European policies for competition and growth in ICT through regulation of Big Tech, network operators and standard-essential technology licensing

 Big Tech companies have profited greatly from dominant market positions while riding largely for free over the top of fixed and mobile telecom networks and devices. The entire Information and Communications Technologies (ICT) ecosystem is enabled by a variety of interoperability technologies including 5G cellular, WiFi and HEVC/H.265 video compression that are openly available in published standards and embedded in components and end-products. How much, if anything, should beneficiaries pay for the capabilities upon which their standard-based implementations are built?

There are great expectations that technology and market developments will provide yet more stellar economic growth and improved consumer welfare in ICT with new innovations in Artificial Intelligence (AI), the metaverse (e.g. Augmented Reality (AR) and Virtual Reality (VR)) and the Internet of Things (IoT). This is a high stakes game with some players having fared rather better than others as computing, communications, applications and Internet-based services have advanced over the last couple of decades. Big Tech companies continue growing handsomely to command a large and ever-increasing proportion of total ecosystem revenues, as I have noted here before.

European policies to regulate ICT markets in various ways that will redistribute rewards and costs are being formulated following various public consultations and extensive lobbying. Regulation is unquestionably required in data protection, child protection and cyber security, as it is in health and safety.  Measures to preserve national security are also required, but excessive restrictions there can be a dubious pretext for over-reach with anti-competitive protectionism. Regulating competition in other ways is also questionable and should only be contemplated where there is clear evidence of market failure or harm to consumers. Reformers should also tread carefully to ensure that remedies don’t do more harm than good through unintended consequences.

Three proposed interventions to guide the invisible hand

In unregulated or lightly regulated markets, competition and growth can develop most dynamically among different players, technologies and business models. Nevertheless, significant interventions are being pursued in ICT where there have been many successes with enormous and widespread market growth and benefit to consumers. A firm’s market dominance, abnormally high growth and profits might or might not result from anticompetitive abuse. Making a determination on that — one way or the other — requires extensive investigations and ties up lots of limited public agency resources. We should be wary of those accused of such abuse when they seek to distract regulators from that contention by claiming it is those in other markets who are causing market failure or harm to competition.

Two major EU interventions have been conceived to reign-in the dominance of Big Tech companies over others with whom they compete or depend.  A third intervention—with the pretext of protecting Small and Medium-sized Enterprises (SMEs) from abusive patent licensing—will perversely have the opposite effect.  It bolsters Big Tech and major industrial firms such as car manufacturers against the major value generators in the ICT ecosystem that create the standardized technologies that everyone benefits from using. 

Gatekeepers and other Core Platform Service competitors

America’s Big Tech companies—Alphabet, Amazon, Apple, Meta and Microsoft—are deemed to be so big and powerful that they have been identified as “gatekeepers” by  the European Commission under its Digital Markets Act, as has China’s ByteDance. Gatekeeper designations reflect positions in search, browsers, operating systems and video sharing among other Core Platform Services.  The success of these companies is illustrated by those American companies’ combined market value increasing by a half to $9 trillion this year. Prospective regulation could limit the extent to which they own and how they offer and operate complementary services, such as in bundling. Similarly, in the US, Alphabet is being sued by the Department of Justice for abusing its dominant position in search to distort the market, for example, by making Google the default on most smartphones and browsers.

It remains to be seen whether regulating gatekeepers will foster more competition, innovation or economic value overall versus other Core Platform Service providers. Figuring out what kinds of structures and behaviors are anti-competitive is difficult in markets where prices are zero for consumers who pay in-kind by being targeted for advertising and who like the simplicity of bundled and integrated offerings.  What’s not to like about also getting free deliveries when one subscribes to Amazon Prime Video? A recent article in the Economist heralds Garmin in fitness trackers, Dropbox in cloud storage and Mercado-Libre in Latin American e-commerce  as examples of companies that have succeeded in growing revenues in competition with the Big Tech firms. Market failure and harm is difficult to prove because counterfactuals—in the but for world— cannot be observed.  Attempts to block acquisitions by Big Tech companies, manipulate their offerings or even break them up will surely be met with extensive and vigorous legal challenges.

Network cost sharing

Telco industry groups GSMA and European Telecommunications Network Operators’ Association (ETNO) have demanded that companies such as those above they depict as Large Traffic Generators (LTGs), and that are sometimes called Large Traffic Originators (LTOs), should pay their “fair share” of the costs to provide broadband Internet access. The sender-pays principle is based on a long-standing grievance of large telecom operators that Big Tech companies generate the majority of traffic and reap most of the benefits of the Internet economy while not chipping in with the costs.  The European Parliament concurred in a June 2023 resolution:

“that the economic sustainability of telecom networks is essential to achieving the 2030 Digital Compass connectivity targets and high-performance connectivity for all citizens within the EU without jeopardizing competition rules; urges the commission to address and mitigate persistent asymmetries in bargaining power as set out by the European Declaration on Digital Rights and Principles for the Digital Decade; calls for the establishment of a policy framework where large traffic generators contribute fairly to the adequate funding of telecom networks without prejudice to net neutrality.”

Most network traffic is video and this proportion continues to increase. Alphabet’s YouTube, Amazon’s Prime Video and ByteDance’s TikTok among others are evidently major originators of network traffic. 

There is a clear need to keep increasing network capacity to accommodate data traffic growth. According Ericsson’s Mobility Reports, mobile network traffic has doubled every couple of years over the last decade or so. Fixed network traffic has also surged in multiples over recent years. A WIK-Consult study for the Commission found that €174-200 billion is needed to achieve Europe’s 2030 Connectivity Targets, including 5G coverage of all populated areas and gigabit-speed fiber.  As reported by Compass Lexecon, ETNO estimates previous investments of €36-40 billion per year, of which roughly half are traffic related and could have been saved absent the largest content providers’ traffic. According to HSBC, the average return on invested capital for major listed European telcos fell from around 8% in 2012 to around 5% in 2020, with many not achieving their cost of capital. 

There is disagreement about those investment figures. Opposing interests argue that the correct figures show there is no investment gap, and so subsidization by tech would result in excess profits for big telcos. However, the validity of the sub-par return on invested capital figure above does not appear to have been challenged. Big Tech companies have much higher rates of return.

A Compass Lexecon research paper concludes there is market failure. Its economic analysis shows that, where data usage is unlimited for a fixed price per month, there will be under-investment in access networks. Network operators do not have the incentive to maximize investment where incremental traffic generates no additional revenue. While LTOs invest in infrastructure such as content delivery networks, they have no incentive to increase their own costs by investing in access networks to the benefit their direct competitors. Perversely, Europe’s Open Internet Regulation (i.e. net neutrality requirements) only exacerbates this shortcoming because it prohibits allowing a traffic generator to make payments to prioritize or improve its services versus competitors’.  

