Ohlhausen wants to explore FTC withdrawing Qualcomm suit

29 March 2017 12:16pm

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23 January 2017. By Claude Marx, Mike Swift and Joshua Sisco.

The lone Republican at the US Federal Trade Commission said she is considering whether to press for the agency to drop its suit against Qualcomm, which could ease significantly the Southern California chipmaker's mounting antitrust headaches.

Maureen Ohlhausen, who is expected to soon be named interim FTC Chairwoman by President Donald Trump, told MLex Monday that she wants the agency's new Republican majority to consider dropping the antitrust suit it filed against Qualcomm on Jan. 17.

"I'd like to explore the possibility of that," Ohlhausen said on the sidelines of Internet policy conference* in Washington, acknowledging she would need a majority of commissioners to reverse course. But with current FTC chairwoman Edith Ramirez set to step down from from the agency February 10, the Democratic majority that approved the Qualcomm suit is in its final days.

In public comments at that same conference, Ohlhausen said that she has not seen strong enough evidence of competitive harm to justify the FTC's suit against Qualcomm in the Northern District of California. She said she is also concerned that no matter the outcome, the filing of the case could erode the strength of intellectual property rights for US companies around the world.

A Qualcomm spokeswoman declined to comment on Ohlhausen's statements Monday. But with the company facing global regulatory scrutiny and multiple private antitrust suits in the US, including a consumer suit filed Jan. 18 on the heels of the FTC complaint, any move by regulators to back down would be a boon to Qualcomm.

On Friday, Apple sued Qualcomm, with allegations similar to the FTC. Losing an ally in the FTC would be a blow for Apple and other mobile phone handset makers that have been supplying the regulator with evidence needed to make its case. However, the handset makers would likely view a dismissal as a purely political move and be spurred to fight Qualcomm even more aggressively.

Ohlhausen dissented in the FTC's 2-1 vote to sue Qualcomm, and the company quoted her in its public response to the suit last week, saying the FTC suit is "an enforcement action based on a flawed legal theory (including a standalone 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 US intellectual property rights in Asia and worldwide."

Apple provided evidence for the FTC's investigation into Qualcomm as well as the antitrust inquiry of the Korea Fair Trade Commission, according to its complaint. Apple said that in retribution for its lawful participation in regulatory investigations, Qualcomm withheld about $1 billion that the iPhone maker says it is contractually owed.

Qualcomm is certain to have a very different take on Apple's conduct with the KFTC and other regulators when it files its response to Apple's suit in US district court in San Diego. As other patent holders in wireless technology standards such as 4G and LTE have argued in patent disputes against Apple, Qualcomm is likely to claim that Apple's hugely profitable iPhone business would have been impossible without decades of costly research and development by Qualcomm.

Apple, opposing patent litigators have argued in the past, was a late arrival to the wireless business when it introduced the iPhone in 2007, and it has little intellectual property of its own in wireless technology. Apple's sprawling patent battle against Samsung, for example, was based exclusively on patents covering the design and internal software functions of the iPhone, not the technology that allows Apple's smartphone to connect to cellular networks.

Ohlhausen has signaled in recent days that she will be a strong proponent of enforcing patent rights on a Republican-led FTC during Trump's presidency. In a recently published academic article, Ohlhausen called the US innovation system "an extraordinary success story," and said it was central to the US economy.

*2017 State of the Net Conference, sponsored by the Internet Education Foundation; Washington; Jan. 23, 2017.

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