A headline starting with the word "bipartisan" reminds us of what happens in the absence of bipartisanship: the cessation of the federal government, commonly called "government shutdown." With paychecks not going out on time, it's more than remarkable that the FTC v. Qualcomm antitrust trial in the Northern District of California is set to continue irrespectively of the shutdown. I agree with what MLex's chief antitrust reporter Mike Swift wrote in the tweet below (both parts--admiration of the FTC staff's efforts and the impression that it has a strong case against Qualcomm):
You really have to admire these @FTC lawyers at the #ftcqcom trial. Through all the crap they must be dealing with with the federal #shutdown they are putting on a strong case from my POV.
— Mike Swift (@Swiftstories) January 11, 2019
When an antitrust defendant faces a strong case, and when that case tackles the core of a business model, a company may very well get desperate and try alternative routes in order to avoid a judicial decision that quite probably isn't going to be pretty from Qualcomm's perspective. Qualcomm has not yet presented its own case-in-chief. The FTC will rest its case on Tuesday (as per the current schedule), and then Qualcomm will be in the driver's seat for a few days. But Qualcomm's lawyers have cross-examined the FTC's live witnesses, and Qualcomm's lead counsel Bob van Nest made an opening statement laying out his defensive strategy. Day 2 went better for Qualcomm than the other three days, but all in all the FTC still controls the center of the chess board, with Qualcomm clinging to a last line of defense: trying to build a basis to argue that the FTC failed to prove actual anticompetitive harm. After four trial days, including testimony by Qualcomm CEO Steve Mollenkopf and Qualcomm president Cristiano Amon, it appears increasingly unlikely that Qualcomm can fundamentally challenge the FTC's allegations and theories. Qualcomm's lawyers are trying many things, and they're trying smart and hard, but it's largely just like scratching at the periphery of the issues.
Qualcomm has an army of public relations professionals and lobbyists working on this case. They've orchestrated a lot of things, some of which Apple CEO Tim Cook complained about and dismissed as falsehoods (without going into specifics) in a recent CNBC interview, and the latest prouct of those efforts is this Fox News article published on Monday morning, entitled "Trump allies warn Obama-era FTC suit against US firm giving boost to China."
I've often shared Fox News articles on social media. I admit it's my favorite TV news network by far and away, and I've had to defend it against liberals who criticized me for sharing articles from what they considered an unreliable source. One story on an antitrust case that misses the point doesn't change how I view Fox News in general. It's all too easy to see they've been used by people who in turn have been used by Qualcomm.
Let's start with the headline. As for "Obama era," I already explained in my post on FTC chairman Joseph Simons's recusal from this case (now I learned from the Fox article that it's because a law firm he was a partner of had Qualcomm for a client) that there are indeed decisions that then-outgoing President Obama made that were against American interests, such as an indirect sponsorship of suicide terrorism or a "refugee" dael with Australia when anyone with half a brain should understand that people who travel all the way from Africa or the Middle East to Australia (!) to seek asylum there, after crossing and bypassing numerous safe countries, lost their refugee status even under the Geneva Convention a long time (and many thousands of miles) ago. But the FTC's antitrust case here is not an ideological issue.
Just like Fox News doubts that my favorite president is aware of the details of this case, I guess then-outgoing President Obama was, in January 2017, more interested in his book deals, in some final retribution against Israeli prime minister Benjamin Netanyahu, in a long vacation, and a hundred or a thousand other things than in fair baseband chipset competition. Presumably he was just told that there was this investigation that had been going on for two years and the transition of power shouldn't delay filing the related lawsuit. Statistically, no president faced more Congressional slow-rolling with respect to appointments of government officials than President Trump. A lot of time could have been wasted, and at some point Qualcomm might have complained about a protracted investigation.
The most counterfactual part of the headline, however, is the idea of "giving [a] boost to China" by letting a company like Intel compete on a more level playing field and by giving a device maker like Apple more choice. Largely, the whole Fox News article just uses China as a bogeyman. Huawei's testimony was great, but merely validated and supported what U.S. companies such as Apple, Intel, or Motorola Mobility (though now owned by Lenovo, the stories go back to the times when it wasn't, and it still employs many people here), or companies from countries that are longstanding U.S. allies such as South Korea, have said. If the FTC's evidence were limited to testimony by Huawei, then I could see why some people might find this strange. But not when there's a long list of companies saying essentially the same things and even more than Huawei did. For an example, Apple and Intel provided insights that Huawei didn't and to some extent simply couldn't have.
What makes that obsession with China even more counterfactual is the fact that Qualcomm itself is known to favor China for the first 5G rollout. I just googled these two stories:
Financial Times (FT.com): "Qualcomm chief says 5G will put China telecoms groups on top", and below the headline: "Steve Mollenkopf says telecoms groups could disrupt market leaders Apple and Samsung"
Global Times (globaltimes.cn): "Qualcomm's 5G plan reflects heavy reliance on China"
The suggestion (in the Fox News article) that playing videotaped testimony by Huawei is like different parts of the government working against each other (in light of concerns over buying Huawei infrastructure) conflates totally unrelated issues. The FTC is seeking an injunction against certain types of conduct on Qualcomm's part, none of which relate even indirectly to the procurement of Huawei products.
Neither Democrats nor Republicans have a patent on pro-competitive action, and there's no reason why Republicans should grant the Democrats one. The CCIA's Patent Progress website has published three public-interest statements filed by members of the U.S. Senate and the U.S. House of Representativesin response to the United States International Trade Commission's mid-December notice relating to the ITC's investigation of Qualcomm's first complaint against Apple (with Qualcomm seeking an import ban, which is the ITC's sole remedy).
The United States Senators and United States Representatives who filed those letters, which support Administrative Law Judge Thomas B. Pender's recommendation that no import ban be ordered given the anticompetitive effect this would have on Intel's ability to compete with Qualcomm, include members of both parties of Congress. While all members of Oregon's Congressional delegation who signed a joint letter are Democrats (well, Oregon doesn't have a Republican Senator at the moment, and only one of five U.S. Representatives from Oregon is a Republican), Congressman Andy Biggs from Arizona (member of the House Judiciary Committee as well as the Committee on Science, Space and Technology) and Congressman Darrell Issa from California are Republicans.
What's particularly interesting about Mr. Issa's letter is that he's a tech entrepreneur, a patent holder, a party to past patent litigation as a plaintiff as well as defendant, and he personally testified before the ITC in connection with a case in which Broadcom was seeking an exclusion order (U.S. import ban) against products incorporating Qualcomm baseband chips. Could a politician possibly have a more knowledgeable background to submit such a public-interest statement? Hard to imagine.
Mr. Issa would also like the district court to adjudicate the FTC's antitrust case now. Obviously, an exclusion order against Intel-powered iPhones would potentially run counter to a finding that Qualcomm illegally sought to avoid competition from Intel.
Those public-interest statements mention 5G: for the U.S. economy, it's better to have Intel compete with Qualcomm on 5G. In the end, both companies will be more innovative then.
In the past, Republican politicians such as Senator Mike Lee (Utah) have spoken out clearly against the abuse of standard-essential patents.
To combat anticompetitive conduct is not, and should not be misportrayed, as a "blue" issue, just like border security should not be a "red" concern. Qualcomm should focus on its case-in-chief, starting Tuesday, and if (as I believe is more likely than not to happen) it becomes necessary, it should adapt its business practices, which it certainly could if it wanted and had to.
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