EXHIBIT A

[PURSUANT TO THE COURT’S ORDER AT ECF 1224, 

FOLLOWING ARE ZTE’S PUBLIC UNREDACTED 

PORTIONS OF BLAYLOCK DEPOSITION TRANSCRIPT 

DESIGNATIONS PREVIOUSLY SUBMITTED UNDER 

SEAL AT ECF 1211]

Case 5:17-cv-00220-LHK Document 1241 Filed 01/10/19 Page 1 of 12
·1· · · · · · · UNITED STATES DISTRICT COURT

· · · · · · · ·NORTHERN DISTRICT OF CALIFORNIA

·2· · · · · · · · · · SAN JOSE DIVISION

·3· ·________________________________

· · ·FEDERAL TRADE COMMISSION,· · · ·)

·4· · · · · · · · · · · · · · · · · ·)

· · · · · · · ·Plaintiff,· · · · · · )· Case No.

·5· · · · · · · · · · · · · · · · · ·)· 17-cv-00220-LHK-NMC

· · · · · · · ·v.· · · · · · · · · · )

·6· · · · · · · · · · · · · · · · · ·)

· · ·QUALCOMM INCORPORATED, a· · · · )

·7· ·Delaware Corporation,· · · · · ·)

· · · · · · · · · · · · · · · · · · ·)

·8· · · · · · ·Defendant.· · · · · · )

· · ·________________________________)

·9· · · · · · · · · · · · · · · · · ·)· Case No.

· · ·IN RE: QUALCOMM ANTITRUST· · · ·)· 17-md-02773-LHK-NMC

10· ·LITIGATION· · · · · · · · · · · )

· · ·________________________________)

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· · · · · · · · · HIGHLY CONFIDENTIAL

15· · · · · · OUTSIDE ATTORNEYS' EYES ONLY

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19· · · · · · · · VIDEOTAPED DEPOSITION OF:

20· · · · · · · · · RICHARD L. BLAYLOCK

21· · · · · · · · · TUESDAY, FEBRUARY 27, 2018

22· · · · · · · · · 8:58 A.M.

23

· · · REPORTED BY:· PAULA A. PYBURN

24· · · · · · · · · CSR 7304, RPR, CLR

25

Case 5:17-cv-00220-LHK Document 1241 Filed 01/10/19 Page 2 of 12
Page 2

·1· · · · · · VIDEOTAPED DEPOSITION OF RICHARD L.

·2· ·BLAYLOCK, the witness, taken on behalf of DEFENDANT,

·3· ·on Tuesday, February 27, 2018, 8:58 a.m., at 11988

·4· ·El Camino Real, Suite 350, San Diego, California,

·5· ·before PAULA A. PYBURN, CSR 7304, RPR, CLR.

·6

·7

·8· ·APPEARANCES OF COUNSEL:

·9

10· ·FOR THE FEDERAL TRADE COMMISSION:

11· · · ·UNITED STATES FEDERAL TRADE COMMISSION

12· · · ·BUREAU OF COMPETITION

13· · · ·BY:· KENT E. COX III, ESQ.

14· · · ·600 Pennsylvania Avenue, NW

15· · · ·Washington, DC 20580

16· · · ·202.326.2058

17· · · ·kcox@ftc.gov

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·1· ·APPEARANCES:· (CONTINUED)

·2

·3· ·FOR CLASS PLAINTIFFS IN CASE

·4· ·NO. 17-md-02773-LHK-NMC:

·5· · · ·COTCHETT, PITRE & MCCARTHY, LLP

·6· · · ·By:· MARK F. RAM, ESQ.

·7· · · ·San Francisco Airport Office Center

·8· · · ·840 Malcolm Road, Suite 200

·9· · · ·Burlingame, California 94010

10· · · ·650.697.6000

11· · · ·mram@cpmlegal.com

12

13· ·FOR DEFENDANT QUALCOMM:

14· · · ·KEKER, VAN NEST & PETERS LLP

15· · · ·By:· MATAN SHACHAM, ESQ.

16· · · ·By:· BRYN WILLIAMS, ESQ.

17· · · ·633 Battery Street

18· · · ·San Francisco, California 94111-1809

19· · · ·415.391.5400

20· · · ·mshacham@keker.com

21· · · ·bwilliams@keker.com

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·1· ·APPEARANCES:· (CONTINUED)

·2

·3· ·FOR DEFENDANT QUALCOMM:

·4· · · ·JONES DAY

·5· · · ·By:· ANTHONY FARES, ESQ.

·6· · · ·4655 Executive Drive, Suite 1500

·7· · · ·San Diego, California 92121-3134

·8· · · ·858.314.1200

·9· · · ·afares@jonesday.com

10

11· ·FOR THIRD-PARTY WITNESS ZTE (USA) INC.:

12· · · ·UPSHAW PLLC

13· · · ·By:· EVERETT UPSHAW, Ph.D., ESQ.

14· · · ·1204 Gano Street

15· · · ·Dallas, Texas 75215

16· · · ·972.920.8000

17· · · ·everettupshaw@upshawpllc.com

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·1· ·APPEARANCES:· (CONTINUED)

·2

·3· ·FOR PILLSBURY WINTHROP:

·4· · · ·PILLSBURY WINTHROP SHAW PITTMAN LLP

·5· · · ·By:· CONOR M. CIVINS, ESQ.

·6· · · ·401 Congress Avenue, Suite 1700

·7· · · ·Austin, Texas 78701-3797

·8· · · ·512.580.9600

·9· · · ·conor.civins@pillsburylaw.com

10

11· ·FOR APPLE, INC.:

12· · · ·FISH & RICHARDSON P.C.

13· · · ·By:· SETH M. SPROUL, ESQ.

14· · · ·12390 El Camino Real

15· · · ·San Diego, California 92130

16· · · ·858.678.4343

17· · · ·sproul@fr.com

18

19· ·ALSO PRESENT:

20· · · ·Ted Bendrick, Videographer

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Case 5:17-cv-00220-LHK Document 1241 Filed 01/10/19 Page 3 of 12
Page 82

·1· ·BY MR. SHACHAM:

·2· · · ·Q· · What such communications are you aware of

·3· ·specifically?

·4· · · · · · MR. UPSHAW:· Same -- same objection --

·5· ·well, same caution.

