There's a third summary judgment motion related to Qualcomm's business practices that is worth talking about, though it is admittedly a distant third given the enormous potential of the FTC's motion regarding the licensong of rival chipset makers and Apple's motion targeting Qualcomm's "double-dipping" (chipset sales + patent royalties). In a lower-profile motion that nevertheless highlights a major issue, Apple has asked Judge Gonzalo Curiel of the United States District Court for the Southern District of California to throw out Qualcomm's counterclaims according to which Apple has to repay rebates amounting to billions of dollars because it breached a "Business Cooperation and Patent Agreement" (BCPA) through its efforts to instigate and broaden antitrust investigations into Qualcomm's conduct (this post continues below the document):
18-09-01 Apple Motion Re. R... by on Scribd
In order to understand the context of the motion, one needs to go back to last year's (amended) complaint, in which Apple stated the issue as follows ("Nature of the Action", paragraph 1):
"Qualcomm pursues its illegal practices through a secret web of agreements designed to conceal and obfuscate its conduct. In at least one such agreement, Qualcomm inserted a gag order that prevented an aggrieved party from seeking relief that could curb Qualcomm's illegal conduct, in an effort to keep courts and regulators in the dark and its coerced customers quiet." (emphasis added)
A "gag order" relating to information that stakeholders give to regulators is highly problematic. Allowing this kind of scheme would enable companies with huge leverage to impede the work of competition authorities to the point that antitrust action would be both less likely to happen and far less likely to succeed.
Most of Apple's motion focuses on compliance ("we didn't breach the agreement"), not on (un)enforceability, but at least Section A.5 makes a public-policy argument:
"Any interpretation of the BCPA that would prevent Apple from responding to the [regulatory] agencies' requests (whether based on subject matter or the alleged truthfulness thereof) or would allow Qualcomm—the target of agency investigations—to receive repayment of billions of dollars based on Qualcomm's own (incorrect) view of their contents would contravene established public policy. The public policy of California favors full disclosure of concerns about unlawful conduct to governmental investigators." (emphasis in original)
"Apple had a legal duty to comply with all subpoenas and CIDs [Civil Investigate Demands] from the FTC. Moreover, FTC rules of practice state that the FTC 'expects all parties to engage in meaningful discussions with staff.' [...] Inherent in this expectation is freedom from retaliation if the investigation's target dislikes a response. For this reason, responses to CIDs are generally confidential 'to safeguard the rights of individuals under investigation and to protect witnesses from retaliation.'"
"The same is true in Korea. The KFTC has stated that it 'relies heavily on third parties to gain information” relevant to ongoing investigations and to detect anticompetitive activity in Korea. [...] And Korean antitrust law expressly states that an investigative target cannot retaliate against, or give 'any disadvantage' to, another entrepreneur for 'cooperating with investigations' of unfair trade practices."
Apple's legal argument in the summary judgment motion is mostly about evidentiary failure on Qualcomm's part (for an example, Apple says there's no evidence Tim Cook discussed the KFTC investigation with his counterpart, whom Qualcomm didn't even seek to depose), about timing (Apple's first written correspondence with certain regulators occurred in eah case after the regulator had launched an investigation; and the BCPA expired at some point, so Qualcomm can't claim a breach based on what occurred post-expiration), and so forth. If Qualcomm convinces Judge Curiel that there is room for factual dispute, the motion may be denied (though Apple could still prevail on any of this at trial). If Apple's strategy works, the court will hold that nothing Apple did constituted a violation of the BCPA (reasonable interpretation provided). And if my wish was granted, the court would sua sponte place a lot more emphasis on the enforceability part than Apple did.
A few more quotes from Apple's complaint show the importance of the underlying issue:
"Qualcomm's recent effort to cover its tracks—by punishing Apple for providing truthful testimony at the request of government regulators—underscores the lengths to which Qualcomm will go to protect its extortion scheme."
"The BCPA carved out, as it must, an acknowledgment that Apple has a responsibility to respond to enforcement agencies' requests for information. But in restraining Apple from initiating action or bringing concerns to law enforcement, Qualcomm conditioned billions of dollars on Apple's silence before courts and regulators about Qualcomm's business practices. And Qualcomm is now interpreting that agreement to retaliate against Apple for responding to requests for information about Qualcomm's practices from competition agencies, inhibiting law-enforcement review of Qualcomm's anticompetitive practices."
"232. Specifically, Qualcomm offered to pay Apple the nearly $1 billion it owed if Apple would, in Qualcomm's words:
(i) publicly and specifically retract and correct each of Apple's misstatements about Qualcomm to regulatory agencies [...]; (ii) inform the relevant agencies that such statements were and are untrue; (iii) disclose Apple’s correspondence with any agencies relating to any investigation of Qualcomm;10 (iv) provide any and all additional facts to regulators and Qualcomm relating to Apple's dealings with Intel concerning any possible or actual consideration from Intel to Apple relating to Apple's implementation of WiMax or the use of Intel chips; and (v) provide Qualcomm with the requested information about any communications between Apple’s senior executives and Samsung.
233. Thus, in an extraordinary and transparent effort to manipulate regulatory iinvestigations into its anticompetitive behavior, Qualcomm offered to repay Apple nearly $1 billion in withheld BCP Payments if Apple recanted its true and, in many cases, sworn testimony before government agencies and instead gave false testimony favorable to Qualcomm."
In light of the above, the term "gag order" is actually an understatement. Qualcomm wanted to be exonerated by using Apple, in exchange for a billion-dollar payment, as its mouthpiece. Demanding a retraction of a statement is reminiscent of what certain communist dictatorships used to do during the Cold War. They, too, obligated people to publicly speak against their previous statements.
While it's understandable that Qualcomm will try anything in a multi-billion-dollar dispute to save money and, therefore, claims that Apple breached the agreement, the most important question is why Qualcomm put a "gag order" in place and made a billion-dollar offer for retracting statements Apple had made to regulators. Why would Qualcomm have done all of that in the first place if its business model was as legal as it keeps telling courts and the general public?
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