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5:17-cv-00220-LHK 

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Eamon P. Joyce (pro hac vice motion filed) 

ejoyce@sidley.com 

SIDLEY AUSTIN LLP 

787 Seventh Avenue 

New York, New York 10019 

Telephone: +1 212 839-5300 

Facsimile: +1 212 839-5599 

Rahul R. Hari, SBN 313528 

rhari@sidley.com 

SIDLEY AUSTIN LLP 

555 West Fifth Street, Suite 4000 

Los Angeles, California 90013 

Telephone: +1 213 896-6000 

Facsimile: +1 213 896-6600 

Attorneys for Amicus Curiae ACT | The App Association 

UNITED STATES DISTRICT COURT 

NORTHERN DISTRICT OF CALIFORNIA 

SAN JOSE DIVISION 

FEDERAL TRADE COMMISSION, 

Plaintiff, 

v. 

QUALCOMM INCORPORATED, a 

Delaware corporation, 

Defendant. 

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

BRIEF OF AMICUS CURIAE ACT | The 

APP ASSOCIATION IN SUPPORT OF 

THE FTC RESPECTING DEFENDANT’S 

MOTION TO DISMISS 

Date: June 15, 2017 

Time: 1:30 p.m. 

Place: Courtroom 8 

Judge: The Hon. Lucy Koh 
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TABLE OF CONTENTS 

Page 

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

II PRELIMINARY STATEMENT ...........................................................................................2

III A FAIR STANDARDS ECOSYSTEM IS VITAL FOR SMALL BUSINESSES...............3

A. FRAND Is A Critical Safeguard For Fair Competition ............................................3

B. FRAND Abuses Are Particularly Injurious To Small Businesses ............................7

IV THE FTC’S ALLEGATIONS SHOULD BE HEARD AND DECIDED ON THEIR 

MERITS AND BASED ON A ROBUST FACTUAL RECORD ........................................8

V CONCLUSION ...................................................................................................................13 
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TABLE OF AUTHORITIES 

 Page(s) 

Cases 

Broadcom Corp. v. Qualcomm Inc., 

501 F.3d 297 (3d Cir. 2007) ....................................................................................................4, 6 

CSIRO v. Cisco Sys., Inc., 

809 F.3d 1295 (Fed Cir. 2015) ..................................................................................................12 

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

773 F.3d 1201 (Fed. Cir. 2014) .............................................................................................9, 12 

Garretson v. Clark, 

111 U.S. 120 (1884) ............................................................................................................11, 12 

Hartford-Empire Co. v. United States, 

324 U.S. 570 (1945) ..................................................................................................................10 

In the Matter of Motorola Mobility LLC and Google Inc., File No. 121 0120, 

Docket No. C-4410, 2013 WL 3944149 (F.T.C. July 23, 2013) ..............................................10

In the Matter of Robert Bosch GmbH, 155 F.T.C. 713, 2013 WL 8364914 (F.T.C. 

Apr. 23, 2013) .............................................................................................................................6 

LaserDynamics, Inc. v. Quanta Computer, Inc., 

694 F.3d 51 (Fed. Cir. 2012) .....................................................................................................12 

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

No. 12-cv-7465, 2013 WL 2099227 (S.D.N.Y. May 14, 2013), aff’d on other 

grounds, 753 F.3d 395 (2d Cir. 2014) .........................................................................................6 

Microsoft Corp. v. Motorola, Inc., 

696 F.3d 872 (9th Cir. 2012) .....................................................................................................10 

Microsoft Corp. v. Motorola, Inc., 

795 F.3d 1024 (9th Cir. 2015) ........................................................................................... passim

Verizon Commc’ns Inc. v. Law Offices of Curtis v. Trinko, LLP, 

540 U.S. 398 (2004). .................................................................................................................10 

Other Authorities 

3GPP, The Mobile Broadband Standard, Tentative 3GPP Timeline for 5G (Mar. 

17, 2015), at http://www.3gpp.org/news-events/3gpp-news/1674-timeline_5g .........................2 
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ACT | The App Association, State of the App Economy (Apr.20, 2017), available 

at http://actonline.org/2017/04/20/state-of-the-app-economy-report-outlinesgrowth-dynamism-of-the-app-ecosystem ...................................................................................7 

All things FRAND, at http://www.allthingsfrand.com .....................................................................1 

William J. Baer, Assistant Attorney General for Antitrust, Remarks, 19th Annual 

International Bar Association Competition Conference, Florence, September 

11, 2015, available at http://www.justice.gov/opa/speech/assistant-attorneygeneral-bill-baer-delivers-remarks-19th-annual-international-ba ...............................................7 

