“There’s a reason the FTC was facing, as Commissioner Slaughter noted, ‘significant headwinds’ with respect to this case—that’s what happens when you’re going in the wrong direction.’” – Kristen Osenga
The Federal Trade Commission’s (FTC’s) March 26 deadline for filing a petition for writ of certiorari at the U.S. Supreme Court has come and gone, officially ending the FTC’s opportunity to appeal its loss at the Ninth Circuit in its antitrust enforcement action against semiconductor developer Qualcomm. As federal regulators move on from this final vestige of Obama-era antitrust enforcement activity against patent-related business activities, much of the intellectual property world continues to await key appointments under President Joe Biden that will reveal the tenor of the policy debate in patents and antitrust during the current administration.
On March 29, Acting FTC Chairwoman Rebecca Kelly Slaughter issued the following statement explaining the agency’s decision not to pursue an appeal to the Supreme Court:
Given the significant headwinds facing the Commission in this matter, the FTC will not petition the Supreme Court to review the decision of the Court of Appeals for the Ninth Circuit in FTC v. Qualcomm. The FTC’s staff did an exceptional job presenting the case, and I continue to believe that the district court’s conclusion that Qualcomm violated the antitrust laws was entirely correct and that the court of appeals erred in concluding otherwise. Now more than ever, the FTC and other law enforcement agencies need to boldly enforce the antitrust laws to guard against abusive behavior by dominant firms, including in high-technology markets and those that involve intellectual property. I am particularly concerned about the potential for anticompetitive or unfair behavior in the context of standard setting and the FTC will closely monitor conduct in this arena.
Some tech media outlets, believing that there are tea leaves to read in Acting Chairwoman Slaughter’s statement, have called this a “tortured” public statement indicating that the FTC gave up enforcing an issue that it should have continued pursuing. But a quick look at Slaughter’s Washington, D.C. background shows that, as former chief counsel for Sen. Chuck Schumer (D-NY) charged with leading issues related to patent trolls, Slaughter has views on patent owners asserting rights against infringers which are likely out of step with the practical realities that practitioners face in developing patent enforcement campaigns. As Acting FTC Chairwoman, Slaughter has also made recent comments to the House Antitrust Subcommittee that problematically elides the idea of standard-essential patent (SEP) enforcement with abuses of market power. Though a smaller point in her written testimony to the House Antitrust Subcommittee, she also advocated for the expansive use of Section 5 of the FTC Act, which declares unfair or deceptive practices in commerce as unlawful, to address what she sees as “market-power abuses” related to patents that cannot be addressed under the Sherman or Clayton Acts. As Acting Chairwoman, Slaughter has also begun initiatives signaling a hardline stance on enforcing against patent-related transactions in the pharmaceutical sector, despite the delicate balance in promoting innovation while encouraging generic competition wrought by the Hatch-Waxman Act.
According to The Wall Street Journal, Slaughter is in the running to be nominated as the full-time Chairwoman of the FTC, although it remains to be seen who President Biden will formally appoint to this post. Such an appointment would play a small part in cementing fears that the Biden Administration will return to the anti-patent politics that played out during the tenure of President Obama. Although the FTC’s antitrust action against Qualcomm largely played out during the Trump Administration, the suit itself was filed in the last days of the Obama Administration and arguably drew support thanks to that administration’s thematic distrust of patent owners. While the Trump Administration grabbed the reins on the FTC’s suit against Qualcomm, Trump’s Department of Justice (DOJ) also took aim at Google with a major antitrust suit filed last October, which targets not patent practices (although Google has certainly been anticompetitive in that area) but rather actual monopolistic practices surrounding the company’s smartphone and search engine activities.
Despite President Biden’s recent nomination of Tiffany Cunningham to serve on the Federal Circuit to replace Circuit Judge Evan Wallach when he retires in May, several important appointments related to patent policy remain, including Biden’s eventual pick for Director of the U.S. Patent and Trademark Office. Antitrust efforts against Big Tech stalwarts like Google, Apple, Amazon and Facebook are certain to continue, and this attempt to rein in Qualcomm’s patent practices, which many experts feel was misguided, has ended, but Slaughter’s influence at one of America’s top antitrust enforcement agencies during the early days of the Biden Administration does not set a positive tone for patent owner prospects.
