On October 28, 2020, the full US Court of Appeals for the Ninth Circuit denied the US Federal Trade Commission’s (FTC) petition for en banc review of the Court’s earlier decision in FTC v. Qualcomm. The prior decision, issued by a panel of the Court on August 11, 2020, was a significant setback for the FTC. It reversed the US District Court for the Northern District of California’s trial decision, which held that Qualcomm’s sales and licensing practices violated Sections 1 and 2 of the Sherman Act. At issue was a Qualcomm licensing practice in which it refused to license its cellular modem chip technology to rival chip manufacturers (such as Intel) and instead licensed exclusively to cell phone handset manufacturers (such as Samsung and Apple), who were customers for its chips. Pursuant to the policy, Qualcomm refused to sell chips to cell phone manufacturers unless they first obtained a license. Qualcomm permitted rival chip manufacturers to create and sell chips employing Qualcomm’s Standard Essential Patents (“SEPs”) without a license in exchange for a commitment that the rivals would license only to OEMs that had entered into a license agreement with Qualcomm. The policy was dubbed “no license, no chips.” Qualcomm’s “no license, no chips” policy was devised to avoid “patent exhaustion” and earn a higher premium on its licenses by licensing downstream to chip customers rather than directly to chip manufacturers.
Please click here to read the full client alert: No Chips? No Worries. Ninth Circuit Rejects FTC’s Petition for En Banc Review of Decision Holding that Qualcomm Has No Antitrust Duty to Deal with Rivals.