Department of Commerce Internet Policy Task Force and Digital Leadership 

Team, Fostering the Advancement of the Internet of Things (Jan. 2017), 

available at

https://www.ntia.doc.gov/files/ntia/publications/iot_green_paper_01122017.pd

f ...................................................................................................................................................2 

ETSI Directives, Guide on Intellectual Property Rights, available at

http://www.etsi.org/images/files/IPR/etsi-guide-on-ipr.pdf .....................................................10 

ETSI, ETSI Guidelines for Antitrust Compliance, available at 

http://www.etsi.org/images/files/IPR/etsi%20guidelines%20for%20antitrust%2

0compliance.pdf ......................................................................................................................4, 6 

ETSI, Intellectual Property Rights Policy, available at 

http://www.etsi.org/images/files/IPR/etsi-ipr-policy.pdf ............................................................6 

European Commission, Horizontal Guidelines (Nov. 1, 2011), available at

http://eur-lex.europa.eu/legalcontent/EN/ALL/?uri=CELEX:52011XC0114%2804%29 ......................................................10 

FTC, Brief of Amicus Curie in Support of Neither Party, 

Apple Inc. v. Motorola, Inc., Nos. 2012-1548 et al. (Fed. Cir. Dec. 14, 2012) ..........................5 

Fiona M. Scott-Morton, U.S. Department of Justice, The Role of Standards in the 

Current Patent Wars (Dec. 5, 2012), available at

https://www.justice.gov/atr/speech/role-standards-current-patent-wars .....................................5 

Full Transcript of Qualcomm’s 4Q05 Conference Call-Prepared Remarks (Nov. 

16, 2005), available at http://seekingalpha.com/article/4317-full-transcript-ofqualcomm-s-4q05-conference-call-prepared-remarks-qcom ....................................................10 

Renata Hesse, U.S. Department of Justice, Antitrust: Helping Drive the Innovation 

Economy (Feb. 5, 2016), available at https://jtlp.law.ufl.edu/article/antitrusthelping-drive-the-innovation-economy ......................................................................................5 

IEEE Standards Association, Internet of Things, at 

http://standards.ieee.org/innovate/iot/ .........................................................................................2 
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Kai-Uwe Kuhn et al., Standard Setting Organizations Can Help Solve the 

Standard Essential Licensing Problem .......................................................................................5 

Qualcomm, New York Analyst Meeting (Nov. 14, 2007), 

http://files.shareholder.com/downloads/qcom/42381305x4115120x144394/ad9

640c4-171c-4192-bb41-

78bbc6c64ecf/nyanalyst_11_14_07%20final%20steve.pdf .....................................................11 

Swisslog, Smartlift, at http://www.swisslog.com/-

/media/Swisslog/Documents/WDS/03_WDS_Solutions/SmartLIFT_Brohure.p

df .................................................................................................................................................4 

Phil Van Wormer, How Bobcat Used SmartLIFT Technology to Boost Warehouse 

Performance, TotalTrax Inc. (Sep. 23, 2014, 6:00:00 AM) available at 

http://info.totaltraxinc.com/blog/how-bobcat-used-smartlift-technology-toboost-warehouse-performance ....................................................................................................4 
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I STATEMENT OF INTEREST 

 Amicus curiae ACT | The App Association (ACT or the “Association”) respectfully 

submits its broader industry perspective regarding the important issues presented in this action, 

and encourages a full and robust adjudication of the Federal Trade Commission’s (“FTC”) claims 

against Qualcomm Incorporated (“Qualcomm”) on their facts and merits. 

The Association is an industry organization comprising more than 5,000 application, or 

app, companies and information technology firms in the mobile economy. The Association 

advocates for an environment that inspires and rewards innovation while providing resources to 

help our members leverage their intellectual assets to raise capital, create jobs, and continue 

innovating. Further information about the Association and its activities is available at 

http://actonline.org. 

Members of the Association rely on, utilize and innovate from standardized technologies, 

including wireless communication technologies. The Association is deeply interested in ensuring 

a fair, efficient ecosystem for technical standards. App developers benefit from a fair standards 

ecosystem, which, in turn, promotes the industries in which they innovate. As one aspect of 

ACT’s interests in this area, the Association views it as imperative that patent owners who 

voluntarily contribute their patented technologies for standardization, and who voluntarily 

promise to license their patents on fair, reasonable and non-discriminatory (FRAND) terms, fully 

abide by their obligations. Because the FRAND promise is designed to address the competitive 

problems that can occur with industry collaboration during the standardization process, the 

violation of a FRAND promise presents not merely contractual issues, but also significant 

competition law concerns. 