Incremental capacity investments need to generate incremental revenues to provide a return on such investments. There is a very clear and direct causal relationship between the amount of traffic generated and the network capacity required to carry it. For example, 1 Gbps connections that can reliably carry 1 Tbytes per month will be required as video streaming almost entirely displaces multichannel terrestrial, satellite and cable distribution, eventually. The Big Tech firms can afford to contribute because they derive incremental revenues as the traffic they originate (e.g. as requested by customers) or generate themselves (e.g. advertising) increases.  If charges on them are even-handed versus their direct competitors they will all benefit, as will end users and the network operators. There is precedent elsewhere for cost sharing. In Korea, SKBroadband and SKTelecom have ended their dispute with Netflix and instead forged a partnership in which Netflix service is purchased in a subscription that presumably enables some of the network operator’s costs to be covered. 

Transparency and predictability in SEP licensing

While the Commission’s own studies have found no market failure in Standard-Essential Patent (SEP) licensing, proposed legislation requires licensors to register their patents and have some of them checked for essentiality. Proposals also include the setting of aggregate royalties, and mandatory but non-binding conciliation in the determination of Fair, Reasonable and Non-Discriminatory (FRAND) royalty rates.

Purported objectives for “improving the SEP licensing system” include providing transparency and predictability—for example, to SMEs with little or no expertise in licensing. However, licensors claim the associated costs and delays will weaken their positions and devalue their SEPs. 

Some MNOs lobbied to lower royalties as handset costs increased with the introduction of 3G and then 4G in the 2000s. Mobile phones were significantly morphing from mere voice and text devices to smartphones back then. Today’s Big Tech companies showed little interest in mobile SEP licensing until the introduction of the iPhone in 2007 and of Android in 2008.  Many Original Equipment Manufacturers (OEMs) subsequently entered the smartphone market without ownership of SEPs.

Comments favoring the Commission’s proposals to regulate royalty rates and licensing are significantly by Apple, automotive manufacturers  and trade groups representing implementers and in some cases funded by the above. The current Spanish Presidency of the Council of the EU is also a fan. The proposed new ministry of patent counting that will also be responsible for setting royalty rates will be at the EU Intellectual Property Office (EUIPO) in Alicante. Major SEP owners and licensors are largely against the proposals. Among the 78 responses to the Commission’s request for feedback on its proposed SEP legislation, the only response from a network operator was from Japan’s NTT DoCoMo, which is also an SEP owner. It also notes that “Regulation imposes excessive tasks and costs on SEP holders, even though it is unclear whether SEP holders will receive a fair and adequate return for their efforts.”  It seems Europe’s network operators are prioritizing their more pressing concerns about network costs, as indicated above, over getting involved too deeply in the public debate on SEP licensing.

Europe has enormous existing assets and potential in development and exploitation of new ICT including 5G Advanced, 6G, IoT and AI. For example, Ericsson and Nokia are global leaders in innovation and standards development for communications and video compression technologies. This needs to be nurtured not undermined. They have each invested around one billion dollars in R&D annually over many years. SEP licensing growth to support further innovation in standards should be fostered not attenuated by regulation. Licensing growth with bilateral and multilateral programs to increase licensing in verticals will encourage development of valuable standard-essential technologies that focus on those verticals. For example, SEP licensing in cars by Avanci has encouraged development of C-V2X technologies in 4G and 5G.  Licensing charges at a maximum of $20 for 4G and $32 for 5G per car are small in comparison to the existential threat posed to incumbent OEMs by them being marginalized in provision of value-added ICT services by Big Tech platforms or by being entirely displaced by new-entrant OEMs in Electric Vehicles (EVs), with alternative distribution and customer relationship models, such as Tesla and BYD. 

Harms, litigation and cures

It is abundantly clear that Big Tech platforms are commanding the lion’s share of any economic surplus in consumer ICT markets. Network operators, standard-essential technology developers and many implementers are much less profitable or rated far more modestly for expected growth. 

While I doubt examples of growth by Garmin, Dropbox and Mercardo-Libre will be sufficient to placate the European authorities, market failure and harm to other Core Platform Services providers will be difficult to prove. Vigorous legal challenges to any proposed interventions are inevitable.

Elsewhere, intervention is warranted in dysfunctional markets where some companies are flourishing while others upon whom they depend are unable to make the investment and returns required to provide what consumers want and need. Society will benefit socially and economically  from ubiquitous fixed and mobile gigabit per second and gigabyte per month broadband. 

However, the EU’s proposed regulation in SEPs will diminish SEP licensing costs to the detriment of the licensors who invest in developing the standard-essential technologies that are openly employed by numerous others. No good will come from biting off the hands that feed the entire ecosystem with new and useful standard-based technologies. There is no sign of harm from the SEP licensing business model. On the contrary, this has substantially enabled the very success that America’s Big Tech companies and the predominantly Asian smartphone OEMs have enjoyed from cellular and video standards with an increasingly mobile-first approach in the provision of many ICT services. In most cases these companies contribute little to the cellular and video technology standards development processes. In technology standards development it is a relatively small number of companies that own and license the vast majority of patents declared standard essential, in comparison to the many more firms that implement them.

This article was originally published by RCR Wireless on 27th September 2023.

FTC New Office of Technology

The U.S. Federal Trade Commission has announced the creation of a Technology Office to support its work. The Press Release states:

The Federal Trade Commission today launched a new Office of Technology that will strengthen the FTC’s ability to keep pace with technological challenges in the digital marketplace by supporting the agency’s law enforcement and policy work. 

“For more than a century, the FTC has worked to keep pace with new markets and ever-changing technologies by building internal expertise," said Chair Lina M. Khan. "Our office of technology is a natural next step in ensuring we have the in-house skills needed to fully grasp evolving technologies and market trends as we continue to tackle unlawful business practices and protect Americans." 

The Office of Technology will have dedicated staff and resources, and will be headed by Chief Technology Officer Stephanie T. Nguyen.  

“I’m honored to lead the FTC’s Office of Technology at this vital time to strengthen the agency’s technical expertise and meet the quickly evolving challenges of the digital economy,” said Nguyen. “I look forward to continuing to work with the agency’s talented staff and building our team of technologists.”  

The Office of Technology will boost the FTC’s expertise to help the agency achieve its mission of protecting consumers and promoting competition. Specifically, the new office will: 

• Strengthen and support law enforcement investigations and actions: The office will support FTC investigations into business practices and the technologies underlying them. This includes helping to develop appropriate investigative techniques, assisting in the review and analysis of data and documents received in investigations, and aiding in the creation of effective remedies. 