·6· · · · · · THE WITNESS:· I'm -- I'm aware that there

·7· ·were multiple communications between Qualcomm's --

·8· ·Qualcomm business leads in China with ZTE personnel

·9· ·that were ongoing in parallel with the negotiations.

10· ·The --

11· ·BY MR. SHACHAM:

12· · · ·Q· · Do you recall anything else about these

13· ·purported communications?

14· · · · · · MR. UPSHAW:· Same caution.

15· · · · · · THE WITNESS:· I do.· I am trying to

16· ·distinguish between that which is -- that which is

17· ·privileged and that which is not.

18· · · · · · MR. CIVINS:· You need to take a break?

19· · · · · · THE WITNESS:· So let me answer -- answer

20· ·your question:· Yes.

21· · · · · · And let's take a short break.

22· · · · · · MR. CIVINS:· Okay.

23· · · · · · THE WITNESS:· Okay.

24· · · · · · MR. CIVINS:· Few seconds, 30 seconds.

25· · · · · · THE VIDEOGRAPHER:· Shall we go off the

Page 83

·1· ·record?

·2· · · · · · MR. SHACHAM:· Yes.

·3· · · · · · THE VIDEOGRAPHER:· Going off the record.

·4· ·The time is 10:52 a.m.

·5· · · · · · (A recess was taken from 10:52 a.m.

·6· · · · · · to 10:57 a.m.)

·7· · · · · · THE VIDEOGRAPHER:· We're back on the

·8· ·record.· The time is 10:57 a.m.

·9· ·BY MR. SHACHAM:

10· · · ·Q· · Mr. Blaylock, do you recall anything else

11· ·about these purported communications?

12· · · · · · MR. CIVINS:· And I'll caution you not to

13· ·disclose any attorney-client privileged or work

14· ·product information.

15· · · · · · THE WITNESS:· And by "these

16· ·communications," you're referring to what we were

17· ·talking about before the break, about the necessity

18· ·of a license for access to Qualcomm chips?· Is that

19· ·accurate?

20· ·BY MR. SHACHAM:

21· · · ·Q· · Yes.

22· · · ·A· · Thank you.

23· · · · · · I recall being aware during the

24· ·negotiations in September of 2015 of there being

25· ·multiple communications between Qualcomm business

Page 84

·1· ·personnel and ZTE personnel, much of the

·2· ·communications initiated by Qualcomm, in which ZTE

·3· ·was cautioned of adverse consequences of not

·4· ·reaching a deal with Qualcomm.

·5· · · ·Q· · Do you have any further recollection about

·6· ·these purported communications?

·7· · · · · · MR. CIVINS:· I'll caution you not to

·8· ·disclose any attorney-client privileged/work product

·9· ·information.

10· · · · · · THE WITNESS:· Yes.

11· ·BY MR. SHACHAM:

12· · · ·Q· · Tell me that recollection.

13· · · · · · MR. UPSHAW:· Same caution.

14· · · · · · THE WITNESS:· There was a suggestion that,

15· ·absent -- absent an agreement reached by a certain

16· ·deadline, that Qualcomm's interest in negotiating

17· ·with -- with ZTE would be diminished and that the

18· ·terms of the relationship would be worse for ZTE.

19· · · · · · THE REPORTER:· Would be --

20· · · · · · THE WITNESS:· -- worse for ZTE.

21· ·BY MR. SHACHAM:

22· · · ·Q· · Who made that suggestion?

23· · · · · · MR. UPSHAW:· Same caution.

24· · · · · · THE WITNESS:· That would be Fabian Gonell.

25· ·///

Page 85

·1· ·BY MR. SHACHAM:

·2· · · ·Q· · When?

·3· · · ·A· · During one of the face-to-face meetings

·4· ·in -- in September 2015 in Pillsbury's Shanghai

·5· ·office.

·6· · · ·Q· · Do you remember a date more specifically

·7· ·than that?

·8· · · ·A· · I believe everything happened between the

·9· ·10th and the 25th --

10· · · ·Q· · So you don't recall --

11· · · ·A· · There was -- if you want a specific day,

12· ·no, I do not.

13· · · ·Q· · To whom did Mr. Gonell make this purported

14· ·suggestion?

15· · · · · · MR. UPSHAW:· Same caution.

16· · · · · · THE WITNESS:· That -- that statement, it

17· ·was made to me and whomever else on behalf of ZTE

18· ·was in the room at the time.

19· · · · · · The -- the personnel in the room changed

20· ·constantly over the course of negotiations.

21· ·BY MR. SHACHAM:

22· · · ·Q· · Do you recall anyone else specifically who

23· ·was in the room at the time other than you and

24· ·Mr. Gonell?

25· · · ·A· · Likely Jessica Wang of ZTE.

Case 5:17-cv-00220-LHK Document 1241 Filed 01/10/19 Page 4 of 12
Page 126

·1· ·BY MR. SHACHAM:

·2· · · ·Q· · Let's turn now to the previous instance in

·3· ·time, the third of the four instances you

·4· ·identified.

·5· · · · · · Okay?

·6· · · ·A· · And just to be clear, your -- your ordering

·7· ·is in reverse chronological order?

·8· · · ·Q· · That's right.

·9· · · ·A· · Okay.

10· · · ·Q· · That's right.· So I'm referring to the last

11· ·instance in time as the first, and then the one

12· ·before that as the second, the one before that as

13· ·the third, and the one before that as fourth.

14· · · ·A· · And the last should be first.

15· · · ·Q· · Exactly.· Is that -- is that all clear?

16· · · ·A· · Yes.

17· · · ·Q· · Okay.· So -- so let's now turn to the third

18· ·instance.

19· · · · · · When did this instance occur?

20· · · ·A· · One or two days before the -- before what

21· ·we were calling the second instance.

22· · · ·Q· · And did this occur when the parties were

23· ·still meeting in China?

24· · · ·A· · All -- all four instances occurred in

25· ·Shanghai.

Page 127

·1· · · ·Q· · What do you recall Qualcomm saying to ZTE

·2· ·in this third instance?

·3· · · ·A· · Like before, this -- Qualcomm conveyed a

·4· ·willingness to negotiate on these licenses and to go

·5· ·forward on the path that we were on, because we had

·6· ·partial agreements on certain terms; that -- but

·7· ·there were open items, some of which related to

·8· ·the -- I think there was a large gap between the

·9· ·amount Qualcomm claimed to be owed related to past

10· ·royalties and the amount that ZTE felt was properly

11· ·owed following certain royalty audits; that

12· ·Qualcomm -- it -- let's see.

