS, RIGHT, USING THE BACKUP DATA THAT WE

JUST LOOKED AT AND YOU USED A 4 PERCENT ROYALTY IN THOSE TESTS,

DIDN'T YOU?

A. YES, I DID.

Q. AND THIS -- THAT'S NOT THE LOWEST ROYALTY THAT CAN BE PAID

UNDER THIS CONTRACT. THAT'S THE HIGHEST ROYALTY, ISN'T IT?

A. SO FOR THE CONTRACTUAL RATE, WE LOOKED AT THIS.

FOR THE EFFECTIVE RATE, THAT'S PART OF THE REASON WHY WE

LOOKED AT THE EFFECTIVE RATE WOULD HAVE BEEN DIFFERENT. BUT

THE CONTRACTUAL RATE WE FOCUSSED ON IS THE 4 PERCENT HERE.

Q. OKAY. AND YOU WOULD AGREE THAT THE MOTOROLA CONTRACT WAS

A VERY COMPLICATED AGREEMENT; RIGHT?

A. I THINK GENERALLY THESE CONTRACTS ARE COMPLICATED. FOR

ME, AS AN ECONOMIST, ALL CONTRACTS ARE COMPLICATED.

Q. BUT GENERALLY THESE LICENSES ARE VERY COMPLEX?

A. YES.

Q. AND IN THIS CASE IN PARTICULAR, THERE WERE -- THERE WERE

CROSS-RIGHTS BEING GRANTED; RIGHT?

A. SOUNDS REASONABLE. I DON'T REMEMBER SPECIFICALLY IN THIS

CONTEXT, BUT IT SOUNDS VERY REASONABLE, YES.

Q. AND QUALCOMM AGREED IN THESE CONTRACTS TO PAY ROYALTIES TO

MOTOROLA; RIGHT?

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UNITED STATES COURT REPORTERS

1937

A. AGAIN, THAT SOUNDS RIGHT. OUT OF MEMORY, I CAN'T REMEMBER

THE EXACT DETAILS. BUT IT SOUNDS RIGHT, YES.

Q. AND THIS CONTRACT HAD A ROYALTY SHARING PROVISION.

QUALCOMM WAS AGREEING TO SHARE WITH MOTOROLA ROYALTIES THAT IT

RECEIVED FROM THIRD PARTIES; CORRECT?

A. AGAIN, I CAN'T CONFIRM EXACTLY, BUT THAT SOUNDS ABOUT

RIGHT.

Q. AND YOU DON'T ACCOUNT FOR THAT ANYWHERE IN YOUR

CONTRACTUAL RATE ANALYSIS, DO YOU?

A. THAT'S CORRECT. I FOCUSSED ON THE CONTRACTUAL RATE.

Q. YOU FOCUSSED JUST ON THE HEAD LINE ROYALTY RATE; RIGHT?

A. I FOCUSSED ON WHAT I CALL THE CONTRACTUAL RATE. WE'RE

HAPPY TO -- NAME IT WHATEVER YOU LIKE. IT'S THE CONTRACTUAL

RATE.

Q. AND WHEN YOU DID YOUR ANALYSIS, YOU WEREN'T SURE WHETHER

THE OTHER TERMS OF THIS AGREEMENT AND THE AT&T AGREEMENT THAT

WAS SIGNED AT THE SAME TIME, WHETHER THOSE OTHER TERMS WERE

RELEVANT TO WHETHER THERE WERE APPROPRIATE BENCHMARKS FOR LATER

AGREEMENTS, DID YOU?

A. IN -- DEPENDS A LITTLE BIT ON THE CONTEXT OF -- I ASSUME

YOU'RE REFERRING TO SOMETHING THAT I SAID SOMEWHERE. IT

DEPENDS ON THE CONTEXT, SO I'D LIKE TO SEE THE CONTEXT.

Q. WELL, LET ME ASK YOU FIRST THEN. DO YOU THINK THAT THESE

OTHER TERMS ARE RELEVANT TO WHETHER THESE ARE APPROPRIATE

BENCHMARKS FOR LATER CONTRACTS THAT DON'T CONTAIN THESE TERMS?

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UNITED STATES COURT REPORTERS

1938

A. NOT IN THE CONTEXT OF THE ANALYSIS IN WHICH I USED THEM.

I FOCUSSED ON THE CONTRACTUAL RATES, AND I COMPARED THE

CONTRACTUAL RATES, AS I EXPLAINED, BETWEEN DIFFERENT PERIODS.

AND THAT'S WHAT I FOCUSSED ON.

Q. SO YOU COMPARED THE CONTRACTUAL RATE IN A CONTRACT THAT

INCLUDES ROYALTY SHARING, A GUARANTEED 20 PERCENT DISCOUNT OFF

OF THE RATES PAID BY COMPETITORS, AND OTHER ITEMS OF VALUE AND

YOU COMPARED JUST THE 4 PERCENT RATE TO LATER CONTRACTS THAT

DIDN'T HAVE THOSE OTHER TERMS; RIGHT?

A. I COMPARED THE CONTRACTUAL RATES ACROSS TERMS. THOSE

OTHER CONTRACTS ALSO HAD TERMS. I JUST FOCUSSED ON ONE

PARTICULAR RATE AND THAT'S WHAT I COMPARED, YES.

Q. SO THE OTHER CONTRACTS, SOME OF THE OTHER CONTRACTS MIGHT

HAVE ALSO HAD COMPLEX TERMS THAT INVOLVED EXCHANGES OF VALUES

BETWEEN THE PARTIES; RIGHT?

A. THEY MIGHT HAVE. I FOCUSSED, AS I SAID, ON THE

CONTRACTUAL RATE.

Q. AND YOU DIDN'T THINK ANY OF THOSE OTHER EXCHANGES OF VALUE

WERE RELEVANT TO YOUR ANALYSIS; RIGHT?

A. WHAT I FOCUSSED ON IS ON ONE IMPLICATION OF THEORY, AND

THAT'S WHAT I TESTED. I COULD HAVE LOOKED AT OTHER THINGS, BUT

I LOOKED AT THAT PARTICULAR CONTRACTUAL RATE. I THINK I WAS

VERY CLEAR ABOUT THAT. I APOLOGIZE IF NOT.

Q. OKAY. AND ISN'T IT TRUE THAT MOTOROLA'S RUNNING ROYALTY

RATE FOR CDMA INCREASED TO 5 PERCENT IN THE YEAR 2000?

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NEVO CROSS BY MS. MILICI

UNITED STATES COURT REPORTERS

1939

A. I CAN'T EXACTLY RECALL AS I SIT HERE TODAY, BUT I ASSUME

YOU HAVE A BASIS FOR THAT.

Q. WELL, YOU CAN LOOK IN YOUR REPORT, PAGE 63, NOTE 223.

A. OKAY.

Q. AND THERE YOU WROTE, "MOTOROLA'S ROYALTY RATE WAS

SUBSEQUENTLY INCREASED TO 5 PERCENT IN A 2000 AMENDMENT TO THE

LICENSE AGREEMENT."

DO YOU SEE THAT?

A. YES. SORRY. WHICH -- I SEE IT ON THE SCREEN.

YES, YOU READ THAT CORRECTLY.

Q. AND THAT'S WHAT YOU WROTE IN YOUR REPORT?

A. YES.

Q. AND YOU DIDN'T INCLUDE THAT 5 PERCENT ROYALTY RATE IN YOUR

ANALYSIS, DID YOU?

A. BECAUSE AS I EXPLAINED, I FOCUSSED ON THE ORIGINAL

CONTRACTS, NOT ON THE AMENDMENTS.

Q. SO YOU LOOKED ONLY AT MOTOROLA'S 1990 CONTRACT AND YOU

COMPARED -- THAT HAD ALL OF THESE COMPLEX TERMS -- AND YOU

COMPARED THAT TO OTHER LICENSES ENTERED IN 2006 AND LATER WITH

OTHER OEM'S, BUT YOU DIDN'T INCLUDE THIS; RIGHT?

A. WHAT I DID WAS I TOOK THE CONTRACTUAL RATE AND THAT'S WHAT

I COMPARED. I THINK YOU MISCHARACTERIZED A LITTLE BIT MY

ANALYSIS.

WHAT I DID WAS I TOOK THE CONTRACTUAL RATE, I DID IT

CONSISTENTLY ACROSS ALL THE CONTRACTS, AND THAT'S WHAT I

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UNITED STATES COURT REPORTERS

1940

COMPARED.

Q. WHY DIDN'T YOU COMPARE THESE OTHER TERMS?

A. BECAUSE I FOCUSSED ON THE CONTRACTUAL RATES. I COULD HAVE

DONE OTHER THINGS. BUT I FOCUSSED ON THE CONTRACTUAL RATES.

THAT'S WHAT I DID.

Q. WOULD IT HAVE BEEN MORE COMPLICATED TO DO THE OTHER

THINGS?

A. I DON'T KNOW. I'D HAVE TO LOOK AT WHAT THE OTHER THINGS

ARE. BUT I FOCUSSED ON THE CONTRACTUAL RATE.

Q. DID YOU CONSIDER DOING OTHER THINGS?

A. EVEN WHAT WE DID WAS AN AMOUNT, SIGNIFICANT AMOUNT OF

ANALYSIS, AND THAT'S WHAT WE DID, AND IT'S ACTUALLY MUCH MORE

THAN ANYONE ELSE HAS DONE IN THIS CASE.

Q. LET'S LOOK AT YOUR DEMONSTRATIVES HERE. IF WE LOOK AT

PAGE 4?

A. ARE YOU GOING TO PUT IT ON THE SCREEN?

Q. IT'S THERE. PAGE 4.

MR. KOTARSKI: OF HIS DEMONSTRATIVES?

THE WITNESS: I CAN LOOK HERE IF YOU'LL JUST SHOW ME.

MS. MILICI: IT'S QDX 9354. YOU MIGHT HAVE RECEIVED

IT DIFFERENTLY PAGINATED.

Q. NOW, IN THIS TEST, YOU SAID THAT YOU WERE COMPARING THE

ROYALTY RATES IN SOME AGREEMENTS TO THE ROYALTY RATES IN OTHER

AGREEMENTS; RIGHT?

A. YES.

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UNITED STATES COURT REPORTERS

1941

Q. AND THE TEST THAT YOU DID WAS TO COMPARE ROYALTY RATES IN

AGREEMENTS BEFORE OCTOBER 1995 TO ROYALTY RATES AFTER; RIGHT?

A. THAT WAS ONE OF THE TESTS I DID. THAT WAS NOT THE ONE I

FOCUSSED ON IN THE TESTIMONY.

I MEAN, I DID DO THAT. THAT WAS PART OF THE ANALYSIS THAT I

DID.

Q. THAT WAS ONE OF YOUR REGRESSIONS; RIGHT?

A. THAT IS DEFINITELY ONE OF MY REGRESSIONS, NOT THE ONE THAT

I FOCUSSED ON IN THE LIVE TESTIMONY.

Q. YOU ALSO DID ONE ON 1993?

A. IN THE ANALYSIS THAT I LOOKED AT, I FOCUSSED, I BELIEVE --

I'D HAVE TO REFRESH MYSELF, PRE-'95 AND POST-'95.

Q. PRE-'95 AND POST-'95. THAT IS WHAT I JUST SAID. SO

PRE-'95, YOU WERE COMPARING PRE-'95 LICENSES TO ALL POST-'95

LICENSES; RIGHT?

A. I DID THAT IN THE REPORT. BUT THAT WAS NOT THE ONE I

FOCUSSED ON IN MY LIVE TESTIMONY. THAT WAS MY ONLY POINT.

Q. OKAY. AND YOU WERE DOING THAT TO COMPARE ROYALTY RATES

BEFORE THERE WAS MARKET POWER UNTIL AFTER THERE WAS -- IT WAS A

PERIOD IN WHICH THERE MIGHT HAVE BEEN MARKET POWER; CORRECT?

A. I TOOK THAT AS A VERY CONSERVATIVE MEASURE OF A PERIOD

WHERE BEFORE THERE WAS CDMA NETWORK OR QUALCOMM SELLING CHIPS,

IT COULD NOT PROCEED -- COULD NOT CONCEIVABLY HAVE HAD MARKET

POWER. SO THAT WAS THE CONSERVATIVE APPROACH.

Q. WELL, WERE YOU HERE WHEN DR. CHIPTY TESTIFIED?

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UNITED STATES COURT REPORTERS

1942

A. YES, I WAS.

Q. AND SHE TESTIFIED, DIDN'T SHE, THAT COMPETITION FOR CHIPS

HAPPENS YEARS BEFORE CHIPS ARE SHIPPED; RIGHT?

A. THAT SOUNDS ABOUT RIGHT. I DON'T REMEMBER SPECIFICALLY

WHAT SHE SAID, BUT YOU THAT SOUNDS RIGHT.

Q. AND IN YOUR DEPOSITION, YOU TESTIFIED THAT OEM'S MAKE CHIP

PURCHASING DECISIONS UP TO TWO YEARS BEFORE A CHIP IS SHIPPED;

CORRECT?

A. IT -- THE CURRENT STATE, THAT SOUNDS ABOUT RIGHT, YES.

Q. AND THESE EARLY LICENSE AGREEMENTS THAT WE'RE TALKING

ABOUT, THE MOTOROLA AND THE AT&T, THOSE ALL CAME WITH SUPPLY

AGREEMENTS; CORRECT?

A. THEY DID HAVE SOME COMPONENT SUPPLY AGREEMENTS, YES.

Q. AND YOU AGREED THAT QUALCOMM WAS THE ONLY COMPANY THAT

SOLD CDMA CHIPS WHEN IT BEGAN SELLING THEM AND FOR ANOTHER FIVE

YEARS; CORRECT?

A. AGAIN, THAT SOUNDS ABOUT RIGHT. I CAN'T TELL YOU FOR

SURE, BUT THAT SOUNDS ABOUT RIGHT.

Q. AND YOU HAVE DONE NO ANALYSIS ABOUT WHETHER THEY HAD

MARKET POWER PRIOR TO THAT DATE; RIGHT?

A. FOR EVERYTHING I DID IN TERMS OF MARKET POWER, AND I THINK

I WAS CLEAR ABOUT THAT IN THE BEGINNING OF MY TESTIMONY, I TOOK

AS GIVEN WHAT WAS OFFERED.

Q. SO YOU TOOK AS GIVEN THAT THEY DIDN'T HAVE MARKET POWER?

A. PRE-'95, YEAH, THAT'S WHAT I LOOKED AT. IT WASN'T

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UNITED STATES COURT REPORTERS

1943

SOMETHING THAT I STUDIED.

Q. AND IN YOUR TESTS, YOUR REGRESSIONS, YOU DON'T CONTROL AT

ALL FOR CHANGES IN HANDSETS, CHANGES IN PORTFOLIOS, DIFFERENCES

AMONG THE OEM'S? YOU DON'T CONTROL FOR ANY OF THAT, DO YOU?

A. LESS WHAT I LOOK AT IS I LOOK AT THE CONTRACTUAL RATES AND

COMPARE BETWEEN THE TWO GROUPS, I EXPLAINED BETWEEN THE TWO

DIFFERENT PERIODS.

Q. AND YOUR REGRESSION IS A BEFORE AND AFTER WHERE YOU ASSIGN

A 0 TO CONTRACTS BEFORE A CERTAIN DATE, A 1 AFTERWARDS, AND

THEN JUST THE CONTRACTUAL ROYALTY RATE; RIGHT?

A. THE CONTRACTUAL ROYALTY RATE IS WHAT I WOULD CALL THE

DEPENDENT VARIABLE, AND THEN THERE IS A VARIABLE THAT INDICATES

WHETHER IT'S A PERIOD OF MARKET POWER OR NOT, AND THAT'S WHAT

WE CALLED A DUMMY VARIABLE. THAT'S WHAT YOU REFER TO AS 01.

Q. AND THOSE ARE THE ONLY TWO VARIABLES IN YOUR TEST;

CORRECT?

A. THAT'S A WAY TO TEST THE DIFFERENCE BETWEEN THE AVERAGE IN

AND THE ROYALTY RATES, YES.

Q. SO YOU'RE AVERAGING EVERYTHING AFTER 1995 AND EVERYTHING

BEFORE JUST ON THE CONTRACTUAL ROYALTY RATE?

A. AS I EXPLAINED, I'M LOOKING AT THE DIFFERENCE IN THE

ROYALTY RATE BETWEEN THESE TWO GROUPS, YES.

Q. SO YOU WOULD AGREE THAT LICENSE NEGOTIATIONS ARE MESSY;

RIGHT?

A. I BELIEVE THAT'S SOMETHING THAT I SAID, YES.

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UNITED STATES COURT REPORTERS

1944

Q. THAT IS SOMETHING THAT YOU SAID.

AND THAT OUTCOMES CAN DEPEND ON A VARIETY OF FACTORS;

RIGHT?

A. AGAIN, I'M PRETTY SURE THAT'S SOMETHING I'VE SAID, YES.

Q. AND YET, THESE ROYALTY RATES ARE CONSISTENT ACROSS, WHAT,

A 25 YEAR PERIOD?

A. YES.

Q. AND DURING THAT TIME, THE PRODUCT CHANGED, DIDN'T IT?

A. I'M NOT SURE WHAT I MEAN BY "THE PRODUCT." I MEAN, IT'S A

LICENSE. BUT --

Q. THE HANDSET CHANGED; CORRECT?

A. OKAY. I'M NOT SURE IF THAT'S THE PRODUCT, BECAUSE WE'RE

TALKING HERE ABOUT LICENSES.

Q. THE PRODUCT IN WHICH THE I.P. WAS GOING TO BE USED CHANGED

DRAMATICALLY OVER THAT TIME; CORRECT?

A. CELL PHONES DID, YEAH, THEY CLEARLY CHANGED.

Q. AND QUALCOMM'S PATENT PORTFOLIO CHANGED OVER TIME?

A. I THINK WE'VE HEARD TESTIMONY TO THAT.

Q. AND THE BARGAINING LEVERAGE OF DIFFERENT OEM'S CHANGED

OVER TIME; RIGHT?

A. THAT'S -- AGAIN, I HAVEN'T STUDIED THAT, BUT THAT SEEMS

REASONABLE.

Q. AND YET THIS RATE IS CONSISTENT FOR THE PAST 25 YEARS?

A. YEAH, IT SEEMS LIKE IT'S CONSISTENTLY AT THE FRAND RATE.

Q. AND YOU TESTIFIED AT YOUR DEPOSITION THAT YOU WERE NOT

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NEVO CROSS BY MS. MILICI

UNITED STATES COURT REPORTERS

1945

SURPRISED BY THE LACK OF VARIATION IN THE ROYALTY RATES BECAUSE

THEY ALL HAVE ONE -- ALL THESE LICENSE NEGOTIATIONS HAD ONE

THING IN COMMON, AND THAT WAS THAT QUALCOMM WAS A PARTY TO

THEM; CORRECT?

A. THAT SOUNDS LIKE SOMETHING I SAID, YES.

Q. OKAY. LET'S LOOK NOW TWO PAGES LATER AT PAGE 6.

NOW, YOU CALL THIS A WCDMA ONLY CONTRACTUAL RATES; RIGHT?

A. THAT'S DEFINITELY WHAT I CALLED IT. IT'S IN THE TITLE,

YES.

Q. AND WHEN YOU'RE CALLING SOMETHING WCDMA ONLY, THAT DOESN'T

MEAN THAT WCDMA IS THE ONLY TECHNOLOGY IN THE CONTRACT, DOES

IT?

A. AGAIN, DEPENDING ON THE SPECIFICS. BUT I THINK I WAS

CLEAR AS TO HOW, HOW WE DEFINE IT. IT'S DEFINED IN THE REPORT.

Q. IN FACT, MOST OF THESE LICENSES ALSO CONTAIN TERMS FOR

CDMA, DON'T THEY?

A. I'D HAVE TO LOOK AT THE SPECIFICS. BUT WE DEFINE THIS

AS -- THOSE PARTICULAR NEGOTIATIONS -- THERE'S A PARTICULAR

PROCESS THAT WE WENT IN TERMS OF WHAT'S A FINDING AS WCDMA

ONLY.

Q. AND THAT PROCESS DIDN'T EXCLUDE CONTRACTS THAT ALSO

CONTAINED TERMS FOR CDMA; CORRECT?

A. AGAIN, WE CAN GO THROUGH THE PROCESS, BUT IF THAT PROCESS

LED TO SOMETHING ALSO HAVING CDMA, YES.

Q. SO YOU CAN'T -- SITTING HERE RIGHT NOW, YOU CAN'T TELL US

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NEVO CROSS BY MS. MILICI

UNITED STATES COURT REPORTERS

1946

HOW MANY OF THESE CONTRACTS APPEARING HERE ACTUALLY CONTAIN

TERMS FOR CDMA, CAN YOU?

A. I CAN TELL YOU THE PROCESS BY WHICH WE WENT, BUT I CAN'T

TELL YOU INDIVIDUAL CONTRACTS AND WHAT THEY HAVE IN THEM.

Q. OKAY. AND SO IF WE LOOK AT THE NEXT SLIDE WHERE IT SAYS

WCDMA ONLY VERSUS CDMA --

I THINK YOU HAVE THE OLD SET THAT THEY GAVE US.

A. I HAVE THE HARD COPY IN FRONT OF ME, IF THAT HELPS.

Q. SO WHEN YOU'RE COMPARING WCDMA ONLY VERSUS CDMA, A LOT OF

THE CDMA LICENSES ACTUALLY HAVE WCDMA TERMS IN THEM, DON'T

THEY?

A. SOME OF THEM WERE SIGNED AT A POINT THAT COVERED BOTH CDMA

AND WCDMA, YES.

Q. SO THE RED DOTS THAT YOU CALLED CDMA, THOSE -- A LOT OF

THOSE LICENSES CONTAIN WCDMA TERMS; RIGHT?

