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IAN SIMMONS (pro hac vice application pending)

isimmons@omm.com

BENJAMIN J. HENDRICKS (Bar #288680)

bhendricks@omm.com

JAMES W. CROOKS (Bar #310447)

jcrooks@omm.com

O’MELVENY & MYERS LLP

1625 Eye Street, NW

Washington, DC 20006-4061

Telephone: +1 202 383 5300

Facsimile: +1 202 383 5414

MICHAEL TUBACH (Bar #145955)

mtubach@omm.com

O’MELVENY & MYERS LLP

Two Embarcadero Center, 28th Fl.

San Francisco, CA 94111-2823

Telephone: +1 415 984 8700

Facsimile: +1 415 984 8701

Attorneys for Amici Curiae

Samsung Electronics Co. Ltd. 

Samsung Semiconductor, Inc.

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

BRIEF OF AMICI CURIAE SAMSUNG 

ELECTRONICS CO. LTD. AND 

SAMSUNG SEMICONDUCTOR, INC. 

IN OPPOSITION TO QUALCOMM 

INCORPORATED’S MOTION TO 

DISMISS

Date: June 15, 2018

Time: 1:30 PM

Place: San Jose Courthouse, Courtroom 8

Judge: Hon. Lucy Koh

Case 5:17-cv-00220-LHK Document 90-1 Filed 05/12/17 Page 1 of 19
TABLE OF CONTENTS

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I. STATEMENT OF INTEREST........................................................................................... 1

II. INTRODUCTION .............................................................................................................. 1

III. FRAND COMMITMENTS VINDICATE KEY ANTITRUST PRINCIPLES ................. 2

A. Standardization can create monopoly power .......................................................... 2

B. FRAND commitments provide a necessary check on SEP market power.............. 3

1. To prevent exclusion, FRAND creates a duty to license all comers........... 4

2. FRAND prohibits SEP holders from charging supracompetitive 

royalties....................................................................................................... 6

IV. QUALCOMM’S FRAND VIOLATIONS CONSTITUTE UNLAWFUL 

EXCLUSIONARY CONDUCT ......................................................................................... 7

A. Qualcomm excludes competitors by refusing to license SEPs to make and 

sell licensed CDMA and premium chipsets in competition with its own 

chipsets.................................................................................................................... 7

B. Qualcomm violates FRAND—and excludes competitors—by imposing 

onerous terms on handset manufacturers, including an unreasonable per

handset tax............................................................................................................. 10

C. The Complaint does not rely on a “price squeeze” theory.................................... 12

V. CONCLUSION................................................................................................................. 13

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CASES

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

486 U.S. 492 (1988)............................................................................................................... 3, 5

Apple Inc. v. Motorola, Inc.,

869 F. Supp. 2d 901 (N.D. Ill. 2012) aff’d in part and rev’d in part on other 

grounds, 757 F.3d 1286 (Fed. Cir. 2014)................................................................................... 4

Apple Inc. v. Samsung Elecs. Co.,

No. 11-CV-01846, 2012 WL 1672493 (N.D. Cal. May 14, 2012)............................................ 3

Apple Inc. v. Samsung Elecs. Co.,

No. 11-CV-01846-LHK, 2011 WL 4948567 (N.D. Cal. Oct. 18, 2011)................................... 7

ASARCO, LLC v. Union Pac. R.R. Co.,

765 F.3d 999 (9th Cir. 2014)...................................................................................................... 8

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

472 U.S. 585 (1985)................................................................................................................... 5

Broadcom Corp. v. Qualcomm Inc.,

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

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

955 F.2d 1373 (9th Cir. 1992).................................................................................................. 13

Cont’l Ore Co. v. Union Carbide & Carbon Corp.,

370 U.S. 690 (1962)................................................................................................................. 13

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

504 U.S. 451 (1992)................................................................................................................... 5

Ericsson, Inc. v. D-Link Sys., Inc.,

773 F.3d 1201 (Fed. Cir. 2014)........................................................................................ 3, 6, 10

FTC v. Cement Inst.,

333 U.S. 683 (1948)................................................................................................................... 2

Funai Elec. Co. v. LSI Corporation,

No. 16-cv-01210-BLF, 2017 WL 1133513 (N.D. Cal. Mar. 27, 2017)..................................... 6

Laser Dynamics, Inc. v. Quanta Computer, Inc.,

694 F.3d 51 (Fed. Cir. 2012).................................................................................................... 10

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TABLE OF AUTHORITIES

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Lotes Co. v. Hon Hai Precision Indus. Co.,

No. 12 Civ. 7465, 2013 WL 2099227 (S.D.N.Y. May 14, 2013).............................................. 7

Microsoft Corp. v. Motorola, Inc.,

696 F.3d 872 (9th Cir. 2012)...................................................................................................... 4

Microsoft Corp. v. Motorola, Inc.,

795 F.3d 1024 (9th Cir. 2015)............................................................................................ 3, 4, 6

