Chertoff Op-Ed on FTC v. Qualcomm Misrepresents the National Security Threat

By Gene Quinn
December 16, 2019

“Chertoff concludes that ‘the U.S. should let competition drive innovation rather than support exclusive national champions.’ He is absolutely correct, but the way to do that is to promote innovation, respect the exclusive nature of patent rights, and accurately and fairly apply antitrust laws.”

https://depositphotos.com/4427649/stock-photo-elephants-holding-green-apple-isolated.htmlOn November 25, former Director of Homeland Security Michael Chertoff wrote an opinion piece in the Wall Street Journal that chastised the Department of Energy for filing an amicus brief on behalf of Qualcomm in a case that can only be properly described as the ongoing persecution of Qualcomm at the hands of the Federal Trade Commission (FTC). What Chertoff fails to state, however, is that not only has the Department of Energy come out in support of Qualcomm, but so too has the Department of Justice, as well as many others, including former Federal Circuit Chief Judge Paul Michel.  Chertoff also conveniently fails to mention the genesis of the Qualcomm case; namely that it was filed by the FTC several days prior to the end of the Obama Administration at the behest of Apple.

Apples to Elephants

Chertoff is upset by the government support of Qualcomm because of what he calls a “monoculture risk,” which he likens to when farmers plan only one variety of a crop, leading to devastation when the crop fails. The problem with Chertoff’s example is it bears no relationship to the world of intellectual property, or the actual dispute between the FTC and Qualcomm. Crops are tangible products that can exist in only so much quantity because of a finite resource, namely the land on which to grow them. Intellectual property exists to protect creations of the mind and no such scarcity exists. With a proper climate and fostering ecosystem any individual, or company, can create. Simply put, Chertoff’s seemingly high-minded analogy is comparing apples to elephants: two things that are wholly unrelated.

Chertoff explains: “American reliance on a single chip provider creates an inviting target for adversaries, who would need to find and exploit only one vulnerability to execute a destructive cyberattack.”

That may well be true, but why this problem has anything to do with the case between the FTC and Qualcomm is not explained by Chertoff, although he certainly leaves the uninformed reader to believe there is an undisputed, direct connection between the two. And if we are to take Chertoff’s critique seriously, he must be suggesting the need for more competition, not less competition. Yet he offers no insight into how or why the possible elimination of the single American chip provider from the marketplace will create greater national security.

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The Consequences of Discouraging Innovation

Nothing the FTC is demanding from Qualcomm will make it more likely that any other U.S. company engages in the expensive, time-consuming research and development necessary to innovate. Quite to the contrary in fact. The remedy facing Qualcomm if the district court decision is not overruled is that they must license their technology to competitors, which will in essence create a free rider problem. Qualcomm competitors will be able to cease innovating themselves and can get access to Qualcomm technology. Why would they innovate?

What the remedy the FTC achieved in the district court will do is make it more difficult for Qualcomm to succeed. Qualcomm now faces what is essentially a compulsory license—an order to license competitors. There is no possibility that such licenses will achieve a fair market value, and the economic prospects for Qualcomm will decrease, which will bring down with it the ability to invest in future research and development.

This is the problem that former UK prime minister Margaret Thatcher characterized so well when describing socialism: At some point you run out of other people’s money. The same is also true with innovation. When you enable a culture of free riders who take with impunity, or as here are able to demand compulsory licenses, at some point you run out of other people’s innovation to take because it is no longer economically feasible for them to innovate in the first place.

The Real and Present Danger

The real problem Mr. Chertoff should be concerned with is the failure of Qualcomm because they are the only U.S. company engaging in research and development in the platform that will become the future of the telecommunications industry for the next generation. If Qualcomm does not succeed, not only will its competitors not have anything to take, but Huawei may well dominate the future of telecommunications. If we are to believe what we are told by the government, Huawei has exceptionally close ties with the Chinese government (to be polite), and if they were to dominate telecommunications technologies in the years to come that would pose a real and present national security threat.