A. THAT'S DEFINITELY A POSSIBILITY.

Q. AND THE BLUE DOTS THAT YOU HAVE THERE THAT YOU'RE CALLING

WCDMA ONLY, THOSE CONTRACTS, A LOT OF THEM HAVE CDMA TERMS;

RIGHT?

A. AGAIN, IT DEPENDS WHAT YOU MEAN BY "TERMS." BUT WE WENT

THROUGH A PROCESS WHERE WE LOOKED AT WCDMA.

Q. AND WHEN YOU WENT THROUGH THAT PROCESS, YOU INCLUDED

CONTRACTS AS WCDMA ONLY THAT INCLUDED CDMA TERMS; RIGHT?

A. YEAH. BUT THE FOCUS WAS ON THE ADDITION, SO IF WCDMA WAS

ADDED, THAT WAS WHY IT WAS WCDMA ONLY.

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NEVO CROSS BY MS. MILICI

UNITED STATES COURT REPORTERS

1947

Q. AND THOSE CONTRACTS CONTAINED TERMS FOR CDMA THAT MIGHT

HAVE BEEN DIFFERENT THAN PREVIOUS TERMS; RIGHT?

A. DEPENDS ON THE CONTEXT, YES. BUT THAT COULD BE A

POSSIBILITY.

Q. AND WHEN YOU WERE COMPARING WCDMA TO CDMA, I BELIEVE YOUR

TESTIMONY WAS THAT QUALCOMM COULDN'T HAVE HAD MARKET POWER IN

WCDMA; IS THAT RIGHT?

A. I BELIEVE THAT THAT HASN'T BEEN ALLEGED.

Q. BUT YOU HAVEN'T DONE ANY ANALYSIS OF WHETHER QUALCOMM

ACTUALLY HAD MARKET POWER IN WCDMA, HAVE YOU?

A. NO. I'M NOT OFFERING THAT OPINION, NO.

Q. AND CAN YOU OFFER THE OPINION THAT THERE WAS NO COST TO

THESE COMPANIES FROM LOSING ACCESS TO WCDMA FROM QUALCOMM?

A. I DID NOT ANALYZE ALL THESE COMPANIES. I JUST LOOKED AT

THE SPECIFIC CASES THAT WE HAD IN THE ANALYSIS.

Q. AND IF WE LOOK AT YOUR WCDMA REGRESSION, CAN WE LOOK AT

THAT FOR A SECOND? I DON'T KNOW WHAT NUMBER IT IS IN THE

EXHIBIT YOU HAVE.

SORRY, YOUR HONOR. WE WERE GIVEN A DIFFERENT SET OF

SLIDES WITH DIFFERENT NUMBERING, SO WE'RE HAVING A LITTLE HARD

TIME.

THE COURT: WHEN WERE YOU GIVEN THAT?

MS. MILICI: YESTERDAY .

Q. OKAY. LET'S LOOK AT PAGE --

THE COURT: CAN YOU GIVE A NEW -- WHATEVER YOU

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NEVO CROSS BY MS. MILICI

UNITED STATES COURT REPORTERS

1948

DISTRIBUTED TODAY, CAN WE GIVE THAT TO THEIR --

MR. BORNSTEIN: THEY HAVE IT, YOUR HONOR.

MS. MILICI: IT'S DIFFERENTLY PAGINATED.

MR. BORNSTEIN: WE GAVE YOU THE CORRECT PAGINATION IN

THE BOOK THIS MORNING.

MS. MILICI: HE DOESN'T HAVE THEM.

THE COURT: HOW MANY COPIES DID YOU HAND THEM? JUST

ONE? DO YOU HAVE A SECOND ONE?

MR. BORNSTEIN: IF WE DON'T HAVE A SECOND ONE, YOU

CAN HAVE MINE.

MS. MILICI: LET'S LOOK AT WHAT'S PAGE 10. IT'S A

WCDMA ONLY EFFECTIVE ROYALTY RATE.

Q. WHEN YOU WERE COMPARING THE WCDMA EFFECTIVE ROYALTY RATES

TO THE LTE COMPATIBLE CHIP PURCHASES FROM QUALCOMM, YOU WERE

LOOKING AT ALL LTE; RIGHT?

A. THAT'S CORRECT, YES.

Q. YOU DIDN'T LIMIT IT TO PREMIUM LTE?

A. I DID NOT HAVE THE ABILITY TO DO THAT.

Q. AND WHEN WE LOOKED AT YOUR EARLIER SLIDES ABOUT WCDMA, YOU

HAD IDENTIFIED CLOSE TO 200 WCDMA CONTRACTS; RIGHT?

A. THAT SOUNDS RIGHT. I CAN GO AND COUNT.

Q. AND IN THIS REGRESSION, YOU ONLY HAVE 83 CONTRACTS.

A. THAT SOUNDS RIGHT.

Q. SO YOU DROPPED MORE THAN HALF OF THE CONTRACTS THAT YOU

IDENTIFIED AS WCDMA ONLY WHEN YOU WERE DOING YOUR REGRESSION?

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NEVO CROSS BY MS. MILICI

UNITED STATES COURT REPORTERS

1949

A. WE APPLIED A CERTAIN CRITERIA, WHICH WAS DROPPED ANY OEM

THAT NEVER, BASICALLY NEVER REPORTED ROYALTIES ON LTE.

Q. SO IS IT YOUR TESTIMONY THAT A SIGNIFICANT NUMBER OF THE

COMPANIES IN THE SUMMARY EXHIBIT THAT WAS JUST ADMITTED NEVER

PAID ROYALTIES?

A. I MEAN, THAT WOULD BE THE WAY TO KIND OF PUT THESE TWO

TOGETHER, BUT THAT WAS THE CRITERIA FOR LOOKING.

Q. AND YOU ALSO EXCLUDED FROM YOUR ANALYSIS SONY, BLACKBERRY,

SAMSUNG, LG, CERTAIN CONTRACTS FROM HUAWEI; IS THAT CORRECT?

A. THAT SOUNDS RIGHT, YES.

Q. DO YOU HAVE ANY IDEA HOW -- WHAT SHARE OF THE HANDSET

MARKET WAS EVEN LEFT IN YOUR ANALYSIS?

A. IN THIS SPECIFIC ONE, I CAN'T TELL YOU AS I SIT HERE

TODAY.

Q. BUT YOU WOULD AGREE THAT YOU EXCLUDED A LOT OF MAJOR

PLAYERS, INCLUDING NOKIA AND ERICSSON; CORRECT?

A. YES. I WAS VERY CLEAR ABOUT THAT. I INCLUDED -- EXCLUDED

THEM.

Q. RIGHT. SO EXCLUDED A LOT OF MAJOR OEM'S; CORRECT?

A. I EXCLUDED THOSE FOUR, YES, AND THEY'RE ALL.

Q. WELL, IT WAS MORE THAN FOUR. SONY, BLACKBERRY, YOU

EXCLUDED SAMSUNG BECAUSE IT WAS AN AMENDMENT, YOU EXCLUDED LG;

CORRECT?

A. YES, BECAUSE THEY WERE UNDER THE GOVERNMENT AGREEMENTS.

Q. BUT -- WELL, WHEN YOU SAY THAT THEY'RE UNDER THE

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NEVO CROSS BY MS. MILICI

UNITED STATES COURT REPORTERS

1950

GOVERNMENT AGREEMENTS, DID YOU DO ANY INVESTIGATION OF THAT?

A. WHEN YOU SAY, "INVESTIGATION," ONE OF THE -- I THINK WE

WENT OVER IT BEFORE. THE WAY WE BUILT THE DATA SET WAS STARTED

FROM THE LMS, AND THEN WE INDICATED WHICH OF THE CONTRACTS WERE

SUBJECT TO THE VARIOUS GOVERNMENT AGREEMENT.

Q. BUT WHEN YOU SAY THAT THEY WERE SUBJECT TO THE AGREEMENT,

TO SOME AGREEMENT WITH THE GOVERNMENT, YOU DIDN'T INVESTIGATE

THAT, DID YOU?

A. I'M SORRY. I'M NOT SURE I UNDERSTAND WHAT YOU MEAN BY

"INVESTIGATE THAT."

Q. WELL, WHEN YOU SAY THAT THE LG AGREEMENT WAS RELATED TO

SOME AGREEMENT WITH THE KOREAN GOVERNMENT, YOU DIDN'T LOOK AT

THAT, DID YOU?

A. MY TEAM CLASSIFIED THAT AS PART OF A -- PART OF THE

ANALYSIS THAT WAS DONE.

Q. DO YOU KNOW WHAT INSTRUCTIONS YOU GAVE THEM ABOUT HOW TO

CLASSIFY THAT?

A. JUST GENERALLY TO, TO GO THROUGH THE CONTRACTS AND SEE IF

THEY WERE SUBJECT TO THESE TERMS.

Q. DO THE CONTRACTS SAY ON THEIR FACE THAT THEY FALL INTO ONE

OF THE CATEGORIES THAT YOU JUST GAVE?

A. I'D HAVE TO GO BACK AND LOOK TO SEE EXACTLY THE PROCESS.

Q. SO ARE YOU AWARE THAT THE KOREAN AGREEMENT THAT YOU'RE

TALKING ABOUT APPLIED TO JUST A COUPLE OF, OF DESIGNATED OEM'S?

A. I'D HAVE TO GO BACK AND LOOK AT THE SPECIFICS OF IT. BUT

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NEVO CROSS BY MS. MILICI

UNITED STATES COURT REPORTERS

1951

THAT SOUNDS ABOUT RIGHT.

Q. AND IN YOUR ANALYSIS, YOU IDENTIFIED A LOT MORE THAN THAT

AS BEING KOREAN AGREEMENTS THAT WERE DROPPED FROM YOUR

ANALYSIS; CORRECT?

A. AGAIN, I'D HAVE TO GO LOOK AT THE SPECIFICS.

Q. BUT YOU DON'T KNOW RIGHT NOW?

A. I MEAN, DIVING INTO THAT SPECIFIC DETAIL, I CAN'T TELL YOU

AS I SIT HERE TODAY.

Q. OKAY. BUT YOU DO AGREE THAT YOU DROPPED MOST OF THE WCDMA

ONLY CONTRACTS?

A. I DON'T KNOW IF IT'S MOST. BUT, YES, THERE WERE A

SIGNIFICANT NUMBER DROPPED, YES.

Q. AND IN CDMA, YOU DID THE SAME THING; RIGHT? WE SAW ONE

SLIDE WHERE YOU IDENTIFIED 300 AGREEMENTS, AND THEN THIS WHEN

YOU DID YOUR REGRESSION, THERE WAS ONLY 75. SO YOU DROPPED

THREE-QUARTERS OF THE LICENSES THAT YOU IDENTIFIED FOR CDMA

WHEN YOU DID YOUR REGRESSION, DID YOU NOT?

A. AGAIN, I CAN'T CONFIRM THE EXACT NUMBERS, BUT, YES,

SIGNIFICANT NUMBERS WERE DROPPED.

Q. AND YOU ARE AWARE, ARE YOU NOT, THAT THE KOREAN GOVERNMENT

DOES NOT AGREE WITH THE POSITION THAT THOSE AGREEMENTS WERE

FREELY -- WERE NOT NEGOTIATED?

A. I'M NOT EXACTLY SURE WHAT THE KOREAN GOVERNMENT'S POSITION

IS.

Q. OKAY. IN FACT, IN YOUR REPORT, THE ONLY THING THAT YOU

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NEVO CROSS BY MS. MILICI

UNITED STATES COURT REPORTERS

1952

CITE FOR THE PROPOSITION THAT THOSE AGREEMENTS SHOULD NOT BE

PART OF THE ANALYSIS IS A PAPER THAT QUALCOMM WROTE; RIGHT?

A. I'D HAVE TO GO BACK AND SEE EXACTLY WHAT WAS CITED. BUT I

ASSUMED THAT -- YOU LOOKED AT IT MORE RECENTLY THAN I HAVE.

Q. AND WHEN YOU DO YOUR REGRESSIONS WITH THE EFFECTIVE

ROYALTY RATE, YOU'RE NOT USING THAT TERM IN THE WAY IT'S

USUALLY USED; RIGHT?

A. I'M NOT SURE WHAT THE WAY THAT IT'S USUALLY USED, BUT --

Q. YOU'RE NOT DIVIDING ROYALS BY THE GROSS REVENUE; RIGHT?

A. I'M DIVIDING ROYALTIES BY THE, WHAT'S CALLED NET REVENUE

IN THE DATABASE.

Q. SO WHAT YOU DID IS YOU TOOK THE GROSS REVENUES AND YOU

MADE SOME SUBTRACTIONS FOR DEDUCTIONS, AND THEN YOU CALCULATED

AN EFFECTIVE ROYALTY RATE; RIGHT?

A. SORT OF, WITH ONE CORRECTION. I DIDN'T ACTUALLY MAKE THE

SUBTRACTION. THE NET REVENUE IS SOMETHING THAT'S IN THE

QUALCOMM DOCUMENT THAT'S USED IN THE NORMAL COURSE OF BUSINESS.

I DIDN'T CREATE THAT VARIABLE. I JUST TOOK THAT VARIABLE FROM

THE DATA SET. BUT THAT'S THE ONE THAT I USED.

Q. AND THAT VARIABLE DOES NOT INCLUDE THE GROSS REVENUE FOR

THE LICENSES; RIGHT?

A. WELL, IT INCLUDES THE GROSS REVENUE. BUT THEN DEDUCTS

FROM IT.

Q. AND THE AMOUNT OF THAT DEDUCTION IS A NEGOTIATED TERM IN

THESE AGREEMENTS, IS IT NOT?

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UNITED STATES COURT REPORTERS

1953

A. MY UNDERSTANDING, THAT'S PART OF WHAT THEY WERE

NEGOTIATING OVER, YES.

MS. MILICI: OKAY. NO MORE QUESTIONS.

THE COURT: OKAY. TIME IS 12:06.

LET'S TAKE OUR LUNCH BREAK NOW. WE'LL TAKE AN HOUR LONG

BREAK AND WE'LL BE BACK AT, LET'S SAY -- LET'S BE BACK AT 1:10.

OKAY?

THANK YOU.

(THE LUNCH RECESS WAS TAKEN FROM 12:07 P.M. UNTIL

1:12 P.M.)

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NEVO REDIRECT BY MR. BORNSTEIN

UNITED STATES COURT REPORTERS

1954

AFTERNOON SESSION

(COURT CONVENED AT 1:12 P.M.)

THE COURT: GOOD AFTERNOON. WELCOME BACK. PLEASE

TAKE A SEAT.

OKAY. GO AHEAD, PLEASE. I'LL WAIT UNTIL -- LET ME KNOW

WHEN YOU'RE READY, PLEASE.

MR. BORNSTEIN: I AM READY, YOUR HONOR.

THE COURT: OKAY. 1:12. GO AHEAD, PLEASE.

REDIRECT EXAMINATION

BY MR. BORNSTEIN:

Q. OKAY. LET'S CALL UP SLIDE 4 FROM YOUR DEMONSTRATIVES,

PLEASE, PROFESSOR.

THIS IS THE -- DO WE HAVE SLIDE 4?

GREAT. THIS WAS THE REGRESSION THAT YOU DISCUSSED

REGARDING CDMA; IS THAT RIGHT?

A. YES, THAT'S THE ANALYSIS OF CDMA.

Q. OKAY. NOW, YOU WERE ASKED A COUPLE OF QUESTIONS ABOUT

COMPARISONS BETWEEN BEFORE 1995 AND AFTER 1995.

DO YOU REMEMBER THAT?

A. YES, I DO.

Q. WERE THERE OTHER ANALYSES AND OTHER COMPARISONS THAT YOU

PERFORMED WITH THIS DATA?

A. YES, THERE WAS THE BEFORE AND AFTER '95 THAT I PERFORMED.

I ALSO PERFORMED THE ANALYSIS THAT I FOCUSSED ON IN MY DIRECT,

WHICH IS THE FOCUS ON THE ALLEGED MARKET POWER PERIOD, AND THEN

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NEVO REDIRECT BY MR. BORNSTEIN

UNITED STATES COURT REPORTERS

1955

I RAN A THIRD REGRESSION THAT I BELIEVE WAS LOOKING FROM. I

THINK IT WAS 2006 ONWARD. I'M ACTUALLY BLANKING. THERE WAS A

THIRD ONE THAT WAS IN MY APPENDIX.

Q. COULD YOU PULL THE MICROPHONE A LITTLE CLOSER?

A. I'M NOT SURE IF IT'S WORKING. I'M PRETTY CLOSE.

THE COURT: UH-HUH. COULD WE -- I'LL STOP THE TIME.

IT'S 1:13.

MR. BORNSTEIN: OH, I HERE IT.

THE WITNESS: IS THAT BETTER NOW?

THE COURT: YES. 1:13. GO AHEAD, PLEASE.

BY MR. BORNSTEIN:

Q. YOU WERE HERE IN COURT WHEN PROFESSOR SHAPIRO TESTIFIED;

RIGHT?

A. YES, I WAS.

Q. DO YOU REMEMBER THAT THE JUDGE ASKED PROFESSOR SHAPIRO

SOME QUESTIONS ABOUT THE PERIOD IN WHICH HE ALLEGES MARKET

POWER EXISTED?

A. YES, I DO.

Q. AND WHAT DID PROFESSOR SHAPIRO SAY ABOUT HIS ALLEGATION OF

MARKET POWER IN CDMA?

A. I BELIEVE IT WAS 2006 TO 2016.

Q. OKAY. AND DID YOU USE THAT FOR YOUR REGRESSION?

A. YES.

Q. LET'S TAKE A LOOK AT SLIDE 6, PLEASE. THIS IS WCDMA AND

LTE.

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NEVO REDIRECT BY MR. BORNSTEIN

UNITED STATES COURT REPORTERS

1956

WHAT REGRESSION PERIODS DID YOU USE FOR THIS SLIDE?

A. SO THE MAIN REGRESSION THAT I USED IS THE ONE THAT I

DESCRIBED LOOKING AT THE SHADED AREA VERSUS EVERYTHING OUTSIDE.

Q. AND WHAT DID PROFESSOR SHAPIRO TESTIFY LAST WEEK WAS

PERIOD OF MARKET POWER THAT HE WAS ALLEGING FOR PREMIUM LTE

CHIPS?

A. I BELIEVE IT WAS 2001 TO 2016.

Q. SO 2001?

A. SORRY. 2011, SORRY.

Q. AND DID YOU USE THAT IN ANY WAY IN CONSTRUCTING YOUR TEST?

A. THAT'S EXACTLY HOW I CONSTRUCTED WHAT I CALL THE SHADED

AREA.

Q. OKAY. AND THERE WERE SOME QUESTIONS ABOUT CHANGES IN THE

PRODUCTS ON WHICH -- THAT WERE LICENSED.

DO YOU REMEMBER THOSE QUESTIONS?

A. I DO.

Q. WHERE ON THIS CHART DID SMARTPHONES FIRST START BEING

SOLD?

A. I BELIEVE THAT, YOU KNOW, TYPICALLY PEOPLE START THINKING

OF THE FIRST IPHONE AS BEING THE FIRST SMARTPHONE, AND I

BELIEVE THAT WAS 2007.

Q. AND WHAT ROYALTY RATES WERE OEM'S AGREEING TO, PER YOUR

CHART, ONCE SMARTPHONES WERE ALREADY ON THE MARKET?

A. WELL, BASICALLY EVERYTHING. I MEAN, YOU CAN DRAW A LINE

FROM 2007 AND UP AND LOOK TO RIGHT OF THAT.

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NEVO REDIRECT BY MR. BORNSTEIN

UNITED STATES COURT REPORTERS

1957

Q. YOU WERE ASKED SOME QUESTIONS ABOUT WHETHER YOU INCLUDED

AMENDMENTS TO AGREEMENTS IN YOUR ANALYSIS.

DO YOU RECALL THAT?

A. YES.

Q. OKAY. CAN YOU EXPLAIN WHY YOU FOCUSSED ON THE INITIAL

AGREEMENTS RATHER THAN AMENDMENTS IN THE STATISTICAL TESTS YOU

RAN?

A. SO WHAT WE FOCUSSED ON, AND JUST TO BE 100 PERCENT

PRECISE, IS WHAT WE FOCUSSED ON ARE CONTRACT NUMBERS. SO

WHATEVER WAS ASSIGNED A NEW CONTRACT NUMBER WAS WHAT WE LOOKED

AT. AND IF THERE WAS -- THERE IS AN AMENDMENT THAT DID NOT

CHANGE THE CONTRACT NUMBER, WE DIDN'T LOOK AT THAT.

THE REASON WE FOCUSSED ON THE INITIAL CONTRACT NUMBER AND

NOT ON AMENDMENTS TO IT WAS BECAUSE THAT WAS MY INTERPRETATION,

OR THAT'S WHAT THE FTC'S THEORY PREDICTS IS TO THE EFFECTS OF

THOSE PARTICULAR CONTRACTS OR PARTICULAR NEGOTIATIONS.

AMENDMENTS ARE VERY DIFFERENT IN THEIR NATURE AND THEY CAN

REALLY VARY EITHER BECAUSE THERE'S AN AMENDMENT, YOU KNOW,

MID-TERM WITH NO EXPIRATION IN SIGHT. IT COULD BE THAT THERE'S

MAYBE AN EXPIRATION COMING UP OR THERE'S SOME -- THAT NEEDS TO

BE ADDED.

AND THEY'RE VERY DIFFERENT BECAUSE DURING THE AMENDMENT

NEGOTIATIONS, THE OEM CAN STILL OPERATE UNDER THE ORIGINAL

CONTRACT.

