EXHIBIT A 

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1348408.2 AAI AMICUS CURIAE BRIEF

CASE NO. 5:17-CV-00220-LHK 

Eric B. Fastiff (State Bar No. 182260)

efastiff@lchb.com 

LIEFF CABRASER HEIMANN & BERNSTEIN, LLP 

275 Battery Street, 29th Floor 

San Francisco, CA 94111-3339 

Telephone: 415.956.1000 

Facsimile: 415.956.1008 

Counsel for Proposed Amicus Curiae 

The American Antitrust Institute 

UNITED STATES DISTRICT COURT 

NORTHERN DISTRICT OF CALIFORNIA 

SAN JOSE DIVISION 

FEDERAL TRADE COMMISSION,

Plaintiff, 

v. 

QUALCOMM, INCORPORATED, a 

Delaware Corporation, 

Defendant. 

Case No. 5:17-cv-00220-LHK

(PROPOSED) AMICUS BRIEF OF THE 

AMERICAN ANTITRUST INSTITUTE IN 

SUPPORT OF THE FTC 

Judge: The Hon. Lucy H. Koh 

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TABLE OF CONTENTS 

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CASE NO. 5:17-CV-00220-LHK 

INTEREST OF AMICUS CURIAE ............................................................................................... 1

INTRODUCTION .......................................................................................................................... 1

I. THE COMPLAINT STATES A MONOPOLIZATION CLAIM ...................................... 2

A. The Complaint Adequately Alleges that Qualcomm’s Licensing Practices 

Are Exclusionary ..................................................................................................... 4

B. The Complaint Adequately Alleges That Qualcomm’s Exclusive Dealing 

with Apple Is Exclusionary ..................................................................................... 8

II. THE COMPLAINT STATES A STANDALONE SECTION 5 CLAIM ........................ 10

A. The Complaint Pleads Harm to Competition ........................................................ 11

B. The Complaint Pleads “Indicia of Oppressiveness” ............................................. 13

CONCLUSION ............................................................................................................................. 14

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CASE NO. 5:17-CV-00220-LHK 

Cases

Abbyy USA Software House, Inc. v. Nuance Commc’ns Inc., 

No. C 08-01035 JSW, 2008 WL 4830740 (N.D. Cal. Nov. 6, 2008) ........................................ 10 

Allied Tube & Conduit Corp. v. Indian Head, Inc., 

486 U.S. 492 (1988) ..................................................................................................................... 7 

Am. Soc’y of Mech. Eng’nrs, Inc. v. Hydrolevel Corp., 

456 U.S. 556 (1982) ..................................................................................................................... 7 

Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 

472 U.S. 585 (1985) ..................................................................................................................... 3 

Barry Wright Corp. v. ITT Grinnell Corp., 

724 F.2d 227 (1st Cir. 1983) ........................................................................................................ 3 

Broadcom Corp. v. Qualcomm Inc., 

501 F.3d 297 (3d Cir. 2007) ......................................................................................................... 7 

Cascade Health Solutions v. PeaceHealth, 

515 F.3d 883 (9th Cir. 2008).............................................................................................. 3, 9, 10 

City of Anaheim v. S. Ca. Edison Co., 

955 F.2d 1373 (9th Cir. 1992)...................................................................................................... 4 

E.I. du Pont de Nemours & Co. v. FTC, 

729 F.2d 128 (2d Cir. 1984) ................................................................................................. 11, 13 

Eastman Kodak Co. v. Image Tech. Servs., Inc., 

504 U.S. 451 (1992) ................................................................................................................... 10 

Feitelson v. Google, Inc., 

80 F. Supp. 3d 1019 (N.D. Cal. 2015) ....................................................................................... 10

Forsyth v. Humana, Inc., 

114 F.3d 1467 (9th Cir. 1997)...................................................................................................... 3 

Free Freehand Corp. v. Adobe Sys., Inc., 

852 F. Supp. 2d 1171 (N.D. Cal. 2012) ............................................................................. 3, 4, 13 

FTC v. Ind. Fed’n of Dentists, 

476 U.S. 447 (1986) ................................................................................................................... 10 

FTC v. Sperry & Hutchinson Co., 

405 U.S. 233 (1972) ................................................................................................................... 10 

Image Tech. Servs., Inc. v. Eastman Kodak Co., 

125 F.3d 1195 (9th Cir. 1997)...................................................................................................... 6 

In re Coca Cola Co., 

117 F.T.C. 795 (1994) ................................................................................................................ 11 

In re Ductile Iron Fittings (DIPF) Direct Purchaser Antitrust Litig., 

Civ. No. 12-711, 2013 WL 812143 (D. N.J. Mar. 5, 2013) ....................................................... 10 

In re General Foods Corp., 

103 FTC 204 (1984) ................................................................................................................... 13 

In re Motorola Mobility LLC, 

File No. 121-0210, 2013 WL 124100 (FTC Jan. 3, 2013) ......................................................... 12 

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(continued) 

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CASE NO. 5:17-CV-00220-LHK 

In re Negotiated Data Solutions LLC, 

File No. 051-0094, 2008 WL 258308 (FTC Jan. 22, 2008) ....................................................... 12 

In re Robert Bosch GmbH, 

File No. 121-0081, 2012 WL 5944820 (FTC Nov. 21, 2012) ................................................... 12 

John Doe 1 v. Abbott Labs., 

571 F. 3d 930 (9th Cir. 2009)....................................................................................................... 6 

linkLine Commc’ns, Inc. v. SBC Cal., Inc., 

No. CV03-5265 SVW (SHx), 2004 WL 5503772 (C.D. Cal. Oct. 20, 2004) ............................. 7 

McWane, Inc. v. Fed. Trade Comm’n, 

783 F.3d 814 (11th Cir. 2015)............................................................................................ 3, 9, 10 

Microsoft Corp. v. Motorola, Inc., 795 F.3d 1024 (9th Cir. 2015)............................................................................................ 4, 6, 12 

Morgan v. Ponder, 892 F.2d 1355 (8th Cir. 1989)...................................................................................................... 3 

New York ex rel. Schneiderman v. Actavis PLC, 787 F.3d 638 (2d Cir. 2015) ......................................................................................................... 7 