In line with our members’ core interests in this area, the Association has established an 

initiative known as “All Things FRAND.” As part of our initiative, the Association maintains a 

comprehensive website and blog, accessible at http://www.allthingsfrand.com. The All Things 

FRAND initiative serves as an international resource and repository for information and 

developments involving standard essential patents (“SEPs”), including competition law issues. 
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As an industry association with significant experience in FRAND, SEPs and related 

competition law matters, the Association respectfully offers its perspective to the Court in 

evaluating the important issues raised in this case. Specifically, ACT addresses how the Court’s 

resolution of the issues raised may impact small business innovators during this critical time of 

development and deployment for new “Fifth Generation” (5G)1 and “Internet of things” (IoT)2

technologies. 

II PRELIMINARY STATEMENT 

The Association and its members rely on a fair standards ecosystem. Our members 

develop next-generation technologies utilizing standardized, upstream technologies. Because 

standardization has locked our members into those upstream technologies, their business and 

markets are injured by SEP abuses that limit their (or their customers’) ability to obtain fully 

licensed standardized components, or that and usurp value or technology that our members’ have 

themselves created. 

There are three behaviors alleged in the FTC Complaint in this action that do not comport 

with FRAND, that can injure our members’ small businesses, and which may properly give rise to 

competition law sanction: 

• Refusing to license suppliers; 

 

1

 While there is no universal definition for a “fifth generation” (5G) mobile network, the term 

encompasses the future wave of interoperable mobile networks being driven through various 

technical standards bodies today. 5G networks are expected to utilize a wide range of spectrum 

bands, both licensed and unlicensed, through new and innovative spectrum efficiencies and 

spectrum sharing arrangements. Standard bodies such as the 3GPP and the Institute of Electrical 

and Electronics Engineers (IEEE), among many others, continue to develop the requirements by 

early 2017. See 3GPP, The Mobile Broadband Standard, Tentative 3GPP Timeline for 5G (Mar. 

17, 2015), at http://www.3gpp.org/news-events/3gpp-news/1674-timeline_5g; see also IEEE 

Standards Association, Internet of Things, at http://standards.ieee.org/innovate/iot/. 

2

 Similar to 5G, IoT will involve everyday products that use the internet to communicate data 

collected through sensors. IoT is expected to enable improved efficiencies in processes, products, 

and services across every sector. In key segments of the U.S. economy, from agriculture to retail 

to healthcare and beyond, the rise of IoT is demonstrating efficiencies unheard of even a few 

years ago. See, e.g., Department of Commerce Internet Policy Task Force and Digital Leadership 

Team, Fostering the Advancement of the Internet of Things (Jan. 2017), available at

https://www.ntia.doc.gov/files/ntia/publications/iot_green_paper_01122017.pdf. 
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• Demanding free cross-licenses from licensees; and 

• Demanding royalties that are not based on the value of the patented technology, 

but instead upon downstream value created by downstream innovators. 

We first address the important link between standardization, competition law, and the 

FRAND promise, and how breach of the FRAND promise can directly implicate competitive 

abuses. We then discuss each of these alleged behaviors, and how they can harm our members. 

III A FAIR STANDARDS ECOSYSTEM IS VITAL FOR SMALL BUSINESSES 

A. FRAND Is A Critical Safeguard For Fair Competition 

Preliminarily, the Association notes its appreciation for the value of intellectual property, 

including patents, and its role in rewarding research and ingenuity. The Association also supports 

and values technical standardization, and respects the important innovations that help make 

standards work. Technical standards are an industry’s agreed-upon protocols and common 

infrastructure technologies, available and promulgated on reasonable terms to all who wish to use 

them. For example, Wi-Fi, LTE, and Bluetooth are common technical standards used in the 

wireless communications industry. App developers use these technical standards, and specifically 

the interoperability they provide, to support a wide variety of innovation and—absent abuses—to 

create and promote competition. 

Standardization is particularly critical in today’s highly digitized markets. We stand today 

at a key inflection point: wireless communication technologies are proliferating throughout the 

U.S. and international economy. Developed industries, such as medical, automotive, health, 

manufacturing and finance, are each evolving to implement wireless technologies as the IoT takes 

shape. Simultaneously, new, highly connected industries and markets implementing wireless 

standards are just now being created. In each of these markets, “downstream” innovative 

technologies utilize these “upstream” standardized communication technologies to develop a 

panoply of unique and diverse products, and many of the Association’s members are the engine 

for such downstream development. 

