Northern District of California, San Jose D.C. No.
Before: TASHIMA, M. SMITH, and BENNETT, Circuit Judges.
Qualcomm Incorporated ("Qualcomm") moves for a
partial stay pending appeal of the district court's May
21, 2019 permanent injunction, which it entered following a
trial on antitrust claims brought by the Federal Trade
Commission ("FTC"). We grant Qualcomm's motion.
alleged that Qualcomm, a leader in cellular standard
technology, violated Sections 1 and 2 of the Sherman Act and
Section 5 of the FTC Act in connection with the licensing of
its standard essential patents ("SEPs") and sale of
its code division multiple access ("CDMA") and
premium long-term evolution ("LTE") modem chips.
Specifically, Qualcomm refused to license SEPs to rival chip
suppliers, allegedly in contravention of commitments Qualcomm
made to certain standard setting organizations in the
industry; refused to sell modem chips to any original
equipment manufacturers ("OEMs") that lacked patent
licensing agreements with Qualcomm; and imposed in its OEM
licensing agreements excessive royalty rates on a per-handset
basis, irrespective of whether the handset contained a
Qualcomm chip or a chip from one of Qualcomm's
competitors. The complaint alleged that the upshot of this
conduct was to maintain Qualcomm's monopoly in the CDMA
and premium LTE chip markets and impose an anticompetitive
surcharge on its competitors' chips.
ten-day trial, the district court issued extensive findings
of fact and determined that Qualcomm's practices violate
the antitrust laws. The district court concluded that
Qualcomm (1) has an antitrust duty to license its SEPs to
rival chip suppliers, and (2) engaged in anticompetitive
conduct by using its royalty rates to effectively impose a
surcharge on its competitors' chips. The district court
entered a multipart permanent injunction.
seeks a stay of the injunction's provisions requiring
that Qualcomm make exhaustive SEP licenses available to its
competitors, prohibiting Qualcomm from conditioning chip
sales on the purchase of patent licenses, and requiring
Qualcomm to negotiate or renegotiate its license agreements
in that respect.
determine whether to issue a stay pending appeal, we consider
"(1) whether the stay applicant has made a strong
showing that he is likely to succeed on the merits; (2)
whether the applicant will be irreparably injured absent a
stay; (3) whether issuance of the stay will substantially
injure the other parties interested in the proceeding; and
(4) where the public interest lies." Nken v.
Holder, 556 U.S. 418, 426 (2009) (quoting Hilton v.
Braunskill, 481 U.S. 770, 776 (1987)). An applicant for
a stay "need not demonstrate that it is more likely than
not they will win on the merits," but rather must show
"a reasonable probability" or "fair
prospect" of success. Leiva-Perez v. Holder,
640 F.3d 962, 966-67 (9th Cir. 2011) (quoting
Hollingsworth v. Perry, 558 U.S. 183, 190 (2010)).
Applying those factors here, we grant Qualcomm's motion
for a partial stay of the injunction pending appeal.
well-settled that, "as a general matter, the Sherman Act
'does not restrict the . . . right of [a] trader or
manufacturer engaged in an entirely private business, freely
to exercise his own independent discretion as to parties with
whom he will deal.'" Verizon Commc'ns Inc.
v. Law Offices of Curtis V. Trinko, LLP
("Trinko"), 540 U.S. 398, 408 (2004)
(second alteration in original) (quoting United States v.
Colgate & Co., 250 U.S. 300, 307 (1919)). The
Supreme Court recognized a very limited exception to that
general rule when a monopolist terminated a voluntary and
profitable course of dealing with a competitor and sacrificed
short-term benefits to exclude competition in the long run.
See generally Aspen Skiing Co. v. Aspen Highlands Skiing
Corp., 472 U.S. 585 (1985). That exception, however, is
"at or near the outer boundary of [Sherman Act]
liability." Trinko, 540 U.S. at 409. And, here,
even the two government agencies charged with the enforcement
of antitrust laws-the FTC and the Antitrust Division of the
Department of Justice ("DOJ"), see FTC v.
AT&T Mobility LLC, 883 F.3d 848, 862 (9th Cir. 2018)
(en banc)-disagree as to whether Qualcomm's conduct
implicates the duty to deal. Indeed, while the FTC prosecuted
this antitrust enforcement action, the DOJ filed a statement
of interest expressing its stark disagreement that Qualcomm
has any antitrust duty to deal with rival chip suppliers.
satisfied that Qualcomm has shown, at minimum, the presence
of serious questions on the merits of the district
court's determination that Qualcomm has an antitrust duty
to license its SEPs to rival chip suppliers. See Lair v.
Bullock, 697 F.3d 1200, 1204 (9th Cir. 2012). Qualcomm
likewise has made the requisite showing that its practice of
charging OEMs royalties for its patents on a per- handset
basis does not violate the antitrust laws. See Doe v.
Abbott Labs., 571 F.3d 930, 931 (9th Cir. 2009) (holding
that "allegations of monopoly leveraging through pricing
conduct in two markets" do not "state a claim under
§ 2 of the Sherman Act absent an antitrust refusal to
deal (or some other exclusionary practice) in the monopoly
market or below-cost pricing in the second market"
to the second Nken factor, we conclude that Qualcomm
has demonstrated a probability of irreparable harm. The
injunction requires Qualcomm to enter new contractual
relationships and renegotiate existing ones on a large scale.
The fundamental business changes that the injunction imposes
cannot be easily undone should Qualcomm prevail on appeal.
See NCAA v. Bd. of Regents of Univ. of Okla., 463
U.S. 1311, 1313-14 (1983) (White, Circuit Justice) (equities
favored stay where, absent a stay, appellant's contracts
to broadcast collegiate football games would be void and
could not be enforced, putting at risk business for entire
season); Am. Trucking Ass'ns, Inc. v. City of Los
Angeles, 559 F.3d 1046, 1057-59 (9th Cir. 2009)
(irreparable harm likely where order subjected plaintiff to
immediate "Hobson's choice" of either (1)
signing agreements that would cause it to "incur large
costs" and "disrupt and change the whole nature of
its business" or (2) refusing to sign agreements,
causing "a loss of customer goodwill" and
potentially entire loss of business).
the balance of equites also weighs in favor of a stay.
See Lair, 697 F.3d at 1215. Although the hardship to
the party opposing the stay and the public interest usually
merge when the government is the opposing party, see
Nken, 556 U.S. at 435, this case is unique, as the
government itself is divided about the propriety of the
judgment and its impact on the public interest. Indeed, the
Department of Defense and Department of Energy aver that the
injunction threatens national security, and the DOJ posits
that the injunction has the effect of harming rather
than benefiting consumers.
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, is a matter for another day. For now, weighing all
relevant factors, we conclude that the requested stay is
warranted. Therefore, pending the resolution of this appeal
or until further order of this court, we stay the portions of
the district court's injunction requiring that (1)
"Qualcomm must make exhaustive SEP licenses available to
modem-chip suppliers," and (2) "Qualcomm must not
condition the supply of modem chips on a customer's
patent license status" and "must negotiate or
renegotiate license terms" with its customers in that
respect. This stay has the effect of maintaining the status
quo ante during this expedited appeal. See id. at
429 ("A stay 'simply suspend[s] judicial alteration
of the status quo[.]'" (first alteration in
original) (quoting Ohio Citizens for Responsible Energy,
Inc. v. NRC, 479 U.S. 1213, 1313 (1986) (Scalia, Circuit
current briefing schedule shall remain in effect, and the
clerk shall place this appeal on the calendar for ...