DEFENDANT’S PROPOSED FINDINGS OF 

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CASE NO. 17-CV-220-LHK-NMC 

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KEKER, VAN NEST & PETERS LLP 

Robert A. Van Nest - # 84065 

rvannest@keker.com 

Eugene M. Paige - # 202849 

epaige@keker.com 

Justina Sessions - # 270914 

jsessions@keker.com 

633 Battery Street 

San Francisco, CA 94111-1809 

Telephone: 415 391 5400 

Facsimile: 415 397 7188 

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, New York 10019-7475 

Telephone: (212) 474-1000 

Facsimile: (212) 474-3700 

Attorneys for Defendant 

QUALCOMM INCORPORATED 

MORGAN, LEWIS & BOCKIUS LLP 

Richard S. Taffet (pro hac vice)

richard.taffet@morganlewis.com 

101 Park Avenue 

New York, NY 10178-0060 

Telephone: (212) 309-6000 

Facsimile: (212) 309-6001 

MORGAN, LEWIS & BOCKIUS LLP 

Willard K. Tom (pro hac vice)

willard.tom@morganlewis.com 

1111 Pennsylvania Avenue NW 

Washington, DC 20004-2541 

Telephone: (202) 739-3000 

Facsimile: (202) 739-3001 

MORGAN, LEWIS & BOCKIUS LLP 

Geoffrey T. Holtz (SBN 191370) 

gholtz@morganlewis.com 

One Market, Spear Street Tower 

San Francisco, CA 94105-1596 

Telephone: (415) 442-1000 

Facsimile: (415) 442-1001 

UNITED STATES DISTRICT COURT 

NORTHERN DISTRICT OF CALIFORNIA 

SAN JOSE DIVISION 

FEDERAL TRADE COMMISSION, 

Plaintiff, 

vs. 

QUALCOMM INCORPORATED, a Delaware 

corporation, 

Defendant. 

Case No. 17-cv-0220-LHK-NMC 

DEFENDANT QUALCOMM 

INCORPORATED’S PROPOSED 

FINDINGS OF FACT AND 

CONCLUSIONS OF LAW 

UNREDACTED VERSION OF 

DOCUMENT SOUGHT TO BE 

SEALED 

Date: January 4, 2019 

Time: 9:00 a.m. 

Dept.: Courtroom 8, 4th Floor 

Judge: Hon. Lucy H. Koh 

Trial Date: January 4, 2019 

Case 5:17-cv-00220-LHK Document 1310-1 Filed 01/14/19 Page 1 of 157
TABLE OF CONTENTS 

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MORGAN, LEWIS &

BOCKIUS LLP 

ATTORNEYS AT LAW

NEW YORK

FINDINGS OF FACT ..................................................................................................................... 1 

I. THE PARTIES .................................................................................................................... 1 

II. THE MOBILE COMMUNICATIONS INDUSTRY AND THE HISTORY OF 

QUALCOMM ..................................................................................................................... 1 

III. QUALCOMM’S LICENSE AGREEMENTS AND TERMS ............................................ 4 

A. Qualcomm’s Early CDMA Licenses Before It Even Had A Chip Business .......... 5 

1. 2G CDMA Licenses ............................................................................... 5 

2. CDMA License Agreements to Korean OEMs ...................................... 7 

B. The Founding of Qualcomm’s CDMA Chip Business ........................................... 7 

C. Qualcomm’s WCDMA Licenses Were Similarly Executed Before 

WCDMA Was Standardized and Before Qualcomm Sold WCDMA Chips .......... 8 

D. Chinese Framework Agreements ............................................................................ 9 

E. Qualcomm’s LTE Agreements ............................................................................. 10 

F. Qualcomm’s 5G Agreements ................................................................................ 12 

G. Caps On Royalties ................................................................................................. 13 

H. Specific OEM Licensing Negotiations.................................................................. 14 

I. Qualcomm’s Practice of Not Selling Chips to Unlicensed Companies Has 

Valid Business Justifications ................................................................................ 33 

J. Qualcomm’s Use of Strategic Funds..................................................................... 35 

IV. QUALCOMM’S DEVELOPMENT OF CELLULAR TECHNOLOGIES ..................... 37 

A. Cellular Standards and Standardization ................................................................ 37 

B. Modem Chips and Cellular Devices ..................................................................... 42 

C. Qualcomm’s Development, Standardization and Commercialization of Key 

Technologies ......................................................................................................... 43 

1. Qualcomm’s Research Approach and Investment in Innovation ......... 43 

2. Qualcomm’s Role in Creation of Ubiquitous High Speed 

Cellular Data ........................................................................................ 47 

3. Qualcomm’s Role in Pioneering 4G .................................................... 50 

4. Qualcomm’s Role Leading the Way to 5G .......................................... 53 

V. QUALCOMM’S PRACTICE OF LICENSING AT THE DEVICE LEVEL .................. 57 

A. Qualcomm’s Commitments to ETSI ..................................................................... 57 

B. Qualcomm’s Commitments to ATIS AND TIA ................................................... 59 

C. The Content of the Relevant 3GPP and 3GPP2 Standards ................................... 61 

D. Industry Practice of Device-Level Licensing ........................................................ 62 

E. Qualcomm’s Licensing Practices with Respect to Chipmakers ............................ 66 

VI. APPLE’S CHIP RELATIONSHIP WITH QUALCOMM ............................................... 67 

VII. COMPETITION IN THE MOBILE COMMUNICATIONS INDUSTRY ...................... 76 

A. The Mobile Handset Industry Is Thriving ............................................................. 76 

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B. Relevant Market Definition................................................................................... 77 

C. Qualcomm’s Success In Winning Chip Sockets Is Earned ................................... 81 

D. Competition Among Chip Makers Is Dynamic .................................................... 83 

E. Chip Prices Are Declining .................................................................................... 88 

F. Baseband Processor Quality Is Improving ............................................................ 90 

VIII. QUALCOMM PLAYS A SUBSTANTIAL ROLE IN EVOLVING WIRELESS 

TECHNOLOGIES THAT PROMOTE THE PUBLIC INTEREST ................................. 91 

CONCLUSIONS OF LAW........................................................................................................... 95 

IX. LEGAL STANDARDS GOVERNING THE FTC’S CLAIMS ....................................... 95 

X. THE FTC FAILS TO PROVE THAT THE CHALLENGED CONDUCT 

CAUSED HARM TO COMPETITION, WHICH IS FATAL TO EACH OF THE 

THEORIES UNDERLYING THE FTC’S SECTION 5 CLAIM ..................................... 99 

A. The FTC Must Establish That Challenged Conduct Caused Harm to 

Competition And It Must Make That Showing Based on Objective and 

Reliable Evidence.................................................................................................. 99 

B. The FTC Has Failed to Prove Its Theory of Anticompetitive Effects ................ 102 

1. The FTC Has Failed To Establish That Qualcomm Has 

Monopoly Power In The Alleged Relevant Markets ......................... 104 

2. The FTC Has Failed to Establish That Qualcomm’s Chip Supply 

Practices Harmed Competition in the Alleged Relevant Markets ...... 111 

3. The FTC Has Not Met Its Burden to Show that Qualcomm’s 

Practice of Device-Level Licensing Has Harmed Competition ......... 120 

4. The FTC has Failed to Meet its Burden to Show that “Strategic 

Funds” Provisions in Qualcomm’s Agreements with OEMs have 

Harmed Competition .......................................................................... 122 

5. The FTC has Failed to Meet its Burden of Showing that 

Qualcomm’s Agreements with Apple Harmed Competition ............. 123 

XI. THE FTC HAS FAILED TO PROVE ADDITIONAL ELEMENTS OF A 

SECTION 2 VIOLATION .............................................................................................. 126 

A. Declining to Sell CDMA or “Premium” LTE Modem Chips to Unlicensed 

Companies Is Not Exclusionary Conduct ........................................................... 126 

B. Declining to Grant Exhaustive Licenses for the Manufacture of CDMA or 

“Premium” LTE Modem Chips Is Not Exclusionary Conduct ........................... 128 

C. Use of Strategic Funds Provisions Did Not Exclude any Sellers of CDMA 

or “Premium” LTE Modem Chips ...................................................................... 129 

D. Conditioning Incentive Payments In Order to Enable Customer-Specific 

Investments to be Made Is Not Exclusionary Conduct ....................................... 129 

E. On the Record in this Case, linkLine Forecloses the Argument that 

Qualcomm’s Chip Supply Practice, Alone or in Combination with Other 

Conduct, Constitutes Exclusionary Conduct....................................................... 131 

1. The FTC Has Not Established an Antitrust Duty to Deal .................. 132 

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2. The FTC has not Established that Qualcomm’s “Course of 

Conduct,” Considered Together, Constitutes Unlawful 

Exclusionary Conduct ........................................................................ 135 

XII. THE FTC HAS NOT PROVED THE ELEMENTS OF A SECTION 1 

VIOLATION ................................................................................................................... 137 

A. The FTC has not Proved a Contract, Combination, or Conspiracy Intended 

to Restrain or Harm Trade................................................................................... 137 

B. The FTC has not Proved that the License Agreements with OEMs or 

Qualcomm’s Agreements with Apple were Unreasonable Restraints of 

Trade ................................................................................................................... 138 

XIII. THE FTC HAS NOT ESTABLISHED THE REQUIREMENTS OF A CLAIM 

UNDER THE “UNFAIR METHODS OF COMPETITION” PRONG OF 

SECTION 5 ..................................................................................................................... 138 

XIV. THE FTC HAS FAILED TO ESTABLISH THAT IT IS ENTITLED TO 

INJUNCTIVE RELIEF ................................................................................................... 139 

A. The FTC Has Not Demonstrated that an Injunction Is Needed To Remedy 

Ongoing Anticompetitive Harm .......................................................................... 141 

1. The FTC has failed to prove any injunctive relief is needed 

under relevant case law ...................................................................... 141 

2. The FTC has failed to prove any of its specific requested relief is 

needed to solve ongoing anticompetitive harms ................................ 143 

B. In the Alternative, the FTC’s Requested Relief is not Narrowly Tailored to 

the Markets or Harms at Issue in this Case ......................................................... 144 

1. Any relief requested by the FTC must be narrowly tailored .............. 144 

2. Each of the specific injunctions requested by the FTC is 

overbroad and not properly tailored, and in some cases, 

impermissibly vague .......................................................................... 146 

C. The FTC Has Not Demonstrated that Equity Warrants a Permanent 

Injunction ............................................................................................................ 148 

XV. CONCLUSION ............................................................................................................... 151 

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MORGAN, LEWIS &

BOCKIUS LLP 

ATTORNEYS AT LAW

NEW YORK

Qualcomm Incorporated (“Qualcomm”) submits the following proposed findings of fact 

and conclusions of law with respect to the trial of this action. 

FINDINGS OF FACT 

I. THE PARTIES 

1. Defendant Qualcomm Incorporated, founded in 1985, is a Delaware corporation 

with its principal place of business in San Diego, California. Qualcomm engages in the 

development and commercialization of foundational techniques and products used in mobile 

devices and other cellular products. Qualcomm’s operating segment relating to its chip and 

software business is called Qualcomm CDMA Technologies (“QCT”). Qualcomm’s operating 

segment relating to the licensing of its patents is called Qualcomm Technology Licensing 

(“QTL”). 

2. Plaintiff Federal Trade Commission is a federal administrative agency with its 

principal office in Washington, D.C. 

II. THE MOBILE COMMUNICATIONS INDUSTRY AND THE HISTORY OF 

QUALCOMM 

3. The cellular industry is a relatively young industry. It includes participants that 

contribute to the industry at one or more of a number of different levels. Some firms innovate, 

inventing the cellular technologies that make mobile communications and efficient use of 

spectrum possible. Some firms implement, manufacturing the user devices (e.g. handsets and 

tablets) that people use and the network equipment (e.g. base stations) that network operators 

such as carriers use. And, some firms manufacture components specified by implementers, such 

as power supplies and batteries for infrastructure equipment and modem chips, batteries, 

touchscreens, etc. for user devices. 

4. Qualcomm is an innovation company that makes its innovations available to other 

members of the industry by contributing them to technical specifications developed and approved 

by industry participants in global collaborative standards development partnerships, and licensing 

them for use in devices that implement cellular communications standards. Qualcomm also 

designs and supplies modem chips and other components of cellular devices. 

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5. Qualcomm was founded in July 1985 by Irwin Jacobs, Harvey White, Andrew 

Viterbi, Klein Gilhousen, Franklin Antonio, Dee Coffman and Andy Cohen, with each founder 

contributing roughly $1500 to start the new company. 

6. Cellular standards are often viewed as generational. The second generation of 

wireless standards is referred to as “2G,” the third generation as “3G,” the fourth generation as 

“4G” and the fifth generation as “5G.” 

7. At the time Qualcomm was founded in 1985, technology development in the 

cellular industry was moving from analog 1G systems introduced in the early 1980’s to digital 2G 

systems. 2G technology was developed, in part, to address the issue of how to improve the 

efficiency of use of cellular spectrum for voice communications, as available spectrum for 

cellular communications is limited and expensive. 

8. In Europe, GSM (Global System for Mobile), a standard based on TDMA (Time 

Division Multiple Access) technology, was being developed at that time. Qualcomm advocated a 

different approach to solving the problem of spectrum efficiency. That approach involved the use 

of CDMA (Code Division Multiple Access) technology. 

9. CDMA systems differ from TDMA systems in a number of advantageous ways. 

First, CDMA uses spreading codes, and not frequency, to separate channels. Each CDMA cell 

uses the same frequencies, avoiding the need for complicated and inefficient frequency planning 

in deploying cells (as happened in GSM networks). Second, CDMA spreads the signal to a much 

wider bandwidth, which makes the system more resistant to interference at a particular frequency. 

Third, CDMA enables soft-handoff in which the mobile device can communicate with two base 

stations simultaneously, reducing dropped calls and increasing signal quality by allowing the 

mobile device to aggregate signals sent over different paths. 

10. The industry was skeptical when Qualcomm first proposed CDMA. Starting in 

1989, Qualcomm faced a negative response from many industry participants who took the view 

that CDMA technology was technologically impossible or would not be cost-effective in a 

competitive cellular marketplace. 

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11. Qualcomm then began the work of convincing the industry otherwise through 

advocacy and demonstrations. 

12. There were no manufacturers willing to make CDMA equipment (handsets or 

infrastructure equipment) because they did not believe that it was going to be successful 

technically or commercially. As a first step, Qualcomm had to invest millions of dollars to build 

prototypes to demonstrate the system could be successful. This required Qualcomm to raise 

capital for investment. 

13. After early successful demonstrations, in the early 1990’s, six operators and 

equipment manufacturers, including AT&T, NYNEX Mobile, Ameritech Mobile 

Communications, Motorola, OKI Electric and PacTel Cellular, agreed to invest in Qualcomm’s 

research and development on CDMA. It was at this time that Motorola and AT&T entered into 

the first licensing agreements with Qualcomm, each contributing $12 million to Qualcomm for 

further development of CDMA technology. 

14. In July 1993, a standard based on Qualcomm’s CDMA technology was adopted by 

a North American standards development organization as IS-95. 

15. In order to continue to convince a skeptical industry to commercialize CDMA on a 

wide scale, Qualcomm entered the product business, in large part to demonstrate the value of its 

technology. In 1994, Qualcomm and Sony Electronics Inc. formed a joint venture general 

partnership named Qualcomm Personal Electronics (QPE), with 51% ownership by Qualcomm, 

to design, manufacture and sell cellular portable phones. 

16. Similarly, in December 1994, Qualcomm and Northern Telecom entered into an 

agreement to jointly manufacture CDMA infrastructure equipment complying with the IS-95 

standard. 

17. In October 1995, Qualcomm formed the Qualcomm CDMA ASIC division (later 

known as QCT) to continue the development and production of CDMA chips and attendant 

software. 

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18. In October 1995, Hutchinson Telecom in Hong Kong launched the first 

commercial CDMA system. 

19. By December 1998, the number of cdmaOne subscribers worldwide reached 23 

million. With its cellular technology gaining broader acceptance in the industry, Qualcomm 

began divesting most of its product businesses. 

20. In March of 1999, Qualcomm and Ericsson settled ongoing patent litigation. As 

part of the settlement, in a complex commercial deal, Qualcomm sold its infrastructure business 

to Ericsson and granted Ericsson a license for the manufacture and sale of handsets and 

infrastructure equipment practicing Qualcomm’s patents. 

21. In late 1999, Qualcomm agreed to sell to Kyocera Wireless Corp. substantially all 

the assets of its wireless portable phone business. This left Qualcomm with two main business 

lines: (a) the continued development of fundamental cellular technology, and (b) the supply of 

modem chips and other components for cellular devices. 

22. By 2000, and through the standardization of WCDMA and CDMA2000, CDMA 

became the multiple access technique for the air interface of 3G cellular networks around the 

world. 

23. These developments, in particular the adoption of WCDMA as the 3G standard on 

networks that had used GSM for 2G communication, reflected the recognition of the cellular 

industry, including historic proponents of GSM, that Qualcomm’s CDMA technology was 

superior to TDMA for the efficient use of spectrum, including for the purpose of sending and 

receiving large amounts of data over a cellular network. 

III. QUALCOMM’S LICENSE AGREEMENTS AND TERMS 

24. Historically, many major participants in the cellular industry, including firms such 

as Nokia, Motorola and Ericsson, were vertically integrated and participated at multiple levels in 

the industry – including as developers and suppliers of technology, handsets, chips and 

infrastructure equipment. As a result, they had incentives to maximize margins at the product 

supply level, even if at the expense of reduced royalty revenue opportunities. 

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25. Many major participants in the cellular industry today are primarily implementers 

of technology that make and sell user devices such as cellular handsets, and network equipment 

such as infrastructure equipment. Implementers also have incentives to maximize margins at the 

product supply level. 

26. Qualcomm, by contrast, as an innovation firm, has different incentives. 

Qualcomm and other innovation firms have incentives to promote competition that results in 

thriving downstream user device and network equipment sales market-wide. 

A. Qualcomm’s Early CDMA Licenses Before It Even Had A Chip Business 

1. 2G CDMA Licenses 

27. Qualcomm’s first business in cellular communications was developing and 

licensing its patented technologies. This is because Qualcomm has always sought to propagate its 

cellular technologies broadly, rather than keep them as proprietary. For this reason, Qualcomm 

has always sought to earn a return on its R&D efforts by obtaining patents on its inventions and 

making those inventions available to the industry though licensing those patents to others. 

28. Qualcomm entered into five license agreements before the first CDMA standard 

(IS-95) was finalized in 1995. 

29. Qualcomm entered into its first license agreement that licensed its CDMA 

technology (“CDMA License Agreement”) with AT&T in July 1990. 

30. Qualcomm entered into its second CDMA License Agreement on September 26, 

1990 with Motorola. 

31. These agreements provided for a royalty rate of 4% of the Net Selling Price (as 

defined in the agreements) of an end-user product to be paid to Qualcomm, and that the royalty 

rate payable by AT&T and Motorola would not exceed 80% of the rate contained in any license 

agreement with a third party to CDMA technology. 

32. AT&T and Motorola each also provided $12 million in funds to support 

Qualcomm’s development and early trials of CDMA-based systems. 

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33. At the time these first license agreements were entered into, Qualcomm held only 

nine patents. Qualcomm’s overall patent portfolio has had a compound annual growth rate of 

31% for the last twenty years. In 1999, the year that the WCDMA standard was adopted, 

Qualcomm received 510 patents. In 2015 alone, Qualcomm obtained nearly 9,000 new patents. 

34. After concluding the AT&T and Motorola agreements, Qualcomm began to 

negotiate and enter into license agreements for the use of its CDMA technology with handset 

manufacturers around the world. These agreements were generally titled Subscriber Unit License 

Agreement (“SULA”), and offered broad licenses to both SEPs and non-essential patents. 

Qualcomm entered into early SULAs with, among others, Nokia on April 9, 1992; Oki Electric 

Industry Co., on July 26, 1993; and Matsushita Communication Industrial Co., Ltd., on December 

20, 1993. 

35. The vast majority of the SULAs had the same general structure. The SULAs 

generally provided a license to certain Qualcomm patent rights to “make and have made, import, 

use, sell, offer to sell and otherwise dispose” of “Subscriber Units,” generally defined as complete 

end-user devices that implement one or more air interface standards (e.g. CDMA or WCDMA) 

identified in the agreement. The grant from Qualcomm generally covered both patents that are 

essential to the specified standards (referred to in the SULAs as “Technically Necessary IPR”) 

and patents that are not essential but are commercially valuable (referred to in the early SULAs as 

“Commercially Necessary IPR” and later as “Other IPR.”) 

36. In exchange for a license to Qualcomm’s patents, Qualcomm’s SULAs provided 

for monetary and non-monetary consideration from the licensee. The monetary value generally 

took two forms – The non-monetary 

consideration generally included . 

37. The 2G SULAs generally called for payment to Qualcomm of a running royalty at 

a rate of 6.5% to 5%, on a sliding scale, based on volume of licensed handsets sold. The running 

royalties are calculated 

 

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38. The patents included in the grant from Qualcomm and the cross-grant from the 

licensee were sometimes limited to those filed or acquired during a defined capture period or 

improvement period, meaning that only patents filed or acquired prior to the improvement or 

capture period are included in the grant, while patents filed or acquired after the improvement or 

capture period ends are not. In other cases, cellular SEPs related to the products implementing 

one or more of the licensed air interface standards were not subject to a capture or improvement 

period. 

2. CDMA License Agreements to Korean OEMs 

39.

40.

 The 

purpose of the lower rates for handsets sold in Korea was to promote the deployment in Korea of 

the world’s first CDMA large-scale commercial networks. 

B. The Founding of Qualcomm’s CDMA Chip Business 

41. Qualcomm’s chip business began in October 1995 when it formed its CDMA 

ASIC Products Unit. 

42. Before Qualcomm had a chip business, Qualcomm already had SULAs with the 

following 16 OEMs, which include all major OEMs of the period but for Ericsson: AT&T Corp., 

Motorola Inc., OKI Electric Industry Co., Ltd., Nokia Corp., Alps Electric Co., Ltd. Alpine 

Electronics Inc., Maxon Telecom Co., Ltd., Samsung Electronics Co., Ltd., 

Panasonic Mobile Communications Co., LTD., NEC Corp., Mitsubishi Electric Corp., Toshiba 

Corporation, Hyundai, Sanyo Electric Co., Ltd. and Fujitsu Limited. 

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43. Qualcomm’s typical royalty rates of 6.5-5% were established based on 

negotiations conducted at a time when Qualcomm was a new company, with untested technology 

that had not yet been standardized and before Qualcomm began to sell chips. 

44. When Qualcomm started its CDMA chip business, the licensing business was 

already established as the mechanism for Qualcomm to obtain return on its R&D investments. 

Qualcomm therefore had no reason to price the value of its intellectual property (IP) into its chips, 

and never did so. With the highly competitive modem chip marketplace and the fact that 

Qualcomm’s modem chip competitors can follow and leverage technology developed by 

Qualcomm and others without incurring any R&D expenses to develop it, it is not practicable 

today for Qualcomm to price its IP into the cost of the modem chip. 

45. Qualcomm’s first CDMA modem chip was shipped by QCT in 1996. 

46. There is no economically meaningful difference in the CDMA royalty rates in 

Qualcomm’s SULAs entered into prior to the time Professor Shapiro alleges Qualcomm gained 

monopoly power in the alleged market for CDMA modem chips, and those entered into after that 

date. 

C. Qualcomm’s WCDMA Licenses Were Similarly Executed Before WCDMA 

Was Standardized and Before Qualcomm Sold WCDMA Chips 

47. Qualcomm concluded a WCDMA patent license agreement with Philips 

Electronics N.V. (“Philips”) on February 26, 1998, almost two years before the approval of the 

WCDMA standard in 3GPP. 

48.

49. In 1999, before 3G was standardized, Qualcomm publicly stated that its 3G rates 

would be the same as its CDMA 2G rates. 

50. Qualcomm entered into 16 WCDMA-only licenses before the approval of the 

WCDMA standard. 

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51. Qualcomm continued to enter into SULAs specifically including licenses to 

practice patents essential to the 3G CDMA2000 and WCDMA standards in early 2000. As 

Qualcomm had announced they would, the 3G agreements reflected comparable terms to the 

preceding 2G agreements. 

52. Qualcomm shipped its first WCDMA modem chip in October 2001. This chip 

was not successful commercially due to its lack of support for backward compatibility with the 

GSM standard. 

53. It was not until 2004 that Qualcomm commercially shipped its first WCDMA 

modem chip that integrated backwards compatibility with GSM. 

54. Qualcomm entered into 22 licenses covering WCDMA before it shipped a viable 

WCDMA/GSM chip. 

55. There is no economically meaningful difference between Qualcomm’s WCDMA 

royalty rates, where it is not even alleged to have market power, and its CDMA royalty rates. 

56. There is no economically meaningful difference between the WCDMA royalty 

rates in Qualcomm’s SULAs entered into prior to the time that Qualcomm began selling 

WCDMA modem chips and those entered into after that date. 

D. Chinese Framework Agreements 

57. The Chinese government did not permit Qualcomm to enter its first license 

agreement with a Chinese company until after it executed a “Framework Agreement for CDMA 

Intellectual Property” (the “F/A”), dated January 28, 2000, with wireless operator China Unicom 

acting as a proxy for the Chinese government, and after a Memorandum of Understanding was 

negotiated and signed with the Chinese Ministry of Information Industry. 

58. In 2001, Qualcomm began entering into CDMA license agreements with Chinese 

licensees selected by the Chinese government. 

59.

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E. Qualcomm’s LTE Agreements 

60. Qualcomm entered into the first license for use of its 4G patents in non-3G 

subscriber units on February 23, 2006, with SOMA Networks, Inc. 

61. In December 2008, LTE Release 8 was frozen. 

62. Prior to the adoption of the LTE standard in December 2008, Qualcomm 

announced that for subscriber units that implement LTE but do not implement any 3G CDMA 

standard, it expected it would charge royalties under its SEPs through LTE Release 8 of 

approximately 3.25% of wholesale selling price. 

63. Qualcomm entered six LTE-only licenses effective before the date LTE Release 8 

was frozen – SOMA Networks, Inc., , , Exoteq Aps, LeadTek Research Inc., United 

Computer & Telecommunication, Inc. In 2010, Qualcomm produced its first LTE modem chips. 

64. enter a separate license to practice 

Qualcomm’s patents essential to the 4G standard in multimode subscriber units that include a 3G 

mode of operation. 4G SEPs 

multimode subscriber units 3G SULAs. 

4G standard 4G products that do not also 

include a CDMA or WCDMA mode of operation. 

65. Prior to the introduction of its first LTE chips in 2010, Qualcomm entered into 68 

WCDMA-only agreements, and 69 before 2011, the date Qualcomm is alleged to have obtained 

market power in what the FTC defines as “premium” LTE modem chips. The royalty rates of 

these agreements were not, and could not have been, influenced or impacted by purchases of, or 

potential purchases of, Qualcomm CDMA or “premium” LTE modem chips. 

66. There is no economically meaningful difference between the royalty terms in 

WCDMA-only agreements that were entered into prior to 2011 and those entered after that date. 

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67. From 2011-2018, Qualcomm did not sell any modem chips for handsets that 

supported only LTE capabilities. Rather, all LTE modem chips sold by Qualcomm were multimode chips, supporting both 2G and 3G capabilities in addition to LTE capabilities. 

68. Qualcomm’s 2G and 3G licensees were, as a result, able to buy multi-mode 

LTE/3G/2G modem chips from Qualcomm and did not need to enter into single mode LTE 

licenses in order to buy LTE modem chips from Qualcomm. 

69. Qualcomm has entered into 312 LTE-only licenses, and does not yet sell modem 

chips for handsets that support only LTE capabilities. The royalty rates of these licenses were not 

influenced or impacted by purchases of, or potential purchases of, Qualcomm’s CDMA or 

“premium” LTE modem chips. 

70. There is no economically meaningful difference between the LTE royalty rates in 

Qualcomm’s agreements with licensees, based on the number of Qualcomm’s modem chips that a 

licensee uses, if any. 

71. The royalty rates of the single mode LTE licensing agreements were not 

influenced or impacted by purchases of, or potential purchases of, Qualcomm CDMA or 

“premium” LTE modem chips. 

72. The royalty rates of multimode license agreements that included both a CDMA 

standard and LTE were not influenced or impacted by purchases of, or potential purchases of, 

Qualcomm’s CDMA or “premium” LTE modem chips. 

73. In 2015, after China’s National Development and Reform Commission (“NDRC”) 

concluded its investigation of Qualcomm, Qualcomm offered and entered into license agreements 

for complete end-user devices known as Chinese Patent License Agreements (“CPLAs”), 

pursuant to a Rectification Plan approved by the NDRC. 

74. The CPLAs provide a license only to Qualcomm’s Chinese patents that are 

essential to a specified cellular standard only for devices made and sold for use in China or made 

in China and sold for use in a jurisdiction in which Qualcomm does not own patents. 

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75. The CPLAs provide for a royalty rate for LTE devices of 3.5% of the Net Selling 

Price for non-branded devices or 3.5% of the Adjusted Net Selling Price (defined as 65% of Net 

Selling Price) for branded devices. The CPLAs provide a royalty rate for CDMA devices of 5% 

of the Net Selling Price for non-branded devices or 5% of the Adjusted Net Selling Price (defined 

as 65% of Net Selling Price) for branded devices. 

76. Some CPLAs are titled Complete Terminal Chinese Patent License Agreement 

(“CTCPLA”). 

77. The Rectification Plan provides that with respect to Chinese manufacturers that 

purchase modem chips from Qualcomm under a chip sales agreement, Qualcomm will not 

terminate the chip sales agreement or the supply of chips under that agreement based on a good 

faith dispute over the customer’s CPLA. The Rectification Plan further provides that Qualcomm 

will not terminate the customer’s supply of chips due to a breach of the CPLA without first 

obtaining a determination by a third party adjudicator that the breach is material, and if such 

breach is determined to be material, Qualcomm will give the customer at least 60 days to cure the 

breach. 

78. The Rectification Plan also provides that Qualcomm is not required to sell chips to 

entities that are not Qualcomm licensees. 

79. In 2015, Qualcomm revised the agreement it typically uses as a starting point for 

negotiations and renamed that template the “Complete Terminal Patent License Agreement” or 

“CTPLA” in place of the term “SULA” used previously. 

80. Through the CTPLA, Qualcomm grants rights to both essential and non-essential 

patents worldwide, excluding Chinese patents which are now typically covered by the CPLAs 

described above. 

F. Qualcomm’s 5G Agreements 

81. In November 2017, Qualcomm announced royalty terms for 5G: an effective 

running royalty rate for an SEP-only license of 3.25% of the selling price for branded multi-mode 

(3G/4G/5G) handsets and 2.275% for branded single-mode handsets, and royalty rates for 

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portfolio licenses including both SEPs and NEPs (non-essential patents) of 4% of the selling price 

for branded single mode handsets and 5% for branded multimode handsets. 

82. The 5G standard in Release 15 was approved in December 2017. 

83. In 2018, Qualcomm entered into agreements covering patents essential to the 5G 

standard and including the announced 5G running royalty rates with Chinese OEMs Xiaomi, 

Meizu and TCL, and a number of additional OEMs including , ASUStek and 

Sharp. In total, as of November 2018, such agreements were entered in 2018. 

84.

G. Caps On Royalties 

85. For more than 20 years, Qualcomm has negotiated and agreed to include in license 

agreements a maximum royalty provision that capped the royalty payable on handsets to a 

maximum amount, regardless of the selling price of the handset. Such a cap, in the amount of 

, was included in the Sharp SULA entered into April 30, 1997. 

86. Over the years, Qualcomm has also, on a voluntary basis and based on its 

monitoring of market conditions and discussions with licensees, conducted a voluntary royalty 

cap program that limits the royalty payable on handsets to a maximum amount, regardless of the 

selling price of the handset. That cap was for many years per handset. 

87. In early 2018, Qualcomm modified its voluntary royalty cap program for handsets 

to provide for a maximum handset selling price against which the royalty rate will be calculated, 

instead of capping the royalty itself. As of April 2018, the maximum handset selling price 

(generally the licensee’s wholesale selling price net of certain permissible deductions such as 

transportation, insurance, packing costs and other items), used for purposes of calculating the 

royalty owed to Qualcomm, is $400. Applying the $400 maximum handset selling price for 

royalty cap purposes, no handset subject to a 5% royalty rate yields payment of a royalty in 

excess of $20, and handsets subject to lower royalty rates have lower maximum royalty 

payments. 