• Advise and engage with staff and the Commission on policy and research initiatives: The office will work with FTC staff and the Commission to provide technological expertise on non-enforcement actions including 6(b) studies, reports, requests for information, policy statements, congressional briefings, and other initiatives.  

• Highlight market trends and emerging technologies that impact the FTC’s work: The office will engage with the public and external stakeholders through workshops, research conferences, and consultations and highlight key trends and best practices. 

The creation of the Office of Technology builds on the FTC’s efforts over the years to expand its in-house technological expertise, and it brings the agency in line with other leading antitrust and consumer protection enforcers around the world. 

The Commission voted 4-0 to approve the creation of the Office of Technology. 

US DOJ Sues Google for Anticompetitive Conduct in Advertising Practices

The U.S. Department of Justice has brought a competition suit against Google concerning its internet advertising practices.  The DOJ press release states:

Today, the Justice Department, along with the Attorneys General of California, Colorado, Connecticut, New Jersey, New York, Rhode Island, Tennessee, and Virginia, filed a civil antitrust suit against Google for monopolizing multiple digital advertising technology products in violation of Sections 1 and 2 of the Sherman Act.

Filed in the U.S. District Court for the Eastern District of Virginia, the complaint alleges that Google monopolizes key digital advertising technologies, collectively referred to as the “ad tech stack,” that website publishers depend on to sell ads and that advertisers rely on to buy ads and reach potential customers. Website publishers use ad tech tools to generate advertising revenue that supports the creation and maintenance of a vibrant open web, providing the public with unprecedented access to ideas, artistic expression, information, goods, and services. Through this monopolization lawsuit, the Justice Department and state Attorneys General seek to restore competition in these important markets and obtain equitable and monetary relief on behalf of the American public.

As alleged in the complaint, over the past 15 years, Google has engaged in a course of anticompetitive and exclusionary conduct that consisted of neutralizing or eliminating ad tech competitors through acquisitions; wielding its dominance across digital advertising markets to force more publishers and advertisers to use its products; and thwarting the ability to use competing products. In doing so, Google cemented its dominance in tools relied on by website publishers and online advertisers, as well as the digital advertising exchange that runs ad auctions.

“Today’s complaint alleges that Google has used anticompetitive, exclusionary, and unlawful conduct to eliminate or severely diminish any threat to its dominance over digital advertising technologies,” said Attorney General Merrick B. Garland. “No matter the industry and no matter the company, the Justice Department will vigorously enforce our antitrust laws to protect consumers, safeguard competition, and ensure economic fairness and opportunity for all.”

“The complaint filed today alleges a pervasive and systemic pattern of misconduct through which Google sought to consolidate market power and stave off free-market competition,” said Deputy Attorney General Lisa O. Monaco. “In pursuit of outsized profits, Google has caused great harm to online publishers and advertisers and American consumers. This lawsuit marks an important milestone in the Department’s efforts to hold big technology companies accountable for violations of the antitrust laws.”

“The Department’s landmark action against Google underscores our commitment to fighting the abuse of market power,” said Associate Attorney General Vanita Gupta. “We allege that Google has captured publishers’ revenue for its own profits and punished publishers who sought out alternatives. Those actions have weakened the free and open internet and increased advertising costs for businesses and for the United States government, including for our military.”

“Today’s lawsuit seeks to hold Google to account for its longstanding monopolies in digital advertising technologies that content creators use to sell ads and advertisers use to buy ads on the open internet,” said Assistant Attorney General Jonathan Kanter of the Justice Department’s Antitrust Division. “Our complaint sets forth detailed allegations explaining how Google engaged in 15 years of sustained conduct that had — and continues to have — the effect of driving out rivals, diminishing competition, inflating advertising costs, reducing revenues for news publishers and content creators, snuffing out innovation, and harming the exchange of information and ideas in the public sphere.”

Google now controls the digital tool that nearly every major website publisher uses to sell ads on their websites (publisher ad server); it controls the dominant advertiser tool that helps millions of large and small advertisers buy ad inventory (advertiser ad network); and it controls the largest advertising exchange (ad exchange), a technology that runs real-time auctions to match buyers and sellers of online advertising.

. . . [Image removed] . . .

Google’s anticompetitive conduct has included:

• Acquiring Competitors: Engaging in a pattern of acquisitions to obtain control over key digital advertising tools used by website publishers to sell advertising space;
• Forcing Adoption of Google’s Tools: Locking in website publishers to its newly-acquired tools by restricting its unique, must-have advertiser demand to its ad exchange, and in turn, conditioning effective real-time access to its ad exchange on the use of its publisher ad server;
• Distorting Auction Competition: Limiting real-time bidding on publisher inventory to its ad exchange, and impeding rival ad exchanges’ ability to compete on the same terms as Google’s ad exchange; and
• Auction Manipulation: Manipulating auction mechanics across several of its products to insulate Google from competition, deprive rivals of scale, and halt the rise of rival technologies.

As a result of its illegal monopoly, and by its own estimates, Google pockets on average more than 30% of the advertising dollars that flow through its digital advertising technology products; for some transactions and for certain publishers and advertisers, it takes far more. Google’s anticompetitive conduct has suppressed alternative technologies, hindering their adoption by publishers, advertisers, and rivals.

The Sherman Act embodies America’s enduring commitment to the competitive process and economic liberty. For over a century, the Department has enforced the antitrust laws against unlawful monopolists to unfetter markets and restore competition. To redress Google’s anticompetitive conduct, the Department seeks both equitable relief on behalf of the American public as well as treble damages for losses sustained by federal government agencies that overpaid for web display advertising. This enforcement action marks the first monopolization case in approximately half a century in which the Department has sought damages for a civil antitrust violation.

In 2020, the Justice Department filed a civil antitrust suit against Google for monopolizing search and search advertising, which are different markets from the digital advertising technology markets at issue in the lawsuit filed today. The Google search litigation is scheduled for trial in September 2023.

Google is a limited liability company organized and existing under the laws of the State of Delaware, with a headquarters in Mountain View, California. Google’s global network business generated approximately $31.7 billion in revenues in 2021. Google is owned by Alphabet Inc., a publicly traded company incorporated and existing under the laws of the State of Delaware and headquartered in Mountain View, California.