Pac. Bell Tel. Co. v. linkLine Commc’ns, Inc., 555 U.S. 438 (2009) ................................................................................................................. 4, 6 

Pro Search Plus, LLC v. VFM Leonardo, Inc., No. SACV 12-2101-JLS (ANx), 2013 WL 6229141 (C.D. Cal. Dec. 2, 2013) ........................ 10 

Rambus Inc. v. FTC, 522 F.3d 456 (D.C. Cir. 2008) ............................................................................................. 12, 13 

Research in Motion Ltd. v. Morotola, Inc., 644 F. Supp. 2d 788 (N.D. Tex. 2008) ......................................................................................... 7 

Safeway Inc. v. Abbott Labs., 761 F. Supp. 2d 874 (N.D. Cal. 2011) ......................................................................................... 6 

Safeway Inc. v. Abbott Labs., Nos. C 07-05470 CW et al., 2010 WL 147988 (N.D. Cal. Jan. 12, 2010) .................................. 6 

Taylor Publ’g Co. v. Jostens, Inc., 216 F.3d 465 (5th Cir. 2000)........................................................................................................ 3 

United Mine Workers of Am. v. Pennington, 381 U.S. 657 (1965) ..................................................................................................................... 5 

United States v. Dentsply Intern’tl, Inc., 399 F.3d 181 (3d Cir. 2005) ............................................................................................... 3, 7, 10 

United States v. Microsoft Corp., 253 F.3d 34 (D.C. Cir. 2001) ......................................................................................... 3, 7, 9, 10 

United States v. United Regional Health Care Sys., Civ. No. 7:11-cv-00030, 76 Fed. Reg. 13209, 2011 WL 808503 (N.D. Tex. Feb. 25, 2011) ..... 9 

Verizon Commc’ns Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398 (2004) ..................................................................................................................... 6 

ZF Meritor, LLC v. Eaton Corp., 

696 F.3d 254 (3d Cir. 2012) ......................................................................................................... 9 

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Other Authorities

3 Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law ¶ 651c (1996) ................................ 3, 10 

Herbert Hovenkamp et al., IP and Antitrust

§ 35.5B (2014 Supp.) ................................................................................................................. 13 

Herbert Hovenkamp, The Federal Trade Commission and the Sherman Act, 

62 Fla. L. Rev. 871 (2010) ......................................................................................................... 11 

Joseph Kattan, The Next FRAND Battle: Why the Royalty Base Matters, 

CPI Antitrust Chronicle, March 2015 .......................................................................................... 5 

Statement of Enforcement Principles Regarding “Unfair Methods of Competition” Under Section 

5 of the Federal Trade Commission Act, 

80 Fed. Reg. 57,056 (Sep. 21, 2015).......................................................................................... 11 

Steven C. Salop & David T. Scheffman, Raising Rivals’ Costs, 

73 Amer. Econ. Rev. no. 2, May 1983 ......................................................................................... 5

Thomas Kratenmaker & Steven Salop, Anticompetitive Exclusion: Raising Rivals’ Costs to 

Achieve Power Over Price, 

96 Yale L. J. 209 (1986) .............................................................................................................. 3 

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1348408.2 AAI AMICUS CURIAE BRIEF

CASE NO. 5:17-CV-00220-LHK 

INTEREST OF AMICUS CURIAE 

The American Antitrust Institute (“AAI”) is an independent nonprofit organization 

devoted to promoting competition that protects consumers, businesses, and society. It serves the 

public through education, research, and advocacy on the benefits of competition and the use of 

antitrust enforcement as a vital component of national and international competition policy. AAI 

is managed by its Board of Directors with the guidance of an Advisory Board that consists of over 

130 prominent antitrust lawyers, law professors, economists, and business leaders. See

http:/www.antitrustinstitute.org.1

 

AAI has a longstanding interest in ensuring that standard setting among competitors is not 

abused and that FRAND commitments, which are central to preventing abuse, are not evaded. 

AAI has also been active in advancing the development of monopolization law, the FTC’s 

“standalone” § 5 authority, and the law governing pleading requirements in antitrust cases. All of 

these interests are implicated in Qualcomm’s motion to dismiss. Qualcomm’s arguments in favor 

of dismissal, if accepted, not only would prevent the FTC from addressing a serious 

anticompetitive problem in the mobile cellular industry, but would undermine the enforcement of 

the antitrust laws in other industries that are dependent on standard setting and throughout the 

economy. 

INTRODUCTION 

The complaint alleges that Qualcomm uses its monopoly power over CDMA and 

premium LTE baseband processors (or chipsets) to extract supra FRAND royalties from its 

customers (cell phone manufacturers, or OEMs), who are dependent on Qualcomm for at least a 

portion of their supply of chipsets. Qualcomm does this primarily by tying the sale of its chipsets 

to the licensing of its standard essential patents (SEPs), which dramatically increases OEMs’ 

 

1

 Individual views of members of AAI’s Board of Directors or Advisory Board may differ from 

AAI’s positions. Certain members of the Board of Directors and the Advisory Board, or their law 

firms, represent parties adverse to Qualcomm in matters related to this one, but were recused from 

AAI’s deliberations and had no role in drafting the brief. Consistent with Fed. R. App. P. 29, 

amicus curiae states: No party’s counsel authored this brief in whole or in part. No party or 

party’s counsel contributed money that was intended to fund preparing or submitting this brief. 

No person or entity other than amicus curiae or its counsel contributed money that was intended 

to fund preparing or submitting this brief. 

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1348408.2 - 2 - AAI AMICUS CURIAE BRIEF

CASE NO. 5:17-CV-00220-LHK 

costs of challenging Qualcomm’s royalty demands. Qualcomm also accomplishes this goal by 

refusing to license its rivals, who otherwise would be able to sell licensed chipsets to OEMs based 

on lower negotiated royalties. The excessive royalties charged to OEMs in turn raise the costs of 

rival chipmakers. As the complaint puts it, the excessive royalties impose a “tax” on OEMs 

doing business with other chipmakers, significantly impairing the other chipmakers’ ability to 

compete and challenge Qualcomm’s chipset monopoly. The complaint also alleges that 

Qualcomm extracted an exclusive dealing arrangement with Apple, which also significantly 

foreclosed rival chipset makers and helped it to maintain its monopoly. The impact is plain. 