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H. Specific OEM Licensing Negotiations 

1. Motorola/Lenovo 

88. Qualcomm and Motorola Inc. entered into a CDMA licensing agreement on 

September 26, 1990, five years before Qualcomm began selling modem chips. The agreement 

specified a 4% royalty on subscriber units (a rate that had been discussed by the parties as early as 

May 1, 1990) an upfront payment by Motorola of $12 million, and a cross-grant of Motorola’s 

patents to Qualcomm. 

89. At the time Motorola executed its agreement, Qualcomm was not selling CDMA 

chips. Thus, the royalty rates in the 1990 CDMA licensing agreement were not influenced or 

impacted by purchases of, or potential purchases of, Qualcomm CDMA or “premium” LTE 

modem chips. 

90.

 

91. The royalty rates in the 2003 WCDMA licensing agreement were not influenced or 

impacted by purchases of, or potential purchases of, Qualcomm’s CDMA or “premium” LTE 

modem chips. 

92.

93. The royalty rates in the 2003 license agreement were not influenced or impacted 

by purchases of, or potential purchases of, Qualcomm’s CDMA or “premium” LTE modem 

chips. 

94.

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95. The royalty rates in the 2007 license agreement amendment were not influenced or 

impacted by purchases of, or potential purchases of, Qualcomm’s CDMA or “premium” LTE 

modem chips. 

96.

97. In 2013, Lenovo used Qualcomm modem chips in of its devices and 

used MediaTek’s and others’ modem chips in of its devices. 

98. In 2014, Google, which had acquired Motorola Mobility three years earlier, sold it 

to Lenovo. 

99. In a letter dated June 5, 2014 from Eric Reifschneider and Cristiano Amon, 

Qualcomm provided Lenovo with assurances that its chip supply would not be interrupted, 

notwithstanding licensing disputes. 

100.

. 

101. The royalty rates in the 2016 license agreement were not influenced or impacted 

by purchases of, or potential purchases of, Qualcomm’s CDMA or “premium” LTE modem 

chips. 

102.

103.

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104. The royalty rates in the 2018 license agreements with Lenovo and Motorola 

Mobility were not influenced or impacted by purchases of, or potential purchases of, Qualcomm’s 

CDMA or “premium” LTE modem chips. 

105. Cristiano Amon, current President of Qualcomm Incorporated, assured 

Lenovo/Motorola Mobility at a December 2015 meeting that its chip supply would never be cut 

due to licensing negotiations. Neither Lenovo’s nor Motorola’s modem chip supply has ever 

been cut. 

106.

107.

108.

2. Blackberry 

109. Qualcomm and BlackBerry entered into a Subscriber Unit License Agreement for 

CDMA technology on March 22, 2000. 

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110. The 2000 Subscriber Unit License Agreement included a upfront fee 

and had a royalty rate of . 

111. BlackBerry did not report a royalty bearing sale of a handset with a Qualcomm 

modem chip under its license agreement 

112. Qualcomm and BlackBerry signed an Amendment to the Subscriber Unit License 

to cover worldwide handset sales and WCDMA technology on March 21, 2001, before 

Qualcomm shipped its first WCDMA modem chip. 

113. The royalty rates in the 2000 CDMA Subscriber Unit License Agreement and 

2001 WCDMA Amendment were not influenced or impacted by purchases of, or potential 

purchases of, Qualcomm’s CDMA or “premium” LTE modem chips. 

114. Qualcomm and BlackBerry signed another Amendment to the Subscriber Unit 

License Agreement for CDMA and WCDMA technology on January 26, 2011, effective as of 

October 1, 2010. 

115. The 2010 Subscriber Unit License Agreement Amendment (“2010 Blackberry 

SULA Amendment”) included a 

 and included a fixed term that would expire 

December 31, 2013 if the agreement was not earlier terminated by one of the parties. That date 

was later extended to December 31, 2016 in an amendment executed on December 31, 2012. 

116. The 2000 and 2001 agreements had no termination date. Blackberry could have 

continued under those earlier agreements rather than enter into the 2010 Blackberry SULA 

Amendment, and it resumed operation under those earlier agreements upon conclusion of the 

term of the 2010 Amendment. 

117. reported by Blackberry under its agreements with 

Qualcomm at the time the 2010 Amendment was entered into used a Qualcomm modem chip, and 

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 of the device sales 

used a Qualcomm modem chip. 

118.

119. John Grubbs, Senior Director of IP Transactions of Blackberry, admits he was 

aware of no threat ever made by Qualcomm to withhold software support or stop modem chip 

deliveries. 

120. The royalty rates in the 2010 Subscriber Unit License Agreement Amendment 

were not influenced or impacted by purchases of, or potential purchases of, Qualcomm’s CDMA 

or “premium” LTE modem chips. 

3. Huawei 

121. Huawei entered into a standard Chinese framework agreement covering CDMA 

patents (IS-95, CDMA and CDMA2000 Subscriber Units) with Qualcomm in 2003. 

122. The 2003 Subscriber Unit License Agreement was patterned on a framework 

agreement negotiated between Qualcomm and the Chinese government. 

123.

124. HiSilicon is wholly owned by Huawei and designs chips internally to reduce the 

costs of hardware design and to serve as a chip supplier to Huawei’s outside vendors. 

125.

126. In a Memorandum of Understanding, dated July 21, 2004, Qualcomm and Huawei 

agreed upon terms to govern commercialization by Huawei of products compliant with the 

WCDMA standards. 

127.

 

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128. Huawei did not need a WCDMA license to buy either LTE or CDMA modem 

chips from Qualcomm. 

129. The royalty rates in the 2003 CDMA Subscriber Unit License Agreement and 

2004 WCDMA Memorandum of Understanding were not influenced or impacted by purchases of, 

or potential purchases of, Qualcomm’s CDMA or “premium” LTE modem chips. 

130.

131. Huawei manufactured its own CDMA modem chips in-house with HiSilicon since 

at least 2016. 

132.

133.

134. By December 2014, Huawei was producing its own “high-end” LTE modem chips 

via HiSilicon to incorporate into its handsets. 

135. Huawei entered into a Subscriber Unit License Agreement covering patents 

essential to the LTE and WCDMA standards with Qualcomm in December 2014, effective July 1, 

2014. 

136.

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137.

138.

139. The royalty rates in the 2013 CDMA license extension and 2014 LTE and 

WCDMA license agreement were not influenced or impacted by purchases of, or potential 

purchases of, Qualcomm’s CDMA or “premium” LTE modem chips. 

140.

141.

142.

143.

144.

4. Nokia 

145. Qualcomm and Nokia entered into a Subscriber Unit License Agreement for 

CDMA subscriber units on April 9, 1992 (“1992 Nokia Agreement”). 

146. The 1992 Nokia Agreement provided a cross-grant to Qualcomm for Nokia’s 

Technically Necessary Patents. 

147. As of April 9, 1992, Qualcomm did not sell CDMA chips. 

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148. The royalty rates in the 1992 Nokia Agreement were not influenced or impacted 

by purchases of, or potential purchases of, Qualcomm’s CDMA or “premium” LTE modem 

chips. 

149. On July 2, 2001, the 1992 Nokia Agreement was amended and restated (“2001 

Nokia Agreement.”). 

150.

151. As of July 2001, Qualcomm did not yet have a WCDMA modem chip on the 

market. 

152. The royalty rates in the 2001 Nokia Agreement were not influenced or impacted 

by purchases of, or potential purchases of, Qualcomm’s CDMA or “premium” LTE modem 

chips. 

153.

154.

155. The LTE terms in the 2008 Nokia Agreement were accepted prior to the 

standardization of LTE, and before Qualcomm ever sold any LTE modem chip, let alone a 

“premium” LTE chip. 

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156. As part of the 2008 Nokia Agreement, 

157. Nokia first reported the sale of handsets incorporating Qualcomm modem chips in 

, when it reported handsets including a Qualcomm modem chip 

 

158. The royalty rates in the 2008 Nokia Agreement were not influenced or impacted 

by purchases of, or potential purchases of, Qualcomm’s CDMA or “premium” LTE modem 

chips. 

5. Sony Corp. 

159.

160.

 

161. In 1999, Sony began purchasing CDMA modem chips from Qualcomm. 

162.

163. Between October 2001 and February 2012, Sony operated a joint venture with 

Ericsson called Sony Ericsson Mobile Communications (SEMC), for its handset business. 

164.

165.

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166.

167. After the joint venture was dissolved in February 2012, 

168.

169. Qualcomm and Sony Mobile executed an interim Subscriber Unit License 

Agreement on May 3, 2012, effective as of February 16, 2012 (February 2012 Interim SULA), 

that would remain in force until the end of September 2012. 

170. The February 2012 Interim SULA had a royalty rate of 5% of Net Selling Price. 

Qualcomm and Sony agreed that a portion of the royalty rate, up to 3.25% of the Net Selling 

Price, was subject to retroactive adjustment if Qualcomm and Sony subsequently agreed to a 

royalty rate of less than 5%. 

171. The February 2012 Interim SULA provided that in the event the parties could not 

agree on the royalty rate, the issue would be determined by a neutral third party. 

172.

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173.

 

174.

175.

 

176. As of October 2012, Sony Mobile was an important modem chip customer of 

Qualcomm, and generated in chip revenue for the previous 12 months. 

177. Qualcomm and Sony Mobile entered into a Subscriber Unit License Agreement for 

CDMA and WCDMA technologies on November 12, 2012, effective as of October 1, 2012. 

178. The November 2012 SULA had a three year term and included a royalty rate of 

5% the Net Selling Price. 

179.

 

180.

181.

182.

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183.

184.

185.

6. Panasonic 

186. Qualcomm and Matsushita Communication Industrial Co., Ltd. (“MCI”), a 

subsidiary of Matsushita Electric Industrial Co., Ltd., entered into a Subscriber Unit License 

Agreement with Qualcomm in December 1993. 

187.

 

188. The royalty rates in the 1993 Agreement were not influenced or impacted by 

purchases of, or potential purchases of, Qualcomm’s CDMA or “premium” LTE modem chips. 

189. In March 2001, after more than 18 months of negotiations, Qualcomm and MCI 

(which subsequently changed its name to Panasonic Mobile Communications Co., Ltd. (“PMC”)) 

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signed an Amendment to the Subscriber Unit License Agreement to cover 3G technologies not 

included in the original agreement. 

190.

191. The lengthy negotiations leading to the 2001 amendment resulted in a number of 

terms that differed from the terms Qualcomm generally sought in a SULA. The cross-grant 

included only patents owned by PMC or patents otherwise originating with employees or agents 

of PMC that were owned by other Panasonic companies – not any other patents owned by the 

parent company Panasonic Corp. or other affiliates of Panasonic Corp. 

192. The royalty rates in the 2001 Panasonic Amendment were not influenced or 

impacted by purchases of, or potential purchases of, Qualcomm’s CDMA or “premium” LTE 

modem chips. 

193. In November 2002, Panasonic submitted a demand for arbitration after receiving a 

letter from Qualcomm . 

194. In September 2003, the arbitrator entered an interim order 

 

195.

196.

 

197. The royalty rates in the 2004 Panasonic Amendment were not influenced or 

impacted by purchases of, or potential purchases of, Qualcomm’s CDMA or “premium” LTE 

modem chips. 

198. In August 2009, Panasonic submitted a demand for arbitration, seeking a 

declaration . 

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199.

200.

201. In 2010 and 2011, Panasonic reported sales under its license agreements of 

handsets including modem chips purchased from Qualcomm as representing of its 

reported handset sales. 

202. The royalty rates in the 2011 Panasonic Amendment were not influenced or 

impacted by purchases of, or potential purchases of, Qualcomm’s CDMA or “premium” LTE 

modem chips. 

7. ZTE 

203.

 

204.

205.

were not influenced or impacted by purchases of, or potential purchases of, Qualcomm’s CDMA 

or “premium” LTE modem chips. 

206.

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207. ZTE did not need the LTE-only Agreement to buy any Qualcomm modem chips 

because Qualcomm has never sold an LTE-only modem chip. 

208.

impacted by purchases of, or potential purchases of, Qualcomm’s CDMA or “premium” LTE 

modem chips. 

209.

210.

211.

212.

by purchases of, or potential purchases of, Qualcomm’s CDMA or “premium” LTE modem 

chips. 

8. Samsung 

213. Qualcomm and Samsung entered into an Infrastructure and Subscriber Unit 

License and Technical Assistance Agreement for CDMA subscriber units on August 31, 1993 

(“1993 Samsung Agreement.”) The terms of the 1993 Samsung Agreement were determined 

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under the supervision of the Korean government, with the same terms also offered to other 

Korean OEMs designated by the Korean government – Maxon, Hyundai and 

214.

 

215. The royalty rates in the 1993 Samsung Agreement were not influenced or 

impacted by purchases of, or potential purchases of, Qualcomm’s CDMA or “premium” LTE 

modem chips. 

216. On March 29, 2004, Samsung and Qualcomm amended the 1993 Samsung 

Agreement, 

 The 2004 Samsung Amendment had a term of two 

years, with a unilateral right for Samsung to extend it. 

217. During the negotiation of the 2004 Samsung Amendment, Samsung was already 

licensed under the 1993 Samsung Agreement, and did not need the 2004 Samsung Amendment to 

be able to purchase modem chips from Qualcomm. 

218. The royalty rates in the 2004 Samsung Amendment were not influenced or 

impacted by purchases of, or potential purchases of, Qualcomm’s CDMA or “premium” LTE 

modem chips. 

219. Samsung exercised its right to extend the term of the 2004 Amendment. 

220. Qualcomm and Samsung further amended the 1993 Samsung Agreement effective 

January 1, 2009 (“2009 Samsung Amendment”). 

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221.

 

222.

223. Samsung was already licensed under the 1993 Samsung Agreement and 2004 

Samsung Amendment, and did not need the 2009 Samsung Amendment to be able to purchase 

modem chips from Qualcomm. 

224. Samsung and Qualcomm exchanged claim charts as part of the 2008 contract 

negotiations. Samsung’s chief negotiator Injung Lee admitted that the 2009 Amendment was 

negotiated in good faith, and that Qualcomm made no ultimatums. 

225. During their 2008 negotiations leading to the 2009 Amendment, Qualcomm 

assured Samsung that the negotiations would not affect chip supply. 

226. The royalty rates in the 2009 Samsung Amendment were not influenced or 

impacted by purchases of, or potential purchases of, Qualcomm’s CDMA or “premium” LTE 

modem chips. 

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227. On January 30, 2018, Qualcomm and Samsung entered into an amendment to the 

1993 Samsung Agreement (“2018 Samsung Amendment.”) The 2018 Samsung Amendment 

includes various cross grant terms, for which Qualcomm has agreed to pay 

The Amendment does not change the royalty rates from the 2009 Samsung Amendment, 

although 

. 

228. By the end of 2017, Samsung (through related corporate entities) had been 

manufacturing its own modem chips for several years. It made its own multimode LTE chips for 

its flagship phones, and its chips included CDMA capabilities. 

 

229. The royalty rates in the 2018 Samsung Amendment were not influenced or 

impacted by purchases of, or potential purchases of, Qualcomm’s CDMA or “premium” LTE 

modem chips. 

9. LG 

230.

231.

232. The royalty rates in the 1993 LG Agreement were not influenced or impacted by 

purchases of, or potential purchases of, Qualcomm’s CDMA or “premium” LTE modem chips. 

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233. On July 11, 2004, Qualcomm and LG amended the 1993 LG Agreement (“2004 

LG Amendment”). 

234.

Qualcomm submitted this dispute to arbitration and expressed to LG that it would 

meet all of LG’s modem chip supply requirements during the course of the arbitration. 

235.

236.

237. The 2004 LG Amendment agreed upon by the parties lowered the royalty rate to 

5% for subscriber units sold outside Korea that used a Qualcomm modem chip, lowered the 

royalty cap for handsets to $20 for subscriber units that used a Qualcomm modem chip, and 

changed the cross licenses to covenants not to assert. 

238. The royalty rates in the 2004 LG Amendment were not influenced or impacted by 

purchases of, or potential purchases of, Qualcomm’s CDMA or “premium” LTE modem chips. 

239.

240. Qualcomm did not sell any LTE modem chips until 2010, and has never sold 

single-mode LTE modem chips. The royalty rates in the 2007 LG Amendment were not 

influenced or impacted by purchases of, or potential purchases of, Qualcomm’s CDMA or 

“premium” LTE modem chips. 

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241.

I. Qualcomm’s Practice of Not Selling Chips to Unlicensed Companies Has 

Valid Business Justifications 

242. Qualcomm does not charge for the value of Qualcomm’s patented innovations in 

the price of the modem chips it sells. Qualcomm charges for the use of those innovations by 

OEMs through the device-level royalty it collects under its license agreements. 

243. Since it first began selling chips in the mid-1990s, Qualcomm has had a practice of 

not supplying commercial quantities of its baseband chips to device manufacturers that make 

standard-compliant devices without an appropriate license from Qualcomm authorizing them to 

make and sell such devices. 

244. Qualcomm’s chip sales practices are well known in the industry, and were well 

known to participants in SDOs before they adopted Qualcomm’s technologies into standards. 

Many of the participants in SDOs are Qualcomm’s licensees and chip customers. 

245. Qualcomm’s practice of not selling chips to unlicensed OEMs is based on the 

following considerations: 

(a) To promote equal treatment and ensure fair competition among handset 

OEMs. This practice ensures that OEMs are treated fairly and equitably 

because unlicensed OEMs would otherwise have a cost advantage over 

OEMs who took an SEP license rather than violate Qualcomm’s patent 

rights. Qualcomm’s licensees have complained to Qualcomm about the 

competitive disadvantage they face from unlicensed OEMs manufacturing 

phones. 

(b) To avoid legal risks and uncertainties, such as claims of exhaustion or 

implied licenses. 

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(c) To avoid helping companies who do not respect intellectual property rights. 

(d) To promote customer relations. Qualcomm does not want to be forced to 

bring infringement actions against its chip customers. 

(e) To ensure that Qualcomm can recover a return on its investments in 

fundamental systems-level R&D even while selling its chips at market 

prices, which do not reflect the value of Qualcomm’s systems-level 

technology. 

246. These business practices have not led Qualcomm to obtain supra-FRAND royalty 

terms from OEMs. 

247. As explained, Qualcomm’s typical licensing terms for 2G, 3G, 4G and 5G have 

been agreed to by multiple licensees before standardization of the relevant generation of cellular 

technologies and before Qualcomm sold any modem chips that support implementation of each 

standard by devices. Qualcomm has never raised its rate once its technology was adopted into a 

standard or Qualcomm began selling modem chips supporting the implementation of that 

technology by devices. 

248. The royalty rates of Qualcomm’s licensees do not vary based on the proportion of 

modem chips purchased from Qualcomm. 

249. Some licensees do not purchase modem chips from Qualcomm. There are 36 

licensees who entered into patent license agreements with Qualcomm, extending to sales of 

complete terminals, who never purchased baseband processor products from Qualcomm to 

incorporate into complete terminal units. The royalty rates of these licenses could not have been 

influenced or impacted by purchases of Qualcomm modem chips. 

250. Many licensees purchase only a small proportion of their modem chips from 

Qualcomm. 

251. Some licensees, such as Huawei and Samsung, are capable of, and engage in, selfsupply of modem chips. 

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252. Qualcomm has never interrupted the commercial supply of modem chips to a 

licensee in good standing during negotiations to amend, renew or otherwise revise an existing 

license agreement. 

253. Qualcomm has never interrupted the modem chip supply of a licensee in good 

standing for anything other than failure to pay for the chips. 

254. Under Qualcomm’s license agreements with OEMs, the royalty rate payable to 

Qualcomm is the same regardless of the source of chips used by the OEM in any particular 

royalty bearing device. 

J. Qualcomm’s Use of Strategic Funds 

255. Qualcomm sometimes enters into agreements to establish strategic funds or market 

development funds with OEMs for the mutual benefit of Qualcomm and the OEMs. 

256. Strategic funds are not royalty rebates or discounts. Rather, the funds are subject 

to various conditions and are only disbursed for the mutual benefit of both parties. 

257. A typical agreement providing for creation of a strategic fund or market 

development fund provides for Qualcomm and the OEM to pay money into a fund that is jointly 

administered by Qualcomm and the OEM to be spent on mutually beneficial marketing, 

promotions or technology and product development initiatives. 

258. Strategic or market development funds of this type are commonly used in the 

cellular and other industries. 

259.

260.

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261. Agreements providing for strategic funds or market development funds are of 

importance to Qualcomm because they can increase its brand recognition. Qualcomm does not 

have as large a marketing reach as many OEMs. 

262.

263.

264.

 

265. Of the approximately current and past handset licensees to Qualcomm’s 

cellular patents, Qualcomm has entered into a strategic or a market development fund that was 

negotiated contemporaneously with a licensing agreement with only : Blackberry, 

OPPO, , , Vivo, Xiaomi, 

Yulong and . 

266. Eight of these purchased 

 

267.

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IV. QUALCOMM’S DEVELOPMENT OF CELLULAR TECHNOLOGIES 

A. Cellular Standards and Standardization 

268. The various industry participants, including innovators, OEMs, infrastructure 

vendors, vertically integrated firms and wireless carriers (e.g. Verizon, AT&T) come together to 

develop standards for the cellular industry through their membership and participation in regional 

Standards Development Organizations (“SDOs”), such as the European Telecommunications 

Standards Institute (“ETSI”) in Europe, the Alliance for Telecommunications Industry Solutions 

(“ATIS”) and the Telecommunications Industry Association (“TIA”) in the U.S. 

269. Beginning with 3G standards, the members of SDOs have developed the Technical 

Specifications underlying 3G, 4G and now 5G standards through global collaborative standards 

development partnerships, such as the Third Generation Partnership Project (“3GPP”) (which 

developed the Technical Specifications for the 3G WCDMA, 4G Long Term Evolution (“LTE”), 

and now 5G New Radio (“NR”) standards) and 3GPP2 (which developed the Technical 

Specifications for the CDMA2000 standard). 

270. 3GPP and 3GPP2 are global collaborative partnerships of SDOs and other industry 

participants that develop cellular standards. The organizational partners of 3GPP are seven 

regional SDOs: ETSI, which is the leading cellular SDO; ATIS, the U.S. SDO; ARIB and TTC 

(both of Japan); CCSA (China); TSDSI (India); and TTA (Korea). The organizational partners of 

3GPP2 are the TIA from the U.S., and ARIB, TTC, CCSA and TTA. 

271. Firms participate in these global partnership projects through their membership in 

one or more of the SDOs that serve as “organizational partners” in the partnership project. 

272. The technical work of promulgating technical specifications occurs at 3GPP, and 

in the past, occurred also at 3GPP2. ETSI and the other regional SDOs then “transpose” (i.e. 

republish and adopt) the technical specifications of 3GPP and 3GPP2 and adopt them as standards 

in their respective jurisdictions. 

273. The working procedures of both 3GPP and 3GPP2 provide that each contributor of 

technology is to comply with the relevant IPR policy of the organizational partner of which it is a 

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member. Many of the technologies included in cellular communications standards are patented. 

SDOs – including each of the organizational partners in 3GPP and 3GPP2 – have adopted IPR 

policies that are intended to ensure that patents do not prevent implementers from practicing the 

standard. 

274. To ensure that 3GPP and 3GPP2 specifications are subject to the same licensing 

requirements worldwide, the operating rules and procedures of both 3GPP and 3GPP2 mandate, 

as a condition of being an organizational partner of each SDO, that the IPR policies of each of 

their organizational partners must be compatible with one another. 

275. Cellular standards specify the way that user equipment (such as a handset) 

operates within the network and communicates with infrastructure equipment. Cellular standards 

do not specify the operation of particular components within a handset or other user equipment. 

276. The process of developing standards begins with performance requirements 

expressed in terms of system-level performance objectives. For example, performance 

requirements have focused on issues such as desired higher download and upload data rates, 

lower latency, and improved data services in available spectrum. 

277. 2G cellular standards include the Global System for Mobile (“GSM”) and 

cdmaOne (also sometimes called “TIA/EIA/IS-95” or “IS-95.”) 

278. ETSI released the first version of GSM in 1990. GSM uses time division multiple 

access (“TDMA”) technology. 

279. Qualcomm invented commercial CDMA technologies, and originally authored the 

very first standard that included a CDMA air interface, and called it cdmaOne. 

280. TIA adopted cdmaOne as a cellular standard in 1993. TIA also adopted IS-95A 

and IS-95B as improvements to cdmaOne. These are considered 2G standards. cdmaOne uses 

code division multiple access (“CDMA”) technology. 

281. 3G cellular standards include the Universal Mobile Telecommunications System 

(“UMTS”) and CDMA2000, both of which use CDMA technology. The first UMTS standard 

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was finalized in 1999 by 3GPP and the first CDMA2000 standard was finalized by 3GPP2 in 

2000. 

282. 3GPP develops cellular technical specifications in “Releases” with new Releases 

being finalized approximately every 12-24 months. Each new Release contains new capabilities 

or features over earlier Releases. When a Release is finalized, all new features are functionally 

frozen and ready for implementation. Each 3GPP Release is self-contained, meaning that one can 

build a cellular system based on the set of frozen specifications in that Release. As such, 

Releases build upon and incorporate previous Releases, while adding new features. 

283. UMTS is an umbrella term for several CDMA-based 3G cellular air interfaces 

standardized within 3GPP: UTRA-FDD, commonly called Wideband CDMA (“WCDMA”), used 

worldwide; UTRA-TDD High Chip Rate, having little deployment; and UTRA-TDD Low Chip 

Rate, commonly called Time Division-Synchronous CDMA (“TD-SCDMA”), used primarily in 

China. Since the first release in 1999, 3GPP has standardized several improvements to the 

original WCDMA release, including: (1) High-Speed Downlink Packet Access (“HSDPA”), 

which refers to certain additional UMTS features included in Release 5; (2) High-Speed Uplink 

Packet Access (“HSUPA”), which refers to certain additional UMTS features included in 

Release 6; and (3) the combination of HSDPA and HSUPA, commonly called High-Speed Packet 

Access (“HSPA” and “HSPA/HSPA+”), which refers to certain additional UMTS features 

included in Release 7 and beyond. 

284. CDMA2000 was standardized by 3GPP2. Included within the CDMA2000 family 

of standards are CDMA2000 1x, often called 1xRTT, and High Rate Packet Data, often called 

1xEV-DO or EV-DO. Qualcomm proposed what became EV-DO in March of 2000. 3GPP2 

released EV-DO as TIA/EIA IS-856 in January 2002. 

285. In the United States, AT&T and T-Mobile operated GSM and WCDMA networks. 

Verizon and Sprint operated cdmaOne and CDMA2000 networks. Verizon has announced that it 

will retire its CDMA networks at the end of 2019. 

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286. All four major U.S. carriers (Verizon, AT&T, T-Mobile and Sprint) operate LTE 

networks, (which also encompasses the LTE Advanced, or “LTE-A,” standard), as their 4G 

standard. LTE uses Orthogonal Frequency Division Multiple Access (“OFDMA”) technology for 

downlink transmissions and single-carrier frequency division multiple access (“SC-FDMA”) 

technology for its uplink transmission. The LTE standard was standardized by 3GPP. The first 

iteration of the LTE standard was adopted in 2008 via 3GPP Release 8. 

287. The 5G NR standard is being standardized within 3GPP. The first iteration of the 

5G NR standard, Release 15, was frozen in 2018. 

288. In addition to introducing new technologies, each wireless standard has relied on, 

and often built upon, technologies developed in prior standards. For example, the air interface for 

the WCDMA design was inspired by the success of IS-95 and incorporates its basic features. As 

another example, innovations originally standardized in CDMA2000, such as Carrier 

Aggregation, were also relied on in the development of later releases of WCDMA as well as LTE 

and 5G NR. 

289. The bulk of 3GPP standardization work is done through working groups, which 

are charged with developing Technical Specifications. In advance of 3GPP working group 

meetings, companies submit documents known as TDocs. At the meetings, those TDocs are 

discussed. There are many types of TDocs. In some, but not all, cases, an “outcome” or “status” 

of the TDoc may be recorded. The use of “outcome” or “status” labels has varied by working 

group and over time. The FTC’s proposed expert, Michael Lasinski relies on these “outcome” or 

“status” labels to consider certain TDocs to be “approved contributions.” 

290. The 3GPP working group TDoc submission and review process, including 

“outcome” or “status” labels, was designed to facilitate written exchanges by industry participants 

with the goal of reaching a collaborative consensus as to standards. It was not designed to 

measure the quantity or quality of any company’s actual technical contributions to the standard. 

Use of the submission or approval process as a proxy for quantity or quality may both undercount 

a company’s substantive contributions and overcount their non-substantive contributions. There 

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is also no correlation between these counts and the extent a company has participated in 

generating the technical concepts incorporated into a standard, or the strength or weakness of a 

company’s patent portfolio. 

291. The substantive work of defining the requirements, features, capabilities and 

protocols of a new Release is completed over a roughly two-year timeframe. During this period 

of substantive work, many companies submit a large number of TDocs. The scope and level-ofdetail in the TDocs submitted during this substantive work varies. Some of the TDocs contain 

detailed cellular system designs based on years of R&D and include algorithms, descriptions, 

testing results and simulation descriptions. Other TDocs are administrative documents that 

contain no innovation at all. 

292. The “author” of a contribution often does not accurately depict the origination of a 

technical concept or solution. For example, a company may take another company’s TDoc, list 

itself as the “source” and resubmit the revised TDoc, or a company may require that it be listed 

first as the source on a TDoc as a condition for supporting the underlying concepts during 

working group discussions. As a result, author status is determined more by a need for 

inclusiveness and reaching a consensus than an accurate depiction of the source of the technical 

contributions a TDoc may contain. 

293. During this period of substantive work, an Editor or Rapporteur within each 

working group may be charged with compiling concepts from various TDocs into a Technical 

Specification based on the consensus of the group. This does not involve any formal votes. Even 

if an Editor or Rapporteur takes text from a TDoc and places it in the Technical Specification, 

that TDoc is not usually given an “outcome” or “status” label reflecting approval. Rather, the 

TDoc may be marked, for example, “Noted,” “Treated,” “Discussed,” or not marked at all. Mr. 

Lasinski’s analysis does not count TDocs bearing such statuses as “approved contributions.” At 

the end of this approximately two-year period, a Technical Specification is deemed “stable.” 

294. Once a Technical Specification is “stable,” the document enters a phase called 

“change control” where members may submit a form of TDoc known as a change request or 

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“CR.” Example categories of CRs include corrections and editorial modifications. CRs 

submitted during the change control phase are discussed and then either approved or rejected 

based on the consensus of the group. “Change control” requires closely tracking any changes to 

the “stable” Technical Specification. Therefore, it is necessary to formally note the status of 

approved CR TDocs with an “outcome” label such as “Agreed.” Mr. Lasinski’s analysis counts 

CRs bearing such statuses as “approved contributions.” While the change control process is a 

necessary administrative task, it occurs after the majority of the substantive development for a 

Technical Specification has been completed. Accordingly, CRs submitted during change control 

have little or no relationship to most of the innovations found in a Technical Specification. 

Moreover, sometimes a single type of contribution may be submitted in multiple CRs—for 

example, each one proposing the same change to a different portion of the Technical 

Specification. In that case, each of the CR’s will be separately credited as an “approved 

contribution” under Mr. Lasinski’s analysis. 

295. In the course of standards development, SDOs often require members to disclose 

and commit to offer licenses to certain patents to companies willing to accept a license on Fair, 

Reasonable and Non-Discriminatory (“FRAND”) terms to practice the standard. The scope of 

these disclosures and commitments to license often relate to a concept known as “essentiality.” 

As an example, ETSI’s IPR policy in section 15.6 defines “essential” as follows: 

“ESSENTIAL” as applied to IPR means that it is not possible on technical 

(but not commercial) grounds, taking into account normal technical practice 

and the state of the art generally available at the time of standardization, to 

make, sell, lease, otherwise dispose of, repair, use or operate EQUIPMENT 

or METHODS which comply with a STANDARD without infringing that 

IPR. For the avoidance of doubt in exceptional cases where a STANDARD 

can only be implemented by technical solutions, all of which are 

infringements of IPRs, all such IPRs shall be considered ESSENTIAL. 

296. As used above, “‘STANDARD’ shall mean any standard adopted by ETSI 

including options therein or amended versions ....” 

