Jennifer Milici, D.C. Bar No. 987096

Daniel Matheson, D.C. Bar No. 502490

J. Alexander Ansaldo, Va. Bar No. 75870

Joseph R. Baker, D.C. Bar No. 490802

Elizabeth A. Gillen, Ca. Bar No. 260667

Federal Trade Commission

600 Pennsylvania Avenue, N.W.

Washington, D.C. 20580

Tel: (202) 326-2912; Fax (202) 326-3496

jmilici@ftc.gov

Lin W. Kahn, Ca. Bar No. 261387

Federal Trade Commission

901 Market Street, Suite 570

San Francisco, CA 94103

Tel: (415) 848-5115; Fax: (415) 848-5184

lkahn@ftc.gov

Attorneys for Plaintiff

FEDERAL TRADE COMMISSION

CRAVATH, SWAINE & MOORE LLP

Gary A. Bornstein (pro hac vice) 

gbornstein@cravath.com

Yonatan Even (pro hac vice)

yeven @cravath.com

825 Eighth Avenue

New York, NY 10019-7475

Telephone: (212) 474-1000

Facsimile: (212) 474-3700

 KEKER VAN NEST & PETERS LLP

 Robert A. Van Nest

 rvannest@keker.com

 633 Battery Street

 San Francisco, CA 94111-1809 Telephone: (415) 676-2289 Facsimile: (415) 397-7188

 MORGAN, LEWIS & BOCKIUS LLP Richard S. Taffet (pro hac vice) richard.taffet@morganlewis.com

 101 Park Avenue

 New York, NY 10178-0060 Telephone: (212) 309-0060 Facsimile: (212) 309-6001

 MORGAN, LEWIS & BOCKIUS LLP

 Geoffrey T. Holtz (SBN 191370)

 Geoffrey.holtz@morganlewis.com

 One Market, Spear Street Tower

 San Francisco, CA 94105-1596 Telephone: (415) 442-1000 Facsimile: (415) 442-1001

 Attorneys for Defendant

 QUALCOMM INCORPORATED

 

 Additional Counsel listed on the Signature Page

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-NMC

PLAINTIFF FEDERAL TRADE 

COMMISSION AND DEFENDANT 

QUALCOMM INCORPORATED’S JOINT 

DISCOVERY STATEMENT REGARDING 

INTERROGATORY NO. 19

Magistrate Judge: 

Hon. Nathaniel M. Cousins

Defendant Qualcomm Incorporated (“Qualcomm”) and Plaintiff Federal Trade 

Commission (“FTC”) hereby submit this joint statement. The parties have met and conferred in 

person, but have been unable to reach agreement on the issues addressed herein.

Case 5:17-cv-00220-LHK Document 743 Filed 05/18/18 Page 1 of 7
1

I. Qualcomm’s Position 

Qualcomm’s Interrogatory No. 19, served on February 23, asks the FTC to provide the 

facts underlying any claim that Qualcomm sold baseband processor chips at prices below cost. 

The FTC initially refused to respond to this Interrogatory 19 at all. After motion practice, on 

April 18, the Court ordered the FTC to provide a response by April 25 (ECF 691). The FTC’s 

response provided some information, but is incomplete. Specifically, the FTC contends that all 

sums payable by Qualcomm to Apple under certain agreements between them should be 

allocated to five Apple iPad devices, to the exclusion of all other Apple devices containing 

Qualcomm chips being sold during the relevant period. The FTC contends that as a result, 

Qualcomm suffered enormous losses on the sale of chips incorporated in those five Apple 

devices – indeed, that Qualcomm effectively paid Apple for the Qualcomm chips incorporated in 

those five devices. The FTC’s response, however, does not provide the facts it relies on to select 

these five Apple devices as the only relevant devices to which Qualcomm’s payments should be 

allocated. Qualcomm therefore asks that the FTC be ordered to provide this additional 

information about its contention, and to do so promptly.

