In January 2017, the Federal Trade Commission (FTC) filed an antitrust complaint against Qualcomm in the Northern District of California. The FTC alleged that Qualcomm had unlawfully monopolized the market for certain semiconductors important in smartphone technology. Among other things, the FTC claimed that Qualcomm had maintained its market position by requiring chip customers to license their chips separately (known as the “no license, no chips” policy) and had refused to license its standard-essential patents (SEPs) to competitors.
Judge Lucy Koh held a bench trial in January 2019 and issued a decision in favor of the FTC in May 2019. In a lengthy opinion, the court determined that Qualcomm’s “no license, no chips” policy violated antitrust law and that Qualcomm had a separate antitrust duty to deal with its competitors. Judge Koh then issued an injunction that, among other things, prohibited Qualcomm from conditioning the supply of chips on a customer’s patent-license status and required Qualcomm to negotiate and make available licenses on FRAND terms.
Qualcomm appealed to the Ninth Circuit. In August 2019, the Ninth Circuit issued an order partially staying Judge Koh’s injunction. According to the Ninth Circuit, “Qualcomm has shown, at a minimum, the presence of serious questions on the merits” of the district court’s opinion. Additionally, the Ninth Circuit needs to decide whether the district court’s “order and injunction represent a trailblazing application of the antitrust laws, or instead an improper excursion beyond the outer limits of the Sherman Act.”
While these issues alone would be interesting, this case is even more intriguing because the Department of Justice (DOJ) has intervened in the case – in favor of Qualcomm. The DOJ filed an amicus brief in favor of the stay of injunction, as well as an amicus brief on the merits. The Ninth Circuit has also granted DOJ’s request for five minutes of oral argument time. Oral argument in the Ninth Circuit is set for February 13, 2020.
This Litigation Update teleforum will recap the district court’s decision, discuss the arguments likely to be made on appeal, and explore the bigger issues this case brings up for antitrust policy.
- Hon. F. Scott Kieff, Fred C. Stevenson Research Professor of Law and Director, Planning and Publications, Center for Law, Economics, & Finance, George Washington University Law School
- Prof. Kristen Osenga, Austin E. Owen Research Scholar & Professor of Law, The University of Richmond School of Law
Teleforum calls are open to all dues paying members of the Federalist Society. To become a member, sign up on our website. As a member, you should receive email announcements of upcoming Teleforum calls which contain the conference call phone number. If you are not receiving those email announcements, please contact us at 202-822-8138.
Operator: Welcome to The Federalist Society's Practice Group Podcast. The following podcast, hosted by The Federalist Society's Intellectual Property Practice Group, was recorded on Wednesday, February 12, 2020, during a live teleforum conference call held exclusively for Federalist Society members.
Micah Wallen: Welcome to The Federalist Society's teleforum conference call. This afternoon's topic is, "A Litigation Update on FTC v. Qualcomm." My name is Micah Wallen, and I am the Assistant Director of Practice Groups at The Federalist Society.
As always, please note that all expressions of opinion are those of the experts on today's call.
Today, we are fortunate to have with us the Honorable Scott Kieff, who is a Fred C. Stevenson Research Professor of Law at George Washington University Law School. We also have Professor Kristen Osenga, who is an Austin E. Owen Research Scholar and Professor of Law at the University of Richmond School of Law. After our speakers give their opening remarks, we will then open up the lines for an audience Q&A.
Without any further ado, Kristen, the floor is yours.
Prof. Kristen Osenga: Thanks so much, Micah. As mentioned, I'm Kristen Osenga, Professor of Law at the University of Richmond School of Law. And I'm going to start off this teleforum talking about how the FTC v. Qualcomm case was brought, the opinion rendered by the district court, and a little bit about how the case got to where it is now on appeal. And then I'll go ahead and turn it over to Scott Kieff, who will talk about maybe the arguments we should expect to hear tomorrow when the case is argued before the Ninth Circuit, as well as some of the broader issues in this case with respect to the patent and antitrust laws.
