Federal Trade Commission v. Qualcomm Inc.

Qualcomm Incorporated (defendant), a major innovator in the cellular-technology industry, held several related patents. Qualcomm’s patents included standard essential patents (SEPs) on the standards practiced in most modern cellular devices. Because all original-equipment manufacturers (OEMs), such as Apple and Samsung, were required to practice Qualcomm’s SEPs, Qualcomm licensed the SEPs to OEMs. In addition to Qualcomm’s lucrative licensing business, it also made and sold modem chips, i.e., the hardware used in cellular devices that enabled the OEMs to practice Qualcomm’s SEPs. To avoid patent exhaustion and maximize profits, Qualcomm licensed its SEPs to OEMs exclusively. Qualcomm did not license its SEPs to competitor chip makers, but because those competitors had to use Qualcomm’s SEPs, Qualcomm entered agreements in which it agreed not to assert patent-infringement claims against competitors that used its SEPs, and the competitors agreed not to sell chips to unlicensed OEMs. Qualcomm also followed the so-called no license, no chip policy and refused to sell chips to unlicensed OEMs. In 2017, after Qualcomm’s competitors and customers complained about its license practices, the Federal Trade Commission (FTC) (plaintiff) sued Qualcomm, alleging that its practices were anticompetitive. Specifically, the FTC claimed that, due to the anticompetitive effect that Qualcomm’s licensing practices had on the OEMs, the practices were an unreasonable restraint on trade and constituted monopolistic behavior in violation of §§ 1 and 2 of the Sherman Act. The district court agreed and held in the FTC’s favor. Qualcomm appealed.