B. Modem Chips and Cellular Devices 

297. A modem (modulator/demodulator) chip, also referred to as a baseband chip, is 

one of several components in a mobile device that may enable cellular connectivity. The modem 

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chip supports modulation, the process of altering a signal so that it can be transmitted over a 

carrier frequency, and demodulation, which allows the signal to be extracted after transmission. 

298. A modem chipset (as distinct from a modem chip) is conventionally a set of chips 

that includes a modem together with an RF (radio frequency) chip and a PMIC (power 

management integrated circuit). 

299. The modem may also be included as a part of an integrated chip that includes 

additional elements such as an applications processor (“AP”) and a graphics processing unit 

(“GPU”). When the modem is combined with an application processor in a single integrated 

chip, that chip is typically called a system on a chip (“SoC”). 

300. A standalone baseband processor that does not include the AP, GPU or other 

functionality that is found in an SoC is referred to as a thin modem. 

301. Modem chips are used in devices, including feature phones, smartphones, and 

cellular-connected tablets that require cellular connectivity. 

302. The 3GPP and 3GPP2 cellular standards do not define how a user equipment such 

as a handset is constructed, whether particular functions are implemented in hardware or 

software, or even the components of a user equipment. Instead, these standards provide user 

device manufacturers broad discretion regarding how to construct a user device. 

C. Qualcomm’s Development, Standardization and Commercialization of Key 

Technologies 

1. Qualcomm’s Research Approach and Investment in Innovation 

303. Qualcomm invests in fundamental, early stage research, with a six to ten-year 

horizon before commercialization. This is high risk R&D that leads to valuable system level 

inventions and concepts that change the way cellular communications work. Qualcomm is able to 

remain ahead of its peers in the industry because it identifies future needs and challenges. 

304. Since the mid-90’s, Qualcomm has contributed and continues to contribute its 

breakthrough technologies to standards development, at the outset to contribute to the definition 

of next generation projects, and throughout as the generational standards evolve. Qualcomm has 

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been at the forefront of the technology development for CDMA, WCDMA, including all major 

releases, LTE, and now 5G. 

305. Qualcomm later devotes significant resources to researching and developing 

chipsets that support cellular communications. Qualcomm’s technologies are designed to further 

cellular communications; thus, the fundamental technologies developed by Qualcomm are widely 

commercialized by others in the wireless industry that implement Qualcomm’s standardized 

inventions – such as device and infrastructure manufacturers. 

306. Since it was founded, Qualcomm has made large investments in research and 

development. In total, it has invested over $50 billion in developing cellular communications 

technologies and chip solutions. 

307. Qualcomm’s investment in R&D increased from $340 million in 2000 to more 

than $1 billion in 2005, and to nearly 

. 

308. As of November 2018, Qualcomm had approximately 140,000 patents and 

pending patent applications. 

309. Qualcomm takes an end-to-end systems engineering approach to research. This 

end-to-end approach addresses the core network, base station, air interface and user equipment 

(such as a handset). Qualcomm identifies future applications and performance capabilities of 

wireless systems, develops technology required to meet identified future needs and then defines 

system requirements and architectures. Qualcomm’s research efforts include full-system level 

design work and development of prototypes. Such prototypes typically involve development of 

both infrastructure equipment and mobile devices to confirm and demonstrate developed 

concepts, and these prototypes are developed years before the chipsets are used in mass marketed 

devices. 

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310. By developing full system prototypes, Qualcomm has been able to present test 

results and provide demonstrations that have influenced the industry and led to the industry 

adopting technologies developed by Qualcomm. 

311. Based, in part, on this full system approach, Qualcomm has made many valuable 

submissions to 3GPP to advance 3G, 4G and 5G, proposing broad, system-level solutions to 

3GPP early in the standardization process. Qualcomm’s standards contributions have covered a 

diverse range of areas relevant to device makers that is unmatched by other large 3GPP 

participants. 

312. Qualcomm has often conducted “world’s first” demonstrations at the annual 

Mobile World Congress. Notable recent Qualcomm Mobile Word Congress demonstrations 

include: FLASH OFDM (2006), HSPA Multicarrier Demo (2008), LTE Full Compliance and 

Interoperability (2009), LTE-A Demo (including seamless forward handoff) (2010), 

Heterogeneous Network (“HetNet”) Trials with Operators in Full OTA Systems (2012), Licensed 

Assisted Access (“LAA”) (2013), Low Density Parity Check (“LPDC”) (2016), Gigabit LTE, 4x4 

MIMO and Millimeter Wave (2017). 

313. Qualcomm’s research efforts have generally been organized into projects under 

various code names. A project typically begins with a focus in a general area and evolves 

towards the standardization of innovations. For example, Project YODA began in 2001 with a 

focus on developing an OFDMA-based system. YODA eventually evolved to focus specifically 

on an OFDMA system to be standardized in 3GPP2 known as UMB. 

314. While organized within projects, Qualcomm’s research teams collaborated across 

projects to cross-pollinate ideas and develop the most promising concepts. For example, at the 

same time as Project YODA, Qualcomm was also engaged in Project Espresso focused on 

developing an OFDMA-based system to be standardized in 3GPP known as LTE. The YODA 

and Espresso teams met frequently, with the best ideas from both projects being contributed to 

both standards. 

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315. Qualcomm has obtained patents covering various concepts developed by 

Qualcomm researchers. 

316. All patents declared potentially essential to a standard are not equally valuable. 

All patents essential to a standard are not equally valuable. The total number of patents declared 

potentially essential to a standard by a company does not necessarily provide an indication of the 

number or magnitude of important or foundational patents held by that company. Likewise, the 

total number of patents essential to a standard owned by a company does not necessarily provide 

an indication of the number or magnitude of important or foundational patents owned by that 

company. 

317. Qualcomm has a broad patent portfolio with patents covering a large range of 

areas relevant to device makers for each of cdma2000, WCDMA, LTE and 5G NR, as well as 

non-standard essential patented technology. 

318. Qualcomm’s patented inventions relevant to WCDMA include important features 

that have advanced the state of wireless, for example, such as power control, soft handover, 

hybrid ARQ, fast link adaptation, discontinuous transmission and reception, quick paging, interRAT handover, MIMO and multi-carrier. 

319. Qualcomm’s patented inventions relevant to LTE include fundamental features, 

for example, such as uplink Single-Carrier Frequency Division Multiple Access (“SC-FDMA”) 

waveform and control channel structure, downlink OFDMA, LTE cell acquisition, carrier 

aggregation, MIMO, hybrid ARQ, fast link adaptation, discontinuous transmission and reception, 

interference cancellation, HetNets, VoLTE optimization, inter-RAT handover, circuit-switched 

fallback and LTE in unlicensed spectrum. 

320. Qualcomm’s patented inventions relevant to 5G NR include features, for example, 

directed to new 5G features such as scalable OFDM, flexible slot-based framework, LDPC 

channel coding, massive MIMO and mobile millimeter wave, as well as continued advances in 

areas such as OFDM and SC-FDMA waveforms, carrier aggregation, handover, MIMO, fast link 

adaptation, hybrid ARQ, use of unlicensed spectrum and HetNets. 

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321. Qualcomm’s patent portfolio has not diminished as some of Qualcomm’s older 

patents developed in connection with 2G and early 3G cellular systems have expired over time. 

Rather, through its research and development efforts, Qualcomm has obtained new, fundamental 

patents on basic advanced concepts that address new challenges in advanced 3G, 4G and 5G 

cellular systems. 

322. As an example, similar to Qualcomm’s now expired patents directed to CDMA 

cellular waveforms and power control techniques, Qualcomm has continued to develop patented 

technologies covering the uplink waveform in LTE – a technology known as SC-FDMA – as well 

as the basic control channel structure that makes up the uplink 4G LTE and 5G NR waveform. 

Qualcomm also developed patented technologies covering the downlink broadcast channel 

structure and accompanying cell search used in 4G LTE and 5G NR. Qualcomm’s newer patents 

also cover concepts and areas that did not exist in prior generations of cellular technology. As an 

example, Qualcomm has developed patented technologies behind advanced 3G, 4G and 5G 

deployments of Carrier Aggregation, MIMO, cellular access in unlicensed spectrum and HetNets, 

all of which play a large role in achieving the performance goals of LTE-A and 5G NR. 

2. Qualcomm’s Role in Creation of Ubiquitous High Speed Cellular Data 

323. Shared High-Capacity Data Channel. In 1996, state of the art cellular systems 

were primarily focused on voice transmissions. Qualcomm took the view that data was the future 

of cellular and sought to re-examine cellular from scratch. In November 1996, Qualcomm’s Dr. 

Roberto Padovani wrote a white paper entitled “A System Design for High Speed Packet Data,” 

recommending a complete re-design of cellular systems to support internet packet data instead of 

voice signals. Dr. Padovani recognized that a single high-speed data channel that was time 

multiplexed among active users was a much better fit for data than multiple lower-capacity 

channels dedicated to users. Dr. Padovani concluded based on analyzing the type of traffic likely 

to make up future cellular systems: 

What this is telling us is that you are better off applying the whole channel 

(frequency, time, and power) to a single user, on a temporary basis, rather 

than sharing the channel among several simultaneous users at lower rates. 

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That is if the application allows to do that. Obviously, for voice services, that 

is not feasible but for packet data it is. 

324. The concept developed by Dr. Padovani and behind Qualcomm project HDR are 

known today as a “common data channel” or “shared high-capacity data channel.” 

325. Qualcomm initially assigned a team of senior engineers to further develop the 

concepts described in Dr. Padovani’s paper and build a prototype to test the feasibility of 

implementing Dr. Padovani’s concepts. This research team evolved into a Qualcomm project 

referred to internally as “WARP” and “HDR” (for “high data rate”). On September 23, 1998, 

Qualcomm demonstrated HDR technology at the PCS ’98 show in Orlando, Florida and shortly 

thereafter conducted further live demonstrations showing data speeds of 2.4 Mbps, which was the 

level of DSL lines used for home internet service at the time, and 300 times faster than state-ofthe-art cellular data systems. 

326. 3GPP2 standardized Qualcomm’s HDR technology as an evolution of CDMA2000 

known as CDMA2000-1X-EVDO (EVolution, Data Optimized or “EV-DO.”) EV-DO introduced 

the first shared high-capacity data channel. This channel was designed to exist alongside existing 

CDMA2000 low-capacity dedicated channels. EV-DO also provided data at a lower cost per 

megabyte of data than existing 3G services. In UMTS Release 5, 3GPP likewise standardized an 

upgrade to WCDMA, introducing a high-speed downlink data channel shared among all users to 

exist alongside Release 99 low-capacity dedicated channels. This channel, the HSDPA channel, 

gives UMTS Release 5 its name. The first deployment of EV-DO occurred in 2002, three years 

ahead of the first deployment of HSDPA. 

327. 4G LTE and 5G NR continue to use the shared high-capacity data channel 

introduced by Qualcomm. Unlike in EV-DO and HSDPA in which the shared high-capacity data 

channel co-exists with low-capacity dedicated channels, in 4G LTE and 5G NR the shared highcapacity data channel is responsible for substantially all downlink connected mode user traffic. 

328. Since development of the HDR concept, Qualcomm has continued to research 

improvements to operation of the shared high-capacity data channel, for example, as part of 

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capacity data channel model to improve battery life and adapt to modern traffic such as Voice 

Over IP (VoIP) data packets. 

329. Discontinuous Reception in Connected Mode (DRX) and Semi-Persistent 

Scheduling (SPS). Two Qualcomm-developed technologies, Discontinuous Reception in 

Connected Mode (“DRX”) and Semi-Persistent Scheduling (“SPS”), substantially improve 

battery life and enable use of a shared high-capacity data channel to support VoIP for a large 

number of users. VoIP support is necessary to facilitate the decommissioning of 2G and 3G 

networks because the original release of LTE did not support voice calls, and instead relied on 

backward capability in 2G or 3G networks to support voice calls. This is known as circuitswitched fallback. Later versions of LTE support voice communications through a technique 

known as Voice over LTE (VoLTE), in which voice information is sent as VoIP packet data over 

the shared high-capacity data channel. 

330. Qualcomm’s DRX technology improves battery life – by 60 to 70% in some cases. 

The technology allows a mobile device to remain in “connected mode” but still power down the 

receiving circuitry at times. Before this technology, a mobile device in active communication (a 

connected mode) receiving a shared high-capacity data channel was required to listen to a 

scheduling channel every subframe, draining the battery. 

331. Qualcomm’s proposal faced substantial opposition within 3GPP because 

conventional wisdom was that a base station should schedule data for a mobile device on the 

shared high-capacity data channel as soon as it arrived at the base station. DRX in connected 

mode went against this conventional wisdom and forced the base station to wait. Based on 

Qualcomm’s system engineering approach, Qualcomm was able to demonstrate that DRX in 

connected mode did not materially impact overall system performance, while still improving 

battery life. 

332. Qualcomm’s SPS technology addresses another disadvantage of existing shared 

high-capacity data channels, as it related to VoIP in particular, which was that the scheduling 

channel had limited capacity. When transmitting small pieces of data, such as VoIP packets, the 

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scheduling channel could not schedule enough simultaneous users to use the available data 

capacity. Rather than expand the scheduling channel and decrease available data capacity, 

Qualcomm developed SPS, which uses a single scheduling message to give a recurring data 

assignment. While eliminating some signaling, SPS also supports more high quality voice 

communications by allowing scheduling messages for quick retransmissions of packets originally 

sent without a scheduling message that were received with errors. 

333. Qualcomm submitted DRX and SPS for standardization both as part of UMTS 

Release 7 and the original LTE release, Release 8. 3GPP adopted the concepts in both. DRX and 

SPS have also been standardized as part of the initial 5G NR release, Release 15. 

334. Qualcomm’s patent portfolio includes patents directed to the basic DRX and SPS 

concepts that are essential to each of UMTS Release 7, LTE Release 8, and 5G NR Release 15, 

and all subsequent releases of each. 

3. Qualcomm’s Role in Pioneering 4G 

335. Qualcomm has conducted research and development in multiple access techniques 

other than CDMA for many years. While 3G standards were still being developed, Qualcomm 

and Flarion Technologies (Flarion) (which became part of Qualcomm in 2006) were actively 

researching new multiple access techniques for cellular systems based on OFDMA and SCFDMA waveforms. Qualcomm recognized the potential of these techniques early and developed 

key technologies related to them. Around 2001, Qualcomm invested in research and development 

related to the use of OFDMA in Project YODA. 

336. Project YODA ultimately evolved into standardization of UMB, a proposed 4G 

standard that shares a number of technical characteristics with LTE. Qualcomm developed a 

complete UMB prototype that was shown at the CTIA Wireless 2007 convention over a year 

before the LTE specification was completed. As discussed above, the Project YODA and Project 

Espresso teams met frequently, with the best ideas from both projects being contributed to both 

UMB and LTE standardization efforts. Many of the concepts from Project YODA were also 

standardized in LTE Release 8. 

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337. In 2004, and in parallel with its 3GPP2 efforts, Qualcomm focused on the 

development of the next generation 3GPP standard. These internal projects included Projects 

Espresso and Frappuccino. Leveraging and improving Dr. Padovani’s HDR system, Qualcomm 

developed a complete cellular system and proposed various innovations found in LTE Release 8. 

Qualcomm’s 4G development efforts included the development of a full LTE prototype known as 

“Slimcat.” Qualcomm demonstrated the first LTE-compliant system at the 2009 Mobile World 

Congress Convention using Slimcat. 

338. In addition to contributions to LTE Release 8, several key concepts from Project 

YODA and Project Frappuccino are defining features in LTE-A in Releases 10, 11 and 12, 

including Carrier Aggregation, MIMO, cellular access in unlicensed spectrum and HetNets. 

339. SC-FDMA Waveform. The 4G LTE standard, starting in Release 8, adopts two 

new waveforms: SC-FDMA for uplink communication from the mobile device to the base station, 

and OFDMA for downlink communication from the base station to the mobile device. 

340. The use of SC-FDMA, as opposed to OFDMA, for the uplink greatly decreases the 

consumption of battery power by the mobile device and obviates the need for expensive power 

amplifiers or larger batteries, both of which help make LTE technically and commercially viable, 

as well as increasing the handset range and performance in manageable form factor. LTE cell 

phones cannot transmit data or voice signals using LTE without continuously using Qualcomm’s 

SC-FDMA invention. 

341. Qualcomm’s patent portfolio includes patented inventions directed to the basic 

structure of the SC-FDMA waveform as implemented in LTE. These patents are essential to LTE 

Release 8 and all subsequent releases. 

342. 5G NR deployments will continue to use Qualcomm’s fundamental SC-FDMA 

technology, while also providing support for regular OFDMA waveforms for the uplink 

transmissions based on the type of uplink grant and resource allocation types. 

343. LTE Cell Acquisition. A basic problem in any cellular system is how a mobile 

device initially detects and synchronizes with a base station. This is called “cell acquisition.” 

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Unlike UMTS, where every cell uses signals of the same bandwidth, LTE supports many 

different bandwidths and gives rise to fundamentally different challenges. 

344. Qualcomm designed a set of synch and broadcast channels enabling efficient cell 

acquisition and reducing the time and power consumption required for the user device to obtain 

necessary information about the base station, including cell ID and system bandwidth. 

Qualcomm developed these concepts as part of Project Espresso. Qualcomm submitted 

contributions to 3GPP broadly defining several channels, including the structure of the synch and 

broadcast channels used for cell acquisition/identification. 3GPP ultimately incorporated the 

features of these contributions in standardizing LTE Release 8. 

345. Qualcomm’s patent portfolio includes inventions covering the basic structure of 

the LTE synch and broadcast channels and the cell acquisition procedure. These patents are 

essential to LTE Release 8 and all subsequent releases. 

346. LTE Control Channels. Well-designed and efficient feedback mechanisms are a 

distinguishing feature of LTE that allow many user devices to communicate vital information to 

the base station in a timely manner using only a small amount of uplink time-frequency resources. 

The Physical Uplink Control Channel (“PUCCH”) carries uplink control information. Every 

resource block that the PUCCH uses is one less that can be used for transmitting data. Thus, it is 

very important that the PUCCH be as efficient and compact as possible while ensuring a high 

level of reliability for the crucial control information. 

347. The PUCCH consists of several different formats. In particular, there are Formats 

1, 1a, 1b, 2, 2a, 2b and 3. Each format transmits various types and amounts of control 

information, supporting basic features such as power control and error retransmission, as well as 

advanced features such as MIMO and Carrier Aggregation. 

348. The PUCCH design is a novel aspect of LTE and is based on spread 

spectrum/CDMA concepts, as well as SC-FDMA. Qualcomm invented the PUCCH structure and 

design, including all the different PUCCH Formats (including the later Format 3). 

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349. Qualcomm’s patent portfolio includes patented inventions covering the basic 

PUCCH structure and design, including various patents directed to each PUCCH Format 

(Formats 1, 1a, 1b, 2, 2a, 2b and 3). These patents are essential to LTE Release 8 and all 

subsequent releases. 

4. Qualcomm’s Role Leading the Way to 5G 

350. Many of Qualcomm’s innovations from HDR, Espresso, YODA, Frappuccino, 

Coconut (another Qualcomm R&D project), and several other projects laid the foundation for 5G 

and LTE-A. In 2012, Qualcomm began transitioning resources to Project Pentari to develop the 

next generation cellular system. Project Pentari continues today developing a complete 5G 

solution. In addition to Project Pentari, Qualcomm continues to produce innovations relevant to 

5G through its work in Project Skyber for mmWave and Project Meridian for further developing 

use of unlicensed spectrum. 

351. Carrier Aggregation. The original LTE Release, Release 8, did not meet the 

performance goals set for 4G cellular known as International Mobile TelecommunicationsAdvanced (“IMT-Advanced”) set by the International Telecommunications Union 

Radiocommunication Sector (“ITU-R.”) It was not until LTE Release 10 (LTE-A) that additional 

standardized features allowed LTE to meet the performance goals. 3GPP submitted LTE Release 

10 to ITU-R as its IMT-Advanced candidate. Carrier aggregation is a critical feature of LTE-A 

and is a major reason for the higher data rates available in newer releases of the LTE standard. 

352. Carrier aggregation enables a single user to transmit data packets to or receive data 

packets from a base station using more than one carrier frequency (called a “carrier.”) A user 

whose device uses two carrier frequencies can achieve roughly double the data rate compared 

with a user device that uses a single carrier frequency. In addition, because carrier aggregation 

allows the same user to simultaneously receive and transmit signals even on widely spaced 

frequency bands, network operators can more effectively use the bands allocated to them, even if 

those bands are not contiguous. 

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353. Network operators must make the most efficient use of limited resources. 

Network operators often need to bid billions of dollars for licenses to particular frequency 

allocations. Due to their cost and the segmented nature of spectrum license bidding, operators are 

often unable to secure spectrum “real estate” holdings that are in the proverbial best 

neighborhoods or on contiguous properties. To use those scattered and sometimes less desirable 

spectrum holdings in the most efficient way possible, operators rely on carrier aggregation 

technology. 

354. Qualcomm was on the leading edge of developing carrier aggregation technologies 

prior to their deployment in modern networks. As one example, carrier aggregation in LTE is 

rooted in the “Multi-carrier technology” found in EV-DO Rev. B. Qualcomm has developed 

Carrier Aggregation technology as part of Projects WARP, Wizard, YODA, Espresso and 

Frappuccino. 

355. The prevalence and importance of carrier aggregation is expected to continue 

quickly expanding as existing LTE network deployments mature and network operators deploy 

next generation (i.e., 5G) networks with more spectrum, including in unlicensed bands (e.g., 5 

GHz), bands with hybrid licensing (e.g., 3.5 GHz), and millimeter wave bands (e.g., 28 GHz and 

above). 

356. Carrier Aggregation concepts developed by Qualcomm are a key organizing 

principle for 5G systems: the user device will have access to and commonly use multiple bands in 

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both directions to achieve high capacity and reliable coverage, while efficiently utilizing the 

cellular networks’ diverse spectral holdings. 

357. Qualcomm’s patent portfolio includes patented inventions directed to the basic 

Carrier Aggregation concept, as well as the control signaling, agility and mobility, and power 

control concepts necessary to implement Carrier Aggregation. These patents are essential to LTE 

Release 10 and all subsequent releases. 

358. Use of Unlicensed Spectrum and HetNets. In 2006, Qualcomm created Project 

Coconut to investigate using unused television spectrum. In 2012, Qualcomm revisited these 

concepts and began investigating using carrier aggregation in unlicensed spectrum, i.e., the same 

frequencies used by Wi-Fi, baby monitors, and cordless phones. By 2013, Qualcomm 

demonstrated carrier aggregation in unlicensed spectrum at Mobile World Congress. The 

industry was skeptical about using cellular in unlicensed spectrum because of fear that it would 

interfere with existing communications in those frequency bands. To address this skepticism, 

Qualcomm created a test environment that isolated multiple Wi-Fi devices, as well as Qualcomm 

prototypes together to show that, with proper protocols, the Qualcomm prototypes did not hurt the 

performance of the Wi-Fi devices. Qualcomm developed a complete protocol for using 

unlicensed spectrum, initially named LTE-Unlicensed (“LTE-U”), that was later standardized as 

Licensed Assisted Access (“LAA.”) LAA allows gigabit LTE speeds and provided an 

opportunity for carriers to offer higher data rates without the expense of buying scarce licensed 

spectrum from the FCC. 

359. HetNet is a term used to describe a cellular network that incorporates both 

traditional macrocells and smaller cells. Traditional cellular networks consist of a network of 

base stations whose coverage areas are known as cells. These base stations are generally tower 

mounted with high-gain antenna arrays and large transmission power (e.g., 40 Watts), and are 

thus capable of covering large areas. These “macrocells,” as they are known, are positioned at 

relatively large distances to cover the needed geographical area. Network operators are 

increasingly looking to densify their networks by adding additional cells. Depending on their size 

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and power level, these cells may include “macrocells,” “microcells” and “femtocells.” As shown 

in the figure below, macro and microcells are usually deployed by the network operators in a 

planned fashion while femtocells are usually deployed in an ad hoc fashion by end users in 

residential environments. Because microcells and femtocells are much smaller and lower power, 

the hurdles and costs associated with these types of base stations are considerably less. 

360. Adding small cells to the network requires addressing potential complications. 

Each added cell can have a substantial effect on the overall network, both with the increased 

capacity it brings, as well as the interference it generates. This effect is even larger when the 

ultra-dense small networks being envisioned for the future are considered. Interference, if not 

addressed, will drastically reduce the capacity benefits of deploying small cells. 

361. Qualcomm has been a leading researcher in the area of HetNets. As part of Project 

YODA, Qualcomm developed protocols to manage service and user connections between 

adjacent cellular base stations with overlapping coverage areas. Adapting HetNet techniques for 

LTE was also a focus of Project Frappuccino between 2008 and 2012. Qualcomm was the first 

company to successfully demonstrate HetNets at Mobile World Congress 2011, followed by fullsystem demonstrations with network operators in 2012. Qualcomm continues to research 

HetNets today. 

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362. 5G deployments will continue the ongoing trend from LTE and become 

increasingly heterogeneous, including through the introduction of mobile mmWave technologies. 

5G NR designs will not only enable the use of higher frequencies in mid-band spectrum for 

macro/small cell deployments, but it will also bring new mmWave opportunities at spectrum 

bands above 24 GHz for mobile broadband. These mmWave deployments are expected to 

proliferate the number of small cells (since mmWave signals have shorter range) and as a result, 

will rely increasingly on Qualcomm’s HetNet innovations to provide technical solutions to 

interference issues that will be encountered when combining traditional macrocells and 5G small 

cells. 

363. Qualcomm’s patent portfolio includes patented inventions directed to LAA 

channel arrangements and HetNet technologies such as basic interference coordination concepts. 

These patents are essential to later releases of LTE that standardized LAA and HetNets. 

V. QUALCOMM’S PRACTICE OF LICENSING AT THE DEVICE LEVEL 

364. Qualcomm has made commitments to license its SEPs essential to 3GPP and 

3GPP2 cellular standards on FRAND terms and conditions. These commitments were made 

pursuant to, among others, the respective IPR policies for ETSI, ATIS and TIA. These IPR 

policies govern the scope of the commitments. 

365. The supply chain for products implementing cellular standards, along with end 

user sales, reaches across many jurisdictions, and SEP holders are located all over the world and 

own SEPs issued by many different jurisdictions. 

A. Qualcomm’s Commitments to ETSI 

366. ETSI’s IPR policy in section 6.1 states: 

When an ESSENTIAL IPR relating to a particular STANDARD or 

TECHNICAL SPECIFICATION is brought to the attention of ETSI, the 

Director-General of ETSI shall immediately request the owner to give within 

three months an irrevocable undertaking in writing that it is prepared to grant 

irrevocable licences on fair, reasonable and non-discriminatory (“FRAND”) 

terms and conditions under such IPR to at least the following extent: 

- MANUFACTURE, including the right to make or have made 

customized components and sub-systems to the licensee's own 

design for use in MANUFACTURE; 

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- sell, lease, or otherwise dispose of EQUIPMENT so 

MANUFACTURED; 

- repair, use, or operate EQUIPMENT; and 

- use METHODS. 

The above undertaking may be made subject to the condition that those who 

seek licences agree to reciprocate. 

367. The ETSI IPR policy also states that “MEMBERS shall use one of the ETSI IPR 

Licensing Declaration forms at the Appendix to this ETSI IPR Policy to make their IPR licensing 

declarations.” That form, in accordance with section 6.1, states: 

To the extent that the IPR(s) disclosed in the attached IPR Information 

Statement Annex are or become, and remain ESSENTIAL in respect of the 

ETSI Work Item, STANDARD and/or TECHNICAL SPECIFICATION 

identified in the attached IPR Information Statement Annex, the Declarant 

and/or its AFFILIATES are (1) prepared to grant irrevocable licences under 

this/these IPR(s) on terms and conditions which are in accordance with 

Clause 6.1 of the ETSI IPR Policy; and (2) will comply with Clause 6.1bis 

of the ETSI IPR Policy. 

368. The definitions in section 15 of the ETSI IPR policy clarify that the commitment 

to license applies to makers of complete operational devices, such as cellular handsets or tablets. 

In particular, the ETSI IPR policy states that “‘MANUFACTURE’, shall mean production of 

EQUIPMENT,” “ ‘EQUIPMENT’ shall mean any system, or device fully conforming to a 

STANDARD,” and “ ‘METHODS’ shall mean any method or operation fully conforming to a 

STANDARD.” 

369. Pursuant to the ETSI IPR Policy, Qualcomm made FRAND commitments to ETSI 

assuring it would make SEP licenses available to applicants in accordance with Clause 6.1 of the 

ETSI IPR Policy. 

370. At the time of the adoption of the ETSI IPR Policy in November 1994, the drafters 

of the ETSI IPR Policy in 1994 did not intend to change the prevailing normal industry practice, 

which was to license only manufacturers of fully compliant end-user devices (device level 

licensing), and not component manufacturers. 

371.

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372.

 In 2003, efforts to define bad or 

unreasonable practices under FRAND caused “major divergences,” and since a consensus was not 

achieved, “it was decided that the [IPR ad hoc group] would simply provide an information on the 

two extreme views and opinions expressed on them by individual members of the ad hoc group.” 

In 2012, Apple renewed efforts before ETSI to change the FRAND definition and the royalty 

base for a FRAND license under the ETSI IPR Policy, but Apple’s requests were rejected with no 

changes to the Policy made. 

373. ETSI and ATIS have fundamentally similar IPR policies. ETSI compared its IPR 

Policy with that of TIA because of their joint oneM2M membership and found it compatible. 

ETSI, ATIS and TIA are all members of oneM2M, which requires such IPR policy compatibility 

among its members. 

B. Qualcomm’s Commitments to ATIS AND TIA 

374. The ATIS IPR Policy states that a holder of essential patent claims may give 

“assurance that a license to such essential patent claim(s) will be made available to applicants 

desiring to utilize the license for the purpose of implementing the standard . . . under reasonable 

terms and conditions that are demonstrably free of any unfair discrimination.” 

375. Pursuant to the ATIS IPR Policy, Qualcomm has made FRAND commitments to 

ATIS assuring that it would make SEP licenses available to applicants “for the purpose of 

implementing” the standard. 

376. Prior to 2001, the TIA IPR Policy required licensing applicants “for the purpose of 

implementing” TIA standards. 

377. From 2001 to 2005, the TIA IPR Policy provided that SEPs “will be made 

available under reasonable terms and conditions that are demonstrably free of any unfair 

discrimination to applicants only and to the extent necessary for the practice of” TIA standards. 

378. In 2005, the IPR Policy was amended to read that SEPs: 

will be made available to all applicants under terms and conditions that are 

reasonable and non-discriminatory, which may include monetary 

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compensation, and only to the extent necessary for the practice of any or all 

of the Normative portions of the above Reference Document for the field of 

use of practice of the Standard. 

379. The change in the language served to make it explicit that a patent that was 

necessarily infringed by the practice of an “optional” element of a standard was nonetheless still 

an “essential” patent and subject to the licensing commitment. It made no change in the scope of 

the applicants to whom the licensing commitment applied, which remained limited to the field of 

use of practice of the standard. 

380. Pursuant to the TIA IPR Policy, Qualcomm has provided TIA with FRAND 

commitments to make SEP licenses available to applicants “only and to the extent necessary for 

the practice of the” TIA standards. 

381. ATIS and TIA are accredited by ANSI, a non-profit organization that oversees the 

development of standards in the United States. To maintain ANSI accreditation, ATIS and TIA 

must meet certain “Essential Requirements” defined by ANSI, including maintaining IPR Policies 

that are consistent with ANSI’s own Patent Policy. 

382. The ANSI Patent Policy provides for patent holders to commit that a license “will 

be made available to applicants desiring to utilize the license for the purpose of implementing the 

standard . . . under reasonable terms and conditions that are demonstrably free of any unfair 

discrimination.” 

383. The ATIS IPR Policy is identical to the ANSI Patent Policy, while the TIA IPR 

Policy has closely similar language. 

384. ANSI’s Executive Standards Council (“ExSC”) has stated: 

We . . . take this opportunity to emphasize that [a prior ExSC decision] was 

not intended to create a “default” interpretation of the ANSI Patent Policy 

requiring licensing at the component level. While the ExSC determined in 

the IEEE case that such a requirement was not inconsistent with the ANSI 

Patent Policy, that does not mean that ANSI’s Patent Policy requires 

licensing at the component level. We do not wish to express or imply any 

such “default” interpretation and we leave it to negotiations between patent 

holders and implementers to decide what licensing terms are appropriate in 

particular standards, subject to the terms of an [SDO’s] patent policy. 