So this case was brought in January 2017, and from the beginning, the case was rather unique. At the time, there were only three of the usual five members at the Federal Trade Commission, or FTC. And the vote to bring the case was 2-1. Commissioner Maureen Ohlhausen, the dissenting vote, issued a rare written dissent. The vote to bring the case was taken just three days before President Trump took office, and political power shifted. And also, the complaint was brought under Section 5 of the FTC Act rather than under the Sherman Act. All of these things, very unusual.
In Commissioner Ohlhausen's own words, this was "an enforcement action based on a flawed legal theory (including a stand alone Section 5 count) that lacks economic and evidentiary support, that was brought on the eve of a new presidential administration, and that, by its mere issuance, will undermine U.S. intellectual property rights in Asia and worldwide."
The FTC filed this antitrust complaint against Qualcomm in the Northern District of California alleging that Qualcomm had unlawfully monopolized the markets for certain modem chips or processors. And these chips are integral for CDMA technology, 3G, and LTE 4G. Qualcomm is a key player in the development of these technology and up to 5G and participates in related standards development organizations. They earn patents for their innovations, and they license these patents.
The FTC made three particular claims about Qualcomm's behavior. First, the FTC alleged that Qualcomm required chip customers to license the patent separately before it would sell them the chips, and this is known as the "no license, no chips" policy, according to the FTC.
Second, Qualcomm declined to license its standard essential patents, or SEPs, to competing or rival modem chip suppliers. And third, the FTC alleged that Qualcomm had used de facto exclusive dealing arrangements with Apple.
All of these, according to the FTC complaint, allowed Qualcomm to maintain elevated royalties and other unreasonable license terms and, therefore, were anti-competitive.
Prior to trial, the court heard a couple motions. The court denied Qualcomm's motion to dismiss and found that the FTC had alleged a valid antitrust complaint, and they agreed to the FTC's motion for partial of summary judgment, finding that Qualcomm did have a duty to provide licenses on fair, reasonable, and nondiscriminatory, or FRAN terms, for any patents declared to a couple of certain standard development organizations.
In January 2019, Judge Lucy Koh, the Northern District of California, held a 10-day bench trial, and many witnesses and economic experts were heard. In response to the FTC's allegations that I listed above, Qualcomm argued that the FTC hadn't met its burden and that Qualcomm's market position was one to superior innovations and better products and finally, that these practices it had engaged in had not harmed competition.
In May of 2019, the court issued a decision in favor of the FTC. In a very, very lengthy opinion, Judge Koh began by concluding that Qualcomm did have market power in the relevant markets. And with respect to the FTC's allegations, the court first found that Qualcomm's “no license, no chips” policy amounted to anticompetitive conduct that allowed Qualcomm to obtain high royalty rates.
With respect to their willingness to license the SEPs, the court found that Qualcomm had not been willing to do so, and more interesting, determined that Qualcomm had a separate antitrust based duty to deal with its rivals under a really old Supreme -- not really old, kind of old, Supreme Court case called Aspen Skiing.
So as a side note here, Aspen Skiing has been criticized as an outlier case, limited by various courts to its specific facts, etc. because it really walks past a lot of most antitrust precedent. And yet, the Aspen Skiing case is exactly the peg that Judge Koh hung this case on. And then she went even further than what's already found to be an outlier case. So this is one of the most concerning aspects of the district court's opinion.
In any case, the court found that Qualcomm had breached, whether it be its contractual obligation duty to deal or these antitrust duties to deal, and therefore, they were able to impose extra costs on its rival, again, harming competition.
And so with respect to the third claim that Qualcomm had engaged in de facto exclusive dealing arrangements with Apple, Judge Koh did look at a couple of agreements, some earlier agreements between the two, determined they were de facto exclusive dealing arrangements because they "coerced Apple into purchasing a substantial portion of its supply from Qualcomm," again, harming competition.
So this case lies at the very heart of the intersection between patent law and antitrust law. And yet, in addition to stretching the antitrust law, possibly past reasonable limits, the district court also sidestepped the impact on patent law. Judge Koh made no findings about the strength or value of Qualcomm's patents and didn't use any concept from patent law in determining a reasonable royalty. And patent law actually has a pretty robust body of precedent that discusses how to determine reasonable royalties and how to use established rates.