13· · · · · · Qualcomm -- let's see -- was -- I think at

14· ·this point certainly one of the issues that was

15· ·significant at the time, not -- not singularly at

16· ·this time, but related to the question of ZTE's

17· ·patents.· And it was a deal point.

18· · · · · · And ZTE conveyed, you know, that it wanted

19· ·to essentially re -- regain control of its patents.

20· ·There had previously been a cross-licensing

21· ·provision built into the license agreements.

22· · · · · · And while Qualcomm had agreed to remove

23· ·that, there was the ongoing issue as to -- Qualcomm

24· ·was looking for ways to, in effect, recapture the

25· ·benefit of that cross-licensing arrangement.· And

Page 128

·1· ·there were different ways in which that was being --

·2· ·being discussed.

·3· · · · · · And in part it -- you know, it was -- it

·4· ·was tied to, I think, some of the non-standard-

·5· ·essential patents.· They were looking for a free

·6· ·license to ZTE patents in exchange for, you know,

·7· ·access to -- the balance of the Qualcomm portfolio.

·8· · · · · · Or, you know -- or, alternatively, they

·9· ·were -- there were some royalty -- so no, I think

10· ·that's -- and then there was debate about the

11· ·circumstances under which -- you know, the kind of

12· ·license they were looking for.

13· · · · · · So I think those were -- those are some of

14· ·the issues I think that were significant, you know,

15· ·at that time.· But as I said before, the crux of it

16· ·was that they were open to reaching agreement with

17· ·ZTE at this time.· As always, you know, their

18· ·openness to reach an agreement related to the

19· ·strategic fund was tied to working something out at

20· ·that time.

21· · · · · · This wouldn't be the full list of what's

22· ·there.· You know, if I were to spend time going back

23· ·and looking at the contemporaneous exchanges or

24· ·redlines, I would be able to -- be able to say more.

25· · · ·Q· · What other statements, if any, do you

Page 129

·1· ·recall Qualcomm making to ZTE in this third

·2· ·instance?

·3· · · ·A· · Without spending some time going back and

·4· ·looking at documents, I cannot recall more than what

·5· ·I've testified about about this instance, you know,

·6· ·now and, you know, earlier today.

·7· · · ·Q· · What documents specifically do you believe

·8· ·would help you refresh your recollection about what

·9· ·Qualcomm said to ZTE in this instance?

10· · · ·A· · As I said a moment ago, the -- what would

11· ·be most useful, I believe, would be the documents

12· ·that have been exchanged with Qualcomm.

13· · · · · · We were -- I'd say at least -- best I

14· ·recall, we were exchanging emails of -- you know, of

15· ·redlines of documents on perhaps a daily basis.· And

16· ·so those -- those would be my best tool for getting

17· ·my mind back to where I was at that time, because I

18· ·would be able to see what -- what issues were --

19· ·were being discussed at that time.

20· · · ·Q· · What, if anything, do you recall ZTE saying

21· ·to Qualcomm during this third instance?

22· · · ·A· · I believe it was around this time that -- I

23· ·believe -- I believe that what we're calling the

24· ·third or fourth instance, probably, most likely, you

25· ·know, in and around the third instance, that ZTE

Case 5:17-cv-00220-LHK Document 1241 Filed 01/10/19 Page 5 of 12
Page 130

·1· ·certainly expressed, you know, its apprehension

·2· ·about, you know, access to Qualcomm chips and

·3· ·supply.

·4· · · · · · And -- so yes.

·5· · · ·Q· · What more specifically, if anything, do you

·6· ·recall about that comment?

·7· · · ·A· · The -- I believe ZTE conveyed, likely

·8· ·through the woman who was the -- there representing

·9· ·the handset business, concern about continued access

10· ·to Qualcomm chips.· And I think they may have

11· ·conveyed, you know, that concern based upon

12· ·communications between Qualcomm business personnel

13· ·and ZTE personnel.

14· · · ·Q· · Do you remember anything more specifically

15· ·about this comment?

16· · · ·A· · The -- not specifically right now.

17· · · ·Q· · Who was the ZTE employee who made this

18· ·comment?

19· · · ·A· · Like I said before, I cannot recall her

20· ·name.

21· · · ·Q· · What, if anything, do you recall Qualcomm

22· ·saying to ZTE in response to this comment?

23· · · ·A· · I don't have a specific recollection of --

24· ·of response on this particular -- this particular

25· ·point, no.

Page 131

·1· · · ·Q· · Do you recall any other statements that ZTE

·2· ·made to Qualcomm during the course of this third

·3· ·instance?

·4· · · ·A· · I recall some lengthy discussion about the

·5· ·strategic fund; the details, can't -- can't recall

·6· ·right now.

·7· · · · · · And I recall some ZTE personnel speaking at

·8· ·length about details of the infrastructure business,

·9· ·and they posed some distinct issues compared to the

10· ·other two licenses.

11· · · · · · Again, the -- the specifics, I couldn't --

12· ·I cannot recall right now.

13· · · ·Q· · What specifically do you recall ZTE saying

14· ·to Qualcomm on the subject of the strat fund during

15· ·this third instance?

16· · · ·A· · The -- what was being discussed was the --

17· ·I think there was -- I think there was a strat fund

18· ·tied to one of the two agreements and not the other,

19· ·and I think there was a discussion of tying the

20· ·strat fund to both of them.

21· · · · · · There was a question of whether -- what the

22· ·basis would be for funding the strat fund, in terms

23· ·of whether it was global purchases of Qualcomm --

24· ·Qualcomm chips or related to purchase of Qualcomm

25· ·chips used in China.

Page 132

·1· · · · · · But I would need to go back and dig in the

·2· ·documents to get more precise than those topics.

·3· · · ·Q· · Sitting here today, do you recall any other

·4· ·comments that ZTE made to Qualcomm during the course

·5· ·of this third instance?

·6· · · ·A· · Not -- not at present.

·7· · · ·Q· · Did any of the documents that you looked at

·8· ·during your calls with the FTC refresh your

·9· ·recollection on the subject of what ZTE said to

10· ·Qualcomm during the course of this third instance?

11· · · ·A· · No.

12· · · ·Q· · Did you have communications with your

13· ·client during the course of this third instance

14· ·about what Qualcomm said to ZTE?