IPOs in the United States Drop

According to Ernst & Young and PwC, the number of IPOs and their value in the United States have dropped significantly from the similar time period from the prior year.  Interestingly, PwC notes that China's numbers of IPOs has remained relatively strong.  Cal Matters and others report that California's number of IPOs is very weak compared to the last year.  As pointed out by commentators, it seems to make sense to wait and see in this market--if you are able.  Notably, if IPOs as an exit strategy dry up, it makes acquisitions a much more important alternative.  It will be interesting to see the direction regulators in the United States take toward acquisitions--particularly in the tech space.  

Bipartisan Letter from U.S. Senators on Drug Patent Thickets

In June, U.S. Senators Leahy (Democrat) and Cornyn (Republican) (and others) sent a letter to the United States Patent and Trademark Office requesting that the USPTO review practices concerning granting “an excessive” amount of patents on pharmaceuticals, such as biologics, that may be driving up drug pricing costs. 

The press release concerning the letter states:

Senators Patrick Leahy (D-VT) and John Cornyn (R-TX) led a bipartisan letter Wednesday asking the U.S. Patent and Trademark Office to address an issue that is a significant cause of soaring drug prices.  Senators Richard Blumenthal (D-CT), Susan Collins (R-ME), Amy Klobuchar (D-MN), and Mike Braun (R-IN) also joined the letter.

The senators explained that drug companies and other large companies sometimes artificially extend the period in which they can charge high prices by filing many patents on nearly the same invention, creating a so-called patent thicket of dozens of patents on a single drug.  Those thickets make any challenge to the patents, or to the drug companies’ pricing of the covered drug, nearly impossible.  Because of the exorbitant cost of taking on each of the patents in these patent thickets, generic manufacturers are impeded from entering the market, hurting competition and raising prices for American consumers.  The secondary patents, which are similar to the originals, often receive less scrutiny from the Patent Office but have an outsized effect on everyday Americans who struggle to afford expensive medication.

Leahy believes the Patent Office has the ability to address this abusive practice, and he is asking the agency to take action to rein in this misuse of the patent system.  The letter requests that the Patent Office look into specific ideas for curbing the abuse and “take regulatory steps to improve patent quality and eliminate large collections of patents on a single invention.”  The Patent Act clearly states an inventor may obtain a single patent for a single invention, not dozens.  The senators believe the Patent Office can and should stop these large companies from undermining the patent system, obstructing appropriate competition, stifling innovation, and hurting Americans, who end up paying for all of this at the pharmacy.

The letter contains several ideas for the USPTO and the public to consider concerning future potential rule-making:

1. Terminal disclaimers, allowed under 37 C.F.R. 1.321(d), allow applicants to receive patents that are obvious variations of each other as long as the expiration dates match. How would eliminating terminal disclaimers, thus prohibiting patents that are obvious variations of each other, affect patent prosecution strategies and patent quality overall?

2. Currently, patents tied together with a terminal disclaimer after an obviousness-type double patent rejection must be separately challenged on validity grounds. However, if these patents are obvious variations of each other, should the filing of a terminal disclaimer be an admission of obviousness? And if so, would these patents, when their validity is challenged after issuance, stand and fall together?

3. Should the USPTO require a second look, by a team of patent quality specialists, before issuing a continuation patent on a first office action, with special emphasis on whether the claims satisfy the written description, enablement, and definiteness requirements of 35 U.S.C. § 112, and whether the claims do not cover the same invention as a related application?

4. Should there be heightened examination requirements for continuation patents, 2 to ensure that minor modifications do not receive second or subsequent patents?

5. The Patent Act requires the USPTO Director to set a “time during the pendency of the [original] application” in which continuation status may be filed. Currently there is no time limit relative to the original application. Can the USPTO implement a rule change that requires any continuation application to be filed within a set time frame of the ultimate parent application? What is the appropriate timeframe after the applicant files an application before the applicant should know what types of inventions the patent will actually cover? Would a benchmark (e.g., within six months of the first office action on the earliest application in a family) be preferable to a specific deadline (e.g., one year after the earliest application in a family)?

6. The USPTO has fee-setting authority and has set fees for filing, search, and examination of applications below the actual costs of carrying out these activities, while maintenance fees for issued patents are above the actual cost. If the up-front fees reflected the actual cost of obtaining a patent, would this increase patent quality by discouraging filing of patents unlikely to succeed? Similarly, if fees for continuation applications were increased above the initial filing fees, would examination be more thorough and would applicants be less likely to use continuations to cover, for example, inventions that are obvious variations of each other?

US Department of Justice Seeks Public Comments on Draft SEPs and FRAND Policy Statement

The US Department of Justice, Antitrust Division is seeking public comments regarding a new draft policy statement regarding SEPs and FRAND.  Details are below:

The Department of Justice announced today that it is requesting public comment on a new draft policy statement concerning standards-essential patents (SEPs) that seeks to promote good-faith licensing negotiations and addresses the scope of remedies available to patent owners that have agreed to license their essential technologies on reasonable and non-discriminatory or fair, reasonable, and non-discriminatory (F/RAND) terms. The Justice Department worked with U.S. Patent and Trademark Office (USPTO) and the National Institute of Standards and Technology (NIST) in responding to President Biden’s recent Executive Order on Promoting Competition in the American Economy, which encouraged the agencies to review the 2019 Policy Statement on Remedies for Standards-Essential Patents Subject to Voluntary F/RAND Commitments to ensure that it adequately promoted competition. Together the agencies, after consulting with the Federal Trade Commission, are now issuing a revised draft statement for public comment.

“The department looks forward to working with our agency partners,” said Assistant Attorney General Jonathan Kanter of the Justice Department’s Antitrust Division. “We are committed to taking a principled, transparent, and balanced approach at the intersection of intellectual property and antitrust law.”

The draft statement is open to public comment for 30 days and provides a framework to facilitate good-faith licensing negotiation between SEP owners and potential licensees. It also discusses what remedies may be available when SEPs subject to voluntary F/RAND commitments are infringed. The draft statement indicates that good-faith negotiation that leads to widespread and efficient licensing between SEP holders and those who seek to implement standardized technologies can help to promote technology innovation, further consumer choice, and enable industry competitiveness. The draft statement will not be finalized until the agencies consider all stakeholder input.

