PLAINTIFF FTC’S HIGH PRIORITY OBJECTION 

RESPONSES FOR JANUARY 29, 2019 

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

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Jennifer Milici, D.C. Bar No. 987096 

J. Alexander Ansaldo, Va. Bar No. 75870 

Wesley G. Carson, D.C. Bar No. 1009899 

Elizabeth A. Gillen, Cal. Bar No. 260667 

Nathaniel M. Hopkin, N.Y. Bar No. 5191598 

Kenneth H. Merber, D.C. Bar No. 985703 

Federal Trade Commission 

600 Pennsylvania Avenue, N.W. 

Washington, D.C. 20580 

(202) 326-2912; (202) 326-3496 (fax) 

jmilici@ftc.gov 

Attorneys for Plaintiff Federal Trade Commission 

UNITED STATES DISTRICT COURT 

NORTHERN DISTRICT OF CALIFORNIA 

SAN JOSE DIVISION 

FEDERAL TRADE COMMISSION, 

Plaintiff, 

vs. 

QUALCOMM INCORPORATED, a 

Delaware corporation, 

Defendant. 

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

PLAINTIFF FEDERAL TRADE 

COMMISSION’S HIGH PRIORITY 

OBJECTION RESPONSES FOR 

CLOSING ARGUMENTS, JANUARY 

29, 2019 

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PLAINTIFF FTC’S HIGH PRIORITY OBJECTION 

RESPONSES FOR JANUARY 29, 2019 

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

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The Federal Trade Commission (“FTC”) submits the following responses to Qualcomm’s 

high priority objections (“HPOs”) to the FTC’s closing argument demonstratives. The FTC has 

no HPOs to Qualcomm’s closing argument demonstratives. 

Following the exchange of closing demonstratives and an initial meet and confer, the FTC 

made several changes to its closing demonstratives in response to Qualcomm’s stated concerns. 

Multiple rounds of meet and confer followed, with the FTC ultimately agreeing to over a dozen 

changes in the spirit of compromise. Qualcomm, however, continues to press the below high 

priority objections to the FTC’s citation to record evidence in its closing slides. Qualcomm’s 

attempt to curtail the FTC’s argument should be denied. 

“It is well established that a trial court has broad discretion in controlling closing 

arguments.” Wagner v. Cty. of Maricopa, 747 F.3d 1048, 1059 (9th Cir. 2013) (citing United 

States v. Spillone, 879 F.2d 514, 518 (9th Cir.1989)). One of the primary reasons a trial court will 

confine a party’s closing argument is to uphold its duty to “prevent any improper arguments” that 

may confuse a jury. See Peterson v. Tri-Cty. Metro. Transp. Dist. of OR, 333 F. App'x 312, 313 

(9th Cir. 2009) (citation omitted) (finding district court was well within discretion to confine 

closing argument where it may have conflicted with jury instructions). Such concerns are less 

pronounced in the bench trial context, where the finder of fact is well equipped to distinguish 

between statements being made for argument and those that quote or restate the evidence 

admitted at trial. Parties have “reasonable latitude to fashion closing arguments,” which includes 

“the freedom to argue reasonable inferences based on the evidence.” United States v. Ruiz, 710 

F.3d 1077, 1083 (9th Cir. 2013) (citation omitted). 

All of Qualcomm’s objections to the FTC’s demonstratives are on the grounds that 

citations to record evidence are misleading in the context of the slide. The citations are not 

misleading. And, given prior disclosure of the FTC’s demonstratives, Qualcomm will have the 

opportunity to address these points in closing. Qualcomm’s objections should be overruled. 

I. FTC’s Responses to Qualcomm’s HPOs

Response to Qualcomm HPO No. 1 (Slide 29, “Qualcomm Refused Rivals’ Licensing 

Requests in Breach of SSO Commitments”). Qualcomm objects that a “see also” citation to Mr. 

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RESPONSES FOR JANUARY 29, 2019 

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Reifschneider’s statements to the IRS on the FTC’s demonstrative slide 29 is “misleading” 

because the cited material supposedly does not relate to the slide’s topic: Qualcomm’s breach of 

SSO commitments to make licenses available to rivals on FRAND terms. But Mr. Reifschnider’s 

statements are clearly germane to the slide’s topic and not misleading. In the cited statements, Mr. 

Reifschneider addressed Qualcomm’s decision to stop granting rights to rival chip makers 

altogether. CX6786R at Tr. 32:19-22 (ECF No. 1455-1). He noted that Qualcomm has made 

FRAND commitments, CX6786R at Tr. 33:2-7 (ECF No. 1455-1), and so refusing to enter any 

kind of agreement was “not a great, you know, position to be in in terms of defending yourself 

against, you know, claims that you’ve broken those promises to make the technology available.” 