Microsoft Corp. v. Motorola, Inc.,

864 F. Supp. 2d 1023 (W.D. Wash. 2012)................................................................................. 3

Microsoft Corp. v. Motorola, Inc.,

No. C10-1823JLR, 2013 WL 2111217 (W.D. Wash. Apr. 25, 2013) ....................................... 6

Pacific Bell Telephone Co. v. linkLine Communications, Inc.,

555 U.S. 438 (2009)........................................................................................................... 12, 13

Rambus Inc. v. FTC,

522 F.3d 456 (D.C. Cir. 2008)............................................................................................... 3, 6

Research in Motion Ltd. v. Motorola, Inc.,

644 F. Supp. 2d 788 (N.D. Tex. 2008)............................................................................... 3, 4, 6

United States v. Microsoft Corp.,

253 F.3d 34 (D.C. Cir. 2001)................................................................................................... 11

Verizon Communications v. Law Offices of Curtis V. Trinko, LLP,

540 U.S. 398 (2004)......................................................................................................... 5, 8, 13

OTHER AUTHORITIES

Carl Shapiro & Hal R. Varian, Information Rules: A Strategic Guide to the 

Network Economy (1999)........................................................................................................... 3

Competitive Impact Statement, United States v. Microsoft, Corp., No. 94-cv-1564 

(SS) (July 27, 1994), available at http://bit.ly/2qF6HKv ........................................................ 11

FTC/DOJ Antitrust Guidelines For The Licensing Of Intellectual Property ............................ 5, 12

Press Release, Qualcomm and Broadcom Reach Settlement and Patent Agreement

(Apr. 26, 2009), available at http://bit.ly/2pKViIV................................................................... 8

Qualcomm, Form 10K (2016), available at http://bit.ly/2q46u6o................................................. 11

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U.S. Dep’t of Justice & Fed. Trade Comm’n, Antitrust Enforcement and 

Intellectual Property Rights: Promoting Innovation and Competition (2007), 

available at http://bit.ly/2aBxyjR .......................................................................................... 3, 4

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I. STATEMENT OF INTEREST

Amici curiae Samsung Electronics Co. Ltd. (“SEC”) and its subsidiary Samsung 

Semiconductor, Inc. (“SSI”) (collectively “Samsung”) respectfully submit this brief in support of 

the Federal Trade Commission’s (“FTC”) opposition to Qualcomm Incorporated’s (“Qualcomm”) 

motion to dismiss. SEC is one of the world’s leading manufacturers of consumer electronic 

products, including mobile handsets, such as its flagship Galaxy S-series phones. SEC licenses 

Qualcomm’s patent portfolio at the handset level, including standard-essential patents (“SEPs”) 

that are necessary to communicate on most cellular networks. Through SEC’s subsidiaries, SSI 

and Samsung Austin Semiconductor, LLC (“SAS”), Samsung also designs and builds 

components for use in mobile communications devices, including baseband chipsets (“chipsets”) 

for use in Samsung handsets.1

 

Samsung, which employs approximately 17,000 people in the United States, is both 

Qualcomm’s customer (as a handset supplier) and Qualcomm’s potential competitor (as a 

manufacturer and potential seller of chipsets). In both capacities, Samsung has directly 

experienced, and been directly harmed by, the exclusionary conduct alleged in the FTC’s 

Complaint (the “Complaint”): Qualcomm refuses to license its SEPs on fair, reasonable, and 

non-discriminatory (“FRAND”) terms so that Samsung can make and can sell licensed chipsets. 

Given its position, Samsung is uniquely situated to assist the Court in understanding the 

important antitrust principles at stake in this case. 

II. INTRODUCTION

To have its patents included in industry standards for mobile communication, Qualcomm 

made a deal: It promised standards-setting organizations (“SSOs”) that if they adopted a standard 

that required the use of Qualcomm patents, Qualcomm would license those patents to any willing 

licensee for a reasonable royalty (the “FRAND” commitment). SSOs have long required SEP 

owners to make FRAND promises because without them the SEP holder would have enormous 

market power from patents required to operate in the industry. In other words, absent FRAND 

 1 SAS manufactures chipsets, which SSI would sell to third-parties if licensed to do so. 

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commitments, SEPs pose a serious threat to competition. 

Because of Qualcomm’s FRAND promises, SSOs adopted mobile standards that rely on 

Qualcomm’s SEPs, foregoing competing standards. But Qualcomm has not upheld its end of the 

bargain: Despite declaring thousands of SEPs, Qualcomm altogether refuses to license SEPs to 

rival chipset manufacturers, instead licensing only handset manufacturers.2 Qualcomm then 

leverages and solidifies this market power by charging a “tax” to handset manufacturers that 

further cements its monopoly power by imposing terms that significantly diminish demand for 

competing chipsets. And because Qualcomm does not license competitors, handset 

manufacturers have no choice but to accept Qualcomm’s onerous terms. In short, Qualcomm 

directly excludes competitors and harms competition. 