In particular, the agencies are interested in comments addressing the following questions:

1. Should the 2019 Policy Statement on Remedies for Standards-Essential Patents Subject to Voluntary F/RAND Commitments be revised?
2. Does the draft revised statement appropriately balance the interests of patent holders and implementers in the voluntary consensus standards process, consistent with the prevailing legal framework for assessing infringement remedies?
3. Does the draft revised statement address the competition concerns about the potential for extension of market power beyond appropriate patent scope identified in the July 9, 2021 Executive Order on Promoting Competition in the American Economy?
4. In your experience, has the possibility of injunctive relief been a significant factor in negotiations over SEPs subject to a voluntary F/RAND commitment? If so, how often have you experienced this?
5. Are other challenges typically present in negotiating a SEP license? If so, what information should be provided or exchanged as a practical matter to make negotiation more efficient and transparent?
6. Are small business owners and small inventors impacted by perceived licensing inefficiencies involving SEPs? If so, how can licensing be made more efficient and transparent for small businesses and small inventors that either own, or seek to license, SEPs?
7. Will the licensing considerations set forth in the draft revised Statement promote a useful framework for good-faith F/RAND licensing negotiations? In what ways could the framework be improved? How can any framework for good-faith negotiations, and this framework in particular, better support the intellectual property rights policies of standards-setting organizations?
8. What other impacts, if any, would the draft revised statement have on standards-setting organizations and contributors to the standards development process?
9. The draft revised statement discusses fact patterns intended to indicate when a potential licensee is willing or unwilling to take a F/RAND license. Are there other examples of willingness or unwillingness that should be included in the statement?
10. Have prior executive branch policy statements on SEPs been used by courts, other authorities, or in licensing negotiations? If so, what effect has the use of those statements had on the licensing process, outcomes, or resolutions?
11. Are there resources or information that the U.S. government could provide/develop to help inform businesses about licensing SEPs subject to a voluntary F/RAND commitment?

Interested parties, including attorneys, economists, academics, consumer groups, industry stakeholders or other members of the public may submit public comments to Regulations.gov until Jan. 5, 2022. Information about the draft revised statement can also be found on the Antitrust Division’s website.

Biden Administration Executive Order on Competition: Some IP Portions

On July 9, 2021, the Biden Administration released an “Executive Order on Promoting Competition in the American Economy” that literally will touch almost every part of the U.S. economy.  The Executive Order can be found, here.  Concerning SEPs the Executive Order states:

To avoid the potential for anticompetitive extension of market power beyond the scope of granted patents, and to protect standard-setting processes from abuse, the Attorney General and the Secretary of Commerce are encouraged to consider whether to revise their position on the intersection of the intellectual property and antitrust laws, including by considering whether to revise the Policy Statement on Remedies for Standards-Essential Patents Subject to Voluntary F/RAND Commitments issued jointly by the Department of Justice, the United States Patent and Trademark Office, and the National Institute of Standards and Technology on December 19, 2019.

The Order further directs the FTC Chair to consider rulemaking in the following areas:

          (i)    unfair data collection and surveillance practices that may damage competition, consumer autonomy, and consumer privacy;
          (ii)   unfair anticompetitive restrictions on third-party repair or self-repair of items, such as the restrictions imposed by powerful manufacturers that prevent farmers from repairing their own equipment;
          (iii)  unfair anticompetitive conduct or agreements in the prescription drug industries, such as agreements to delay the market entry of generic drugs or biosimilars;
          (iv)   unfair competition in major Internet marketplaces;
. . . and
          (vii)  any other unfair industry-specific practices that substantially inhibit competition.

The Order directs the Secretary of Agriculture to prepare a report concerning IP laws and seeds and other inputs:

to help ensure that the intellectual property system, while incentivizing innovation, does not also unnecessarily reduce competition in seed and other input markets beyond that reasonably contemplated by the Patent Act (see 35 U.S.C. 100 et seq. and 7 U.S.C. 2321 et seq.), in consultation with the Under Secretary of Commerce for Intellectual Property and Director of the United States Patent and Trademark Office, submit a report to the Chair of the White House Competition Council, enumerating and describing any relevant concerns of the Department of Agriculture and strategies for addressing those concerns across intellectual property, antitrust, and other relevant laws.

The Order directs the Secretary for Health and Human Services to address drug access and pricing:

          (iv)    not later than 45 days after the date of this order, submit a report to the Assistant to the President for Domestic Policy and Director of the Domestic Policy Council and to the Chair of the White House Competition Council, with a plan to continue the effort to combat excessive pricing of prescription drugs and enhance domestic pharmaceutical supply chains, to reduce the prices paid by the Federal Government for such drugs, and to address the recurrent problem of price gouging;
          (v)     to lower the prices of and improve access to prescription drugs and biologics, continue to promote generic drug and biosimilar competition, as contemplated by the Drug Competition Action Plan of 2017 and Biosimilar Action Plan of 2018 of the Food and Drug Administration (FDA), including by:
               (A)  continuing to clarify and improve the approval framework for generic drugs and biosimilars to make generic drug and biosimilar approval more transparent, efficient, and predictable, including improving and clarifying the standards for interchangeability of biological products;
               (B)  as authorized by the Advancing Education on Biosimilars Act of 2021 (Public Law 117-8, 135 Stat. 254, 42 U.S.C. 263-1), supporting biosimilar product adoption by providing effective educational materials and communications to improve understanding of biosimilar and interchangeable products among healthcare providers, patients, and caregivers;
               (C)  to facilitate the development and approval of biosimilar and interchangeable products, continuing to update the FDA’s biologics regulations to clarify existing requirements and procedures related to the review and submission of Biologics License Applications by advancing the “Biologics Regulation Modernization” rulemaking (RIN 0910-AI14); and
               (D)  with the Chair of the FTC, identifying and addressing any efforts to impede generic drug and biosimilar competition, including but not limited to false, misleading, or otherwise deceptive statements about generic drug and biosimilar products and their safety or effectiveness;
          (vi)    to help ensure that the patent system, while incentivizing innovation, does not also unjustifiably delay generic drug and biosimilar competition beyond that reasonably contemplated by applicable law, not later than 45 days after the date of this order, through the Commissioner of Food and Drugs, write a letter to the Under Secretary of Commerce for Intellectual Property and Director of the United States Patent and Trademark Office enumerating and describing any relevant concerns of the FDA; 
          (vii)   to support the market entry of lower-cost generic drugs and biosimilars, continue the implementation of the law widely known as the CREATES Act of 2019 (Public Law 116-94, 133 Stat. 3130), by:
               (A)  promptly issuing Covered Product Authorizations (CPAs) to assist product developers with obtaining brand-drug samples; and
               (B)  issuing guidance to provide additional information for industry about CPAs; and
          (viii)  through the Administrator of the Centers for Medicare and Medicaid Services, prepare for Medicare and Medicaid coverage of interchangeable biological products, and for payment models to support increased utilization of generic drugs and biosimilars.