CX6786R at Tr. 33:11-17 (ECF No. 1455-1). In the next sentence, Mr. Reifschneider explained 

why Qualcomm had adopted its approach of not licensing rivals: “You know, we also have a big 

chipset business, you know, of our own, and we’re also interested in protecting that, right.” 

CX6786R at Tr. 33:18-20 (ECF No. 1455-1). These statements directly relate to Qualcomm’s 

commitments to SSOs. 

Qualcomm appears to believe that the next two sentences of Mr. Reifschneider’s 

statement provide needed context. There, Mr. Reifschneider noted that Qualcomm would 

sometimes, “when pressed,” enter non-exhaustive agreements because competing chip makers 

had “information that can be, you know, useful to us in terms of who they’re selling their chips to, 

so we can make sure that, you know, we know where the chips are going, and we can get our 

royalty on the product that contains the chips.” CX6786R at Tr. 33:20-34:5 (ECF No. 1455-1). 

Qualcomm’s limited willingness to enter non-exhaustive agreements to “make sure...we can get 

our royalty” on handsets is entirely consistent with the FTC’s argument that Qualcomm has 

breached its SSO commitments. In fact, this additional “context” simply explains that improving 

Qualcomm’s ability to collect handset royalties on handsets containing rivals’ chips protects 

Qualcomm’s chip business. 

Response to Qualcomm HPO No. 2 (Slide 30, “License Refusals Supported Elevated 

Royalties from No License-No Chips”). Qualcomm objects that one of Mr. Blecker’s statements 

to the IRS, cited in Slide 30 of the FTC’s demonstratives, is taken out of context. The 

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demonstrative presents Qualcomm statements to the IRS confirming that Qualcomm could not 

extract desired royalties from a chip supplier because, as Mr. Blecker acknowledged, “it would be 

hard to convince a court that that was a fair royalty also.” CX6786R at Tr. 73:20-21 (ECF No. 

1455-1). That statement was played at trial, and is not misleading in the context of the slide. 

Mr. Blecker addressed Qualcomm’s average per-handset royalty, which he could not 

recall precisely and estimated at $10. He explained “you couldn’t charge a ten-dollar royalty on a 

chipset that cost five dollars, or six dollars, or seven dollars.” CX6789R at Tr. 73:10-15 (ECF No. 

1455-1). Similarly, Mr. Gonell observed that the problem with trying to collect the average perhandset royalty on a chip is that “as a practical matter you can’t.” CX6789R at Tr. 73:16-19 (ECF 

No. 1455-1). In response, Mr. Blecker stated “Yeah, and it would be hard to convince a court that 

that was a fair royalty also.” CX6786R at Tr. 73:20-21 (ECF No. 1455-1). In context, it is quite 

clear that Mr. Blecker is referring to Qualcomm’s average per-unit handset royalty, measured in 

dollars, being applied to a modem chip rather than a handset. The statement is not presented in a 

misleading way on the FTC’s demonstrative.1

 Qualcomm’s objection should be overruled. 

 1

 For the Court’s convenience, the full context of Mr. Blecker’s statement at page 73 of 

the IRS meeting transcript, CX6786R at Tr. 73:10-24 (ECF No. 1455-1), is presented below: 

10 MR. BLECKER: Yeah, but if I would average royalty on 

11 all the handsets that we collect royalties on -- I don't 

12 remember what it is anymore, I used to know the number -- but 

13 if -- if it were ten dollars, for example, you couldn't charge 

14 a ten-dollar royalty on a chipset that cost five dollars, or 

15 six dollars, or seven dollars. 

16 MR. GONELL:· Theoretically you could -- 

17 MR. BLECKER:· You could. 

18 MR. GONELL:· -- but as a practical matter you can't. 

19 As a practical matter it's hard. 

20 MR. BLECKER:· Yeah, and it would be hard to convince 

21 a court that that was a fair royalty also. 

22 MR. GONELL:· Well, I know courts look at the 

23 economist, and the economist will tell you the company should 

24 be indifferent between those things 

25 MR. HOWELL:· Right.· No, we're your silent partner. 

1 We want for you to make a lot of money, for that to happen. 

2 MR. BLECKER:· But it's on the handset is where the 

3 money is. 

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Response to Qualcomm HPO No. 3 (Slide 34, “Qualcomm’s Anticompetitive Apple 

Contracts”). Qualcomm objects to the FTC’s inclusion of the phrase “Apple refrains from 

challenging Qualcomm’s licensing model, 2007-2016,” and the citations following it, on the 

grounds that cited testimony “does not support” the statement. 