Several chipset makers have exited the market and those that remain have had only limited 

success. 

Qualcomm’s behavior harms consumers in two ways. They are harmed immediately 

because excessive royalties charged to OEMs are passed along to consumers who pay higher 

prices for cell phones or receive lower quality devices with fewer features, or both. And they are 

harmed over the longer term because the foreclosure of rivals reinforces Qualcomm’s chipset 

monopoly, which allows it to charge supracompetitive “all in” prices for chipsets (chipsets plus 

royalties) and impairs innovation in mobile technologies. The complaint alleges that 

Qualcomm’s conduct constitutes monopolization and unreasonable restraints of trade, and is a 

“standalone” violation of Section 5 of the FTC Act. In this brief, AAI articulates the legal 

standards applicable to the FTC’s monopolization and unfair methods of competition claims, and 

explains why Qualcomm’s principal legal and factual attacks on the complaint lack merit.2

I. THE COMPLAINT STATES A MONOPOLIZATION CLAIM 

In its motion to dismiss, Qualcomm does not contest the first element of a monopolization 

claim, namely that it has monopoly power supported by high barriers to entry. Rather, it argues 

that the complaint fails to sufficiently allege the second element, “exclusionary conduct.” The 

Ninth Circuit, following the Supreme Court, defines such conduct as “behavior that tends to 

 2

 Qualcomm’s arguments directed at the § 1 claim are repetitive of its § 2 arguments and are not 

addressed in this brief. AAI’s points are necessarily limited by the fact that certain parts of the 

complaint and the parties’ briefs (including the discussion of Qualcomm’s strategic funds) are 

redacted. 

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impair the opportunities of rivals and either does not further competition on the merits or does so 

in an unnecessarily restrictive way.” Cascade Health Solutions v. PeaceHealth, 515 F.3d 883, 

894 (9th Cir. 2008); Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585, 605 n.32 

(1985) (same); accord Free Freehand Corp. v. Adobe Sys., Inc., 852 F. Supp. 2d 1171, 1180 

(N.D. Cal. 2012) (Koh, D.J.). The government is not required to show “clear evidence” of 

anticompetitive effect. McWane, Inc. v. Fed. Trade Comm’n, 783 F.3d 814, 836 (11th Cir. 2015) 

(noting that “Supreme Court precedent speaks not of ‘clear evidence’ or definitive proof of 

anticompetitive harm, but of ‘probable effect’”) (citation omitted). In a monopoly maintenance 

case, it is enough that “a defendant has engaged in anticompetitive conduct that ‘reasonably 

appear[s] capable of making a significant contribution to . . . maintaining monopoly power.’” 

United States v. Microsoft Corp., 253 F.3d 34, 79 (D.C. Cir. 2001) (alterations in original) 

(quoting 3 Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law ¶ 651c, at 78 (1996).3

Qualcomm contends that the government has failed to allege a “plausible antitrust theory,” 

Q. Br. 1, but the government’s theory of exclusionary conduct fits within the well-accepted 

framework of “raising rivals’ costs.” See Forsyth v. Humana, Inc., 114 F.3d 1467, 1478 (9th Cir. 

1997) (monopolist’s conduct that increased the operating costs of rivals, enabling it to charge 

higher prices, qualifies as exclusionary conduct (citing, inter alia, Thomas Kratenmaker & Steven 

Salop, Anticompetitive Exclusion: Raising Rivals’ Costs to Achieve Power Over Price, 96 Yale L. 

J. 209 (1986))); McWane, 783 F.3d at 832 (conduct is exclusionary “when it allows a monopolist 

to maintain its monopoly power by raising its rivals’ costs sufficiently to prevent them from 

growing into effective competitors”). Indeed, Qualcomm appears to accept that the government’s 

“tax” and exclusive-dealing theories, which are applications of the raising rivals’ costs 

framework, are sound monopolization theories in principle. Qualcomm argues primarily that the 

complaint insufficiently details the magnitude and impact of the costs it imposes on its rivals and 

 3

 The same formulation is followed by other circuits. See Taylor Publ’g Co. v. Jostens, Inc., 216 

F.3d 465, 475 (5th Cir. 2000); Morgan v. Ponder, 892 F.2d 1355, 1363 (8th Cir. 1989); Barry 

Wright Corp. v. ITT Grinnell Corp., 724 F.2d 227, 230 (1st Cir. 1983) (Breyer, J.); see also 

McWane, 783 F.3d at 837 (“reasonably appears to significantly contribute to maintaining 

monopoly power”); United States v. Dentsply Intern’tl, Inc., 399 F.3d 181, 187 (3d Cir. 2005) 

(“reasonably appears to be a significant contribution to maintaining monopoly power”). 

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is barred by Pac. Bell Tel. Co. v. linkLine Commc’ns, Inc., 555 U.S. 438 (2009). But Qualcomm 

misapprehends the relevant law and fails to credit plausible allegations in the complaint.4

A. The Complaint Adequately Alleges that Qualcomm’s Licensing Practices Are 

Exclusionary 

Qualcomm questions the complaint’s “tax” theory first by challenging the sufficiency of 

the allegations that it used its monopoly power over certain baseband processors to obtain 

elevated royalties. Q. Br. 9-11. Qualcomm says that the complaint does not allege that 

Qualcomm’s royalties are unreasonable or above a FRAND level. This argument is hard to 

fathom given the extensive evidence cited by the complaint that Qualcomm’s royalties are above 

the level that a court or neutral arbiter would determine to be FRAND. ¶¶ 4, 77. Indeed, the fact 

that Qualcomm’s royalties increase (proportionally) with increases in the price of a smart phone 

due to features that have nothing to do with cellular connectivity (like longer battery life or 

greater data storage), while Qualcomm’s share of cellular patents declines, would seem to be 

prima facie evidence of unreasonableness. Moreover, the complaint’s allegation that Qualcomm 

is able to obtain elevated royalties by threatening to withhold essential chip supplies if OEMs 

challenge Qualcomm’s royalty demands in court is well grounded. ¶¶ 79-83; see also ¶ 123 

(Qualcomm paid Apple not to initiate or induce others to litigate challenge to royalty demands). 