The Order directs the Secretary of Commerce to reconsider proposed regulations concerning technology transfer:

   (r)  The Secretary of Commerce shall:
          (i)    acting through the Director of the National Institute of Standards and Technology (NIST), consider initiating a rulemaking to require agencies to report to NIST, on an annual basis, their contractors’ utilization activities, as reported to the agencies under 35 U.S.C. 202(c)(5);
          (ii)   acting through the Director of NIST, consistent with the policies set forth in section 1 of this order, consider not finalizing any provisions on march-in rights and product pricing in the proposed rule “Rights to Federally Funded Inventions and Licensing of Government Owned Inventions,” 86 Fed. Reg. 35 (Jan. 4, 2021); 

                (iii)  not later than 1 year after the date of this order, in consultation with the Attorney General and the Chair of the Federal Trade Commission, conduct a study, including by conducting an open and transparent stakeholder consultation process, of the mobile application ecosystem, and submit a report to the Chair of the White House Competition Council, regarding findings and recommendations for improving competition, reducing barriers to entry, and maximizing user benefit with respect to the ecosystem.

Senator Klobuchar Introduces Legislation to Strengthen Antitrust Enforcement in United States

Former Democrat Presidential Candidate and current Senator from Minnesota, Amy Klobuchar is the new chair of the antitrust subcommittee in the U.S. Senate.  She recently introduced new legislation designed to reign in technology companies and increase competition through antitrust law.  The Press Release from her office states:

WASHINGTON – U.S. Senator Amy Klobuchar (D-MN), the lead Democrat on the Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights, introduced sweeping new legislation today to reinvigorate America’s antitrust laws and restore competition to American markets. The Competition and Antitrust Law Enforcement Reform Act will give federal enforcers the resources they need to do their jobs, strengthen prohibitions on anticompetitive conduct and mergers, and make additional reforms to improve enforcement.

“Competition and effective antitrust enforcement are critical to protecting workers and consumers, spurring innovation, and promoting economic equity. While the United States once had some of the most effective antitrust laws in the world, our economy today faces a massive competition problem. We can no longer sweep this issue under the rug and hope our existing laws are adequate,” said Senator Klobuchar. “The Competition and Antitrust Law Enforcement Reform Act is the first step to overhauling and modernizing our laws so we can effectively promote competition and protect American consumers.”

This bill is cosponsored by Judiciary Subcommittee on Antitrust and Commerce Committee members Richard Blumenthal (D-CT), Cory Booker (D-NJ), Ed Markey (D-MA), and Brian Schatz (D-HI).

Many industries are consolidating as large mergers and acquisitions increase and big companies buy out upstart rivals before they can become a competitive threat. Harmful exclusionary practices by dominant companies – such as refusals to deal with rivals, restrictive contracting, and predatory pricing – squelch competition. U.S. antitrust law enforcement against powerful firms has lagged efforts in other developed countries, particularly when it comes to enforcement against the dominant digital platforms and other large corporations. To remedy these longstanding issues, the Competition and Antitrust Law Enforcement Reform Act will:

1. Increase Enforcement Resources

For years, enforcement budgets at the Justice Department’s Antitrust Division and Federal Trade Commission have failed to keep pace with the growth of the economy, the steady increase in merger filings, and increasing demands on the agency's resources. To enable the agencies to fulfill their missions and protect competition by bringing enforcement actions against the richest, most sophisticated companies in the world, this bill would authorize increases to each agency’s annual budget.

2. Strengthen Prohibitions Against Anticompetitive Mergers

The bill would restore the original intent of Section 7 of the Clayton Act, which was designed to stop anticompetitive mergers in order to address competitive problems in their “incipiency” before they ripened and caused harm. As the law stands today due to court decisions, enforcers can block only the most egregious acquisitions, which has allowed many harmful mergers to escape scrutiny. To remedy this, the Competition and Antitrust Law Enforcement Reform Act will:

• Update the legal standard for permissible mergers. The bill amends the Clayton Act to forbid mergers that “create an appreciable risk of materially lessening competition” rather than mergers that “substantially lessen competition,” where “materially” is defined as “more than a de minimus amount.” By adding a risk-based standard and clarifying the amount of likely harm the government must prove, enforcers can more effectively stop anticompetitive mergers that currently slip through the cracks. The bill also clarifies that mergers that create a monopsony (the power to unfairly lower the prices a company it pays or wages it offers because of lack of competition among buyers or employers) violate the statute.
• Shift the burden to the merging parties to prove their merger will not violate the law. Certain categories of mergers pose significant risks to competition, but are still difficult and costly for the government to challenge in court. For those types of mergers, the bill shifts the legal burden from the government to the merging companies, which would have to prove that their mergers do not create an appreciable risk of materially lessening competition or tend to create a monopoly or monopsony. These categories include:

1.       Mergers that significantly increase market concentration

2.       Acquisitions of competitors or nascent competitors by a dominant firm (defined a 50% market share or possession of significant market power)

3.       Mega-mergers valued at more than $5 billion

3. Prevent Harmful Dominant Firm Conduct

Decades of flawed court decisions have weakened the effectiveness of Section 2 of the Sherman Antitrust Act to prevent anticompetitive conduct by dominant companies. The bill creates a new provision under the Clayton Act to prohibit “exclusionary conduct” (conduct that materially disadvantages competitors or limits their opportunity to compete) that presents an “appreciable risk of harming competition.”

4. The legislation would establish a new, independent FTC division to conduct market studies and merger retrospectives.

5. Implement Additional Reforms to Enhance Antitrust Enforcement

The Competition and Antitrust Law Enforcement Reform Act will also implement a series of reforms to seek civil fines for antitrust violations, study the effect of past mergers, strengthen whistleblower protections, and more.

“This bill will turbocharge antitrust enforcement,” said Charlotte Slaiman, Competition Policy Director at Public Knowledge. “Much-needed updates to the Clayton Act’s merger review and exclusionary conduct provisions, along with a new office at the Federal Trade Commission and more funds for antitrust enforcers, will help level the playing field for enforcers to better protect consumers from anticompetitive abuses. I’m looking forward to continuing to work with Senator Klobuchar on this and other competition policy proposals.”

"Consumer Reports appreciates Senator Klobuchar's steady leadership in working to strengthen our antitrust laws to equip them to protect a competitive marketplace and the benefits that consumers, small businesses, and workers receive from it. This legislation gives our antitrust laws an important re-set. It ensures that harmful merger trends and exclusionary conduct can be stopped before it is too late and the harm is locked in. It extends the reach of the law so that blocking others from a fair chance to compete is a violation, even before a monopoly results. And it gives our government the enforcement authority and resources needed for effective deterrence. We look forward to working with Senator Klobuchar and others to revive our antitrust laws for the marketplace of the 21st century,” said George Slover, Senior Policy Counsel, Consumer Reports.