15· · · · · · MR. CIVINS:· You can answer that "yes" or

16· ·"no."

17· · · · · · THE WITNESS:· Yes.

18· ·BY MR. SHACHAM:

19· · · ·Q· · What was the substance of those

20· ·communications?

21· · · · · · MR. CIVINS:· Objection.· Privilege.

22· · · · · · I instruct you not to answer.

23· ·BY MR. SHACHAM:

24· · · ·Q· · Did you have communications with your

25· ·client during the course of this third instance

Page 133

·1· ·about how ZTE should respond in light of what

·2· ·Qualcomm said during this third instance?

·3· · · · · · MR. CIVINS:· You can answer that "yes" or

·4· ·"no."

·5· · · · · · THE WITNESS:· Yes.

·6· ·BY MR. SHACHAM:

·7· · · ·Q· · What was the substance of those

·8· ·communications?

·9· · · · · · MR. CIVINS:· Objection.· Privilege.

10· · · · · · I instruct you not to answer.

11· ·BY MR. SHACHAM:

12· · · ·Q· · Did you have communications with your

13· ·client after this third instance about what Qualcomm

14· ·said to ZTE during the course of this third

15· ·instance?

16· · · · · · MR. CIVINS:· You can answer that "yes" or

17· ·"no."

18· · · · · · THE WITNESS:· Yes.

19· ·BY MR. SHACHAM:

20· · · ·Q· · What was the substance of those

21· ·communications?

22· · · · · · MR. CIVINS:· Objection.· Privilege.

23· · · · · · I instruct you not to answer.

24· ·BY MR. SHACHAM:

25· · · ·Q· · Did you have communications with your

Case 5:17-cv-00220-LHK Document 1241 Filed 01/10/19 Page 6 of 12
Page 226

·1· ·Qualcomm?

·2· · · ·A· · Yes.

·3· · · ·Q· · What other phone calls or communications do

·4· ·you recall?

·5· · · ·A· · As I mentioned a moment ago, Fabian Gonell

·6· ·announced the intention to leave the country, and

·7· ·did leave the country.· Therefore, much of the

·8· ·negotiation after the impasse, in that -- that

·9· ·meeting which you referred to as "the first

10· ·instance" in our earlier colloquy, the negotiations

11· ·were largely by telephone between me and

12· ·Fabian Gonell.

13· · · ·Q· · And what else do you recall was said in

14· ·those telephone calls?

15· · · ·A· · Quite a lot was said.· The -- we had a

16· ·series of phone calls; I could not tell you how

17· ·many.· And in each of these phone calls we were

18· ·principally negotiating through exchanged redlines.

19· · · · · · And so point by point we were negotiating

20· ·remaining open terms in the agreements.

21· · · ·Q· · Do you recall anything else specifically

22· ·that was said either by Qualcomm to ZTE or ZTE to

23· ·Qualcomm on these phone calls?

24· · · ·A· · As I say, the -- there were other -- I had

25· ·phone calls with Fabian Gonell while he was still in

Page 227

·1· ·Shanghai, a phone call with Fabian Gonell that

·2· ·resulted in that -- that meeting that prompted the

·3· ·resumption of discussions.

·4· · · ·Q· · Do you recall anything else that was said

·5· ·on these phone calls?

·6· · · ·A· · Other than -- other than logistics and the

·7· ·actual negotiations, no, I cannot right now.

·8· · · ·Q· · Do you recall any other phone calls or

·9· ·meetings that occurred during the course of these

10· ·negotiations other than what you've testified to so

11· ·far today?

12· · · · · · MR. UPSHAW:· Objection.· Mischaracterizes.

13· · · · · · THE WITNESS:· I do not recall any other --

14· ·other than the occurrence of the series of meetings

15· ·in Shanghai and the meetings in San Diego that I've

16· ·testified, I do not recall any other physical

17· ·meetings that I attended.

18· · · · · · The -- I'm certainly aware that there were

19· ·meetings and phone calls between Qualcomm personnel

20· ·and ZTE personnel, in part because Qualcomm told us

21· ·that, you know, their business folks had spoken to

22· ·ZTE personnel in various instances.

23· ·BY MR. SHACHAM:

24· · · ·Q· · And one of those meetings was the August

25· ·meeting between Mr. Aberle and the ZTE executive

Page 228

·1· ·that you testified about?

·2· · · ·A· · That is one, although I am thinking about

·3· ·discussions between Qualcomm personnel in China with

·4· ·ZTE personnel in China at a -- at a -- at a lower

·5· ·level within the companies.

·6· · · ·Q· · You weren't present for any of those

·7· ·discussions?

·8· · · ·A· · Correct.

·9· · · ·Q· · Okay.· So you have no firsthand knowledge

10· ·of what was said in those discussions?

11· · · ·A· · That is correct.

12· · · ·Q· · During the course of the negotiations, did

13· ·Qualcomm ever cut off ZTE's chip supply?

14· · · · · · MR. UPSHAW:· You can answer to the extent

15· ·you can do so without revealing any privileged

16· ·communications.

17· · · · · · THE WITNESS:· Not to my knowledge.

18· ·BY MR. SHACHAM:

19· · · ·Q· · Did ZTE internally believe that Qualcomm

20· ·was actually going to cut off chip supplies?

21· · · · · · MR. CIVINS:· Objection.· I instruct you not

22· ·to answer unless there's a way you can do so without

23· ·disclosing privileged information.

24· · · · · · THE WITNESS:· I believe that on at least

25· ·one instance that that apprehension was expressed by

Page 229

·1· ·Jessica Wang to Qualcomm in one of the live meetings

·2· ·in Shanghai.

·3· ·BY MR. SHACHAM:

·4· · · ·Q· · That you testified about already?

·5· · · ·A· · There were -- there were more meetings than

·6· ·just the ones that I specifically testified to.· I'm

·7· ·referring to the sequence of meetings that occurred

·8· ·in Shanghai, yes.

·9· · · ·Q· · When -- when Ms. Wang expressed that

10· ·apprehension, was that in one of the four instances

11· ·that we discussed earlier today?

12· · · ·A· · I can't say whether it was or was not for

13· ·the simple reason that there are many -- many

14· ·meetings that we had.· So no, I cannot tell you

15· ·whether it was or it was not.

16· · · ·Q· · Do you have any further specific

17· ·recollection of that expression of apprehension?