Qualcomm has not articulated to the FTC an objection that the statement itself is 

misleading, and there is no requirement that the FTC include on its closing argument slides a 

comprehensive set of all possible citations from the trial record. In any event, the cited testimony 

does support the statement that Apple refrained from challenging Qualcomm’s licensing model. 

In the testimony cited, Apple’s Jeff Williams responds to a reference to his prior testimony, and a 

further question, regarding “the reasons that Apple accepted that 7.50 [royalty] amount.” He 

explains that Apple agreed to Qualcomm’s net royalty terms in 2011 and 2013 in part because it 

believed it could not “pursue [Qualcomm] legally” without losing access to Qualcomm’s chips. 

Williams Tr. 889:4-13. Mr. Blevins testified about Apple’s inability to challenge Qualcomm 

because of “the royalty leverage” that Qualcomm had because Apple “had to buy their chips,” 

and Apple’s later decision to “establish a supplemental chip source” to increase its ability to 

challenge Qualcomm’s licensing model. Blevins Tr. 711:3-17 (discussing CX0534, an Apple 

presentation dated April 24, 2014). Apple sued Qualcomm in January 2017, only after it began 

buying some modem chips from Intel. See Williams Tr. 889:14-18, 890:8-9. 

Response to Qualcomm HPO No. 4 (Slide 43, “Fabian Gonell’s Testimony Corroborates 

Prof. Shapiro’s Analysis”). Qualcomm objects that the demonstrative is “misleading” because it 

uses excerpts of Mr. Gonell’s testimony. The demonstrative is not misleading, and Qualcomm has 

not even identified what portion of testimony should be included for “completeness.” The 

demonstrative shows why Mr. Gonell’s testimony corroborates Prof. Shapiro’s analysis of 

anticompetitive harm. Qualcomm has also objected that the slide “conflates two topics,” but the 

FTC is entitled to explain in its closing argument how the evidence that has been admitted at trial 

supports its expert’s analysis. 

On direct examination of Mr. Gonell, Qualcomm counsel pursued a long line of 

questioning regarding Qualcomm’s no license-no chips policy and so-called “historical reasons 

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for why Qualcomm doesn’t price the I.P. into the chip.” Tr. 1417:7-8; 1421:6-7. Mr. Gonell 

explained that, under its current policies, every time Qualcomm sells a chip, it receives price “X” 

for the chip and royalty “Y” for use of Qualcomm’s intellectual property. Tr. 1422:7-1423:13. 

This description parallels Prof. Shapiro’s explanation that the “all-in price” for a modem chip is 

the nominal chip price plus the per-handset royalty that Qualcomm charges. Tr. 1129:12-15. 

Mr. Gonell went on to explain the impact on Qualcomm if it were to sell its modem chips 

exhaustively: when using rival chips, OEMs could force Qualcomm to defend its royalty demands 

in court or arbitration. Tr. 1421:22-1423:5. If forced to litigate, Mr. Gonell explained that 

Qualcomm would at most recover “Y,” but that would only happen if “we win on everything.” Tr. 

1423:2-13. Mr. Gonell then explained that, in response, Qualcomm would have to lower the all-in 

price that it collects from OEMs. Tr. 1423:9-16. This testimony corroborates the proposition that, 

by structuring its business to avoid a neutral royalty determination, Qualcomm evades an 

important competitive constraint on the royalty and all-in price that it can collect. 

The demonstrative in question shows how Mr. Gonell’s testimony corresponds with Prof. 

Shapiro’s analysis, as reflected in Prof. Shapiro’s demonstratives. Qualcomm is free to explain 

during its argument why it thinks the evidence is inconsistent with Professor Shapiro’s analysis, 

or what two topics it believes are conflated by the demonstrative. But Qualcomm’s disagreement 

with the FTC’s argument does not mean that the demonstrative is misleading or should be 

stricken. The Court should overrule Qualcomm’s objection. 

 

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PLAINTIFF FTC’S HIGH PRIORITY OBJECTION 

RESPONSES FOR JANUARY 29, 2019 

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Dated: January 29, 2019 

Respectfully submitted, 

FEDERAL TRADE COMMISSION, 

 /s/ Jennifer Milici 

Jennifer Milici 

J. Alexander Ansaldo 

Wesley G. Carson 

Elizabeth A. Gillen 

Nathaniel M. Hopkin 

Kenneth H. Merber 

Federal Trade Commission 

600 Pennsylvania Avenue, N.W. 

Washington, D.C. 20580 

(202) 326-2912; (202) 326-3496 (fax) 

jmilici@ftc.gov 

Attorneys for Federal Trade Commission 

Case 5:17-cv-00220-LHK Document 1460 Filed 01/29/19 Page 7 of 7