SO ANY AMENDMENT THAT WOULD OPERATE WOULD BE UNDER THE

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NEVO REDIRECT BY MR. BORNSTEIN

UNITED STATES COURT REPORTERS

1958

UMBRELLA OF THE ORIGINAL CONTRACT, SO IT REALLY KIND OF CREATES

A VERY DIFFERENT DYNAMIC THAN THE ONE THAT WAS DISCUSSED UNDER

THE FTC'S COMPLAINT.

Q. AND YOU WERE ASKED SOME QUESTIONS ABOUT THE CONTRACTS THAT

WERE NOT INCLUDED IN YOUR STATISTICAL ANALYSES.

DO YOU RECALL THOSE QUESTIONS?

A. YES.

Q. SO CAN YOU EXPLAIN WHY YOU DID NOT INCLUDE WHAT YOU CALLED

THE GOVERNMENTAL AGREEMENTS IN YOUR STATISTICAL TEST?

A. SO THE GOVERNMENTAL AGREEMENTS ARE, THESE ARE AGREEMENTS

THAT WERE SUBJECT TO THE TERMS THAT ARE NEGOTIATED OR SET -- I

DON'T KNOW IF NEGOTIATED IS THE RIGHT TERM -- SET AFTER

DISCUSSIONS, I'D SAY, WITH THE RELEVANT GOVERNMENT.

AND, AGAIN, THAT'S A VERY DIFFERENT TYPE OF DYNAMIC THAN

THE NEGOTIATIONS OR AGREEMENTS THAT ARE SET SUBJECT TO THE FTC

COMPLAINT.

SO, FOR EXAMPLE, CHIP LEVERAGE, I CAN'T SEE HOW THAT WOULD

ACTUALLY PLAY A ROLE IN THOSE NEGOTIATIONS.

Q. AND WITH RESPECT TO SONY, SAMSUNG, BLACKBERRY, AND NOKIA,

PARTICULAR AGREEMENTS WITH THOSE COMPANIES, WHY DID YOU EXCLUDE

THOSE, THOSE AGREEMENTS?

A. SO THOSE WERE EXCLUDED FROM, MOSTLY FROM THE EFFECTIVE

RATE REGRESSIONS, NOT THE ONES THAT WE JUST LOOKED AT.

AND THE REASON THAT I EXCLUDED THOSE IS THAT IN THREE OF

THOSE FOUR CASES, I BELIEVE, THERE WAS VERY LARGE UPFRONT FEES

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NEVO REDIRECT BY MR. BORNSTEIN

UNITED STATES COURT REPORTERS

1959

THAT WERE BASICALLY SHIFTING KIND OF RISK SHARING. SO THERE

WAS AN IDEA OF PAYING A LARGE AMOUNT OF UPFRONT FEE TO COVER

CERTAIN QUANTITY, AND IT BASICALLY AT THAT POINT SHIFTS THE

RISK OF WHAT HAPPENS IF YOU REACH THAT QUANTITY OR NOT FROM,

LET'S SAY, FROM QUALCOMM TO THE OEM.

AND, THEREFORE, THEY'RE REALLY A DIFFERENT ANIMAL AND IT'S

NOT REALLY CLEAR HOW TO COMPUTE AN EFFECTIVE ROYALTY RATE

THAT'S COMPARABLE TO THE OTHER AGREEMENTS.

Q. NOW, YOU SAID YOU EXCLUDED THOSE FROM YOUR STATISTICAL

ANALYSIS. DID YOU IGNORE THEM ENTIRELY IN FORMING YOUR

OPINION, THOSE AGREEMENTS?

A. NO. I LOOKED AT THOSE, AT SAMSUNG, AT THE SONY AND THE

BLACKBERRY AGREEMENTS, I LOOKED AT THEM AND ANALYZED THEM IN A

QUALITATIVE WAY IN MY REPORT.

Q. AND CONCLUDED WHAT?

A. THAT THEY'RE NOT CONSISTENT WITH THE FTC CLAIMS.

Q. OKAY. THERE WERE SOME QUESTIONS ABOUT WHAT YOU MEANT BY

WCDMA ONLY AGREEMENTS AND YOU HAD SAID A COUPLE TIMES THERE WAS

A PROCESS FOR IDENTIFYING THEM.

CAN YOU PLEASE TELL US WHAT THAT PROCESS WAS?

A. SO THE EXACT PROCESS IS DESCRIBED IN THE APPENDIX IN MY

REPORT.

BUT KIND OF AT A HIGH LEVEL, WITHOUT GOING INTO THE

VERY -- INTO THE WEEDS, IT WAS EITHER ADDING A, A WCDMA -- SO

IF AN OEM ALREADY HAD A CDMA AGREEMENT, BUT WAS ADDING A WCDMA

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NEVO REDIRECT BY MR. BORNSTEIN

UNITED STATES COURT REPORTERS

1960

LICENSE, THAT WAS CONSIDERED A WCDMA ONLY,

OR IF THEY DID NOT HAVE A CDMA LICENSE, SO IT WAS

BASICALLY THEIR FIRST LICENSE, THAT WAS KIND OF AT A HIGH

LEVEL, THOSE WERE ARE CONSIDERED WCDMA ONLY.

Q. WHY DID YOU DO IT THAT WAY?

A. BECAUSE WE WANTED TO FOCUS ON AGREEMENTS THAT WERE ABOUT

WCDMA.

Q. OKAY. AND HOW DOES DOING THAT -- DOING THE ANALYSIS THAT

WAY ACHIEVE THAT GOAL?

A. SO IF -- I THINK IT'S EASIEST TO SEE IF YOU JUST LOOK AT A

WCDMA AGREEMENT THAT DID NOT HAVE, OR AN OEM THAT DID NOT HAVE

A CDMA BEFORE, THAT'S CLEAR IT'S ONLY WCDMA. SO THAT'S KIND OF

A CLEAR ONE.

SIMILARLY, IF IT WAS A, ADDING A WCDMA TO AN OEM THAT

ALREADY HAD A CDMA, AGAIN, IT WAS JUST WHAT THE NEW COMPONENT

WAS, THE ADDITION OF THE WCDMA.

Q. YOU SAID A NUMBER OF TIMES IN THE EARLIER PART OF THE

CROSS-EXAMINATION THAT YOU FOCUSSED ON THE CONTRACTUAL RATE IN

THE AGREEMENTS THAT YOU ANALYZED FOR SOME OF YOUR ANALYSIS.

WHY DID YOU FOCUS ON THAT PARTICULAR ASPECT OF THE

AGREEMENTS?

A. INITIALLY WE FOCUSSED ON THAT BECAUSE THAT IS WHAT THE,

THE COMPLAINT AND PROFESSOR SHAPIRO'S INITIAL REPORT WAS REALLY

ABOUT, AND THAT'S SOMETHING THAT WE COULD CONSISTENTLY GET FROM

THE CONTRACTS, AND THAT'S WHAT WE LOOKED AT.

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NEVO REDIRECT BY MR. BORNSTEIN

UNITED STATES COURT REPORTERS

1961

WE ALSO LOOKED -- AND I THINK WE DISCUSSED THIS IN THE

UPFRONT FEES -- THAT WAS ANOTHER DIMENSION OF THE CONTRACT THAT

WE LOOKED AT.

Q. AND WHAT ASPECT OF QUALCOMM'S CONTRACTS DOES

PROFESSOR SHAPIRO ALLEGE IMPOSES A TAX ON QUALCOMM'S RIVALS?

A. I BELIEVE IT IS THE CONTRACTUAL RATE.

Q. YOU WERE ASKED, WITH RESPECT TO YOUR NEAR TERM LTE DEMAND

ANALYSIS, YOU WERE ASKED WHETHER YOU LOOKED AT PREMIUM LTE OR

NOT.

AND I BELIEVE YOU TESTIFIED THAT YOU WEREN'T ABLE TO DO IT

ON A PREMIUM LTE BASIS; IS THAT CORRECT?

A. THAT'S -- I THINK THAT'S EXACTLY WHAT I SAID, YES.

Q. OKAY. CAN YOU EXPLAIN WHY YOU WERE NOT ABLE TO DO IT ON A

PREMIUM LTE BASIS AS OPPOSED TO LTE MORE GENERALLY?

A. SO REALLY TWO, TWO REASONS. ONE IS THAT THE DATA THAT WE

USED, THE TRANS LOG DATA, WHICH CONTAINS THE SALES --

Q. WHAT ARE TRANS LOGS?

A. THAT'S, THAT'S THE DATA THAT CONTAINS THE SALES AND THE

REPORTING OF THE ROYALTY, THE ACTUAL -- BUT THAT'S ONE OF THE

DATA SETS THAT WE USED.

Q. DOES IT STAND FOR TRANSACTION LOG?

A. THAT SOUNDS RIGHT.

Q. OKAY.

A. SORRY. I'VE BEEN WORKING WITH THAT SO LONG.

THAT DATA I BELIEVE DOES NOT, AT LEAST NOT CONSISTENTLY,

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NEVO REDIRECT BY MR. BORNSTEIN

UNITED STATES COURT REPORTERS

1962

GO DOWN TO THE EXACT CHIP LEVEL, SO WE CAN'T REALLY BREAK DOWN

AS TO THE SALES AT THE CHIP, AT THE CHIP LEVEL AND THEN SEE

WHETHER THEY'RE PREMIUMS OR NOT. SO THAT'S ONE.

ANOTHER ISSUE THAT, YOU KNOW, MAYBE IF WE HAD MORE TIME,

WE COULD HAVE OVERCOME THE FIRST ONE, MAYBE, I'M NOT SURE.

BUT ANOTHER ISSUE THAT WE HAD IS REALLY ONLY ONCE WE GOT

PROFESSOR SHAPIRO'S REPORT DID WE ACTUALLY KNOW EXACTLY WHICH

CHIPS WERE INCLUDED IN HIS ANALYSIS AND THERE WAS JUST NOT

ENOUGH TIME, EVEN IF WE SOMEHOW WERE ABLE TO GET THE DATA, TO

REALLY COMPUTE THIS ON A PREMIUM LTE.

Q. THERE WERE ALSO SOME QUESTIONS FROM FTC COUNSEL ABOUT

PARTICULAR AGREEMENTS, AND I THINK THIS IS THAT MAYBE DIDN'T

MATCH UP IN THE FTC'S VIEW IN TERMS OF THE TEXT OF THE

AGREEMENTS AND THE WAY THEY WERE TREATED IN THE DATA.

DO YOU RECALL THOSE?

A. YES, I DO.

Q. DID PROFESSOR SHAPIRO, IN HIS OPENING REPORT, DO ANY

EMPIRICAL TESTING TO ASSESS WHETHER THE PREDICTIONS OF HIS TAX

THEORY ARE BORNE OUT BY THE DATA AT ALL?

A. NOT THAT I CAN RECALL.

MR. BORNSTEIN: NO FURTHER QUESTIONS.

THE COURT: OKAY. TIME IS 1:24.

MR. MATHESON: JUST A COUPLE.

THE COURT: OKAY. STILL 1:24. GO AHEAD, PLEASE.

///

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NEVO RECROSS BY MS. MILICI

UNITED STATES COURT REPORTERS

1963

RECROSS-EXAMINATION

BY MS. MILICI:

Q. SIR, YOU JUST TESTIFIED THAT YOU EXCLUDED AMENDMENTS IF

THEY DIDN'T HAVE A NEW CONTRACT NUMBER; CORRECT?

A. WE FOCUSSED THE UNIT OF ANALYSIS AS A CONTRACT NUMBER.

Q. OKAY. SO THE UNIT OF ANALYSIS IS A CONTRACT NUMBER. SO

YOU DID INCLUDE AMENDMENTS IF THERE WAS A NEW CONTRACT NUMBER,

AND YOU DIDN'T INCLUDE AMENDMENTS IF IT DIDN'T HAVE A NEW

CONTRACT NUMBER. IS THAT FAIR?

A. OUR DEFINITION OF A NEW AGREEMENT WAS WE WENT BY THE

CONTRACT NUMBER.

Q. OKAY. DID YOU INVESTIGATE WHAT THE POLICY WAS FOR

ASSIGNING A NEW CONTRACT NUMBER?

A. I DID AT SOME POINT, BUT I CAN'T RECALL IT RIGHT NOW.

Q. OKAY. AND YOU JUST TESTIFIED ABOUT HOW YOU DECIDED ABOUT

WHAT THE CATEGORY WCDMA ONLY MEANT IN YOUR CHARTS; IS THAT

RIGHT?

A. YES.

Q. AND TO BE CLEAR, IF AN OEM SIGNED AN AGREEMENT THAT

CHANGED ITS CDMA RATE AND ADDED WCDMA, YOU WOULD CALL THAT

WCDMA ONLY; CORRECT?

A. GENERALLY, YES. I'D HAVE TO LOOK AT THE SPECIFICS, BUT

GENERALLY, YES.

Q. AND YOU DON'T KNOW HOW MANY OF THE CONTRACTS IN YOUR

ANALYSIS ACTUALLY DID JUST, JUST ADDRESS WCDMA; RIGHT?

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NEVO RECROSS BY MS. MILICI

UNITED STATES COURT REPORTERS

1964

A. AS I SIT HERE TODAY, I CAN'T -- I CAN'T POINT TO THAT.

THAT IS A KNOWABLE FACT, BUT I CAN'T POINT TO IT.

Q. IS IT FAIR TO SAY THAT MOST OF THE LICENSES THAT YOU HAVE

LOOKED AT INCLUDE BOTH CDMA AND WCDMA IN THE SAME CONTRACT?

A. AS I SIT HERE TODAY, I CAN'T SAY ONE WAY OR THE OTHER.

Q. AND WHEN YOU DID YOUR REGRESSION OF COMPARING WCDMA

EFFECTIVE RATES TO LTE PURCHASES, YOU DID NOT LOOK AT WCDMA

PURCHASES, DID YOU?

A. I LOOKED FOR THE REASON I EXPLAINED AT LTE PURCHASES.

Q. BUT YOU JUST ASSUMED THAT QUALCOMM DID NOT HAVE MARKET

POWER IN WCDMA AND DID NOT TEST THAT; CORRECT?

A. I WENT BY THE ALLEGATIONS. BUT, YES, BASED ON THE

ALLEGATIONS -- I TOOK THE ALLEGATIONS AS GIVEN, YES.

Q. OKAY. AND YOU DID NOT DO ANY INVESTIGATION AS TO WHETHER

THERE WAS MARKET POWER AT ANY TIME; CORRECT?

A. I TOOK THE ALLEGATIONS AS GIVEN AND DID NOT DO ANY

ADDITIONAL ANALYSIS.

MS. MILICI: OKAY. THANK YOU.

THE COURT: OKAY. TIME IS 1:26.

MR. BORNSTEIN: NOTHING FURTHER, YOUR HONOR.

THE COURT: OKAY.

MR. BORNSTEIN: PROFESSOR NEVO IS --

THE COURT: CAN I JUST ASK -- I WON'T CHARGE ANYONE

TIME. MUCH THESE GOVERNMENT AGREEMENTS, WHICH GOVERNMENT IS

THESE? IS THIS THE NCKRD?

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UNITED STATES COURT REPORTERS

1965

MR. BORNSTEIN: SHOULD WE LET PROFESSOR NEVO ANSWER

THAT QUESTION, YOUR HONOR?

THE COURT: IF HE KNOWS THE ANSWER.

DO YOU KNOW THE ANSWER? HE'S KIND OF ACTING LIKE HE

DIDN'T KNOW WHICH KOREAN LICENSES, BUT IF YOU DO, GO AHEAD.

THE WITNESS: OH. SO THERE'S THE KOREAN GOVERNMENT

AGREEMENT, AND THERE'S TWO SEPARATE AGREEMENTS WITH THE CHINESE

GOVERNMENT.

THE COURT: OKAY. AND HOW MANY LICENSES ARE UNDER

EACH GOVERNMENT?

THE WITNESS: I'M NOT SURE. I CAN'T RECALL AS I SIT

HERE TODAY, AND I'M TRYING TO REMEMBER IF -- IT'S PROBABLY

DENOTED WHERE SOMEWHERE IN MY REPORT, BUT IT WOULD TAKE ME TIME

TO PULL THAT UP.

THE COURT: OKAY.

MR. BORNSTEIN: IF THE COURT IS INTERESTED, WE CAN

PROVIDE THAT SEPARATELY LATER.

THE COURT: NO, IT'S OKAY. I JUST DIDN'T UNDERSTAND

WHAT THE UNIVERSE OF THIS WAS.

OKAY. WHEN YOU SAY THERE'S TWO CHINESE GOVERNMENT

GROUPINGS, WHAT DOES THAT MEAN?

THE WITNESS: SO IF I MAY, IF WE CAN JUST PULL UP --

THERE'S MORE DESCRIPTION. THERE'S TWO SEPARATE TIME PERIODS IN

WHICH THE AGREEMENTS WERE REACHED.

AND I THINK THE -- SO IF WE LOOK AT THE CDMA AT EXHIBIT 4,

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UNITED STATES COURT REPORTERS

1966

OR SORRY, PAGE 4, THE CDMA CONTRACTUAL RATES, THERE'S ONE I

REFER TO AS CPLA, MEANING THERE'S A CHINESE FRAMEWORK

AGREEMENT.

THE COURT: OKAY.

MR. BORNSTEIN: AND TO ANSWER YOUR HONOR'S QUESTION,

CPLA'S ARE THE ONES THAT RELATE TO THE NDRC PROCEEDINGS IN

CHINA.

THE COURT: OKAY. ALL RIGHT. THANK YOU.

ALL RIGHT. IS THIS WITNESS SUBJECT TO RECALL OR NOT

SUBJECT TO RECALL?

MR. BORNSTEIN: NOT SUBJECT TO RECALL BY QUALCOMM.

MS. MILICI: NOT BY THE FTC.

THE COURT: OKAY. THEN YOU HAVE COMPLETED YOUR TRIAL

TESTIMONY, AND YOU ARE FREE TO STEP DOWN.

THE WITNESS: THANK YOU.

THE COURT: PLEASE CALL YOUR NEXT WITNESS.

OH, IS THIS GOING TO BE A DEPOSITION?

MR. BYARS: IT IS, YOUR HONOR.

THE COURT: OKAY. AND IT'S NOT SEALED, SO WE'RE

GOOD.

MR. BYARS: NOT SEALED. THIS IS CHRISTINA PETERSSON

OF ERICSSON. IT'S ABOUT SEVEN MINUTES LONG. THE EXHIBITS THAT

WILL BE IN YOUR HONOR'S BINDER ARE ALREADY ADMITTED.

THE COURT: OKAY. 1:29. GO AHEAD, PLEASE.

///

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PETERSSON DEPOSITION

UNITED STATES COURT REPORTERS

1967

(THE VIDEOTAPED DEPOSITION OF CHRISTINA PETERSSON WAS

PLAYED IN OPEN COURT OFF THE RECORD.)

THE COURT: OKAY. TIME IS 1:36. OKAY. WHO'S YOUR

NEXT WITNESS?

MR. BYARS: YOUR HONOR, NEXT IS RENEE MCELVAINE OF

INTERDIGITAL.

THE COURT: OKAY. DO YOU WANT TO INTRODUCE EXHIBITS

WITH HER?

MR. BYARS: I DO, YOUR HONOR.

THE COURT: OKAY. THEN JUST GIVE ME ONE MINUTE.

ALL RIGHT. GO AHEAD, PLEASE. TIME IS 1:36.

MR. BYARS: I OFFER INTO EVIDENCE QX 3502.

MR. CARSON: NO OBJECTION.

THE COURT: ANY OBJECTION?

MR. CARSON: NO OBJECTION.

THE COURT: DID YOU SAY NO OBJECTION?

MR. CARSON: NO OBJECTION.

THE COURT: OKAY. IT'S ADMITTED.

(DEFENDANT'S EXHIBIT QX 3502 WAS ADMITTED IN EVIDENCE.)

MR. BYARS: THANK YOU, YOUR HONOR.

THE COURT: OKAY. I DON'T WANT TO CHARGE YOU FOR THE

SAME MINUTE TWICE, SO ARE YOU READY TO START YOUR VIDEO?

MR. BYARS: WE ARE.

THE COURT: OKAY. 1:37.

///

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MCELVAINE DEPOSITION

UNITED STATES COURT REPORTERS

1968

(THE VIDEOTAPED DEPOSITION OF RANAE MCELVAINE WAS PLAYED

IN OPEN COURT OFF THE RECORD.)

THE COURT: OKAY. TIME IS 1:39. I FORGOT TO ASK,

FOR MS. PETERSSON, IS SHE SUBJECT TO RECALL OR NOT?

MR. BYARS: NOT SUBJECT TO RECALL BY QUALCOMM.

MS. MILICI: NOT BY THE FTC.

THE COURT: ALL RIGHT. AND THEN WHAT ABOUT

MS. MCELVAINE, IS SHE --

MR. BYARS: NOT SUBJECT TO RECALL.

MS. MILICI: NOT BY THE FTC.

THE COURT: OKAY. SO BOTH OF THOSE ARE NO.

ALL RIGHT. GO AHEAD AND CALL YOUR NEXT WITNESS, PLEASE.

IS THIS A SEALED ONE.

MR. BYARS: THE TESTIMONY IS NOT SEALED, BUT THE

DOCUMENT IS SEALED, SO I'LL COVER THE PROJECTOR.

THE COURT: THAT WORKS. ALL RIGHT.

MR. BYARS: THIS IS ILKKA RAHNASTO OF NOKIA, YOUR

HONOR.

THE COURT: DO YOU HAVE A SEPARATE BINDER FOR HER?

OKAY. THANK YOU. AND ARE YOU SEEKING TO ADMIT ANY EXHIBITS

WITH HER?

MR. BYARS: I AM, YOUR HONOR.

THE COURT: OKAY. TIME IS 1:40. GO AHEAD, PLEASE.