Chertoff concludes that “the U.S. should let competition drive innovation rather than support exclusive national champions.” He is absolutely correct, but the way to do that is to promote innovation, respect the exclusive nature of patent rights, and accurately and fairly apply antitrust laws. The real national security issue here is not the U.S. government pointing out that Judge Koh fundamentally misapplied U.S. antitrust law and laid waste to the fabric of U.S. patent law.

The real national security issue is a fundamental failure of the United States patent system to encourage innovation and prevent free riders. Sadly, that failure coupled with the political connections of Qualcomm’s competitors during the Obama years, has led to misapplication of competition policy for the short-term benefit of profits of Qualcomm’s domestic competitors and the long-term benefit of foreign competitors.

A position that makes it more difficult for America’s “single chip provider” to succeed and easier for the Chinese competition to succeed demonstrates extraordinarily naïveté when one professes concern for national security.

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The Author

Gene Quinn

Gene Quinn is a Patent Attorney and Editor and President & CEO ofIPWatchdog, Inc.. Gene founded IPWatchdog.com in 1999. Gene is also a principal lecturer in the PLI Patent Bar Review Course and Of Counsel to the law firm of Berenato & White, LLC. Gene’s specialty is in the area of strategic patent consulting, patent application drafting and patent prosecution. He consults with attorneys facing peculiar procedural issues at the Patent Office, advises investors and executives on patent law changes and pending litigation matters, and works with start-up businesses throughout the United States and around the world, primarily dealing with software and computer related innovations. is admitted to practice law in New Hampshire, is a Registered Patent Attorney and is also admitted to practice before the United States Court of Appeals for the Federal Circuit. CLICK HERE to send Gene a message.

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

Discuss this

There are currently 19 Comments comments. Join the discussion.

  1. angry dude December 16, 2019 2:16 pm

    Chertoff’s grand(grand?)children (if he has any) will have to take mandatory Chinese lessons and will be periodically disciplined with a whip by their Chinese School Master for their lack of enthusiasm learning Chinese

    Don’t want to rely on single US company with exclusive patent rights to the unique technology they developed in US ?

    You will rely on China then – for your kids education too

    A country of idiots in high offices … corrupt idiots which makes it even worse

  2. Jacek the "troll" December 17, 2019 2:51 pm

    The sun is green. This self-evident truth is ignored by righteous defendants of the status quo. What about a straitjacket?

  3. Veteran of the Cellular Wars December 17, 2019 5:06 pm

    It is unfortunate those who do not know the facts continue to write articles in favor of the status quo. Let the FTC prove its case (or not) without Qualcomm’s labbying machine getting third parties to weigh in. The DOJ – please – Makan Delrahim represented Qualcomm before in competition matters and will work with them again when out of office. Look at the areas where wireless is not being deployed because of current dominance by Q and then write an article.

  4. angry dude December 18, 2019 6:53 am

    Veteran of the Cellular Wars @3

    Dude,

    If by “dominance” you mean strong patent position – then that’s how it should work – designed like that by the Founding Fathers and for a very good reason: patent is exclusive right – The Right to Exclude Others. Period.

    If “dominance” is coming simply from enormous monopolistic market power and political connections then anti-trust laws should be applied and those corporations should be broken up into pieces – much like they did it to Standard Oil a century ago and to AT&T more recently

    Break them up (but probably not Quallcomm) – Apple, Google, Amazon and the rest of SV looters of the US Patent System

    I suggest you shut up and study patent laws before writing your garbage opinion here

  5. Jacek the "troll" December 18, 2019 12:24 pm

    Mr. Veteran. What about your Spine? is it still there? Certainly, this is not something easy to wear. Big obstacle when we bend ourselves upfront of mighty $. Reason and truth is only one. It doesn’t come in shades of grey.