18· · · ·A· · Thinking back on it, it is -- strengthens

19· ·my recollection as foundation for answering yes when

20· ·you asked if I thought that the negotiations were

21· ·contentious.

22· · · ·Q· · Okay.· But the question I asked was, do you

23· ·have any further specific recollection of this

24· ·expression of --

25· · · · · · MR. CIVINS:· -- apprehension.

Case 5:17-cv-00220-LHK Document 1241 Filed 01/10/19 Page 7 of 12
Page 262

·1· ·structures that were apparently intended, you know,

·2· ·as relayed by Qualcomm, to replicate some of the --

·3· ·some of the affects of the cross-licensing

·4· ·arrangement, if that were to go away.

·5· · · · · · And there is some aspect of a -- well, I

·6· ·need to go back and check for sure, but I believe

·7· ·there's some aspect of a -- of a standstill

·8· ·arrangement built into the final agreements.

·9· ·BY MR. COX:

10· · · ·Q· · And what's the -- the period of the

11· ·standstill arrangement that you're referring to?

12· · · ·A· · I do not recall with certainty.· It's in --

13· ·it's in the agreements.

14· · · ·Q· · So just above that there's a discussion of

15· ·the term of the license agreements.

16· · · · · · Do you -- do you recall a controversy

17· ·between Qualcomm and ZTE over how long the license

18· ·agreement should -- should last?

19· · · ·A· · It was a point of negotiation.· You know,

20· ·in general, Qualcomm was looking for a longer term;

21· ·ZTE was looking for a shorter term.· We -- you know,

22· ·I can't recall where we wound up, but it's -- it is

23· ·what it is in the license agreement.

24· · · ·Q· · And what -- and what was the arguments that

25· ·ZTE made to Qualcomm about the -- supporting its

Page 263

·1· ·desire for a shorter term?

·2· · · ·A· · ZTE expressed the belief that the -- the

·3· ·market was changing in terms of the relative value

·4· ·of CDMA versus 4G or 5G, and felt that in -- that

·5· ·there ought to be a event when the rates would be

·6· ·renegotiated, ought come sooner rather than later,

·7· ·as a consequence of the belief that that was sort of

·8· ·a -- a sunsetting of value of CDMA.

·9· · · ·Q· · And what you described as a sunsetting of

10· ·value of CDMA, could you explain what that means?

11· · · ·A· · That CDMA was a standard implemented

12· ·earlier, continued to be -- it was continued to

13· ·persist in many phones, even phones that were

14· ·implementing 4G at the time -- although I'm not an

15· ·expert on this; so I don't -- but there's the belief

16· ·that as -- as the standards evolved that the

17· ·relative importance of 4G- or 5G-related patents

18· ·compared to CDMA patents, you know, would shift, and

19· ·ZTE articulated that it had a substantial patent

20· ·portfolio that was more directed towards -- towards

21· ·4G standards.

22· · · ·Q· · Okay.· You can put that document down.· I'd

23· ·like to show you another document that's been

24· ·Bates-labeled CX3924.

25· · · · · · (Whereupon, Exhibit CX3924 was

Page 264

·1· · · · · · marked for identification by the

·2· · · · · · Court Reporter.)

·3· ·BY MR. COX:

·4· · · ·Q· · And I'll state for the record that CX3924

·5· ·is Bates-labeled ZTE50338, and the cover page is an

·6· ·email from Mike Hird to Fabian Gonell dated

·7· ·June 14th, 2015.· And it has as an attachment "Draft

·8· ·Term Sheet, 6/14/15," and "Redline to QC Draft Doc."

·9· ·It's the second attachment.

10· · · · · · Do you recognize this document?

11· · · ·A· · Yes.

12· · · ·Q· · What is it?

13· · · ·A· · This was a revised draft term sheet that --

14· ·that was prepared by Pillsbury, sent to Qualcomm's

15· ·counsel, you know, in -- in response to the last

16· ·form of the term sheet that we had received from

17· ·Qualcomm.

18· · · ·Q· · So you took the Qualcomm term sheet and

19· ·wrote over it with your own changes?

20· · · ·A· · What we did was we provided a revised draft

21· ·term sheet, and then ran a redline comparison and

22· ·provided that -- that redline.

23· · · · · · So, okay, we sent them a -- sent them a new

24· ·term sheet, you know, that, you know, was a clean

25· ·Word document, and then we also ran a redline.

Page 265

·1· · · · · · Yes.· That's -- that's all we did.

·2· · · ·Q· · Is that redline attached to this document?

·3· · · ·A· · Yes.· It begins at 50349.

·4· · · ·Q· · And that would be ZTE50349?

·5· · · ·A· · Yes.

·6· · · ·Q· · And it's got an exhibit label of

·7· ·CX3924-012?

·8· · · ·A· · Yes, it does.

·9· · · ·Q· · So let me direct your attention to the --

10· ·page 3 of the revised -- the redline term sheet,

11· ·which is page 14 of the exhibit.

12· · · · · · Do you see that?

13· · · ·A· · I do.

14· · · ·Q· · And under "New Products," there -- we

15· ·talked before about the efforts that Qualcomm and

16· ·ZTE were in having discussions about terms for

17· ·licensing of new products.

18· · · · · · And was this your response or another step

19· ·forward in that negotiation?

20· · · ·A· · On this particular term, this was, you

21· ·know, ZTE's response presented to Qualcomm.

22· · · ·Q· · And do you see in the -- in the middle of

23· ·the page there, you've added some language to the

24· ·term sheet?

25· · · ·A· · Yes, I do.

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Page 282

·1· · · · · · MR. SHACHAM:· Objection.· Form.

·2· · · · · · THE WITNESS:· So -- well -- so yes.· In

·3· ·this box, whereas previously there were the terms

·4· ·for this -- for strategic fund that were contingent

·5· ·upon which option as presented by Qualcomm ZTE

·6· ·elected, they changed their proposal as presented

·7· ·here to some variation of the proposal previously

·8· ·associated with Option 1.

·9· ·BY MR. COX:

10· · · ·Q· · And under the added new language (b), do

11· ·you see that?

12· · · ·A· · Yes.

13· · · ·Q· · And it says (as read):

14· · · · · · · · Commencing with devices sold in

15· · · · · · the third calendar quarter of 2015,

16· · · · · · Qualcomm's quarterly contributions

17· · · · · · to the fund would be increased from

18· · · · · · 3.25 percent of the chipset purchase

19· · · · · · price to 4.75 percent of the chipset

20· · · · · · purchase price.