Cf. Microsoft Corp. v. Motorola, Inc., 795 F.3d 1024, 1031 (9th Cir. 2015) (describing patent 

“hold-up” where SEP holder obtains “an unduly high royalty rate” by threatening to withhold 

license). 

Qualcomm also argues that the FTC’s “tax” theory lacks merit because the complaint does 

not allege any disparity in the royalties Qualcomm charges OEMs that use rival chipsets instead 

 4

 Before addressing Qualcomm’s arguments, we note an overriding flaw in Qualcomm’s motion 

to dismiss is its attempt to isolate each alleged anticompetitive behavior and argue that it is 

insufficiently exclusionary to violate § 2 on its own, without considering the cumulative effect of 

the conduct. Such an approach is improper, particularly where, as here, its anticompetitive 

policies and practices are “interrelated,” and its “course of conduct” is alleged to be unlawful. 

FTC’s Complaint for Equitable Relief, ECF No. 1 ¶¶ 3, 147 [citations in the form ¶__ refer to the 

FTC’s complaint]; see City of Anaheim v. S. Ca. Edison Co., 955 F.2d 1373, 1376 (9th Cir. 1992) 

(“it would not be proper to focus on specific individual acts of an accused monopolist while 

refusing to consider their overall combined effect”); Free Freehand, 852 F. Supp. 2d at 1180, 

1184 (aggregated anticompetitive effect must be considered). 

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of Qualcomm chipsets. According to Qualcomm, “because there is no difference in the royalty 

rates, there is no ‘tax’ on competitors’ products, and there is no foreclosure of competition.” Q. 

Br. 12. However, raising rivals’ costs can be an effective exclusionary strategy even if the costs 

nominally apply across the board, as the FTC ably explains. See Steven C. Salop & David T. 

Scheffman, Raising Rivals’ Costs, 73 Amer. Econ. Rev. no. 2, May 1983, at 267, 268 (citing 

industry-wide wage increases and product standards as examples); United Mine Workers of Am. v. 

Pennington, 381 U.S. 657, 668-69 (1965) (agreement between union and large operators to secure 

uniform labor standards throughout the industry violates sections 1 and 2 of Sherman Act where it 

has the purpose and effect of excluding marginal producers). The FTC’s brief details the ways 

that Qualcomm’s ostensibly “chip neutral” tax imposes disproportionate costs on its rivals. In 

addition, the complaint alleges that the elevated royalties impose higher all-in costs on OEMs 

buying chipsets from rivals than from Qualcomm. It alleges that setting royalty rates at elevated 

levels, for example, allows Qualcomm (but not rivals) to “discount” from those rates in order to 

purchase exclusivity or provide other inducements for OEMs to purchase Qualcomm’s chipsets.5

 

¶¶ 102, 121. Moreover, in a but-for world in which OEMs could purchase licensed chipsets from 

rivals and did not need a separate patent license from Qualcomm, the all-in price for nonQualcomm chipsets would be reduced,6

 and Qualcomm would be forced to compete for chipset 

sales on the basis of the price and quality of its chipsets alone. See ¶ 94. 

Qualcomm argues that “the FTC’s ‘tax’ claim is, at best, a ‘price squeeze’ claim” which is 

 5

 The royalty-free SEP cross licenses that Qualcomm is able to extract from OEMs also allow it to 

provide OEMs that purchase Qualcomm chipsets (but not rival chipsets) patent protection from 

third-party suits; OEMs that purchase rival chipsets presumably must pay additional royalties to 

those third parties. ¶ 77d; ¶ 111 (“Qualcomm has insisted on cross-licenses to its licensees’ SEPs, 

for the benefit of Qualcomm’s baseband processor business and the customers of that business.”). 6

 OEMs would obtain the rights they need for chipsets sold by Qualcomm’s rivals by virtue of 

exhaustive patent licenses FRAND requires Qualcomm to provide to the rivals. See infra pp. 6-7. 

The royalty burden would be reduced because Qualcomm would have less leverage over rivals in 

negotiating royalties than it has over OEMs, as the negotiation would depend solely on the 

parties’ predictions of how a court or neutral arbiter would set the FRAND rate. Not expressly 

stated by the complaint is the fact that the royalty burden is also likely to be reduced because the 

royalty base (the chipset rather than the handset) would be smaller and not continually growing as 

features unrelated to processor technology are added. See Joseph Kattan, The Next FRAND 

Battle: Why the Royalty Base Matters, CPI Antitrust Chronicle, March 2015 (1), http://www. 

gibsondunn.com/publications/Documents/Kattan-Why-the-Royalty-Base-Matters-CPI03.2015.pdf. 

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foreclosed by linkLine, 555 U.S. 438. Q. Br. 12. But linkLine is inapposite even if Qualcomm’s 

conduct is characterized as a price squeeze. As Qualcomm acknowledges, linkLine declined to 

recognize a price-squeeze claim under § 2 of the Sherman Act in the absence of an antitrust “duty 

to deal.”7

 The Court reasoned that if a monopolist could refuse to deal with a rival without 

incurring antitrust liability, then there could be no liability for squeezing a rival by charging the 

rival an excessively high wholesale price compared to the monopolist’s retail price.8 But the 

complaint here alleges that Qualcomm does have an antitrust “duty to deal” with its rivals, which 

arises from its FRAND obligations.9 

Although not conceding the point, Qualcomm does not argue with the allegations that 

FRAND requires it to license all applicants, including rivals. See Motorola, 795 F.3d at 1031 

(“SEP holder cannot refuse a license to a manufacturer who commits to paying the [F]RAND 

rate”).10 Qualcomm does suggest that a FRAND obligation cannot create an antitrust duty to deal 

because such a duty “must arise under the antitrust laws rather than some other body of law.” Q. 