  6. angry dude December 18, 2019 5:01 pm

    Jacek the “troll” @5

    That “veteran” apparently has no shame using the word “veteran”

    He’s probably some corporate lawyer or exec who collected $$$$$$$$ due to patents his corporation willfully stole from small (and not so small in case of Quallcomm) entities all the while completely destroying US Patent System for the benefit of China and the rest of the world, while the real veterans were risking and losing their lives to protect this country

  7. George December 19, 2019 3:26 am

    I know this is slightly (or totally) off-topic here, but does anyone know HOW & WHY Theranos and Elizabeth Holmes got so many patents allowed (> 130?) in so few years (130 patent applications. My guess is not many (since they don’t seem to have required many RCE’s or CIP’s).

    What do you guys/gals think about this? Think the Theranos patent examinations were all on the up&up or that maybe there was something fishy going on there? I think I smell fish that’s seen better days (like maybe 50 years ago)!

  8. George December 19, 2019 3:31 am

    Are comments ‘auto-edited’ somehow? I know I wrote more sentences and paragraphs than what I see. If so, it kind of messed things up. Is there a character limit now?

  9. George December 19, 2019 3:54 am

    Except on the flip side – for the very same reasons – the FTC and U.S. government and the military will never let Qualcomm go out of business (or be ‘forced’ out of business, especially by the Chinese). What they may force them to do is just share more, or at least threaten others less. That may be a fair balance between monopoly patent rights and our anti-trust laws. Yeah, anti-trust laws when applied to patents can be a bitch, but they DO (usually) encourage competition and innovation, rather than stifle it. That’s why they were enacted in the first place. Unless Qualcomm were to ask for exorbitant license fees, they would probably be allowed to charge whatever is considered ‘historically reasonable’ for such IP. Sorry, I find it hard to feel sorry for any company that makes billions of dollars more than they had to invest! Only WISH I had problems like that!!! Most other inventors do too! Not sure about patent attorneys though. The more conflicts and controversies the more money they make! They win no matter what.

    P.S. Are you also saying Qualcomm has never stolen any IP from others? Ever? That would be amazing and they should get a medal for ethics, if true!

  10. Eileen McDermott December 19, 2019 8:06 am

    Hi George – comments are not auto-edited to my knowledge, but they sometimes require approval before they post – it may just be that your reply was pending?

  11. angry dude December 19, 2019 10:56 am

    George@9

    Dude,

    Patent rights are prescribed in the US Constitution and they refer to individuals not corporations
    Patents are NOT monopolies
    They are strictly negative rights
    The Right to Exclude Others
    They were created like that by the Founding Fathers and for a very good reason
    Patent rights have nothing to do with investment of money in the first place
    I suggest you educate yourself before posting nonsense here

  12. George December 19, 2019 3:18 pm

    @ Angry Dude (11)

    First, get some help for those anger issues. Patents do not give you the right to impose your own ‘injunctions’ against use of what YOU consider to be your invention (that requires an order from a court, which is super-hard to get). You do have a right to get fair compensation for all uses of your invention though (and that’s not hard to get if you have a valid patent and can prove it’s been infringed). And, the whole point of patents is to be able to recoup your costs and investment of time – at a minimum – together with getting an additional reward on the financial and professional(/reputational) RISKS any inventor takes when proposing and pursuing new ideas (something rarely discussed). And, obviously, inventions can go nowhere commercially without substantial financial investments or support from some source or sources, usually called investors today but in the past sometimes called benefactors.