MR. BYARS: I OFFER INTO EVIDENCE QX 2778.

THE COURT: ALL RIGHT. ANY OBJECTION?

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ILKKA DEPOSITION

UNITED STATES COURT REPORTERS

1969

MR. CARSON: NO OBJECTION, YOUR HONOR.

THE COURT: ALL RIGHT. THAT'S ADMITTED.

(DEFENDANT'S EXHIBIT QX 2778 WAS ADMITTED IN EVIDENCE.)

THE COURT: GO AHEAD, PLEASE.

(THE VIDEOTAPED DEPOSITION ILKKA RAHNASTO WAS PLAYED IN

OPEN COURT OFF THE RECORD.)

THE COURT: OKAY. TIME IS 1:42.

MR. VAN NEST: YOUR HONOR, QUALCOMM CALLS

MR. ALEX ROGERS.

THE COURT: OH, LET ME ASK, WITH REGARD TO

MR. RAHNASTO, IS HE SUBJECT TO RECALL OR NOT SUBJECT TO RECALL?

MR. BYARS: NOT SUBJECT, YOUR HONOR.

MS. MILICI: NOT SUBJECT.

THE COURT: OKAY. THANK YOU.

THE CLERK: PLEASE RAISE YOUR RIGHT HAND.

(DEFENDANT'S WITNESS, ALEX ROGERS, WAS SWORN.)

THE WITNESS: YES, 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: ALEX ROGERS. R-O-G-E-R-S.

THE COURT: ALL RIGHT. TIME IS 1:43. GO AHEAD,

PLEASE.

MR. VAN NEST: THANK YOU, YOUR HONOR.

///

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ROGERS DIRECT BY MR. VAN NEST

UNITED STATES COURT REPORTERS

1970

DIRECT EXAMINATION

BY MR. VAN NEST:

Q. MR. ROGERS, PLEASE INTRODUCE YOURSELF TO THE COURT.

A. YOUR HONOR, MY NAME IS ALEX ROGERS.

Q. WHERE DO YOU WORK?

A. I WORK AT QUALCOMM.

Q. WHAT DO YOU DO THERE?

A. I AM THE PRESIDENT OF QUALCOMM TECHNOLOGY LICENSING.

Q. HOW LONG HAVE YOU HAD THAT ROLE?

A. SINCE THE END OF 2016.

Q. WHO DO YOU REPORT TO?

A. I REPORT TO STEVE MOLLENKOPF. HE'S THE CEO.

Q. CAN YOU GIVE US A BRIEF SUMMARY OF YOUR EDUCATIONAL

BACKGROUND, MR. ROGERS?

A. YES. I GRADUATED FROM GEORGETOWN UNIVERSITY,

UNDERGRADUATE DEGREE IN LITERATURE OF THEOLOGY. GOT A MASTER'S

DEGREE FROM GEORGETOWN UNIVERSITY, AND THEN FINISHED UP AT

GEORGETOWN UNIVERSITY LAW SCHOOL.

Q. HOW LONG HAVE YOU WORKED AT QUALCOMM?

A. SINCE JANUARY OF 2001.

Q. AND CAN YOU BRIEFLY OUTLINE FOR THE COURT YOUR CAREER AT

QUALCOMM PRIOR TO TAKING OVER QTL?

A. YES. I STARTED AS SENIOR LEGAL COUNSEL MANAGING

LITIGATION MATTERS, WAS PROMOTED A FEW TIMES, AND THEN

EVENTUALLY TOOK THE ROLE AS INTERIM GENERAL MANAGER OF THE

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ROGERS DIRECT BY MR. VAN NEST

UNITED STATES COURT REPORTERS

1971

LICENSING GROUP IN MARCH OF 2016.

AND THEN AT THE END OF 2016, THE OCTOBER/NOVEMBER

TIMEFRAME, I TOOK THE ROLE AS PRESIDENT OF QTL.

Q. AND WHAT RESPONSIBILITIES DO YOU HAVE AS THE PRESIDENT OF

QTL?

A. WELL, I HAVE GENERAL SUPERVISORY RESPONSIBILITIES OVER THE

MANAGEMENT OF THE ENTIRE BUSINESS, THE LICENSE AGREEMENTS, THE

P&L OF THE BUSINESS.

Q. AND DOES THAT ALSO INVOLVE PARTICIPATING IN DEVELOPING NEW

LICENSING PROGRAMS?

A. YES, IT DOES.

Q. ARE YOU RESPONSIBLE FOR MANAGING EXISTING LICENSE PROGRAMS

AS WELL?

A. YES, I AM.

Q. CAN YOU TELL US HOW QTL IS RELATED TO QCT, THE CHIP

BUSINESS?

A. SO QTL IS THE TECHNOLOGY LICENSING ARM OF QUALCOMM, AND

IT'S A SEPARATE BUSINESS THAT'S RUN WITH SEPARATE MANAGERS FROM

QCT. WE HAVE SEPARATE ACCOUNTING, SEPARATE P&L.

AND SO QCT HAS ITS OWN SET OF MANAGEMENT. QTL HAS ITS OWN

SET OF MANAGEMENT. WE'RE TWO SEPARATE BUSINESSES WITHIN THE

SAME CORPORATE STRUCTURE.

Q. AND, MR. ROGERS, DO YOU PERSONALLY HAVE ANY RESPONSIBILITY

FOR QCT OR THE CHIP BUSINESS?

A. I DO NOT.

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Q. AT A HIGH LEVEL, HOW WOULD YOU DESCRIBE THE BUSINESS OF

QTL?

A. SO QTL IS THE COMMERCIALIZATION ARM OF QUALCOMM'S RESEARCH

AND DEVELOPMENT ACTIVITIES. AND THE WAY I WOULD DESCRIBE IT IS

THAT QUALCOMM IS ESSENTIALLY A TECHNOLOGY DEVELOPMENT COMPANY,

AND WE DEVELOP ESSENTIAL TECHNOLOGIES FOR CELLULAR SYSTEMS. WE

CONDUCT RESEARCH AND DEVELOPMENT THAT LEADS TO THE INNOVATIONS

THAT LEAD TO THE DEVELOPMENT OF THE CELLULAR SYSTEMS.

WE TAKE THIS TECHNOLOGY DEVELOPMENT, THIS R&D, AND WE PUSH

IT INTO THE INDUSTRY PRIMARILY THROUGH STANDARDS ORGANIZATIONS.

AND THEN WE ALSO PATENT THE INNOVATIONS ASSOCIATED WITH

THAT SYSTEMWIDE DEVELOPMENT ACTIVITY AND OTHER ACTIVITIES.

AND THEN QTL TAKES THE OUTPUT OF THAT, THE INTELLECTUAL

PROPERTY, THE PATENT PORTFOLIO, AND WE LICENSE THAT FOR

LICENSING REVENUE, AND THEN WE PUT THAT REVENUE BACK INTO

RESEARCH AND DEVELOPMENT AND TECHNOLOGY AND INNOVATION.

Q. AND AS OF MARCH OF 2018, CAN YOU DESCRIBE FOR US, JUST IN

GENERAL, THE TYPES OF LICENSES THAT QTL OFFERED TO LICENSEES?

A. SO GENERALLY WE OFFER PORTFOLIO WIDE LICENSES THAT INCLUDE

CELLULAR STANDARD ESSENTIAL PATENT LICENSES, AS WELL AS PATENTS

RELATED TO OTHER STANDARDS OUTSIDE OF CELLULAR, AS WELL AS

NON-ESSENTIAL PATENTS.

SO OUR PORTFOLIO WIDE LICENSING PROGRAM IS AT A CERTAIN

RATE, 5 PERCENT.

AND THEN IN ADDITION TO THAT, WE ALSO OFFER CELLULAR

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STANDARD ESSENTIAL PORTFOLIO LICENSES, THAT IS, SEP ONLY

LICENSES AS WELL.

Q. AND ARE THOSE SEP LICENSES RELEVANT TO MORE THAN ONE

GENERATION OF THE CELLULAR STANDARDS?

A. YES. THOSE LICENSES WILL COVER 2G, 3G, 4G, AND NOW 5G.

Q. NOW, DOES QTL OFFER ANY OTHER SERVICES TO LICENSEES?

A. YES, WE DO. WE FUND A GROUP WITHIN QUALCOMM CALLED ESG,

ENGINEERING SERVICES GROUP, AND THAT GROUP ACTUALLY OFFERS

SERVICES TO CARRIERS, INFRASTRUCTURE EQUIPMENT MANUFACTURERS,

HANDSET AND DEVICE MANUFACTURERS TO HELP THEM IMPLEMENT NEW

TECHNOLOGIES.

BUT IN ADDITION, QTL ALSO HAS A SMALL GROUP OF ENGINEERS

AND WE WORK WITH, WITH LICENSEES TO HELP THEM UNDERSTAND NEW

TECHNOLOGIES, TO HELP THEM IMPROVE ASPECTS OF THEIR PRODUCTS

AND BRING THEM TO MARKET.

AND WE ALSO FUND DIFFERENT LABS IN DIFFERENT PLACES AROUND

THE WORLD, INCLUDING THE U.S., CHINA, TAIWAN, INDIA, WHERE WE

HELP LICENSEES ESSENTIALLY DEVELOP TECHNOLOGIES FOR THEIR

PRODUCTS AND HELP THEM BRING THEM TO MARKET.

Q. AND THESE ENGINEERING SERVICES, ARE THEY AVAILABLE TO

LICENSEES WHO DON'T PURCHASE ANY QUALCOMM CHIPS?

A. YES. YOU JUST NEED TO BE A LICENSEE.

Q. AND WHAT IS THE BENEFIT OF THIS PROGRAM TO QTL?

A. WELL, THE MORE THAT WE CAN HELP LICENSEES BRING PRODUCT TO

MARKET, PARTICULARLY MORE QUICKLY, AND PRODUCTS THAT WILL BE

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SUCCESSFUL, THE BETTER OFF WE ARE AS A LICENSING BUSINESS.

IN ADDITION, WE WANT TO BRING NEW COMPANIES TO MARKET. WE

WANT TO BRING SMALLER, STARTUP COMPANIES THAT WANT TO GET INTO

THE MARKET. WE WANT TO HELP THEM SUCCEED IN GETTING THEIR

PRODUCTS INTO THE MARKET SUCCESSFULLY.

Q. MR. ROGERS, HAVE YOU PERSONALLY PARTICIPATED IN LICENSING

NEGOTIATIONS ON BEHALF OF QTL?

A. YES, I HAVE.

Q. IN GENERAL TERMS, CAN YOU DESCRIBE HOW QTL APPROACHES

LICENSING NEGOTIATIONS?

A. SO NEGOTIATIONS ARE DIFFERENT DEPENDING ON THE LICENSEE.

WE HAVE CERTAIN TERMS THAT WE OFFER.

BUT ONCE YOU GET INTO A LICENSING NEGOTIATION, A LOT

DEPENDS ON WHAT THE LICENSEE IS INTERESTED IN, AND THE GIVE AND

TAKE BETWEEN QUALCOMM AND THE LICENSEE.

SO IT DEPENDS ON THE PRODUCT THAT THEY'RE INTERESTED IN,

THE SCOPE OF THE LICENSE THAT THEY MAY BE INTERESTED IN, AND

OTHER FACTORS THAT AFFECT THEIR BUSINESS.

Q. DOES QTL TYPICALLY NEGOTIATE IN TEAMS?

A. YES. WE HAVE LICENSING MANAGERS, AND THAT SET OF FOLKS IS

LED BY OUR GENERAL MANAGER, JOHN HAN -- H-A-N, YES -- AND WE

ALSO HAVE LAWYERS WITHIN QTL THAT GET INVOLVED IN THE LICENSING

DISCUSSIONS, AND SOMETIMES SOME OF OUR ENGINEERS WITHIN QTL

WILL GET INVOLVED IN THE LICENSING DISCUSSIONS AS WELL.

Q. AND HOW ABOUT ON THE LICENSEE'S SIDE? HOW ARE THEIR TEAMS

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TYPICALLY FORMED?

A. SO THEY'RE TYPICALLY REPRESENTED BY THE SAME TYPES OF

FOLKS WITH THE SAME TYPES OF EXPERTISE. THEY'LL HAVE BUSINESS

PEOPLE INVOLVED, THEY'LL HAVE INHOUSE LAWYERS INVOLVED, THEY

MAY HAVE ENGINEERING FOLKS INVOLVED AS WELL. AND SOMETIMES

THEY MAY ALSO HAVE OUTSIDE COUNSEL INVOLVED.

Q. HOW LONG DO NEGOTIATIONS FOR LICENSING AGREEMENTS

TYPICALLY LAST?

A. SO THEY CAN LAST, IT'S VERY -- IT'S VARIED. THEY CAN BE

WEEKS, WHICH WOULD BE VERY QUICK. BUT THEY CAN LAST FOR

MONTHS, AND SOME CAN EVEN LAST FOR YEARS.

Q. NOW, FROM TIME TO TIME DO LICENSEES ASK QTL TO RENEGOTIATE

EXISTING LICENSES?

A. YES, THEY DO.

Q. WHAT CIRCUMSTANCES WOULD OCCASION THAT?

A. SO THEY MAY HAVE A CHANGE IN THEIR BUSINESS, THEY MAY HAVE

STOPPED SELLING PRODUCTS, THEY MAY WANT TO ADD CERTAIN PRODUCTS

THAT ARE UNLICENSED, THEY MAY WANT TO RENEGOTIATE THE SCOPE OF

A PARTICULAR LICENSE.

THERE ARE ANY VARIETY OF FACTORS THAT CAN CAUSE A LICENSEE

TO WANT TO RENEGOTIATE A LICENSE.

Q. WHAT LEVERAGE, IF ANY, ARE LICENSEES ABLE TO EXERT OVER

QUALCOMM IN THESE LICENSING NEGOTIATIONS.

A. I THINK THE MOST TYPICAL WOULD BE EITHER TO STOP PAYING OR

TO THREATEN TO STOP PAYING.

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Q. AND IN YOUR TIME AS THE PRESIDENT OF QTL, HAVE LICENSEES

DONE EXACTLY THAT?

A. YES, THEY HAVE. WHEN I FIRST TOOK OVER AS INTERIM GENERAL

MANAGER IN THE 2016 TIMEFRAME, THERE WERE A NUMBER OF LICENSEES

IN CHINA, FOR EXAMPLE, THAT HAD STOPPED PAYING UNDER THEIR

EXISTING AGREEMENTS.

AND IN ADDITION, APPLE HAS RECENTLY CAUSED ITS CONTRACT

MANUFACTURERS TO STOP PAYING.

AND WE HAVE ANOTHER LICENSEE THAT IS A FAIRLY SIGNIFICANT

LICENSEE THAT HAS STOPPED PAYING FOR SOME PERIOD OF TIME AND IS

NOW IN A PARTIAL PAY SITUATION.

Q. AND WHEN THAT HAPPENS, DO NEGOTIATIONS TYPICALLY CONTINUE?

A. YES. WHEN THAT HAPPENS, NEGOTIATIONS DO CONTINUE.

Q. AND IN ANY OF THESE INSTANCES THAT YOU MENTIONED, DID

QUALCOMM INTERRUPT CHIP SUPPLY OR THREATEN TO INTERRUPT CHIP

SUPPLY TO THE LICENSEES?

A. NO.

Q. MR. ROGERS, HOW OFTEN ARE LICENSING AGREEMENTS AND CHIP

SALE AGREEMENTS NEGOTIATED AT THE SAME TIME?

A. SO THESE AGREEMENTS ARE NEGOTIATED ACCORDING TO WHAT I

WOULD CALL A DIFFERENT PACE OF PLAY. SO IT'S ACTUALLY PRETTY

RARE THAT THAT WOULD OVERLAP.

ON THE LICENSING SIDE, WE NEGOTIATE AGREEMENTS THAT ARE

GOING TO LAST FOR YEARS.

ON THE CHIP SIDE, THEY HAVE A VERY FAST PACE OF PLAY WHERE

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1977

THEY GO THROUGH THEIR PURCHASE ORDER AND THEIR PRICING AT A

MUCH MORE RAPID PACE.

SO THESE DON'T TYPICALLY OVERLAP.

Q. I WANT TO TALK WITH YOU FOR JUST A MINUTE ABOUT FRAND.

HAS QUALCOMM MADE FRAND COMMITMENTS TO VARIOUS STANDARD

SETTING ORGANIZATIONS?

A. YES, WE HAVE.

Q. AND WHEN YOU CONSIDER QTL'S FRAND OBLIGATIONS IN THE

CONTEXT OF THE CELLULAR STANDARD SETTING, DO YOU HAVE A

PARTICULAR I.P. POLICY IN MIND?

A. YES. I TYPICALLY LOOK TO THE ETSI IPR POLICY.

Q. AND WHY IS THAT?

A. WELL, FROM MY PERSPECTIVE, AND I THINK FROM QUALCOMM'S

PERSPECTIVE, THE ETSI STANDARD SETTING ORGANIZATION IS THE

PRIMARY ORGANIZATION FOR CELLULAR STANDARDS ACTIVITIES WITHIN

3GPP.

AND IN ADDITION, THE ETSI IPR POLICY IS, FROM MY

PERSPECTIVE, KIND OF THE CENTRAL IPR POLICY FOR FRAND

COMMITMENTS FOR CELLULAR STANDARD ESSENTIAL PATENTS.

Q. AND BASED ON YOUR UNDERSTANDING OF ETSI'S POLICIES, ARE

QTL'S LICENSING PRACTICES CONSISTENT WITH THOSE OBLIGATIONS?

A. YES, THEY ARE.

Q. HOW SO?

A. WELL, WE LICENSE AT THE EQUIPMENT LEVEL, SO, FOR EXAMPLE,

THAT WOULD BE A SMARTPHONE OR A HANDSET.

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1978

AND WE LICENSE ON FAIR AND REASONABLE TERMS, AND WE

LICENSE ON NON-DISCRIMINATORY TERMS.

AND SO IN OUR VIEW, OUR LICENSING PRACTICES ARE CONSISTENT

WITH ETSI'S IPR POLICY.

Q. HOW DOES QUALCOMM MAKE ITS STANDARD ESSENTIAL PATENTED

TECHNOLOGY AVAILABLE TO OTHER CHIP MAKERS?

A. SO WE DON'T LICENSE AT THE COMPONENT LEVEL, WHICH IS NOT

REQUIRED UNDER THE ETSI IPR POLICY. BUT THE WAY THE TECHNOLOGY

IS MADE AVAILABLE IS WE WORK ON UNDERLYING TECHNOLOGY, THAT

FINDS ITS WAY INTO THE SPECIFICATIONS THAT THEN BECOME

STANDARDIZED.

AND THEN BASICALLY EVERYBODY IN THE INDUSTRY HAS ACCESS TO

THAT. THOSE STANDARDS ARE PUBLISHED, ANYBODY CAN ACCESS THOSE

SPECIFICATIONS.

AND QUALCOMM DOESN'T DO ANYTHING WITH RESPECT TO COMPONENT

MANUFACTURERS TO IN ANY WAY PRECLUDE THAT ACCESS.

Q. MR. ROGERS, IN LATE 2017, DID QTL ANNOUNCE A NEW STANDARD

LICENSING PROGRAM FOR 5G CELLULAR PATENTS?

A. YES, WE DID.

Q. AND CAN YOU DESCRIBE FOR THE COURT WHAT THE PUBLISHED

ROYALTY RATES ARE UNDER THAT PROGRAM?

A. YES. SO WHAT WE ANNOUNCED IN NOVEMBER OF 2017 WAS A

LICENSING FRAMEWORK THAT WOULD INCLUDE 5G, AND OF COURSE WE

STILL HAVE OUR FULL PORTFOLIO AGREEMENT AT 5 PERCENT, WHICH

WOULD INCLUDE STANDARD ESSENTIAL PATENTS AND THE REST OF OUR

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1979

PORTFOLIO, INCLUDING NON-ESSENTIAL PATENTS.

BUT WITH RESPECT TO SEP ONLY LICENSE AGREEMENTS, FOR 5G

MULTIMODE DEVICES, THE RATE WAS 3.25 PERCENT, AND FOR SINGLE

MODE DEVICES, RATE WAS 2.275 PERCENT.

THAT WAS THE RATE THAT WAS ANNOUNCED -- THOSE WERE THE

RATES THAT WERE ANNOUNCED IN NOVEMBER AND THOSE WERE THE RATES

THAT CONTINUED THROUGH -- THAT CONTINUED.

Q. ALL RIGHT. AND EXPLAIN TO THE COURT THE DIFFERENCE

BETWEEN THE MULTIMODE STANDARD ESSENTIAL PROGRAM AND THE SINGLE

MODE PROGRAM. WHAT'S THE DIFFERENCE BETWEEN THOSE TWO?

A. SO THE BASIC DIFFERENCE IS THAT WHEN WE SAY MULTIMODE,

THAT MEANS THAT FOR A DEVICE THAT PRACTICES 3G STANDARDS AND 4G

STANDARDS AND IN THIS CASE THE FIRST RELEASE OF 5G, THAT DEVICE

WOULD BE FULLY LICENSED UNDER THE SEP ONLY LICENSE AGREEMENT AT

3.25 PERCENT.

Q. ARE THESE RATES ALL SUBJECT TO A CAP?

A. YES, THEY ARE.

Q. WHAT IS THE CAP?

A. SO AT THE TIME, THE RATES WOULD BE APPLIED TO THE NET

SELLING PRICE OF A DEVICE. AT THE TIME THE CAP FOR THE DEVICE

WAS $500. THAT WAS IN NOVEMBER OF 2017.

BUT AT THE PRESENT TIME, AS OF JANUARY 2018, THE CAP WAS

REDUCED FROM $500 TO $400.