Br. 15 n.12. But a FRAND obligation is exactly the kind of voluntary undertaking the breach of 

which may give rise to a refusal-to-deal claim under the antitrust laws. See Verizon Commc’ns 

Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398, 409 (2004) (distinguishing Aspen 

Skiing because the “complaint does not allege that Verizon voluntarily engaged in a course of 

dealing with its rivals, or would ever have done so absent statutory compulsion”); cf. linkLine 

Commc’ns, Inc. v. SBC Cal., Inc., No. CV03-5265 SVW (SHx), 2004 WL 5503772, at *6, *11 

 7

 “The question before us is whether . . . a price-squeeze claim may be brought under § 2 of the 

Sherman Act when the defendant is under no antitrust obligation to sell the inputs to the plaintiff 

in the first place. We hold that no such claim may be brought.” 555 U.S. at 442. 8 Id. at 451; see id. at 456-57 (also questioning whether predatory pricing claim could be brought 

“if AT&T can bankrupt the plaintiffs by refusing to deal altogether”). 9

 The duty-to-deal here also distinguishes this case from John Doe 1 v. Abbott Labs., 571 F. 3d 

930 (9th Cir. 2009), cited by Qualcomm. Indeed, Judge Wilken upheld a monopolization claim 

involving the same conduct at issue in Doe under the theory, not asserted in Doe, that defendants 

breached a duty to deal. See Safeway Inc. v. Abbott Labs., Nos. C 07-05470 CW et al., 2010 WL 

147988 (N.D. Cal. Jan. 12, 2010) (denying motion to dismiss); Safeway Inc. v. Abbott Labs., 761 

F. Supp. 2d 874 (N.D. Cal. 2011) (denying summary judgment). 

10 The FRAND obligation displaces ordinary patent and antitrust principles under which courts 

are reluctant to circumscribe a patent holder’s right to choose its licensees. But even without a 

FRAND obligation, a patent holder’s exclusive rights are not as absolute as Qualcomm would 

have it. See, e.g., Image Tech. Servs., Inc. v. Eastman Kodak Co., 125 F.3d 1195 (9th Cir. 1997) 

(adopting only a rebuttable presumption that protecting patent rights provides legitimate 

justification for a refusal to license rivals in § 2 case). 

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(C.D. Cal. Oct. 20, 2004) (holding that there could be no liability for SBC’s alleged refusal to 

deal where the dealing was not voluntary, but compelled by law).11 Indeed, the Third Circuit has 

recognized that an allegation that Qualcomm sought to have its technology included in an 

industry-wide standard and that it “voluntarily agreed to license that technology on FRAND 

terms” was consistent with Trinko’s requirements for a refusal-to-deal claim. Broadcom Corp. v. 

Qualcomm Inc., 501 F.3d 297, 316-17 (3d Cir. 2007) (also noting that Trinko pointed “to the 

extensive regulatory framework that created oversight functions,” which was absent in the 

standard-setting context). Moreover, the FRAND duty to license competitors may even be 

required by antitrust law to ensure that collaborative standard setting does not violate § 1 of the 

Sherman Act. See Allied Tube & Conduit Corp. v. Indian Head, Inc., 486 U.S. 492, 501 (1988) 

(legality of standard setting depends on “‘meaningful safeguards’ that “prevent the standardsetting process from being biased by members with economic interests in stifling product 

competition” (quoting Am. Soc’y of Mech. Eng’nrs, Inc. v. Hydrolevel Corp., 456 U.S. 556, 570-

73 (1982))); Research in Motion Ltd. v. Morotola, Inc., 644 F. Supp. 2d 788, 796 (N.D. Tex. 

2008) (Allied Tube and Broadcom make clear that “standards, without the proper safeguards, are 

inherently anticompetitive”). 

Qualcomm argues that the complaint alleges no harm to competition from its refusal to 

license its rivals because its rivals are still able to compete. Q. Br. 15. However, it is well settled 

that “‘[t]he test is not total foreclosure.’” New York ex rel. Schneiderman v. Actavis PLC, 787 

F.3d 638, 656 (2d Cir. 2015) (holding that monopolist’s conduct violated § 2 where it barred 

rivals “‘from the cost-efficient’” means of distribution (quoting Dentsply, 399 F.3d at 191, and 

Microsoft, 253 F.3d at 64)). Moreover, Qualcomm ignores the complaint’s theory that 

Qualcomm’s refusal to license rivals helps it to obtain elevated royalties from OEMs and thereby 

raise rivals’ costs. See supra n. 6. Qualcomm also argues that the FTC’s theory is “internally 

inconsistent” because OEMs will still need a license for those Qualcomm patents that are not 

exhausted by a rival’s sale of chipsets, and therefore Qualcomm will still be able to use its 

 11 While dismissing plaintiff’s refusal-to-deal claim, the district court in linkLine declined to 

dismiss plaintiff’s price-squeeze claim. The Supreme Court reversed the latter ruling. 

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leverage over chipset supply to extract elevated royalties on those residual patents. Q. Br. 17. Of 

course, the complaint says nothing about such patents. But even assuming such patents exist to a 

non-trivial degree, Qualcomm’s argument ignores (again) that the complaint alleges Qualcomm’s 

“no license, no chips” policy works together with its refusal to license rivals to elevate royalties 

and foreclose rivals, and that separating chipset access from the royalty negotiation with OEMs 

on any non-exhausted patents would preclude Qualcomm from using its leverage to obtain 

elevated royalties on those patents. 

B. The Complaint Adequately Alleges That Qualcomm’s Exclusive Dealing with 

Apple Is Exclusionary 

Qualcomm maintains that the complaint’s exclusive dealing allegations fail to state a 

claim for unlawful monopolization because they fail to allege sufficient anticompetitive effects. 

Besides the fact that Qualcomm improperly considers the exclusive dealing allegations in 

isolation,12 Qualcomm’s argument is inconsistent with monopolization law, pleading standards, 

and a fair reading of allegations in the complaint. 

Qualcomm does not seriously contest that its agreements with Apple—which provided for 

Qualcomm to pay Apple billions of dollars in conditional rebates from 2011 through 2016 in 

exchange for Apple using Qualcomm chipsets exclusively in all new iPhone and iPad models—

constituted de facto exclusive dealing arrangements. Qualcomm points out that conditionalpricing arrangements do not automatically constitute de facto exclusive dealing, which of course 

is true. But, exclusive dealing is plainly established where, as here, the complaint alleges that 

“[a]s a result of” the conditional rebates, Apple in fact “sourced baseband processors exclusively 

from Qualcomm for all new iPad and iPhone products that it launched over [a] five-year period.” 