    Patents established a clearly defined ‘social contract’, which unfortunately has now become muddied by an increasingly subjective and inconsistent patent system. We need an objective one again (which was almost trivial in the beginning). Therefore, in order to bring that clarity back (something that in the beginning could be done with just common sense), I am a strong proponent of the use of AI to settle most if not all IP issues (without needing a boatload of money). Only computers can provide the consistency and freedom from (emotionally driven) bias that plagues our current system. Computers will also allow deciding all IP matters in ‘minutes’ – not years – including considering ALL known prior art, not just prior patents! Talk about a ‘gold standard’ of examination! Humans could never even come close to doing this, if they had 1000 years to do it! With such a system, ‘valid’ patents could be issued within days, disputes could be settled in days, and patents could become cheap (if not free) to get AND DEFEND, and no more need for ‘maintenance fees’ either! IP would then become truly egalitarian, as it was originally intended to be (since the Founders never talked about or envisioned the need for lots of money to get IP rights). As I often say, when a homeless person can get a patent in the U.S. and also effectively defend it, then I’ll be happy!

    Second, I’m NOT ‘dude’ to you! You’re not one of my friends! Let”s maintain just a little respect here, OK?

    By the way, are you even an attorney? Sure doesn’t sound like you know what YOU are talking about. I work with patents and their prosecution every day. I also study patent history and its economic effects.

  13. George December 19, 2019 3:43 pm

    Let me try re-posting comment #7 again. It seems to have been automatically(?) truncated for some reason (since no time elapsed after posting). Anyway, have also shortened it.

    —————————————————————–

    I know this is slightly (or totally) off-topic here, but does anyone know HOW & WHY Theranos and Elizabeth Holmes got so many patents allowed (> 130?) in so few years (< 5) and why it seems NONE were ever rejected (but correct me if I am wrong there)? More specifically, should the FBI maybe take a lot into this 'always fortuitous' outcome for Theranos' applications? Were they just 'rubber stamped'?! Was it the makeup of their board of directors (maybe) or their market value at the time? Are those valid Examiner and Supervisor considerations now? Do those things trump the statutes now? Do they count as 'secondary considerations' that automatically override primary ones?

    As I said, maybe someone at the JD or FBI needs to take a closer look at the case of Theranos & Holmes, as in examining the file wrappers for those 'groundbreaking' inventions and see how many 103 objections were raised on them. My guess is not many (since it doesn't seem they had to file many RCE's or CIP's).

    What do you guys/gals think about this? Think the Theranos patent examinations were all on the up&up or that maybe there was something fishy going on there? I think I smell fish that's seen better days (like maybe 50 years ago)!

  14. angry dude December 19, 2019 6:13 pm

    @George

    Dude,

    I have BS, MS, MA and PhD degrees (all in engineering and hard sciences) from the best universities on this f$%^&*g planet (in Russia and in USA)
    I am not an attorney (although I know much more about patent “law” than most “attorneys” in this blog) and I have absolutely no respect for you and your kind of folks. Period.

    I am angry as hell because I filed my patent application back in 2002 and it was published for everyone in the world to see in 2004, and issued in 2006 just a few months after Ebay was decided…

    I consider myself cheated out of my lifetime’s work by the corrupt US government because I could very well keep my invention a trade secret for quite a while.

    What I have accomplished is incomprehensible to you (for lack of basic math and engineering education) but it is “Mona Lisa” to me (and to well educated folks at Apple, Google, Amazon and the rest of SV looters and pirates)

    Now get lost

  15. George December 19, 2019 11:37 pm

    @ Angry Dude (14)

    “I consider myself cheated out of my lifetime’s work by the corrupt US government because I could very well keep my invention a trade secret for quite a while. What I have accomplished is incomprehensible to you (for lack of basic math and engineering education) but it is “Mona Lisa” to me (and to well educated folks at Apple, Google, Amazon and the rest of SV looters and pirates). Now get lost.”

    Well, THAT kind of explains some things, doesn’t it?!
    —————————————————————————————————–

    “What I have accomplished is incomprehensible to you”

    I doubt it! I’m a mathematician, physicist, computer scientist and inventor, so I can feel your pain, but that doesn’t excuse your total lack of respect for others and their views or your inability to have a civil debate. If you can’t do that you can’t convince anyone of anything, much less a patent examiner or a court.

