Today was the tenth, final and shortest day of the FTC v. Qualcomm antitrust trial before Judge Lucy H. Koh in the Northern District of California. It was also the only one of the ten trial days without a break. Tomorrow we'll hear closing arguments (with a break between the two parties' one-hour presentations).
The short amount of time in court today was enough for Qualcomm's extremely weak position to be on full display again. As I wrote yesterday, it's time look past the question of merits (where the facts and the law are overwhelmingly on the FTC's side) and on to the subject of remedies. But for the sake of complete coverage, a few things from today's session are worth mentioning:
Professor Shapiro's direct examination for the sake of a rebuttal of various Qualcomm experts went like his original testimony the week before last: he was confident, and explained everything in clear and simple terms. He confirmed that he stood by all of his conclusions, and while he pointed out to some major flaws in Professor Snyder's and Dr. Chipty's testimony, he didn't use the kind of dismissive terminology that they had used when commenting on Professor Shapiro's analysis. On Twitter I described this as "respectfully ridiculing" those reports.
However, with respect to Professor Nevo's report and testimony, he used such as terms as "intellectual bankruptcy" and "all messed up." He also said "sloppy work." What a litigation watcher like me always asks oneself in such a situation is whether someone resorts to strong rhetoric from a position of weakness (lacking strong arguments) or does so because something really is so absurd that euphemisms are unwarranted. In this case, it's clearly the latter. The first example I'll give is that Professor Nevo used all sorts of agreements Qualcomm had concluded with companies (as we've known since Friday, with out-of-this-world selectivity rather than the focus on "real-world results" he pretended to have) to show that a certain royalty rate level (we're talking about 5%) was FRAND.Professor Shapiro, who has served twice as chief economist of the DOJ's antitrust division, pointed out the very same misrepresentation of Microsoft's past operating system license agreements (a per-hardware charge even if no Microsoft software was installed) that I explained on Friday in my live tweets as well as in my blog post. Professor Shapiro said his "charitable interpretation" (in other words, he didn't want to allege that Mr. Nevo is a liar) was that Mr. Nevo "failed to understand" the Microsoft case, showing "the bankruptcy of [Nevo's| arguments."
Just imagine this: Qualcomm spent millions on an "expert" who told the court such unbelievably wrong things that the errors were pointed out live on Twitter, and my live tweets and subsequent blog post have just been validated now by Professor Shapiro's rebuttal testimony.
On cross-examination, Qualcomm's lead counsel in the FTC case, Mr. van Nest, first only got Professor Shapiro to confirm obviously true characteristics of his analysis. He got back to the JFTC order mentioned above, arguing that the alleged leverage there was not about chipsets, which was pointless because the exact nature of coercion doesn't make a negotiation result any more reliable. The Japanese case may have been over infrastructure or cross-licenses, but whatever it was, those license deals can't be viewed as a benchmark.
Then, toward the end of the first cross today, Mr. van Nest displayed a different kind of bankruptcy--I'm hesitant to call it an "intellectual" bankruptcy, though. He confronted, over the FTC's objection (overruled by Judge Koh), Professor Shapiro with quotes from a district court ruling related to the AT&T Time Warner merger case, in which the judge disagreed with Professor Shapiro's analysis because it allegedly ran counter to all the trial testimony. Mr. van Nest sought to discredit Professor Shapiro in Judge Koh's eyes. Like in other situations in this trial, I'm not sure that a tactic for a jury trial is appropriate for a bench trial, though in this case it can't be ruled out that it may also have an effect in a bench trial (just far less certain than with a jury). My feeling is Judge Koh will make the necessary determinations herself regardless of what Judge Leon in Washington D.C. wrote.
Professor Shapiro pointed out that many other judges (he's been testifying in such cases for a long time) relied upon his analysis and this one was an "outlier." He also noted that the DOJ was appealing the decision and one would have to await the outcome in the D.C. Circuit.
A quick Google search shows the AT&T decision is controversial.
Even if the judge who handled that merger case was right (I don't have an opinion on that other case as I haven't researched it), real-world evidence in the form of trial testimony and documents shown in FTC v. Qualcomm does support Professor Shapiro.
Bringing up not only an unrelated case but also an issue (analysis running counter to relevant testimony) that just doesn't apply to FTC v. Qualcomm showed one thing: Qualcomm's huge, high-profile trial team had to resort to an attempted competence assassination because the facts are not on Qualcomm's side. The law isn't really on Qualcomm's side either as we know particularly from Judge Koh's wholesale denial of the 2017 motion to dismiss.
Professor Shapiro today highlighted how those agreements allegedly negotiated without anticompetitive leverage are just totally unsuitable for this purpose. Five of seven contracts shown on one slide involved Japanese device makers, and the Japan Fair Trade Commission had actually handed down an order according to which those agreements came into being under unfair circumstances. On cross-examination, Qualcomm's lead counsel Bob van Nest kept insisting that the JFTC had not found any chipset-based leverage, but that was besides the point. Coercion is coercion, leverage is leverage, no matter the lever.
In many other cases, companies concluded agreements and didn't immediately ship phones with Qualcomm chips, but did so a little later; or they bought chips from Via, but Via had an agreement with Qualcomm under which it was not allowed to ship chips to OEMs lacking a Qualcomm patent license (Lenovo testified to that effect, for instance). So basically, there was a lot of leverage, often the same leverage as the one the FTC is concerned about, sometimes maybe a different one, but the bottom line is those other license agreements don't serve as an indicator of a FRAND rate (which negotiation results never prove conclusively anyway).
In light of how the trial went, including its final day today, the most likely scenario for tomorrow is that the FTC will continue to just present its facts and theories in a low-key way, while Qualcomm (presumably Mr. van Nest will deliver the closing argument, though I believe Cravath's Mr. Bornstein would be the better choice in light of the nature of the case and Judge Koh's apparent immunity to any attempts to manipulate her) will probably use stronger rhetoric and get more emotional.
With ever more Qualcomm allies writing op-eds for different media falsely describing Huawei as the FTC's "star witness" (which is totally false because Apple and Intel played far greater roles here and we even heard testimony from more Samsung than Huawei executives), Qualcomm is apparently trying to make its primary closing argument (for a settlement that wouldn't be helpful) outside of Judge Koh's courtroom anyway. Like I said, the focus is now on remedies as Qualcomm has realistically lost the merits part of the case by a wide margin.
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