“Senator Klobuchar’s bill puts us on a path toward tractable, actionable, achievable antitrust reform that will free consumers, workers, and businesses from the crushing economic impact of anticompetitive mergers and monopolies. This is exactly the kind of leadership we need at the moment we need it most,” said Diana L. Moss, President, American Antitrust Institute.

This legislation is endorsed by Professor Jonathan Baker of American University Washington College of Law, Professor Martin Gaynor of Carnegie Mellon University, Professor Nancy Rose of Massachusetts Institute of Technology, Professor Steven Salop of Georgetown University Law Center, Professor Fiona Scott Morton of the Yale University School of Management, and Professor Carl Shapiro of the University of California at Berkeley.

US DOJ Antitrust Division Releases Review Letter Concerning University Patent Pool

The United States Department of Justice, Antitrust Division, (DOJ) has recently released a statement concerning the potential anticompetitive impact of a patent pool involving universities concerning patents involving “autonomous vehicles, the “Internet of Things,” and “Big Data.”  The DOJ finds that the pool is “unlikely to harm competition.”  The Press Release states:

The Justice  Department’s Antitrust Division announced today that it has completed its review of a proposed joint patent licensing pool known as the University Technology Licensing Program (UTLP).  UTLP is a proposal by participating universities to offer licenses to their physical science patents relating to specified emerging technologies.

As part of its review, the division interviewed potential participants and considered its prior guidance on patent pools.  The department has concluded that, on balance, and based on the representations in UTLP’s letter request, the proposed joint patent licensing program is unlikely to harm competition. 

“University research is a key driver of innovation,” said Acting Principal Deputy Assistant Attorney General Michael Murray for the Antitrust Division.  “In the physical science area, however, some university research may never be commercialized due to the costs associated with negotiating multiple licenses and combining the complementary university patents that may be necessary for cutting-edge implementations.  To the extent that UTLP makes it easier for universities to commercialize inventions that may be currently unlicensed and under-utilized, industry participants, university researchers, and ultimately the public can benefit.” 

Currently 15 participating universities intend to cooperate in licensing certain complementary patents through UTLP, which will be organized into curated portfolios relating to specific technology applications for autonomous vehicles, the “Internet of Things,” and “Big Data.”  The overarching goal of UTLP is to centralize the administrative costs associated with commercializing university research and help participating universities to overcome the budget, institutional relationship, and other constraints that make licensing in these areas particularly challenging for them. 

UTLP has incorporated a number of safeguards into its program to help protect competition, including admitting only non-substitutable patents, with a “safety valve” if a patent to accomplish a particular task is inadvertently included in a portfolio with another, substitutable patent.  The program also will allow potential sublicensees to choose an individual patent, a group of patents, or UTLP’s entire portfolio, thereby mitigating the risk that a licensee will be required to license more technology than it needs.  The department’s letter notes that UTLP is a mechanism that is intended to address licensing inefficiencies and institutional challenges unique to universities in the physical science context, and makes no assessment about whether this mechanism if set up in another context would have similar procompetitive benefits.

Under the Department of Justice’s business review procedure, an organization may submit a proposed action to the Antitrust Division and receive a statement as to whether the Antitrust Division currently intends to challenge the action under the antitrust laws based on the information provided.  The department’s conclusions in this business review apply only to UTLP.  They are not applicable to any other agreements or initiatives relating to patent licensing by universities or other entities.  The department reserves the right to challenge the proposed action under the antitrust laws if the actual operation of the proposed conduct proves to be anticompetitive in purpose or effect.

Copies of the business review request and the department’s response are available on the Antitrust Division’s website at https://www.justice.gov/atr/business-review-letters-and-request-letters, as well as in a file maintained by the Antitrust Documents Group of the Antitrust Division. 

The DOJ Business Review Letter is available, here.  The universities' request letter for review is available, here.  

Big Win for Qualcomm in the Ninth Circuit

 In a big win for Qualcomm, the Ninth Circuit Court of Appeals (Judge Callahan writing the opinion), in FTC v. Qualcomm, __ F.3d __ (9^th Cir. August 11, 2020), found that Qualcomm had not violated competition law based on licensing practices, including refusal to deal and FRAND practices.  Notably, the Ninth Circuit overturned the District Court’s “permanent, worldwide injunction prohibiting Qualcomm’s core business practices.”  The District Court made five major findings:

1) Qualcomm's “no license, no chips” policy amounts to “anticompetitive conduct against OEMs” and an “anticompetitive practice[ ] in patent license negotiations”; (2) Qualcomm's refusal to license rival chipmakers violates both its FRAND commitments and an antitrust duty to deal under § 2 of the Sherman Act; (3) Qualcomm's “exclusive deals” with Apple “foreclosed a ‘substantial share’ of the modem chip market” in violation of both Sherman Act provisions; (4) Qualcomm's royalty rates are “unreasonably high” because they are improperly based on its market share and handset price instead of the value of its patents; and (5) Qualcomm's royalties, in conjunction with its “no license, no chips” policy, “impose an artificial and anticompetitive surcharge” on its rivals’ sales, “increas[ing] the effective price of rivals’ modem chips” and resulting in anticompetitive exclusivity.

One important problem with the District Court’s analysis, according to the Ninth Circuit, was the District Court’s failure “to distinguish between Qualcomm’s licensing practices (which primarily impacted OEMs) and its practices relating to modem chip sales (the relevant antitrust market).”  The Ninth Circuit rejected the District Court’s reliance on the Aspen exception to the general concept that refusals to deal are not antitrust violations and quoted a prior case: “’Competitors are not required to engage in a lovefest.’”  The Ninth Circuit also found that Qualcomm’s conduct in breaching its SSO agreements did not arise to an antitrust violation.  Notably, the Ninth Circuit stated:

Finally, we note the persuasive policy arguments of several academics and practitioners with significant experience in SSOs, FRAND, and antitrust enforcement, who have expressed caution about using the antitrust laws to remedy what are essentially contractual disputes between private parties engaged in the pursuit of technological innovation. The Honorable Paul R. Michel, retired Chief Judge of the Court of Appeals for the Federal Circuit, argues that it would be a mistake to use “the hammer of antitrust law ... to resolve FRAND disputes when more precise scalpels of contract and patent law are effective.” Amicus Curiae Br. of The Honorable Paul R. Michel (Ret.) at 23. Judge Michel notes that “[w]hile antitrust policy has its place as a policy lever to enhance market competition, the rules of contract and patent law are better equipped to handle commercial disputes between the world's most sophisticated companies about FRAND agreements.” Id. at 24. Echoing this sentiment, a former FTC Commissioner, Joshua Wright, argues that “the antitrust laws are not well suited to govern contract disputes between private parties in light of remedies available under contract or patent law,” and that “imposing antitrust remedies in pure contract disputes can have harmful effects in terms of dampening incentives to participate in standard-setting bodies and to commercialize innovation.” Wright, supra note 1, at 808–09.

