DOJ asks appeals court to pause enforcement of Qualcomm antitrust ruling
The U.S. Justice Department on Tuesday asked a federal appeals court to temporarily halt enforcement of an antitrust ruling against Qualcomm, citing the necessity of the company in 5G networking, and support from both the Energy Department and Defense Department.
"For DoD, Qualcomm is a key player both in terms of its trusted supply chain and as a leader in innovation, and it would be impossible to replace Qualcomm's critical role in 5G technology in the short term," wrote Ellen Lord, the Under Secretary for Defense for Acquisition and Sustainment, in a filing seen by Reuters. The company was one of the first to market with a 5G modem for smartphones and tablets.
The Trump administration and others in U.S. government have strongly opposed Chinese businesses gaining dominance in the 5G space. The worry is not just economic, but that the Communist Party could push for backdoors that would enable spying and cyberwarfare. State-sponsored hackers have repeatedly probed American networks.
The antitrust case in question was brought by the Federal Trade Commission, which won an initial verdict in late May. The agency successfully argued that Qualcomm engaged in anti-competitive patent licensing, and U.S. District Judge Lucy Koh ordered the firm to license to rival chipmakers.
Qualcomm quickly launched an appeal, but has had no luck staying enforcement pending the outcome.
Apple and Qualcomm settled their own patent licensing fight in April. After the fact it was revealed that Apple had plotted a years-long scheme to reduce its royalty payments, which is likely why the case settled on the first day of trial, netting Qualcomm between $4.5 billion and $4.7 billion.
"For DoD, Qualcomm is a key player both in terms of its trusted supply chain and as a leader in innovation, and it would be impossible to replace Qualcomm's critical role in 5G technology in the short term," wrote Ellen Lord, the Under Secretary for Defense for Acquisition and Sustainment, in a filing seen by Reuters. The company was one of the first to market with a 5G modem for smartphones and tablets.
The Trump administration and others in U.S. government have strongly opposed Chinese businesses gaining dominance in the 5G space. The worry is not just economic, but that the Communist Party could push for backdoors that would enable spying and cyberwarfare. State-sponsored hackers have repeatedly probed American networks.
The antitrust case in question was brought by the Federal Trade Commission, which won an initial verdict in late May. The agency successfully argued that Qualcomm engaged in anti-competitive patent licensing, and U.S. District Judge Lucy Koh ordered the firm to license to rival chipmakers.
Qualcomm quickly launched an appeal, but has had no luck staying enforcement pending the outcome.
Apple and Qualcomm settled their own patent licensing fight in April. After the fact it was revealed that Apple had plotted a years-long scheme to reduce its royalty payments, which is likely why the case settled on the first day of trial, netting Qualcomm between $4.5 billion and $4.7 billion.
Comments
The government isn't going to let a foreign company buy Intel's IP, but Apple owning it puts us no closer to closing the 5G gap to the Chinese.
I'm trying to figure out why DOE and DoD are worried about Qualcomm having to pay the fine. I'm sure they have the money. I don't see Qualcomm going out of business so why is the US government concerned? Probably because they own too much Qualcomm stock.
All manufacturers who are producing the hardware in the near term already have license agreements - and their ability to manufacture won't be impeded by renegotiating the agreement for fairer terms as required by Koh. If anything this will mean that the companies will able to bring a cheaper product to market. Renegotiating their IP contracts would most likely be complete prior to their 5G hardware launch. (E.g. Apple) - thus there is an incentive to not delay the ruling.
Additionally those priced out of 5G for an inability to afford Qualcomm's patent portfolio are not going to be able to manufacture hardware in a soon enough window or scale to meaningfully affect 5G rollout/supply. Keeping the status-quo merely locks them out further, making the problem worse.
Let's also consider for a moment that it is Qualcomm's behaviour which has artificially constrained 5G. Holding back the enforcement would ensure that 5G is dominant in the market when negotiations occur, and thus provides Qualcomm further cache to remove the ruling under the grounds of national security.
All the DoD, DoJ, the executive office is doing is reinforcing Qualcomm’s monopoly on chips. This is like, and still is, the government requiring their IT equipment use Microsoft Office, instead of saying a compatible office suite, or better yet, as part of a government contracts, the file formats must either be open or affordably licensed. As it stands, there are exabytes of government information resident in Microsoft file formats. There is no guarantee that those files could be opened 10 years from now.
All the government needs to do is mandate that this or that hardware is compliant with their security and manufacturing guidelines, which is what is done now. If a contractor ends up doing nefarious, guess what, company executives don’t get a golden parachutes, they get jail time. If it is about private companies buying wireless equipment, the gov’t can write the rules of acquisition for this type of equipment, like mandating that this equipment is made in the USA and whatnot.
Although i think they will be late to the party, I have very little doubt that -- as they've done numerous times previously, see also USB4 -- Apple's talent will ultimately be responsible for some US-made 5G technology and/or standards. If the US is suddenly so interested in wresting leadership away from the Chinese, that's the company they ought to be supporting in that regard. I might add that this whole "crisis" is entirely self-created; the US was happy to shift manufacturing jobs and technology to China when it suited them ...
The weird thing is why does the DOJ think the ruling will harm Qualcomm enough to go away?
I doubt they will get such a severe punishment as to put them out of business. They might end up getting someone from the Govt involved like the iBooks case with Apple. Maybe go over all the FRAND agreements and see who’s getting f*cked.
If they are anticompetitive in licensing they should become competitive. It’s not like they won’t want any other kind of business they can get if their wings are clipped. If the USG doesn’t want QC licensing to the Chinese they can put an export restriction on QC’s tech.
The difficulty with the approach I outline is the difficulty of bringing the manufacture of all necessary components back to the US - I have no idea how hard that will be, but I doubt it's achievable in a short timeframe. Still, a couple of years might do it, and we don't know the planned ramp-up time for governmental agencies' adoption of 5G so it might be a viable option.
As a non-US citizen, I'm largely oblivious to other side-effects of this approach, so please chime in with relevant issues. But I think the interference of governments in the courts should be exercised only in exceptional circumstances, and from what this article lays out I don't see any reason for delaying the enforcement of the court order against Qualcomm. As others have said, QC won't be destroyed by being forced to play by the rules - and the IP is already out there, being licensed, so the security argument seems extremely suspect.
While the company has obvious selfish business reasons to do so the US government along with certain specific departments is telling the court there are security effects that should be looked at and the enforcement of Judge Koh's ruling should be delayed and the implications of her requirements be considered while the appeal of the antitrust ruling itself is being heard.
So two cases. This is the appeal of Judge Koh's denial of a temporary stay of enforcement, not the ruling itself.