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385. The ANSI ExSC further clarified that a commitment to license “to the extent 

necessary to practice wholly compliant implementations,” rather than mere components, is 

equivalent to the ANSI Patent Policy’s requirement that a license be for “the purpose of 

implementing the standard.” 

C. The Content of the Relevant 3GPP and 3GPP2 Standards 

386. Cellular networks include the “core network,” “radio access network,” and “user 

equipment,” each of which are referred to as “domains” or “entities.” The core network includes 

the switching equipment that routes communications between the radio access network and the 

Internet or telephone network. The radio access network includes base stations that use wireless 

channels in the spectrum to communicate with user equipment. Examples of user equipment 

includes smart phones, cell phones, and the like. 

387. The 3GPP and 3GPP2 standards that are subject to the ETSI, ATIS and TIA IPR 

Policies at issue in this case address performance, interoperability and communication protocols 

between the broad “domains” of a cellular system: (1) Infrastructure, which comprises fixed 

equipment such as base stations that send and receive wireless signals and relay those, and (2) 

User Equipment (“UE” – the 3GPP term, sometimes referred to above and below as a “user 

device”) or Mobile Station (the 3GPP2 term), an operational user device such as a handset. 

388. 3GPP and 3GPP2 standards generally treat the internal workings of the 

“Infrastructure” and “UE” or “Mobile Station” domain as a “black box.” The standards specify 

the actions that complete infrastructure equipment or user devices must take (such as which 

signals it must transmit) to operate on a cellular network. 

389. These cellular standards do not define how a user device is constructed or how the 

components of a user device operate. Rather, they provide OEMs broad discretion regarding how 

to construct a user device or infrastructure. These standards also say nothing about the design of 

modem chips, antennae, power-control chips or the many other components that make up 

infrastructure equipment or user devices and do not specify whether any required functions must 

be carried out by hardware or software. They do not describe or define modem chips. 

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390. Conformance with the standards is tested and determined by analyzing the 

functioning of a complete operational device, not the behavior or design of any component of the 

device such as modem chips. There are published compliance testing protocols for devices, but 

none for modem chips. 

391. Modem chips do not and cannot operate on a cellular network on their own, 

outside of a complete user device that has all of the hardware and software components needed to 

implement the standards-specified functionality. The same model of modem chip can be placed 

in a user device that practices a standard and a user device that does not practice a standard. 

D. Industry Practice of Device-Level Licensing 

392. It is cellular industry practice for SEP owners to make licenses available for the 

manufacture and sale of end-user devices, but not for the manufacture and sale of components 

such as baseband chips. 

393. Device-level licensing was standard industry practice before Qualcomm built its 

licensing program. 

394. Qualcomm followed this established industry practice when it launched its 

licensing program in the 1990s. Its understanding and intent at all relevant times with respect to 

its licensing commitments made to ETSI, ATIS and TIA was that it was committing to make 

licenses available at the device level in accordance with industry practice. 

395.

 

 

396.

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397.

398.

399.

 

400.

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401. Via Licensing also manages a WCDMA (3G) patent pool that licenses the 

WCDMA SEPs owned by AT&T, Fujitsu, KDDI, Koninklijke KPN, Mitsubishi Electric, NEC, 

NTT DoCoMo, Sharp, Siemens, SK Telecom Co., Technology InAriscale and Toshiba. Via 

Licensing licenses its WCDMA patent pool only at the device level. 

402.

403. Modem chip suppliers are also aware of industry practice to license SEPs at the 

device level, and not at the component or modem level. 

404. MediaTek’s General Manager, Corporate Sales, John Finbarr Moynihan, testified 

that during a negotiation, Nokia “went out of their way to make it absolutely clear that they were 

not licensing to the chipset company.” He testified further that it was his “general[] 

underst[anding]” that “all essential IPR is typically licensed by the IPR holders to the end device 

manufacturer.” 

405.

406.

407. Intel claims to have entered only one agreement to cellular SEPs for the purpose of 

manufacturing chips. 

408. Samsung’s chip division did not have exhaustive licenses from major SEP holders. 

Samsung has requested such licenses, but no major cellular patent holder has granted a license in 

response to its requests. Nor does Samsung license its own SEPs to chip sellers. Samsung has 

not licensed MediaTek. 

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409. Samsung has sought to license its own cellular SEPs at the device level, using the 

device as the rate base. 

410. Via Licensing grants patent agreements at the device level. 

411.

412.

413.

414.

415. Blackberry licenses its SEPs at the device level. 

416. Qualcomm has received inbound chip level cross-licenses to the cellular SEPs of 

its device maker licensees. These cross-licenses are designed to prevent a device maker from 

signing a license for rights under Qualcomm’s patents and then opportunistically asserting their 

own patents against Qualcomm. 

417. Qualcomm’s cross-licenses are negotiated terms that are not addressed by any 

obligation arising under an SDO IPR policy. 

418. Qualcomm does not seek SEP licenses covering the manufacture or sale of chips 

outside the context of cross licenses. 

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E. Qualcomm’s Licensing Practices with Respect to Chipmakers 

419. Qualcomm makes licenses to its cellular SEPs available to any willing licensee for 

the manufacture and sale of end-user devices, including chipmakers (to the extent they are 

manufacturing and selling end-user devices.) Qualcomm has licensed Samsung and Huawei — 

who are both chip makers and user device makers – to use Qualcomm’s SEPs in their user 

devices. 

420. Qualcomm does not seek to prevent others from practicing its cellular SEPs to 

manufacture or sell components of end-user devices; it neither asserts its SEPs against competing 

chip makers nor seeks to collect royalties from them. 

421. Qualcomm does not grant exhaustive licenses to manufacture or sell components 

of end-user devices, such as modem chips. Nor has it granted exhaustive licenses to chipmakers 

in the past. 

422. Competing modem chip manufacturers make and sell modem chips without any 

patent license agreement with, or royalties payable to, Qualcomm. 

423. Since 2006, Qualcomm has never asserted any SEP against any chip manufacturer. 

424. Qualcomm has negotiated to provide competing chip manufacturers with other 

types of non-exhaustive contractual assurances. 

425. Qualcomm has in the past entered into non-exhaustive patent licenses granting 

chipmakers rights to make and sell modem chips. 

426.

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427. On January 30, 2018, Qualcomm entered into a “Cellular Modem Component 

Patent Commitment Agreement” with Samsung. Under the agreement, Qualcomm agreed not to 

assert its cellular SEPs against Samsung, in connection with Samsung’s manufacture and sale of 

modem chips, unless it first offers Samsung a license to make and sell chips on terms that are fair, 

reasonable and non-discriminatory. 

428. No chipmaker has sued Qualcomm in more than a decade seeking a license on the 

grounds that Qualcomm was obligated by its licensing declarations to SDOs to license at the 

component level. 

429. Chip manufacturers have no need for a separate license and are not blocked from 

access to SEPs in any way. The technology is broadly available as a result of the standardization 

process, and . Nor does 

Qualcomm have any incentive to do so. Instead, when chip suppliers have sought contractual 

assurances that Qualcomm will not assert its SEPs against them, Qualcomm has been willing to 

negotiate such agreements on a non-exhaustive basis. 

VI. APPLE’S CHIP RELATIONSHIP WITH QUALCOMM 

430. From 2007 to January 2011, Apple exclusively used in its iPhones modem chipsets 

from Infineon, which was acquired by Intel in 2011. 

431.

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432. In 2009, Apple awarded Qualcomm the socket for the CDMA version of the 

iPhone 4, which was released in February 2011. Apple continued to use an Infineon chip for the 

WCDMA version of the iPhone 4. 

433.

but would not do so unless Qualcomm paid Apple a 

substantial amount of money 

. 

434.

 

435. Qualcomm had to undertake substantial relationship-specific investments in order 

to sell modem chips to Apple. 

436. Apple has developed and uses its own proprietary application processor (AP), and 

Apple devices – unlike the devices of other OEMs – require a “thin modem” chip that could be 

integrated with Apple’s own AP. 

437. While Qualcomm offered thin modem solutions at the time it negotiated with 

Apple about supplying it with modem chips, 

 The chips developed for Apple differed 

from those other modem-only products because the Apple thin modems required extensive 

customization, engineering, and support, including the software and other interfaces that allow 

these chips to work with Apple’s proprietary APs and operating system. 

438. The investment that was necessary to meet Apple’s requirements was one of 

several risks Qualcomm faced in negotiating a chip supply agreement with Apple. These risks 

included: 

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(a) Apple demanded a schedule of large incentive payments to be made early in the 

engagement. 

(b) Qualcomm would have to undertake significant R&D investments – well in excess 

of $1 billion between 2011 and 2017 – in its thin modem line, including costs associated with 

customizing thin modems for Apple. 

 

(c) Qualcomm needed to incur these significant R&D investments, and to make many 

of the payments under the Apple Agreements, in advance of selling significant volumes to, or 

receiving revenue from, Apple. Therefore, these substantial costs could potentially never be 

recovered from Apple. 

(d)

(e) Unlike its other modem chip products, Qualcomm’s thin modem sales were 

concentrated in Apple – meaning there were limited opportunities to sell the thin modems 

customized for Apple to other OEMs. 

(f) Because Qualcomm does not own fabrication facilities, 

439. To address the foregoing risks in addition to Apple’s refusal to provide any 

purchase volume commitments to Qualcomm, and to give Qualcomm reasonable assurances that 

it would have a chance to recoup its large up-front payments to Apple, Qualcomm and Apple 

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agreed to place conditions on three types of incentive payments from Qualcomm to Apple in the 

February 2011 Transition Agreement: 

440. Transition Fund ($250 Million): Qualcomm agreed to pay Apple $250 million in 

two installments of $125 million each, on March 31, 2012 and March 31, 2013. 

 Apple also agreed to achieve certain volume thresholds of purchases 

from Qualcomm to qualify for the full amount of each payment. If Apple launched a device with 

a non-Qualcomm modem chip in 2013, Apple agreed to repay the second installment of the 

Transition Fund. 

441. Marketing Development Fund ($150 Million): Qualcomm agreed to pay Apple six 

quarterly payments of $25 million each, beginning in the third quarter of 2011, for marketing 

efforts to drive demand for global sales of products that contained WCDMA chips. 

 

442. Variable Incentive Fund (up to $600 Million): Qualcomm agreed to pay Apple an 

annual payment of up to $200 million, capped at $600 million total, within 45 days of October 1st 

of each year from 2012 to 2015. Each year’s payment was based on a volume schedule, and 

 Apple 

reached the cap of $600 million after receiving the maximum payment of $200 

million in . 

443.

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444.

445. and 

negotiate the large incentive payments as part of the 2011 Transition Agreement. 

446.

447. Qualcomm and Apple entered into the First Amendment to the Transition 

Agreement on February 28, 2013, effective January 1, 2013. This agreement established two 

types of new incentive payments from Qualcomm to Apple: 

448. Marketing Fund: For Apple products sold between January 1, 2013 and December 

31, 2016, Qualcomm agreed to pay Apple , 

and , if those devices contained 

a Qualcomm modem chip. Apple demanded and Qualcomm agreed that these sums would begin 

to accrue on January 1, 2013, long before Qualcomm would find out if Apple would purchase 

chips from Qualcomm for its 2015 and 2016 devices. 

449. Additional Variable Incentive Fund: Qualcomm agreed to pay Apple up to 

. 

450. In negotiating the Transition Agreement, Apple sought an exclusive supplier. 

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451. During the time the Transition Agreement and First Amendment to Transition 

Agreement were in effect, Apple engaged other suppliers. 

452. During the time the Transition Agreement and First Amendment to the Transition 

Agreement were in effect, 

453. The 2011 Transition Agreement did not prevent or foreclose any modem chip 

supplier with a chip that could meet Apple’s performance and scheduling requirements from 

supplying Apple. 

454.

455.

456. Apple 

 issued a “man on the moon” challenge that required Qualcomm to 

accelerate development of its multimode modem chip that better fit its size and 

power preferences by 12 months. 

 

457.

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458.

459.

460.

461.

462.

463.

464.

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465. 

466.

467.

468.

 

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469.

 

470.

 

471. In 2016 Apple invoked its choice to purchase from alternative suppliers, electing 

to purchase modem chips for the iPhone 7 from Intel in addition to Qualcomm, and awarding a 

substantial portion of its total purchases to Intel. Apple did this while the First Amendment to the 

Transition Agreement was still in effect. The collaborative work between Apple and Intel for the 

iPhone 7 model incorporating an Intel modem chip began in 2014. 

472. Apple incorporated Intel modem chips into certain models of the iPhone 7 released 

in October 2016, and the iPhone 8 and iPhone X released in September 2017, even though the 

performance of the available Intel modem chips was inferior to that of the Qualcomm modem 

chips used in other models of the 2016 and 2017 iPhones. 

473. Apple uses Intel modem chips exclusively in the iPhone models released in 

September and October 2018. 

474. From 2011 to 2016, Apple purchased the majority of Qualcomm’s thin modems. 

Other OEMs used predominantly SoCs in their handsets. Intel did not sell high-end SoCs, and it 

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currently does not have any SoC in development, having abandoned such development to focus 

on thin modems for Apple. 

475. The 2013 First Amendment to the Transition Agreement terminated on December 

31, 2016. 

476. The 2013 First Amendment to the Transition Agreement did not foreclose any 

modem chip supplier with a chip that could meet Apple’s performance and scheduling 

requirements from supplying Apple. 

477. Apple’s share of LTE-enabled handsets never exceeded 41% in any year from 

2011 to 2017, and it was less than 25% from 2015 onward, declining to 16% in 2017. 

VII. COMPETITION IN THE MOBILE COMMUNICATIONS INDUSTRY 

A. The Mobile Handset Industry Is Thriving 

478. The average price of handsets before the introduction of smartphones declined 

from over $500 in 1994 to slightly over $100 in 2005. 

479. The average smartphone price fell nearly 34% between 2010 and 2017, from 

approximately $427 in 2010 to $283 in 2016, before increasing in 2017 to $314, primarily 

because of the launch of the iPhone X, which sold for at least $999. 

480. Between 2008 and 2017 worldwide smartphone sales increased nearly tenfold, 

from 151 million to 1.46 billion. 

481. In 2007, Nokia led the cellular handset industry worldwide. After Apple 

introduced the iPhone in 2007, it became a leading supplier, accounting for 14.8% of global 

smartphone sales in 2017. Samsung, which accounted for less than 5 percent of global 

smartphone sales until 2009, accounted for 21.7% in 2017, while the share of Nokia had fallen to 

less than 1% in 2017. The next four largest smartphone OEMs in terms of global unit sales in 

2017 – Huawei, OPPO, TCL and Vivo – are all new entrants that did not even begin supplying 

smartphones until 2009 or later. 

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B. Relevant Market Definition 

482. Network operators, even in large markets like the U.S., had not fully rolled-out 

their LTE networks prior to 2014. In 2010, there was virtually no LTE roll-out. By 2011, the 

share of the population that resided in countries where LTE had already rolled out was about 

8.6%. By 2012, that share of the population was about 12%. In 2012, while Verizon’s LTE 

network covered around 80% of the U.S. population, AT&T’s LTE network covered less than 

50% of the U.S. population. Until 2014, the majority of the world would not have been able to 

use an LTE-enabled handset. 

483. The first commercial handset launches with modem chips that supported LTE 

occurred in 2011. At least until 2013, Samsung concurrently offered versions of its flagship 

handsets in both 3G and LTE versions: Galaxy S2 (introduced in 2011), Galaxy S3 (introduced in 

2012), and Galaxy S4 and Galaxy Note (both in 2013.) Samsung viewed Apple’s 3G iPhone to 

be competing with Samsung’s flagship LTE Galaxy S series handsets. 

484. Apple first included LTE-capable modem chips in the iPhone 5, released in 

September 2012. The iPhone 4, released in June 2010, and iPhone 4S, released in October 2011, 

incorporated modem chips with only 3G capabilities. Samsung began manufacturing its own 

LTE modem chips in 2013, which have since been included in Samsung phones selling for more 

than $400. 

485. Huawei, through its HiSilicon subsidiary, began manufacturing its own LTE 

modem chips in 2011, which have since been included in Huawei phones selling for more than 

$400. 

486. Professor Shapiro provided no opinion regarding modem chip market shares or 

market power after December 2016. 

487. Apple used no Qualcomm modem chips in its iPhone models released in 2018 – 

the iPhone XS (priced at $999 to $1,349), iPhone XS Max (priced at $1099 to $1,449) and iPhone 

XR (priced at $749 to $899.) 2018 iPhone models all use modem chips from Intel, and Apple 

plans to use only Intel modem chips in all of its 2019 iPhone models. 

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488. Apple continues to sell the iPhone 7 (priced at $449 to $549) and iPhone 7 Plus 

(priced at $569 to $669.) Apple dual-sources the modem chips for the iPhone 7 and 7 Plus from 

Intel and Qualcomm. The Intel XMM7360 modem used in certain models supports LTE Cat. 10 

with a maximum downlink/uplink speed of 450/50 Mbps. 

489. A number of modem chips, such as the Intel XMM7160 and the Samsung 

CMC220, that are not included in the FTC’s proposed relevant market of “Premium LTE Modem 

Chips” were incorporated into handsets that cost more than $300 before 2013 and more than $400 

after 2013. 

490. A number of modem chips that the FTC includes in its proposed relevant market 

of “Premium LTE Modem Chips” were incorporated into handsets that cost less than $300 before 

2013 and less than $400 from 2013 onward. 

491. The FTC has made no specific allegations about the existence of a WCDMA 

modem chip market, and it has not alleged that Qualcomm has monopoly power in such a market. 

492. In amended responses to interrogatories dated February 7, 2018, the FTC 

identified all modem chips that it claimed to be “premium” LTE modem chips. In his expert 

report dated May 24, 2018, Dr. Shapiro identified all modem chips that he claimed to be 

“premium” LTE modem chips. The FTC’s list of asserted “premium” LTE modem chips differs 

from Dr. Shapiro’s list of asserted “premium” LTE modem chips: 

FTC’s and Professor Shapiro’s Lists of “Premium LTE” Modem Chipsets 

Supplier Modem Chipset “Premium LTE” Modem Chipsets Identified by:

FTC Professor Shapiro

Broadcom 7373 X

HiSilicon BALONG V9R1 X

HiSilicon K3V2 X

HiSilicon KIRIN 659 X

HiSilicon KIRIN 910 X

HiSilicon KIRIN 920 X

HiSilicon KIRIN 925 X X

HiSilicon KIRIN 928 X

HiSilicon KIRIN 930 X

HiSilicon KIRIN 935 X X

HiSilicon KIRIN 950 X X

HiSilicon KIRIN 955 X X

HiSilicon KIRIN 960 X X

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HiSilicon KIRIN 970 X X

Intel XGOLD716 X

Intel XGOLD726 X X

Intel XGOLD736 X X

Intel XGOLD748 X X

MediaTek 6589 X

MediaTek 6595 X

MediaTek 6750 X

MediaTek 6752 X

MediaTek 6753 X

MediaTek 6755 X

MediaTek 6757 X

MediaTek 6795 X

MediaTek 6797 X

MediaTek 6799 X

MediaTek 8392 X

MediaTek 8735 X

Motorola T6VP0XBG X

Qualcomm MDM9200 X X

Qualcomm MDM9215 X

Qualcomm MDM9215M X* X

Qualcomm MDM9225 X

Qualcomm MDM9230 X

Qualcomm MDM9235 X

Qualcomm MDM9235M X* X

Qualcomm MDM9240 X

Qualcomm MDM9250 X

Qualcomm MDM9320 X

Qualcomm MDM9330 X

Qualcomm MDM9340 X

Qualcomm MDM9350 X

Qualcomm MDM9600 X

Qualcomm MDM9615 X

Qualcomm MDM9615M X* X

Qualcomm MDM9625 X

Qualcomm MDM9625M X* X

Qualcomm MDM9630 X

Qualcomm MDM9635 X

Qualcomm MDM9635M X* X

Qualcomm MDM9640 X

Qualcomm MDM9645 X X

Qualcomm MDM9650 X

Qualcomm MDM9655 X X

Qualcomm MSM8916 X

Qualcomm MSM8930 X

Qualcomm MSM8939 X

Qualcomm MSM8952 X

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Qualcomm MSM8953 X

Qualcomm MSM8956 X

Qualcomm MSM8960 X X

Qualcomm MSM8974 X X

Qualcomm MSM8976 X

Qualcomm MSM8992 X X

Qualcomm MSM8994 X X

Qualcomm MSM8996 X X

Qualcomm MSM8998 X X

Samsung CARMEN X

Samsung CARMEN PLUS X

Samsung CMC221D X

Samsung CMC222M X

Samsung CMC303 X X

Samsung EXYNOS 8890 X X

Samsung EXYNOS 8895 X X

Samsung S333 2CA X

Samsung S333 3CA X X

Samsung S5E7880 X

Samsung SA5333D X

Total 53 54

Number of chips only in FTC’s list: 26

Number of chips only in Professor Shapiro’s list: 27

Number of chips common across both lists: 27

493. Modem chips gain in speed and functionality with each new product cycle. 

 

494. There are modem chips omitted from the FTC’s listing of chips in the asserted 

“premium” category that are included in cell phones selling for more than $400 (or more than 

$300 before 2013), such that under Prof. Shapiro’s definition such chips should have been 

included. There are modem chips included in the FTC’s listing of such chips in the asserted 

“premium” category that were included in cell phones selling for less than $400 (or less than 

$300 before 2013). OEMs considered additional modem chips, not included in the FTC’s listing, 

for use in handsets that cost more than $300 before 2013 and more than $400 after 2013. 

495.

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496.

497. As of 2018, only one major carrier in the U.S. (Sprint) and carriers in China 

require handsets to be CDMA-enabled to be activated on their networks. Other major CDMA 

carriers – Verizon Wireless (in the U.S.) and KDDI (in Japan) – have leveraged VoLTE 

capabilities such that their subscribers are no longer required to use phones with CDMA 

capability. Verizon now certifies and sells phones without CDMA support, including HTC’s 

2017 flagship phone, the HTC U11, the LG Exalt LTE, and the Asus ZenFone V. 

498.

C. Qualcomm’s Success In Winning Chip Sockets Is Earned 

499. Qualcomm wins modem chip sockets against its many competitors by offering a 

technically superior product or by competing on price. Qualcomm’s integrated solutions simplify 

handset design and reduce cost. 

500. Qualcomm achieves success by focusing on developing modem chips with 

differentiating features that support the latest set of standardized capabilities. It works on a chip’s 

design for two to three years before bringing the chip to market, leveraging R&D that has been 

ongoing for years prior. 

501. Qualcomm has repeatedly been the first to market with leading edge cellular 

features. Many of those firsts have been described in section IV above. Additional examples 

include: 

(a) In February 2000, Qualcomm delivered the MSM5000, the world’s first 

CDMA2000 chipset which supported communications that exceeded the 

ITU’s 3G data rate requirement of 144kbps, providing 154kbps on both the 

uplink and downlink. 

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(b) In 2003-2004, Qualcomm introduced the world’s first HSPA and 

WCDMA/GSM multi-mode chipset, the MSM6275. 

(c) In July 2008, in a prototype using its newly-introduced MSM8200 chipset, 

Qualcomm completed the world’s first HSPA+ data call, achieving a 

download data rate of 28Mbps in a 5MHz carrier. 

(d) In late 2010, Qualcomm introduced the industry’s first chip that supported 

LTE, 2G and 3G communications, allowing phones to receive high-speed 

service where available, but still function in areas served by legacy towers. 

(e) In November 2013, Qualcomm announced the first cellular modem built on 

20nm technology. This chip supports carrier aggregation up to 40MHz and 

allows download speeds of up to 300Mbps, and using it, in January 2014, 

Qualcomm achieved the first 300Mbps data “call.” 

(f) In October 2016, Qualcomm was the first to announce a commercial 

modem chipset for supporting 5G with the X50 modem, and in October 

2017 announced the first data connection using smartphone-sized chips 

over millimeter wave frequencies, a prerequisite to 5G data 

communications. 

502.

 

503.

 

504. Infineon, later acquired by Intel, and Broadcom have also employed a “fast 

follower” model. 

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D. Competition Among Chip Makers Is Dynamic 

505. In the mid-to-late 1990s, many chip makers were heavily invested in GSM and 

chose not to develop CDMA modem chips and devices. 

506. In the late 1990s and early 2000s, as CDMA gained traction, some chip makers 

began producing CDMA modem chips, including VIA, DSPC (later acquired by Intel and then 

Marvell), Motorola and Texas Instruments. 

507. Because of the relatively small footprint of CDMA, most chip makers ceased 

manufacturing CDMA modem chips and focused on WCDMA, which quickly became the 

commercially dominant standard, leaving CDMA accounting for about 5 percent outside of 

China. 

508. Nonetheless, OEMs always had alternative suppliers for CDMA modem chips in 

the mid-2000s, primarily VIA and Texas Instruments (which supplied all of Nokia’s CDMA 

needs). 

509. In the late 2000s, Texas Instruments decided to leave the CDMA space, leaving 

only Qualcomm and VIA as CDMA suppliers. Other chip makers were reluctant to enter CDMA 

at that stage, viewing the technology as dying and expecting it to be quickly replaced by VoLTE. 

510.

 

511. In 2015, China Telecom and China Unicom advocated for a six-mode (GSM, 

CDMA, WCDMA, TD-SCDMA, TDD-LTE, FDD-LTE) handset national standard in China. In 

April 2016, the Chinese government mandated that six-mode standard for interoperability across 

all three major Chinese carriers (China Telecom, China Unicom, and China Mobile). This 

imposed a requirement whereby all phones sold in China would need to support six different 

standards, including CDMA. The mandating of this national standard caused demand for 

CDMA-compatible modem chips to increase and renewed the interest of chip makers in adding 

CDMA capabilities to their modem chips. 

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512. MediaTek released its first CDMA-capable LTE multimode modem chip in 2015. 

Today all of MediaTek’s modem chips support CDMA (among other standards). 

513. In 2016, HiSilicon began providing Huawei with multimode LTE modem chips 

that support CDMA. 

514. In 2018, Samsung released a multimode LTE modem chip that supports CDMA. 

515. In 2018, Intel – which ultimately acquired VIA in 2015 – released a multimode 

LTE thin modem that supports CDMA. All Apple 2018 devices sold for activation on carriers 

requiring CDMA support use an Intel thin modem with CDMA support. 

516. MediaTek gained about a 15% share of the FTC’s asserted CDMA market in 2015, 

which grew to over 35% in 2016. 

517. As a result of carriers’ pace in rolling out LTE networks and handset makers’ 

interest in continuing to sell non-LTE handsets between 2011 and 2013, Qualcomm’s LTE 

baseband processor business competed with non-LTE baseband processor suppliers. 

518. By 2011, Qualcomm internally identified Samsung, ST-Ericsson, GCT (partnering 

with LGE), Huawei, Altair, Nvidia (succeeding Icera) and Intel (succeeding Infineon) as posing 

significant potential competition for LTE baseband processors, and noted MediaTek, Broadcom 

and Motorola as other LTE baseband processor suppliers to consider. 

519. After being first to market a multimode LTE modem chip in 2009, starting in 2014 

Qualcomm’s share of sales of LTE baseband processors has rapidly declined as Intel, Samsung, 

MediaTek and HiSilicon released competitive LTE modem chips and gained share of sales over 

time. 

520. MediaTek launched its first LTE baseband processors in 2014. 

521. By 2016, Dr. Shapiro calculates that Qualcomm’s share of what he defines as the 

“premium” LTE baseband processor market dropped to 57% under one definition of the market, 

and to below 50% under another definition of the market, even while not accounting for 

HiSilicon’s sales. 

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522. For 2017, Dr. Shapiro does not calculate what he defines as the “premium” LTE 

baseband processor market share for Qualcomm or Qualcomm’s competitors, while Dr. Chipty 

calculates that Qualcomm’s share in what Dr. Shapiro defines as the “premium” LTE baseband 

processor market dropped further to 49.2%, and that competitors MediaTek, Intel, Samsung and 

HiSilicon increased their combined share to 50.8%. 

523. Samsung multi-sourced baseband processors from more than one vendor, 

including from Qualcomm, Samsung LSI, Intel, ST-Ericsson, Broadcom, MediaTek and 

Spreadtrum, to secure price competitiveness. 

524.

525.

526. Vivo previously used a Qualcomm baseband processor for its 2014 X5 Max 

device, but switched to MediaTek’s baseband processor for its subsequent 2015 X5 Max+ and X6 

devices. 

527.

528.

529. From 2008 to 2010, Apple single-sourced baseband processors from Infineon, 

which was acquired by Intel in 2011. 

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530.

531. From 2011 to 2013, Apple sourced baseband processors for new iPhones from 

only Qualcomm, and it continued to source baseband processors for its legacy devices from Intel. 

532.

533. Apple single-sourced from Qualcomm for devices launched in 2014 and 2015, and 

then began to dual-source baseband processors from Qualcomm and Intel for the iPhones released 

in 2016 and 2017, sourcing approximately 50% from each in 2017. Apple single-sourced from 

Intel for the iPhones released in 2018. 

534.

535. Apple and Intel worked together on the Intel modem chip used in the 2016 iPhone 

7 starting in 2014. 

536.

537.

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538.

539. Broadcom was initially successful in supplying 2G and 3G modem chips to large 

customers such as Nokia and Samsung, but ultimately exited the modem chip market. It did not 

produce any LTE modem chips until February 12, 2013. Broadcom eventually was unsuccessful 

in its LTE endeavor, forcing it to cease supplying modem chips. The exit was due to several 

factors, including its decision not to focus on producing 4G modem chips until 2010 and loss of 

large customers Nokia and Samsung. Other factors contributing to its demise were rapidly 

declining ASPs of 2G and 3G phones and an insufficient number of engineers. 

540. Broadcom attempted to make up for its late arrival to 4G by acquiring Renesas, but 

this approach did not allow it to successfully enter the 4G market. 

541. Texas Instruments was successful in the 1990s and early 2000s, but with the 

market decline of its largest customer, Nokia, it was unable to maintain its success and ultimately 

exited the modem chip market. Low cost competitors like MediaTek, Spreadtrum, and Infineon 

overtook Texas Instruments in the market for 2G devices. Texas Instruments’ WCDMA modem 

chip design, in collaboration with NTT DoCoMo, never went into final production because it had 

miscalculated modem chip demand in Japan. 

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542.

 

543.

544. Since 2010, a number of chip suppliers have introduced modem chips with LTE 

capabilities, while other chip suppliers have left the market: 

545. Many competitors have already announced 5G modem chips, including Intel and 

Samsung. 

E. Chip Prices Are Declining 

546. The average selling price (“ASP”) of Qualcomm’s LTE baseband processors has 

declined by 44% from 2012 to 2018: 

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Year LTE Baseband ASP 

(US$)

2012 $23.74

2013 $22.29

2014 $19.72

2015 $15.55

2016 $14.25

2017 $14.02

Q2 2018 $13.37

547. Prices of modem chips Professor Shapiro contends are “premium LTE” have also 

declined. 

548. The average ASP for 3G modem chips has fallen from around $14 in 2008 to 

about $5 in 2018. 

549. The average ASP for 2G modem chips has fallen from around $5 in 2008 to under 

$2 in 2018. 

550. Qualcomm felt pressure on its LTE baseband processor pricing and margins from 

competitors MediaTek, Intel, and Samsung, and responded to new offerings by these competitors 

by lowering the prices of its “premium”- LTE baseband processors (as that term is defined by 

Shapiro). 

551. Prof. Shapiro recognized that after MediaTek entered in 2015 with a modem chip 

supporting LTE/CDMA multi-mode capability, Qualcomm had to lower the price of its 

equivalent offering. 

552.

553.

554.

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555. When negotiating the terms of Qualcomm supplying baseband processors for 

Apple devices, 

 

556. When negotiating the terms of supplying baseband processors for Apple devices, 

Qualcomm considered potential competitive threats, including MediaTek, Broadcom, and Intel. 

F. Baseband Processor Quality Is Improving 

557. Qualcomm’s R&D investment drives the pace of innovation. From at least 2006 

to the present, Qualcomm has spent at least of its revenue on R&D, including of its 

revenue in 2016. 