    As to having to give away your ‘magnificent and unique’ work of conceptual ‘art’, hopefully someone advised you that you DIDN’T HAVE TO do that! If you’d have been satisfied with just getting a domestic patent, rather than one or more international ones (which you probably couldn’t have afforded to get anyway), you wouldn’t have had to ‘publicly’ disclose your invention. All you would’ve had to do is indicate on your application that you wanted to exercise the right of ‘non-publication’ (which the supporters of the AIA and Europeans wanted to get rid of too). Then your disclosure would have remained secret until and unless you actually were awarded a patent on it (as it should always be by default, and I think used to be that way). Also, had you gotten that U.S. (only) patent, it would have offered you the same protection against those same companies you mentioned (and hate), because they are all American companies! Your (measly) U.S. patent would then have offered you gold-plated protection in the U.S., which is what licensees really want (if it’s bullet-proof and applicable).

    Anyway, since that’s water over the dam now, and it’s out there now, what was this groundbreaking invention that you speak of? Where can your application(s) be found? Have a number? Very curious as to why you either did get screwed, or just ‘think’ you got screwed by the system. Both are possible by the way, so not saying you don’t have anything to legitimately complain about. Also, did you pursue this using a patent attorney or on your own? That could have made a big difference too.

    Finally I’m on the side of providing equitable IP protections for all Americans (and even non-Americans). I’m on the side of the little guy, over the big guys, always (not that they are ALL bad or evil). Sometimes inventors just expect too much from this patent system that we are now stuck with (I know I do, all the time).

    Hopefully those in power (specifically our technically/scientifically illiterate Congress) will finally remember what the Constitution intended and figure out how to transform this completely dysfunctional mess we now have, into something that doesn’t require 1000’s of pages of rules and then exceptions to those rules (much less years of study to just ‘try’ to understand).

    I’d like nothing more than to see patent laws reduced to a single laminated sheet of rules, that computers could understand and execute – to perfection – every time (or at least most of the time). That’s the future of patent law that I imagine and will be working towards. I am confident it can be done, if there is the will to do it. Things don’t have to be so complicated that no one really understands anything anymore including the same lawyers & judges that created this mess (it sure as hell wasn’t inventors or investors!!!).

    Simplicity, consistency and fairness should be our ultimate goal, as it was 200 years ago (with ‘letters patents’). We just need to get back to that to see America become #1 again in innovation & invention, a pursuit that USED TO offer every American with at least a decent chance of moving from poverty to wealth (or at least a middle class existence). What happened to that excellent idea the Founders had (along with many others) and why have we forgotten it now?

  16. angry dude December 20, 2019 9:52 am

    George@17

    Dude,

    You really sound like a little kid living in imaginary world

    Have you ever tried not just to get your patent issued by the USPTO but to enforce your patent against some well-funded SV corporation ??
    Try it once and you’ll be just as angry and frustrated (and broke)

  17. Anon December 20, 2019 11:24 am

    George,

    Like an empty wagon clattering along an uneven sidewalk, angry dude “lives” in his emotion to the point that reason is totally eclipsed.

    So much so that he does not even appear to realize just how much a t001 of the Efficient Infringers he often is with his mantra of “just quit.”

    There is certainly a difference between having been wronged and then using that animus to be a positive factor for change and having been wronged and then being so consumed that lashing out regardless of effect is all that one is left with.

  18. angry dude December 20, 2019 1:15 pm

    Anon@17

    Maybe it’s not just me “having been wronged” and wiped out, but the entire generation of inventors in this country who filed their patents before Ebay (before AIA or Alice for some)
    Feel the pain… but you can’t… cause you are a lawyer – lawyers always make money (until there is no money left in US patents which is about to happen)

  19. Anon December 20, 2019 1:55 pm

    ac,

    You absolutely missed the point there and it matters not at all to the subsequent actions that you choose that any number of others have been effected.

    Let me remind you again: there is nothing wrong with having emotion. There is everything wrong in letting emotion overcome reason.

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