The Ninth Circuit rejected the District Court’s determination that Qualcomm engaged in anticompetitive conduct by charging “unreasonably high royalty rates” among other things.  The Ninth Circuit stated:

We hold that the district court's “anticompetitive surcharge” theory fails to state a cogent theory of anticompetitive harm. Instead, it is premised on a misunderstanding of Federal Circuit law pertaining to the calculation of patent damages, it incorrectly conflates antitrust liability and patent law liability, and it improperly considers “anticompetitive harms to OEMs” that fall outside the relevant antitrust markets. Furthermore, even if we were to accept the district court's conclusion that Qualcomm's royalty rates are unreasonable, we conclude that the district court's surcharging theory still fails as a matter of law and logic.

On the Federal Circuit’s damages law, the Ninth Circuit states:

Even if we accept that the modem chip in a cellphone is the cellphone's SSPPU, the district court's analysis is still fundamentally flawed. No court has held that the SSPPU concept is a per se rule for “reasonable royalty” calculations; instead, the concept is used as a tool in jury cases to minimize potential jury confusion when the jury is weighing complex expert testimony about patent damages. See Ericsson, 773 F.3d at 1226(explaining that the SSPPU concept is a flexible evidentiary tool, not an unyielding substantive element of patent damages law); VirnetX, Inc. v. Cisco Sys., Inc., 767 F.3d 1308, 1327–28 (Fed. Cir. 2014) (same); LaserDynamics, 694 F.3d at 68 (same). As this case involved a bench trial, the potential for jury confusion was absent.

Moreover, the Federal Circuit rejected the premise of the district court's determination: that the SSPPU concept is required when calculating patent damages. See Commonwealth Sci. & Indus. Research Org. v. Cisco Sys., Inc., 809 F.3d 1295, 1303 (Fed. Cir. 2015) (“The rule Cisco advances—which would require all damages models to begin with the [SSPPU]—is untenable [and] conflicts with our prior approvals of a methodology that values the asserted patent based on comparable licenses.”) (citations omitted). The Federal Circuit has also observed that “ ‘[s]ophisticated parties routinely enter into license agreements that base the value of the patented inventions as a percentage of the commercial products’ sales price,’ and thus ‘[t]here is nothing inherently wrong with using the market value of the entire product.’ ” Exmark Mfg. Co. Inc. v. Briggs & Stratton Power Prods. Grp., LLC, 879 F.3d 1332, 1349 (Fed. Cir. 2018) (some alterations in original) (quoting Lucent Techs., Inc. v. Gateway, Inc., 580 F.3d 1301, 1339 (Fed. Cir. 2009)). These statements of law and current practice run counter to the district court's conclusion that patent royalties cannot be based on total handset price and that doing so exposes a firm to potential antitrust liability.

On Qualcomm’s “no license, no chips” policy, the Ninth Circuit stated:

This is not to say that Qualcomm's “no license, no chips” policy is not “unique in the industry” (it is), or that the policy is not designed to maximize Qualcomm's profits (Qualcomm has admitted as much). But profit-seeking behavior alone is insufficient to establish antitrust liability. As the Supreme Court stated in Trinko, the opportunity to charge monopoly prices “is an important element of the free-market system” and “is what attracts ‘business acumen’ in the first place; it induces risk taking that produces innovation and economic growth.” Trinko, 540 U.S. at 407, 124 S.Ct. 872. The record suggests that this case is more like Am. Express, where a company's novel business practice at first appeared to be anticompetitive, but in fact was disruptive in a manner that was beneficial to consumers in the long run because it forced rival credit card companies to adapt and innovate. 138 S. Ct. at 2290. Similarly here, companies like Nokia and Ericsson are now “[f]ollowing Qualcomm's lead” with respect to OEM-level licensing, and beginning in 2015 rival chipmakers began to successfully compete against Qualcomm in the modem chip markets. We decline to ascribe antitrust liability in these dynamic and rapidly changing technology markets without clearer proof of anticompetitive effect.

On the alleged anticompetitive nature of Qualcomm’s dealings with Apple, the Ninth Circuit stated:

Even if we were to agree with the district court that the Apple agreements were exclusive dealing contracts that substantially foreclosed competition in the relevant antitrust markets, it is undisputed that these agreements do not pose any current or future threat of anticompetitive harm. Despite the “clawback provisions,” Apple itself terminated the agreements in 2015—two years before the FTC filed its action. Thus, while we agree with the district court that these were structured more like exclusive dealing contracts than volume discount contracts, they do not warrant the issuance of an injunction.

Finally, the Ninth Circuit nicely sums up its reasoning and approach:

Anticompetitive behavior is illegal under federal antitrust law. Hypercompetitive behavior is not. Qualcomm has exercised market dominance in the 3G and 4G cellular modem chip markets for many years, and its business practices have played a powerful and disruptive role in those markets, as well as in the broader cellular services and technology markets. The company has asserted its economic muscle “with vigor, imagination, devotion, and ingenuity.” Topco Assocs., 405 U.S. at 610, 92 S.Ct. 1126. It has also “acted with sharp elbows—as businesses often do.” Tension Envelope Corp. v. JBM Envelope Co., 876 F.3d 1112, 1122 (8th Cir. 2017). Our job is not to condone or punish Qualcomm for its success, but rather to assess whether the FTC has met its burden under the rule of reason to show that Qualcomm's practices have crossed the line to “conduct which unfairly tends to destroy competition itself.” Spectrum Sports, 506 U.S. at 458, 113 S.Ct. 884. We conclude that the FTC has not met its burden.

First, Qualcomm's practice of licensing its SEPs exclusively at the OEM level does not amount to anticompetitive conduct in violation of § 2, as Qualcomm is under no antitrust duty to license rival chip suppliers. To the extent Qualcomm has breached any of its FRAND commitments, a conclusion we need not and do not reach, the remedy for such a breach lies in contract and patent law. Second, Qualcomm's patent-licensing royalties and “no license, no chips” policy do not impose an anticompetitive surcharge on rivals’ modem chip sales. Instead, these aspects of Qualcomm's business model are “chip-supplier neutral” and do not undermine competition in the relevant antitrust markets. Third, Qualcomm's 2011 and 2013 agreements with Apple have not had the actual or practical effect of substantially foreclosing competition in the CDMA modem chip market. Furthermore, because these agreements were terminated years ago by Apple itself, there is nothing to be enjoined.