There are many examples of how downstream developers draw upon the upstream 

standardized technologies to create new products and spur economic efficiency. Take for 
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instance Swisslog, an app developer that utilized standardized Wi-Fi to develop its unique 

“Smartlift” technology. Smartlift enables an indoor, localized GPS warehousing network to 

aggregate data from sensors on forklifts and directional barcodes placed around a building. Born 

from the technical standardization process, Smartlift allows warehouse managers to access realtime inventory reports on their phones or tablets, increasing productivity by as much as thirty 

percent.3

It is expected, and indeed essential, that technical standards will incorporate patented 

technologies contributed by standards participants. Companies that participate in standardization 

by voluntarily contributing their patented technologies see reward themselves. For instance, 

contributors may benefit from the increased product markets or increased licensing opportunities 

that can accompany the proliferation of a successful standard. 

But these benefits only accrue when technical standards setting processes are operating as 

intended. When the system is gamed, standardization processes carry significant competitive 

risks. See, e.g., Microsoft Corp. v. Motorola, Inc., 795 F.3d 1024, 1030-31 (9th Cir. 2015) 

(standardization “creates an opportunity for companies to engage in anti-competitive behavior”). 

Standard setting can involve close technical collaboration between horizontal and vertical market 

participants.4

 From a competition law standpoint, technologies selected for inclusion in a 

standard might be viewed as “winners” that are collaboratively “whitelisted” by industry 

 

3 See Swisslog, Smartlift, at http://www.swisslog.com/-

/media/Swisslog/Documents/WDS/03_WDS_Solutions/SmartLIFT_Brohure.pdf; Phil Van 

Wormer, How Bobcat Used SmartLIFT Technology to Boost Warehouse Performance, TotalTrax 

Inc. (Sep. 23, 2014, 6:00:00 AM) available at http://info.totaltraxinc.com/blog/how-bobcat-usedsmartlift-technology-to-boost-warehouse-performance. Swisslog’s customer, Bobcat, is an 

equipment company based in North Dakota that has deployed Swisslog’s technology in its 

warehouse and experienced a thirty percent increase in pallets per hour “with no inventory 

errors.” Id.

4 See, e.g., ETSI, ETSI Guidelines for Antitrust Compliance, §§ A-B (ETSI is “a forum in which 

competitors interact with each other. Therefore, the market-related rules apply to the decisions 

which are adopted by the Institute as a standardization body as well as with regard to the activities 

of Members within ETSI”; accordingly, “[t]he imposition of discriminatory and unfair conditions 

by the dominant company, to any categories of users, or any other company having contractual 

relationships with the dominant company, is abusive”), available at 

http://www.etsi.org/images/files/IPR/etsi%20guidelines%20for%20antitrust%20compliance.pdf. 
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participants. Conversely, technologies that are not selected might be viewed as “losers” that are 

collaboratively “blacklisted.” See Broadcom Corp. v. Qualcomm Inc., 501 F.3d 297, 314 (3d Cir. 

2007) (“standard[ization], by definition, eliminates alternative technologies”). 

Accordingly, thorny competition law issues may be presented where the patented 

technologies of certain companies are utilized rather than those of other companies. The 

companies whose technologies are utilized may have unchecked and significant market power to 

demand excessive royalties, exclude competitors, or otherwise take advantage of an industry’s 

collaborative agreement to make products in a certain way (i.e., in accordance with the standard) 

rather than another. See, e.g., Microsoft, 795 F.3d at 1030-31 (addressing “hold up” power of 

patents incorporated into standards); FTC, Brief of Amicus Curie in Support of Neither Party 3-4, 

Apple Inc. v. Motorola, Inc., Nos. 2012-1548 et al. (Fed. Cir. Dec. 14, 2012) (“[t]he problem of 

patent hold-up can be particularly acute in the standard-setting context, where an entire industry 

may be locked into a standard that cannot be avoided without infringing or obtaining a license for 

numerous (sometimes thousands) of standard-essential patents.”).

5

 

To address these competition law issues, many standard-setting organizations (SSOs) have 

 

5 See generally, e.g., Kai-Uwe Kuhn et al., Standard Setting Organizations Can Help Solve the 

Standard Essential Licensing Problem, CPI Antitrust Chronicle (Mar. 2013) (“SSOs constrain the 

license terms for SEPs because of the substantial market power necessarily enjoyed by the owner 

of an SEP in a successful standard. Moreover, this market power is achieved through the joint 

action of entities—the SSO members—that might be in competition with each other outside the 

SSO.”); Fiona M. Scott-Morton, U.S. Department of Justice, The Role of Standards in the 

Current Patent Wars (Dec. 5, 2012), available at https://www.justice.gov/atr/speech/rolestandards-current-patent-wars (“Standard essential patents achieve their status through the 

collective action at the SSOs. Harm can occur when companies come together and bestow 

market power on each other by agreeing on a common technology. FRAND commitments are 

designed to reduce occurrences of opportunistic or exploitative conduct in the implementation of 

standards. It is these commitments, along with other things, that make competition authorities 

more comfortable with these collective decisions.”); Renata Hesse, U.S. Department of Justice, 

