Qualcomm Chips Away At Cellular Chip Licensing Class Action

Published date08 October 2021
Subject MatterAnti-trust/Competition Law, Consumer Protection, Antitrust, EU Competition , Consumer Law
Law FirmWinston & Strawn LLP
AuthorJeffrey J. Amato, Ian L. Papendick, Dana L. Cook-Milligan and Patrick S. Opdyke

Qualcomm Inc. has won another battle in the fight over its alleged monopoly of modem chips used in cell phones. On September 29, 2021, the Ninth Circuit vacated the district court's class certification order and remanded the matter for reconsideration. Stromberg v. Qualcomm Inc., No. 19-15159, 2021 WL 4448713 (9th Cir. Sept. 29, 2021). The panel unanimously held that the district court's choice of law analysis was faulty, and that it erred in certifying a Rule 23(b)(3) damages class because the differences between relevant state laws meant that common issues of law did not predominate in the class as certified. Id. at *5-11. As to the Rule 23(b)(2) injunctive class, the Ninth Circuit vacated the certification order in light of its FTC v. Qualcomm decision, 969 F.3d 974 (9th Cir. 2020), and asked the district court on remand to first address the effect of that decision, particularly on the classes' ability to meet the Rule 23(a) threshold requirements and the viability of plaintiffs' claims with the appellate court's additional guidance. Id. at *11-12. For a more detailed discussion of the Ninth Circuit's FTC v. Qualcomm decision, see Winston & Strawn's Competition Corner Post here.

Plaintiffs' attorneys, in antitrust cases and in general, often seek to certify a nationwide class under the state law where the case is filed. The Ninth Circuit's decision is a clear statement that nationwide classes are inappropriate when there are material differences between states' laws that are not accounted for as part of a rigorous choice of law analysis. Time will tell how plaintiffs' attorneys will adjust their class certification strategy, but defendants are now armed with significant precedent to defend against nationwide class certification, especially in the Ninth Circuit.

Qualcomm's Business Model and Litigation History

Qualcomm is a global leader in cellular technology that, as relevant here, licenses standard essential patents (SEPs) for cellular communication technologies, including for 3G and LTE. Stromberg v. Qualcomm, Inc., No. 19-15159, 2021 WL 4448713 (9th Cir. Sept. 29, 2021). SEPs are "standard essential" because any entity that wishes to practice the standard'e.g., 3G'must license the relevant SEPs from their owners. Id. at *1. In exchange for having their patents incorporated into a standard, patent-holders like Qualcomm typically commit to licensing their SEPs on fair, reasonable, and non-discriminatory (FRAND) terms. Id. at *2.

At issue in the Stromberg litigation was Qualcomm's practice of licensing its patents solely to cellphone original equipment manufacturers (OEMs) rather than any upstream cellphone component suppliers. For its SEPs, Qualcomm typically receives a royalty of 5% of the device's wholesale net selling price. Id. Qualcomm is also the leading supplier of 3G and LTE modem chips'products which practice Qualcomm's cellular SEPs'to OEMs, which OEMs then incorporate into their...

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