21· · · ·A· · I do see that.

22· · · ·Q· · Now, this would be monies paid to ZTE by

23· ·Qualcomm?

24· · · ·A· · For the purchase of chipsets, yes.

25· · · ·Q· · And did -- did Qualcomm indicate the

Page 283

·1· ·reasons that it was adding this provision?

·2· · · ·A· · Well, they were increasing the amount of

·3· ·the contribution.· And I think they -- they were --

·4· ·ZTE at that time had communicated that it wanted

·5· ·either Option 2 or something close to Option 2.

·6· · · · · · Qualcomm was at that -- at this juncture

·7· ·proposing an option that had been rejected by ZTE.

·8· ·And it was, you know, offering to increase something

·9· ·of value to ZTE in order to induce ZTE to consider

10· ·or accept what was -- what was more or less

11· ·Option 1.

12· · · ·Q· · What, if anything, did Qualcomm say about

13· ·the relationship between the strategic funds and the

14· ·royalty rates?

15· · · · · · MR. SHACHAM:· Objection.· Form.

16· · · · · · THE WITNESS:· At various points in the

17· ·negotiations, whether it was in Shanghai or at the

18· ·term sheet stage or both --

19· · · · · · THE REPORTER:· At the what?

20· · · · · · THE WITNESS:· Whether it was in Shanghai or

21· ·at the term sheet stage or both, Qualcomm had stated

22· ·that it had -- it was more willing to negotiate on

23· ·the strategic fund and increase in contributions to

24· ·the strategic fund in lieu of making, you know,

25· ·direct reductions to the -- you know, to the royalty

Page 284

·1· ·rates in order to give ZTE, you know, a commensurate

·2· ·economic benefit in lieu of reducing royalty rates.

·3· ·BY MR. COX:

·4· · · ·Q· · Did Qualcomm give reason for its stated

·5· ·preference?

·6· · · ·A· · Yes.

·7· · · ·Q· · What reason did it give?

·8· · · ·A· · The -- it gave -- Qualcomm at different

·9· ·times referred to the existence of its most favored

10· ·nations royalty commitments to certain -- certain

11· ·partners, a -- a desire to maintain a certain

12· ·standard, you know, royalty rate.

13· · · · · · But principally they -- they referred to

14· ·their most favored nations, you know, obligations

15· ·most frequently when -- when ZTE, you know, at

16· ·various junctures requested reduced royalties.

17· · · ·Q· · And was that a concern about the impact

18· ·such a change to the royalty rate would have to

19· ·other licensees?

20· · · · · · MR. SHACHAM:· Objection to form.· Lack of

21· ·foundation.

22· · · · · · THE WITNESS:· So if I understand your

23· ·correction -- question correctly, yes.· Qualcomm was

24· ·expressing a concern about the implications of a --

25· ·granting a reduced royalty to ZTE for the

Page 285

·1· ·contractual obligations it would have to other

·2· ·licensees, specifically those to whom it had

·3· ·promised to give MFN treatment for.

·4· ·BY MR. COX:

·5· · · ·Q· · Now, would this accrual that's described on

·6· ·page 10 of the exhibit, 3.5 -- 3.25 percent of the

·7· ·chipset purchase price to 4.75 percent of the

·8· ·chipset purchase price -- would that apply to

·9· ·non-Qualcomm chipset purchases?

10· · · ·A· · As I read this now, to the best of my

11· ·recollection, no.

12· · · ·Q· · So the -- the -- the strategic funds would

13· ·only be applied when ZTE purchased Qualcomm chips?

14· · · · · · MR. SHACHAM:· Objection.· Form.

15· · · · · · THE WITNESS:· The strategic fund was funded

16· ·with contributions that were calculated based upon a

17· ·percentage of ZTE, you know, chipset purchases.

18· ·BY MR. COX:

19· · · ·Q· · From Qualcomm?

20· · · ·A· · From Qualcomm, yes.

21· · · · · · MR. CIVINS:· I was going to say, we've been

22· ·going about an hour and a half.· Are you good?· Do

23· ·you want to take a break?· Or how are we doing on

24· ·time?· You okay?

25· · · · · · MR. COX:· I'm -- I probably have about

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Page 310

·1· ·BY MR. RAM:

·2· · · ·Q· · And while you're taking a look at that, for

·3· ·the record, it's ZTE51593.· And my question is about

·4· ·the last-in-time email from Mr. Gonell to you, dated

·5· ·September 25, 2015.

·6· · · · · · Do you see that email?

·7· · · ·A· · I do see, yes, the email at the top of the

·8· ·page.

·9· · · ·Q· · And in it he -- Mr. Gonell writes, "It

10· ·has" -- well, I'll start earlier.

11· · · · · · After the semicolon, you see it says (as

12· ·read):

13· · · · · · · · The sales price issue is a deal

14· · · · · · killer for us.· It has consequences

15· · · · · · well beyond this deal and affects

16· · · · · · the basic economics for us?

17· · · · · · Do you remember discussing what those

18· ·"consequences well beyond this deal" are?

19· · · ·A· · The -- in essence, Qualcomm represented

20· ·that they needed to have a standard definition of

21· ·sales price in certain -- certain elements of sales

22· ·price -- or "selling price" may be the term; I can't

23· ·recall -- needed to be consistent across agreements,

24· ·not across agreements with ZTE, although that's

25· ·something we -- we sought, but across agreements

Page 311

·1· ·with other licensees.

·2· · · · · · And -- and so they felt that because of MFN

·3· ·contractual commitments or similar contractual

·4· ·obligations that they had with -- with other

·5· ·licensees, that changes to the definition of selling

·6· ·price would have an effect on their other licenses.

·7· · · · · · And I think -- and that is -- that went to

·8· ·aspects of the basic economics that they were

·9· ·talking about.

10· · · ·Q· · Did Mr. Gonell explain to you how having a

11· ·different term in ZTE's contract would affect its

12· ·contracts with other companies?· For example, did he

13· ·explain how those other companies would learn of the

14· ·contract language between ZTE and Qualcomm?

15· · · · · · MR. SHACHAM:· Objection.· Form.

16· · · · · · THE WITNESS:· I don't know if he explained

17· ·how they would learn.· It is possible that he said

18· ·that they had a contractual obligation to -- you

19· ·know, to alert other -- other parties of -- of terms

20· ·that would trigger, you know, an -- an MFN

21· ·provision.