This case presents a simple question: By excluding would-be competitors from making 

and selling licensed chipsets and cementing its market power by forcing downstream customers to 

accept onerous licensing terms, has Qualcomm harmed competition? As the Complaint makes 

clear, the answer is yes—not only does this conduct violate Qualcomm’s FRAND commitments, 

but it also contravenes the Sherman Act by eliminating competition.3

 FRAND obligations are 

designed to limit the market power that SEP holders obtain when SSOs incorporate those holders’ 

patents into a standard. For this reason, several courts, including the Ninth Circuit, have held that 

when an SEP holder violates its FRAND commitments to the detriment of competition, it also 

violates the Sherman Act. The Complaint amply supports the FTC’s contentions that Qualcomm 

has violated the antitrust laws in this manner. Thus, this Court should deny Qualcomm’s motion 

to dismiss.

III. FRAND COMMITMENTS VINDICATE KEY ANTITRUST PRINCIPLES

A. Standardization can create monopoly power

Though technological standards and the SSOs that promulgate them can generate 

enormous economic benefits, “product standards set by such associations have a serious potential 

 2 Qualcomm acknowledges this policy of refusing to license potential competitors.

3 Conduct that violates the Sherman Act also violates § 5 of the Federal Trade Commission Act. 

See, e.g., FTC v. Cement Inst., 333 U.S. 683, 689 (1948).

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for anticompetitive harm.” Allied Tube & Conduit Corp. v. Indian Head, Inc., 486 U.S. 492, 500 

(1988); Microsoft Corp. v. Motorola, Inc., 795 F.3d 1024, 1030-31 (9th Cir. 2015) (“Microsoft 

II”) (“The development of standards . . . creates an opportunity for companies to engage in anticompetitive behavior.”). SEP owners act as “gatekeepers” to a standard since an implementer 

must practice the SEP to use the standard, Research in Motion Ltd. v. Motorola, Inc., 644 F. 

Supp. 2d 788, 794 (N.D. Tex. 2008) (“RIM”), exposing implementers to hold-up by those 

refusing to license “blocking” patents. See Ericsson, Inc. v. D-Link Sys., Inc., 773 F.3d 1201, 

1209 (Fed. Cir. 2014); see also Carl Shapiro & Hal R. Varian, Information Rules: A Strategic 

Guide to the Network Economy 241-42 (1999). Thus, “SEP holders are in a position to demand 

more for a license than the patented technology, had it not been adopted by the SSO, would be 

worth,” Microsoft II, 795 F.3d at 1031, because “[a] standard, by definition, eliminates alternative 

technologies,” Broadcom Corp. v. Qualcomm Inc., 501 F.3d 297, 314 (3d Cir. 2007).

For this reason, “a number of courts have recognized a legal distinction between a normal 

patent—to which antitrust market power is generally not conferred on the patent owner, and a 

patent incorporated into a standard—to which antitrust market power may be conferred on the 

patent owner.” Apple Inc. v. Samsung Elecs. Co., No. 11-CV-01846, 2012 WL 1672493, at *6 

(N.D. Cal. May 14, 2012) (Koh, J.) (citing Broadcom, 501 F.3d at 314); see also Rambus Inc. v. 

FTC, 522 F.3d 456, 463 (D.C. Cir. 2008) (finding patent holder’s SEPs for computer memory 

technologies “g[a]ve it monopoly power in each of those markets”); U.S. Dep’t of Justice & Fed. 

Trade Comm’n, Antitrust Enforcement and Intellectual Property Rights: Promoting Innovation 

and Competition 34 (2007) (“DOJ/FTC IP Report”), available at http://bit.ly/2aBxyjR (“[C]ourts 

have been sensitive to antitrust issues that may arise in the context of collaboratively set 

standards.”).

B. FRAND commitments provide a necessary check on SEP market power 

SSOs mitigate these anticompetitive risks by requiring SEP holders “to license any patents 

essential to implementing the standard on [FRAND] terms” as a “quid pro quo for having one’s 

technology adopted in a formal standard.” Shapiro & Varian, supra, at 228; see also Microsoft 

Corp. v. Motorola, Inc., 864 F. Supp. 2d 1023, 1032 (W.D. Wash. 2012) (“Microsoft I”) (noting 

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various SSOs “will not incorporate patented technology into a standard unless [they] can obtain a 

declaration from the patent holder agreeing to either license free of charge or on [F]RAND 

terms”). Far from a mere contract, “FRAND commitments [are] important safeguards against 

monopoly power.” Broadcom, 501 F.3d at 314 (reversing dismissal of monopolization claims); 

see also RIM, 644 F. Supp. 2d at 791 (“‘FRAND commitments’ are intended to prevent owners of 

essential patents from acquiring too much of the market power that would otherwise be inherent 

in owning an essential patent.”). Two aspects of the FRAND commitment are vital to ensure that 

SEP owners do not abuse the market power that flows from SEPs.