558. MediaTek increased its R&D expenditure from 10.5% of its revenue in 2006 to 

20.2% of its revenue in 2016. 

559. Intel increased its R&D expenditure from 16.6% of its revenue in 2006 to 21.5% 

of its revenue in 2016. 

560. Huawei increased its R&D expenditure from 8.5% of its revenue in 2008 to 14.6% 

of its revenue in 2016. 

561. Samsung increased its R&D expenditure from 6.7% of its revenue in 2006 to 7.3% 

of its revenue in 2016. 

562. After Qualcomm introduced carrier aggregation capability in its baseband 

processors in 2013, Intel introduced carrier aggregation capability in its XMM7260 baseband 

processor in 2014, HiSilicon in its Kirin 920 baseband processor in 2014, Samsung in its Exynos 

Modem 303 baseband processor in 2014, and MediaTek in its MT6797 baseband processor in 

2016. 

563. After Qualcomm introduced LTE/CDMA multimode capability in its baseband 

processors, MediaTek introduced LTE/CDMA multimode capability in its MT6753 baseband 

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processor in 2015, HiSilicon in its Kirin 960 baseband processors in 2016, Samsung in its Exynos 

9 Series 9810 baseband processor in 2018 and Intel in its XMM7560 baseband processor 2018. 

564. LTE baseband processor data transfer speeds increased more than 6-fold from 

2013-2017, and continue to increase. LTE baseband processors released in 2018 now have 

downlink speeds meeting or exceeding 1 gigabit per second (“Gbps”), and Qualcomm’s baseband 

processors have a maximum downlink speed exceeding 2 Gbps. 

565. The global cost of data per megabyte decreased from approximately $8.00 per 

megabyte in 2006 to approximately $0.10 per megabyte in 2013, and further decreased to 

approximately $0.01 per megabyte in 2016. 

566. Advances in modem chip technology in the products offered by the five largest 

modem chip suppliers from 2013-2018 are summarized as follows: 

VIII. QUALCOMM PLAYS A SUBSTANTIAL ROLE IN EVOLVING WIRELESS 

TECHNOLOGIES THAT PROMOTE THE PUBLIC INTEREST 

567. Qualcomm is the only U.S.-based company that engages in significant, early stage 

R&D to conceive, standardize, and commercialize cellular wireless technology. Its R&D efforts 

are conducted with a five- to ten-year horizon before commercial realization of the technology 

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could be achieved. Such a long-term R&D investment strategy carries a high level of risk for its 

investments. 

568. For example, Qualcomm started focusing R&D efforts on 5G in early 2014. 

Qualcomm made the initial contributions to 3GPP of a broad 5G framework. In 2015, 3GPP 

commenced a formal study of potential 5G requirements, which identified more than 70 different 

use cases, categorized into different groups: massive Internet of Things, Critical 

Communications, enhanced Mobile Broadband and Network Operation. In June 2016, the 3GPP 

Technical Specifications Groups (TSG#72) agreed on a detailed workplan for the first 5G release, 

Release 15. 5G NR Release 15 was frozen in 2018, and work on 5G NR Release 16 is ongoing. 

The first phase of 5G is focused on use of 5G technology for smartphones. The second phase is 

focused on use of 5G in vertical use cases such as automobiles, industrial IoT, medical, and 

others, which is more complex and requires additional R&D to, for example, determine the best 

solution to replace cables in factories with cellular interconnectivity. 

569. For each generation of cellular standards, Qualcomm’s R&D efforts support basic, 

early stage R&D that leads to the introduction of technologies to the development of standards, 

and which address technical features that are sought by users of standards – e.g., device and 

infrastructure manufacturers, and carriers. Qualcomm’s R&D and technical contributions to 

standards development continues as standards evolve toward approval and beyond. For example, 

Qualcomm pioneered mmWave and channel coding technologies, two fundamental components 

of 5G, and it continues to devote resources to improving these technologies. 

570. Licensees have stopped paying royalties when there have been disputes regarding 

their license agreements with Qualcomm, regardless of the nature of the dispute. This arises in 

relation to direct disputes with Qualcomm and regulatory decisions they interpret as relating to 

their obligations under their agreements. 

571.

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572. Qualcomm has been investing in R&D related to 5G-specific technologies since 

March 2014. Qualcomm is the only U.S.-based entity with a leading role in 5G standards 

development. Much of the technology Qualcomm developed for 4G and 3G technologies has 

been incorporated into 5G. Around the 2014/2015 period, Qualcomm’s executives made the 

decision to ramp up R&D in 5G. 

573. With a finite amount of R&D funding available, the determination of where to 

devote R&D efforts is a zero sum game. 5G is a strategic priority for Qualcomm. Due to 

complexity, the transition from 4G to 5G is far more difficult and expensive than the transition 

from 3G to 4G, and it thus requires a greater proportion of the available funding for “core” R&D. 

574. Huawei, a Chinese company, is the next most significant leader in 5G 

development after Qualcomm. Huawei is the only company in the world that is involved in every 

segment of the cellular wireless sector – standards, modems, devices and infrastructure. 

575. On September 26, the Federal Communications Commission voted to approve a 

declaratory ruling and report and order that preempts local authority over 5G wireless facility 

deployment and management of local rights-of-way. The FCC expressly cited the “national 

strategy to promote the timely buildout of this new infrastructure across the country by 

eliminating regulatory impediments that unnecessarily add delays and costs to bringing advanced 

wireless services to the public.” 

576. The U.S. Treasury’s Committee on Foreign Investment in the United States 

(CFIUS) issued a letter regarding Broadcom’s attempt to acquire Qualcomm, in which it stated 

that a significant “risk to the national security of the United States” could arise from changing 

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Qualcomm’s assets innovation-focused business model as a result of acquisition by a foreign 

entity. 

577. CFIUS stated that Qualcomm is a “global leader in the development and 

commercialization of foundational technologies and products used in mobile devices,” that 

Qualcomm “led the mobile revolution in digital communications technologies,” and that 

“Qualcomm’s technological success and innovation is driven by its unmatched expertise and 

research and development,” which “drive[s] U.S. leadership in key-standard setting bodies.” 

CFIUS concluded that the “weakening of Qualcomm’s technological leadership” (including 

limiting R&D expenditures) and “disrupt[ing] ... Qualcomm’s capabilities as a supplier of 

products” to the U.S. government “could pose a risk to the national security of the United States.” 

578. The CFIUS Letter also stated that “[r]eduction in Qualcomm’s long-term 

technological competitiveness and influence in standard-setting would significantly impact U.S. 

national security. This is in large part because a weakening of Qualcomm’s position would leave 

an opening for China to expand its influence on the 5G standard-setting process.” 

579. The CFIUS Letter specifically referenced the “detrimental impact on national 

security” that could result from a limitation or cessation of supply of Qualcomm products or 

services, such as the work Qualcomm is doing in partnership with the United States government 

to address cybersecurity in connection with the Internet of Things. 

580. CFIUS further stated that “Qualcomm's current business model . . . relies on the 

licensing business to fund the company's large R&D expenditures.” Qualcomm’s chip business 

operates in a highly competitive environment, and is a low margin business that could not 

generate sufficient profits to replace the profits from the licensing business. An injunction that 

would result in significantly reduced licensing revenues, thus significantly impairing Qualcomm’s 

R&D efforts and capabilities, would likely result in hindering Qualcomm’s ability to lead the 5G 

standard-setting process and enabling Huawei and Chinese interests to assume the leadership in 

5G standardization. Such a result would significantly impact U.S. interests, including 

“substantial negative national security consequences for the United States.” 

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CONCLUSIONS OF LAW 

IX. LEGAL STANDARDS GOVERNING THE FTC’S CLAIMS 

581. Section 13(b) of the Federal Trade Commission Act (the “FTC Act”), 15 U.S.C. 

§53(b), permits the FTC to bring a case in federal district court to enjoin conduct that “is 

violating, or is about to violate” Section 5 of the FTC Act, 15 U.S.C. §45. 

582. In this case, the FTC alleges that Qualcomm’s conduct violates Section 5 because 

it violates both Section 1 and Section 2 of the Sherman Act. (Complaint ¶147). The FTC also 

alleges that, even if Qualcomm’s conduct does not violate either Section 1 or Section 2 of the 

Sherman Act, Qualcomm’s conduct nonetheless “constitute[s] unfair methods of competition in 

violation of [Section 5] of the [FTC Act].” (Complaint ¶147). 

583. Section 1 of the Sherman Act prohibits “[e]very contract, combination . . . or 

conspiracy, in restraint of trade or commerce among the several States.” 15 U.S.C. §1. To show 

a violation of Section 1, the FTC must “prove ‘three elements: (1) an agreement or conspiracy 

among two or more persons or distinct business entities; (2) by which the persons or entities 

intend to harm or restrain competition; and (3) which actually restrains competition.’” City of 

Vernon v. Southern Cal. Edison Co., 955 F.2d 1361, 1365 (9th Cir.), cert. denied, 506 U.S. 908 

(1992) (quoting Morgan, Strand, Wheeler & Biggs v. Radiology, Ltd., 924 F.2d 1484, 1488 (9th 

Cir. 1991) (citation and quotations omitted)); see also Amarel v. Connell, 102 F.3d 1494, 1522 

(9th Cir. 1996); Name Space, Inc. v. Internet Corp. for Assigned Names & Nos., 795 F.3d 1124, 

1129 (9th Cir. 2015). Only “unreasonable” restraints of trade are unlawful. Leegin Creative 

Leather Prod., Inc. v. PSKS, Inc., 551 U.S. 877, 885 (2007). The FTC does not allege that any 

agreement it challenges here is per se unlawful, nor could it as it does not challenge any 

“horizontal” agreement between competitors or other agreement that falls within the narrow 

category that the Supreme Court has found to be per se unlawful. See Ohio v. Am. Express Co., 

138 S. Ct. 2274, 2283-84 (2018). Therefore, the FTC’s Section 1 claim is subject to analysis 

under the “rule of reason,” under which the FTC must prove that the challenged agreements are 

“restraints with anticompetitive effect that are harmful to the consumer” rather than “restraints 

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stimulating competition that are in the consumer’s best interest.”1Id. at 2284 (quoting Leegin, 

551 U.S. at 886); see also Metro Indus. v. Sammi Corp., 82 F.3d 839, 843 (9th Cir. 1996) (under 

rule of reason analysis, “the factfinder weighs all of the circumstances of a case in deciding 

whether a restrictive practice should be prohibited as imposing an unreasonable restraint on 

competition” (quoting Bus. Elecs. Corp. v. Sharp Elecs. Corp., 485 U.S. 717, 723 (1988)). “The 

rule of reason weighs legitimate justifications for a restraint against any anticompetitive effects.” 

Paladin Assocs., Inc. v. Mont. Power Co., 328 F.3d 1145, 1156 (9th Cir. 2003). Under the rule of 

reason governing challenges to vertical agreements, as here, the plaintiff must prove the 

defendant had market power in a properly defined market. See Am. Express, 138 S. Ct. at 2283 & 

n.7 (noting that “[v]ertical restraints often pose no risk to competition unless the entity imposing 

them has market power, which cannot be evaluated unless the Court first defines the relevant 

market”). The plaintiff must also “prove that the challenged restraint has a substantial 

anticompetitive effect that harms consumers in the relevant market.” Id. at 2284. The FTC 

alleges that Qualcomm’s license and other agreements with OEMs and alleged “exclusive 

dealing” arrangements with Apple violate Section 1 of the Sherman Act. (Complaint ¶147; FTC 

Response to Interrogatory No. 2). 

584. A claim under Section 2 of the Sherman Act “has two elements: (1) the possession 

of monopoly power in the relevant market and (2) the willful acquisition or maintenance of that 

power as distinguished from growth or development as a consequence of a superior product, 

business acumen, or historic accident.” United States v. Grinnell Corp., 384 U.S. 563, 570-71 

(1966). “To be condemned as exclusionary, a monopolist’s act must have an ‘anticompetitive 

effect.’ That is, it must harm the competitive process and thereby harm consumers. In contrast, 

harm to one or more competitors will not suffice.” United States v. Microsoft Corp., 253 F.3d 34, 

58 (D.C. Cir. 2001); In re eBay Seller Antitrust Litig. 545 F. Supp. 2d 1027, 1032 (N.D. Cal. 

2008) (plaintiff must establish “harm to the competitive process as distinct from the ... harm to 

1

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modem chips, e.g., OEMs. See Ohio v. Am. Express Co., 138 S. Ct. at 2284 (“[T]he plaintiff has 

the initial burden to prove that the challenged restraint has a substantial anticompetitive effect that 

harms consumers in the relevant market.” (emphasis added)). 

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one or more competitors”) (citing Microsoft, 253 F.3d at 34). The FTC must also show that the 

harm resulting from the allegedly anticompetitive conduct occurred in the alleged relevant 

market. Beulter Sheetmetal Works. v. McMorgan & Co., 616 F. Supp. 453, 455 (N.D. Cal. 1985) 

(citing Fine v. Barry and Enright Prod., 731 F.2d 1394, 1399 (9th Cir.), cert. denied, 469, U.S. 

881, (1984)). “When a legitimate business justification supports a monopolist’s exclusionary 

conduct, that conduct does not violate § 2 of the Sherman Act.” Image Tech. Servs., Inc. v. 

Eastman Kodak Co., 125 F.3d 1195, 1212 (9th Cir. 1997). The FTC alleges that Qualcomm’s 

practice of refusing to sell modem chips to unlicensed OEMs, granting exhaustive licenses to its 

cellular SEPs at the device level, and entering into strategic fund agreements with certain OEMs, 

as well as alleged “exclusive dealing” arrangements with Apple, underlie its claim under Section 

2 of the Sherman Act. (Complaint ¶ 147). 

585. A Section 5 claim alleging that a particular practice constitutes an “unfair method 

of competition in or affecting commerce,” 15 U.S.C. § 45(a)(1), as FTC brings here, requires a 

showing of harm to competition similar to that required by the Sherman Act. See FTC v. 

Raladam Co., 283 U.S. 643, 647-48 (1931); E.I. du Pont de Nemours & Co. v. FTC, 729 F.2d 

128, 137 (2d Cir. 1984); Boise Cascade Corp. v. FTC, 637 F.2d 573, 579-81 (9th Cir. 1980). The 

FTC has recognized that Section 5 claims under the “unfair method of competition” prong of the 

statute should be “evaluated under a framework similar to the rule of reason, that is, an act or 

practice challenged by the Commission must cause, or be likely to cause, harm to competition or 

the competitive process, taking into account any associated cognizable efficiencies and business 

justifications.” Fed. Trade Comm’n, Statement of Enforcement Principles Regarding “Unfair 

Methods of Competition” Under Section 5 of the FTC Act at 1. The FTC must prove that the 

challenged conduct is “collusive, coercive, predatory, or exclusionary,” or that it has an 

“anticompetitive purpose or cannot be supported by an independent legitimate reason.” E.I. du 

Pont de Nemours & Co., 729 F.2d at 140. 

586. The FTC bears the burden of showing the requisite anticompetitive effect for 

purposes of proving a claim under Section 1 and Section 2 of the Sherman Act, and under Section 

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5 of the FTC Act. If the FTC establishes a prima facie case by demonstrating anticompetitive 

effect, then Qualcomm may proffer a procompetitive justification for its conduct. If Qualcomm 

offers “a nonpretextual claim that its conduct is indeed a form of competition on the merits 

because it involves, for example, greater efficiency or enhanced consumer appeal—then the 

burden shifts back to [the FTC] to rebut that claim,” and if “the monopolist’s procompetitive 

justification stands unrebutted, then the plaintiff must demonstrate that the anticompetitive harm 

of the conduct outweighs the procompetitive benefit.” Microsoft, 253 F.3d at 59 (claim under 

Section 2); see also County of Tuolumne v. Sonora Cmty. Hosp., 236 F.3d 1148, 1159 (9th Cir. 

2001) (claim under Section 1). 

587. This burden-shifting framework is commonly referred to as the “rule of reason,” 

the purpose of which is to distinguish between conduct that actually harms competition and 

conduct that in fact promotes competition. Leegin, 551 U.S. at 885-86 (the rule of reason is the 

“accepted standard” for testing whether challenged conduct (other than conduct that is “per se” 

unlawful) harms competition in violation of the Sherman Act); see also Microsoft, 253 F.3d at 58-

59; Areeda & Hovenkamp, Law: An Analysis of Antitrust Principles and Their Application 

(“Areeda & Hovenkamp”) ¶¶ 1500, 1512. Under the rule of reason, the factfinder “weighs all of 

the circumstances of a case” in determining whether challenged conduct in fact harms 

competition in violation of the Sherman Act. Leegin, 551 U.S. at 885 (quoting Cont’l T. V., Inc. 

v. GTE Sylvania Inc., 433 U.S. 36, 49 (1977)). 

588. If the FTC successfully proves a violation of Section 5 of the FTC Act, it must 

also establish that permanent injunctive relief is warranted under Section 13(b). Section 13(b) 

authorizes the FTC to pursue permanent injunctive relief in federal court only “in proper cases ... 

and after proper proof.” 15 U.S.C. § 53(b). The statute explains that the FTC must prove an 

ongoing or likely future violation of the antitrust laws and that injunctive relief will not only 

remedy that harm but also “be in the interest of the public.” Id. § 53(b)(1)–(2). 

589. The Ninth Circuit has recognized that, even if proven, “past wrongs are not enough 

for the grant of an injunction;” in a case governed by the FTC Act, “an injunction will issue only 

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if the wrongs are ongoing or likely to recur.” FTC v. Evans Prods. Co., 775 F.2d 1084, 1087 (9th 

Cir. 1985); see also FTC v. AbbVie Inc., 329 F. Supp. 3d 98, 145 (E.D. Pa. 2018) (FTC must 

prove that defendant “is currently violating antitrust laws or is about to violate antitrust laws”). 

This showing must be made based on evidence of current market conditions and practices at the 

time a remedy is sought. See id. (denying a permanent injunction because the record contained 

“no basis to conclude that” antitrust violations are “likely to reoccur”); FTC v. Merch. Servs. 

Direct, LLC, No. 13-CV-0279-TOR, 2013 WL 4094394, at *3 (E.D. Wash. Aug. 13, 2013) 

(concluding that, after “stale” evidence regarding past alleged violations was “excised,” “there is 

little to suggest that the violations . . . are likely to recur” and denying preliminary injunction). 

590. The FTC bears the burden of proof on each element of its claims by a 

preponderance of the evidence. FTC v. DIRECTV, Inc., No. 15-cv-01129-HSG, 2018 WL 

3911196, at *2 (N.D. Cal. Aug. 16, 2018). 

X. THE FTC FAILS TO PROVE THAT THE CHALLENGED CONDUCT CAUSED 

HARM TO COMPETITION, WHICH IS FATAL TO EACH OF THE THEORIES 

UNDERLYING THE FTC’S SECTION 5 CLAIM 

A. The FTC Must Establish That Challenged Conduct Caused Harm to 

Competition And It Must Make That Showing Based on Objective and 

Reliable Evidence. 

591. A showing of harm to competition is a required element of claims under Sections 1 

and 2 of the Sherman Act and any claim under Section 5 of the FTC Act. See, e.g., Amarel, 102 

F.3d at 1522 (showing of actual harm to competition is required element of claim under Section 1 

of the Sherman Act); Microsoft, 253 F.3d at 58-59 (showing that challenged conduct “indeed has 

the requisite anticompetitive effect,” and has “harmed competition, not just a competitor” is 

required element of claim under Section 2 of the Sherman Act); Boise Cascade, 637 F.2d at 579-

81 (claim under the “unfair methods of competition” prong of Section 5 claim requires a showing 

of harm to competition similar to that required by the Sherman Act). 

592. Moreover, the FTC must establish a causal link between the challenged conduct 

and actual harm to competition. See, e.g., Verizon Commc’ns v. Law Offices of Curtis V. Trinko, 

LLP, 540 U.S. 398, 407 (2004) (“To safeguard the incentive to innovate, the possession of 

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monopoly power will not be found unlawful unless it is accompanied by an element of 

anticompetitive conduct); Rambus Inc. v. FTC, 522 F.3d 456, 464 (D.C. Cir. 2008) (alleged 

deceptive conduct in standards development organization did not constitute unlawful 

monopolization where FTC failed to establish causal link between that conduct and 

anticompetitive harm). 

593. For purposes of a Section 2 claim, therefore, acquiring a large market share by outcompeting competitors is not improper monopolization. “A firm may acquire a monopoly simply 

by virtue of being a better competitor. For example, a firm may have better production methods 

or be more innovative than its past and prospective competitors.” Alaska Airlines, Inc. v. United 

Airlines, Inc., 948 F.2d 536, 547 (9th Cir. 1991) (a touchstone of antitrust law is that a firm that 

succeeds based on its superior skills, foresight, and industry, is competing, not harming 

competition, even if its success is to the detriment of its rivals); see also Paladin Assocs., Inc. v. 

Mont. Power Co., 328 F.3d 1145 (9th Cir. 2003) (affirming summary judgment for defendant and 

noting that “[i]n competition, there are winners and losers. Even viewing the evidence in the light 

most favorable to [plaintiff], we must conclude that [defendant], because of its superior skills, 

foresight, and industry, made six sales that [plaintiff] did not,” and doing so did not violate the 

Sherman Act.) Thus, to prove its Section 2 claim, the FTC must prove that Qualcomm acquired 

or maintained a monopoly through actions other than competition on the merits, i.e., improper 

conduct that harmed the competitive process and did not allow others to compete on the merits. 

Trinko, 540 U.S. at 407 (“The mere possession of monopoly power, and the concomitant charging 

of monopoly prices, is not only not unlawful; it is an important element of the free-market 

system. The opportunity to charge monopoly prices—at least for a short period—is what attract 

‘business acumen’ in the first place; it induces risk taking that produces innovation and economic 

growth.”). 

594. To establish causation, the FTC must also “rule out alternative market-based 

explanations” for the defendant’s competitive success. It’s My Party, Inc. v. Live Nation, Inc., 

811 F.3d 676, 685-86 (4th Cir. 2016) (plaintiff failed to rule out market-based explanations why 

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consumers might prefer defendant’s alleged bundled venue and promotion services – including 

superiority of the defendant’s venue). Only by ruling out such alternative explanations can a 

plaintiff establish the causation necessary to establish cognizable harm to competition. Id. With 

specific respect to conduct concerning FRAND commitments and standards development, a 

plaintiff must show that the alleged harm to competition would not have occurred but for the 

challenged conduct. Rambus, 522 F.3d at 466-67 (FTC failed to show that defendant’s 

technology would not have been adopted into the standard but for the defendant’s alleged failure 

to disclose its SEPs, and thus FTC failed to establish that challenged conduct harmed competition 

from alternative technologies). 

595. For this reason, showing that a defendant raised prices or otherwise increased costs 

to customers (or charged more than it would have absent monopoly power) is insufficient. See 

NYNEX Corp v. Discon, Inc. 525 U.S. 128, 136-37 (1998) (absent showing that telephone service 

company’s conduct harmed competitive process, fact that conduct resulted in higher prices to 

consumers did not suffice to support antitrust claims – higher prices resulted from defendant’s 

lawful monopoly and its deception of regulatory agency, not from a less competitive market); 

Forsyth v. Humana, Inc. 114 F.3d 1467, 1477-78 (9th Cir. 1997), overruled on other grounds by 

Lacey v. Maricopa Cty., 693 F.3d 896 (9th Cir. 2012) (mere fact that plaintiffs’ co-payments 

increased as a result of defendant’s alleged kick-back scheme did not support antitrust claim 

because evidence did not “explain how the scheme reduced competition in the relevant market.”) 

Even in cases where the defendant is alleged to charge higher prices than it would absent alleged 

monopoly power, the FTC must still establish that the challenged conduct caused harm to 

competition by “impair[ing] rivals in a manner tending to bring about or protect a defendant’s 

monopoly power.” Rambus Inc. v. FTC, 522 F.3d at 464. A showing that a defendant engaged in 

unsavory conduct is insufficient unless that conduct actually harmed the competitive process. Id.; 

see also Trinko, 540 U.S. at 407. 

596. Evidence of increasingly competitive conditions in the alleged relevant markets 

also weighs heavily against a finding that there has been harm to competition. Omega Envtl, Inc. 

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v. Gilbarco, Inc., 127 F.3d 1157, 1164 (9th Cir. 1997) (evidence that a competitor had “built a 

substantial distribution network” and that its “market share ha[d] increased since its entry by at 

least one third (from approximately 6% to 8%), while industry output in the ... market [] 

expanded substantially” precluded a finding that challenged conduct was a barrier to entry where 

plaintiff had produced no credible evidence that the challenged conduct had deterred its entry); 

see also R.W. Int’l Corp. v. Welch Food, Inc., 13 F.3d 478, 487–88 (1st Cir. 1994) (fact that the 

distributor “successfully entered the market during the relevant period of time ... indicat[ed] a 

lack of injury to competition” from terminating the distributor even if the distributor had 

“suffered economic consequences from [the] decision to terminate”). 

B. The FTC Has Failed to Prove Its Theory of Anticompetitive Effects 

597. The FTC’s theory of harm to competition is that Qualcomm has monopoly power 

in alleged markets for CDMA and “premium” LTE modem chips, and that it has leveraged these 

alleged modem chip monopolies in licensing negotiations with OEMs to obtain licensing terms 

for its cellular SEPs that are above FRAND. The FTC further alleges that these “supra-FRAND” 

rates impose a tax on its rival modem chip suppliers, which then reduces competition in the 

alleged relevant markets by reducing competitors’ sales and margins and thereby reducing the 

ability and incentive of Qualcomm’s competitors to invest and innovate. (Complaint ¶¶ 31-32; 

44-45; 76-94). To prove this theory, the FTC must prove that (a) the alleged markets, for CDMA 

and “premium” LTE modem chips, are properly defined, (b) that Qualcomm has market power in 

those markets, (c) that Qualcomm used that market power to cause OEMs to agree to royalty 

terms that were higher than “fair and reasonable,” and (d) that but for these increased royalties, 

the prices of Qualcomm’s modem chips would have been higher, resulting in competitors in the 

alleged markets having sufficiently more sales at higher margins, that the alleged markets would 

have been meaningfully more competitive, and that Qualcomm’s competitors would have 

invested more and become more effective competitors against Qualcomm. 

598. The FTC has failed to prove this theory based on objective and reliable evidence. 

See Aerotec Int’l, Inc. v. Honeywell Int’l, Inc., 836 F.3d 1171, 1175 (9th Cir. 2016) (holding that 

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plaintiff’s antitrust claims failed for lack of evidence of harm to competition, and noting that 

“[t]his case serves as a reminder that anecdotal speculation and supposition are not a substitute for 

evidence, and that evidence decoupled from harm to competition – the bellwether of antitrust – is 

insufficient”); see also Cal. Dental Ass’n v. FTC, 224 F.3d 942, 957 (9th Cir. 2000) (dismissing 

FTC’s challenge to advertising restrictions where FTC “never quantified any increase in price or 

reduction in output of dental services resulting from” challenged restrictions, whereas defendant 

had produced strong, empirical evidence of procompetitive effects supported by expert testimony 

and statements from individual dentists); United States v. AT&T, Inc., 310 F. Supp. 3d 161, 211-

12 (D.D.C. 2018) (government failed to offer any reliable, objective evidence of harm to 

competition to support challenge to proposed merger – statements by defendants were taken out 

of context, statements by third-party competitors likely reflected “self-interest rather than genuine 

concerns about harm to competition,” and expert witness relied on inputs that were not supported 

by evidence); United States v. Oracle Corp., 331 F. Supp. 2d 1098, 1167-68 (N.D. Cal. 2004) 

(finding testimony from customers about competitive conditions in market unreliable and 

unpersuasive, as testimony was only “small sample” of “heterogeneous customer market” and 

“the most persuasive testimony from customers is not what they say in court, but what they do in 

the market,” and actual data showed broader competition than alleged); Areeda & Hovenkamp ¶ 

538b (stating that “‘subjective’ testimony by customers” constitutes the “[l]east reliable 

[evidence]” and that “[t]hough not irrelevant, such statements are often unreliable”). 

599. The FTC cannot meet its burden of proof by providing only “a theory of the likely 

effect of” the challenged conduct. Boise Cascade 637 F.2d at 578. Speculation based “on general 

economic theory” or “academic suppositions” on what could or would happen but for the 

challenged conduct also do not constitute actual evidence of adverse effects. Military Servs. 

Realty, Inc. v. Realty Consultants of Va., Ltd., 823 F.2d 829, 832 (4th Cir. 1987) (granting 

summary judgment where expert based his conclusion on general economic theory and did not 

conduct any quantitative analysis to determine the actual effect the challenged conduct had on 

competition); see also Procaps S.A., Inc. v. Patheon, Inc., 845 F.3d 1072, 1085 (11th Cir. 2016) 

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(experts’ conclusions regarding the “theoretical” and “hypothetical” effects on competition were 

insufficient to establish harm to competition); Brooke Group Ltd. v. Brown & Williamson 

Tobacco Corp. 509 U.S. 209, 233-34 (1993) (rejecting unsupported speculation that competition 

would have increased even more absent challenged conduct – in light of evidence showing that 

output expanded following alleged predation, plaintiff’s theory relied on speculation that output 

expanded at a slower rate than it would have absent the challenged conduct, which was not an 

inference supported by concrete evidence). 

1. The FTC Has Failed To Establish That Qualcomm Has Monopoly 

Power In The Alleged Relevant Markets. 

600. As a first step, the FTC must prove that Qualcomm has monopoly power in both 

alleged relevant markets: (a) the alleged market for CDMA modem chips; and (b) the alleged 

market for “premium” LTE modem chips. This requires, first, defining the relevant markets. See 

Ohio v. Am. Express, 138 S. Ct. 2274, 2285 & n.7 (2018) (in a case alleging vertical restraints 

under Section 1 of the Sherman Act, the court cannot assess whether the conduct has 

anticompetitive effects without first defining the relevant market and measuring market power.) 

Second, the FTC must prove that Qualcomm has monopoly power in each market. 

601. Monopoly power is “the power to control prices or exclude competition.” Grinnell,

384 U.S. at 571 (quoting United States v. E.I. du Pont de Nemours & Co., 351 U.S. 377, 391 

(1956)). 

602. Although “high market share” may potentially be “evidence from which the 

existence of monopoly power may be inferred ... market share alone does not prove monopoly 

power.” United States v. Syufy Enterprises, 712 F. Supp. 1386, 1401 (N.D. Cal. 1989) (citing 

Hunt-Wesson Foods, Inc. v. Ragu Foods, Inc., 627 F.2d 919, 924 (9th Cir. 1980), cert. denied, 

450 U.S. 921 (1981)). A “high market share cannot be inferred as creating actual or potential 

monopoly power where a given market has low entry barriers and other market factors rendering 

monopoly power unlikely.” United States v. AMR Corp., 140 F. Supp. 2d 1141, 1209 (D. Kan. 

2001) (citation omitted). “Because untapped potential provides a mouth-watering incentive for 

vigorous competition, it is axiomatic that monopoly power is unlikely to arise in dynamic 

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industries marked by a rapidly expanding volume of demand and low barriers to entry.” Metro 

Mobile CTS, Inc. v. NewVector Commc’ns, Inc., 892 F.2d 62, 63 (9th Cir. 1989). 

603. Assuming a relevant market has been properly defined, courts consider “structural 

characteristics of markets in determining whether or not a firm has monopoly power, including 

the relevant size and strength of competitors, ... probable development of the industry, [and] 

potential competition.” Antitrust Law Developments 236 (8th ed.); see also Reazin v. Blue Cross 

and Blue Shield of Kan., Inc., 899 F.2d 951, 967 (10th Cir. 1990) (“Power over price and power 

over competition ... depend on various market characteristics, including ... market trends, 

number and strength of other competitors, and entry barriers.” (citation omitted)). 

604. Strong competition and trends toward even stronger competition indicate a lack of 

monopoly power. Oahu Gas Serv., Inc. v. Pacific Resources, Inc., 838 F.2d 360, 366 (9th Cir. 

1988) (even a high market share does not support finding of monopoly power “in a market with 

low entry barriers or other evidence of a defendant’s inability to control prices or exclude 

competitors” (emphasis added)). 

