## Facts

- Qualcomm supplied CDMA and premium LTE modem chips and held standard-essential patents (SEPs) covering cellular standards.
- Qualcomm generally licensed its SEPs to handset manufacturers (OEMs) rather than to competing modem-chip suppliers.
- Qualcomm conditioned chip supply on OEMs having a patent license (“no license, no chips”) and collected royalties typically based on handset pricing.
- The FTC sued, alleging Qualcomm’s licensing and chip-supply practices unlawfully restrained trade and monopolized the relevant modem-chip markets in violation of Sherman Act §§ 1 and 2 (and FTC Act § 5).
- After a bench trial, the district court found antitrust liability and entered a permanent, worldwide injunction, including requirements that Qualcomm license SEPs to rival chipmakers and modify licensing practices.
- Qualcomm appealed.

## Issues

1. Whether Qualcomm had an antitrust duty to deal by licensing SEPs to rival chip manufacturers under the limited Aspen Skiing exception.
2. Whether licensing SEPs at the OEM level (rather than to rival chipmakers) constituted exclusionary conduct under Sherman Act § 2.
3. Whether “no license, no chips” and Qualcomm’s royalty structure operated as an anticompetitive surcharge that harmed competition in the modem-chip markets under the rule of reason.
4. Whether Qualcomm’s agreements with Apple constituted unlawful exclusive dealing that substantially foreclosed competition in the CDMA modem-chip market, and whether injunctive relief was warranted.

## Decision

- The Ninth Circuit vacated the district court’s judgment and reversed the permanent injunction.
- Qualcomm had no antitrust duty to license SEPs to rival chip suppliers; the Aspen Skiing exception did not apply on the record presented.
- Qualcomm’s OEM-level SEP licensing policy, standing alone, was not an anticompetitive violation of the Sherman Act.
- The “no license, no chips” policy and royalty practices were not shown to impose an exclusionary surcharge on rival chip sales and were considered chip-supplier neutral for purposes of competitive effects.
- The Apple agreements did not substantially foreclose competition and had been terminated years earlier, leaving no basis for injunctive relief.

## Legal Principles

- As a general rule, a firm has no antitrust duty to deal with rivals; compelled dealing is limited to exceptional circumstances under Aspen Skiing.
- Antitrust liability under § 2 requires proof of exclusionary conduct that harms the competitive process in a properly defined relevant market, not merely harm to particular customers or a shift in bargaining leverage.
- Rule-of-reason analysis requires evidence of competitive harm (e.g., reduced output, higher prices, diminished competition) in the relevant antitrust markets, not speculative or remote effects.
- Contractual or policy disputes tied to FRAND commitments do not, without more, establish an antitrust violation absent proof of market harm.
- Exclusive dealing requires a showing that the challenged arrangements had the actual or practical effect of substantially foreclosing competition; terminated agreements generally weaken the case for forward-looking injunctive relief.

## Conclusion

The court held that the FTC failed to prove that Qualcomm’s SEP-licensing model, “no license, no chips” policy, royalty structure, or Apple agreements constituted exclusionary conduct harming competition in the relevant modem-chip markets, and it vacated the liability judgment and reversed the permanent injunction.


Fed. Trade Comm'n v. Qualcomm Inc., 969 F.3d 974 (9th Cir. 2020)