She just simply decided the rates were too high. And if she had actually looked at the evidence of what was happening in the smart phone industry, she may have seen decreased prices, increased features and functionality, and many market entrances, none of which support the findings she made of unreasonably high royalty rates.
After finding that Qualcomm had violated the FTC Act, the court then issued a sweeping injunction which prohibited Qualcomm from using this “no license, no chips” policy, required Qualcomm to negotiate licenses and renegotiate existing licenses, and make exhaustive licenses available for SEP patents on FRAN terms to both rival chip makers as well as phone manufacturers, and then finally, prohibited Qualcomm from entering into either express or de facto exclusive dealing arrangements.
Not surprisingly, Qualcomm appealed to the Ninth Circuit. In August 2019, the Ninth Circuit issued an order partially staying Judge Koh's injunction. According to the Ninth Circuit, "Qualcomm has shown, at a minimum, the presence of serious questions on the merits of the district court's opinion." Additionally, the Ninth Circuit needed to decide whether the district court's order and injunction "represent a trailblazing application of antitrust laws or, instead, an improper excursion beyond the outer limits of the Sherman Act."
Not surprisingly, this case has garnered many amicus briefs. Groups weighing in on both sides as well as briefs in favor of neither party. I will admit my priors. I'm a signatory on a brief of antitrust and patent law professors, economists, and scholars that are arguing that this is antitrust overreach and really bad for patent law.
But as noted in the write up for this teleforum, this case is especially intriguing because the Department of Justice also filed an amicus brief. So of course, the Department of Justice is the other institution charged with enforcing antitrust laws in the United States. And they filed an amicus brief in favor of the stay of injunction supporting Qualcomm, as well as an amicus brief on the merits of the case. In its efforts to stay the injunction, the Department of Justice also got some support from the Departments of Defense and Energy based on the position that the injunction that Judge Koh had issued could undermine United States leadership in the race to 5G technology and that would have an impact on national security.
And in fact, the Ninth Circuit has granted the Department of Justice's request for five minutes of time at tomorrow's oral argument. The apparent split of opinion is not just between the FTC and DOJ, although that's really interesting, but one of the FTC commissioners, Christine Wilson, has also publicly criticized the FTC's continued pursuit of this case, including saying in a Wall Street journal op-ed that she's dismayed by Judge Koh's opinion and fears that it could have long-standing negative effects.
And with that, I'm going to turn it over to Scott, who might tell you what some of the arguments you might hear tomorrow are, as well as some of these broader issues and negative effects.
Hon. Scott Kieff: Thank you so much, Kristen. That's just an immensely helpful overview, both in telling us what's going on and telling us where some of the wrinkles lie. It's in the spirit of then highlighting some more wrinkles I thought I might offer some additional ideas, recognizing that like Kristen, although I haven't weighed in formally in this particular case, I have taken a number of positions over the arc of my career on topics related to this case including both parties in the case and so thought it might be helpful to include on a webpage for the teleforum a short piece that discusses some of the issues I'll highlight here in case folks are interested in following up.
So I think one central wrinkle that's worth just noticing related to how the case got started. As Kristen pointed out, it got started at a time when you had transition in a multi-member agency. The Federal Trade Commission is one of these parts of the U.S. government that was purposefully built by our society to have a particular structure. There are a number of these so-called independent commissions that were setup this way. The Federal Trade Commission is one of them.
There are others, the Securities and Exchange Commission, the Federal Communications Commission. There are many, but in these multi-headed bipartisan commissions, the structure was really an important part of the deal. That's why they were made, and that's why they were made their way. And their way is the FTC has a lot of staff. It also is run by commissioners, plural. There are five commissioners. No more than three are supposed to be a member of the same party, and the chair is set by the president.
So the practice has been for a long time that these are agencies in which in effect the president sets a significant amount of the agenda. The president, whether she or he has long been in office or is new to office, gets to pick who's the chair, basically, can keep the chair for a fair amount of time and basically, can remove the chair.
So that means you basically have a president backed up by a chair backed up by a majority of commissioners. And it's not a pure power system. The whole gist of this is to have the offsetting members, the minority commissioners, able to walk around the building and talk to staff and try to exchange in the marketplace for ideas within the building with the majority commissioners and the chair, as well as with the investigatory staff, and of course, to be able to publish dissenting opinions. And then, of course, for all of this to switch when majorities switch or when the president switches.