605. In assessing market power, a court must also consider the extent to which the 

conduct of even a seller with a large market share is disciplined by powerful buyers. United 

States v. Archer-Daniels-Midland Co., 781 F. Supp. 1400, 1416–18 (S.D. Iowa 1991) (existence 

of large, powerful buyers limited ability of sellers to raise prices in market for high fructose corn 

syrup). Buyers can reduce or discipline a firm’s market power by, for example, sponsoring entry 

by competitors or engaging in self-supply. See FTC v. Cardinal Health, Inc., 12 F. Supp. 2d 34, 

58-60 (D.D.C. 1998). 

a. The FTC Has Not Established That Qualcomm Has Monopoly 

Power in the Alleged Market for CDMA Modem Chips. 

606. The evidence shows that Qualcomm was unable to exercise sustained, meaningful 

market power in CDMA modem chips. In the cellular industry, a relatively small number of 

powerful OEMs, each of which buys far larger quantities of non-CDMA modem chips than 

CDMA modem chips, and together provide a substantial portion of Qualcomm’s chip revenue, 

could easily retaliate in the much larger non-CDMA segments against any effort by Qualcomm to 

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exercise monopoly power in the far smaller CDMA segment. 

 See United 

States v. Archer-Daniels-Midland Co., 781 F. Supp. at 1416–18. 

607. The evidence further shows that there were no significant barriers to entry that 

prevented chipmakers with existing GSM, WCDMA, and LTE modem chips, including Intel, 

MediaTek, Samsung, and Huawei, from quickly developing and marketing CDMA multimode 

modem chips when they have decided to do so. The evidence also shows that OEMs have been 

able to sponsor entry into the CDMA segment. 

608. The evidence further shows that to the extent a market for CDMA modem chips 

was ever meaningful, such a market ceased to have competitive significance with Verizon’s 

certification of non-CDMA phones. The FTC alleged that CDMA capability was particularly 

important because it was necessary to sell phones into the U.S. market. But CDMA capability is 

not necessary to sell phones compatible with three of the four major cellular network providers in 

the United States. CDMA capability has never been necessary to sell phones compatible with 

European cellular networks and many Asian cellular networks. 

609. This evidence of lack of entry barriers, diminishing competitive import, and 

increasingly competitive conditions precludes any finding of monopoly power in the alleged 

market for CDMA modem chips. Oahu Gas Service, Inc., 838 F.2d at 366; see also United States 

v. Int’l Harvester Co., 274 U.S. 693, 708–09 (1927) (pointing to evidence of increasingly strong 

competitors with greater “competitive efficiency” and a decrease in the defendant’s market share 

as evidence against a finding of antitrust violation); United States v. U.S. Steel Corp., 251 U.S. 

417, 439 n.1 (1920) (pointing to decrease in defendant’s market share over ten-year period from 

“50.1 percent to 40.9 percent,” and competitors’ increase in business by percentage that 

outstripped the defendant’s increase in business as “indicat[ing] that . . . [the] power of the 

corporation [is] not sufficient to retard prosperous growth of efficient competitors”); United 

States v. Syufy Enters., 903 F.2d 659, 665–67 (9th Cir. 1990) (concluding that defendant had no 

market power because new entrant reduced market share from 93% to 75% over four years—a 

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much smaller and slower decline than the decline of Qualcomm’s share of sales of CDMAcompatible modem chips). 

610. The FTC’s monopolization claim fails for an additional reason: lack of current 

evidence. The only evidence of market conditions after 2016 submitted at trial shows 

increasingly competitive conditions, including declining prices, new entry by rival chipmakers, 

and a continuing decline in Qualcomm’s global share of baseband modem chip units sold in every 

relevant segment, including CDMA modem chips. The FTC’s expert did not examine any 

evidence concerning market conditions in the alleged relevant market for CDMA modem chips 

after 2016, and offered no opinion about whether Qualcomm has had or is likely to obtain 

monopoly power in that alleged market at any time after 2016. Thus, all Dr. Shapiro could do 

was speculate as to Qualcomm’s current or future monopoly power. Expert opinions based on 

speculation rather than on reliable evidence do not suffice to establish monopoly power. United 

States v. AT&T, Inc. 310 F. Supp. 3d 161, 212 (D.D.C. 2018) (expert witness relied on 

speculation and inputs that were not supported by evidence). Thus, the FTC has failed to meet its 

burden to prove that Qualcomm currently has, or is about to obtain, monopoly power in CDMA 

modem chips. 

611. The FTC’s failure to meet its burden of establishing that Qualcomm has monopoly 

power in CDMA modem chips defeats its claim of monopoly maintenance in CDMA modem 

chips. 

b. The FTC Has Not Established That the Alleged Market for 

“Premium” LTE Modem Chips Is Properly Defined, or that 

Qualcomm Has Monopoly Power in that Alleged Market. 

612. The FTC has failed to establish that the alleged market for “premium” LTE 

modem chips” is properly defined, or that Qualcomm has monopoly power in such alleged market 

if it had been properly defined. 

613. “The U.S. Supreme Court has said that in analyzing the relevant product market, 

the appraisal is one of cross-elasticity of demand; that is, the reasonable interchangeability of 

commodities.” In re Super Premium Ice Cream Distribution Antitrust Litig., 691 F. Supp. 1262, 

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1268 (N.D. Cal. 1988), citing United States v. DuPont & Co., 351 U.S. 377, 394-95 (1956); 

Brown Shoe Co. v. United States, 370 U.S. 294, 325 (1962). A properly defined market must take 

into account the commercial realities of competition. See, e.g., Balaklaw v. Lovell, 14 F.3d 793, 

799 (2d Cir. 1994). 

614. The FTC has shifted its definition of the alleged market for “premium” LTE 

modem chips. Initially, it defined this market as including LTE baseband processors that 

“support[] advanced LTE functionality” and have the “latest features” (Complaint ¶ 42) or 

processors that “implement the most advanced currently deployed LTE technology, and/or are 

suitable for use in a premium handset at a given point in time” (FTC’s 2nd Am. Resp. to 

Qualcomm’s First Set of Interrogatories, Response to Interrogatory No. 4, at 18). Later, its 

expert, Dr. Shapiro defined the market as including “those LTE-compatible chips that OEMs have 

deployed in premium-tier handsets,” where “premium-tier handsets” are handsets that cost more 

than $300 before 2013 and more than $400 after 2013. Alternatively, the FTC’s expert defined 

the market as including “only those chips explicitly identified by Qualcomm in its internal 

documents as ‘premium,’ rather than by the phones within which they are used.” 

615. With respect to the FTC’s initial market definition, the FTC acknowledged that it 

could not identify the “minimum features that would be necessary, at any particular moment in 

time, for an LTE baseband processor to be included in the market for premium LTE baseband 

processors.” (Response to Interrogatory No. 4, at 19.) 

616. With respect to the FTC’s expert’s market definition, based on LTE modem chips 

actually used in “premium-tier handsets” as defined by specific price thresholds, “[m]arket 

definitions based on price levels . . . have not found favor with courts” because products in one 

alleged price band often are found to compete with products in another. Casey v. Diet Ctr., Inc., 

509 F. Supp. 1561, 1568 (N.D. Cal. 1984) (citing Brown Shoe, 370 U.S. at 326; United States v. 

Jos. Schlitz Brewing Co., 253 F. Supp. 129 (N.D. Cal. 1966)); see also Premium Ice Cream, 691 

F. Supp. at 1268 (“Such distinctions are economically meaningless where the differences are 

actually a spectrum of price and quality differences”). 

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617. Moreover, the FTC’s definition of the market based on modem chips that were 

actually used in certain handsets does not take into account the degree of and potential for ex-ante 

competition for those sockets. At a minimum, modem chips that OEMs considered, but 

ultimately rejected, for use in “premium tier handsets” are part of the market because they 

literally provided competition for the chips that OEMs ultimately selected. 

618. The evidence here shows that modem chips included within the proposed 

definition compete against and are interchangeable with chips that fall outside the definition. For 

example, a number of modem chips that the FTC excluded from its proposed relevant market of 

“premium” LTE modem chips were incorporated into handsets that cost more than $300 before 

2013 and more than $400 after 2013, and therefore were substitutes for modem chips that the 

FTC did include in its proposed relevant market. Similarly, a number of modem chips that the 

FTC included in its proposed relevant market of “premium” LTE modem chips were incorporated 

into handsets that cost less than $300 before 2013 and less than $400 after 2013. Further, OEMs 

considered additional modem chips for use in handsets that cost more than $300 before 2013 and 

more than $400 after 2013. This evidence is inconsistent with the FTC’s expert’s proposed 

definition of a relevant market for “premium” LTE modem chips. See, e.g., United States v. H&R 

Block, Inc., 833 F. Supp. 2d 36, 83 (D.D.C. 2011) (rejecting a market definition that sought to 

distinguish between “premium” and “value” segments for the do-it-yourself tax preparation 

services market because evidence showed that competitors in each segment competed directly on 

price and features); Creston Electronics, Inc. v. Cyber Sound & Sec. Inc., No. 11-3492 

(FSH)(MAH), 2012 U.S. Dist. LEXIS 16132, at *12–*16 (D.N.J. Feb. 9, 2012) (rejecting 

plaintiff’s market definition of “high-end residential automation and control systems” costing 

$25,000 or more because “it does not allege which products or components that make up these 

control systems are interchangeable with one another functionally and/or economically” and for 

failing to allege products costing below $25,000 “do not compete” with these “high-end” 

systems”); Premium Ice Cream, 691 F. Supp. at 1268 (rejecting a market definition for “super 

premium” ice cream because of a lack of “sufficient facts” that customers of such ice creams “do 

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not buy others which are lower in the spectrum of price or quality” and because of “significant 

overlap among the various grades and brands”). 

619. Even if the proposed market of so-called “premium” LTE modem chips had been 

properly defined, the FTC has failed to establish that Qualcomm has monopoly power in that or 

any other segment of the market for LTE modem chips. 

620. The FTC’s expert acknowledged that Qualcomm’s share of “premium” LTE 

modem chips sales was reduced between 2014 and 2016 by the entry of Samsung, Intel, and 

MediaTek as competitors. During that time period, according to the FTC’s expert, Qualcomm’s 

share of “premium” LTE modem chip sales fell sharply from in 2014 to in 2016. 

Under the FTC’s expert’s “alternative” definition of the market, Qualcomm’s share fell below 

. 

621. The evidence that Qualcomm submitted at trial concerning current market 

conditions shows increasingly competitive conditions, including declining prices, new entry by 

rival chipmakers, increasing self-supply by OEMs, and a continuing decline in Qualcomm’s 

global share of baseband chip units sold in every relevant segment, including alleged “premium” 

LTE chips. Moreover, today, the evidence shows that each of the top three major global OEMs – 

Samsung, Huawei and Apple – is not dependent on Qualcomm for either so-called “premium” 

LTE modem chips or modem chips that support CDMA: Samsung and Huawei self-supply chips 

for their respective flagship phones, both also have available self-supply of multi-mode LTE 

modem chips that support CDMA, and Apple is sourcing exclusively from Intel for all its 2018 

devices, including those sold for activation on carriers requiring CDMA support. 

622. The evidence also shows Qualcomm was unable to exercise market power in the 

alleged market for “premium” LTE modem chips because powerful OEMs, which buy far larger 

quantities of non-LTE and “non-premium” LTE modem chips than “premium” LTE modem 

chips, could easily retaliate in the much larger non-“premium” LTE segments against any effort 

by Qualcomm to exercise monopoly power in the far smaller alleged “premium” LTE segment. 

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623. This evidence of increasingly competitive conditions precludes a finding of 

monopoly power in the alleged market for “premium” LTE modem chips. Oahu Gas Service, 

Inc., 838 F.2d at 366; Int’l Harvester Co., 274 U.S. at 708–09; U.S. Steel Corp., 251 U.S. at 439 

n.1; Syufy Enters., 903 F.2d at 665–66. 

624. The FTC submitted no evidence of market conditions in the alleged relevant 

markets after 2016. Thus, the FTC has failed to prove that Qualcomm has, or is about to have, 

monopoly power in “premium” LTE modem chips. This is another, independent, reason that the 

FTC’s claim fails. 

625. The FTC’s failure to meet its burden of establishing that Qualcomm has monopoly 

power in an alleged market for “premium” LTE modem chips defeats its claim of monopoly 

maintenance in “premium” LTE modem chips. 

2. The FTC Has Failed to Establish That Qualcomm’s Chip Supply 

Practices Harmed Competition in the Alleged Relevant Markets. 

626. The FTC alleges that Qualcomm’s practice of selling chipsets only to licensed 

handset manufacturers (i) “coerced” licensees to enter into licenses for Qualcomm’s patents on 

terms to which they would not have agreed but-for the need for Qualcomm’s CDMA or 

“premium” LTE modem chips, which resulted in “supra-FRAND” royalties, (ii) that such 

royalties, in turn, imposed a “tax” on competing chipmakers, and (iii) that the tax forced 

competitors to exit, deterred entry, made competitors invest less and become weaker competitors, 

and resulted in improper monopoly maintenance. 

a. The FTC has not Established that Qualcomm “Coerced” OEMs 

to Enter into Licenses That Resulted in Supra-FRAND 

Royalties. 

627. The first step of the FTC’s theory challenging Qualcomm’s chip supply practices 

is that Qualcomm “coerced” OEMs to enter into licenses that resulted in supra-FRAND royalties 

because OEMs purportedly could not obtain Qualcomm’s modem chips without agreeing to such 

terms, and OEMs could not afford to forgo buying such modem chips because Qualcomm’s 

monopoly power in alleged relevant markets for CDMA and “premium” LTE modem chips 

prevented the OEMs from sourcing such modem chips from rival suppliers. 

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628. The FTC’s theory fails because the FTC has not proven with reliable evidence that 

the licensing terms charged by Qualcomm for licenses to its cellular SEPs include a “supraFRAND” component that was coerced by Qualcomm’s purported monopoly power in the CDMA 

or “premium” LTE modem chip markets. 

629. If it were true that Qualcomm’s prevailing license terms included unfair and 

unreasonable royalties or other terms as a result of withholding or threatening to withhold chip 

supply, one would expect to find that any OEM who did not need Qualcomm’s CDMA or 

“premium” LTE modem chips would not have entered into a license with Qualcomm having its 

prevailing royalty terms, including royalty rates. In other words, such an OEM would have 

negotiated for royalty terms that did not include the purportedly unfair or unreasonable royalty 

terms. For this reason, the evidence is inconsistent with the FTC’s theory. 

630. Thirty-six licensees signed license agreements with Qualcomm extending to sales 

of complete terminals (i.e., cell phones), who have never bought any modem chips at all from 

Qualcomm to incorporate into complete terminal units. Necessarily, these licensees could not 

have been “coerced” by either the “need” for Qualcomm’s CDMA or “premium” LTE modem 

chips, or Qualcomm’s purported market power in these alleged markets, into entering into a 

license by any need for Qualcomm’s modem chips. 

631. Fifteen licensees entered into CDMA patent license agreements with Qualcomm 

before Qualcomm even established its chip business. Necessarily, these licensees could not have 

been “coerced” into entering into a license by any need for Qualcomm’s CDMA or “premium” 

LTE modem chips, because of course, such chips didn’t even exist (let alone market power). 

632. The situation with WCDMA is similar. As an initial matter, the FTC has not 

alleged or established that Qualcomm held or exercised market power in WCDMA modem chips. 

Instead, FTC argues that Qualcomm’s WCDMA agreements entered into during the period where 

Qualcomm purportedly had market power in “premium” LTE modem chips, contain a “supraFRAND” component generated from a fear that “premium” LTE modem chip supply would be 

interrupted. But Qualcomm entered into 68 WCDMA-only license agreements before Qualcomm 

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sold any LTE modem chips at all. Necessarily, these licensees could not have been “coerced” 

into entering into a WCDMA license containing a “supra-FRAND” component generated from a 

fear that “premium” LTE modem chip supply would be interrupted because Qualcomm did not 

yet sell “premium” LTE modem chips at the time the licenses were entered into. 

633. Qualcomm’s licenses covering LTE-only devices are similarly free from any 

“supra-FRAND” component generated from a fear that “premium” LTE modem chip supply 

would be interrupted. An LTE-only license agreement provides for royalty payments on sales of 

handsets that are compatible with the LTE standard and that contain a single-mode LTE-only 

modem chip. Qualcomm has never sold an LTE-only modem chip for handsets; rather, the only 

LTE modem chips it has sold for use in handsets are multi-mode chips that also support cellular 

communication using a 3G standard. Qualcomm will sell a multi-mode chip to any OEM that has 

a license for any of the 3G modes for which the modem chip is compatible, even if the customer 

does not have a license agreement covering LTE products. For example, Qualcomm will sell a 

multi-mode WCDMA/LTE chip to any OEM who has a WCDMA license. Qualcomm entered 

into 312 LTE-only licenses despite the fact that Qualcomm has never sold LTE-only chips for use 

in handsets. Necessarily, these licensees could not have been “coerced” into entering into an 

LTE-only license by any need for Qualcomm’s CDMA or “premium” LTE modem chips because 

the licensees did not need an LTE-only license to buy modem chips being sold by Qualcomm at 

the time the licenses were entered into. Thus, the royalty terms for such LTE-only agreements 

are free from any possible “coercion” based upon the fear that “premium” LTE modem chip 

supply would be interrupted. 

634. Qualcomm entered into 29 5G licenses in 2018, before it sold any 5G modem 

chips. Necessarily, these licensees could not have been “coerced” into entering into a license by 

any need for Qualcomm’s modem chips. 

635. Further, the FTC’s theory does not apply to licensees who had no near-term need 

for Qualcomm’s chips. Companies that entered into licenses with Qualcomm two or more years 

before they began buying CDMA or “premium” LTE modem chips from Qualcomm could not 

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have been deterred from bringing a legal challenge to Qualcomm’s licensing terms for fear of 

losing access to chips because those companies had plenty of time to do so before they bought 

such chips. Thus, the conclusion that Qualcomm’s purported market power in CDMA or 

“premium” LTE modem chips coerced these licensees to enter licenses containing a “supraFRAND” component because of fear that chip supply would be interrupted is not sustainable. 

636. The FTC’s theory likewise does not apply to licenses that were negotiated under 

the supervision of, and approved by, a licensee’s home government, such as China or Korea. 

Such licenses could not have been the product of some undue coercion by Qualcomm. 

637. Under the FTC’s theory, if even a single OEM was not “coerced” into entering 

into a Qualcomm license by the need for Qualcomm’s CDMA or “premium” LTE modem chips, 

that licensee could have challenged Qualcomm’s licensing rates and would have if they were 

unfair or excessive, and, if the challenge were successful, Qualcomm would have thus been 

forced to lower its rates for all licensees. This is because, according to the FTC, the “nondiscriminatory” component of the FRAND requirement, combined with “most favored royalty 

rate” clauses in numerous Qualcomm licenses, means that a more favorable royalty rate for one 

OEM would result in the more favorable royalty rate for all OEMs. (FTC response to Interrog. 

No. 6). Because hundreds of licensees have entered into a Qualcomm license without being 

“coerced” by a fear that Qualcomm would interrupt supply of CDMA or “premium” LTE modem 

chips, the FTC’s proof necessarily fails. 

638. In addition, if it were true that Qualcomm received an unfair and unreasonable 

“supra-FRAND” component to the royalties it charges by threatening to withhold CDMA or 

“premium” LTE modem chip supply, one would expect that Qualcomm’s royalty terms in license 

agreements entered with purchasers of the allegedly monopolized chips during periods of alleged 

monopolization would be higher than in license agreements entered when Qualcomm did not 

have a chip business. The evidence showed that this was not the case. 

639. If the FTC’s theory were true, one would also expect that Qualcomm’s royalty 

terms for purchasers of the allegedly monopolized CDMA and “premium” LTE modem chips 

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would be higher than for licensees purchasing only modem chips as to which the FTC does not 

allege that Qualcomm ever had a monopoly, such as WCDMA modem chips. The evidence 

showed that this was not the case either. 

640. One would also expect that royalty terms in license agreements entered during 

periods of alleged monopolization of CDMA or “premium” LTE modem chips would be higher 

than in license agreements entered when Qualcomm had a non-monopoly share of the alleged 

relevant markets (e.g., less than 50%, leaving aside the fact that shares exceeding 50% can be 

non-monopoly shares in the face of low entry barriers or other factors). This, too, was not the 

case. 

641. The FTC also cannot reconcile that Qualcomm’s licensing practices have been 

consistent and well-known since it began licensing more than two decades ago. As noted above, 

the evidence shows that Qualcomm’s royalty rates have been consistent between the periods 

during which Qualcomm allegedly held monopoly power in the alleged markets and when it did 

not. In other words, Qualcomm charged virtually identical rates in licenses executed in periods 

where Qualcomm did not have any market power to those licenses executed during periods where 

Qualcomm purportedly did have market power (and according to the FTC include a “supraFRAND” rate component). Thus, this evidence shows that Qualcomm could not possibly have 

used alleged monopoly power in chip markets as leverage, given that the purportedly affected 

license agreements are not different. Without difference in rates, the FTC’s theory fails as a 

matter of law. 

642. In addition, during the time that Qualcomm has maintained its consistent and wellknown licensing practices, its technology has repeatedly been included in multiple generations of 

standards, including in numerous releases within each standard. Implementers substantially 

outnumber innovators in the standards development organizations that have issued those 

standards, and decisions on standards are reached by consensus, which may mean something less 

than unanimity, but means more than a simple majority. The FTC did not provide an explanation 

why, if Qualcomm’s licensing practices were in breach of its FRAND commitments, Standards 

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Development Organizations (“SDOs”)—which were populated by meaningful numbers of 

representatives of Qualcomm licensees, all of whom were aware of Qualcomm’s licensing 

practices and license terms—continued to include Qualcomm’s technology in their standards. 

This is further evidence that the market does not view that Qualcomm’s practices create a “supraFRAND” rate component that imparts anticompetitive harm to the market. 

643. The evidence further shows that handset makers engaged in multi-sourcing and 

had access to alternative sources of modem chip supply. The FTC failed to explain why handset 

makers could not turn to these alternative sources of supply to neutralize Qualcomm’s alleged 

threat of withholding its own modem chip supply. 

644. The FTC’s theory fails for the additional reason that it has not demonstrated that 

any particular license – let alone all of Qualcomm’s licenses – contain a supra-FRAND royalty 

component that was caused by Qualcomm coercing such supra-FRAND component by virtue of 

threatening to interrupt chip supply. The FTC relies on the opinion of its expert, 

Michael Lasinski, but Mr. Lasinski’s opinion is neither reliable nor supported in fact. 

Mr. Lasinski also fails to make the causal connection required. It is not enough for the FTC to 

argue that Qualcomm’s rates are “supra-FRAND” in the abstract. The FTC has to directly link 

any purported “supra-FRAND” component to the alleged monopoly power, which neither 

Mr. Lasinski nor Dr. Shapiro does. The FTC’s case fails because it falls well-short of proving 

that Qualcomm’s purported market power in CDMA or “premium” LTE modem chips caused the 

effect of a “supra-FRAND” component to Qualcomm’s royalty rates. Nor is there any evidence 

that Mr. Lasinski’s “portfolio strength” metric is reliable and representative of the actual value of 

Qualcomm’s portfolio. 

645. Accordingly, the FTC’s multi-step theory that Qualcomm’s practice of not selling 

modem chipsets to unlicensed companies was anticompetitive fails at its first step, because the 

FTC has not shown that the practice resulted in “supra-FRAND” royalties. 

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b. The FTC has not Established that Qualcomm’s Royalties 

Imposed a “Tax” on Competing Chipmakers. 

646. Had the FTC established the first step of its theory, that Qualcomm’s practice of 

not selling CDMA or “premium” LTE modem chips to unlicensed customers “coerced” OEMs to 

sign license agreements with a “supra-FRAND” component to its royalties, it would also have to 

show that the “supra-FRAND” component somehow harmed competition in the alleged relevant 

modem chip markets. This is because a mere increase in the costs borne by OEMs, regardless of 

the modem chip they used, whether from Qualcomm or a competitor, is not evidence of harm to 

competition sufficient to support an antitrust claim, regardless of the means by which such 

increase in price or cost was imposed on OEMs. See NYNEX Corp v. Discon, 525 U.S. 128, 136-

37 (1998) (absent showing that telephone service company’s conduct harmed competitive 

process, fact that conduct resulted in higher prices to consumers did not suffice to support 

antitrust claims; higher prices resulted from defendant’s lawful monopoly and its deception of 

regulatory agency, not from a less competitive market.); Forsyth v. Humana, Inc. 114 F.3d 1467, 

1477-78 (9th Cir. 1997) (mere fact that plaintiffs’ co-payments increased as a result of 

defendant’s alleged kick-back scheme did not support antitrust claim because evidence did not 

“explain how the scheme reduced competition in the relevant market.”); see also Rambus Inc. v. 

FTC, 522 F.3d 456, 464, 466 (D.C. Cir. 2008) (ruling, in the specific context of alleged supraFRAND royalties, that even if deceptively failing to disclose patents or applications to the SDO 

enabled Rambus to charge higher royalties than it otherwise could have charged, such conduct 

would not constitute illegal monopolization, because the FTC had not shown that the failure to 

disclose harmed competition by “impair[ing] rivals in a manner tending to bring about or protect 

a defendant’s monopoly power”). 

647. According to the FTC’s theory and the FTC’s economist, the effect of any excess 

royalty would depend on: (i) its magnitude; (ii) its effect on Qualcomm’s chip pricing – i.e., 

whether it allowed Qualcomm to price its modem chips lower than it otherwise would; (iii) the 

response by competing chipmakers to changes in Qualcomm’s chip pricing; (iv) the elasticity of 

demand for modem chips generally, and for each supplier’s chips specifically, as well as on the 

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elasticity of demand for phones (which affects demand for modem chips); and (v) the ability of 

OEMs to pass through any surcharge to consumers. 

648. The FTC failed to provide any evidence that any “tax”—let alone a meaningful tax 

sufficient to bring about exclusion—was imposed on any competitor, or that any competitor 

exited, did not enter, or reduced its investments in developing modem chips due to Qualcomm’s 

conduct. 

649. As to Qualcomm’s chip pricing, there is no dispute that, even if one were to 

assume that Qualcomm was able to lower its chip prices as a result of the supposed “tax,” the 

resulting chip prices were still above cost. The law strongly disfavors theories of anticompetitive 

harm based on lower prices unless the prices are below cost. Weyerhaeuser Co. v. Ross-Simmons 

Hardwood Lumber Co., 549 U.S. 312, 319 (2007) (to “allow plaintiffs to recover for above-cost 

price cutting” “perversely, chill[s] legitimate price cutting, which directly benefits consumers,” 

and would therefore “not constitute sound antitrust policy”) (quoting Brooke Group Ltd. v. Brown 

& Williamson Tobacco Corp., 509 U.S. 209, 224 (1993)).

650. As to the response by competing chipmakers, the evidence demonstrated that 

multiple chip makers – including Intel and – increased their investments in order to 

compete in the alleged relevant markets. Competitors entered and expanded, and Qualcomm’s 

market share fell. While there was exit as well as entry, as one would expect in a dynamic 

market, the FTC presented no evidence that exit in the CDMA or “premium” LTE modem chip 

markets resulted from Qualcomm’s practice of not selling CDMA or “premium” LTE modem 

chips to non-licensees, and the FTC cannot point to any evidence showing a causal link between 

this challenged conduct and any exit in the alleged relevant markets. Conversely, Qualcomm 

introduced evidence that those exits were the result of normal competition and those firms’ own 

shortcomings, and not the result of any of the challenged conduct. See Ortho Diagnostic Sys., 

Inc. v. Abbott Labs., Inc., 920 F. Supp. 455, 465 (S.D.N.Y. 1996) (“competitors being driven out 

of business” as a “natural product of legitimate competition” is “tolerated” when “an exit” “is the 

product of an inability compete efficiently on the merits”); Package Shop, Inc. v. AnheuserCase 5:17-cv-00220-LHK Document 1310-1 Filed 01/14/19 Page 122 of 157
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Busch, Inc., 675 F. Supp 894, 944 n.20 (D.N.J. 1987) (citing as support of finding “intense 

interbrand competition in the brewing industry” an economic report stating that the “extent of 

exits from brewing in the last decade indicate that this is hardly an industry in which an 

inefficient producer is protected from the chilling winds of competition”); FTC v. Occidental 

Petroleum Corp., No. 86-900, 1986 U.S. Dist. LEXIS 26138, at *28 (D.D.C. Apr. 29, 1986) 

(finding no possibility of harm to competition as “vigorous competition continues in an industry 

in which there has been entry, exit, and realignment among PVC producers”); United States v. 

Hughes Tool Co., 415 F. Supp. 637, 643–44 (C.D. Cal. 1976) (“substantial entry and exit rates in 

firms and products” indicates that “entrance is relatively easy and that healthy competition is 

present” in the relevant markets). 

651. The FTC has likewise put forward no evidence attempting to assess the extent to 

which market shares, sales, profits, or R&D expenditures of competitors in either alleged market 

would have been different but for the challenged conduct. 

c. The FTC has not Established that the Alleged “Tax” Resulted 

in Improper Monopoly Maintenance.

652. The final step of the FTC’s theory of harm to competition from not selling CDMA 

and “premium” LTE modem chips to unlicensed customers requires it to show that the alleged 

“tax” in fact harmed competition by allowing Qualcomm to maintain its alleged monopoly in the 

alleged relevant markets for CDMA and “premium” LTE modem chips. 

653. This final step of the FTC’s theory is inconsistent with the evidence. Rival 

chipmakers, instead of being foreclosed by the alleged “tax,” have thrived: there has been new 

entry, rival chipmakers have competed vigorously, and they have gained shares of modem chip 

sales in every relevant segment, while Qualcomm’s shares have rapidly declined. See Omega 

Envtl., 127 F.3d at 1164; R.W. Int’l Corp., 13 F.3d at 487–88. 

654. The evidence shows that Qualcomm has had to compete hard even to maintain its 

declining share, making large investments in innovation, leading to better products at everdecreasing prices. The evidence also shows that Qualcomm’s LTE modem chip prices have 

declined considerably each year since 2012. Prices have also declined considering only the 

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alleged “premium” LTE modem chips as defined by Professor Shapiro. Such behavior is 

inconsistent with the conduct of a monopolist enjoying artificial entry barriers. Laurence J. 

Gordon, Inc. v. Brandt, Inc., 554 F. Supp. 1144, 1156 (W.D. Wash. 1983) (rejecting plaintiff’s 

attempt to prove defendant’s monopoly power as “inadequate” because of evidence of declining 

market share and defendant’s “vigorous competition” with competitors). 

655. The evidence also shows that where Qualcomm was able to successfully compete 

in the relevant modem chip markets, that result was due to Qualcomm’s investment in R&D, 

superior products, and business acumen. See Grinnell, 384 U.S. at 571 (1966); see also 

Kentmaster Mfg. Co. v. Jarvis Prods. Corp., 146 F.3d 691, 694–95 (9th Cir. 1998) (finding that 

defendant’s ability to attract a rival’s customers by providing equipment “at little or no cost to 

customers as part of a system in which customers also purchase spare and replacement pans from 

Defendant at profitable prices” is not predatory but an act of “beat[ing] a competitor’s prices,” 

which is “good business and normal business”). 

656. The evidence also shows that to the extent competing chipmakers struggled or 

exited the relevant modem chip markets, this was the result of factors other than Qualcomm’s 

conduct, such as the rival’s failure to provide competitive solutions. See Image Tech. Servs., Inc. 

v. Eastman Kodak Co., 125 F.3d 1195, 1222 (9th Cir. 1997) (finding that evidence did not 

support a finding of antitrust injury and damage award to competitor because competitor’s “exit 

was caused by factors other than [defendant’s] conduct”). 

657. In sum, the FTC has failed to meet its burden of establishing that Qualcomm’s 

practice of refusing to sell modem chips to unlicensed OEMs causes any harm to competition. 

3. The FTC Has Not Met Its Burden to Show that Qualcomm’s Practice 

of Device-Level Licensing Has Harmed Competition. 

658. The FTC alleges that Qualcomm practice of licensing only at the device level, not 

at the component level, exacerbates the effects of its practice of not selling CDMA or “premium” 

LTE modem chips to non-licensees, because, if chipmakers were licensed, they could purportedly 

challenge Qualcomm’s royalty rates without concern over access to Qualcomm’s chips. 

(Complaint ¶¶ 107-15). 