¶ 126. 

Moreover, the complaint alleges that “the penalties under these agreements are 

sufficiently large that, if they were attributed as discounts to the price of Qualcomm baseband 

 12 See supra n. 4. Qualcomm’s exclusive dealing arrangements with Apple not only contributed 

directly to the foreclosure of rival chipmakers, but also did so indirectly by committing Apple not 

to “initiate nor induce others to initiate litigation claiming that Qualcomm had failed to offer a 

license on FRAND terms.” ¶ 123. 

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processors reasonably contestable by a Qualcomm competitor, the resulting price of Qualcomm 

processors would be below Qualcomm’s cost.” ¶ 125c. This means that an equally efficient rival 

could not compete for Apple’s business, a particularly potent hallmark of exclusionary conduct. 

See Cascade, 515 F.3d at 906-07 (bundled rebate “is exclusionary for purpose of § 2” where it 

fails to satisfy “discount attribution standard” because it means that it is likely to exclude “an 

equally or more efficient competitor”) (citation omitted); ZF Meritor, LLC v. Eaton Corp., 696 

F.3d 254, 282-83 (3d Cir. 2012) (conditional rebates tied to market-share targets constituted de 

facto partial exclusive dealing where “due to Eaton’s position as the dominant supplier, no OEM 

could satisfy customer demand without at least some Eaton products, and therefore no OEM 

could afford to lose Eaton as a supplier”); Competitive Impact Statement 13-16, United States v. 

United Regional Health Care Sys., Civ. No. 7:11-cv-00030, 76 Fed. Reg. 13209, 13220, 2011 

WL 808503 (N.D. Tex. Feb. 25, 2011) (where discount tied to exclusivity fails to satisfy discount 

attribution test, contracts amount to de facto exclusive dealing and are anticompetitive because 

they would “likely exclude an equally-efficient competitor”). 

Qualcomm also argues that the complaint insufficiently alleges anticompetitive effects 

from its exclusive dealing agreement with “just one customer.” Q. Br. 4. Notwithstanding that 

the complaint details the importance of that customer for “a nascent broadband processor 

supplier,” and that the agreements foreclosed “a substantial share of the market for premium LTE 

baseband processors” and “impeded the development of other baseband processor suppliers into 

effective competitors to Qualcomm,” ¶¶ 129-130, Qualcomm contends that the allegations are 

deficient because they fail to identify the precise portion of the market foreclosed and the 

particular competitors that were excluded. Q. Br. 18. 

Qualcomm’s demand for greater specificity of foreclosure and anticompetitive effects is 

misplaced.13 As noted above, the question under § 2 is whether the exclusive dealing “reasonably 

 13 Qualcomm states, without support, that “the FTC must allege foreclosure or rivals that is 

sufficient in magnitude and scope to deprive them of the opportunity to compete for efficient 

scale.” Q. Br. 3-4. There is no such requirement. See McWane, 783 F.3d at 840 (upholding 

liability where foreclosure was sufficient to slow rival’s growth and its ability to constrain 

monopolist’s monopoly power); Microsoft, 253 F.3d at 71 (exclusive dealing unlawful where it 

prevented “rival [from] pos[ing] a real threat to Microsoft’s monopoly”). 

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appears capable of making a significant contribution to maintaining monopoly power.” See supra

p. 3; see also McWane, 783 F.3d at 837 (“‘It is enough to show that anticompetitive consequences 

are a naturally-to-be-expected outcome of the challenged conduct.’” (quoting 3 Phillip Areeda & 

Herbert Hovenkamp, Antitrust Law ¶ 657a2, at 162 (3d ed. 2008))). Where a monopolist’s 

exclusive dealing “tends to impair the opportunities of rivals” and lacks a procompetitive 

justification, it violates the rule of reason under § 2. Cascade, 515 F.3d at 894. 

Accordingly, courts in § 2 cases have held, “The question of whether the alleged exclusive 

dealing arrangements foreclosed a substantial share of the line of commerce is a merits question 

not proper for the pleading stage.” In re Ductile Iron Fittings (DIPF) Direct Purchaser Antitrust 

Litig., Civ. No. 12-711, 2013 WL 812143, at *19 (D. N.J. Mar. 5, 2013); Pro Search Plus, LLC v. 

VFM Leonardo, Inc., No. SACV 12-2101-JLS (ANx), 2013 WL 6229141, at *7 (C.D. Cal. Dec. 

2, 2013) (same). Even after trial it is not necessary for the Commission to “place an exact 

number on the percentage foreclosed.” McWane, 783 F.3d at 838. The cases cited by Qualcomm 

are inapposite because they involve exclusive dealing claims under § 1 rather than § 2,14 are not 

rulings on the pleadings, or are otherwise distinguishable.15 

II. THE COMPLAINT STATES A STANDALONE SECTION 5 CLAIM 

It is well settled that the ban on “unfair methods of competition” under § 5 of the FTC Act 

goes beyond the scope of the Sherman Act. See FTC v. Ind. Fed’n of Dentists, 476 U.S. 447, 454 

(1986); FTC v. Sperry & Hutchinson Co., 405 U.S. 233, 244 (1972) (FTC may consider “public 

 14 Qualcomm cites Feitelson v. Google, Inc., 80 F. Supp. 3d 1019 (N.D. Cal. 2015), which 

involved exclusive dealing claims under § 1 and § 2, for the proposition that “Courts have 

generally ‘assume[d] that at the pleading stage, the degree of foreclosure required to make out an 

exclusive dealing claim does not differ under § 1 and § 2.’” Q. Br. 22 n.20. However, what the 

court in Feitelson actually said was, “For purposes of this motion, the Court assumes” the 

standards do not differ, which made sense because “the parties’ briefing [did] not suggest they 

believe there is a difference.” 80 F. Supp. 3d at 1030 n.8 (emphasis added). In fact, courts 

generally hold that exclusive dealing may violate § 2 even if it does not satisfy the foreclosure 

requirements for a § 1 violation. See Microsoft, 253 F.3d at 70; Dentsply, 399 F.3d at 197; see 

also Cascade, 515 F.3d at 911 n.22 (rejecting argument that jury verdict for defendant on 

exclusive dealing claim under § 1 precluded liability under § 2). The reason is that foreclosure 

has the greater potential to harm competition in monopoly markets. See McWane, 783 F.3d at 