Antitrust: Helping Drive the Innovation Economy (Feb. 5, 2016), available at

https://jtlp.law.ufl.edu/article/antitrust-helping-drive-the-innovation-economy (“Standard setting 

involves a group of competitors getting together and deciding upon a common technical standard 

incorporating a patented technology, ending competition between alternative technologies. Such 

patents become that much more valuable after adopters are locked into the standard and cannot 

easily revise the standard, or use an alternative standard. Naturally, this raises antitrust 

concerns.”). 
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adopted patent policies that require members to license the patents necessary for the 

implementation of the standard on FRAND terms. The FRAND promise—when kept—serves to 

minimize the competition law issues associated with standardization by providing that patent 

licenses will remain available to all market participants on terms that are reasonable and that 

promote a “level playing field” for competition.6 In other words, while no company has an 

obligation to commit its patents to a standard, where a company chooses to do so the FRAND 

promise acts as a crucial constraint on the abuse of market power associated with SEPs. As the 

Ninth Circuit has explained, the voluntary FRAND commitment “must be construed in the public 

interest because it is crafted for the public interest.” Microsoft, 795 F. 3d at 1052. After all, the 

FRAND commitment is designed to protect against the competitive abuses and consumer harm 

that standardization can otherwise enable. 

The public interest function of FRAND breaks down where a company violates its 

obligation to license on FRAND terms. While breach of FRAND may surely give rise to 

contractual or similar claims by particular parties, it may also involve significant competition law 

problems and violations. As the FTC has noted in addressing a prior matter to enforce 

competition law interests in connection with SEPs: 

While not every breach of a FRAND licensing obligation will give rise to 

[competition law] concerns, when such a breach tends to undermine the 

standard-setting process and risks harming American consumers, the public 

interest demands action rather than inaction from the Commission. 

In the Matter of Robert Bosch GmbH, 155 F.T.C. 713, 2013 WL 8364914, at *54 (F.T.C. Apr. 23, 

2013). In other words, the practice of SEP “hold up” is also a competition law problem. See, 

e.g., Broadcom, 501 F.3d at 314 (FRAND commitments serve as “important safeguards against 

 

6

 ETSI, Intellectual Property Rights Policy, ¶ 3.1 (“[T]he ETSI IPR POLICY seeks to reduce the 

risk to ETSI, MEMBERS, and “others applying ETSI STANDARDS . . . , that investment in the 

preparation, adoption and application of STANDARDS could be wasted as a result of an 

ESSENTIAL IPR for a STANDARD . . . being unavailable. In achieving this objective, the ETSI 

IPR POLICY seeks a balance between the needs of standardization for public use in the field of 

telecommunications and the rights of the owners of IPRs.”), available at

http://www.etsi.org/images/files/IPR/etsi-ipr-policy.pdf; ETSI, Guidelines for Antitrust 

Compliance, § B (noting that the competition interests addressed by the ETSI Policies are “aimed 

at allowing firms to compete on a level playing field.”). 
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monopoly power”; “the patent holder’s subsequent breach of that [FRAND] promise, is 

actionable anticompetitive conduct.”); Lotes Co. LTD. v. Hon Hai Precision Indus. Co. LTD., No. 

12-cv-7465, 2013 WL 2099227, at *5 (S.D.N.Y. May 14, 2013) (“conduct that undermines the 

procompetitive benefits of private standard setting may ... be deemed anticompetitive under 

antitrust law.”), aff’d on other grounds, 753 F.3d 395 (2d Cir. 2014).7 These anti-competition 

concerns have serious implications for developing industry. 

B. FRAND Abuses Are Particularly Injurious To Small Businesses 

The Association is committed to the protection of small businesses that innovate in 

technical standards (i.e., our members and potential members). The app ecosystem alone

contributes $143 billion to the U.S. economy, and these small business innovators created 

110,000 new American jobs from May 2014 to May 2016.8

 Technical standards are central to 

what these small businesses do; app innovators use them as a foundation for their own innovation 

and for further competition. 