Qualcomm did release a statement on the FTC’s decision to drop its antitrust enforcement efforts through the company’s General Counsel, Don Rosenberg:
We are pleased that the case is over and the Ninth Circuit Court of Appeal’s unanimous decision stands. The Ninth Circuit acknowledged our historic contributions to the industry and reminded us all that hypercompetitive behavior should be encouraged. Qualcomm got to where it is today by investing tens of billions of dollars in R&D and inventing technologies used by billions of people around the world. Now, more than ever, we must preserve the fundamental incentives to innovate and compete.
Gene Quinn, President & CEO, IPWatchdog
“My first thought on the FTC’s decision not to appeal the Ninth Circuit’s ruling is: GOOD! They had to know that they would not be able to prevail at the Supreme Court had they moved forward and the Court decided to take the case. For the FTC to prevail, the Supreme Court would have had to overrule previous antitrust rulings and fundamentally shift antitrust law to affirmatively require companies to deal with competitors. An affirmative duty to deal with competitors is a bridge too far for antitrust law, and something unsupported by prior Supreme Court antitrust rulings as most eloquently explained by Judge Douglas Ginsberg in his writings. Generally speaking, antitrust law generally requires fairness in the marketplace, but that wasn’t what the FTC was seeking. Further, there was no way that an order to renegotiate every contract Qualcomm had entered into for the previous seven years could stand. The remedies were punitive.
“The politics underlying the case also would not have played well in the Supreme Court. Whether people like it or not, this Supreme Court is a political branch of government and watches closely the political winds. It is impossible to fathom that the Court would fundamentally change antitrust law as Judge Koh did in a political prosecution by an evenly split FTC on the eve of a Trump Administration at the behest of Apple, a strong Obama era supporter.”
James Edwards, Executive Director, Conservatives for Property Rights
“The FTC case was suspect from the start. Its naked political motivation was always clear, and Commissioner [Maureen] Ohlhausen’s dissent has stuck to this case, exposing the flaws underlying the move. The decision not to appeal to the Supreme Court is the first rational thing the agency has done in this ill-founded case. Hopefully, the FTC will take stock of how it went astray, with respect both to appropriate exercise of patent exclusivity and to antitrust’s limits where IP is concerned, and never repeat this sort of bogus litigation.”
“Qualcomm was never in violation of antitrust and was always well within its rights regarding intellectual property. This is the cherry on top of that truth. When other departments of the federal government go on record against the FTC’s malicious lawsuit, when national security and industrial competitiveness hang in the balance because of antitrust activism, when the former chief judge of the Federal Circuit and a former Federal Trade Commissioner weigh in opposing the FTC, when the agency cynically resorts to calling a witness from the Chinese chief challenger for foundational 5G technology leadership, when the appeals court gives the case de novo review because the agency and the trial judge so botched the law and the facts, there’s little left for the FTC to stand on.
“Here’s hoping that this unfortunate windmill tilting exercise will lead the FTC to take to heart what the Ninth Circuit instructed. Dynamic competition from the exercise of IP exclusivity — even when SEPs are involved — foster competition, benefit consumers, lay the foundation of new markets, and give implementers and others to enter the market and to innovate on that IP-provided foundation.
“The FTC should reassess with an honest eye and an open mind.”
Kristen Osenga, Austin E. Owen Research Scholar & Professor of Law, University of Richmond School of Law
“I am delighted that the FTC decided not to petition for review at the Supreme Court – this is a good outcome not just for Qualcomm, but other innovative companies and innovation itself. That said, I thought the statement of Acting Chairwoman Slaughter was highly concerning. First, dominant firms that achieve that status through innovation and business acumen should definitely not be the target of bold antitrust enforcement; these firms are doing exactly what we want from them. Second, and something that had been resolved decades ago – antitrust and intellectual property are not foes. Simply enforcing a company’s intellectual property does not equate to abusive behavior. Third, participating in standards development — just like owning intellectual property — does not automatically confer market power. Recent scholarly work by legal experts and economists has demonstrated that standard essential patents, particularly in high-tech industries like cellphones, are not being used anti-competitively. There’s a reason the FTC was facing, as Commissioner Slaughter noted, ‘significant headwinds’ with respect to this case – that’s what happens when you’re going in the wrong direction.”
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