AND TO EXPLAIN THAT VERY BRIEFLY, VERY SIMPLY, YOUR HONOR,

IF A DEVICE WAS ACTUALLY SOLD ON THE MARKET FOR $800, THE

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1980

ROYALTY RATE WOULD ONLY BE APPLIED UP TO $400. THAT WOULD CAP

THE NET SELLING PRICE OF THE DEVICE.

Q. AND IN A TYPICAL LICENSE FOR A HANDSET PRODUCT, WHAT

ROYALTY BASE IS APPLIED?

A. SO IT'S THE NET SELLING PRICE OF THE HANDSET ITSELF, SO

THE SMARTPHONE ITSELF WHEN IT'S SOLD BY, YOU KNOW, FOR EXAMPLE,

SAMSUNG TO A THIRD PARTY.

Q. AND IS THAT TYPICAL ACROSS MOST OF YOUR LICENSES?

A. YES.

Q. NOW, HOW DID YOU ARRIVE AT THIS OFFER IN LATE 2017? WHAT

WAS THE GENESIS OF IT?

A. SO WE DEVELOPED THIS LICENSING FRAMEWORK IN CHINA

FOLLOWING THE RESOLUTION OF THE NDRC ACTION IN CHINA IN

FEBRUARY OF 2015.

IN FEBRUARY OF 2015 WHEN WE RESOLVED THE NDRC ACTION,

THERE WAS A RECTIFICATION PLAN THAT WAS PUT IN PLACE WHEREBY

CHINA'S -- QUALCOMM'S LICENSING PROGRAM IN CHINA WOULD PROCEED

UNDER CERTAIN TERMS AND CONDITIONS.

AND THE PROGRAM THAT WE DEVELOPED IN CHINA WAS ESSENTIALLY

ACCORDING TO THE SAME LICENSING FRAMEWORK I JUST DESCRIBED. IT

WAS 3 AND A QUARTER PERCENT FOR MULTIMODE DEVICES, 3G, 4G

BRANDED DEVICES, THROUGH A PARTICULAR RELEASE OF 4G AT THAT

POINT IN TIME, RELEASE 11.

AND THEN WE BUILT A LICENSING PROGRAM IN CHINA BASED ON

THOSE TERMS, AND AS OF NOVEMBER 2017 WHEN WE ANNOUNCED OUR 5G

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1981

RATE, WE HAD BUILT THAT LICENSING PROGRAM UP TO ABOUT 150

AGREEMENTS BY THAT POINT IN TIME.

AND SO WE TOOK THAT SAME LICENSING PROGRAM AND SIMPLY

EXTENDED IT TO APPLY THE SAME RATES INSIDE OF CHINA AND OUTSIDE

OF CHINA, AND ALSO INCLUDED ADDITIONAL TECHNOLOGIES, THAT IS,

THE LATER RELEASES OF 4G AND THE FIRST RELEASE OF 5G.

Q. OKAY. LET'S BACK UP JUST A LITTLE BIT, MR. ROGERS.

TELL THE COURT, WHAT IS THE NDRC?

A. SO THE NDRC IS THE AGENCY IN CHINA THAT IS RESPONSIBLE, AT

LEAST WAS AT THAT TIME, RESPONSIBLE FOR CERTAIN -- ESSENTIALLY

MANAGING THE ANTI MONOPOLY LAW IN CHINA, AT LEAST THE PARTS OF

IT THAT APPLIED.

SO THE NDRC WAS THE AGENCY THAT ESSENTIALLY CONDUCTED THE

INVESTIGATION OF QUALCOMM'S LICENSING PROGRAM IN CHINA.

Q. NOW, YOU MENTIONED THE RECTIFICATION PLAN CAME INTO BEING

IN 2015. WHAT IS THE RECTIFICATION PLAN?

A. SO WHEN THAT INVESTIGATION CONCLUDED, IT CONCLUDED WITH A

PLAN THAT ESSENTIALLY WAS THE PLAN UNDER WHICH QUALCOMM'S

LICENSING PROGRAM WOULD PROCEED IN CHINA.

AND THE RECTIFICATION PLAN IS THE NAME OF THAT PLAN.

AND ESSENTIALLY THE RECTIFICATION PLAN SET THE TERMS AND

THE RESTRICTIONS UNDER WHICH CHINA -- EXCUSE ME -- UNDER WHICH

QUALCOMM COULD LICENSE IN CHINA, AND IT APPLIED TO OUR CHINESE

CELLULAR ESSENTIAL, CELL STANDARD ESSENTIAL PATENTS, AND IT

APPLIED TO DEVICES MADE AND USED -- EXCUSE ME -- MADE AND SOLD

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1982

FOR USE IN CHINA.

Q. DID THE PLAN APPLY OUTSIDE OF CHINA?

A. NO, IT DID NOT.

BUT THE -- THE LICENSES THAT WERE AVAILABLE UNDER THAT

PLAN, WHICH WE CALL CHINESE PATENT LICENSE AGREEMENTS, CPLA'S,

WERE MADE AVAILABLE TO EVERYBODY IN THE WORLD FOR DEVICES MADE

AND SOLD FOR USE IN CHINA.

Q. NOW, YOU MAY HAVE TOLD US THIS, BUT AS OF MARCH OF 2018,

HOW MANY LICENSEES HAD SIGNED UP FOR THE CPLA AS YOU DESCRIBED?

A. WELL, AS OF NOVEMBER OF 2017, IT WAS -- WE HAD AT LEAST

150 AGREEMENTS. AND SO BY MARCH OF 2018, WE HAD A SIGNIFICANT

ADDITIONAL NUMBER. I COULDN'T TELL YOU IF IT'S OVER 200 BY

THAT POINT IN TIME.

Q. NOW, DID ANY COMPANY THAT WAS ELIGIBLE FOR A CPLA SEP

LICENSE ELECT TO KEEP THEIR EXISTING FULL PORTFOLIO LICENSE IN

PLACE?

A. YES.

Q. HOW MANY COMPANIES DID THAT?

A. I DON'T KNOW THE EXACT NUMBER, BUT THERE WERE A

SIGNIFICANT NUMBER OF COMPANIES THAT DID ELECT TO KEEP THEIR

FULL PORTFOLIO LICENSE. THERE WERE COMPANIES FROM KOREA,

JAPAN, TAIWAN THAT CHOSE TO KEEP THEIR FULL PORTFOLIO LICENSES.

Q. NOW, UNDER THE RECTIFICATION PLAN, DOES THE PLAN REQUIRE

QUALCOMM TO LICENSE AT THE COMPONENT LEVEL?

A. NO, IT DOES NOT.

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Q. DOES THE PLAN ALLOW QUALCOMM TO LICENSE AT THE HANDSET

LEVEL?

A. YES, IT DOES.

Q. AND WITH RESPECT TO QUALCOMM'S POLICY OF SELLING CHIPS

ONLY TO LICENSED OEM'S, DOES THE PLAN ALLOW FOR THAT?

A. YES, IT DOES. THE PLAN EXPRESSLY STATES THAT QUALCOMM CAN

SELL CHIPS ONLY TO LICENSED OEM'S CONSISTENT WITH THE TERMS SET

FORTH IN THE RECTIFICATION PLAN.

Q. WHAT DOES THAT MEAN?

A. SO IN OTHER WORDS, WE WERE PERMITTED UNDER THIS PLAN TO

ESSENTIALLY OFFER THE LICENSING TERMS UNDER THE RECTIFICATION

PLAN AND SELL ONLY TO LICENSE -- TO CUSTOMERS WHO WERE LICENSED

UNDER THOSE TERMS.

Q. NOW, WERE THE LICENSE NEGOTIATIONS THAT YOU HAD PURSUANT

TO THE RECTIFICATION PLAN, WERE THEY CONDUCTED UNDER THE

SUPERVISION OF THE NDRC IN CHINA?

A. YES, THEY WERE.

Q. AND DID YOU HAVE REPORTING OBLIGATIONS AS WELL?

A. YES, WE DID.

Q. CAN YOU DESCRIBE TO THE COURT WHAT ACTION YOU TOOK IN THAT

REGARD?

A. SO I WOULD REGULARLY VISIT WITH THE NDRC FOLLOWING THE

RECTIFICATION PLAN TO BRIEF THE NDRC CASE TEAM ON THE STATUS OF

THE LICENSING PROGRAM AS IT ROLLED OUT AFTER FEBRUARY OF 2015.

AND IN ADDITION, WE WOULD REGULARLY PROVIDE THE NDRC WITH

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1984

COPIES OF THE LICENSE AGREEMENTS THAT WERE SIGNED UNDER THE

RECTIFICATION PLAN.

THE NDRC WOULD ALSO INDEPENDENTLY TALK TO LICENSEES AND

TALK TO US ABOUT THEIR CONVERSATIONS WITH LICENSEES, AND IN ONE

MEETING IN SHENZHEN, THE NDRC CALLED A LARGE MEETING WITH

QUALCOMM AND PROBABLY ABOUT 30 OR SO MANUFACTURERS TO TALK

ABOUT THE RECTIFICATION PLAN AND THE LICENSING THAT WOULD OCCUR

AFTER THE RECTIFICATION PLAN.

Q. NOW, DID THE PLAN REQUIRE QUALCOMM TO MAKE THIS OFFER

AVAILABLE GLOBALLY OR WORLDWIDE?

A. NO. THE -- THE RECTIFICATION PLAN AND THE LICENSING TERMS

THAT WERE SET FORTH UNDER THE RECTIFICATION PLAN, YOU CAN THINK

OF IT AS JURISDICTIONALLY LIMITED TO CHINA.

AGAIN, THE OFFER WAS MADE TO EVERYBODY, ANY LICENSEE

AROUND THE WORLD, BUT IT WAS MADE WITH RESPECT TO QUALCOMM'S

CHINESE STANDARD ESSENTIAL PATENTS AND TO DEVICES MADE AND SOLD

FOR US IN CHINA.

Q. NOW, AT THE TIME THAT THE 5G PROGRAM WAS ANNOUNCED IN

NOVEMBER OF 2017, HAD THE TECHNICAL SPECIFICATION FOR 5G BEEN

FINALIZED?

A. NO, NOT YET.

Q. WHEN DID THAT HAPPEN?

A. THAT HAPPENED IN DECEMBER OF 2017.

Q. AND HAD THE STANDARD BEEN ADOPTED BY 3GPP BY THAT TIME?

A. NOT BY THAT TIME.

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Q. DID THAT HAPPEN SOMETIME AFTER MARCH OF 2018?

A. IT HAPPENED AFTER THE BEGINNING OF 2018. I'M NOT SURE IF

IT WAS BEFORE OR AFTER MARCH.

Q. LET'S TURN TO TALK BRIEFLY ABOUT SAMSUNG. DID SAMSUNG

HAVE A LICENSE AGREEMENT WITH QUALCOMM WHEN YOU WERE PROMOTED

INTO YOUR CURRENT ROLE?

A. YES, IT DID.

Q. AND DID YOU BECOME FAMILIAR WITH THAT LICENSE AGREEMENT?

A. GENERALLY, YES.

Q. HAVE THERE BEEN DISCUSSIONS WITH SAMSUNG REGARDING

AMENDING THAT AGREEMENT SINCE YOU TOOK OVER AT QTL?

A. YES.

Q. WHEN DID YOU GET INVOLVED IN THOSE?

A. SO I WOULD HAVE BEEN INVOLVED IN THE SAMSUNG DISCUSSIONS

PROBABLY GOING BACK TO 2016, BUT CERTAINLY INVOLVED IN 2017

INTO THE BEGINNING OF 2018.

Q. AND DID YOU PERSONALLY PARTICIPATE IN THE DISCUSSIONS?

A. YES, I DID.

Q. WHO REPRESENTED QTL?

A. SO MYSELF, DEREK ABERLE WHEN HE WAS THERE WAS INVOLVED,

JOHN HAN, THE GENERAL MANAGER OF QTL, WAS VERY MUCH INVOLVED.

WE ALSO HAD SOME ATTORNEYS WITHIN QTL AND LICENSING

MANAGERS INVOLVED IN THOSE DISCUSSIONS AS WELL, AND ALSO FOLKS

FROM THE ENGINEERING SIDE WITHIN QTL AS WELL.

Q. SO IT SOUNDS LIKE THIS WAS A PRETTY BIG GROUP?

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1986

A. YES.

Q. WHO WAS REPRESENTING SAMSUNG?

A. SO SAMSUNG WAS REPRESENTED PRIMARILY BY DR. AHN, WHO'S THE

EVP, EXECUTIVE VICE-PRESIDENT, OF THEIR LICENSING GROUP. HIS

NAME IS A-H-N.

AND ALSO BY INJUNG LEE, WHO WAS SECOND IN CHARGE.

SAMSUNG ALSO HAD A NUMBER OF INHOUSE ATTORNEYS INVOLVED,

AND I THINK ALSO SOME, SOME ENGINEERS AS WELL.

Q. AND OVER WHAT PERIOD OF TIME DID THESE NEGOTIATIONS TAKE

PLACE?

A. AS I SAID, I THINK THESE NEGOTIATIONS WERE ONGOING

BEGINNING AT LEAST IN 2016, ALL THROUGH 2017, AND THEN INTO THE

BEGINNING OF 2018.

Q. AND WAS THIS TO AMEND AN EXISTING SAMSUNG AGREEMENT?

A. YES. IT WAS AN AMENDMENT TO AN AGREEMENT THAT WAS FIRST

ENTERED INTO IN 1993, AND THEN AMENDED AGAIN AT LEAST AS OF

2009, AND THEN THIS WAS AN AMENDMENT TO THAT EXISTING

AGREEMENT.

Q. AND I TAKE IT THESE NEGOTIATIONS ARRIVED ULTIMATELY AT AN

AGREEMENT, OR A SERIES OF AGREEMENTS?

A. YES, IT DID.

Q. AND DID YOU AMEND THE EXISTING PATENT LICENSE AGREEMENT?

A. YES. WE AMENDED THE AGREEMENT BETWEEN QUALCOMM AND

SAMSUNG. THE FUNDAMENTAL TERMS OF THE AGREEMENT REMAINED IN

PLACE, THE ROYALTY RATE, FOR EXAMPLE, THE LICENSE FROM QUALCOMM

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ROGERS DIRECT BY MR. VAN NEST

UNITED STATES COURT REPORTERS

1987

TO SAMSUNG REMAINED IN PLACE.

BUT WE AMENDED OTHER ASPECTS OF THE AGREEMENT. ONE OF THE

THINGS THAT WE DID WAS WE REDUCED THE CAP ASSOCIATED WITH THE

LICENSE FROM $500 TO $400 FOR HANDSETS. WE ALSO INCREASED THE

SCOPE OF THE RIGHTS THAT WE GOT BACK FROM SAMSUNG TO THEIR

INTELLECTUAL PROPERTY FOR OUR PRODUCTS.

Q. AND HAD THERE BEEN AN EXISTING CROSS-LICENSE IN THE

ORIGINAL -- THE AGREEMENT THAT WAS BEING AMENDED?

A. YES. WE ALREADY HAD A CROSS-LICENSE FROM SAMSUNG, AND WE

INCREASED THE SCOPE OF THAT CROSS-LICENSE THROUGH A

PARTICULARLY COMPLICATED MECHANISM THAT ESSENTIALLY GAVE US

RIGHTS TO SIGNIFICANT NEW NUMBER OF PATENTS THAT THEY HAD.

Q. AND DID QUALCOMM PAY SEPARATE CONSIDERATION FOR THAT

EXPANDED SCOPE OF RIGHTS?

A. YES, WE DID.

Q. NOW, AS PART OF THE DISCUSSION YOU HAD WITH SAMSUNG, WERE

THERE OTHER DISPUTES ADDRESSED?

A. YES. THERE WERE A NUMBER OF OTHER DISPUTES BETWEEN

QUALCOMM AND SAMSUNG THAT WERE ADDRESSED AND RESOLVED AS PART

OF THIS OVERALL NEGOTIATION.

Q. AND WHAT CLAIMS DID QUALCOMM HAVE VIS-À-VIS SAMSUNG?

A. SO SAMSUNG WAS A -- HAS A LARGE FAB AND SAMSUNG WAS MAKING

QUALCOMM CHIPSET PRODUCTS, AND WE HAD SOME CONCERNS BECAUSE

SAMSUNG ALSO HAS A COMPETING CHIPSET BUSINESS. AND WE HAD SOME

CONCERNS ABOUT INFORMATION EXCHANGE BETWEEN THE FAB AND THE

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ROGERS DIRECT BY MR. VAN NEST

UNITED STATES COURT REPORTERS

1988

CHIPSET BUSINESS AND BETWEEN THE FAB AND SOME OF OUR CUSTOMERS.

WE RAISED THOSE CONCERNS, AND THOSE CONCERNS WERE

ADDRESSED AS PART OF THE OVERALL RESOLUTION.

Q. AND DID SAMSUNG --

A. THERE WAS ALSO SOME, I THINK, OVERDUE PAYMENT CONCERNS, OR

UNDER DUE PAYMENT CONCERNS THAT WERE ADDRESSED.

Q. ALL RIGHT. AND DID SAMSUNG HAVE DISPUTES OF ITS OWN

RELATED TO QUALCOMM?

A. YEAH, SAMSUNG HAD DISPUTES RELATING TO QUALCOMM'S LICENSE

AGREEMENTS THAT WERE PART OF THE MATTERS ASSOCIATED WITH THE

KFTC, AND SAMSUNG HAD SOME CONCERNS ABOUT WHETHER IT WAS BEING

TREATED FAIRLY WITH RESPECT TO APPLE.

Q. WITH RESPECT TO APPLE?

A. YES.

Q. NOW, HOW WERE THESE DISPUTES RESOLVED?

A. SO EVERYTHING WAS RESOLVED IN A MUTUAL SETTLEMENT AND

RELEASE AGREEMENT THAT WAS ENTERED INTO AT THE SAME TIME AS THE

AMENDED LICENSE AGREEMENT.

Q. AND DID QUALCOMM PAY SAMSUNG SEPARATE CONSIDERATION AS

PART OF THAT AGREEMENT?

A. WE DID.

Q. NOW, DID THE AGREEMENT OR SERIES OF AGREEMENTS ADDRESS

COMPONENT LEVEL LICENSING AS WELL?

A. YES, THERE WAS A PARTICULAR AGREEMENT THAT WE ENTERED INTO

THAT ADDRESSED THE QUESTION OF COMPONENT LEVEL LICENSING, BUT

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ROGERS DIRECT BY MR. VAN NEST

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1989

IT WASN'T ITSELF A COMPONENT LEVEL LICENSE. IT WAS ESSENTIALLY

A CONTRACTUAL ASSURANCE WITH RESPECT TO QUALCOMM -- SAMSUNG'S

COMPONENT BUSINESS.

Q. AND WHAT WAS THE ASSURANCE THAT QUALCOMM GAVE?

A. SO SAMSUNG HAS A CELLULAR BASEBAND BUSINESS THAT THEY MAKE

PRIMARILY FOR THEIR OWN USE, AND QUALCOMM GAVE SAMSUNG AN

ASSURANCE THAT SHOULD QUALCOMM EVER SEEK TO ASSERT ITS CELLULAR

SEPS AGAINST THAT COMPONENT BUSINESS, AGAINST THOSE COMPONENTS,

WE WOULD FIRST MAKE SAMSUNG AN OFFER ON FAIR, REASONABLE, AND

NON-DISCRIMINATORY TERMS.

Q. NOW, DID YOU PRESENT THIS BODY OF AGREEMENTS TO THE KOREAN

FAIR TRADE COMMISSION?

A. YES, WE DID.

Q. WHY DID YOU DO THAT?

A. WELL, THE KFTC MATTER HAD CONCLUDED, IT WAS ON APPEAL, AND

WE WANTED TO MAKE SURE THAT THE KFTC WAS AWARE THAT WE HAD

REACHED THIS SET OF AGREEMENTS AND THAT THEY WERE FULLY

INFORMED.

Q. SO WAS THE ENTIRE SERIES OF AGREEMENTS PROVIDED TO THE

GOVERNMENT?

A. YES, AND WE BASICALLY GAVE THEM AN OVERVIEW.

Q. AND DID THE KFTC EXPRESS AN OBJECTION TO ANY PROVISION OF

THE AGREEMENTS?

A. NO.

MR. VAN NEST: PASS THE WITNESS, YOUR HONOR.

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ROGERS DIRECT BY MR. VAN NEST

UNITED STATES COURT REPORTERS

1990

THE COURT: OKAY. TIME IS 2:12. WE NORMALLY TAKE

OUR BREAK AT 2:15.

WE COULD GO TO 2:20 AND TAKE OUR BREAK AT 2:20. WHY DON'T

WE DO THAT.

MR. MATHESON: WHATEVER THE COURT PREFERS, YOUR

HONOR.

THE COURT: I'M SORRY, WHAT DID YOU SAY?

MR. MATHESON: WHATEVER YOU PREFER, YOUR HONOR. I

HAVE TO PASS OUT A FEW BINDERS.

THE COURT: OKAY. LET'S TAKE THE BINDERS.

(PAUSE IN PROCEEDINGS.)

MR. CARSON: MAY I APPROACH, YOUR HONOR?

THE COURT: YES, PLEASE.

(PAUSE IN PROCEEDINGS.)

THE COURT: YOU KNOW, WHY DON'T WE GO AHEAD AND TAKE

OUR TEN MINUTE BREAK NOW AND YOU CAN SORT THIS OUT.

MR. MATHESON: GOOD IDEA. THANK YOU, YOUR HONOR.

THE COURT: ALL RIGHT. YOU MAY STEP DOWN DURING THE

TEN MINUTE BREAK.

THE WITNESS: THANK YOU, YOUR HONOR.

THE COURT: ALL RIGHT. WE'LL BE IN RECESS FOR TEN

MINUTES. THANK YOU.

