Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Following FTC filing against Qualcomm, consumers file class action, (Jan 20, 2017)

By Jody Coultas, J.D.

Purchasers of cellular telephones and other cellular devices have filed suit against Qualcomm Incorporated for its allegedly anticompetitive conduct in acquiring and maintaining its monopoly over the modem chipset market, in abusing the intellectual property rights underlying the technology, and in charging an excessive and unlawful royalty on devices incorporating such patents. The illegal conduct allegedly forced the class members to pay inflated prices for the devices at issue (Bornstein v. Qualcomm Inc., filed on January 18, 2017).

Qualcomm was one of the earliest developers of cellular technology, developing the technology underlying the Code Division Multiple Access (CDMA) standard on which network carriers such as Verizon and Sprint relied. It is the dominant producer of CDMA chipsets and holds the largest number of standard essential patents for CDMA technology. Having agreed to license its technology on fair, reasonable, and nondiscriminatory (FRAND) terms, Qualcomm’s technology has been incorporated into virtually every relevant cellular standard in the last several years.

The purchasers allege that Qualcomm has not adhered to its FRAND promises, and took advantage of standard-setting process to acquire and maintain monopoly control of the modem chipset market. Beginning at least as early as 2008, Qualcomm, among other things, (1) refused to license, or alternatively imposed onerous restrictions on licenses of, its SEPs to competing chipset makers; (2) conditioned the supply of its CDMA chipsets on agreeing to Qualcomm’s license agreements for its entire patent portfolio; (3) entered into exclusive deals with certain cellular phone manufacturers, such as Apple, Inc. ("Apple"); and (4) most onerously, ignored the requirements of SSOs to license its SEPs to patent users FRAND terms to extract unreasonably high, unilaterally determined royalty payments.

The class argues that they were forced to pay supracompetitive prices for the telephones they purchased. The complaint in Bornstein v. Qualcomm Incorporated was filed in the federal district court in San Jose, California. The class is seeking damages, a permanent injunction, restitution, pre- and post-judgment interest, attorney fees and costs, a jury trial, and any other just relief.

The suit follows a similar complaint filed January 17 by the FTC in the same court against Qualcomm for unlawfully maintained its monopoly. The agency said in a statement that the company’s sales and licensing practices hamper Qualcomm’s competitors and threaten innovation in mobile communications. The agency is seeking an injunction against Qualcomm "to undo and prevent its unfair methods of competition in or affecting commerce."

This is Case No. 5:17-cv-00234-NC.

Attorneys: Michael D. Hausfeld, Michael P. Lehmann, Bruce J. Wecker, Christopher L. Lebsock, Samantha J. Stein (Hausfeld LLP), Lee Albert, Gregory B. Linkh, and Brian P. Murray (Glancy Prongay & Murray LLP), Michael A. Rose, Frank R. Schirripa, and Daniel B. Rehns (Hach Rose Schirripa & Cheverie LLP), Lesley E. Weaver (Bleichmar Fonti & Auld LLP), and Paul C. Whalen (Law Office of Paul C. Whalen, P.C.).

Companies: Qualcomm Inc.

News: Antitrust CaliforniaNews