The convergence of computing and communication technologies, driven by the app 

economy, is at an important moment as a diverse array of industries come together to build the 

IoT. As alluded above, the IoT is an encompassing technological approach where everyday 

products use the internet to collect, utilize and communicate data collected through standardized 

sensors. If its potential is fully realized, the IoT will enable improved efficiencies in processes, 

products, and services across every sector. The IoT’s seamless interconnectivity will utilize 

known and yet-to-be-developed industry standards, such as 5G, Wi-Fi, LTE, Bluetooth, and 

countless others. As such, reasonable licensing for SEPs is a “must have” for many small 

companies, such as our members, their customers and suppliers, who want to have a legitimate 

 

7 See also, e.g., William J. Baer, Assistant Attorney General for Antitrust, Remarks, 19th Annual 

International Bar Association Competition Conference, Florence, September 11, 2015, available 

at http://www.justice.gov/opa/speech/assistant-attorney-general-bill-baer-delivers-remarks-19thannual-international-ba (“A holder of patented technologies essential to implementing a standard 

(‘standard-essential patents’ or ‘SEPs’) may be able to take advantage of this lock-in by 

demanding extra rents ... [T]he bargaining power of implementers is far weaker after the standard 

is adopted and the patent holder’s market power, if any, is increased.”). 

8

 ACT | The App Association, State of the App Economy (Apr. 20, 2017), available at

http://actonline.org/2017/04/20/state-of-the-app-economy-report-outlines-growth-dynamism-ofthe-app-ecosystem/. 
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chance to compete in the IoT’s tech-driven areas. Honoring and upholding the FRAND promise 

is a foundation to allow technological standards to deliver on their potential to provide immense 

value to consumers by promoting interoperability while advancing healthy competition between 

innovators at all levels of the supply chain. 

Although some large corporations may be able to absorb the cost of FRAND abuses or to 

seek redress through litigation to prevent them, small business innovators who need reasonable 

access to SEPs in order to protect and defend their interests easily may find themselves 

financially barred from similar protections. Indeed, the FRAND abuser almost surely will have 

more resources than the majority of downstream entities who rely on the standardized technology. 

As a result, small business innovators faced with FRAND abuse may be forced to: 

• abandon their business plans involving standards altogether; 

• accept excessive royalty demands made by the SEP holders, and thus transfer the 

value of their own innovations to entrenched, upstream SEP holders; or 

• change their product’s design to avoid the standard (an impossible task for markets 

requiring interoperability). 

The net effect of SEP unchecked abuses would be the exclusion of the tens of thousands of 

American small businesses, not only from established markets, but also within the emerging 

vertical markets for IoT and 5G technologies. Therefore, the Association urges the court to 

consider the serious implications of this case for the future of industry, especially small 

businesses innovating in the 5G and IoT spaces. Thorough fact-finding on the FTC’s allegations 

provide just the opportunity for such consideration. 

IV THE FTC’S ALLEGATIONS SHOULD BE HEARD AND DECIDED ON THEIR 

MERITS AND BASED ON A ROBUST FACTUAL RECORD 

The FTC’s complaint alleges behaviors that the Association views as contrary to FRAND 

and detrimental to businesses and innovators throughout the supply chain. The Association 

believes that the detrimental effects will be particularly pronounced as to small and medium sized 

businesses. 

The FTC alleges the following behaviors as part of its competition law claims: 
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• Refusing to license suppliers (e.g., semiconductor or other component makers), see 

Compl. ¶ 147; 

• Demanding free cross-licenses, including to non-SEPs (or “distinguishing 

technologies”), id. ¶ 77 (d) (alleging that cross-licensing rates “failed to adjust 

[the] royalty rate to account for the value of [the licensee’s] cross-licensed 

patents”); and 

• Demanding royalties that are not based on the value of the patented technology, 

but instead upon downstream value created by downstream innovators, id. ¶ 77(b). 

These alleged behaviors implicate important industry and public interests that will ultimately 

affect the Association’s members and their customers. In particular, if the behaviors described in 

the FTC’s complaint were to be permitted, it would grievously harm industry and consumer 

interests in adapting current industries—and building new industries—that utilize technologies 

associated with 5G and IoT. Such behaviors stunt businesses that rely on—or will soon rely on—

an efficient, fair and balanced approach to licensing of wireless communication standards. 

First, the obligation to license all implementers is simply a consequence of a voluntary 

FRAND promise. SEP owners have long had notice—from intellectual property rights (IPR) 

policies, from Courts and from competition authorities—that the FRAND licensing promise 

entails exactly that obligation. As the Ninth Circuit has summarized: “Under these [FRAND] 

agreements, an SEP holder cannot refuse a license to a manufacturer who commits to paying the 

RAND rate”; rather, a FRAND obligation includes “requirement to negotiate licenses with all 

seekers.” Microsoft, 795 F.3d at 1031; accord Ericsson, Inc. v. D-Link Systems, Inc., 773 F.3d 

1201, 1227 1230 (Fed. Cir. 2014) (“[T]he licensor’s established policy and marketing program to 

maintain his patent monopoly by not licensing others to use the invention [is not relevant for 

SEPs]. ... Because of [the SEP holders] RAND commitment ... it cannot have that kind of policy 

for maintaining a patent monopoly.”).9

 This obligation is squarely implicated by the FTC’s 

 