22· · · · · · I don't recall in greater detail, but

23· ·such -- provisions such as that are not uncommon.

24· ·BY MR. RAM:

25· · · ·Q· · Okay.· You can set that document aside.

Page 312

·1· · · · · · And earlier I believe you testified that

·2· ·strategic fund contributions are made by Qualcomm

·3· ·only when ZTE purchases Qualcomm chips; is that

·4· ·right?

·5· · · · · · MR. SHACHAM:· Objection.· Form.

·6· · · · · · MR. UPSHAW:· Objection.· Misstates prior

·7· ·testimony.

·8· · · · · · THE REPORTER:· Misstates --

·9· · · · · · MR. UPSHAW:· Misstates prior testimony.

10· · · · · · THE WITNESS:· The strategic fund was a --

11· ·was a fund where contributions to it were made by

12· ·Qualcomm based upon, you know, amounts of -- you

13· ·know, it was dollar amounts of chipsets purchased by

14· ·ZTE from Qualcomm.· And, you know, the strategic

15· ·fund could -- could be used for certain specified

16· ·purposes, I believe, subject to agreement, both

17· ·Qualcomm and ZTE.

18· ·BY MR. RAM:

19· · · ·Q· · But, for example, if ZTE bought chips from

20· ·a different manufacturer, Qualcomm wouldn't make a

21· ·contribution?

22· · · ·A· · Not --

23· · · · · · MR. SHACHAM:· Objection.· Form.

24· · · · · · THE WITNESS:· -- in respect of -- not in

25· ·respect of that purchase.

Page 313

·1· ·BY MR. RAM:

·2· · · ·Q· · And during the negotiations, did Qualcomm

·3· ·explain strategic funds to you?

·4· · · ·A· · There were discussions of -- of the

·5· ·strategic fund.· It was a preexisting arrangement

·6· ·between ZTE and Qualcomm, and -- and it was modified

·7· ·but retained through the negotiations.

·8· · · ·Q· · Were market development funds discussed

·9· ·during the negotiations?

10· · · ·A· · I do not recall the term "market

11· ·development fund" being used.· It is -- best as I

12· ·can recall, certain marketing -- marketing endeavors

13· ·could be among the purposes for which strategic

14· ·funds could be expended.

15· · · ·Q· · And during the negotiations, did you hear

16· ·or observe Qualcomm provide any justification for

17· ·its licensing rights?

18· · · ·A· · Yes.

19· · · ·Q· · And what did you hear or observe from

20· ·Qualcomm?

21· · · ·A· · Qualcomm stated that other licensees had

22· ·agreed to license Qualcomm's intellectual property,

23· ·you know, at the rates that they were offering.

24· · · ·Q· · Was that persuasive to you?

25· · · · · · MR. UPSHAW:· I'm going to just caution the

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Page 314

·1· ·witness, you can respond to the extent you don't --

·2· ·you can do so without revealing any privileged or

·3· ·work product information.

·4· · · · · · THE WITNESS:· You're asking me as an

·5· ·individual?

·6· ·BY MR. RAM:

·7· · · ·Q· · As an individual.· As a --

·8· · · ·A· · It was not my role as an individual to be

·9· ·persuaded or not.· The -- in my -- in my role I did

10· ·not accept that -- that position.· And, you know, in

11· ·my -- my role on behalf of ZTE, I argued for various

12· ·economic concessions.

13· · · ·Q· · And earlier there was discussion about a

14· ·website that Qualcomm had referred to.

15· · · · · · Did Qualcomm provide any patent claim

16· ·charts during negotiations?

17· · · ·A· · When you say "claim charts," you mean

18· ·charts with individual limitations of claims lined

19· ·up against features of specific ZTE products?

20· · · ·Q· · Yes.

21· · · ·A· · No.

22· · · ·Q· · And did you or any other ZTE

23· ·representatives and Qualcomm representatives discuss

24· ·FRAND or FRAND principles during the negotiations?

25· · · · · · MR. UPSHAW:· You may respond to the

Page 315

·1· ·extent that it's related to the negotiations and not

·2· ·to any privileged conversations or work product.

·3· · · · · · THE WITNESS:· The -- the concept of FRAND

·4· ·came up in the course of -- course of the

·5· ·discussions.· However, the -- so yes, the concept of

·6· ·FRAND came up.· However, the discussions were

·7· ·compounded by the fact that we were licensing both

·8· ·standard essential patents and other patents.

·9· ·BY MR. RAM:

10· · · ·Q· · Did Qualcomm require ZTE to license both

11· ·standard essential patents and nonstandard essential

12· ·patents?

13· · · · · · MR. SHACHAM:· Objection.· Form.

14· · · · · · THE WITNESS:· No, I don't think it would be

15· ·fair to say that Qualcomm required that.

16· · · · · · I said -- testified to the opposite, that

17· ·Qualcomm's initial proposal of the new China patent

18· ·license failed to account for patents -- previously

19· ·licensed patents other than -- yeah, they were not

20· ·standard essential patents.

21· · · · · · And ZTE raised the concern that it did not

22· ·wish to engage in a serial negotiation where it

23· ·would negotiate revised rates for standard essential

24· ·patents only and face an uncertain situation where

25· ·it may need in the future to negotiate, you know, a

Page 316

·1· ·separate license for nonstandard essential patents.

·2· · · · · · In short, ZTE did not want to be in a

·3· ·situation where it simply went around in a circle

·4· ·and came back to exactly where it was, where it

·5· ·received a discount and then needed to pay the

·6· ·amount of the discount to get back to the

·7· ·nonstandard essential patents that it had previously

·8· ·licensed.

·9· ·BY MR. RAM:

10· · · ·Q· · And while you were negotiating the

11· ·amendments in September 2015, were you aware that

12· ·the existence of a license between Qualcomm and ZTE

13· ·was a condition precedent to ZTE's purchase of chips

14· ·from Qualcomm?

15· · · · · · MR. SHACHAM:· Objection.· Lack of

16· ·foundation.

17· · · · · · MR. UPSHAW:· And object to the form.

18· · · · · · THE WITNESS:· The -- could I have the

19· ·question read back, please?

20· · · · · · MR. RAM:· I'm sorry, that was probably

21· ·messy.

