Qualcomm SVP of Product Management Raj Talluri speaking at CES 2017 earlier this month. Image source: Qualcomm.
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A little over a week after the U.S. Federal Trade Commission lodged an antitrust complaint against Qualcomm (NASDAQ: QCOM), the likelihood of the mobile chip giant facing harsh regulatory backlash just got a little smaller.
President Trump has just appointed Republican FTC Commissioner Maureen Ohlhausen as acting chairwoman of the FTC. While some of Trump's nominees for other positions have been controversial due to potentially unqualified candidates, Ohlhausen has extensive experience. Ohlhausen has been a commissioner since 2012, and previously served in other roles at the agency for 11 years. The appointment comes as outgoing Democratic Chairwoman Edith Ramirez is set to resign in a few weeks on Feb. 10.
Following Ramirez's resignation, there will be three remaining seats to be filled. Two are expected to go to Republicans and the other to a Democrat. This is an important development for Qualcomm specifically because Ohlhausen was the dissenting opinion in the FTC's suit against the company. Now that Ohlhausen has been promoted to chairwoman, it seems increasingly likely that Qualcomm will be able to settle the complaint expeditiously and likely at minimal cost. The Trump FTC may also simply withdraw the complaint. The same can't be said for the other lawsuit that Qualcomm is facing.
A powerful ally
In her dissenting opinion, Ohlhausen largely sided with Qualcomm.
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Importantly, there is no suggestion that Qualcomm charges higher royalties to [original equipment manufacturers] that buy non-Qualcomm chipsets. Hence, the complaint's taxation theory requires that Qualcomm charge OEMs unreasonably high royalties.
Rather than allege that Qualcomm charges above-[fair, reasonable, and non-discriminatory] royalties, the complaint dances around that essential element. It alleges that Qualcomm's practices disrupt license challenges and bargaining in the shadow of law, and that the ensuing royalties are "elevated." But the complaint fails to allege that Qualcomm charges more than a reasonable royalty.
Given that stance, Qualcomm is likely cheering at Ohlhausen's appointment right about now.
That's what she said
Like most Republicans, Ohlhausen believes in lighter regulations. "Finally, I will ensure the Commission minimizes the burdens on legitimate business as we carry out this vital work," Ohlhausen said in a statement.
Two days ago, Ohlhausen delivered a speech at the Heritage Foundation laying out how the new administration would approach antitrust issues. There are some pertinent parts regarding intellectual property and patent suits. Some of this is regarding patent-assertion entities (PAEs), which is the technical euphemism for patent trolls. While Qualcomm certainly doesn't qualify as a PAE since it has a large chip business in addition to its licensing business, there are still parts of her speech that may be rather relevant to Qualcomm:
I consider it an important achievement that, under a Democratic administration, the revised IP Licensing guidelines lacked any reference to standard-essential patents, limits on the pursuit of injunctive relief, and PAEs. Their omission is notable when contrasted with recent (and regrettable) antitrust interventions on SEPs and patent remedies.
So, too, I embrace the IP Guidelines' recognition that the "antitrust laws generally do not impose liability upon a firm for a unilateral refusal to assist its competitors, in part because doing so may undermine incentives for investment and innovation."
Ohlhausen also laid out a few other guiding principles:
I worry that the FTC imposes unnecessary and disproportionate costs on business. The most obvious examples occur when the Commission wrongly sues a firm to potentially devastating effect.
Next, I want to address a tendency of the Obama-era Commission to discount the value of intellectual-property rights. I have written at length -- most recently in the Harvard Journal of Law & Technology --that respecting patents is indispensable to an innovative economy. America produces more technological innovation than any other country on earth -- reality that reflects, in part, inventors' rights under U.S. law.
And yet the FTC sees a competition problem when owners of standard- essential patents ask a court to enjoin unlicensed infringers. In doing so, the Commission wrongly heeded calls by technology users that want to pay the smallest possible royalties for their inputs.
She then addressed the Qualcomm case directly:
Those unfortunate events preceded the FTC's decision last week to sue Qualcomm. No doubt, we'll spend some time today discussing that case. As many of you know, I took the unusual step of writing a dissent to accompany a vote to authorize a complaint. Suffice it to say that I hope that the Commission under the Trump administration will act to protect IP rights.
So yeah, Qualcomm investors probably don't have to worry all that much about the FTC's suit anymore.
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