9 See also, e.g., Microsoft Corp. v. Motorola, Inc., 696 F.3d 872, 884 (9th Cir. 2012) (FRAND 

commitment “admits of no limitation as to who or how many applicants could receive a license”);

ETSI Directives, Guide on Intellectual Property Rights, § 1.4 (all ETSI members and all third 
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allegations that exhaustive cross-licenses were required by the defendant for its own business as a 

condition of accessing licenses to its FRAND-encumbered SEPs. See Compl. ¶ 113. Our 

members and their customers—many of whom have no expertise with the details of upstream 

wireless technologies—should have the right to obtain fully licensed components from the 

companies that make those components and who are thus best positioned to assess and negotiate 

regarding the relevant patents. 

Qualcomm’s assertions that SEP owners having made a FRAND commitment nonetheless 

have “no duty under the antitrust laws to assist [their] competitors” mistake the issue. 

Mot. Dismiss 3 (citing Verizon Commc’ns Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 

398 (2004)). The case cited for that premise does not address voluntary promises to license on 

FRAND terms, or the fundamental competition law issues that, in the first place, created the need 

for such a promise. Moreover, Qualcomm has repeatedly acknowledged its obligation to grant 

licenses to competing chipset manufacturers,10 and its interest in acquiring exhaustive “pass 

 

parties have right “to be granted licenses on fair, reasonable and non-discriminatory terms and 

conditions in respect of a standard”), available at http://www.etsi.org/images/files/IPR/etsi-guideon-ipr.pdf; In the Matter of Motorola Mobility LLC and Google Inc., File No. 121 0120, Docket 

No. C-4410, 2013 WL 3944149, at *30 (F.T.C. July 23, 2013) (“By making a FRAND 

commitment, a SEP holder voluntarily chooses to license its SEPs to all implementers of the 

standard on fair and reasonable terms.”) (emphasis added); European Commission, Horizontal 

Guidelines, ¶¶ 285-287 (Nov. 1, 2011) (“In order to ensure effective access to the standard, the 

IPR policy would need to require participants wishing to have their IPR included in the standard 

to provide an irrevocable commitment in writing to offer to license their essential IPR to all third 

parties on fair, reasonable and non-discriminatory terms.”) (emphasis added), available at

http://eur-lex.europa.eu/legal-content/EN/ALL/?uri=CELEX:52011XC0114%2804%29. These 

FRAND-specific principles are consistent with the longstanding rule that a non-discriminatory 

licensing requirement entails that “similar licenses at uniform reasonable royalties must be 

available to all who desire them.” Hartford-Empire Co. v. United States, 324 U.S. 570, 574 

(1945) (emphasis added).

10 See, e.g., Full Transcript of Qualcomm’s 4Q05 Conference Call-Prepared Remarks (Nov. 16, 

2005 (“We have never refused to license our essential patent to any company to supply chips, 

handsets, infrastructure or test equipment. The number of companies licensed by Qualcomm that 

are actively marketing WCDMA chips demonstrates that Qualcomm has not attempted to exclude 

any chip set manufacturer.”) available at http://seekingalpha.com/article/4317-full-transcript-ofqualcomm-s-4q05-conference-call-prepared-remarks-qcom.
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through” licenses for its own products.11

Second, to require—as a condition to accessing SEP licenses—cross-licenses to third 

party intellectual property without compensation would unfairly allow an SEP owner to access 

and exploit downstream and differentiating innovation. The Association’s members are largely 

downstream innovators that develop next-generation technologies beyond the scope of patents 

covering the upstream, standardized level of the supply chain. It is abusive to use the market 

power associated with patents that were voluntarily committed to FRAND licensing (expressly to 

avoid the competition law problems otherwise applicable to standard setting) to thereafter 

mandate cross-licensing of valuable downstream technologies that were never standardized or 

committed to FRAND. Without a doubt, companies that utilize others’ patented, standardized 

technologies should be obligated to pay fair and reasonable compensation to SEP holders. But 

the Association’s members should never be required, as a condition to accessing industry 

standards, to transfer their proprietary, non-standardized and innovative advancements for free. 

Third, the obligation to base royalties solely upon the value of the patented invention has 

been a fundamental precept of US law for more than a century. In Garretson v. Clark, for 

example, the Supreme Court found that only consideration of the value of “the patented feature” 

is appropriate in assessing patent royalties. 111 U.S. 120, 121 (1884). The Court emphasized: 

“The patentee . . . must in every case give evidence tending to separate or apportion the 

defendant’s profits and the patentee’s damages between the patented feature and the unpatented 

features, and such evidence must be reliable and tangible, and not conjectural or speculative ...” 