1. To prevent exclusion, FRAND creates a duty to license all comers 

The owner of a FRAND-encumbered SEP must license that patent to any prospective 

licensee, including potential rivals. This duty to deal on fair terms to all willing licensees is the 

hallmark of FRAND, as federal courts—including the Ninth Circuit—and the FTC have long 

recognized. See, e.g., Microsoft II, 795 F.3d at 1031 (FRAND prohibits SEP holders from 

“refus[ing to] license to a manufacturer who commits to paying the [F]RAND rate” in order to 

“mitigate the risk that a SEP holder will extract more than the fair value of its patented 

technology”); Microsoft Corp. v. Motorola, Inc., 696 F.3d 872, 884 (9th Cir. 2012) (“[The 

FRAND commitment] admits of no limitations as to who or how many applicants could receive a 

license. . . .”); Apple Inc. v. Motorola, Inc., 869 F. Supp. 2d 901, 913-14 (N.D. Ill. 2012) (Posner, 

J., sitting by designation) (“By committing to license its patents on FRAND terms, Motorola 

committed to license . . . to anyone willing to pay a FRAND royalty.”) (emphasis added), aff’d in 

part and rev’d in part on other grounds, 757 F.3d 1286, 1331-32 (Fed. Cir. 2014); cf. DOJ/FTC 

IP Report, supra, at 36 (to mitigate hold-up, SSOs often “require SSO members to commit to 

license any of their IP that is essential to an SSO standard on ‘reasonable and nondiscriminatory’ 

(‘RAND’) terms”). This duty applies to competitors because otherwise “[a]ny company wishing 

to compete with [the SEP owner] has to have its permission, giving it the power to eliminate all 

competition.” RIM, 644 F. Supp. 2d at 794. Thus, when an SEP owner makes FRAND promises, 

it has “promise[d] it would allow competitors to ‘pass through the gates’ on FRAND terms.” Id. 

Because FRAND imposes a duty to deal that is “intended as a bulwark against unlawful 

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monopoly,” Broadcom, 501 F.3d at 305, a refusal to license SEP technology to competitors is not 

merely a contractual violation, but a “decision by a monopolist to make an important change in 

the character of the market,” Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585, 

604 (1985). After all, in the context of an SEP, the “market” can be the patented technology 

itself, because “[a] standard, by definition, eliminates alternative technologies.” Broadcom, 501 

F.3d at 314.4 By flouting FRAND’s duty to deal, an SEP holder gains near-total power in the 

market for standard-essential technologies and any dependent downstream market. 

Qualcomm resists this conclusion, claiming that Verizon Communications v. Law Offices 

of Curtis V. Trinko, LLP, 540 U.S. 398 (2004) found that it “has no duty under the antitrust laws 

to assist its competitors.” Mot. at 3. Yet Qualcomm overlooks Trinko’s observation that “[u]nder 

certain circumstances, a refusal to cooperate with rivals can constitute anticompetitive conduct 

and violate § 2.” Trinko, 540 U.S. at 408-09 (discussing Aspen Skiing, 472 U.S. at 601); see also 

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

(“[A monopolist’s] activities are examined through a special lens.”). Far from adopting the per se

rule that Qualcomm would prefer, the Trinko Court emphasized that each market must be 

analyzed on its own terms: “Antitrust analysis must always be attuned to the particular structure 

and circumstances of the industry at issue.” Trinko, 540 U.S. at 411. Examining the specific 

contours of the market at issue (access to local exchange carrier networks), the Trinko Court 

found that the Telecommunications Act did not create an antitrust duty to deal with competitors. 

Id. at 407-10. By contrast, courts have recognized that FRAND obligations—including the duty 

to license all comers—exist to prevent the unlawful exercise of monopoly power. See supra pp.

4-6.5

 That is, the “particular structure and circumstances of the industry” for Qualcomm’s SEPs, 

 4

 See also FTC/DOJ Antitrust Guidelines For The Licensing Of Intellectual Property § 3.2.2 (the 

“FTC/DOJ Guidelines). 5 The Court’s conclusion that no duty existed in Trinko was the existence of a regulatory structure 

that minimized “the additional benefit to competition provided by antitrust.” Trinko, 540 U.S. at 

412. By contrast, no reticulated regulatory structure exists here: SSOs are private organizations 

and thus antitrust scrutiny plays an important role. See Broadcom, 501 F.3d 297, at 309; cf. 

Allied Tube, 486 U.S. at 501 (finding Noerr-Pennington immunity does not to apply to SSOs 

because “no official authority has been conferred on [SSOs] by any government”). 

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see Trinko, 540 U.S. at 411, make clear that FRAND creates an antitrust duty to deal enforceable 

under the Sherman Act. 