22· · · ·Q· · When you were negotiating with Qualcomm in

23· ·September 2015, was it your understanding that in

24· ·order for ZTE to continue to purchase modem chips

25· ·from Qualcomm that it also had to have a license

Page 317

·1· ·from Qualcomm?

·2· · · ·A· · It --

·3· · · · · · MR. CIVINS:· You can answer that question

·4· ·as long as it doesn't divulge privileged

·5· ·information.

·6· · · · · · THE WITNESS:· I think it was clear enough

·7· ·from Qualcomm communications that it was necessary

·8· ·to have a license from Qualcomm to use Qualcomm's

·9· ·technology.

10· · · · · · And to the extent that -- and that it was

11· ·my -- it was our understanding at the time that

12· ·Qualcomm's sales of the chips did not come with a

13· ·license to use the chips, and, therefore, it was

14· ·necessary to have a license in order to be able to

15· ·purchase the chips, you know, and make any

16· ·commercial use of them.

17· · · · · · MR. CIVINS:· Counsel, just for the record,

18· ·it's now 6:30 and we're at the sort of allotted time

19· ·that we had talked about.· How much -- how much --

20· ·how many more questions do you have?

21· · · · · · MR. RAM:· All right.· Give me five minutes.

22· · · · · · MR. CIVINS:· Okay.

23· ·BY MR. RAM:

24· · · ·Q· · So during the negotiations did ZTE ever

25· ·raise any claim that Qualcomm's patents were

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Page 322

·1· ·addition to the ones that I had showed you this

·2· ·morning; is that right?

·3· · · ·A· · That is correct.

·4· · · ·Q· · Were any of those documents ones that you

·5· ·had previously discussed with the FTC in the course

·6· ·of your two telephone calls with the FTC this year?

·7· · · ·A· · As for the -- at least -- at least one

·8· ·version of the term sheet, if not more, was provided

·9· ·to me for the purpose of the second telephone

10· ·conference with the FTC.

11· · · · · · And it is likely that at least one of the

12· ·versions of the term sheet that I was shown today,

13· ·you know, overlaps with, you know, at least one of

14· ·those that I discussed on the phone.

15· · · · · · THE REPORTER:· I discussed on the what?

16· · · · · · THE WITNESS:· On the -- on the telephone.

17· ·BY MR. SHACHAM:

18· · · ·Q· · Did any of the documents that -- additional

19· ·documents that FTC's counsel or the MDL plaintiffs'

20· ·counsel showed you during the course of their

21· ·examination refresh your recollection as to what

22· ·Qualcomm sent to ZTE or ZTE sent to Qualcomm in the

23· ·course of those four instances that you testified

24· ·about earlier?

25· · · · · · MR. UPSHAW:· It's asked and answered to

Page 323

·1· ·some extent.

·2· · · · · · THE WITNESS:· Those documents refreshed my

·3· ·recollection on -- on some points.· And to the

·4· ·extent that they expand upon answers I had given,

·5· ·you know, earlier -- earlier in the day, they

·6· ·refreshed my recollection.

·7· · · · · · But beyond that, they do -- they do not

·8· ·refresh my recollection as to additional material

·9· ·related to those four, quote-unquote, instances.

10· ·BY MR. SHACHAM:

11· · · ·Q· · You testified about certain instances when

12· ·Qualcomm said it was more willing to negotiate on

13· ·the strategic fund instead of on reducing royalty

14· ·rates or something to that effect.

15· · · · · · Do you recall that?

16· · · ·A· · I do.

17· · · ·Q· · Do you recall any specific instances in

18· ·which someone from Qualcomm made a statement to you

19· ·to that effect, or is that a composite recollection?

20· · · ·A· · No.· I recall that Fabian Gonell made it

21· ·clear that their latitude for negotiating royalty

22· ·rates, you know, was constrained, and that they had

23· ·a whole lot more opportunity to find a way to bridge

24· ·the gap between the parties on that.

25· · · · · · My recollection is -- it was specific that

Page 324

·1· ·it was Fabian Gonell saying that; it is specific to

·2· ·being -- it's a point returned to on more than one

·3· ·occasion.· So it is not a recollection tied to a

·4· ·single event but it is multiple events.

·5· · · ·Q· · You don't recall when specifically

·6· ·Mr. Gonell said that to you?

·7· · · ·A· · When we were sitting across the table from

·8· ·each other in Pillsbury's conference room in

·9· ·Shanghai, you know, on probably most days that, you

10· ·know, we met during the -- during, you know, those

11· ·September negotiations.

12· · · ·Q· · Do you remember anything else more specific

13· ·that Mr. Gonell said on that point?

14· · · · · · MR. UPSHAW:· Object.· Mischaracterizes.

15· ·Asked and answered.

16· · · · · · THE WITNESS:· As I said, it's a point that

17· ·we came back to.· And so it was at times, you know,

18· ·addressed by him in the context of describing, you

19· ·know, his involvement in negotiations with other --

20· ·other licensees other than ZTE and referencing the

21· ·fact that they -- they had wanted and it was very

22· ·important to them to keep a standard license rate;

23· ·that --

24· · · · · · And the -- the flexibility related to

25· ·multiple aspects of how the strategic fund could be

Page 325

·1· ·funded.· So it was not simply, you know, any one

·2· ·aspect of it, but it was different.

·3· · · · · · The -- initially the strategic fund was

·4· ·tied to, I believe, chip sales for use in China.

·5· ·And so there was discussion about expanding, you

·6· ·know, the scope of purchases of Qualcomm chips by

·7· ·ZTE that could give rise to strategic fund funding.

·8· · · · · · And -- so those are different features that

·9· ·I recall from these conversations.

10· ·BY MR. SHACHAM:

11· · · ·Q· · Anything else?

12· · · · · · THE REPORTER:· Pardon me?

13· ·BY MR. SHACHAM:

14· · · ·Q· · Anything else?

15· · · · · · MR. UPSHAW:· Objection.· Vague.

16· · · · · · THE WITNESS:· No.

17· ·BY MR. SHACHAM:

18· · · ·Q· · Did you have communications with your

19· ·client about these statements made by Mr. Gonell?

20· · · · · · MR. CIVINS:· You can answer that "yes" or

21· ·"no."

22· · · · · · THE WITNESS:· Yes.

23· ·BY MR. SHACHAM:

24· · · ·Q· · What was the substance of those

25· ·communications?

Case 5:17-cv-00220-LHK Document 1241 Filed 01/10/19 Page 12 of 12