So what's interesting about this particular case is you're transitioning from presidential administration number one to presidential administration number two, and you're switching political parties. And yet, the practical effect of the transition process was that you were left with a staff that had not managed to convince the prior administration to really get the case going before that administration left but was able, in the eleventh hour—or, to stick with the clock analogy, something more like 11:59 PM—to move forward with the case, supported or covered by the residual two commissioners who had been in effect in the majority power structure of the prior regime, without the new presidential administration, the new chair, and the new majority able to intervene.
So if these agencies are created explicitly and deliberately to allow for collaboration and competition in the marketplace for ideas and to allow for elections to have consequences and changes to be made and preferences to dominate, then it is worth noticing that in the choice between chocolate and vanilla, the choice being exercised and the choice being made and a change happening, we had the old flavor ruling the day rather than the new flavor.
That's not to say that everybody has to agree on flavor, of course, that's the thing about flavor. Reasonable minds can differ. But it is noteworthy that you've got a staff working in effect through or under the cover of a residual power structure that had not even managed to get that prior power structure to bring a case, was somehow able to get the new power structure to bring the case precisely because the new power structure was not even in place. So it was the gap of transition that is associated with the start of this case.
There's something else that flows from that gap in the debates that we have long had in our system about how independent and how constitutional powers of our government are when they're exercised. We think of these agencies as being more independent and we think of that as a good thing. But we also want them to be somewhat reviewable or somewhat subject to outside pressure from the political branches. That's why we don't locate them in the third branch in the court system.
And yet, in the fight over independence, we have something that is almost like the Dean Wormer, Animal House remark about double secret probation. Here we have double-layered independence and its double-layered secret independence, which is to say you've got a staff acting independently of the commissioners, and it's the commissioners who are supposed to be somewhat independent of the Executive or the Legislative Branches, and at least the agreement they have to reach with each other over nominations and confirmations.
This is quite an extraordinary amount of independence. This is really just a small number of staff within an agency like this, are able to bring an action like this. And then the action's pretty big. So if you do a quick search for news articles covering this case, everybody seems to have a view on this case. This is attracting an incredible amount of attention.
Let me then just highlight some of the other themes that Kristen mentioned. She mentioned that there doesn't seem to be a lot of formal adjudication in the case around the heart of the case. The heart of the case is a notion that there's too much value being extracted by one side, like Qualcomm, the patentee. Maybe there is, maybe there isn't, but at least if you wanted to ask yourself as someone studying the case, what makes for too much?
You'd, presumably, want to get a sense of what makes for just right. Mama bear, papa bear, baby bear, there's something that's too little. There's something that's too much. There's something that's just right. Too much must be more than just right, more than the right amount. But there isn't a reported discussion in the determination in the case of what really is the right amount.
Now, it's not that strange that a specific number be absent, but it is a little odd that there's not even a discussion qualitatively of what generally would be a good amount. And I think one reason that may be the case is, as some of the commentators have pointed out, it's not clear what really is informing the anti-competitive nature, what really is informing the arguments about anti-competition effect in this case.
Is it some core duty that arises out of antitrust law to generally help customers who want to buy or rent stuff from you, buy your chips or take a license under your IP? Is it the reasonableness of the price being charged that might be in violation of a commitment to a standard setting organization to give the world prices that are fair, reasonable, and nondiscriminatory? Is it the R of FRAN? It's really a derogation of a duty to live up to a commitment to a group, then why is there not more of a formal contract law breach of contract analysis going on? And then, of course, breach has to be material to matter. Why is there not an analysis of how bad the breach was or what signpost would've made it better?
There are some, in these more recent phases of the case, some interesting discussions about how people outside of the regular patent antitrust interface have gotten involved in the case. People in the security or national security field have weighed in. And some have suggested that national security concerns require a result in favor of one side, and others from that same field have weighed in to say the exact opposite.
I, at least, wonder whether there's a little bit of risk that both sides are falling into by focusing so much on strong versions of those arguments and on how right or wrong price is because price really, specific pricing or even the nature of pricing, is not really still the focus of the analysis. It might be the case that national security interest in avoiding, for example, a 5G infrastructure from China, might still suggest some interest or some importance in both side of the case, just like allowing the patentee to negotiate over its own IP might not necessarily lead to the kind of monoculture risks that the other side of the case are expressing a lot of concern about.