2. FRAND prohibits SEP holders from charging supracompetitive royalties 

FRAND “limit[s] a patent holder to a reasonable royalty on the economic value of its 

patented technology itself apart from the value associated with incorporation of the patented 

technology in the standard.” Microsoft Corp. v. Motorola, Inc., No. C10-1823JLR, 2013 WL 

2111217, at *12 (W.D. Wash. Apr. 25, 2013) (emphases added); see also Ericsson, Inc., 773 F.3d 

at 1226-27 (“[T]he . . . royalty rate must reflect the value attributable to the infringing features of 

the product, and no more.”). 

The reasonable royalty requirement, like the duty to deal imposed by FRAND, promotes 

competition. The Ninth Circuit recognized that leveraging SEPs to extract an “unduly high 

royalty rate” is “anti-competitive behavior,” and that SSOs impose FRAND obligations to 

mitigate against that risk. Microsoft II, 795 F.3d at 1030-31. Thus, this duty is closely related to 

FRAND’s duty to license SEPs to all willing licensees because, without the reasonable royalty 

requirement, an SEP owner could demand an exorbitant royalty from competitors, amounting to a

de facto refusal to license. See RIM, 644 F. Supp. 2d at 794 (holding that licensing “only at 

exorbitant rates” would “harm competition” by increasing prices for all products except for the 

SEP holder’s).

Qualcomm does not meaningfully dispute that a breach of FRAND may implicate the 

Sherman Act, but instead argues that “alleging a FRAND violation is not enough to make out an 

antitrust claim without also alleging that the purported violation caused actual harm to 

competition.” Mot. at 15 (citing Rambus v. FTC, 522 F.3d 456 (D.C. Cir. 2008)). But this 

observation is of no help to Qualcomm because, as discussed below, the Complaint alleges 

exactly that: Qualcomm not only violated FRAND but its conduct excluded potential competitors 

(like Samsung) and harmed consumers. The FTC’s Complaint fits comfortably within the wellCase 5:17-cv-00220-LHK Document 90-1 Filed 05/12/17 Page 11 of 19
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established case law linking FRAND violations to the antitrust laws.6

IV. QUALCOMM’S FRAND VIOLATIONS CONSTITUTE UNLAWFUL 

EXCLUSIONARY CONDUCT

The Complaint states an antitrust claim because it plausibly alleges that Qualcomm 

engages in two types of exclusionary conduct: (1) Qualcomm refuses to license competitors to 

make and sell licensed chipsets that use Qualcomm’s SEPs; and (2) Qualcomm imposes a handset 

“tax” by leveraging its SEPs to coerce handset manufacturers to accept unreasonable licensing 

terms that reinforce its monopoly position. On both counts, the Complaint identifies how this 

conduct excludes rivals and harms competition in the markets for CDMA and premium chipsets.

A. Qualcomm excludes competitors by refusing to license SEPs to make and sell 

licensed CDMA and premium chipsets in competition with its own chipsets 

The Complaint alleges that Qualcomm “refus[es] to license FRAND-encumbered patents 

to baseband processor competitors.” Compl. ¶ 147; see also id. ¶¶ 3c, 59. Indeed, the Complaint 

lists “former and current competitors” excluded by Qualcomm’s conduct. Id. ¶ 112. The FTC 

also alleges that this exclusionary conduct “bolsters [Qualcomm’s] ability to maintain elevated 

royalties and other unreasonable license terms.” Id. ¶ 6. This conduct not only violates 

Qualcomm’s FRAND commitments—which require Qualcomm to “license SEPs ‘to all 

applicants under terms and conditions that are reasonable and non-discriminatory,” id. ¶ 107 

(emphasis added)—it also violates the Sherman Act because Qualcomm has successfully 

excluded rivals and “contribute[d] to [its] ability to tax its competitors’ sales and maintain its 

monopoly,” id. ¶ 115; see also id. ¶ 134.

 6 See, e.g., Broadcom, 501 F.3d at 314 (reversing grant of a motion to dismiss, holding that “[a] 

patent holder’s subsequent breach of [a FRAND] promise, is actionable anticompetitive 

conduct.”); Funai Elec. Co. v. LSI Corporation, No. 16-cv-01210-BLF, 2017 WL 1133513, at *5 

(N.D. Cal. Mar. 27, 2017); Lotes Co. v. Hon Hai Precision Indus. Co., No. 12 Civ. 7465, 2013 

WL 2099227, at *5 (S.D.N.Y. May 14, 2013) (“[C]onduct that undermines the procompetitive 

benefits of private standard setting may . . . be deemed anticompetitive under antitrust law.”); 

Apple Inc. v. Samsung Elecs. Co., No. 11-CV-01846-LHK, 2011 WL 4948567, at *4 (N.D. Cal. 

Oct. 18, 2011) (denying defendant’s motion to dismiss antitrust claim because “[c]ourts have 

recognized that fraudulent FRAND declarations that are used to induce SSOs to adopt standards 

essential patents can be monopoly conduct for purposes of establishing a Section 2 claim.”).

