Koh's Qualcomm Antitrust Order Could Jeopardize Nuclear Security, DOJ Warns
With backing from Defense and Energy departments, Justice tells the Ninth Circuit that failing to stay Koh's antitrust order could jeopardize national, even nuclear security.
July 17, 2019 at 04:12 PM
5 minute read
The original version of this story was published on The Recorder
The Department of Justice has literally gone nuclear on U.S. District Judge Lucy Koh.
Backed by the Department of Defense, the DOJ warned the U.S. Court of Appeals for the Ninth Circuit on Tuesday that failing to stay Koh's antitrust injunction against the cellular communications giant would pose a national security risk, including to nuclear safety.
DOJ submitted declarations from officials in the Defense and Energy departments spelling out their concerns.
“DoD firmly believes that any measure that inappropriately limits Qualcomm's technological leadership, ability to invest in research and development (R&D), and market competitiveness, even in the short-term, could harm national security,” wrote Ellen Lord, under secretary of defense for acquisition and sustainment,
“DOE's missions in nuclear security and protection of the Nation's energy and nuclear infrastructure are dependent on secure and advanced wireless communications, of which Qualcomm is the major and predominant U.S. supplier of both current generation and upcoming 5G chipsets,” wrote Max Everett, chief information officer of the Department of Energy. “Measures that significantly undermine Qualcomm's financial and competitive position also have the potential to adversely impact the Department's critical missions.”
Koh issued an injunction in May following a bench trial in FTC v. Qualcomm. It would force Qualcomm to license its standard-essential chip modem patents to its competitors on fair, reasonable and non-discriminatory (FRAND) terms and renegotiate licenses with smartphone makers free from threats to disrupt their chip supply. Qualcomm is asking the Ninth Circuit to stay the injunction pending its appeal, saying it threatens to “fundamentally change the way it has done business for decades.”
Before Koh, the FTC turned the national security argument back around on Qualcomm, arguing that a stay would let it entrench its monopoly power during the 5G rollout. “Qualcomm's argument that anything that diminishes its corporate profits would necessarily threaten national security is absurdly overbroad” and contrary to the Sherman Act, the Federal Trade Commission's Jennifer Milici argued to Koh, who declined to enter a stay.
A similar debate played out before the International Trade Commission last fall, after Administrative Law Judge Thomas Pender found it would be against the national interest to exclude Intel-supplied smartphones from the U.S., even if they infringed a Qualcomm patent. Pender found that the wireless industry was best served by healthy competition between Qualcomm and Intel, but Intel has since exited the 5G market.
Now DoD and DOJ are formally throwing their support behind Qualcomm in the FTC dispute. “5G is globally acknowledged by all major international participants as the battleground of the future,” Lord writes in her declaration. “Allies such as France and Germany are also considering ways to limit Chinese vendor participation in core 5G network deployment, as is Japan.”
Lord says the Defense Department's “main concerns include the possibility of cyber espionage,” but DOJ's antitrust division is taking it a step further in its amicus submission.
“Nuclear security and the protection of the Nation's energy and nuclear infrastructure depend on secure and advanced wireless communications,” DOJ says in its statement of interest.
The brief is signed by Patrick Kuhlmann of the antitrust division. It appears that division chief Makan Delrahim, who worked as a lobbyist for Qualcomm in private practice, will be recused from the appeal.
Ericsson Inc. and former Federal Chief Judge Paul Michel also threw their support behind Qualcomm in amicus submissions Monday. Jonathan Massey of Massey & Gail wrote for Ericsson that an injunction will disrupt settled expectations just as the wireless industry is prepared to roll out the 5G standard.
“Without all the necessary elements of the 5G ecosystem available, the enormous amount of money, effort, and technological innovation that has been devoted to this effort over the last several years will be jeopardized,” Massey writes on Ericsson's behalf.
The Ninth Circuit just last year stayed an injunction that requires the operators of Salt Lake Comic Con to change its name and website registrations while they appeal a trademark judgment obtained by the San Diego Comic Convention, Massey points out. So too did the Ninth Circuit temporarily stay the 2011 district court injunction ending the military's “don't ask, don't tell policy” banning openly gay service members pending appeal. “By the same token, the district court's order in this case carries national security implications,” Massey writes.
Matthew Dowd of Dowd Scheffel submitted a proposed amicus from Michel that calls Koh's injunction “extraordinary in its breadth and in its unprecedented interpretation of antitrust obligations in the FRAND and SEP setting.”
Before Koh, LG Electronics was among the amici curiae siding with the FTC. “Without the benefit of this court's injunction,” LG will have to negotiate with Qualcomm from a position of “extreme weakness,” the company argued.
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