So I think there's some room to maneuver on both of those. Why don't I pause her and invite some back and forth, either from Kristen or from the audience?
Micah Wallen: Not seeing a question jump in the liens yet. Kristen, I will toss it back over to you.
Prof. Kristen Osenga: Thank you. I think that I would like to toss a question to you. With the Ninth Circuit signaling pretty clearly that it did not love Judge Koh's opinion and its stay of the injunction, indicating serious problems and excursions beyond the Sherman Act, would you hazard to guess whether they're going to take up more seriously with the extension of Aspen Skiing or would you think the Ninth Circuit's going to focus instead on the lack of any rigorous antitrust analysis?
Hon. Scott Kieff: I would love to tell you about tomorrow two days from now when tomorrow is yesterday. It's hard to tell you about tomorrow when it's still tomorrow. So I think it's tricky.
I do think an appellate court in a case like this might in effect stay the lower court action without actually harboring deep skepticism about the case but rather harboring a great apprehension about making sure it does the right thing itself. So a pause and a we're-going-to- do-it-ourselves activity may signal more a desire to roll up their sleeves and dive in than a desire to criticize below.
That being said, not every case that gets a long written published opinion by a federal appellate court is also one where the appellate court stays the lower court. So you can read some tea leaves, I agree with you. I think it's tricky to see what exactly the Ninth Circuit wants to do, and I think it's not likely the FTC and the companies celebrating the FTC's effort will stop at the Ninth Circuit, if the Ninth Circuit presents an obstacle for them. I think given that, the dynamic effects within the Ninth Circuit become more complicated, and I think that's the lens through which I will try to refract the analysis, inter-circuit play, if you will.
Prof. Kristen Osenga: Fair enough.
Micah Wallen: All right, and we do have an audience lining up for a question. So without further ado, we'll move to that caller.
Ned Jacobs (sp): Good afternoon. This is Ned Jacobs calling from Saint Croix in the Virgin Islands. Is it unusual for the Department of Justice to step in and disagree with one of these independent or semi-independent agencies of the federal government in a case like this? Does this indicate that President Trump is likely opposed to the position that had been taken by the agency? Is there any movement to get rid of staff within that agency that may be advocating Obama type of principles as opposed to Trump type of principles?
Hon. Scott Kieff: So first of all, from cloudy Washington D.C. to what I imagine is sunny Saint Croix, hi, and can you send us some warm weather, please? Second of all, I think that you're right. This is one of these interesting cases where you see one part of a government interacting with another part of the same government. But if you go back to the sum of the discussions that both Kristen and I were raising, that's in a sense also not new since that's how the case started. Remember, it was within the one agency during the transition that this sprung up. So there have been a couple of places to take the conversation.
One direction ago is to say well, but now you have the Department of Justice Antitrust Division, a main line Executive Branch agency, expressing the Executive Branch energy preference. Is that conflict with a so-called independent agency a big thing? Well, it's not every day, but it's not a big thing. It's not unheard of.
In fact, you'll see over the last many years, it's become common for agencies to express views about each other. And sometimes that's because agencies feel that they want to protect their own lane. Sometimes, it's agencies that want to expand their own lane. Sometimes, it's not an agency, [inaudible 25:14] of course, agencies are really groups of human beings. It's some control group or relevant group within an agency.
I will tell you that the document posted on the webpage for this teleforum is a document I wrote when I was a commissioner of the U.S. International Trade Commission in a formal communication to the Department of Justice Antitrust Division and the Federal Trade Commission. But it represents the views of Commissioner Kieff, not the U.S. International Trade Commission because all six International Trade Commission commissioners did not vote on it.
Sometimes, some of the documents that move around in this space, including the documents both of those agencies sent over to the agency where I used to work, sometimes those documents, like the one posted on this webpage, bear the name of an individual commissioner. Sometimes, the popular perception is that that represents the action of the agency. It doesn't unless the plurality of commissioners went through the ordinary adjudicative process within the agency to reach a determination based on that action.