A. Background

The FTC alleged in its Complaint that if certain sums conditionally payable by 

Qualcomm to Apple under certain agreements between them were attributed as discounts only to 

chips “reasonably contestable by a Qualcomm competitor”, then “the resulting price of 

Qualcomm processors would be below Qualcomm’s cost.” (ECF 1 at ¶125(c)). To better 

understand the scope and basis of the FTC’s allegation in this regard, Qualcomm served 

Interrogatory 19, seeking to ascertain (a) whether the FTC was, in fact, making any claim of 

below cost pricing, and if so, (b) the supporting facts and reasons for any contention that 

“penalties, discounts or rebates” payable by Qualcomm should be attributed to some subset of 

Qualcomm’s chips, rather than to all the chips Qualcomm sold for use in any OEM’s devices.1

The FTC’s response references a single manufacturer, Apple, and further references sums 

payable by Qualcomm to Apple under two agreements between them. The FTC tallies all such 

sums, payable in full only if Apple decided not to incorporate Qualcomm chips into essentially 

all its cellular devices, but attributes them to just five “lower-volume products,” to the exclusion 

 1 Interrogatory No. 19 reads:

If you contend that Qualcomm ever charged any Cellular Device manufacturer a price for a 

Baseband Processor that was lower than Qualcomm's cost of such Baseband Processor, then 

identify:

a) Each such Cellular Device manufacturer;

b) Each Baseband Processor Qualcomm sold below Qualcomm's cost;

c) Qualcomm's costs you contend were higher than the prices of such Baseband Processors, 

including whether such costs represent Qualcomm's marginal costs, average variable costs or 

some other measure of costs;

d) the price at which such Baseband Processors were sold; and

e) any “penalties”, “discounts” or rebates You contend should be applied to lower the effective 

price of such Baseband Processors, including those alleged in Paragraph 125(c) of Your 

Complaint, and all reasons You contend such penalties, discounts or rebates should be applied to 

Baseband Processors you contend were sold below cost rather than to other Baseband 

Processors.

Case 5:17-cv-00220-LHK Document 743 Filed 05/18/18 Page 2 of 7
2

of all iPhones and other Apple devices containing Qualcomm chips. On the basis of such 

attribution, the FTC contends that Qualcomm chips in those five devices were sold at substantial 

losses – in fact, that Qualcomm was effectively paying Apple considerable sums to incorporate 

Qualcomm’s chips in these devices. The FTC’s response, however, does not provide any basis 

or explanation for its selection of those five much lower-selling iPad devices, to the exclusion of 

all other cellular Apple devices. In meet and confer discussions, the FTC maintained its refusal 

to supplement its response with this information. 

B. Qualcomm Is Entitled To A Complete Response To Interrogatory No. 19

Qualcomm seeks information that the FTC undeniably possesses, and appears to have 

possessed since before filing its Complaint. Yet the FTC refuses to provide Qualcomm with this 

information. The Federal Rules obligate the FTC to provide relevant information in its 

possession. Fed. R. Civ. P. 33(b)(3) (interrogatories must “be answered . . . fully”); Cable & 

Computer Tech., Inc. v. Lockheed Saunders, Inc., 175 F.R.D. 646, 652 (C.D. Cal. 1997) 

(granting motion to compel party to answer “interrogatories with information they now 

possess”). The FTC’s refusal to provide a complete response unfairly limits Qualcomm’s ability 

to challenge the factual bases for this claim. Former Shareholders of Cardiospectra, Inc. v. 

Volcano Corp., 2013 WL 5513275, at *1 (N.D. Cal. Oct. 4, 2013) (noting that interrogatories 

facilitate “narrow[ing] the issues that will be addressed at trial and to enable the propounding 

party to determine the proof required to rebut the respondent’s position.”); Fed. R. Civ. P. 33 

Adv. Comm. Notes (1970) (interrogatories “can be most useful in narrowing and sharpening the 

issues, which is a major purpose of discovery”).

Significantly, despite having a common interest arrangement with Apple, receiving Apple 

documents, and having participated fully in many Apple depositions, the FTC has not cited any 

contemporaneous evidence showing that Apple's decision-making regarding the so-called 

penalties was different for these five devices as compared to any other. To the extent the FTC 

intends to rely on any such evidence, it should be required to identify the evidence with 

particularity. Qualcomm is entitled to the bases for the FTC’s selection of the five devices it has 

identified in its response, and the bases for its exclusion of all other Apple devices.