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659. But the facts do not support the FTC’s contention. If rival chipmakers had truly 

felt restrained by Qualcomm’s practice of licensing only at the device level, and if they believed 

that Qualcomm had committed to providing them with such licenses, they could easily have sued 

Qualcomm for breach of its FRAND commitment, seeking a FRAND license covering CDMA or 

“premium” LTE modem chips. Indeed, the predicate for the FTC’s theory is that chipmakers 

would have no qualms about suing Qualcomm to vindicate their rights under Qualcomm’s 

commitments to license under FRAND terms, because they do not require access to Qualcomm’s 

chips; but they have not in fact brought any suit against Qualcomm seeking licenses at the 

component level. Moreover, the data discussed above, showing increased investment by 

competing chipmakers, undermines the FTC’s theory; Intel, MediaTek, and Samsung would not 

pour billions into their modem chip businesses had they truly believed Qualcomm could stop that 

business in its tracks by asserting its SEPs against them. 

660. Competing chipmakers are not constrained in their ability to compete by the lack 

of a license from Qualcomm, as evidenced by new entry by rival chipmakers and by Qualcomm’s 

decreasing share of chip sales and increasing shares by leading competitors. 

661. Competition in the cellular communications industry has thrived under the devicelevel licensing practice followed by Qualcomm and all other major SEP holders, and in the 

corresponding absence of licenses covering CDMA or “premium” LTE modem chips. At the 

modem chip level, there has been new entry, and Qualcomm’s share of sales has decreased in 

these alleged markets. 

662. This evidence contradicts the FTC’s assertion that Qualcomm’s practice of not 

offering licenses to sellers of CDMA or “premium” LTE modem chips has harmed competition. 

Allied Orthopedic Appliances, Inc. v. Tyco Health Care Group LP, 592 F.3d 991, 2001 (9th Cir. 

2010) (competitor’s increase in market share and defendant’s decrease in market share indicated 

that the competitor was “effectively competing”); see also Areeda & Hovenkamp ¶ 807f (there 

can be no “dangerous probability” that a defendant will acquire monopoly power when “the 

challenged conduct has been in place for at least two years and the remaining market remains 

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robustly competitive, as evidenced by ongoing entry, profitability of rivals, and stability of their 

aggregate market share.”). 

663. The FTC has failed to meet its burden to establish that Qualcomm’s practice of not 

offering licenses to sellers of CDMA or “premium” LTE modem chips has caused any harm to 

competition. 

4. The FTC has Failed to Meet its Burden to Show that “Strategic 

Funds” Provisions in Qualcomm’s Agreements with OEMs have 

Harmed Competition. 

664. The FTC also asserts that “[o]n some occasions, Qualcomm has induced certain 

OEMs to accept its preferred license terms using both the ‘stick’ of threatened [modem chip] 

supply disruption and the ‘carrot’ of [strategic] funds conditioned on the OEM’s acceptance of 

Qualcomm’s preferred [SEP licensing] terms.” (Complaint ¶102). 

665. The FTC alleges that these strategic funds have helped Qualcomm “close the gap” 

with OEMs that resist Qualcomm’s preferred terms, helping Qualcomm “to maintain high 

royalties on handsets that use competitors’ [modem chips].” (Id.). 

666. Out of the more than 345 current and past handset licensees to Qualcomm’s 

cellular patents, Qualcomm has entered into strategic funds that were negotiated 

contemporaneously with a licensing agreement with only nine counterparties. 

 

667. The strategic funds furthered Qualcomm’s legitimate interests in developing the 

market for new products, products implementing new releases of standards, and other new 

technologies. Any inference that the purpose or effect of these funds was anticompetitive is not 

supported by the evidence. 

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5. The FTC has Failed to Meet its Burden of Showing that Qualcomm’s 

Agreements with Apple Harmed Competition. 

668. The FTC also alleges that a competing chipmaker—specifically Intel—was 

foreclosed from competing to supply five iPad models with its “premium” LTE modem chips by 

agreements that Qualcomm entered into with Apple in 2013. (Complaint ¶¶ 116-31). 

669. Because “there are well-recognized economic benefits to exclusive dealing 

arrangements,” in order to establish that these agreements have harmed competition, the FTC 

must prove that they foreclosed “competition in a substantial share of the line of commerce 

affected.” Allied Orthopedic Appliances, 592 F.3d at 996–97 (internal quotation marks omitted) 

(quoting Omega Envtl., 127 F.3d at 1162); see also E. Food Servs., Inc. v. Pontifical Catholic 

Univ. Servs. Ass’n., Inc., 357 F.3d 1, 8 (1st Cir. 2004) (“[I]t is widely recognized that in many 

circumstances [exclusive arrangements] may be highly efficient—to assure supply, price stability, 

outlets, investment, best efforts or the like—and pose no competitive threat at all.”); Ryko Mfg. 

Co. v. Eden Servs., 823 F.2d 1215, 1234 n.17 (8th Cir. 1987) (explaining that exclusive dealing 

contracts can help prevent dealer free-riding on manufacturer-supplied investments to promote 

rival's products); Race Tires Am., Inc. v. Hoosier Racing Tire Corp., 614 F.3d 57, 83 (3d Cir. 

2010) (competition to be an exclusive supplier may constitute “a vital form of rivalry,” which the 

antitrust laws should encourage.) 

670. The FTC’s own jurisprudence recognizes that “a proper analysis of exclusive 

dealing arrangements should take into account market definition, the amount of foreclosure in the 

relevant markets, the duration of the contracts, the extent to which entry is deterred, and the 

reasonable justifications, if any, for the exclusivity.” In re Beltone Elecs. Corp., 100 F.T.C. 68, 

92 (1982). Similarly, the Supreme Court has stated that “to determine substantiality [of the share 

of the alleged market foreclosed by an exclusive dealing arrangement] in a given case, it is 

necessary to weigh the probable effect of the contract on the relevant area of effective 

competition, taking into account the relative strength of the parties, the proportionate volume of 

commerce involved in relation to the total volume of commerce in the relevant market area, and 

the probable immediate and future effects which pre-emption of that share of the market might 

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have on effective competition therein.” Tampa Elec. Co. v. Nashville Coal Co., 365 U.S. 320, 

329 (1961). 

671. To satisfy the requirement that an exclusive dealing arrangement result in 

foreclosure of competition in a “substantial share” of the alleged market, the FTC must prove a 

foreclosure of a large percentage of the market. See, e.g., Microsoft, 253 F.3d at 70; see also Stop 

& Shop Supermarket Co. v. Blue Cross & Blue Shield of R.I., 373 F.3d 57, 68 (1st Cir. 2004) 

(“For exclusive dealing, foreclosure levels are unlikely to be of concern where they are less than 

30 or 40 percent.”). Here, the evidence shows that the five iPad models represented an 

insubstantial aspect of the “premium” LTE modem chip market. 

672. The FTC has defined the relevant market with respect to the Apple agreements as 

“premium” LTE modem chips, but it has failed to establish what share of that market was 

allegedly foreclosed by the specific iPad products or modem chips from which the FTC claims 

Intel was foreclosed. As a result, the FTC has not established such a share to be “substantial.” In 

re Beltone Elecs. Corp., 100 F.T.C. at 92. Even assuming the Qualcomm-Apple agreements 

completely foreclosed this alleged “premium” LTE segment, that is not a sufficiently substantial 

share to raise antitrust concerns in light of the evidence showing that Apple’s share of sales of 

LTE-enabled handsets never exceeded 41% in any year from 2011 to 2017, was less than 25% 

from 2015 onward, and declined to 16% in 2016. Therefore Apple bought only a commensurate 

share of LTE modem chips in each year. See Microsoft, 253 F.3d at 70; Stop & Shop, 373 F.3d at 

68. 

673. The fact that many other OEMs were potential and actual purchasers of 

“premium” LTE modem chips during the same period covered by the Qualcomm-Apple 

agreements, including Samsung, LG, Sony, Huawei, HTC, OPPO, vivo, Xiaomi, and ZTE, 

further confirms that there was no substantial foreclosure. 

674.

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675. The evidence also establishes that Intel was able to develop the capability to 

supply modem chips for iPhones in 2016 without first supplying Apple iPads, which is 

inconsistent with the FTC’s theory that Intel was foreclosed from iPhones by its inability to 

supply chips for iPads. 

676. The evidence also establishes that HiSilicon, and Samsung LSI were 

able to develop “premium” LTE modem chips – including LTE modem chips that the FTC 

considers “premium” – without ever selling to Apple, which is also inconsistent with the FTC’s 

theory of foreclosure. See W. Parcel Express v. United Parcel Serv. of Am., Inc., 190 F.3d 974, 

976-77 (9th Cir. 1999) (pointing to increased competition in the relevant market in affirming 

summary judgment on claim that alleged exclusive dealing contracts created high barriers to 

entry). 

677. Finally, the evidence shows that in 2016, Apple elected to purchase modem chips 

for the iPhone7 from Intel in addition to Qualcomm, and awarded a substantial portion of its total 

purchases to Intel. Apple did this even while the alleged exclusivity provisions of the 2013 

agreement were still in effect. 

678. Subsequently, Apple purchased approximately 50% of the modem chips for its 

iPhones from Intel in 2017, and will purchase 100% of its modem chips for iPhones and iPads 

from Intel in 2018 and 2019. 

679. The evidence further establishes that Intel’s failure to make meaningful sales to 

customers other than Apple had nothing to do with the challenged agreements between Apple and 

Qualcomm. Intel was unable to make such sales because Intel was unable to develop an 

integrated system-on-a-chip (“SoC”) and instead chose to focus on thin modems, which are not 

purchased in large quantities by any handset supplier other than Apple. 

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680. In light of this evidence, the FTC has not established that the Apple agreements 

resulted in “substantial foreclosure” that harmed competition in the alleged relevant market for 

“premium” LTE modem chips. 

* * * 

681. In sum, the FTC has failed to make the required showing of harm to competition 

with respect to any of the challenged conduct. 

XI. THE FTC HAS FAILED TO PROVE ADDITIONAL ELEMENTS OF A SECTION 

2 VIOLATION 

682. The FTC has further failed to prove that Qualcomm willfully maintained any 

monopoly power in a relevant market. Microsoft, 253 F.3d at 58. 

683. To establish that Qualcomm “willfully” maintained monopoly power, the FTC had 

to show that Qualcomm’s conduct was unlawful and exclusionary, as distinguished from growth 

or development as a consequence of a superior product, business acumen, or historic accident. 

Id.; Trinko, 540 U.S. at 407; Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447, 458 (1993). 

A. Declining to Sell CDMA or “Premium” LTE Modem Chips to Unlicensed 

Companies Is Not Exclusionary Conduct. 

684. The FTC has failed to establish that Qualcomm’s practice of not selling CDMA or 

“premium” LTE modem chips to unlicensed OEMs was “exclusionary”—conduct that makes 

sense only as a means to exclude CDMA or “premium” LTE competitors on some basis other 

than the merits, rather than as legitimate competition. Aerotech Int’l, Inc. v. Honeywell Int’l, Inc., 

836 F.3d 1171, 1184 (9th Cir. 2016) (“[T]here is no duty to deal under the terms and conditions 

preferred by a competitor’s rivals; there is only a duty not to refrain from dealing where the only 

conceivable rationale or purpose is to sacrifice short-term benefits in order to obtain higher profits 

in the long run from the exclusion of competition.” (citation omitted) (internal quotation marks 

omitted); see also SOLIDFX, LLC v. Jeppesen Sanderson, Inc., 841 F.3d 827, 841–43 (10th Cir. 

2016) (defendant’s decision to refuse to license its copyrighted work was a presumptively lawful 

“legitimate business justification,” and not “irrational but for its anticompetitive effect,” thus 

exercising that right could not be deemed unlawful), cert. denied, 138 S. Ct. 75 (2017); Novell, 

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Inc. v. Microsoft Corp., 731 F.3d 1064, 1075 (10th Cir. 2013) (monopolist’s refusal to deal and 

even forgoing of short-term profits may be consistent with perfectly legitimate business reasons 

and even procompetitive ends, like pursuing “an innovative replacement product”). 

685. The evidence shows that the practice in question reduces transaction costs, aligns 

royalties with the value of the licensed patents, minimizes disputes, and is efficient. 

686. The FTC failed to disprove this legitimate, alternative explanation for Qualcomm’s 

practice. This dooms the FTC’s claim. Stearns Airport Equip. Co. v. FMC Corp., 170 F.3d 518, 

522–23 (5th Cir. 1999) (only conduct that is “economically irrational” when “examined without 

reference to its effects on competitors” provides a “strong inference that it was taken for the 

purpose of harming competitors rather than otherwise advancing the monopolist’s business”); see 

also SOLIDFX, LLC, 841 F.3d at 841–43 (no liability for antitrust damages where defendant 

“established a valid business justification”); Novell, Inc., 731 F.3d at 1075 (requiring “a showing 

that the monopolist’s refusal to deal was part of a larger anticompetitive enterprise” in addition to 

proof that the monopolist forsook short-term profits); In re Citric Acid Litig., 191 F.3d 1090, 

1100–01 (9th Cir. 1999) (“firms must have broad discretion to make decisions based on their 

judgments of what is best for them and [those] business judgments should not be second-guessed 

even where the evidence concerning the rationality of the challenged activities might be subject to 

reasonable dispute”) (citing Reserve Supply Corp. v. Owens-Corning Fiberglas Corp., 971 F.2d 

37, 49–53 (7th Cir. 1992); Valley Liquors, Inc. v. Renfield Importers, Ltd., 822 F.2d 656, 662 (7th 

Cir. 1987)). 

687. At a minimum, the evidence fails to show that Qualcomm’s decision not to supply 

modem chips to unlicensed OEMs was only rational as a sacrifice of short-term benefits of such 

modem chip sales in order to obtain higher profits in the long run by excluding competition in the 

alleged modem chip markets. See Aerotec Int’l, 836 F.3d at 1184. 

688. The “evidence must tend to exclude the possibility” that a firm’s conduct is a 

legitimate means to compete for business and not an “economically senseless” scheme to harm 

competition. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 597–98 

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(1986) (quoting Monsanto Co v. Spray-Rite Serv. Corp., 465 U.S. 752, 764 (1984)); see also It’s 

My Party, Inc. v. Live Nation, Inc., 811 F.3d 676, 685-86 (4th Cir. 2016) (plaintiff failed to rule 

out market-based explanations why consumers might prefer defendant’s alleged bundled venue 

and promotion services – including superiority of the defendant’s venue). The FTC has not 

submitted evidence that excludes the possibility that Qualcomm’s chip supply practice is the 

result of a legitimate and justified business decision rather than a scheme to harm competition. 

Moreover, the fact that Qualcomm follows the same practice with respect to its supply of 

WCDMA and non-“premium” LTE modem chips further confirms that the practice is a legitimate 

and justified business decision, and not an “economically senseless” scheme to harm competition. 

689. Accordingly, the FTC has not met its burden of showing that Qualcomm’s chip 

supply practices are exclusionary. 

B. Declining to Grant Exhaustive Licenses for the Manufacture of CDMA or 

“Premium” LTE Modem Chips Is Not Exclusionary Conduct. 

690. The FTC has also failed to meet its burden of proving that Qualcomm’s practice of 

not granting licenses to sellers of CDMA or “premium” LTE modem chips constitutes 

exclusionary conduct. 

691. The evidence shows instead that Qualcomm’s device-level licensing became the 

standard industry practice, and was adopted by Qualcomm, because it reduces transaction costs, 

aligns royalties with the value of the licensed patents, and is much more efficient than the multilevel licensing that would be required if Qualcomm and other innovators licensed other than at 

the device level. 

692. The FTC has not ruled out this more plausible explanation for Qualcomm’s 

practice of not licensing at the component level, and has failed to establish that Qualcomm’s 

licensing practices are “irrational” but for their alleged anticompetitive effect. SOLIDFX, 841 

F.3d at 841-43; Novell, 731 F.3d at 1075. 

693. As shown in Part IIIE below, the FTC has also failed to establish that Qualcomm’s 

licensing practices breached an antitrust duty to deal. 

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694. In sum, the FTC has failed to establish that Qualcomm’s device-level licensing 

practices are exclusionary conduct. 

C. Use of Strategic Funds Provisions Did Not Exclude any Sellers of CDMA or 

“Premium” LTE Modem Chips. 

695. As discussed in Part IIB(4) above, the FTC also challenges strategic funds 

provisions included in agreements with certain OEMs. 

696. The evidence shows that the strategic funds, where they were used, furthered 

Qualcomm’s legitimate interests in promoting its brand, and in developing the market for both 

new products and products implementing new releases of standards and other new technologies. 

697. This evidence is consistent with the explanation that the strategic funds provisions 

are legitimate marketing funds rather than exclusionary conduct, and that they are justified by the 

value they confer on Qualcomm’s business. Western Parcel Express v. United Parcel Service of 

Am., Inc., 190 F.3d 974, 976 (9th Cir. 1999) (volume discounts that did not prevent customers 

from using competitors’ services were procompetitive and lawful under antitrust law) (citing 

Fedway Assocs. v. U.S. Treasury, 976 F.2d 1416, 1418 (D.C. Cir. 1992)). 

698. In sum, the FTC has failed to establish that the challenged strategic funds 

provisions are “irrational” but for their alleged anticompetitive effect. SOLIDFX, 841 F.3d at 

841-43; Novell, 731 F.3d at 1075. 

D. Conditioning Incentive Payments In Order to Enable Customer-Specific 

Investments to be Made Is Not Exclusionary Conduct. 

699. The FTC also challenges conditional incentive payments in agreements Qualcomm 

entered into with Apple in 2013 as unlawful “exclusive dealing” under Section 2. (Complaint ¶¶ 

116-31). 

700. “Exclusive dealing agreements are often entered into for entirely procompetitive 

reasons, and generally pose little threat to competition.” ZF Meritor, LLC v. Eaton Corp., 696 

F.3d 254, 270 (3d Cir. 2012) (citation omitted). It “is widely recognized that in many 

circumstances [exclusive dealing contracts] may be highly efficient – to assure supply, price 

stability, outlets, investment, best efforts or the like – and pose no competitive threat at all.” 

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Eastern Food Servs., Inc. v. Pontifical Catholic Univ. Servs. Ass’n, Inc., 357 F.3d 1, 8 (1st Cir. 

2004); (citing Hovenkamp & Areeda ¶¶ 1810–14). In particular, exclusive dealing contracts can 

help promote interbrand competition by preventing downstream “free riding” on investments 

made by a manufacturer. Ryko Mfg. Co. v. Eden Servs., 823 F.2d 1215, 1234 n.17 (8th Cir. 1987); 

see also Areeda & Hovenkamp, ¶¶ 1812a, 1814a. 

701. The FTC’s own jurisprudence recognizes that “a proper analysis of exclusive 

dealing arrangements should take into account market definition, the amount of foreclosure in the 

relevant markets, the duration of the contracts, the extent to which entry is deterred, and the 

reasonable justifications, if any, for the exclusivity.” In re Beltone Elecs. Corp., 100 F.T.C. 68, 

92 (1982) (emphasis added). 

702.

 

703.

 

704. The FTC does not dispute that Qualcomm had a legitimate need to protect its 

relationship-specific investment. The FTC speculates instead that the challenged provisions may 

not have been necessary to protect that investment, and that the parties could have used a less 

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restrictive alternative to mitigate Qualcomm’s risks. Such speculation does not suffice to satisfy 

the FTC’s burden of showing that the provisions are unlawful exclusionary conduct, particularly 

in light of the evidence showing that 

 but also demanded $1 billion from 

Qualcomm, 

 The rule of reason does not require that a defendant use “the least 

restrictive means” to achieve a legitimate end. See Am. Motor Inns v. Holiday Inns, Inc., 521 

F.2d 1230, 1248-50 (3rd Cir. 1975) (“Although relevant to ascertaining the reasonableness of the 

[exclusivity] clause, it is not determinative that the Holidex system could, as the district court 

found, be protected adequately’ by less restrictive alternatives. In a rule of reason case, the test is 

not whether the defendant deployed the least restrictive alternative. Rather the issue is whether 

the restriction actually implemented is ‘fairly necessary’ in the circumstances of the particular 

case, or the whether the restriction ‘exceed[s] the outer limits of restrain reasonably necessary to 

protect the defendant.’”). 

705. The FTC also ignores the procompetitive benefits Apple enjoyed under the Apple 

Agreements, including reduction of expenses, and assurance of a stable and continuous modem 

chip supply from Qualcomm to meet Apple’s unique and demanding needs. See ZF Meritor, LLC 

v. Eaton Corp., 696 F.3d 254, 270 (3d Cir. 2012). 

706. In sum, the FTC has failed to establish that the challenged provisions in the Apple 

agreements are “irrational” but for their alleged anticompetitive effect. SOLIDFX, 841 F.3d at 

841-43; Novell, 731 F.3d at 1075. 

E. On the Record in this Case, linkLine Forecloses the Argument that 

Qualcomm’s Chip Supply Practice, Alone or in Combination with Other 

Conduct, Constitutes Exclusionary Conduct. 

707. In addition to the FTC’s failure to establish that any of the four types of conduct it 

challenged constitutes exclusionary conduct, the FTC failed to overcome the hurdle posed by the 

Supreme Court’s decision in linkLine. Pac. Bell Tel. Co. v. linkLine Commc’ns, Inc., 555 U.S. 

438, 450 (2009). On Qualcomm’s Motion to Dismiss, this Court ruled that linkLine did not 

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foreclose the FTC’s theory that Qualcomm maintained its monopoly power by charging 

unreasonably high royalties and unreasonably low modem chip prices, because the FTC had 

adequately alleged that Qualcomm violated a duty to deal in refusing to license its FRANDencumbered SEPs to its modem chips competitors. (Decision at 36-38.) This Court further ruled 

that the FTC had adequately pleaded an “overarching anticompetitive scheme.” (Id.) 

708. The record in this case, however, does not establish that Qualcomm had an 

antitrust duty to deal with its competitors to license its SEPs on FRAND terms to modem chip 

rivals to sell CDMA or “premium” LTE modem chips. Nor did it establish the existence of any 

“overarching anticompetitive scheme.” 

1. The FTC Has Not Established an Antitrust Duty to Deal. 

709. The record demonstrates that Qualcomm did not have a contractual obligation to 

license at the component level under the IPR Policy of the European Telecommunications 

Standards Institute (“ETSI”), the leading SDO to which Qualcomm provided licensing 

declarations. This is confirmed by decades of industry practice and understanding of licensing 

obligations under the ETSI IPR Policy, and by the plain language of the ETSI IPR Policy and 

Qualcomm’s licensing declarations under that Policy. 

710. Qualcomm has preserved for appeal its challenge to the Court’s determination that 

Qualcomm has a contractual duty to license at the component level under the IPR policies of two 

other SDOs, the Telecommunications Industry Association (“TIA”) and the Alliance for 

Telecommunications Industry Solutions (“ATIS”). 

711. Even if a contractual obligation had existed under the ETSI IPR Policy or under 

the IPR policies of other SDOs, including TIA and ATIS, not every voluntary agreement or 

contractual obligation creates an antitrust duty to deal. See In re Adderall XR Antitrust Litig., 754 

F.3d 128, 135 (2d Cir. 2014) (affirming dismissal of claim that patent holder’s breach of supply 

agreement with generic manufacturers breached an antitrust duty to deal, as “[t]he mere existence 

of a contractual duty to supply goods does not by itself give rise to an antitrust ‘duty to deal’”); 

SOLIDFX, 841 F.3d at 843 (defendant’s breach of agreement to grant access to toolkit for 

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creation of iPad app did not give rise to liability under antitrust law); Intergraph, 195 F.3d 1346, 

1354–55 (Fed. Cir. 1999) (Intel’s withdrawal of special benefits it had previously provided to 

Intergraph, including pursuant to contract, was not an antitrust violation, as “the Sherman Act 

does not convert all harsh commercial actions into antitrust violations. Unilateral conduct that 

may adversely affect another's business situation, but is not intended to monopolize that business, 

does not violate the Sherman Act.”). Even a duty imposed by federal regulation, standing alone, 

does not suffice to create an antitrust duty to deal. linkLine, 555 U.S. at 447-48 (duty to provide 

interconnection services arising under FCC regulations did not give rise to antitrust duty to deal). 

712. Although the Supreme Court in Aspen Skiing recognized that an antitrust duty to 

deal could arise when a defendant terminates a long-standing, voluntary and procompetitive 

course of conduct, the Court has subsequently explained that the Aspen antitrust duty to deal is 

“at or near the outer boundary of § 2 liability”; and as such, the Supreme Court has “been very 

cautious in recognizing ... exceptions” to the general right to refuse to deal with competitors (and 

has cautioned other courts about usurping that right), due in part to the “uncertain virtue of forced 

sharing.” Trinko, 540 U.S. at 408–09 (2004) (emphasis added). 

713. An antitrust duty to deal only arises under Aspen Skiing when the plaintiff proves 

that the defendant made “a decision to alter a voluntary course of dealing together with evidence 

of anticompetitive malice,” SmithKlineBeecham Corp. v. Abbott Labs., No. C 07-5702 CW, 2014 

WL 6664226, at *4 (N.D. Cal. Nov. 24, 2014), and that recognition of an antitrust duty to deal 

will not raise “concern[s] about the administrability of a judicial remedy,” MetroNet Servs. Corp. 

v. Qwest Corp., 383 F.3d 1124, 1133 (9th Cir. 2004). 

714. Those circumstances that would give rise to an antitrust duty to deal under Aspen 

Skiing are not present here. 

715. First, to establish a “voluntary course of dealing,” the FTC would have to show 

that Qualcomm has engaged in an actual course of dealing of exhaustive licensing to CDMA or 

“premium” LTE modem chip makers. Neither Qualcomm’s participation in standard setting, nor 

Qualcomm’s contribution of technologies to the standard and its declarations to ETSI, TIA, 

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ATIS, or any other SDO constitute a “voluntary course of dealing” that involves offering 

exhaustive licenses of its cellular SEPs to such rival chipmakers. Even if Qualcomm’s 

declarations had included a commitment to offer to license such rival chipmakers to sell CDMA 

or “premium” LTE modem chips, a commitment to make licensing offers is not the same thing as 

actually entering into exhaustive license agreements with chip makers. See Adderall XR, 754 F.3d 

at 135 (concluding that settlement agreement as a contract to supply goods does not give rise to 

an antitrust duty to deal because “[the defendant] did not terminate any prior course of dealing—

let alone a ‘presumably profitable’ one”). It is undisputed that Qualcomm never licensed CDMA 

or “premium” LTE modem chip competitors exhaustively at the modem chip level, and it 

therefore cannot be shown to have discontinued a voluntary and profitable course of conduct that 

it never engaged in. 

716. Second, the FTC must show evidence that Qualcomm altered its supposed 

preexisting voluntary course of dealing with rival chipmakers for reasons of “anticompetitive 

malice.” SmithKlineBeecham Corp., 2014 WL 6664226, at *4. The evidence fails to show this. 

Qualcomm cannot be found to have acted for reasons of “anticompetitive malice” by adopting a 

practice followed by the entire industry, including SEP holders that are not competitors in the 

alleged relevant markets. 

717. Third, finding that Qualcomm has an antitrust duty to engage in component-level 

licensing would raise the “judicial administrability” concerns noted by the Supreme Court in 

Trinko that such a duty would require “antitrust courts to act as central planners, identifying the 

proper price, quantity, and other terms of dealing-a role for which they are ill suited.” Trinko, 549 

U.S. at 408; see also MetroNet Servs. Corp. v. Qwest Corp., 383 F.3d 1124, 1133 (9th Cir. 2004). 

This is because if Qualcomm were found to have an antitrust duty to license at the component 

level, the result would be a multi-level licensing regime that would give rise to endless disputes 

about which entities should be paying what proportion of the royalties on any given product at 

any given time. This would be different in kind from the role courts play now in determining 

reasonable FRAND rates; it would involve not only determinations of those rates, but also 

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complicated determinations of the proportion of such rates that should be paid by licensees at 

different levels of the supply chain. This is the sort of undertaking that Trinko cautions courts 

should avoid. 

718. In sum, the FTC has not established that Qualcomm’s refusal to license its rival 

sellers of CDMA or “premium” LTE modem chips breached any antitrust duty to deal. 

2. The FTC has not Established that Qualcomm’s “Course of Conduct,” 

Considered Together, Constitutes Unlawful Exclusionary Conduct. 

719. Having failed to establish that either Qualcomm’s chip supply practices, its devicelevel licensing practices, its strategic funds provisions, or its agreements with Apple 

independently constitutes unlawful exclusionary conduct, the FTC cannot combine them to 

sustain its claim. 

720. Separate claims that do not independently rise to the level of a Sherman Act 

violation on their own cannot be analyzed together to create an antitrust violation. Intergraph 

Corp. v. Intel Corp., 195 F.3d 1346, 1366-67 (Fed. Cir. 1999) (rejecting plaintiff’s contention that 

its “various theories of antitrust liability” should “not be viewed separately but” instead “taken 

together,” and that “[e]ach legal theory” must instead be separately examined for “sufficiency and 

applicability”). For instance, in City of Groton v. Conn. Light & Power Co., 662 F.2d 921 (2d 

Cir. 1981), the Second Circuit held that multiple antitrust claims, each of which amounted to just 

a fraction of a violation, cannot add up to a whole violation of Section 2. 662 F.2d at 928–29 

(“Even though many of the issues the municipalities raise are interrelated and interdependent, 

however, we must ... analyze the various issues individually. Moreover, we reject the notion that 

if there is a fraction of validity to each of the basic claims and the sum of the fractions is one or 

more, the plaintiffs have proved a violation of section 1 or section 2 of the Sherman Act.”). 

721. Similarly, the Federal Circuit in Intergraph required analysis of the validity of 

each antitrust claim in that case separately. 195 F.3d at 1366–67. Specifically discussing 

Continental Ore’s admonition to consider all of the facts in an antitrust claim together, the 

Federal Circuit explained that in Continental Ore the Supreme Court held only that the “factual 

components of a case should be viewed together, not the pieces of the legal theory.” Id. at 1366 

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(emphasis added) citing Continental Ore Co. v. Union Carbide & Carbon Corp., 370 U.S. 690, 

698–99 (1962). Thus, “Continental Ore did not hold ... that the degrees of support for each legal 

theory should be added up. Each legal theory must be examined for its sufficiency and 

applicability, on the entirety of the relevant facts.” Id. at 1366–67. 

722. The Supreme Court applied this rule in linkLine, refusing to combine a fraction of 

a duty-to-deal claim and a fraction of a predatory-pricing claim (i.e., independently meritless 

claims) to create an antitrust violation in that case. linkLine, 555 U.S. at 450 (citing Trinko, 540 

U.S. at 410). Specifically, the Supreme Court in linkLine held that the alleged high wholesale and 

low retail prices could not be evaluated together under a “monopoly broth theory,” despite their 

necessary connection in the plaintiff’s theory of harm. 555 U.S. at 452. Not only was there no 

monopoly broth exception in linkLine, but the Supreme Court held that the plaintiff’s “pricesqueeze claim, looking to the relation between retail and wholesale prices, [was] nothing more 

than an amalgamation of a meritless claim at the retail level and a meritless claim at the wholesale 

level.” Id. The Supreme Court held that if neither of these pricing decisions was unlawful on its 

own, “then a firm is certainly not required to price both of these services in a manner that 

preserves its rivals’ profit margins.” Id. Thus, the Court’s reasoning relied on the assumption 

that two independently lawful acts (or meritless claims) could not combine for an antitrust 

violation. 

723. The FTC’s theory here is very similar to the theory in linkLine. The FTC has not 

alleged that the alleged lowered price of modem chips constitutes predatory pricing. And it has 

not established Qualcomm’s chip supply practice or device-level licensing breached any antitrust 

duty to deal as explained above. As a result, it has failed to establish unlawful exclusionary 

conduct sufficient to sustain a claim under Section 2. 

724. In sum, the FTC has failed to establish that Qualcomm’s “course of conduct,” 

considered as a whole, constitutes unlawful exclusionary conduct that has caused any harm to 

competition in the alleged relevant markets. 

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XII. THE FTC HAS NOT PROVED THE ELEMENTS OF A SECTION 1 VIOLATION 

A. The FTC has not Proved a Contract, Combination, or Conspiracy Intended to 

Restrain or Harm Trade. 

725. The FTC challenges under Section 1 the terms of Qualcomm’s license agreements 

with OEMs, as well as certain other agreements including baseband processor supply agreements, 

strategic development agreements, and alleged “exclusive dealing” agreements with Apple. 

However, the FTC has not provided direct or circumstantial evidence that reasonably tends to 

prove that Qualcomm and the OEMs “had a conscious commitment to a common scheme 

designed to achieve an unlawful objective.” Monsanto Co. v. Spray-Rite Serv. Corp., 465 U.S. 