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Qualcomm does not deny the facts underlying these allegations: (1) that it made FRAND 

commitments in consideration for the adoption of mobile standards using CDMA technology; and 

(2) that it refuses to license SEPs to rival chipset manufacturers. See Mot. at 4-5. Instead, 

Qualcomm argues that under Trinko it “has no duty under the antitrust laws to assist its 

competitors.” Mot. at 3. But as discussed above, Trinko does not support this principle because 

FRAND commitments are “intended as a bulwark against [the] unlawful monopoly” SEP owners 

would otherwise enjoy, Broadcom, 501 F.3d at 305, and the Complaint alleges Qualcomm 

excludes rivals and overcharges its customers. Thus, Trinko cannot support dismissal. 

Qualcomm also suggests that no competitor has sued it for this conduct, and that this 

“affirmatively negate[s] any inference that [its] supposed breach of FRAND commitments caused 

any anticompetitive effect.” Mot. at 16 (emphasis omitted). Both Qualcomm’s premise and 

conclusion are wrong. First, a former chipset competitor has sued Qualcomm: In 2006, 

Broadcom sued Qualcomm, alleging, inter alia, “that Qualcomm ignored its FRAND 

commitment to [SSOs] . . . by demanding discriminatorily higher (i.e., non-FRAND) royalties 

from competitors and customers using chipsets not manufactured by Qualcomm.” Broadcom, 

501 F.3d at 304 (emphasis added). This suit led to a landmark opinion in the Third Circuit—

which Qualcomm ignores—holding that “the patent holder’s subsequent breach of that [FRAND] 

promise[] is actionable anticompetitive conduct.” Id. at 314. Rather than litigate, Qualcomm 

settled with Broadcom for $891 million in an agreement that allowed Qualcomm to continue its 

licensing practices.7

 Second, the Complaint explains why others may not have brought suit. See 

Compl. ¶¶ 76-83. For example, if Samsung (a potential chipset competitor) sued, it would risk 

losing “access to Qualcomm’s baseband processors” necessary to make CDMA-compliant 

handsets. Compl. ¶ 79. “To avoid [such] consequences, OEMs [like Samsung] have acceded to 

royalties and other licensing terms that Qualcomm demanded even when they believed those 

terms to be non-FRAND.” Id. ¶ 83. Qualcomm has no response to this allegation.

 7 Press Release, Qualcomm and Broadcom Reach Settlement and Patent Agreement (Apr. 26, 

2009), available at http://bit.ly/2pKViIV. See ASARCO, LLC v. Union Pac. R.R. Co., 765 F.3d 

999, 1010 n.2 (9th Cir. 2014) (allowing judicial notice of public settlement information).

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The Complaint makes clear that Qualcomm has gained control over today’s CDMA and 

premium baseband chipset markets by violating FRAND. Indeed, “[s]everal former competitors 

of Qualcomm have sold off or shuttered their baseband processor businesses” as a result of 

Qualcomm’s conduct. Id. ¶ 139. Similarly, the Complaint states that Qualcomm has excluded 

competitors from entering the market. Id. ¶¶ 35, 45, 138. Qualcomm cannot deny that there is no 

market for licensed chipsets due to its refusal to license its SEPs to competing chipset 

manufacturers; the absence of sales of licensed chipsets is a prima facie output effect. 

Qualcomm’s response—that “Intel, MediaTek and Samsung continue to compete against 

Qualcomm in the sale of modem chips without having a license,” Mot. at 16,—is contradictory. 

Without a license, these firms cannot compete without infringement risk. None of these firms 

(nor any other) sell licensed CDMA or premium LTE chipsets in competition with Qualcomm, 

see Compl. ¶¶ 32-37, as a direct consequence of Qualcomm’s refusal to license. 

Samsung manufactures baseband chipsets for use in some of its own handsets because it 

has a handset license. As the Complaint explains, self-supply does not constitute “meaningful 

competition.” Compl. ¶ 45. As for Intel, the Complaint observes that it acquired Via 

Technologies to gain access to CDMA technology, but that Via’s chipsets are not “multi-mode” 

and thus cannot compete in the premium chipset market. Id. ¶ 34. And although Apple has 

agreed to purchase non-CDMA chipsets from Intel, per Qualcomm’s admitted policy not to 

license chipset manufacturers, these sales are not licensed—and, in any event, Apple has 

disclosed that Qualcomm threatened to sue it for infringement based on these sales. Complaint, 

Apple Inc. v. Qualcomm Inc., No. 17-cv-0108-GPC-NLS, ECF No. 1 ¶¶ 9-10 (S.D. Cal. Jan. 20, 

2017).

8

 That Qualcomm is now embroiled in litigation with a significant handset manufacturer 

speaks volumes about the lengths to which it will go to maintain its market dominance. Finally, 

the Complaint states that “MediaTek has not offered multi-mode CDMA processors suitable for 

use in flagship handsets,” Compl. ¶ 35, belying Qualcomm’s suggestion that MediaTek is a 

 8 Qualcomm’s counterclaims allege Apple misled consumers and interfered with its business 

contracts when Apple sought to buy chipsets elsewhere. Answer and Counterclaims, Apple Inc. 

v. Qualcomm Inc., No. 17-cv-0108-GPC-NLS, ECF No. 61 (S.D. Cal. Apr. 10, 2017).