(RECESS FROM 2:14 P.M. UNTIL 2:23 P.M.)

THE CLERK: PLEASE BE SEATED.

THE COURT: ALL RIGHT. GOOD AFTERNOON. WELCOME

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ROGERS CROSS BY MR. MATHESON

UNITED STATES COURT REPORTERS

1991

BACK.

OKAY. ARE YOU READY?

MR. MATHESON: YES, MA'AM.

THE COURT: 2:23. GO AHEAD, PLEASE.

MR. MATHESON: THANK YOU, YOUR HONOR.

CROSS-EXAMINATION

BY MR. MATHESON:

Q. YOU DISCUSSED THE STANDARD ESSENTIAL PATENT ONLY LICENSE

ARRANGEMENT THAT QUALCOMM WAS OFFERING TO THE WORLD IN MARCH OF

2018.

QUALCOMM DID NOT BEGIN OFFERING THAT TO OEM'S WORLDWIDE

UNTIL NOVEMBER OF 2017; RIGHT?

A. SO THAT PROGRAM WAS ANNOUNCED IN NOVEMBER OF 2017. BUT WE

OFFERED SEP ONLY LICENSES PRIOR TO THAT.

Q. YOU DID NOT OFFER THE -- OKAY. PRIOR TO YOUR DEPOSITION,

YOU COULD ONLY IDENTIFY THREE OEM'S WHO -- LEAVING ASIDE CPLA

LICENSES, WHO HAD AN SEP ONLY LICENSE FROM QUALCOMM; RIGHT?

A. CORRECT.

Q. SO IT WAS POSSIBLE TO NEGOTIATE AN SEP LICENSE ONLY WITH

QUALCOMM, BUT QUALCOMM DID NOT OFFER TO THE WORLD THE 3.25

PERCENT SEP ONLY LICENSE YOU DESCRIBED UNTIL NOVEMBER OF 2017;

IS THAT RIGHT?

A. WELL, THE PROGRAM THAT WE DESCRIBED WAS CREATED FOR THAT

NOVEMBER ANNOUNCEMENT. BUT WE OFFERED LTE SEP ONLY LICENSES AT

I BELIEVE 3 .25 OR 3.5 PERCENT PRIOR TO 4G.

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ROGERS CROSS BY MR. MATHESON

UNITED STATES COURT REPORTERS

1992

Q. AND THOSE WERE NOT MULTIMODE; CORRECT? SO THE MULTIMODE

3.25 PERCENT SEP ONLY LICENSE THAT YOU DESCRIBED WAS NOT

AVAILABLE TO THE WORLD UNTIL NOVEMBER 2017; RIGHT?

A. A SLIGHT CORRECTION. IT WAS NOT AVAILABLE -- LET ME PUT

IT THIS WAY. IT WAS AVAILABLE TO THE WORLD INSIDE OF CHINA

UNDER THE CPLA PROGRAM. AND THEN IT WAS MADE AVAILABLE

WORLDWIDE, INCLUDING OUTSIDE OF CHINA, IN NOVEMBER.

Q. THANK YOU.

SO YOU ALSO TESTIFIED ON DIRECT THAT AFTER THE CPLA WAS

ANNOUNCED, OEM'S, INCLUDING THOSE IN KOREA AND TAIWAN, ELECTED

TO KEEP THEIR FULL PORTFOLIO LICENSE RATHER THAN TAKE THE CPLA

LICENSE; RIGHT?

A. CORRECT.

Q. AND THE CPLA LICENSE, AS YOU JUST SAID, IS ONLY GOOD FOR

SALES MADE INTO CHINA, SO OEM'S WHO WERE NOT MAKING SALES IN

CHINA WOULDN'T REALLY HAVE ANY INTEREST IN THAT LICENSE; RIGHT?

THAT'S ONE REASON THEY MIGHT NOT HAVE TAKEN ADVANTAGE OF IT?

A. WELL, HYPOTHETICALLY, YOU'RE CORRECT THAT IF THEY'RE NOT

MAKING SALES INTO CHINA, AND THEY HAVE NO INTENT TO MAKE SALES

INTO CHINA, THEN THEY WOULD NOT BE INTERESTED IN TAKING

ADVANTAGE OF THE CPLA AGREEMENT.

Q. CAN YOU TURN IN THE LARGE BINDER I GAVE YOU, SIR -- YOU

HAVE THREE BINDERS, I'M AFRAID. THE BIG ONE IS CALLED BINDER

NUMBER 1. CAN YOU TURN TO TAB 6, WHICH IS CX 8195.

CAN YOU IDENTIFY THIS, SIR, AS AN E-MAIL YOU RECEIVED IN

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ROGERS CROSS BY MR. MATHESON

UNITED STATES COURT REPORTERS

1993

JANUARY OF 2018, ATTACHING MATERIALS RELATED TO AN EARNINGS

CALL?

A. I SEE THAT.

MR. MATHESON: YOUR HONOR, MOVE TO ADMIT CX 8195.

THE COURT: ANY OBJECTION?

MR. VAN NEST: NO OBJECTION, YOUR HONOR.

THE COURT: IT'S ADMITTED.

(PLAINTIFF'S EXHIBIT CX 8195 WAS ADMITTED IN EVIDENCE.)

THE COURT: GO AHEAD, PLEASE.

BY MR. MATHESON:

Q. COULD YOU TURN TO CX 8195-007, SIR.

DIRECTING YOUR ATTENTION TO THE SECOND QUESTION FROM THE

BOTTOM IT READS, "WHY DOES QUALCOMM PRACTICE NO LICENSE, NO

CHIPS? IS THIS JUST A WAY TO PRESSURE COMPANIES INTO SIGNING

LICENSE AGREEMENTS?"

NOW, THE FIRST BULLET INDICATES THE MANNER IN WHICH

QUALCOMM EXECUTIVES MIGHT RESPOND TO THIS QUESTION DURING THE

INVESTOR CALL; IS THAT FAIR?

A. I THINK THAT'S FAIR.

Q. AND IT READS, "WE HAVE LEGITIMATE REASONS FOR THIS

PRACTICE AND THE RECENT LEXMARK DECISION ON EXHAUSTION

VALIDATES THAT THIS PRACTICE IS NECESSARY."

NOW, THE LEXMARK DECISION IS A DECISION BY THE

UNITED STATES SUPREME COURT; IS THAT RIGHT?

A. CORRECT.

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ROGERS CROSS BY MR. MATHESON

UNITED STATES COURT REPORTERS

1994

Q. TURNING YOUR ATTENTION TO THE THIRD BULLET IT READS, "WE

HAVE NEVER THREATENED," IT SAID THREADED, BUT I ASSUME THAT

MEANS THREATENED, "WE HAVE NEVER THREATENED TO CUT YOU HAVE OR

CUT OFF CHIP SUPPLY TO GET A LICENSEE/CUSTOMER TO ACCEPT OUR

LICENSE TERMS."

DO YOU SEE?

A. I SEE THAT.

Q. ARE YOU AWARE THAT IN DECEMBER OF 2015, RICK *OSELOW, THE

PRESIDENT OF MOTOROLA, TOLD QUALCOMM THAT ERIC REIFSCHNEIDER

WAS CONSTANTLY THREATENING TO CUT OFF CHIP SUPPLY?

A. NO.

Q. SO AS FAR AS YOU ARE CONCERNED, IT WAS A TRUE STATEMENT,

TO THE BEST OF YOUR KNOWLEDGE IN JANUARY OF 2018, THAT QUALCOMM

HAD NEVER THREATENED TO CUT OFF CHIP SUPPLY TO GET A LICENSEE

TO ACCEPT LICENSE TERMS; RIGHT?

A. THAT'S CORRECT.

Q. WOULD YOU TURN TO CX 8195-083.

UNDER 5G IT READS, "ANOTHER IMPORTANT AREA IS 5G AND WE

ESTIMATE THAT WE HAVE A 12 TO 24 MONTH LEAD AHEAD OF OUR KEY

COMPETITORS IN THE TRANSITION TO 5G."

NOW, IN THE CONTEXT OF THIS BULLET, ARE THE KEY

COMPETITORS REFERRED TO COMPETING MAKERS OF MODEM CHIPS?

A. IT COULD BE COMPETING MAKERS OF MODEM CHIPS, YES.

Q. WOULD YOU TURN TO TAB 5 IN YOUR BINDER, SIR, WHICH IS

CX 8196.

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ROGERS CROSS BY MR. MATHESON

UNITED STATES COURT REPORTERS

1995

A. TAB 5. I'M SORRY, DID YOU SAY TAB 5?

Q. TAB 5, SIR, CX 8196.

A. OKAY.

Q. CAN YOU IDENTIFY THIS AS MATERIALS PREPARED IN CONNECTION

WITH A BOARD OF DIRECTORS MEETING IN DECEMBER OF 2017?

A. THAT'S CORRECT.

MR. MATHESON: YOUR HONOR, MOVE TO ADMIT CX 8196.

MR. VAN NEST: YOUR HONOR, WE DON'T HAVE OBJECTION,

BUT I THINK THIS EXHIBIT AND THE PRIOR EXHIBIT ARE SUBJECT TO

SEALING MOTIONS WHICH WE'VE AGREED TO FILE AFTER THE WITNESS'S

TESTIMONY IS COMPLETED.

THEY'RE VERY LARGE DOCUMENTS, AND THE FTC IDENTIFIED WHICH

PAGES THEY WOULD USE, SO WE DON'T HAVE ANY DISAGREEMENT IN

COURT TODAY.

BUT IF THE ENTIRE AGREEMENT IS GOING TO BE FILED AS

OPPOSED TO JUST THESE PAGES, WE WOULD NEED TO MOVE TO SEAL 8195

AND 8196. ALTERNATIVELY, WE COULD JUST ADMIT THE PAGES THAT

ARE USED.

THE COURT: I'D LIKE THE WHOLE DOCUMENT TO BE

ADMITTED. SO JUST GO AHEAD AND FILE THAT. CAN YOU FILE IT

TODAY, THE SEALING MOTION?

MR. VAN NEST: I -- WE WILL TRY TO DO THAT, YOUR

HONOR.

THE COURT: OKAY. IT'S ADMITTED.

(PLAINTIFF'S EXHIBIT CX 8196 WAS ADMITTED IN EVIDENCE.)

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ROGERS CROSS BY MR. MATHESON

UNITED STATES COURT REPORTERS

1996

THE COURT: GO AHEAD, PLEASE.

BY MR. MATHESON:

Q. COULD YOU TURN, SIR, TO CX 8196-129.

MR. KOTARSKI: I BELIEVE THIS PAGE IS SEALED.

MR. MATHESON: 129?

MR. KOTARSKI: ACCORDING TO THE LIST I HAVE, YES.

MR. MATHESON: OKAY. LET'S PUT IT UP THERE. I DID

NOT THINK IT WAS. THANK YOU, KEN.

Q. COULD I TURN YOUR ATTENTION, SIR, TO THE PORTION OF THIS

SLIDE THAT READS, "GLOBAL 5G MOMENTUM."

IT'S FAIR TO SAY THIS SLIDE IDENTIFIES VARIOUS CARRIERS

WHO HAVE COMMITTED TO COMMERCIAL LAUNCH OF 5G; CORRECT?

A. THERE ARE CARRIERS IDENTIFIED HERE, YES.

Q. AND TAKING A LOOK AT THE PORTION OF THE SLIDE THAT DEALS

WITH ACTIVE SDX 50 DESIGN ENGAGEMENTS, THE SDX 50/55 REFERS TO

THE SNAPDRAGON X 505G MODEM THAT QUALCOMM CLAIMS TO RELEASE TO

SUPPORT 5G NETWORKS?

A. YES.

Q. NOW, THE DESIGN ENGAGEMENTS REFERRED TO WITH THE OEM'S

IDENTIFIED, WHO I WILL NOT SAY OUT LOUD IF THIS IS SEALED,

THOSE DESIGN ENGAGEMENTS OCCUR WELL IN ADVANCE OF SHIPPING

CHIPS IN COMMERCIAL QUANTITIES TO OEM'S; RIGHT?

A. WELL, YOU'RE ASKING SOMETHING THAT'S ON THE PRODUCT SIDE.

I DON'T KNOW HOW FAR IN ADVANCE OF COMMERCIAL CHIP SHIPMENTS,

BUT CERTAINLY IN ADVANCE OF COMMERCIAL SHIPMENTS IF THERE'S A

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ROGERS CROSS BY MR. MATHESON

UNITED STATES COURT REPORTERS

1997

DESIGN ENGAGEMENT WITH A PARTICULAR OEM.

Q. THANK YOU. COULD YOU TURN TWO SLIDES PREVIOUSLY TO

CX 8196-127.

MR. KOTARSKI: I BELIEVE THIS ONE IS NOT SEALED.

BY MR. MATHESON:

Q. IN THE RED AT THE TOP -- WELL, IT READS, "SUBSTANTIAL

DEVELOPMENT OF I.P. FOR 5G REFLECTING SIGNIFICANT TECHNOLOGY

LEADERSHIP, 75 PERCENT OF 4G PATENTS AND APPLICATIONS HAVE

POTENTIAL APPLICABILITY TO 5G."

DO YOU SEE THAT, SIR?

A. I DO.

Q. NOW, IT'S QUALCOMM'S POSITION THAT 4G AND 5G ARE BOTH

BASED ON OFDM; RIGHT?

A. THAT'S A TRUE STATEMENT.

Q. COULD YOU TURN TO --

THE COURT: LET ME ASK A QUESTION. QUALCOMM MOVED TO

SEAL THIS DOCUMENT, AND I ALREADY RULED ON YOUR SEALING REQUEST

YESTERDAY. SO I'M NOT SURE, MR. VAN NEST, WHAT YOU'RE TALKING

ABOUT. I'M LOOKING AT ECF 1430 FILED JANUARY 24TH, 2019.

MR. MATHESON: YOUR HONOR, IN ORDER TO ACCOMMODATE

THEIR CONCERN ABOUT GETTING DECLARATIONS, WE TOLD THEM WHICH

SPECIFIC SLIDES OF THIS DOCUMENT WE WOULD BE DISPLAYING IN

COURT.

THE COURT: I SEE. OKAY.

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ROGERS CROSS BY MR. MATHESON

UNITED STATES COURT REPORTERS

1998

BY MR. MATHESON:

Q. CAN YOU TURN TO TAB 4 IN YOUR BINDER, SIR, WHICH IS

CX 7122.

CAN YOU IDENTIFY THIS AS A DRAFT STRAT PLAN AND BOARD

PRESENTATION YOU RECEIVED IN JUNE OF 2017?

A. THAT IS CORRECT.

MR. MATHESON: YOUR HONOR, MOVE TO ADMIT CX 7122.

MR. VAN NEST: NO OBJECTION, ARE YOUR HONOR.

THE COURT: IT'S ADMITTED.

(PLAINTIFF'S EXHIBIT CX 7122 WAS ADMITTED IN EVIDENCE.)

THE COURT: GO AHEAD, PLEASE.

BY MR. MATHESON:

Q. COULD YOU TURN, SIR, TO CX 7122-016. PORTIONS OF THIS

SLIDE HAVE BEEN SEALED, SO I'VE OBSCURED THE MONITOR.

SIR, JUST SO YOU KNOW WHICH PORTIONS HAVE BEEN SEALED, WE

SHOULD NOT IDENTIFY THE SPECIFIC OEM'S OR THE PARTICULAR

CATEGORIES OF SQUARES NEXT TO THE OEM'S.

BUT THE TITLES IN EACH BOX ARE PUBLICLY AVAILABLE, JUST SO

YOU DON'T ACCIDENTALLY SAY THE NAME OF AN OEM.

A. THANK YOU, COUNSEL.

Q. SO IT'S FAIR TO SAY, THEN, THIS SHOWS QTL'S TOP 20

ACCOUNTS BY REVENUE IN THE FIRST THREE-QUARTERS OF 2016, JUST

LOOKING AT THE TITLE; RIGHT?

A. THAT'S CORRECT.

Q. AND THE BOX AT THE TOP THAT'S EITHER BLUE OR PURPLE

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ROGERS CROSS BY MR. MATHESON

UNITED STATES COURT REPORTERS

1999

DEPENDING HOW IT'S PRINTED WITH A TIMELINE INDICATES WHICH

OEM'S LICENSE AGREEMENTS ARE UP FOR RENEGOTIATION OR EXPIRATION

AS TIME GOES ON; RIGHT?

A. THAT IS CORRECT.

Q. AND THEN THE ORANGE BOX UNDERNEATH IT, THE TITLE IS NOT

SEALED, IT READS, NO FIXED EXPIRATION DATE, NO RIGHT TO

TERMINATE DATE.

DO YOU SEE THAT, SIR?

A. I DO.

Q. AND THERE ARE 12 OF QUALCOMM'S TOP 20 OEM'S BY LICENSE

REVENUE IDENTIFIED IN THAT BOX; RIGHT?

A. THERE ARE 12 IDENTIFIED IN THAT BOX.

Q. AND LOOKING AT THE LOWER RIGHT-HAND CORNER, WHICH IS ALSO

NOT SEALED, THERE ARE THREE KINDS OF COLORED SQUARES; RIGHT?

AND THE BLUE, OR THE TURQUOISE, INDICATE AN OEM'S LICENSE

PROVIDES LIKELY COVERAGE OF 5G I.P., (BASED ON OFDM DEF)."

DO YOU SEE THAT?

A. I DO.

Q. NOW, THAT RELATES -- THAT REFERS TO THE DEFINITION OF OFDM

IN AN OEM'S SUBSCRIBER UNIT LICENSE AGREEMENT; RIGHT?

A. THAT WOULD REFER TO WHATEVER PARTICULAR DEFINITION IS IN

THE SUBSCRIBER UNIT AGREEMENT RELATING TO THE OFDM.

Q. THANK YOU. NOW, IN 2016, 2017 TIMEFRAME, YOU WERE

INVOLVED IN DISCUSSIONS WITH APPLE ABOUT A POTENTIAL LICENSE

AGREEMENT WITH QUALCOMM; RIGHT?

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2000

A. THAT IS CORRECT.

Q. NOW, IN THE COURSE OF THOSE DISCUSSIONS, APPLE SENT

QUALCOMM AN ARBITRATION PROPOSAL; RIGHT?

A. AT SOME POINT, ARBITRATION WAS DISCUSSED AND PROPOSALS

WERE EXCHANGED I BELIEVE BY BOTH SIDES.

Q. WELL, APPLE SENT QUALCOMM AN ARBITRATION PROPOSAL; RIGHT?

A. I -- I'M NOT 100 PERCENT SURE. TO THE BEST OF MY

RECOLLECTION, ARBITRATION PROPOSALS WERE EXCHANGED BY BOTH

SIDES.

Q. IT'S A TRUE STATEMENT THAT ON APRIL 18TH, 2016, APPLE SENT

QUALCOMM AN ARBITRATION PROPOSAL THAT WANTED TO ARBITRATE,

AMONG OTHER ISSUES, WHETHER EACH PARTY'S CELLULAR SEPS ARE

ESSENTIAL AND INFRINGED, AND NOT OTHERWISE INVALID,

UNENFORCEABLE LICENSE EXHAUSTED; RIGHT?

A. IF YOU'RE READING FROM A DOCUMENT WITH THAT DATE, I'LL

TAKE YOUR WORD FOR IT. BUT I DON'T KNOW -- I DON'T RECALL A

DOCUMENT OF THAT DATE WITH THAT PARTICULAR STATEMENT.

Q. NOW, THE PARTIES NEVER ENDED UP ARBITRATING; RIGHT?

A. WE DID NOT ARBITRATE.

Q. QUALCOMM DID NOT ACCEPT THE TERMS ON WHICH APPLE PROPOSED

ARBITRATION TO QUALCOMM; CORRECT?

A. QUALCOMM PROPOSED TERMS FOR AN ARBITRATION UNDER GOOGLE

MMI GENERALLY, AND APPLE DIDN'T ACCEPT THOSE, SO WE COULDN'T

COME TO A MUTUAL AGREEMENT ON TERMS FOR AN ARBITRATION.

Q. OKAY. MY QUESTION WAS ABOUT THE TERMS THAT APPLE PROPOSED

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TO QUALCOMM.

NOW, APPLE WANTED TO ARBITRATE WHETHER QUALCOMM'S PATENTS

ARE ACTUALLY VALID AND ACTUALLY INFRINGED BY THE DEVICES APPLE

SELLS, AND QUALCOMM WOULD NOT ARBITRATE UNDER THOSE CONDITIONS;

RIGHT?

A. THAT'S CORRECT. THAT'S FALSE.

Q. WELL, SIR, COULD I SHOW A DOCUMENT THAT MIGHT REFRESH YOUR

RECOLLECTION.

IF I CAN APPROACH, YOUR HONOR?

THE COURT: GO AHEAD, PLEASE.

MR. MATHESON: (HANDING.)

MR. VAN NEST: CAN I HAVE A COPY, COUNSEL? IS IT IN

THE BINDER?

MR. MATHESON: IT'S NOT (HANDING).

Q. SIR, LOOKING AT THIS DOCUMENT, DOES THIS REFRESH YOUR

RECOLLECTION THAT YOU WROTE A LETTER TO MR. B.J. WATROUS OF

APPLE IN MARCH 2017?

A. YES.

Q. TURNING YOUR ATTENTION TO THE PAGE OF THE DOCUMENT THAT IS

NUMBERED NUMBER 4 AT THE TOP, BATES NUMBER ENDS IN DASH 94.

