UNITED STATES INTERNATIONAL TRADE COMMISSION

WASHINGTON, D.C. 20436

In the Matter of

CERTAIN MOBILE ELECTRONIC DEVICES

AND RADIO FREQUENCY AND ITC Docket: 337-3279
PROCESSING COMPONENTS THEREOF

PUBLIC INTEREST STATEMENT OF PROPOSED RESPONDENT APPLE INC.

 

 
 Qualcomm’s second ITC complaint against Apple’s products containing Intel chips is yet another

attempt to eliminate competition in the sale of premium LTE chips and avoid the impact of the many

regulatory and district court actions seeking to stop Qualcomm’s anticompetitive practices. Qualcomm

now “triples-down” on its anticompetitive behavior, yet again demonstrating its intent to put its only

competitor, Intel, out of business. Qualcomm does so despite the Federal Trade Commission’s action

seeking to put an end to its anticompetitive practices, Apple’s action seeking the same relief, over thirty

class action litigations, and numerous actions by competition agencies across the globe, including

investigations resulting in decisions finding Qualcomm’s anticompetitive practices illegal and levying

billions in fines in Korea, Taiwan, the European Union, and China.

Qualcomm’s first ITC complaint sent a clear message—that it wanted no competitor, customer, or

government agency to stand in the way of its illegal practices. Qualcomm’s second ITC complaint equally

sends a message of desperation and defiance. Faced with a wave of challenges that threaten to curtail the

conduct Qualcomm has used to strangle the market—and that seek to restore and promote competition in

the premium LTE chip market—Qualcomm again seeks to avoid that outcome by asking the Commission

to protect Qualcomm’s monopoly before it faces judgement elsewhere.

Apple is a perennial innovator. Apple’s creation of the iPhone and iPad are not incremental

advances, but have revolutionized the way in which people interact with technology and with each other.

Apple continues to provide revolutionary technologies, sparking innovation in numerous other businesses,

including established companies such as Intel, entrepreneurs, App developers, and suppliers. Over the last

decade, Qualcomm has been one of the largest beneficiaries of Apple’s innovation, reaping billions from

the sale of baseband processors and patent royalties. But while Qualcomm was once an innovator, it is no

longer. Indeed, its Complaint references CDMA technology that was introduced in 1989. Instead of

continuing to innovate and compete on the merits, Qualcomm persistently—and in the face of numerous

challenges from all over the world—abuses its dominant chipset positions and uses restrictive double-

dipping licensing practices to intimidate companies to stifle the next wave of telecommunications

technology, seeking to recover not once (from vast sales of chipsets implementing industry standards) but

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twice (from billions in duplicative royalties as a prerequisite for buying Qualcomm’s chipsets). With the

benefit of hindsight, Qualcomm sought to patent what it deemed successful in the marketplace, and now

mimics an oversized patent troll—shaking down companies using its market power, rather than bringing

new technologies to the market and competing on the merits. These abusive traits are not hypothetical;

they have been recognized and condemned around the world.

I. Qualcomm’s Continued Campaign Against Legitimate Competition

Qualcomm’s complaint is in response to a rising tide of opposition to Qualcomm’s anti-

competitive practices. In October, Taiwan’s Fair Trade Commission fined Qualcomm $773 million for

violating antitrust laws, following similar violations previously found in China and Korea carrying similar

fines.1 Qualcomm also recently lost an appeal of a penalty imposed by the European Commission for its

antitrust practices.2 Qualcomm also lost its request to stay an order by the Korean Fair Trade Commission

to suspend its unfair business practices in patent licensing and chip sales.3 In the U.S., after losing its

motion to dismiss the Federal Trade Commission’s claims of prohibited conduct,4 Qualcomm lost its

motion to dismiss a number of antitrust claims filed by U.S. consumers,5 lost its motion seeking an

antitrust anti-suit injunction,6 and lost its motion for a preliminary injunction against contract

manufacturers taking a stand against Qualcomm’s abusive practices.7 Qualcomm remains silent on these

critical issues in its public interest statement. In parallel with the 1065 Investigation, moreover,

                                                                                                                                                                                                                            

1
“Qualcomm Updates: Taiwan Antitrust Fine, Lawsuit Against Apple in China,” Forbes, Oct. 16, 2017,
https://www.forbes.com/sites/greatspeculations/2017/10/16/qualcomm-updates-taiwan-antitrust-fine-
lawsuit-against-apple-in-china/#1a342fa5f26f.
2
“Qualcomm Loses Appeal Against EU Threat of Daily Fine,” Reuters, July 17, 2017,
https://www.reuters.com/article/us-eu-qualcomm-antitrust/qualcomm-loses-appeal-against-eu-threat-of-
daily-fine-idUSKBN1A219J.
3
“Korea’s Supreme Court Dismissed Qualcomm’s Re-appeal,” Business Korea, Nov. 29, 2017,
http://www.businesskorea.co.kr/english/news/industry/19957-qualcomm-faces-huge-penalty-
korea%E2%80%99s-supreme-court-dismissed-qualcomm%E2%80%99s-re-appeal.
4
FTC v. Qualcomm Inc., Case No. 17-CV-00220-LHK (June 26, 2017), Dkt. No. 133 (order denying
Qualcomm’s motion to dismiss claims).
5
In re Qualcomm Antitrust Litig., Case No. 17-MD-02773-LHK (Nov. 10, 2017), Dkt. No. 175 (order
denying motion to dismiss plaintiff’s consolidated class action complaint, California Cartwright Act, and
California Unfair Competition Law claims concerning antitrust violations).
6
Apple Inc. v. Qualcomm, No. 3:17-CV-00108-GPC-MDD, ECF No. 92 (Sept. 7, 2017).
7
Qualcomm v. Compal Elecs., Inc. et al., No. 3:17-cv-01010-GPC-MDD, ECF No. 35-1 (Sept. 7, 2017).