752, 768 (1984) (quoting Edward J. Sweeney & Sons, Inc. v. Texaco, Inc., 637 F.2d 105, 111 (3d 

Cir. 1980). The fact that OEMs agreed to license agreements does not mean that “they agreed to 

use” the terms “to restrain trade,” particularly trade in the alleged chip markets the FTC relies 

upon in which those OEMs did not participate. Toscano v. PGA, 258 F.3d 978, 984 (9th Cir. 

2001) (sponsors entering into PGA sponsorship agreements committing to operate tournaments in 

accordance with PGA rules showed “only that the local sponsors accepted the fact that the 

tournaments would be operated according” to those rules and regulations, “not that they agreed to 

use those rules to restrain trade”). 

726. In some circumstances a plaintiff may also establish the first element of a Section 

1 claim – i.e., concerted action - by showing that a defendant with market power coerced a 

counterparty to enter into an agreement that constitutes an unreasonable restraint on trade. See 

Cargill Inc. v. Budine, No. CV-F-07-349-LJO-SMS, 2007 WL 4207908, at *3 (E.D. Cal. Nov. 

27, 2007) (holding that a contract between a buyer and seller satisfied the concerted action 

element of Section 1 of the Sherman Act where the seller coerced the buyer's acquiescence in a 

tying arrangement imposed by the seller) (citing Systemcare, Inc. v. Wang Laboratories Corp.,

117 F.3d 1137, 1142-43 (10th Cir. 1997)). As discussed in Part IIB2(a) above, the FTC has not 

established that any OEMs were coerced to enter license agreements with Qualcomm. 

727. The FTC has failed to show that Qualcomm possesses market power in a properly 

defined relevant market, that it coerced a counterparty to enter into a license agreement, or that 

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any license agreement unreasonably restrained trade – i.e., caused an adverse competitive effect 

(see Part II supra, and Part IV.B infra). As such, the FTC has failed to prove the first element of 

a Section 1 claim based on the license agreements with device manufacturers. Monsanto, 465 

U.S. at 768. 

728. The same is true of Qualcomm’s agreements with Apple. The FTC has not 

provided direct or circumstantial evidence that reasonably tends to prove that Qualcomm and 

Apple “had a conscious commitment to a common scheme designed to” foreclose competition in 

the alleged modem chip markets, or that Apple was coerced to enter the agreements, and those 

agreements cannot support a claim under Section 1. Monsanto, 465 U.S. at 768. 

B. The FTC has not Proved that the License Agreements with OEMs or 

Qualcomm’s Agreements with Apple were Unreasonable Restraints of Trade. 

729. For the reasons set forth in Part IIB above, the FTC has failed to establish that 

Qualcomm’s license agreements with OEMs or its agreements with Apple have caused any harm 

to competition, and they therefore do not constitute unreasonable restraints of trade under Section 

1 of the Sherman Act. Nat’l Collegiate Athletic Ass’n v. Board of Regents, 468 U.S. 85, 104 

(1984) (the criterion to be used in determining an unreasonable restraint on trade “is its impact on 

competition.”) 

XIII. THE FTC HAS NOT ESTABLISHED THE REQUIREMENTS OF A CLAIM 

UNDER THE “UNFAIR METHODS OF COMPETITION” PRONG OF SECTION 

5 

730. The FTC has also failed to offer proof sufficient to establish a claim under the 

“unfair methods of competition” prong of Section 5 of the FTC Act. 

731. To prevail on a standalone alone claim under Section 5, the FTC must meet its 

burden of showing harm to competition. See Boise Cascade Corp. v. FTC, 637 F.2d 573, 579, 

581 (9th Cir. 1980) (standalone claim under Section 5 failed where there was insufficient 

evidence to support a finding of anticompetitive effect). It has not done so. See Part IIB supra.

732. In addition, the FTC must prove that the challenged conduct is “collusive, 

coercive, predatory, or exclusionary,” or that it has an “anticompetitive purpose or cannot be 

supported by an independent legitimate reason.” E.I. du Pont de Nemours & Co. v. FTC, 729 

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F.2d 128, 140 (2d Cir. 1984). For the reasons explained above, the FTC has failed to put forward 

evidence sufficient to establish that Qualcomm’s conduct was “collusive, coercive, predatory, or 

exclusionary,” or that it lacked legitimate reasons and so must have had an anticompetitive 

purpose. 

733. In addition, when the FTC seeks a permanent injunction in federal court under 

Section 13(b) and is not seeking a preliminary injunction, it lacks the authority to expand the 

boundaries of prohibited conduct under Section 5 beyond those that are already well-established. 

See S. Rep. 93-151, at 30-31 (1973) (Congress authorized the FTC to seek a permanent injunction 

when a court is reluctant to grant a temporary injunction because it cannot be assured of an early 

hearing on the merits, as well as in routine cases “in which it does not desire to further expand 

upon the prohibitions of the [FTC Act]” through administrative adjudication). 

734. The FTC, however, has failed to establish that there has been harm to competition 

as a result of any of the challenged conduct, or that the challenged conduct violates established 

standards of competition law, and the FTC has therefore failed to prove a standalone claim under 

Section 5 of the FTC Act. See Parts II-IV, supra. 

XIV. THE FTC HAS FAILED TO ESTABLISH THAT IT IS ENTITLED TO 

INJUNCTIVE RELIEF 

735. Section 13(b) authorizes the court to enter a permanent injunction only “in proper 

cases ... and after proper proof.” 15 U.S.C. § 53(b). 

736. Permanent injunctions cannot be awarded under Section 13(b) based on a past 

antitrust law violation. See 15 U.S.C. § 53(b)(1) (to obtain injunction, FTC must prove that 

defendant “is violating, or is about to violate” the FTC Act); FTC v. Evans Prods. Co., 775 F.2d 

1084, 1087 (9th Cir. 1985) (“past wrongs are not enough for the grant of an injunction . . . . an 

injunction will issue only if the wrongs are ongoing or likely to recur”); see also FTC v. AbbVie 

Inc., No. CV 14-5151, 2018 WL 3830533, at *35 (E.D. Pa. June 29, 2018) (FTC must prove that 

defendant “is currently violating antitrust laws or is about to violate antitrust laws”); see also

TRW, Inc. v. FTC, 647 F.2d 942, 954 (9th Cir. 1981) (reversing a cease and desist order because 

the FTC had not proved a “cognizable danger of recurrent violation” to justify prospective relief) 

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(citing United States v. W.T. Grant Co., 345 U.S. 629, 633 (1953)). The FTC must prove that 

prospective relief is truly necessary—either to stop an ongoing violation of the antitrust laws or to 

prevent a likely future violation of the antitrust laws. 

737. Accordingly, in considering a request for a permanent injunction pursuant to 

Section 13(b), the Court cannot rely upon “stale” evidence concerning past conduct, but must 

determine if the FTC has adduced proof that Qualcomm “is currently violating antitrust laws or is 

about to violate antitrust laws.” FTC v. AbbVie Inc., 2018 WL 3830533, at *35 (E.D. Pa. June 29, 

2018); FTC v. Merch. Servs. Direct, LLC, No. 13-CV-079 TOR, 2013 WL 4094394, at *3 

(E.D. Wash. Aug. 13, 2013) (denying preliminary injunction after excising “stale” evidence and 

finding little to suggest that violations were likely to recur); see also FTC v. Amazon.com, Inc., 

No. C14-1038-JCC, 2016 WL 10654030, at *4-6 (W.D. Wash. July 22, 2016) (denying 

permanent injunction where a violation of FTC Act was identified as still occurring but harm was 

not likely to continue into future and so violation unlikely to recur). 

738. The FTC must prove each injunction it seeks is narrowly tailored to the specific 

conduct and the specific antitrust harms at issue in the case, and should not interfere with 

legitimate business conduct. See United States v. Grinnell Corp., 384 U.S. 563, 577–80 (1966) 

(noting the parties’ objections to what they had described as “broad and generalized” equitable 

relief, and “suggest[ing]” to the lower court on remand to narrowly tailor its injunction to “the 

precise practices found to have violated the [Sherman] Act”); see also Lamb-Weston, Inc. v. 

McCain Foods, Ltd., 941 F.2d 970, 974 (9th Cir. 1991). 

739. In accordance with the text of the statute and traditional equitable factors, the FTC 

cannot obtain an injunction without proving that the balance of hardships warrants equitable 

relief, and the public interest would not be disserved by the permanent injunction. See 15 U.S.C. 

§ 53(b). 

740. When an injunction would be contrary to the public interest in national security, 

that factor can outweigh all other factors, and the Court should refuse an injunction even if the 

plaintiff has otherwise proved future harm. Winter v. N.R.D.C., 555 U.S. 7, 23–25 (2008). 

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741. Furthermore, though Section 13(b) relieves the FTC of having to prove irreparable 

injury to obtain a preliminary injunction, see, e.g., FTC v. Affordable Media, 179 F.3d 1228, 1233 

(9th Cir. 1999), Section 13(b) does not similarly relieve the FTC of having to prove irreparable 

injury to obtain a permanent injunction. To obtain an injunction for a statutory violation, a 

plaintiff must prove all traditional equitable factors, including irreparable injury, unless the 

statute explicitly says otherwise. See eBay Inc. v. MercExchange, LLC, 547 U.S. 388, 391–92 

(2006). 

742. The FTC is not entitled to the injunctive relief it has requested. First, the FTC has 

failed to prove that each injunction it seeks (including prohibiting Qualcomm’s practice of selling 

chips only to licensed OEMs, requiring licensing SEPs to competitors, prohibiting strategic funds, 

and prohibiting “exclusive dealing” provisions in its chip supply agreements) is necessary to 

remedy current or future anticompetitive effects in the CDMA and “premium” LTE markets, or 

that there is a present need to enjoin exclusivity arrangements in the future based on conduct that 

is ongoing or likely to recur. Second, the FTC has failed to prove that each injunction it seeks is 

sufficiently narrowly tailored and specific with respect to the alleged bases for liability in this 

case, to the markets at issue, and to the alleged harms. Third, the FTC has failed to establish that 

the requested relief is warranted under applicable equitable factors, including that it would serve 

the public interest. 

A. The FTC Has Not Demonstrated that an Injunction Is Needed To Remedy 

Ongoing Anticompetitive Harm. 

1. The FTC has failed to prove any injunctive relief is needed under 

relevant case law. 

743. Injunctions are forward-looking remedies. Thus, the FTC is required to show that 

a permanent injunction is necessary—because harm to competition is ongoing or likely to recur 

(in which case the injunction will stop it). See FTC v. Evans Prods., 775 F.2d at 1087 (“As a 

general rule, ‘[p]ast wrongs are not enough for the grant of an injunction’; an injunction will issue 

only if the wrongs are ongoing or likely to recur.”); see also TRW, Inc. v. FTC, 647 F.2d at 954 (it 

is the FTC’s burden to demonstrate the wrongs are ongoing or likely to recur); FTC v. 

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DiscountMetalBrokers, Inc., 2017 WL 4442998, at *5–6 (C.D. Cal. Oct. 4, 2017) (same); FTC v. 

Kutzner, 2017 WL 4685065, at *2 (C.D. Cal. Sept. 21, 2017) (same). 

744. It is not enough for the FTC to prove that Qualcomm’s conduct remains 

unchanged or is likely to recur in the future, for in an antitrust case, the question is whether a 

violation is likely to recur—and whether conduct is violative of the antitrust laws depends on the 

context and market conditions; the same conduct may be violative under certain circumstances 

and benign under different circumstances. In other words, evidence establishing that conduct had 

anticompetitive effects in the past does not necessarily establish that the same conduct presently 

has or will have anticompetitive effects in the future, if relevant market conditions have changed. 

In this case, therefore, the FTC must prove not only that Qualcomm committed a violation of the 

antitrust laws and that violation is continuing or likely to recur, but also that Qualcomm has or 

will have market power, such that the challenged conduct underlying the violation will exclude 

competitors, harm competition, and thus violate the antitrust laws in the future. See FTC v. 

AbbVie, 2018 WL 3830533, at *35 (shrunken market share and impending patent expiration 

weigh against conclusion that violation is likely to recur). 

745. All of the FTC’s evidence concerns competition in the CDMA or “premium” LTE 

modem chip markets in periods ending in late 2016, over two years ago. That evidence is stale, 

does not concern current or future market conditions, and therefore does not meet the FTC’s 

burden to obtain a permanent injunction. See Apple, Inc. v. Samsung Elecs. Co., 2012 WL 

2527044, at *3 (N.D. Cal. July 2, 2012) (J. Koh); see also Mercexchange, LLC v. eBay, Inc., 467 

F. Supp. 2d 608, 611 (E.D. Va. 2006). 

746. The FTC’s principal expert on market conditions, for example, did not examine 

any evidence of market conditions in the CDMA or “premium” LTE markets after 2016, and 

offered no opinion concerning whether Qualcomm has had monopoly power in the relevant 

markets at any time since 2016, except as to opine that Qualcomm’s alleged market power has 

declined in 2017. 

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747. The evidence of market conditions in the CDMA or “premium” LTE markets since 

2016 submitted by Qualcomm shows competitive conditions that are inconsistent with a 

conclusion that Qualcomm currently has entrenched monopoly power in the alleged relevant 

markets. 

748. Major OEMs have substantially reduced their purchases or even ceased purchasing 

modem chips from Qualcomm in the CDMA and “premium” LTE markets alleged by the FTC. 

Apple, for example, now sources modem chips exclusively from Intel, and not from Qualcomm, 

for all of its 2018 iPhone models. Qualcomm lacks market power and cannot exercise monopoly 

leverage to enter supra-FRAND agreements, including as evidenced by the more than 30 5G 

agreements that Qualcomm has recently entered with OEMs. 

2. The FTC has failed to prove any of its specific requested relief is 

needed to solve ongoing anticompetitive harms. 

749. The FTC has not established that there is any current need for an injunction 

prohibiting Qualcomm “from conditioning the supply of modem chips on a customer’s patentlicense status.” (Joint Pretrial Statement at 2; FTC Interrogatory Response at 5.) Under the 

FTC’s theory, this policy of not selling products to unlicensed customers is not anticompetitive 

unless Qualcomm has sufficient market power to “leverage” OEMs in license negotiations. But 

the FTC has failed to prove Qualcomm currently has such power, and current evidence 

demonstrates that it does not. 

750. The FTC has failed to prove that there is any current need for an order requiring 

“Qualcomm to make exhaustive SEP licenses available to modem-chip suppliers on fair, 

reasonable, and non-discriminatory terms and to submit, as necessary, to arbitral or judicial 

dispute resolution to determine such terms.” (Joint Pretrial Statement at 2-3; FTC Interrogatory 

Response at 6.) Again, given the FTC’s failure to prove Qualcomm currently exercises monopoly 

power such that the combination of its monopoly leverage over OEMs and refusal to license for 

the manufacture of components creates a “tax” on competitor margins—and the fact that current 

market evidence demonstrates the opposite—there is no current anticompetitive harm caused by 

these practices that could justify these injunctions. 

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751. For much the same reason, the FTC has failed to prove that an injunction 

prohibiting Qualcomm from using incentive payments (Joint Pretrial Statement at 2-3; FTC 

Interrogatory Response at 6) in licensing negotiations is needed to remedy present or ongoing 

anticompetitive harms in the CDMA or “premium” LTE markets. 

752. Nor has the FTC proven that an injunction prohibiting Qualcomm “from entering 

express or de facto exclusive-dealing agreements for the supply of modem chips” is necessary 

based on current conditions in the CDMA or “premium” LTE markets. (Joint Pretrial Statement 

at 2-3; FTC Interrogatory Response at 6.) Any alleged exclusive dealing with Apple has ceased, 

and the FTC has presented no evidence it will likely recur. The alleged effects of the purported 

Apple-exclusive agreements—i.e., foreclosure of “premium” LTE modem chip supply 

competitors to sell to Apple—no longer exist because Apple now purchases Intel chips and began 

to do so even before Qualcomm’s agreements with Apple ended in 2016. 

753. And the FTC has failed to demonstrate any need for this Court to enjoin 

Qualcomm “from engaging in similar and related conduct” to the conduct that the FTC alleges is 

anticompetitive (FTC Interrogatory Response at 5 (citing Complaint)), or for this Court to 

“[r]equire Qualcomm to submit to compliance and monitoring procedures.” (Joint Pretrial 

Statement at 3.) Of course, the FTC must put on evidence both that specific conduct has caused 

specific anticompetitive harms, and that those harms persist such that an injunction is required. 

But it has failed to make those showings. 

B. In the Alternative, the FTC’s Requested Relief is not Narrowly Tailored to 

the Markets or Harms at Issue in this Case. 

1. Any relief requested by the FTC must be narrowly tailored. 

754. Permanent injunctions must be “tailored to remedy the specific harm alleged.” 

Lamb-Weston, Inc. v. McCain Foods, Ltd., 941 F.2d 970, 974 (9th Cir. 1991) (citing Aviation 

Consumer Action Project v. Washburn, 535 F.2d 101, 108 (D.C. Cir. 1976)). In other words, an 

injunction cannot “enjoin all possible breaches of the law.” Price v. City of Stockton, 390 F.3d 

1105, 1117 (9th Cir. 2004) (citing Zepeda v. INS, 753 F.2d 719, 728 n.90 (9th Cir. 1983)). It 

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must be tailored to the precise conduct that has “been found to violate [the] law.” Skydive 

Arizona, Inc. v. Quattrocchi, 673 F.3d 1105, 1116 (9th Cir. 2012). 

755. Antitrust remedies may not enjoin more conduct than is necessary to remedy the 

anticompetitive harms. The FTC must “establish that [the scope of the equitable relief sought] is 

necessary to preserve effective relief for injured consumers.” Merch. Servs. Direct, 2013 WL 

4094394, at *4. Facebook, Inc. v. Power Ventures, Inc., 252 F. Supp. 3d 765, 784–85 (N.D. Cal. 

2017) (Koh, J.) (injunctions must be “narrowly tailored to correct the legal violations at issue and 

[should not be] overbroad.”). 

756. Here, the FTC’s requested relief is overbroad and unnecessary to correct the 

anticompetitive harms it has alleged. The FTC’s proposed injunctions are overbroad because 

they are not limited to the alleged relevant markets the FTC’s experts analyzed. 

757. Specifically, the FTC’s theory is that Qualcomm has used its alleged monopoly 

power in the alleged relevant markets for CDMA and “premium” LTE modem chips to obtain 

royalty rates that contain a supra-FRAND component. But Qualcomm’s license agreements are 

standard-specific. Accordingly, any monopoly power Qualcomm may have had in the alleged 

markets for CDMA and “premium” LTE modem chips could not have been used to coerce supraFRAND royalties in license agreements for other standardized technologies, such as WCDMA. 

758. Moreover, the FTC does not allege that Qualcomm has monopoly power with 

respect to WCDMA modem chips, or in any modem chip markets other than in the alleged 

relevant markets for CDMA and “premium” LTE modem chips. 

759. Indeed, the FTC has put on no evidence about the market for WCDMA modem 

chips (a much larger segment than CDMA modem chips) or non-“premium” LTE modem chips 

(also a much larger segment than “premium,” as the FTC has defined it). 

760. Without any evidence, or even allegations, that this relief extending beyond the 

alleged relevant markets is necessary to address the anticompetitive harms alleged by the FTC, 

this Court cannot issue an injunction against Qualcomm’s conduct in those unaddressed markets. 

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761. Such an overbroad injunction would go beyond the “specific harm alleged,” and 

would be unnecessarily burdensome on Qualcomm given the evidence (and lack of evidence) 

showing harm to competition. Lamb-Weston, 941 F.2d at 974; Grinnell, 384 U.S. at 579–80; see 

also Cramer Prod., Inc. v. Int’l Comfort Prod., Ltd., 931 F.2d 900 (Table), at *4 (10th Cir. 1991) 

(upholding limitation of injunction prohibiting breach of distributor agreement to domestic 

markets based on the evidence presented by the plaintiff, recognizing that injunctive relief must 

be narrowly tailored to the relevant market). 

2. Each of the specific injunctions requested by the FTC is overbroad 

and not properly tailored, and in some cases, impermissibly vague. 

762. Despite that the FTC limited both its allegations and its evidence to the CDMA 

and “premium” LTE markets, the FTC failed to limit its proposed injunctions to those markets. 

763. Specifically, the FTC proposes enjoining Qualcomm from “conditioning the 

supply of modem chips on a customer’s patent-license status” in all markets, and requiring 

Qualcomm to allow renegotiations with respect to all chip sales and patent licenses, including, for 

example, WCDMA modem chips and WCDMA licenses, and non-“premium” LTE chips and 

non-“premium” LTE licenses. (Joint Pretrial Statement at 2; FTC Interrogatory Response at 5–6.) 

764. The FTC also seeks to compel Qualcomm to license all SEPs to all rival chip 

makers, not just SEPs with respect to CDMA and “premium” LTE markets. (Joint Pretrial 

Statement at 2-3; FTC Interrogatory Response at 6.) And the FTC would have this Court prohibit 

incentive payments and express or de facto exclusive dealing contracts—again—in all markets, 

and not just the ones about which the FTC has adduced any evidence. (Joint Pretrial Statement at 

2-3; FTC Interrogatory Response at 6). 

765. Moreover, the FTC seeks an order requiring Qualcomm to “renegotiate . . . license 

terms” with all OEM licensees. (Joint Pretrial Statement at 2; FTC Interrogatory Response at 6.) 

Not only would such an injunction require renegotiation in markets where Qualcomm is not even 

alleged to have market power, such as WCDMA or non-“premium” LTE, but it is also overbroad 

insofar as it requires renegotiation of agreements no matter what the terms and no matter whether 

any anticompetitive harms caused or resulted from those agreements. Such an injunction would 

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be tailored neither to the markets nor harms at issue, including because it would apply to 

agreements entered into outside the 2011-2016 timeframe for which the FTC has presented 

evidence. 

766. The requested relief also is not tailored to specific agreements or commerce that 

falls within the reach of the FTC Act. Section 5 of the FTC Act explains that the Section does 

“not apply to unfair methods of competition involving commerce with foreign nations (other than 

import commerce) unless” those “methods of competition have a direct, substantial, and 

reasonably foreseeable effect” on U.S. commerce and “such effect gives rise to” the FTC Act 

claim. 15 U.S.C. § 45(a)(3); see also 15 U.S.C. § 6a (applying same rule to Sherman Act 

claims). To the extent that any of the injunctions would affect purely foreign commerce that does 

not cause anticompetitive harm in the United States, that extraterritorial effect is also 

overbroad. See, e.g., United States v. LSL Biotechnologies, 379 F.3d 672, 681-83 (9th Cir. 2004).

767. Such an overbroad order requiring renegotiations also should fail for lack of 

specificity. Any injunction “must ... state its terms specifically” and “describe in reasonable 

detail ... the act or acts restrained or required.” Fed. R. Civ. P. 65(d)(1). This command applies 

to antitrust injunctions, which are “unenforceable” if they “do[] not enjoin a specific act or 

practice.” LabMD, Inc. v. FTC, 894 F.3d 1221, 1237 (11th Cir. 2018). But the FTC’s 

requirement that Qualcomm renegotiate all contracts and licenses “free from the threat of lack of 

access to modem chip supply or associated technical, software, or other support,” begs the 

questions of what is prohibited, how this will be determined, how parties will determine if such 

amorphous conditions are present, and others. (Joint Pretrial Statement at 2). 

768. The FTC’s additional catchall request to enjoin Qualcomm from engaging in any 

“similar and related conduct in the future” also fails as non-specific. (Interrogatory Response at 5 

(citing Complaint)). “Similar and related” are not specific terms and give no detail as to what 

acts are restrained, as required under Rule 65(d)(1). It is also unclear whether these “similar and 

related” actions will be prohibited in all markets or just the markets at issue in this case—if the 

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former, this command is also impermissibly untethered from the harms and products at issue in 

this case. 

769. In sum, the injunctive relief sought by the FTC is not “tailored to remedy the 

specific harm alleged.” Lamb-Weston, Inc. v. McCain Foods, Ltd., 941 F.2d 970, 974 (9th Cir. 

1991). It may not be granted. 

C. The FTC Has Not Demonstrated that Equity Warrants a Permanent 

Injunction. 

770. The FTC failed to prove the necessary equitable factors for imposing the 

permanent injunction the FTC seeks. 

771. First, the balance of equities weighs against an injunction in this case. 

Competition in the alleged CDMA and “premium” LTE markets is robust and only increasing. 

The unnecessary and overbroad injunctive relief sought by the FTC will harm competition in this 

expanding and dynamic industry, and it will put Qualcomm at a competitive disadvantage by 

changing the rules of the game after Qualcomm invested billions of dollars into system-level 

innovation shared with the industry through standard-setting, in reliance on the way that the 

modem chip industry has evolved organically over the past 30 years. 

772. Second, the public interest weighs against granting the FTC’s requested 

injunctions. Due to their overbreadth, those injunctions represent over-enforcement of the 

antitrust laws and will limit Qualcomm’s leading role in innovation by prohibiting actions not 

recognized as violating the antitrust laws, will undermine U.S. competitiveness in the fast-paced 

and dynamic modem chip industry by hampering Qualcomm’s ability to continue its leading 

innovation in that industry, and will interfere with important national security interests. See Barry 

Wright Corp. v. ITT Grinnell Corp., 724 F.2d 227 (1st Cir. 1983) (efforts to stop anticompetitive 

conduct should not discourage legitimate competition); see also Matsushita Elec. Indus. Co. v. 

Zenith Radio Corp., 475 U.S. 574, 594 (1986) (“Mistaken inferences in cases such as this one are 

especially costly, because they chill the very conduct the antitrust laws are designed to protect.”). 

773. The U.S. Treasury’s Committee on Foreign Investment in the United States 

(CFIUS) recently recognized the significant “risk to the national security of the United States” 

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that could arise from changing Qualcomm’s innovation-focused business model as a result of 

acquisition by a foreign entity. See CFIUS March 5, 2018 Letter at 1–2. 

774. CFIUS explained that Qualcomm is a “global leader in the development and 

commercialization of foundational technologies and products used in mobile devices,” that 

Qualcomm “led the mobile revolution in digital communications technologies,” and that 

“Qualcomm’s technological success and innovation is driven by its unmatched expertise and 

research and development,” which “drive[s] U.S. leadership in key-standard setting bodies.” Id.

at 2. As such, CFIUS concluded that the “weakening of Qualcomm’s technological leadership” 

(including limiting R&D expenditures) and “disrupt[ing] ... Qualcomm’s capabilities as a 

supplier of products” to the U.S. government would pose serious national security risks to the 

United States. Id. at 2–3. 

775. CFIUS further explained that “Qualcomm's current business model . . . currently 

relies on the licensing business to fund the company's large R&D expenditures.” Id. at 3. 

Important, legitimate aspects of this business model include selling modem chips only to licensed 

OEMs and licensing exhaustively only at the device level. 

776. The public interest favors the dynamic and competitive innovation in modem chip 

technology—including as driven by Qualcomm’s innovation and industry—which have improved 

technology and lives around the nation. The national security public interest also favors 

Qualcomm’s R&D and business model, which the FTC’s requested overbroad injunctions would 

significantly impede. The Supreme Court in Winter v. N.R.D.C., recognized the immense public 

interest attendant in national security concerns—which can even outweigh other eBay factors. 

555 U.S. 7, 23–25 (2008); id. at 20 (noting it is the plaintiff’s burden to demonstrate the public 

interest would be served by the injunctions); see also Internet Specialties W., Inc. v. MilonDiGiorgio Enters., Inc., 559 F.3d 985, 994 (9th Cir. 2009) (noting Winter held “that the public 

interest in national security defeated [the requested] injunction”); Def. Distributed v. U.S. Dep’t of 

State, 838 F.3d 451, 459–60 (5th Cir. 2016) (explaining in preliminary injunction case that “the 

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public interest in national defense and national security is stronger” than admittedly strong 

interests in protecting against potential violation of constitutional rights pending trial). 

777. Third, the FTC failed to prove irreparable harm from Qualcomm’s conduct. 

Indeed, the FTC failed to adduce evidence of any current or future harm to competition or the 

CDMA or “premium” LTE modem chip marketplaces that cannot be remedied but for the 

injunctions the FTC seeks. And it pointed to no monopoly maintenance by Qualcomm that can 

be rectified only by injunctive relief. Even if the FTC could show that Qualcomm had monopoly 

power at one point, it has lost that power and has not caused any harms to competition that would 

be fixed (let alone need be fixed) by these injunctions. 

778. Opinions holding that the FTC need not prove irreparable harm to obtain 

preliminary injunctive relief predate the Supreme Court’s holding in eBay Inc. v. MercExchange, 

LLC, 547 U.S. 388, 391–92 (2006), that plaintiffs seeking a permanent injunction under a federal 

statute (the Patent Act in that case) must prove all traditional equitable factors for injunction, 

including irreparable harm, unless Congress specifically indicates some other test should apply. 

Id. Section 13(b) bears no indication that Congress intended a different test to apply to permanent 

injunctions in antitrust cases; on the contrary, the statute conspicuously fails to require proof of 

irreparable injury for preliminary injunctions then notes that permanent injunctions can be issued 

only in “proper cases” after the FTC puts on “proper proof.” 15 U.S.C. § 53(b) See eBay, 547 

U.S. at 391-92; see also Amoco Prod. Co. v. Gambell, 480 U.S. 531, 542 (1987) (“[A]n 

injunction is an equitable remedy that does not issue as of course.”); Weinberger v. RomeroBarcelo, 456 U.S. 305, 313 (1982) (“The grant of jurisdiction to ensure compliance with a statute 

hardly suggests an absolute duty to do so under any and all circumstances, and a federal judge 

sitting as chancellor is not mechanically obligated to grant an injunction for every violation of 

law. . . . Of course, Congress may intervene and guide or control the exercise of the courts’ 

discretion, but we do not lightly assume that Congress has intended to depart from established 

principles.”). 

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779. Here, the FTC has failed its burden to prove irreparable harm, the balance of the 

equities, or the public interest necessary to impose its requested injunctions. That relief thus must 

be denied. 

XV. CONCLUSION 

780. The FTC has failed to meet its burden of showing: (1) that there has been any 

harm to competition in the alleged relevant markets; (2) the elements of a Section 2 claim; (3) the 

elements of a Section 1 claim; (4) the elements of a standalone claim under Section 5 of the FTC 

Act; and (5) that the FTC is entitled to injunctive relief, and specifically that: (i) there is a 

significant possibility of future harm to competition that would warrant injunctive relief; (ii) the 

remedy the FTC seeks is appropriately tailored to any proven harm; and (iii) that the remedy the 

FTC seeks is in the public interest. 

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Dated: December 6, 2018 KEKER, VAN NEST & PETERS 

By: /s/ Robert A, Van Nest

ROBERT A. VAN NEST 

EUGENE M. PAIGE 

JUSTINA SESSIONS 

Gary A. Bornstein (pro hac vice)

Yonatan Even (pro hac vice)

CRAVATH, SWAINE & MOORE LLP 

Worldwide Plaza 

825 Eighth Avenue 

New York, NY 10019-7475 

Tel.: (212) 474-1000 

Fax: (212) 474-3700 

gbornstein@cravath.com 

yeven@cravath.com 

Richard S. Taffet (pro hac vice)

MORGAN, LEWIS & BOCKIUS LLP 

101 Park Avenue 

New York, NY 10178-0060 

Tel.: (212) 309-6000 

Fax: (212) 309-6001 

richard.taffet@morganlewis.com 

Willard K. Tom (pro hac vice)

MORGAN, LEWIS & BOCKIUS LLP 

1111 Pennsylvania Avenue NW 

Washington, DC 20004-2541 

Tel.: (202) 739-3000 

Fax: (202) 739 3001 

willard.tom@morganlewis.com 

Geoffrey T. Holtz (SBN 191370) 

MORGAN, LEWIS & BOCKIUS LLP 

One Market, Spear Street Tower 

San Francisco, CA 94105-1596 

Tel.: (415) 442-1000 

Fax: (415) 442-1001 

gholtz@morganlewis.com 

Attorneys for Defendant 

QUALCOMM 

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FILER’S ATTESTATION 

I, Geoffrey T. Holtz, am the ECF user whose identification and password are being used 

to file this Stipulation. In compliance with Civil Local Rule 5-1(i)(3), I hereby attest that the 

signatories on this document have concurred in this filing. 

s/ Geoffrey T. Holtz 

Geoffrey T. Holtz 

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