And otherwise, it's a group of independent professionals with the power of their office expressing their own views. We all have views. We hope they're well-formed, but they're different. And I think that underlying your question is well, can this Executive Branch weigh in? And the answer is it is weighing in. Past Executive Branches have weighed in. They have weighed in in a space just like this.
What are their tools for weighing in? They include setting the majority of commissioners on the commission, setting the chair of the commission, having other Executive Branch agencies weigh in. Here, the Department of Justice Antitrust Division as well as some other agencies within the U.S. government have weighed in.
You also ask about removing personnel. That is much harder, and that's, in fact, how the staff were able to start this case, is they were able to start this case because of administrative ordinary delays and recusals with incoming individuals. At that point, the train had left the station, and once the train had left the station, the train basically continues down the tracks.
Kristen, did you have anything you wanted to add?
Prof. Kristen Osenga: Well, I guess I could say I guess I'm a little more cynical -- not cynical, cynical is not the right word. Anyway, I have a slightly different perspective than Scott in that I do think, at least in this moment in time, we might be seeing a slight difference of priorities when it comes to the FTC versus the DOJ.
And I say that largely based on some of the priorities that have been announced by Mr. Delrahim of the DOJ and a very pro-patent, pro-innovation stance that he has taken in all of his public remarks. And I don't now that we've seen that same priority come out in the same way as the FTC. So to the extent that there might be a difference of opinion between the two agencies, I think that that's maybe evidence of that.
Micah Wallen: All right. We have another caller in the queue. We'll now move to that next caller.
Walter Clapp: Hi, this is Walter Clapp. I practice a little litigation in Montana. I'll admit I'm not super familiar with the Sherman Act, so I've been doing a little reading while we've been on this call. And I think the thing that was most interesting to me was in this last moment, you were talking about the staff starting this case in this cog, starting this wheel in motion and how that really is the fourth branch by the administrative branches of our government that are wholly unaccountable. And I just found that interesting.
The second thing that I'd like to notice, and then it will turn into a question, I assure you. I was on Wikipedia, and I saw that the -- it ends that the Sherman Act exists as a competitive marketplace to protect consumers from abuses. I practice a bit of family law, and we obviously deal with abuse. That's a different type of abuse.
It struck me that what we're talking about is something moral. It's a fine line, like abuse, sexual abuse or abuse of individuals physically. And here we're talking about market manipulations, but it's still a moral question and the fact that it exists independent of the -- I don't know. The signposts seem to have eroded away, and I look at this. And I guess my question is looking to an act that was passed in 1890 that has these signposts for abuse, are we in need of great change here? Are there larger changes that you personally would recommend or are those actions afoot already?
Prof. Kristen Osenga: I'll go ahead and start, Scott. There's always a potential for changes afoot. Part of the beauty of the Sherman Act that hasn't really changed since 1890 is the fact that it's so flexible. Who knew that we would have Facebook, Netflix, Amazon, etc. that are currently being investigated by the FTC for possibly anti-competitive behavior. Who knew that in 1890?
So by having a very broad act that's really focusing on competitive harm in whatever way, shape, or form that is without a whole lot of really strict sign posts is actually beautiful, because it lets us keep up with the times, and we want that and we like that. So I actually am kind of happy that there's not a whole lot of hard structure built into the Sherman Act for that reason.
Is there changes afoot? Possibly. There's always people who want to make some changes, and I read about some this morning in Law 360. So they're always there, but I think that recognizing that the lack of sign posts is actually a feature not a bug of the Sherman Act makes it a little more beautiful and easier to take. Do you have any thoughts, Scott?
Hon. Scott Kieff: I would just add I do think that there is some world view differences here. And I have a world view, and it gets to be wrong like everyone else's, but maybe it's not wrong. So my world view about patents and antitrust as they interact in a case like this one gets me to think a whole lot less about value and whether the value is unreasonably high or unreasonably low. I care a lot more about who is setting the value.
And so I, having had to sit as an adjudicator adjudicating cases like this and as someone who thinks of himself as reasonably smart and skilled in these fields, I can tell you I don't know the right answer on valuation if you ask me to pick one. But I am equally confident no one else does. And I do think everyone else does for themselves.