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Qualcomm filed another lawsuit against Apple in California.8 It even declared a patent to be one of the

most important in the history of telecommunications only to quickly withdraw it from the litigation.9

After all of this, Qualcomm then filed the instant complaint, along with three district court cases.

Of note, Qualcomm filed this ITC complaint only two business days after Apple filed its answer and

counterclaims in the San Diego litigation that is a parallel action to the 1065 Investigation, seemingly in

retaliation for Apple’s assertion of its own patents against Qualcomm.10 Apple did not invoke its right to

stay the San Diego litigation; Apple is ready, willing, and able to have a full and fair airing of whatever

patent issues Qualcomm advances.

Qualcomm’s second ITC complaint represents an effort to use the Commission’s processes to

sidestep the chorus of agencies and courts finding Qualcomm to be an illegal monopolist in the last few

months. Moreover, Qualcomm has no explanation why its facially anti-competitive conduct, including its

“no license, no chips” policy, its use of non-standards-essential patents (NEPs) as leverage against its

standards-essential patents (SEPs), its refusal to reasonably license its patents to chip manufacturers (such

as Intel), its extortionate royalty demands, and its demand for supplier exclusivity should be tolerated.11

Most tellingly, Qualcomm continues to accuse only Apple products that contain Intel baseband processors,

despite alleging that Apple does not have a license to the asserted patents for even those products with

Qualcomm baseband processors—demonstrating that Qualcomm’s use of Section 337 is for anti-

competitive, rather than patent-enforcing, purposes. Compl. at ¶¶ 2, 32, 33.

II. Factors 1 and 2: The Public Health and Welfare and Competitive Conditions.
                                                                                                                                                                                                                            

8
Qualcomm Inc. v. Apple Inc., Case No. 17-CV-1375-JAH-AGS (S.D. Cal.), Compl. at ¶ 35 (July 6,
2017).
9
Id. at Dkt. No. 14, Amended Compl. at ¶ 34 (Aug. 25, 2017) (withdrawing the ’658 patent); see also
Qualcomm Press Release, “Qualcomm Files Patent Infringement Complaints Against Apple with
International Trade Commission and Federal Court,” July 6, 2017,
https://www.qualcomm.com/news/releases/2017/07/06/qualcomm-files-patent-infringement-complaints-
against-apple-international (identifying the ’658 patent as “central to the performance of the iPhone”).
Qualcomm has even recently sponsored radio advertisements on NPR, touting these misleadinag
assertions. See, e.g., https://www.qualcomm.com/weinvent (accessed Dec. 7, 2017).
10
Id. at Dkt. No. 97, Amended Answer to Complaint at ¶ 73 (Nov. 29, 2017) (asserting as counterclaim-
plaintiff infringement by Qualcomm of eight Apple patents relating to power-efficiency).
11
See, e.g., Apple Public Interest Statement, Inv. No. 337-TA-1065, at 2-3 (EDIS Doc. 617712); Intel
Public Interest Statement, Inv. No. 337-TA-1065, at 2-3 (EDIS Doc. 617681); Non-party Plaintiffs’ Public
Interest Statement, Inv. No. 337-TA-1065, at 2-4 (EDIS Doc. 617715).

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 Qualcomm’s Complaint presents a direct attack upon competitive conditions that cannot be

permitted. Qualcomm’s use of the Commission’s processes to circumvent the authority of another

administrative agency (i.e., the FTC) is not only unprecedented but also dangerous, potentially subjecting

the public at large to a perpetual illegal monopoly and the increased prices and stagnant innovation that

comes with it. The risk of an illegal monopoly is not academic—an exclusion order on Intel-based Apple

products will put Intel out of the premium LTE chip business, empowering Qualcomm to go about

business as usual. In the FTC’s words, “[i]f Qualcomm’s remaining competitors were to exit the business

as a result of Qualcomm’s anticompetitive conduct, this would have a significant adverse impact on

competition in baseband processor markets and on innovation.” FTC Compl., ¶140; id. at ¶¶129, 139.

