Koh Is All In on Certification of Qualcomm Antitrust Class
The California district court judge found "substantial" and "compelling evidence" for certifying a class of as many as 240 million people and organizations that bought cellphones in the U.S. over the past seven years.
September 30, 2018 at 10:34 PM
4 minute read
Judge Lucy Koh does not sound at all skeptical of a consumer class seeking to recover $5 billion in antitrust damages from Qualcomm Inc.
Describing the plaintiffs' evidence variously as “substantial,” “strong” and “compelling,” Koh, of the U.S. District Court for the Northern District of California, on Thursday certified an estimated class of some 240 million individuals who've purchased cellphones at prices allegedly inflated by Qualcomm's chip licensing policies.
“Plaintiffs have proposed a valid theory and methodology for showing, based on common evidence, that Qualcomm's overcharge was passed through to all class members in the form of higher quality-adjusted prices,” Koh wrote in a 66-page order.
She also turned back Qualcomm's bid to exclude expert witness Kenneth Flamm, whose testimony Koh described as “central” to the plaintiffs' case. Flamm contends that 88 percent of every dollar overcharge to manufacturers caused by Qualcomm's alleged anticompetitive practices is passed through to consumers, leading to the plaintiffs' $4.84 billion damage estimate.
Qualcomm had argued that Flamm's model is built on unreliable data, but Koh labeled that contention irrelevant to admissibility and, in any event, “misplaced.”
“As Qualcomm acknowledges, Dr. Flamm applies his methodology to extensive transactional data supplied by actors at every step of the handset distribution chain,” Koh wrote.
She appointed Kalpana Srinivasan of Susman Godfrey and Joseph Cotchett of Cotchett, Pitre & McCarthy class counsel.
Separately, Qualcomm's bid to exclude imports of infringing Apple smartphones at the International Trade Commission was dealt a setback Friday. Administrative Law Judge Thomas Pender found that one of the five patent claims asserted by Qualcomm is infringed. But, he wrote in a brief public order, he will recommend to the commission “that the statutory public factors weigh against issuing a limited exclusion order as to products found to infringe the patents asserted in this investigation.”
Apple is represented by at the ITC by Wilmer Cutler Pickering Hale and Dorr. Qualcomm is represented there by Quinn Emanuel Urquhart & Sullivan.
The consumers brought their class action in 2017 on the heels of a Federal Trade Commission antitrust suit against Qualcomm, which also is pending before Koh. Both the consumers and the FTC allege that Qualcomm inflates prices by, among other things, refusing to supply cellphone modem chips to manufacturers who won't license Qualcomm patents that are essential to practicing wireless industry standards, a practice the consumers call “no license, no chips.” They also accuse Qualcomm of demanding license fees after their patents are exhausted by an authorized sale, and of entering into deals with Apple that until recently excluded other chip suppliers such as Intel Corp.
Qualcomm is represented by Keker, Van Nest & Peters, Cravath Swaine & Moore and Morgan Lewis & Bockius. They urged Koh not to certify what they described as “a sprawling agglomeration of indirect purchasers” that is “virtually unprecedented in size and scope.”
They also argued that the wide variety of distribution channels, price points, promotions, subsidies and payment arrangements in the smartphone ecosystem rendered the case unsuitable for class certification.
Koh's ruling was hands down for the consumers. She said plaintiffs had demonstrated that “adjudication of Qualcomm's alleged antitrust violations will overwhelmingly turn on common legal and factual issues.”
“Plaintiffs have presented copious common evidence to prove that Qualcomm engaged in three uniform practices,” she wrote, “namely, (1) Qualcomm's “no license-no chips” policy, (2) Qualcomm's refusal to license cellular SEPs to competing modem chip manufacturers, and (3) Qualcomm's exclusive dealings with Apple.”
Splitting the class into more than 100 million individual cases would not make the case more manageable, Koh wrote, nor would Qualcomm's proposal to divide it into subclasses based on brand or distribution channel.
“The court finds Qualcomm's proposal would not conserve resources because the majority of the proof does not vary by brand or distribution channel,” she wrote.
The class she certified covers “all natural persons and entities in the United States who purchased, paid for and/or provided reimbursement for some or all of the purchase price” for all UMTS, CDMA and/or LTE cellular phones since February 2011.
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