Id. In other words, the value to be measured in assessing royalties “is only the value of the 

 

11 See, e.g., Qualcomm, New York Analyst Meeting 14 (Nov. 14, 2007) (“Qualcomm Lowers 

Overall IP Cost: Reduces royalty stacking – Qualcomm has proactively acquired exhaustive 

licenses from its licensees and others that allow Qualcomm to pass through a significant number 

of 3rd party intellectual property rights to Qualcomm's chipset/software customers; This reduces 

potential royalty stacking for Qualcomm customers because they do not need to pay additional 

royalties to the 3rd parties for us of the licensed patents in devices that include Qualcomm 

chips/software." available at 

http://files.shareholder.com/downloads/qcom/42381305x4115120x144394/ad9640c4-171c-4192-

bb41-78bbc6c64ecf/nyanalyst_11_14_07%20final%20steve.pdf.
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infringing features of an accused product,” Ericsson, 773 F.3d at 1226, because “[a]s with all 

patents, the royalty rate for SEPs must be apportioned to the value of the patented invention,” id.

at 1232.12 The Federal Circuit has explained 

When dealing with SEPs, there are two special apportionment issues that arise. 

First, the patented feature must be apportioned from all of the unpatented 

features reflected in the standard. Second, the patentee’s royalty must be 

premised on the value of the patented feature, not any value added by the 

standard’s adoption of the patented technology. These steps are necessary to 

ensure that the royalty award is based on the incremental value that the patented 

invention adds to the product, not any value added by the standardization of that 

technology. ... Just as we apportion damages for a patent that covers a small 

part of a device, we must also apportion damages for SEPs that cover only a 

small part of a standard. 

Id. at 1232-33. These requirements are common sense, and have been repeatedly reaffirmed. 

See, e.g., CSIRO v. Cisco Sys., Inc., 809 F.3d 1295, 1301 (Fed Cir. 2015) (reaffirming Garretson

requirement of valuation based solely on patented invention while recognizing that various expert 

methodologies may be used to attain such result). 

For SEPs, utilizing royalty methodologies that overstate the value of the patented 

invention is not simply a FRAND violation. It is an exploitation of the industry collaborations 

inherent in standard setting. The Association’s members and their industries cannot fairly 

develop under those circumstances. Violating a FRAND promise in order to undermine 

downstream innovation and control downstream competition entails a clear and present danger to 

 

12 The Association recognizes the narrow “entire market value” exception to royalty analysis, but 

believes that exception to be inapplicable to the issues raised here. For the exception to apply, the 

patent holder must establish that an infringing component provides the basis for consumer 

demand for the entire apparatus. LaserDynamics, Inc. v. Quanta Computer, Inc., 694 F.3d 51, 

67-72 (Fed. Cir. 2012). “It is not enough to merely show that the [patented technology] is viewed 

as valuable, important, or even essential to the use of the [product]. Nor is it enough to show that 

a [product] without [the patented technology] would be commercially unviable.” Id. Rather, the 

entire market value rule must not be applied absent evidence that the infringing feature “alone 

motivates consumers to purchase” the downstream product. Id. Applying the entire market value 

rule to collaborative industry standards violates both law and common sense; it is difficult if not 

impossible to imagine an applicable scenario where one single patented technology alone might 

be responsible for the “entire market value” of a device implementing a complex, industrydeveloped standard. Rather, here the implicated communications standards involve more than 

one hundred thousand patents declared to be applicable as per the ETSI database. The notion that 

any single patent might “alone motivate consumers to purchase” a laptop, smartphone or tablet is 

fanciful. 
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both businesses and consumers. 

In short, with its action against Qualcomm, the FTC has moved to ensure that FRAND 

promises have meaning and protect the competitive, public interests that FRAND was designed to 

serve. Regardless of the action’s ultimate outcome, the FTC’s allegations deserve a full and fair 

adjudication on their merits. Resolution of this action will provide important clarity to businesses 

and consumers regarding the effect of a FRAND commitment and conduct that is, or is not, 

acceptable under the competition laws. All stakeholders impacted by SEPs—particularly the 

small business innovators that ACT represents—will benefit as a result. 

V CONCLUSION 

Because SEP abuse is both a contractual and competition law problem impacting 

companies throughout the supply chain, and which has particularly problematic effects for the 

small technology businesses the Association represents, ACT supports the denial of Qualcomm’s 

motion to dismiss. 

Respectfully submitted 

Dated: May 12, 2017 SIDLEY AUSTIN LLP 

Eamon P. Joyce (pro hac vice application pending) 

Rahul R. Hari 

By: /s/ Rahul R. Hari 

Rahul R. Hari 

Attorneys for Amicus Curiae 

ACT | The App Association