The chilling effect of an “Intel-only” exclusion order would extend far beyond the premium LTE

chip business. An exclusion order that further entrenches Qualcomm’s monopoly would deter other

OEMs from challenging Qualcomm’s “no-license-no-chips” policy that illegally ties Qualcomm’s

unreasonable patent license terms to its chips, Qualcomm’s refusal to license its competitors despite their

repeated requests, Qualcomm’s refusal to license on FRAND terms, and Qualcomm’s other discriminatory

and exclusionary practices. With even more control over the chip market through the elimination of its

rival Intel, Qualcomm will have unbridled power to threaten OEMs’ supply chains to leverage exorbitant

royalty rates or require exclusivity from mobile device companies.

Qualcomm’s requested exclusion order would also create a spillover monopoly extending to

product technology that it did not invent, such as the new fifth generation (5G) technology, which will

replace its 4G LTE predecessor—technologies developed by hundreds of companies around the world.

5G not only has the potential to make the internet more accessible to more people and more industries, but

more importantly it may unshackle the mobile industry from Qualcomm’s anti-competitive practices. An

exclusion order will burden these new technologies with Qualcomm’s legacy monopolies. Against this

backdrop, Qualcomm’s requested remedial orders would have lasting, detrimental effects on competition.

III. Factor 3: No Evidence Suggests That U.S. Production of Like or Directly Competitive
Articles Could Replace the Challenged Articles.
Worldwide scrutiny of Qualcomm’s monopolistic practices calls into question its ability to fill the

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void of an exclusion order. Qualcomm appears to have recently switched to a Taiwanese manufacturer,12

and after Taiwan’s October 2017 sanction against it, Qualcomm met with Taiwan’s Vice Premier and

suspended its cooperation with Taiwan’s government-backed Industrial Technology Research Institute.13

Qualcomm presents no evidence that any third party could replace Apple’s excluded products in a

commercially reasonable time. Users with iPhones that contain Intel chips have no available substitute to

ensure compatibility with their networks.

IV. Factor 4: The Requested Relief Would Harm Consumers

Qualcomm’s requested exclusion of Apple’s products containing non-Qualcomm baseband

processor chips would also harm consumers, who will be left with no meaningful choice for baseband

processor modems. Third party submissions from U.S. consumers who have brought class-action lawsuits

against Qualcomm as well as representatives of more than thirty companies have further commented that

Qualcomm’s actions here would harm U.S. consumers by, for example, passing on Qualcomm’s

exorbitant royalties to customers and perpetuating Qualcomm’s illegal monopoly.14

V. Delegation of Public Interest

For the reasons detailed in the letter seeking consolidation filed herewith, Apple requests that this

investigation (if instituted) be consolidated with Qualcomm’s 1065 Investigation. One reason supporting

consolidation is to permit unified consideration of the public interest in both investigations, which are

duplicative, and to avoid conducting repetitive evidentiary proceedings and risk of inconsistent findings.

Indeed, Qualcomm’s apparent aim of entrenching its unlawful monopoly through the use of Section 337 is

identical across investigations. Even if the Commission does not consolidate, Apple asks it to delegate

public interest to the Administrative Law Judge for evaluation and decision in the investigation, and

assign the investigation to Administrative Law Judge Pender to ensure consistency and efficient

consideration of the issues.

                                                                                                                                                                                                                            

12
“Q’comm Reportedly Taps TSMC’s 7nm,” EE Times, June 13, 2017,
https://www.eetimes.com/document.asp?doc_id=1331893.
13
“Qualcomm exerts pressure on Taiwan over antitrust fine,” Digitimes.com, Oct. 26, 2017,
http://www.digitimes.com/news/a20171026PD203.html.
14
See, e.g., Non-party Plaintiffs’ Public Interest Statement, Inv. No. 337-TA-1065 (EDIS Doc. 617715);
Comp. & Commc’ns Ind. Ass’n Public Interest Statement, Inv. No. 337-TA-1065 (EDIS Doc. 617665).

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 Respectfully submitted,

FISH & RICHARDSON P.C.

December 14, 2017 /s/ Ruffin B. Cordell 

Ruffin B. Cordell
Lauren A. Degnan
Indranil Mukerji
FISH & RICHARDSON P.C.
The McPherson Building
901 15th Street, NW, Suite 700
Washington, DC 20005
Tel: (202) 783-5070
Facsimile: (202) 783-2331

Benjamin C. Elacqua
FISH & RICHARDSON P.C.
1221 McKinney Street, Suite 2800
Houston, Texas 77010
Tel: (713) 654-5300
Facsimile: (713) 652-0109

Betty H. Chen
FISH & RICHARDSON P.C.
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Redwood City, California 94063
Tel: (650) 839-5070
Facsimile: (650) 839-5071

William F. Lee
Joseph J. Mueller
WILMER CUTLER PICKERING HALE AND
DORR LLP
60 State Street
Boston, MA 02109
Tel: (617) 526-6000
Facsimile: (617) 526-5000

Nina S. Tallon
WILMER CUTLER PICKERING HALE AND
DORR LLP
1875 Pennsylvania Avenue NW
Washington, DC 20006
Tel: (202) 663-6000
Facsimile: (202) 663-6363

Counsel for Proposed Respondent Apple Inc.