836; cf. Eastman Kodak Co. v. Image Tech. Servs., Inc., 504 U.S. 451, 488 (1992) (Scalia, J., 

dissenting) (monopolist’s “activities are examined through a special lens”). 15 For example, Abbyy USA Software House, Inc. v. Nuance Commc’ns Inc., No. C 08-01035 

JSW, 2008 WL 4830740, at *2 (N.D. Cal. Nov. 6, 2008) is a case in which the plaintiff “has not 

pled any foreclosure whatsoever in the relevant market.” 

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values beyond simply those enshrined in the letter or encompassed in the spirit of the antitrust 

laws”). This is not controversial. See generally Herbert Hovenkamp, The Federal Trade 

Commission and the Sherman Act, 62 Fla. L. Rev. 871, 875 (2010) (“[T]he rationales for 

expansive coverage are quite persuasive as a whole and may even be overwhelming.”).16 

However, in its prosecutorial discretion, the FTC has adopted principles that limit its enforcement 

of “standalone” violations to activities and practices that “contravene the spirit of the antitrust 

laws and those that, if allowed to mature or complete could violate the Sherman Act or Clayton 

Act.” Statement of Enforcement Principles Regarding “Unfair Methods of Competition” Under 

Section 5 of the Federal Trade Commission Act, 80 Fed. Reg. 57,056 (Sep. 21, 2015). Under 

these principles, the Commission will use its authority to remedy “harm to competition or the 

competitive process” that impairs consumer welfare, taking into account “cognizable efficiencies 

and business justifications.” Id. 

A. The Complaint Pleads Harm to Competition 

Qualcomm argues that the complaint fails to state an “unfair methods” violation because it 

fails to plead any plausible harm to the competitive process or any “indicia of oppressiveness.” 

Q. Br. 23 (citing E.I. du Pont de Nemours & Co. v. FTC, 729 F.2d 128 (2d Cir. 1984)). As to 

competitive harm, Qualcomm recycles its (incorrect) arguments for dismissing the 

monopolization count. But there are two respects in which the requisite competitive harm for an 

unfair methods claim may be less than, or different from, the competitive harm required for a § 2 

violation. First, “a showing of an actual anticompetitive effect is unnecessary to prove a violation 

of Section 5 because that section was designed to stop [in] their incipiency acts and practices that 

could lead to violations of the Sherman or Clayton Acts.” In re Coca Cola Co., 117 F.T.C. 795, 

970 n.25 (1994); Hovenkamp, supra, at 875. Accordingly, even if the effect of Qualcomm’s 

conduct were insufficient to state a claim under § 2, its tendency to harm competition may be 

sufficient for an unfair methods claim, assuming the absence of a countervailing procompetitive 

justification. 

 16 One of the reasons is that while the Sherman Act is largely enforced by private parties who 

may obtain treble damages, the FTC Act is only enforced by the Federal Trade Commission for 

equitable relief. See Hovenkamp, supra, at 877-78. 

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Second, an unfair methods claim may lie where the conduct of a monopolist harms 

competition or the competitive process without regard to its exclusion of rivals. Thus, the FTC 

has brought “standalone” claims under § 5 when a patent holder breaches a licensing commitment 

designed to mitigate monopoly power in technology markets that is conferred by the standardsetting process, where the resultant harm is to competition in the markets that use the technology 

(i.e., among implementers) and to the standard-setting process itself. For example, in N-Data, the 

FTC brought and settled a complaint that a non-practicing entity that acquired certain SEPs had 

violated § 5 when it opportunistically demanded royalties from computer device manufactures 

well in excess of the fees its assignor had promised the SSO it would charge, thereby increasing 

the price of devices and decreasing the incentives of manufacturers and others to participate in 

standard setting activities. In re Negotiated Data Solutions LLC, File No. 051-0094, 2008 WL 

258308, at *37 (FTC Jan. 22, 2008) (analysis of proposed consent order to aid public comment). 

And in Motorola Mobility, the FTC brought and settled claims that an SEP holder violated § 5 by 

seeking injunctive relief against willing licensees in violation of its commitment to license its 

SEPs on FRAND terms, where the threats enhanced its bargaining leverage to demand supra

FRAND royalties and had the likely anticompetitive effect, among others, of increasing the costs 

and prices of the numerous products that comply with the relevant standards. In re Motorola 

Mobility LLC, File No. 121-0210, 2013 WL 124100, at *5, *37 (FTC Jan. 3, 2013) (complaint 

and statement of the Commission). As the FTC explained, “standard setting often supplants the 

competitive process with the collective decision-making of competitors, requiring that we be 

vigilant in protecting the integrity of the standard-setting process,” and “a breach of a FRAND 

commitment in the context of standard setting poses serious risks to the standard-setting process, 

competition, and consumers.” Id. at *38; see also In re Robert Bosch GmbH, File No. 121-0081, 

2012 WL 5944820, at *28-*29 (FTC Nov. 21, 2012) (similar); cf. Motorola, 795 F.3d at 1052 

n.22 (noting that a “RAND commitment . . . is crafted for the public interest”) (internal quotation 

marks omitted).17

 17 In Rambus Inc. v. FTC, 522 F.3d 456 (D.C. Cir. 2008), the FTC found that a monopolist in 

DRAM technology had violated § 2 by breaching its commitment to disclose relevant patent 