THE FIRST BULLET -- DOES THIS REFRESH YOUR RECOLLECTION,

SIR, THAT ON APRIL 18TH, 2016, QUALCOMM SENT -- OR APPLE SENT

TO QUALCOMM AN ARBITRATION PROPOSAL PROPOSING TO ARBITRATE THE

ISSUE OF, QUOTE, "WHETHER EACH PARTY'S CELLULAR SEPS ARE

ESSENTIAL AND INFRINGED AND NOT OTHERWISE INVALID,

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UNENFORCEABLE, LICENSED, EXHAUSTIVE, ET CETERA."

DID APPLE SEND THAT PROPOSAL TO QUALCOMM ON APRIL 18TH,

2016, SIR?

A. YES. AND IT GOES ON.

Q. IT DOES, INDEED.

COULD YOU TAKE A LOOK AT TAB 11 OF THE SMALL BINDER THAT I

SENT YOU, SIR -- THAT I GAVE TO YOU, SIR. IT'S TITLED WITNESS

BINDER 2.

A. THE WITNESS BINDER 2?

Q. YES, THERE'S A SMALLER ONE.

A. TAB 11?

Q. TAB 11, SIR. IT SHOULD BE CX 6594.

A. OKAY.

Q. CAN YOU IDENTIFY THIS AS AN E-MAIL ATTACHING A

PRESENTATION YOU RECEIVED IN MARCH 2016?

A. YES, THAT'S CORRECT.

I'M SORRY. I'M LOST ON THE EXHIBITS. THIS IS 594.

Q. YEAH, O'CLOCK IT SHOULD BE CX 6594?

A. YES, THAT'S CORRECT.

MR. MATHESON: YOUR HONOR, MOVE TO ADMIT CX 6594.

MR. VAN NEST: NO OBJECTION, YOUR HONOR. BUT I

BELIEVE IT'S SUBJECT TO THE SAME SEALING ISSUE --

THE COURT: OKAY.

MR. VAN NEST: -- THAT WE DISCUSSED.

THE COURT: IT'S ADMITTED.

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(PLAINTIFF'S EXHIBIT CX 6594 WAS ADMITTED IN EVIDENCE.)

THE COURT: GO AHEAD, PLEASE.

BY MR. MATHESON:

Q. COULD YOU YOUR HONOR TURN TO THE NEXT TAB IN YOUR BINDER,

SIR, WHICH IS TAB 12, CX 7571.

A. OKAY.

Q. CAN YOU IDENTIFY THIS AS AN ACCOUNTING MEMO THAT WAS SENT

TO YOU IN JULY 2016?

A. THAT IS CORRECT.

Q. NOW, PORTIONS OF THIS DOCUMENT HAVE BEEN SEALED, BUT NOT

THE FIRST PAGE.

CAN WE TAKE A LOOK AT -- OR NOT ALL OF IT. CAN WE TAKE A

LOOK AT CX 7571-002. KEN, YOU CAN PUT IT UP ON THE SCREEN IF I

LET YOU.

UNDER BACKGROUND IT READS, "QUALCOMM AND YULONG ARE

PARTIES TO A 'COMPLETE TERMINAL CHINESE PATENT LICENSE

AGREEMENT,' CPLA, AND A 'STRATEGIC FUNDING AGREEMENT,' SFA,

BOTH DATED APRIL 13, 2016."

DO YOU SEE THAT, SIR?

A. I DO.

Q. NOW, THE COMPLETE TERMINAL CHINESE PATENT LICENSE

AGREEMENT ARE WHAT WE'VE BEEN DISCUSSING THAT QUALCOMM AGREED

TO WITH A NUMBER OF CHINESE OEM'S FOLLOWING THE RESOLUTION OF

THE NDRC ISSUE; RIGHT?

A. YES, EXCEPT IT WAS MADE AVAILABLE TO ANYBODY, NOT JUST

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ROGERS CROSS BY MR. MATHESON

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2004

CHINESE OEM'S.

Q. TAKING A LOOK AT DASH 006, WHICH IS UNDER SEAL, THE THIRD

PARAGRAPH UNDER SFA MATTERS -- NOW, THIS REFERS TO THE

STRATEGIC FUNDING AGREEMENT; RIGHT? SFA?

A. CORRECT.

Q. OKAY. NOW, IT READS QUOTE, "THE SFA WAS ENTERED INTO BY

QCTAP BUT WAS NEGOTIATED PRIMARILY BY QTL IN CONNECTION WITH

THE EXECUTION OF THE CPLA AND THE TRANSACTIONS WILL THEREFORE

ULTIMATELY BE REFLECTED IN THE QTL SEGMENT."

NOW, WHEN IT SAYS, "ULTIMATELY REFLECTED IN THE QTL

SEGMENT," THAT ENEMAS THAT QTL WILL BEAR THE COST OF THE

STRATEGIC FUNDING AGREEMENT; RIGHT?

A. QTL WILL RECOGNIZE THAT AS CONTRA REVENUE.

Q. AND BY RECOGNIZING IT AS CONTRA REVENUE, THAT REDUCES

QTL'S REVENUES; RIGHT?

A. CORRECT.

Q. TURN TO THE NEXT TAB IN THAT SAME BINDER, SIR. IT SHOULD

BE CX 7618.

A. UM-HUM.

Q. AGAIN, PORTIONS OF THIS ARE SEALED, BUT WE WILL NOT SHOW

THE SEALED PORTIONS.

CAN YOU IDENTIFY THIS, SIR, AS A PRESENTATION ON WHICH YOU

WERE THE -- ON THE DISTRIBUTION LIST FOR THIS PRESENTATION IN

JULY 2016?

A. THAT'S CORRECT.

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2005

Q. COULD YOU PLEASE TURN TO THE PAGE THAT ENDS DASH 025.

YOU CAN SHOW THAT, KEN.

MR. KOTARSKI: IT'S NOT ADMITTED YET I DON'T BELIEVE.

MR. MATHESON: SORRY. YOUR HONOR, MOVE TO ADMIT

CX 7618.

THE COURT: ANY OBJECTION?

MR. VAN NEST: NO OBJECTION, YOUR HONOR, OTHER THAN

SEALING.

THE COURT: ALL RIGHT. IT'S ADMITTED.

(PLAINTIFF'S EXHIBIT CX 7618 WAS ADMITTED IN EVIDENCE.)

THE COURT: GO AHEAD, PLEASE.

BY MR. MATHESON:

Q. DO THE NUMBERS IN THE TABLE REPORTING QCT CDMA ASIC MARKET

SHARE RELATE TO QUALCOMM'S CDMA CAPABLE MODEM CHIPS?

A. YES, THEY RELATE TO CDMA CAPABLE MODEM CHIPS.

Q. CAN YOU TURN TO THE NEXT TAB IN YOUR BINDER, SIR, WHICH IS

CX 7629. NOW, THIS IS THE SAME REPORT SENT TO YOU IN JULY OF

2017; RIGHT?

A. YEAH. BUT I -- ACTUALLY, LET ME CLARIFY THAT LAST

QUESTION. I BELIEVE -- YOU WERE ON PAGE 25.

Q. THAT'S CORRECT, SIR.

A. SO THE CDMA ASIC MARKET SHARE RELATES TO CDMA CHIPS, BUT

NOT WCDMA CHIPS.

Q. OKAY. LET'S STICK WITH THE TAB WE'RE ON.

YOU CAN IDENTIFY THE TAB WE'RE CURRENTLY ON, WHICH SHOULD

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2006

BE TAB 14 IN YOUR BINDER, CX 7629, AS THE SAME MARKET TRENDS

TECHNOLOGY LICENSING PROGRAM FOR JULY OF 2017; RIGHT?

A. THAT'S CORRECT.

MR. MATHESON: YOUR HONOR, MOVE TO ADMIT CX 7629.

MR. VAN NEST: NO OBJECTION, YOUR HONOR.

THE COURT: IT'S ADMITTED.

(PLAINTIFF'S EXHIBIT CX 7629 WAS ADMITTED IN EVIDENCE.)

THE COURT: GO AHEAD, PLEASE.

BY MR. MATHESON:

Q. TURN TO THE PAGE LABELED DASH 026 IN THIS PRESENTATION.

AGAIN, THE -- I'LL ASK YOU THE SAME QUESTION. THE NUMBERS

IN THE BOX LABELED QCT CDMA ASIC MARKET SHARE RELATE TO

QUALCOMM'S SALES OF CDMA CAPABLE MODEM CHIPS; RIGHT?

A. AS DISTINGUISHED FROM WCDMA.

Q. OKAY. NOW, IN THE WORLDWIDE ROW, ALL OF THOSE NUMBERS ARE

OVER 92 PERCENT; IS THAT RIGHT? OR 92 PERCENT OR MORE; IS THAT

RIGHT?

A. AGAIN, WE'RE STILL REFERRING TO THE SAME TABLE? THAT IS

CORRECT.

Q. YOU TESTIFIED EARLIER ABOUT THE AGREEMENT NEGOTIATED

WITH -- YOU CAN TAKE THAT DOWN, KEN -- WITH SAMSUNG IN EARLY

2018, OR SIGNED WITH SAMSUNG IN EARLY 2018; RIGHT?

A. YES.

Q. NOW -- AND YOU TESTIFIED WHEN YOU PRESENTED THE AGREEMENT

TO THE KFTC, YOU DID SO AS A BODY OF AGREEMENTS; RIGHT?

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2007

A. THAT'S MY UNDERSTANDING.

Q. AND THAT ALSO INCLUDED A FOUNDRY AGREEMENT THAT QUALCOMM

AND SAMSUNG REACHED; RIGHT?

A. I DON'T KNOW.

Q. WELL, YOU WERE INVOLVED IN DISCUSSING THE FOUNDRY

AGREEMENT, THE PROPOSED FOUNDRY AGREEMENT BETWEEN QUALCOMM AND

SAMSUNG IN THE FALL OF 2017; RIGHT?

A. I HAD SOME AWARENESS OF THE -- OF A PROPOSED FOUNDRY

AGREEMENT.

Q. AND THAT AGREEMENT WAS FOR A SUBSTANTIAL AMOUNT OF MONEY,

RIGHT? OR THE PROPOSAL INVOLVED A SUBSTANTIAL AMOUNT OF MONEY?

A. IF THERE WERE TO BE A FOUNDRY AGREEMENT, I THINK IT WOULD

HAVE BEEN. BUT I DON'T KNOW THAT ONE EVER ACTUALLY HAPPENED.

Q. WELL, QUALCOMM PUBLICLY ANNOUNCED A FOUNDRY AGREEMENT WITH

SAMSUNG THREE WEEKS AFTER IT PUBLICLY ANNOUNCED THE AGREEMENT

THAT YOU PRESENTED TO THE -- THE BODY OF AGREEMENTS YOU

PRESENTED TO THE KFTC; RIGHT?

A. THAT COULD BE.

Q. WERE YOU AWARE OF THIS AT ONE TIME?

A. I DIDN'T REALLY PAY ATTENTION TO THE FOUNDRY ISSUES ONCE

WE GOT INTO KIND OF THE LICENSING DISCUSSIONS. I WAS AWARE THE

FOUNDRY ISSUES EXISTED, OR SOME SORT OF FOUNDRY DISCUSSION

EXISTED.

BUT THEN MY INVOLVEMENT IN THAT WAS VERY LIMITED, AND IT

DIDN'T CONTINUE. SO I ACTUALLY DON'T REMEMBER A FOUNDRY

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UNITED STATES COURT REPORTERS

2008

ANNOUNCEMENT.

Q. YOU DON'T RECALL ONE WAY OR THE OTHER IF QUALCOMM PUBLICLY

ANNOUNCED ON FEBRUARY 21ST, 2018, THAT IT REACHED AN AGREEMENT

WITH SAMSUNG TO USE SAMSUNG'S FOUNDRY CAPABILITIES; IS THAT

RIGHT?

A. I ACTUALLY DON'T RECALL ONE WAY OR THE OTHER.

Q. NOW, YOU TESTIFIED TO SEVERAL FEES THAT QUALCOMM PAID TO

MANY SAMSUNG UNDER THE BODY OF AGREEMENTS; IS THAT RIGHT?

A. YES.

Q. IT'S FAIR TO SAY THAT QUALCOMM NEGOTIATED AT LEAST SIX

SEPARATE PAYMENTS MADE TO SAMSUNG UNDER THAT BODY OF

AGREEMENTS?

A. I DON'T KNOW IF THAT'S THE RIGHT NUMBER.

Q. WELL, I HAVE A DOCUMENT UP THERE ON YOUR STAND, SIR, WITH

A BINDER CLIP ON IT. IT'S PREVIOUSLY BEEN ADMITTED AS JX 0122.

UNFORTUNATELY, AN AWFUL LOT OF THIS -- NOT UNFORTUNATELY.

IT IS A FACT THAT A LOT OF THIS DOCUMENT IS SEALED, SO I'LL

HAVE TO CONCEAL IT FROM THE PUBLIC.

BUT CAN YOU TAKE A LOOK AT -- I HAVE IT ON YOUR STAND AS

WELL, YOUR HONOR, WITH A BINDER CLIP.

THE COURT: I HAVE IT.

BY MR. MATHESON:

Q. CAN YOU TAKE A LOOK AT 0122-008.

NOW, YOU CAN IDENTIFY THIS AS THE BODY OF AGREEMENTS, IT

CERTAINLY APPEARS TO BE THE BODY OF AGREEMENTS NEGOTIATED

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2009

BETWEEN QUALCOMM AND SAMSUNG IN JANUARY AND SIGNED IN JANUARY

OF 2018; RIGHT?

A. YES, THESE ARE SAMSUNG/QUALCOMM AGREEMENTS FROM THAT TIME.

Q. AND TAKING A LOOK AT 008, DO YOU SEE THE 2018 AMENDMENT

FEE IN SECTION 2.1?

A. YES, I DO.

Q. AND THAT'S A QUARTERLY FEE PAYABLE BY QUALCOMM TO SAMSUNG

IN THE FORM OF A CREDIT; RIGHT?

A. YES, THAT'S A FEE THAT RELATES, AS I SAID, TO THAT

COMPLICATED PART OF THE AGREEMENT THAT ESSENTIALLY WAS THE

CROSS-LICENSE ELEMENT.

Q. IF YOU TAKE A LOOK AT JX -- SO WE'LL COUNT THAT AS ONE.

NOW, JX 0122-037, ARABIC NUMERAL 2, A REFERS TO A MONTHLY

REBATE, AND THAT IS GOING TO BE ISSUED BY QUALCOMM TO SAMSUNG

IN THE FORM OF A MONTHLY REBATE; RIGHT?

A. I DON'T KNOW. I'VE NEVER -- I'VE NEVER -- I DON'T THINK

I'VE EVER SEEN THIS DOCUMENT BEFORE.

Q. SO YOU WEREN'T EVEN AWARE OF --

A. GIVE ME A CHANCE TO LOOK AT IT.

Q. -- OF THIS PAYMENT THAT FLOWS FROM QUALCOMM TO SAMSUNG AS

A PART OF THE BODY OF AGREEMENTS NEGOTIATED BETWEEN QUALCOMM

AND SAMSUNG IN JANUARY OF 2018? IS THAT A FAIR STATEMENT?

A. YEAH. THIS LOOKS LIKE AN AGREEMENT ON THE CHIP SIDE.

Q. OKAY. AND LOOKING DOWN AT LETTER B, IT HAS A PREMIUM TIER

CORE CHIPSETS, AND AGAIN, YOU WERE NOT AWARE OF THAT PAYMENT

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2010

RELATED TO PREMIUM CORE CHIPSETS; RIGHT?

A. I'M NOT FAMILIAR WITH THE TERMS OF THIS AGREEMENT.

Q. NOW, EARLIER, SIR, YOU SAID THAT QUALCOMM NEVER THREATENED

TO CUT OFF CHIP SUPPLY TO OEM'S IN THE CONTEXT OF LICENSE

NEGOTIATIONS; RIGHT?

A. I BELIEVE SO, YES.

Q. BUT YOU'VE PERSONALLY OBSERVED INSTANCES IN WHICH QUALCOMM

TOLD CUSTOMERS WHOSE LICENSES HAD LAPSED THAT THE OEM NEEDED TO

SIGN A LICENSE OR QUALCOMM WOULD TERMINATE CHIP SHIPMENTS;

ISN'T THAT RIGHT?

A. I PERSONALLY OBSERVED THAT? I DON'T RECALL THAT.

Q. CAN YOU TAKE A LOOK AT TAB 10 OF YOUR FIRST BIG, THICK

BINDER AND IDENTIFY THIS AS AN E-MAIL YOU RECEIVED ON

OCTOBER 31ST, 2012.

A. WHERE IS THIS?

Q. TAB 10 OF BINDER NUMBER 1.

THIS IS CX 5185. IS THIS AN E-MAIL, SIR, YOU RECEIVED IN

OCTOBER OF 2012?

A. YES, I'M LISTED THERE.

MR. MATHESON: YOUR HONOR, MOVE TO ADMIT CX 5185.

MR. VAN NEST: NO OBJECTION, YOUR HONOR.

THE COURT: IT'S ADMITTED.

(PLAINTIFF'S EXHIBIT CX 5185 WAS ADMITTED IN EVIDENCE.)

BY MR. MATHESON:

Q. SO THE FIRST PAGE, THERE'S A LOT REDACTED FOR PRIVILEGE,

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2011

OBVIOUSLY. BUT YOU ULTIMATELY RECEIVED THIS E-MAIL CHAIN.

AND CAN WE LOOK AT CX 5185 AT 04. THE SECOND FULL

PARAGRAPH BEGINNING "ACCORDINGLY."

CAN YOU IDENTIFY THIS, THE MATERIAL ON THIS PAGE, AS AN

E-MAIL THAT ERIC REIFSCHNEIDER SENT TO JONATHAN PEARL OF SONY

MOBILE, WHICH WAS ULTIMATELY FORWARDED TO YOU?

A. SO THIS CHAIN WAS FORWARDED TO ME, AND THERE ARE E-MAILS

BACK AND FORTH BETWEEN MR. REIFSCHNEIDER AND MR. PEARL.

Q. OKAY. BUT THE CONTENT OF -- IF YOU LOOK AT 003, SIR,

YOU'LL SEE IT'S FROM ERIC REIFSCHNEIDER TO PEARL, JONATHAN, AND

THAT IS THE E-MAIL THAT CONTINUES ON TO PAGE 4; RIGHT?

A. YES, THAT'S CORRECT.

Q. THE PARAGRAPH BEGINS, "ACCORDINGLY," AND ENDS "QCT HAS

BEEN SHIPPING CHIPS TO SMC FOR ALMOST THREE WEEKS NOW WITHOUT A

LICENSE IN PLACE. IT WILL NOT BE POSSIBLE FOR THAT TO

CONTINUE."

THAT'S A THREAT TO CUT OFF CHIP SUPPLY, ISN'T IT?

A. THERE WAS BACK AND FORTH BETWEEN MR. REIFSCHNEIDER AND

MR. PEARL. BUT I DON'T RECALL -- I THINK THE SONY MATTER

RESOLVED ACTUALLY QUITE AMICABLY.

Q. I DIDN'T ASK YOU IF IT RESOLVED AMICABLY. I ASKED, THIS

RIGHT HERE ON THE SCREEN, "QCT HAS BEEN SHIPPING CHIPS TO SMC

FOR ALMOST THREE WEEKS NOW WITHOUT A LICENSE IN PLACE. IT WILL

NOT BE POSSIBLE FOR THAT TO CONTINUE. "

THAT'S A THREAT TO CUT OFF CHIP SUPPLY, ISN'T IT?

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2012

A. YOU KNOW, I DON'T KNOW THE CONTEXT OF THIS.

MR. MATHESON: NO FURTHER QUESTIONS.

THE WITNESS: YOU READ IT CORRECTLY.

THE COURT: ALL RIGHT. THE TIME IS 2:52.

ANY REDIRECT?

MR. VAN NEST: YES, JUST BRIEFLY, YOUR HONOR.

MR. MATHESON: YOUR HONOR, I BELIEVE I MOVED TO ADMIT

CX 7571. I DISPLAYED IT ON THE SCREEN AND I DID NOT --

THE COURT: 7571 WAS ADMITTED. WHAT WAS ADMITTED WAS

8195, 8196 -- IT'S OKAY.

HOW MANY DID YOU HAVE TOTAL? ONE, TWO, THREE, FOUR, FIVE,

SIX, SEVEN -- EIGHT. I HAVE EIGHT. EIGHT IS RIGHT?

MR. MATHESON: I BELIEVE THAT'S CORRECT. SORRY, YOUR

HONOR.

MR. VAN NEST: EXCUSE ME, YOUR HONOR. IS THAT THE

DOCUMENT FOR REFRESHING RECOLLECTION?

MR. MATHESON: NO. THAT ONE WAS NEVER ADMITTED.

THE COURT: NO. THAT -- THAT BINDER CLIP WAS NOT

ADMITTED.

MR. VAN NEST: I'M SORRY.

MR. MATHESON: SORRY ABOUT THAT.

MR. VAN NEST: YOUR HONOR, BEFORE I BEGIN --

THE COURT: YES.

MR. VAN NEST: -- MY STAFF IS ASKING YOUR INDULGENCE

TO FILE THE SEALING MOTION BY NOON TOMORROW.

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UNITED STATES COURT REPORTERS

2013

THE COURT: YES.

MR. VAN NEST: IT'S 832 PAGES SO FAR JUST WITH THOSE

EXHIBITS THAT WE ALLOWED. YOU'VE ALREADY SEALED THE ONES THAT

WERE, YOU KNOW, SUBJECT TO TODAY'S CROSS. BUT COULD THEY HAVE

UNTIL NOON? IT'S SUCH A HUGE AMOUNT.

THE COURT: IF THIS DOESN'T HAVE TO BE DONE FOR THE

CLOSING.

MR. VAN NEST: IT DOESN'T.

THE COURT: WE CAN DO IT EVEN LATER.

NOW, WHAT ARE ALL THE DOCUMENTS? HOW MANY OF THESE DO YOU

NEED TO MOVE TO SEAL?