The FTC cites portions of its Response to assert that it has provided the reasons for its 

selection of just these five iPad devices to which it allocates all costs for all iPhones and other 

Apple devices. But one need only read the referenced passages to see that, at most, the FTC has 

provided cryptic references that offer hints at possible reasons but do not in fact provide those

reasons, which the interrogatory expressly requests. Did the FTC select the five devices solely 

because they were “low volume” devices? Or because they were “data only” products? Or 

because these were the only devices for which there was a “reasonably contestable” and 

acceptable alternative chip from Intel or another supplier? The Court ordered that the FTC 

respond to this interrogatory in order to focus the issues in the case, which is a key purpose of 

interrogatories. But one cannot discern the actual reasons for the FTC’s selection of these five 

devices from its response.

The FTC does not, and could not plausibly, contend that it does not know the bases for its 

contention. The FTC should therefore be ordered to supplement its response promptly to provide 

all bases for its selection of the five iPad devices it identified in its April 25 response.

Case 5:17-cv-00220-LHK Document 743 Filed 05/18/18 Page 3 of 7
II. FTC's Position

The FTC met and conferred with Qualcomm regarding its responses to Qualcomm's 

interrogatories, and Qualcomm's responses to the FTC's interrogatories, on May 7 and May 14. 

These discussions included the FTC's response to Inte1Togatory 19, which sought information 

about allegations in paragraph 125( c) of the FTC' s complaint concerning application of a pricecost test to Qualcomm's agreements with Apple. In paragraph 125(c) of the complaint, the FTC 

states that a price-cost test is not required to assess the competitive effects of Qualcomm' s 

agreements with Apple, but alleges that if the penalties under those agreements "were attributed 

as discounts to the price of Qualcomm baseband processors reasonably contestable by a 

Qualcomm competitor, the resulting price of Qualcomm processors would be below 

Qualcomm's cost." Complaint at 261125(c) (ECF No. 1). 

During the parties' meet and confer discussions, The FTC explained that its response to 

Interrogatory 19 already identifies the Baseband Processors at issue, and the penalties and 

rebates at issue. Further, the response identifies the reasons the FTC contends that the penalties 

or rebates should be applied to the listed Baseband Processors. As Qualcomm acknowledges, 

the FTC's Response identifies facts and record citations sho�iilJ,L��at" 

- - - "

2 In 

suppo1i of that proposition, the FTC cites a statement made by Qualcomm' s head of sales for 

Apple to Qualcomm's CEO and other executives that, just prior to offering Apple 

Qualcomm believed the '· 

"

3 The FTC also cited a statement by a Qualcomm employee 

that "T 

" 

The FTC's response thus contains the facts about which Baseband Processors the FTC 

contends were sold to Apple below cost, the calculations supporting the allegation, and the 

reasons the FTC has for attributing prices and costs to those Baseband Processors. In patiicular, 

the response contains all of the information that Qualcomm asks the Court to compel: the FTC

contends that Qualcomm perceived that .·· _ _ · 

. 

· 

_ 

· · 

_ _ _ and Qualcomm offered conditional 

payments that, at times, would have penalized Apple ' if it did, in fact, 

Qualcomm remains unsatisfied with the FTC's response to Interrogatory 19, but not 

because the FTC provided insufficient facts. Instead, Qualcomm appears dissatisfied with the 

reasons the FTC has provided for applying the penalties and rebates to the Baseband Processors 

at issue. But arguments about the proper application of the price/cost test are better suited for 

expert discovery, and Qualcomm will receive the FTC's expert disclosure in less than a week. 

Likewise, disputes about the law applicable to exclusive dealing claims and, in particular, the 

price-cost test, are better addressed in briefing to the court. While Qualcomm may want the 

FTC to prematurely disclose its expert's opinions, or its draft arguments, it does not appear to 

2 Supplemental Objections and Responses to Defendant Qualcomm Interrogatory Nos. Eighteen 

And Nineteen ("FTC Sup. Resp."), p12:25. Qualcomm narrowed its interrogatory to facts 

relevant to paragraph 125(c) of the FTC's complaint concerning Qualcomm's exclusive dealing 

with Apple. Thus, it is not surprising that the FTC's response referred to the single manufacturer, 

Apple, that was the subject of the allegation and the inte1Togatory. 