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competitor in the relevant markets. Thus, Qualcomm faces little or no direct competition in the 

CDMA and premium LTE baseband chipset markets because its exclusionary conduct has had the 

effect Qualcomm intended.

B. Qualcomm violates FRAND—and excludes competitors—by imposing onerous 

terms on handset manufacturers, including an unreasonable per handset tax 

Qualcomm’s exclusionary practices allow it to impose unilateral and onerous terms on 

licensees that harm would-be competitors by erecting additional barriers to entry to the baseband 

chipset market. This harms handset manufacturers that must pay rents on their own innovations 

to Qualcomm through a per handset tax; and harms end-users who pay higher prices for handsets. 

As the Complaint alleges, Qualcomm’s refusal to license rivals gives it leverage to impose its “no 

license, no chips” policy on handset manufacturers. See id. ¶ 47; ¶¶ 80-82 (alleging that without 

Qualcomm’s dominance in CDMA and premium LTE technology, an OEM could challenge 

Qualcomm’s terms “by substituting non-Qualcomm processors”). Through this policy, 

Qualcomm coerces handset manufacturers to sign long-term licenses that disincentivize handset 

manufacturers from seeking alternative chipset suppliers and enable Qualcomm to extract 

monopoly profits from the full handset whether or not the value is derived from Qualcomm’s 

SEPs. These terms (called a handset “tax” by the FTC) derive from—and reinforce—the 

monopoly power Qualcomm gains by flouting its FRAND obligations. See Compl. ¶ 87.

Chief among these onerous terms is Qualcomm’s insistence that handset manufacturers 

pay a royalty equal to a percentage of the price of the full handset instead of the smallest saleable 

patent practicing unit (“SSPPU”)—i.e., the baseband chipset itself—as required by the Federal 

Circuit.9

 See id. ¶ 77(b). While Qualcomm argues this practice is necessary to avoid “a finding 

of exhaustion or implied license,” Mot. at 6, Qualcomm relinquished its right to select the level of 

production at which to exhaust its SEPs by promising to license all comers when it entered the 

FRAND contract. See supra pp. 4-6. Qualcomm’s exhaustion argument shows how its conduct 

 9 See generally Ericsson, 773 F.3d 1201; Laser Dynamics, Inc. v. Quanta Computer, Inc., 694 

F.3d 51 (Fed. Cir. 2012).

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is interrelated with its refusal to license chipset manufacturers: If Qualcomm licensed rivals, no 

handset manufacturer would blindly accept Qualcomm’s terms because they could buy fully 

licensed chipsets—exhausting SEPs substantially embodied in the chipset—from a competitor.10 

It is precisely this choice that Qualcomm’s actions have denied the market. 

Qualcomm dismisses this charge as “hypothetical,” Mot. at 9, because the FTC cannot 

identify handset manufacturers that purchased licensed chipsets from a competitor. But the 

absence of a real-world comparison is ocular proof of Qualcomm’s successful exclusion: No 

competitive royalty negotiations have occurred because Qualcomm has altogether refused to 

grant its competitors a license and thereby a chance to compete. See United States v. Microsoft 

Corp., 253 F.3d 34, 79 (D.C. Cir. 2001) (“To require that § 2 liability turn on a plaintiff’s ability 

or inability to reconstruct the hypothetical marketplace absent a defendant’s anticompetitive 

conduct would only encourage monopolists to take more and earlier anticompetitive action.”). 

In important respects, this case is analogous to the DOJ’s lawsuit and eventual consent 

decree condemning Microsoft’s “per processor” licenses in which Microsoft sought payment 

based on finished products whether or not they incorporated Microsoft’s operating system. 

Compare Compl. ¶ 87 with Competitive Impact Statement, United States v. Microsoft, Corp., No. 

94-cv-1564 (SS), at 13 (July 27, 1994), available at http://bit.ly/2qF6HKv. The DOJ found that 

these licenses cemented Microsoft’s market power and excluded competitors because the per 

processor “tax” eliminated OEMs’ incentives to purchase a competing operating system. 

Similarly, Qualcomm’s exclusion of upstream competition gives it the power to lock down longterm licenses at the handset level,11 disincentivizing competitor chipset manufacturers from 

 10 If Qualcomm owns other SEPs not embodied in the chipset, see Mot. at 6, it could seek a 

separate FRAND-compliant license for those patents from the handset manufacturer (but without 

leveraging its chipset monopoly in licensing negotiations) and, assuming arguendo Qualcomm 

would readily identify those patents, the handset manufacturer could undertake an evaluation as 

to whether its products practice those patents. Given the nature of Qualcomm’s SEPs, Samsung 

does not believe a separate license would be necessary, but Qualcomm has prevented the market 

from making this determination. 