So what do I mean by that? What I mean is the more we can encourage private ordering and parties to reach agreement with each other, the more we free the government mediators in the middle and adjudicators from having to trace through all of these disputes, the exact right value that everyone's contributed. What makes a smartphone so awesome is a very, very complicated question. And I don't think it's actually helpful for the system to try to figure out very much whether prices are too high or too low for most mainstream market transactions of this type.
Does that mean we should have no antitrust? No. But it does mean we should be looking at many of the things Kristen was talking about in her opening remarks like is this an industry whose structure is generally characterized by stable or increasing prices or stable and decreasing quality? And if so, that looks like a bad market. But if this is a market where price, quality is -- or quality adjusted prices are just falling like a stone and that means prices are going down and quality is going up, and participants are entering the market on a regular basis and the market is really for more than my particular kind of product even if my particular kind of product is right now hip and where it's at because either everyone wants to be there, it's just in fashion, or everyone has committed to each other to some degree that that is a technical standard they want to follow for the moment.
All of those fashion and technical standards commitments say only a little bit about the overall structure of the market and lock in effects and lock out effects. But plummeting quality adjusted prices and ever ongoing flows of market entrance, those things tell us a lot about market structure, and they tell us that this is a competitive market that's generally doing fine, which generally seems like a bad case for antitrust scrutiny.
Micah Wallen: One question just popped up in the queue. We'll now go to our next caller.
Rob Rando: Hi, this is Rob Rando, mostly patent litigation out of New York. I have a question, might be a little bit off the mark, but I'll ask it anyway. To what extent do you think that the considerations of this case revolve around, or maybe determined or influenced by, the security concerns and the issue of Qualcomm being the only viable U.S. developer of 5G?
Hon. Scott Kieff: I think that it is worth noticing that the briefs focusing on security entered late in the game, not early in the game. Now, those are externally filed briefs. They weren't the focus of the parties' arguments, although they were present in the parties' arguments at the start. I do think with respect to the monoculture national security argument, I think it would be worth asking a lot about it before reaching a decision one way or the other.
So for example, it is true, we see this with human beings and human viruses all the time. You happen to get a virus that does well in the human culture. And zing, man, you've got an epidemic pretty quickly, and that's bad for everyone. So the concept of risk for monoculture is really powerful and really important. But just because it's really powerful and really important doesn't mean honoring it gets you a win on a case like that because what are the alternatives?
Well, first of all, is it better to have a U.S. monoculture or better to have a Chinese monoculture? Well, I think we're seeing all over the political spectrum and all over the planet a general recognition that however invasive may be the U.S. national security apparatus, it is more friendly to most of the rest of the world than the national security apparatus of China.
So even if the monoculture point is a powerful one, not sure that that militates in favor of Huawei as the winner. Secondly, it's not clear that giving Qualcomm a total free pass on a case like this and a total win on every patent case they bring leaves them as the U.S. monoculture. Intel was very heavily in the market for modems that were going to compete with Qualcomm's modem, until Intel chose to get out of that market.
I don't think they made that choice because it couldn't be done. They made that choice because it suited them in the moment. They're reasonable people, I don't question their decision. But the fact that they were, until that decision, so heavily invested in that space, suggests to me that it was quite reasonable and possible for an entity like them, indeed, them, to be invested in that space, which would've been competition.
Same with Samsung. And Intel and Samsung are not the only last hopes here. There's a lot going on in the so-called national security analysis other than national security requires Qualcomm wins or national security requires Qualcomm loses.
Micah Wallen: No other questions in the queue. I will leave it to both of you if you have any closing remarks.
Prof. Kristen Osenga: No. I just think it'll be interesting what we hear tomorrow.
Hon. Scott Kieff: We look forward to it.
Micah Wallen: All right. Well, on behalf of The Federalist Society, I'd like to thank both of our experts for the benefit of their valuable time and expertise today. We welcome listener feedback by email at email@example.com. Thank you all for joining us. We are adjourned.
Operator: Thank you for listening. We hope you enjoyed this practice group podcast. For materials related to this podcast and other Federalist Society multimedia, please visit The Federalist Society's website at fedsoc.org/multimedia.