3 FTC Sup. Resp. p13:l (citing CX5288). 

3 

Case 5:17-cv-00220-LHK Document 743 Filed 05/18/18 Page 4 of 7
4

actually seek more facts or “reasons” which would be responsive to its interrogatory.

The FTC objected to the Interrogatory as seeking the premature disclosure of expert 

materials, and has already committed to Qualcomm that it will supplement and amend its 

responses as appropriate under the Federal Rules. And the FTC which provide its expert 

disclosures to Qualcomm in less than a week. Qualcomm will receive information about 

methods of analysis and legal positions in due course. It now has the facts responsive to its 

interrogatory, which is all that it is entitled to this week.

4

 4 Qualcomm has also expressed – for the first time when it provided the FTC with its portion of a 

draft Joint Discovery Statement on May 17 – concern about the lack of citation from Apple 

sources to support the FTC’s contention that Qualcomm made sales to Apple at negative prices.

The interrogatory did not seek citations from a specific source, but rather sought the FTC’s 

“reasons” for calculating costs one way rather than another. The FTC has provided its reasons 

and identified evidence supporting those reasons. At the same time, the FTC’s experts are 

finalizing their reports which will provide significantly more information about application of the 

price-cost test.

Case 5:17-cv-00220-LHK Document 743 Filed 05/18/18 Page 5 of 7
5

 Respectfully submitted,

 /s/ Jennifer Milici

Jennifer Milici, D.C. Bar No. 987096

jmilici@ftc.gov

Daniel Matheson, D.C. Bar No. 502490

dmatheson@ftc.gov

J. Alexander Ansaldo, Va. Bar No. 75870

jansaldo@ftc.gov

Joseph R. Baker, D.C. Bar No. 490802

jbaker@ftc.gov

Elizabeth A. Gillen, Ca. Bar No. 260667

egillen@ftc.gov

Federal Trade Commission

600 Pennsylvania Avenue, N.W.

Washington, D.C. 20580

Tel: (202) 326-2912; Fax (202) 326-3496

Lin W. Kahn, Ca. Bar No. 261387

lkahn@ftc.gov

Federal Trade Commission

901 Market Street, Suite 570

San Francisco, CA 94103

Tel: (415) 848-5115; Fax: (415) 848-5184

Attorneys for Plaintiff

FEDERAL TRADE COMMISSION

 /s/ Gary A. Bornstein_________________ CRAVATH, SWAINE & MOORE LLP

Gary A. Bornstein (pro hac vice) 

gbornstein@cravath.com

Yonatan Even (pro hac vice)

yeven @cravath.com

825 Eighth Avenue

New York, NY 10019-7475

Telephone: (212) 474-1000

Facsimile: (212) 474-3700

KEKER VAN NEST & PETERS LLP

Robert A. Van Nest

rvannest@keker.com

Eugene M. Paige

epaige@keker.com

633 Battery Street

San Francisco, CA 94111-1809

Telephone: (415) 676-2289

Facsimile: (415) 397-7188

Case 5:17-cv-00220-LHK Document 743 Filed 05/18/18 Page 6 of 7
6

MORGAN, LEWIS & BOCKIUS LLP

Richard S. Taffet (pro hac vice)

richard.taffet@morganlewis.com

101 Park Avenue

New York, NY 10178-0060

Telephone: (212) 309-0060

Facsimile: (212) 309-6001

MORGAN, LEWIS & BOCKIUS LLP

Geoffrey T. Holtz (SBN 191370)

geoffrey.holtz@morganlewis.com

One Market, Spear Street Tower

San Francisco, CA 94105-1596

Telephone: (415) 442-1000

Facsimile: (415) 442-1001

MORGAN, LEWIS & BOCKIUS LLP

Willard K. Tom

willard.tom@morganlewis.com

1111 Pennsylvania Avenue, N.W.

Washington, D.C. 20004-2541

Telephone: (202) 739-3000

Facsimile: (202) 739-3001

Attorneys for Defendant

QUALCOMM INCORPORATED

Case 5:17-cv-00220-LHK Document 743 Filed 05/18/18 Page 7 of 7