Footnote continued on next page

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In this case, where Qualcomm is alleged to use its monopoly power in baseband 

processors to obtain elevated royalties on its SEPs in violation of its FRAND commitment, an 

unfair methods claim may be based on the harm to competition and consumers in the markets in 

which OEMs pay Qualcomm inflated royalties, ¶ 144, as well as the harm to the standard setting 

process itself, see ¶¶ 49, 77.18

B. The Complaint Pleads “Indicia of Oppressiveness” 

As to the Second Circuit’s “indicia of oppressiveness,” there is no basis to impose such a 

requirement here. The Second Circuit adopted that requirement to address facilitating practices in 

an oligopolistic industry, du Pont, 729 F.2d at 139, not monopolistic conduct. In any event, du 

Pont allowed that “unfair methods” includes conduct that is “coercive,” id. at 138, 140, which 

aptly describes Qualcomm’s use of its dominant position in chipsets to demand and obtain 

royalties and other “onerous” licensing terms from OEMs that they believe are not FRAND. ¶¶ 

47, 83, 86. Moreover, contrary to Qualcomm’s argument, the complaint satisfies du Pont’s 

“oppressiveness” requirement by alleging that Qualcomm’s conduct lacks independent legitimate 

business reasons. See ¶ 145. 

Qualcomm contests this allegation, but “the existence of valid business reasons in antitrust 

cases is generally a question of fact not appropriate for resolution at the motion dismiss stage.” 

Free Freehand, 852 F. Supp. 2d at 1182 (internal quotation marks omitted). Moreover, 

Footnote continued from previous page

rights to a standard setting organization. The D.C. Circuit reversed because the FTC failed to 

prove that the breach enabled the respondent to attain monopoly power (i.e., that had the patents 

been disclosed, the relevant technology would not have been included in the standard). Rather, it 

was just as likely that that standard setting organization would have chosen the technology 

anyway, but would have insisted on a FRAND commitment to mitigate the conferral of monopoly 

power. Importantly, while the Court held that § 2 is not violated when conduct merely permits a 

monopolist to avoid (non-competitive) constraints on the exercise of monopoly power, the Court 

remanded the case to the Commission for potential consideration under a standalone § 5 theory. 

Id. at 467; see also Herbert Hovenkamp et al., IP and Antitrust § 35.5B, at 33-54.1 (2014 Supp.) 

(commenting on Rambus that “overcharge can properly constitute competitive harm” in 

downstream market) 

18 Qualcomm cites In re General Foods Corp., 103 FTC 204 (1984), for the proposition that § 5 

does not reach conduct that is “affirmatively permitted or encouraged by the antitrust laws.” Q. 

Br. 23. Assuming that is correct, it does not mean that the same standards necessarily apply to 

monopolistic conduct under § 2 and § 5, as General Foods implicitly recognized. 103 FTC 204, 

1984 WL 565373, at *123 n.127. In any event, the antitrust laws do not affirmatively permit or 

encourage the use of monopoly power in one market to facilitate the breach of a FRAND 

commitment in another. 

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Qualcomm’s purported justifications are dubious. Qualcomm argues that it conditions the sale of 

its chipsets to the licensing of its standard essential patents because it “does not wish to facilitate 

infringement of its patents.” Q. Br. 24. But no infringement of its patents would occur if it sold 

its chipsets without requiring a separate patent license. The complaint alleges that Qualcomm’s 

“no license-no chips” policy is unique in the industry and that “[o]ther component suppliers rely 

on component sales, rather than separate patent licenses, to convey” the IP rights their customers 

need to use or resell the components. ¶¶ 64-65. As to its refusal to license its rivals, Qualcomm 

suggests that this is justified by its desire not to assist its competitors, but this can’t be a 

legitimate business justification insofar as it contradicts its FRAND commitment.19 And while 

Qualcomm asserts that there can be legitimate business reasons for exclusive dealing 

arrangements, it does not suggest one for its exclusive dealing arrangements at issue here. 

*** 

Collaborative standard setting among competitors “creates an opportunity for companies 

to engage in anti-competitive behavior,” Motorola, 795 F.3d at 1030-31, and FRAND 

commitments are “important safeguards against monopoly power.” Broadcom, 501 F.3d at 314. 

Indeed, they are essential to permit standard setting to occur “at all under the antitrust laws.” 

Allied Tube, 486 U.S at 506-07. Accordingly, the antitrust laws play a critical role in policing 

FRAND evasions where harm to competition is evident in technology markets or product markets 

in which the technology used. That role is doubly important where, as alleged here, a standardsetting participant has monopoly power in a product market and it uses that power to evade 

FRAND constraints and thereby hobble its rivals, entrench its monopoly, and harm millions of 

consumers. 

CONCLUSION 

The complaint states a monopolization claim because it plausibly alleges conduct that: 

(a) impairs Qualcomm’s rivals’ opportunities, and (b) reasonably appears capable of making a 

significant contribution to maintaining Qualcomm’s monopoly power. The complaint’s “tax” and 

 19 Qualcomm points out that the complaint does not allege that licensing only at the handset level 

is “anomalous.” Q. Br. 17. But the complaint does allege that Qualcomm demands a chipset-level 

license for itself. ¶ 111. 

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exclusive dealing theories no doubt involve raising Qualcomm’s rivals’ costs which makes it 

more difficult for them to compete and to challenge Qualcomm’s monopoly. At this stage of the 

proceeding, the Court must assume Qualcomm’s alleged conduct not to have procompetitive 

justifications, and the conduct therefore violates § 2. The complaint also alleges a standalone 

violation of § 5, which may be found even in the absence of exclusion. For these and the other 

reasons stated above and in the FTC’s brief, Qualcomm’s motion to dismiss should be denied. 

Dated: May 12, 2017 Respectfully submitted, 

LIEFF CABRASER HEIMANN & BERNSTEIN, LLP 

By:/s/ Eric B. Fastiff

Eric B. Fastiff 

 Eric B. Fastiff (State Bar No. 182260) 

efastiff@lchb.com 

275 Battery Street, 29th Floor 

San Francisco, CA 94111-3339 

Telephone: 415.956.1000 

Facsimile: 415.956.1008 

Counsel for Proposed Amicus Curiae 

The American Antitrust Institute 

Richard Brunell 

Vice President & General Counsel 

American Antitrust Institute 

1730 Rhode Island Avenue, NW 

Suite 1100 

Washington, DC 20036 

Telephone: 202.600.9640 

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