MR. VAN NEST: I THINK WE MENTIONED THEM AS WE WENT

ALONG.

THE COURT: SO I GOT 8196 AND 7122.

MR. VAN NEST: I THINK 8196, 8195.

THE COURT: OKAY.

MR. VAN NEST: 7629, 7618, 65 -- OH, I'M SORRY.

THAT'S IT.

THE COURT: OKAY. WHAT ABOUT 7571?

MR. VAN NEST: I DON'T THINK THERE'S ANY SEALING

REQUEST ASSOCIATED WITH THAT.

MR. MATHESON: YOUR HONOR, I BELIEVE THAT HAS BEEN

FULLY RESOLVED.

MR. VAN NEST: ONE MORE. 6594.

THE COURT: OKAY. WAIT. SO 7571, THERE'S NO NEED

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FOR SEALING. IS THAT RIGHT?

MR. VAN NEST: THAT'S CORRECT. NO NEED FOR SEALING.

6594, WE NEED TO MOVE TO SEAL.

THE COURT: ALL RIGHT. WELL, DO YOU -- WHAT DO YOU

WANT TO MOVE IN? JUST -- I'M NOT EVEN CLEAR FROM YOUR BINDER.

IS THIS THE ENTIRE DOCUMENT OR THESE ARE JUST THE PAGES

THAT YOU SAID YOU WANTED TO USE?

MR. MATHESON: YOUR HONOR, WE ARE MOVING IN THE

ENTIRE DOCUMENT IN EACH CASE.

THE COURT: OKAY. SO THEN THE SEALING WOULD BE 8195,

8196, 7122, 6594, 7618, AND 7629? IS THAT CORRECT?

MR. ADLER: GARY ADLER, MORGAN LEWIS.

I'M SORRY, YOUR HONOR. THE DOCS THAT WE WOULD NEED TO

MOVE TO SEAL ON ARE CX 8195, CX 8196, CX 6594, CX 7618.

THE COURT: OKAY. WHAT ABOUT 7122?

MR ADLER: NO, THAT'S BEEN DEALT WITH, YOUR HONOR.

AND 7629 IS THE LAST OF THE GROUP.

THE COURT: OKAY. WAIT A MINUTE. I'M SORRY. I WANT

TO DO IT IN THE ORDER ADMITTED BECAUSE THAT'S THE ORDER IN MY

NOTES. SO 8195 AND 8196 I GOT.

MR. ADLER: YES, MA'AM.

THE COURT: 6594?

MR. ADLER: CORRECT.

THE COURT: AND THEN IS IT 7618?

MR. ADLER: YES.

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2015

THE COURT: AND THEN 7629?

MR. ADLER: THAT'S CORRECT, YOUR HONOR.

THE COURT: SO YOU NEED TO MOVE TO SEAL ALL FIVE OF

THOSE?

MR. ADLER: YES.

THE COURT: OKAY. AND THIS DOES NOT HAVE TO BE DONE

BEFORE CLOSING; IS THAT RIGHT?

MR. VAN NEST: NO, AS LONG AS WE'RE NOT FILING THE

EXHIBITS ON THE PUBLIC RECORD, OF COURSE NOT.

THE COURT: OKAY. WELL, THEN DO YOU WANT TO FILE

THIS ON MONDAY?

MR. VAN NEST: SURE.

MR. ADLER: THAT WOULD BE FINE, YOUR HONOR.

MR. VAN NEST: THAT'S BETTER.

THE COURT: WHY DON'T YOU FILE IT MONDAY?

MR. ADLER: THANK YOU, YOUR HONOR.

THE COURT: OKAY. LET'S MOVE TO THE REDIRECT,

PLEASE. IT'S 2:55.

REDIRECT EXAMINATION

BY MR. VAN NEST:

Q. MR. ROGERS, AS OF MARCH OF 2018 WERE YOU EXPECTING

COMPETITION IN 5G?

A. YES, SIR.

Q. WHAT COMPANIES DID QUALCOMM BELIEVE WOULD BE COMPETING FOR

5G?

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ROGERS REDIRECT BY MR. VAN NEST

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2016

A. HUAWEI HAD ALREADY ANNOUNCED A 5G CHIP I THINK IN THE

PRIOR MONTH AT MOBILE WORLD CONGRESS; SAMSUNG HAD ANNOUNCED A

5G CHIP; INTEL HAD A 5G PROJECT; MEDIATEK HAD A 5G CHIP PROJECT

AS WELL.

Q. DID YOU ACTUALLY ATTEND THE 2018 MOBILE WORLD CONGRESS IN

JANUARY?

A. I THINK IT WAS IN FEBRUARY.

Q. DID YOU ATTEND?

A. YES, I DID.

Q. WHAT DID YOU SEE THERE?

A. I SAW THE HEAD OF THE MOBILE DEPARTMENT OF HUAWEI HOLDING

UP A 5G CHIP AND TALKING ABOUT THE 5G CHIP CAPABILITIES OF

HUAWEI.

Q. COULD WE HAVE CX 8196 ON THE SCREEN, AND PAGE 121. IT'S

IN YOUR BINDER, BUT WE HAVE IT HERE.

COULD WE GO TO THE BOTTOM OF THE PAGE. ACTUALLY, YEAH, DO

WE HAVE -- OKAY. WITH REFERENCE TO THE BOTTOM RESULT, 5G

CHIPSET COMPETITIVE LANDSCAPE, CAN YOU TELL US WHAT IS RECORDED

THERE?

A. YEAH. IT'S SAMSUNG AND HISILICON, THAT'S THE DIVISION OR

THE COMPANY THAT BELONGS TO HUAWEI THAT MAKES CHIPS, IS

EXPECTED TO COMPETE WITH QCT.

AND THEN IT REFERS TO INTEL AND MEDIATEK LAGGING ON TIME

TO MARKET, BUT OBVIOUSLY THEY'RE PREPARING 5G CHIPS AS WELL.

Q. THANK YOU, MR. ROGERS.

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ROGERS REDIRECT BY MR. VAN NEST

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2017

WHY DIDN'T QUALCOMM ACCEPT APPLE'S ARBITRATION PROPOSAL?

A. SO IT'S REALLY SIMPLE. APPLE HAD AN ARBITRATION PROPOSAL

THAT NO HUMAN BEING COULD ACTUALLY COMPLETE, OR NO SETS OF

ARBITRATORS COULD ACTUALLY COMPLETE WITHIN A REASONABLE

TIMEFRAME. THEY INSISTED THAT EVERY SEP, A CLAIM FROM EVERY

SEP BE EVALUATED FOR ESSENTIALITY VALIDITY, INFRINGEMENT, ON A

DETAILED BASIS FOR THOUSANDS UPON THOUSANDS OF SEPS. FOR

EXAMPLE, IN THIS CASE BOTH SIDES ARE ALLOTTED 50 HOURS. THAT

ARBITRATION WOULD TAKE BOTH SIDES TO HAVE 1,000 HOURS. IT JUST

SIMPLY WASN'T PRACTICAL.

SO WHAT WE SAID TO APPLE WAS, LOOK, WE'RE HAPPY TO DO

PATENT-BY-PATENT ANALYSIS, BUT LET'S PUT IT TO THE ARBITRATORS

AS TO WHAT ACTUALLY MAKES SENSE BECAUSE WE DON'T THINK AN

ARBITRATION PANEL WILL AGREE TO YOUR PROPOSAL. SO WE'LL

PRESENT TO THE ARBITRATORS THE WAY A PATENT PORTFOLIO LICENSE

OUGHT TO BE ARBITRATED, AND YOU PRESENT IT TO THE ARBITRATORS

THE WAY YOU THINK A PORTFOLIO LICENSE WILL BE ARBITRATED,

NEITHER SIDE WILL TELL THE OTHER SIDE WHAT TO DO, AND THE

ARBITRATOR WILL DECIDE WHAT TO DO. THAT'S REFLECTED LATER IN

THE LETTER AS I INFORMED COUNSEL.

Q. AND NOW THE PARTIES ARE LITIGATING IN COURT AROUND THE

WORLD, APPLE AND QUALCOMM?

A. YES, WE ARE.

Q. COULD I HAVE CX 7629 UP AND PAGE 026. I THINK YOU WERE

SHOWN THIS DURING YOUR EXAMINATION.

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2018

MR. MATHESON ASKED YOU ABOUT THE CDMA MARKET. COULD WE

HIGHLIGHT THE WCDMA MARKET AT THE BOTTOM. AND IN PARTICULAR,

THE VERY BOTTOM LINE.

WHAT HAPPENED TO QUALCOMM'S SHARE OF THE WCDMA MARKET,

MR. ROGERS, BETWEEN 2015 AND THE END OF 2017?

A. WELL, YOU'LL SEE A PRETTY STEADY DECLINE IN THE WCDMA

MARKET FROM 2015 DOWN THROUGH 2017 DOWN TO 45 PERCENT, 44 AND

45 PERCENT IN THE LAST COUPLE OF QUARTERS LISTED THERE.

BUT THAT'S Q1 OF 2017. THAT DECLINE CONTINUED, IS MY

UNDERSTANDING, INTO 2018 AS WELL.

MR. VAN NEST: I HAVE NOTHING FURTHER, YOUR HONOR.

THE COURT: OKAY. THE TIME IS 2:59.

IS THERE ANY RECROSS?

MR. MATHESON: NONE, YOUR HONOR.

THE COURT: ALL RIGHT. MAY THIS WITNESS BE EXCUSED

SUBJECT TO RECALL OR NOT SUBJECT TO RECALL?

MR. MATHESON: NOT FOR US, YOUR HONOR.

MR. VAN NEST: NO, NOT SUBJECT TO RECALL, YOUR HONOR.

THE COURT: OKAY. THEN YOU'VE COMPLETED YOUR TRIAL

TESTIMONY, AND YOU ARE FREE TO LEAVE.

THE WITNESS: THANK YOU VERY MUCH, YOUR HONOR.

THE COURT: AND QUALCOMM MAY CALL ITS NEXT WITNESS.

MR. BYARS: YOUR HONOR, IN THE INTERESTS OF TIME,

WE'RE GOING TO BE CALLING THE NEXT TWO DEPOSITIONS ON THE LIST

ONLY. THE NEXT ONE, MR. LEE OF SAMSUNG, IS SEALED.

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AHN DEPOSITION

UNITED STATES COURT REPORTERS

2019

THE COURT: OKAY.

MR. BYARS: THE ONE FOLLOWING THAT IS ONLY ABOUT TWO

AND A HALF MINUTES, AND IT'S NOT SEALED. WE'RE HAPPY TO TAKE

THOSE OUT OF ORDER AND DO THE SECOND ONE FIRST.

THE COURT: WHY DON'T WE DO THAT, BECAUSE WE'LL HAVE

TO CLEAR THE COURTROOM FOR THE LEE VIDEO.

MR. BYARS: SURE, YOUR HONOR.

THE COURT: OKAY. SO LET'S GO AHEAD, THEN, AND START

WITH MR. AHN. YOU SAID THAT'S VERY SHORT. DO YOU WANT TO

ADMIT ANY EXHIBITS WITH HIM?

MR. BYARS: NO, YOUR HONOR.

THE COURT: OKAY. ARE YOU READY TO SHOW IT?

MR. BYARS: WE ARE, YOUR HONOR.

THE COURT: OKAY. THEN IT'S 3:00 O'CLOCK.

GO AHEAD, PLEASE.

(THE VIDEOTAPED DEPOSITION OF SEUNGHO AHN WAS PLAYED IN

OPEN COURT OFF THE RECORD.)

THE COURT: OKAY. TIME IS 3:03.

MR. BYARS: YOUR HONOR, THE NEXT DEPOSITION IS

SEALED, MR. INJUNG LEE OF SAMSUNG.

THE COURT: OKAY. IS THAT GOING TO BE YOUR LAST

WITNESS?

MR. BYARS: IT WILL BE, YOUR HONOR.

THE COURT: MR. LEE?

OKAY. SO AFTER THIS LAST WITNESS, THEN I BELIEVE WE'RE

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UNITED STATES COURT REPORTERS

2020

DONE FOR THE DAY; IS THAT CORRECT?

MR. VAN NEST: YES, YOUR HONOR, I BELIEVE THAT'S

CORRECT.

THE COURT: OKAY. AND THEN WE START UP AT 9:00

O'CLOCK ON MONDAY?

MR. VAN NEST: THAT'S RIGHT.

THE COURT: OKAY. THEN I'LL GO AHEAD AND CLEAR THE

COURTROOM.

HOW LONG IS THIS DEPOSITION?

MR. BYARS: IT'S JUST SHY OF SEVEN MINUTES.

THE COURT: OKAY. SO WE'LL BE CONCLUDING FAIRLY

EARLY THEN TODAY. LET'S GO AHEAD AND DO THIS, AND THEN WE'LL

JUST ADJOURN RATHER THAN TAKING ANY BREAKS.

ALL RIGHT. I'M GOING TO ASK THAT EVERYONE WHO IS NOT

AUTHORIZED TO REMAIN IN THE COURTROOM, IF YOU WOULD PLEASE STEP

OUTSIDE. WE'RE DONE FOR THE DAY AS FAR AS WHAT YOU CAN

OBSERVE.

(PROCEEDINGS SEALED FROM PAGES 2021 TO 2021.)

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UNITED STATES COURT REPORTERS

2022

(IN OPEN COURT.)

THE COURT: OKAY. TIME IS 3:12.

ALL RIGHT. DOES QUALCOMM REST THEN?

MR. VAN NEST: I WOULD SAY, YOUR HONOR, SUBJECT TO

WHAT I'LL CALL HOUSEKEEPING, REPLACING EXHIBITS WITH REDACTED

VERSIONS AND SEALING AND THE LIKE, YES, WE REST.

THE COURT: OKAY.

MR. VAN NEST: THERE MAY BE SOME HOUSEKEEPING WITH

THE EXHIBIT LIST THAT I JUST WANT TO BE SURE WE CHECK. BUT

APART FROM THAT, YES, QUALCOMM RESTS.

THE COURT: OKAY. WELL, THE PARTIES WILL SUBMIT A

JOINT EXHIBIT LIST WITH EVERYTHING ADMITTED UP TO NOW, SO I

HOPE THAT WILL BE YOUR WAY OF RESOLVING ANY ISSUES.

MR. VAN NEST: THAT'S MY EXPECTATION AND HOPE, AND I

THINK THAT'S RIGHT.

THE COURT: IS THIS PUBLIC? YES, AFTER THE VIDEO. I

MEAN, ARE THERE PEOPLE STILL WAITING OUTSIDE? MY GOSH, I THINK

THERE ARE STILL PEOPLE WAITING OUTSIDE. I GUESS WE COULD OPEN

THE DOOR NOW.

RIGHT. SO AFTER THE VIDEO ENDED, I THINK THE SEALED

PORTION ENDED.

MR. VAN NEST: THAT'S RIGHT.

THE COURT: I GUESS SOME PEOPLE ARE STILL WAITING.

OKAY. QUALCOMM RESTED.

I THINK WE ARE THEN DONE FOR THE DAY.

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UNITED STATES COURT REPORTERS

2023

I'D LIKE TO GIVE YOU YOUR TIME ESTIMATES, PLEASE.

(PAUSE IN PROCEEDINGS.)

THE COURT: OKAY. SO QUALCOMM TODAY USED 3 HOURS AND

16 MINUTES. SO YOUR TOTAL IS NOW, THAT YOU'VE USED, IS 24

HOURS AND 27 MINUTES. SO WHAT DOES THAT LEAVE YOU WITH, 33

MINUTES LEFT?

MR. VAN NEST: THAT'S WHAT I COUNT, YOUR HONOR.

THE COURT: OKAY. AND THEN AS FAR AS FTC, YOU USED

TODAY 1 HOUR AND 18 MINUTES, SO YOUR TOTAL IS NOW 23 HOURS AND

58 MINUTES. SO I BELIEVE YOU HAVE 1 HOUR AND 2 MINUTES LEFT.

SO WE HAVE BASICALLY AN HOUR AND 35 MINUTES LEFT, AND

WE'LL START MONDAY AT 9:00.

AND THEN YOU'LL HAVE THE REST OF THE DAY AND HALF OF THE

DAY ON TUESDAY TO PREPARE YOUR CLOSINGS.

OKAY. WHAT IS --

MR. VAN NEST: CAN I HAVE JUST A MINUTE, YOUR

HONOR --

THE COURT: YES.

MR. VAN NEST: -- ON THE TIME?

THE COURT: OKAY. UM-HUM. DID I CALCULATE IT WRONG?

MR. VAN NEST: I JUST WANT TO CHECK.

THE COURT: OKAY. PLEASE DO.

(PAUSE IN PROCEEDINGS.)

MR. VAN NEST: NO, I THINK YOU'RE CORRECT. I MAY BE

OFF BY A MINUTE OR TWO, BUT I THINK YOU'RE ESSENTIALLY -- I

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UNITED STATES COURT REPORTERS

2024

HAVE US AT 35 MINUTES, BUT --

THE COURT: OH, LET ME JUST --

MR. VAN NEST: I HAD US AT 3:14 TODAY. I'M NOT SURE

WHERE THE --

THE COURT: OKAY. WELL, I CAN TELL YOU WHAT MY TIMES

WERE AND YOU CAN TELL ME.

THE JOHNSON DIRECT WAS 26 MINUTES FROM 9:04 TO 9:29. THE

REDIRECT WAS 5 MINUTES FROM 9:36 TO 9:40.

THE NEVO DIRECT WAS AN HOUR, 9:41 TO 10:40. THE NEVO

CONTINUATION OF THE DIRECT WAS 10:57 TO 11:27, 31 MINUTES. THE

NEVO REDIRECT WAS 13 MINUTES, 1:12 TO 1:24.

PETERSSON VIDEO WAS 8 MINUTES, 1:29 TO 1:36.

MCELVAINE VIDEO WAS 3 MINUTES, 1:37 TO 1:39.

RAHNASTO VIDEO WAS 3 MINUTES, 1:40 TO 1:42.

THE ROGERS DIRECT WAS 30 MINUTES, 1:43 TO 2:12. THE

ROGERS REDIRECT WAS 5 MINUTES, 2:55 TO 2:59.

THE AHN VIDEO WAS 4 MINUTES, 3:00 O'CLOCK TO 3:03.

AND THE LEE VIDEO WAS 8 MINUTES, 3:05 TO 3:12.

MR. VAN NEST: I HAD 28 MINUTES, I'M SORRY, FOR

ROGERS'S DIRECT. THAT'S WHERE THE TWO MINUTES ARE.

THE COURT: OH, OKAY. I HAD RECORDED THAT AS 1:43 TO

2:12.

MR. VAN NEST: I DON'T THINK WE STARTED UNTIL 1:45,

BUT IT'S TWO MINUTES. IT'S UP TO THE COURT.

THE COURT: OKAY. I WAS LOOKING AT THE TRANSCRIPT.

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UNITED STATES COURT REPORTERS

2025

I'M DOING THIS ALL OFF OF THE REALTIME TRANSCRIPT, SO I THINK

THAT WAS CORRECT.

OKAY. WHAT ELSE?

SO BASICALLY WE HAVE AN HOUR AND A HALF, ROUGHLY, LEFT ON

MONDAY.

I'VE ISSUED THE RULING ON HIGH PRIORITY OBJECTIONS. I'VE

DONE THE SEALING MOTIONS.

I THINK THE NEXT WOULD BE THE HIGH PRIORITY OBJECTIONS ON

CLOSING SLIDES, WHICH WILL COME IN ON TUESDAY MORNING.

HOPEFULLY YOU WON'T HAVE ANY.

AND THEN I GUESS WE'LL HAVE THE ADDITIONAL SEALING MOTION.

MR. VAN NEST: THAT'S RIGHT.

THE COURT: ANYTHING ELSE?

MR. VAN NEST: I THINK YOU GAVE US UNTIL MONDAY TO DO

THAT.

THE COURT: THAT'S FINE. THAT'S FINE. IT SOUNDS

LIKE THAT ONE IS NOT AS TIME PRESSURED.

MR. VAN NEST: NO.

THE COURT: SO IF YOU NEEDED UNTIL TUESDAY, THAT'S

FINE, TOO.

MR. VAN NEST: THANK YOU.

THE COURT: WHICH DAY ARE YOU GOING TO DO IT, JUST SO

WE'LL KNOW TO LOOK FOR IT? IS MONDAY OKAY?

MR. VAN NEST: MONDAY IS FINE.

THE COURT: OKAY. ALL RIGHT.

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UNITED STATES COURT REPORTERS

2026

THEN I THINK THAT IS IT. AS I SAID BEFORE, YOU EACH HAVE

AN HOUR FOR CLOSING.

WHAT ELSE? ANYTHING ELSE?

I THINK THE ORDER IS GOING TO TAKE SOME TIME JUST BECAUSE

THE QUANTITY OF EVIDENCE THAT'S BEEN INTRODUCED IS VOLUMINOUS

AND THE LEGAL ISSUES ARE COMPLEX.

ANYTHING ELSE?

MR. VAN NEST: I DON'T THINK SO, YOUR HONOR.

THE COURT: THANK YOU ALL FOR BEING CAMPED OUT IN

SAN JOSE FOR SO LONG. I APOLOGIZE TO YOUR FAMILIES AND YOUR

FRIENDS.

OKAY. ANYTHING ELSE FOR TODAY?

MR. VAN NEST: WE'LL SEE YOU MONDAY MORNING.

THE COURT: WE'LL SEE YOU MONDAY MORNING AT 9:00.

THANK YOU.

MR. VAN NEST: THANK YOU, YOUR HONOR.

MS. MILICI: THANK YOU, YOUR HONOR.

(THE EVENING RECESS WAS TAKEN AT 3:19 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 25, 2019

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