11 Qualcomm reports it has over 300 licensees, none of which are chipset rivals. See Qualcomm, 

Form 10K, at 7 (2016), available at http://bit.ly/2q46u6o. 

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challenging Qualcomm’s handsets-level licensing policy. This practice is unheard of among 

other mobile component suppliers. See Compl. ¶¶ 64-68. 

Qualcomm also forces handset manufacturers, as a precondition to obtaining a license, to 

agree to cross license IP to Qualcomm and covenant not to sue other Qualcomm licensees for 

infringing IP cross licensed to Qualcomm as a precondition for a handset license. See Compl. ¶¶ 

77(d), 111. This further disincentivizes innovation12 by levying a discriminatory “tax” in breach 

of FRAND that raises the all-in cost of rival chipsets that are not sold with similar pass-through 

rights, improperly favoring Qualcomm’s chipsets. See Id. ¶ 88. This conduct, coupled with its 

per handset royalty, ensures that no handset manufacturer has an incentive to buy a baseband 

chipset from any firm but the entity they are already paying: Qualcomm.13 In short, Qualcomm 

has effectively “raise[d] OEM’s costs of using baseband processors supplied by Qualcomm’s 

competitors,” thus “reduc[ing] the ability and incentive of competitors to invest and innovate.” 

Compl. ¶ 87. Qualcomm’s onerous handset licensing terms not only evidence that its 

exclusionary conduct has been successful—the terms themselves represent anticompetitive 

conduct that reinforce Qualcomm’s unlawful dominance.

C. The Complaint does not rely on a “price squeeze” theory 

Qualcomm characterizes the FTC’s allegations as a “price squeeze” and argues that it “has 

no obligation to ensure that the royalty rates charged to [handset manufacturers] leave ‘room’ to 

preserve chip suppliers’ margins.” Mot. at 11-13. But this ignores Qualcomm’s FRAND 

obligation to charge only a reasonable royalty rate, and that when an SEP holder violates the 

FRAND commitment to exclude rivals, it violates the Sherman Act. Thus, Qualcomm’s reliance 

on Pacific Bell Telephone Co. v. linkLine Communications, Inc., 555 U.S. 438, 457 (2009), for 

the proposition that a “standalone” price squeeze theory does not state an antitrust claim is 

shadow boxing: This is not a “price squeeze.” The Complaint alleges that Qualcomm’s 

 12 The DOJ/FTC Guidelines recognize that grantbacks may disincentivize competition. See id. §

5.6 (explaining that grantbacks can “adversely affect competition” by “substantially reduc[ing] 

the licensee’s incentives to engage in research and development and thereby limit[s] rivalry.”).

13 Indeed, Qualcomm admits that it believes handset manufacturers must pay it “regardless of 

whether the handsets include any components from Qualcomm.” Mot. at 5. 

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unreasonable royalties are part of a broader course of conduct—including an outright refusal to 

deal in violation of FRAND—that has harmed competition. See Cont’l Ore Co. v. Union Carbide 

& Carbon Corp., 370 U.S. 690, 699 (1962) (“[P]laintiffs should be given the full benefit of their 

proof without tightly compartmentalizing the various factual components and wiping the slate 

clean after scrutiny of each.”); City of Anaheim v. S. Cal. Edison Co., 955 F.2d 1373, 1376 (9th 

Cir. 1992) (evaluating unilateral conduct for a “synergistic effect”). Moreover, as it did in Trinko, 

the Court in linkLine noted that a “unilateral refusal to deal with its rivals can give rise to antitrust 

liability” in certain circumstances. 555 U.S. at 448. Because the defendants in linkLine had no 

antitrust duty to deal, no similar liability existed. Id. at 449. By contrast, Qualcomm does have 

an antitrust duty to deal with competitors and customers on fair, reasonable, and nondiscriminatory terms—a duty enforceable under the Sherman Act when, as here, it is necessary to 

prevent anticompetitive and exclusionary conduct. Supra pp. 4-6.

V. CONCLUSION

For these reasons set forth above, Samsung respectfully requests the Court deny 

Qualcomm’s motion to dismiss.

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Dated: May 12, 2017

Respectfully submitted,

By: /s/ Ian Simmons

IAN SIMMONS (pro hac vice application 

pending)

isimmons@omm.com

BENJAMIN J. HENDRICKS (Bar #288680)

bhendricks@omm.com

JAMES W. CROOKS (Bar #310447)

jcrooks@omm.com

O’MELVENY & MYERS LLP

1625 Eye Street, NW

Washington, DC 20006-4061

Telephone: +1 202 383 5300

Facsimile: +1 202 383 5414

MICHAEL TUBACH (Bar #145955)

mtubach@omm.com

O’MELVENY & MYERS LLP

Two Embarcadero Center, 28th Fl.

San Francisco, CA 94111-2823

Telephone: +1 415 984 8700

Facsimile: +1 415 984 8701

Attorneys for Amici Curiae

Samsung Electronics Co. Ltd. 

Samsung Semiconductor, Inc.

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