There is nothing worse than an unanswered question. For scientists and researchers, an unanswered question can hold up innovation. For businesses, it can scare off investment. In politics, unanswered questions can look like cover-ups and corruption.
The U.S. Federal Trade Commission’s (FTC) lawsuit against technology company Qualcomm rings true of all three of these problems. A case is like a question put to the judicial system of what the law is, and the process of litigation leads us to an answer that will often inform industries of the appropriate way to act.
This is especially important in today’s high-tech industry, which employs more than 7.3 million Americans and continues to expand its reach into all facets of our increasingly connected society and our daily lives. This rapid innovation often pushes boundaries, leading to questions that need answers in order to continue to innovate.
The constant evolution and development of new technologies that consumers have come to expect from technology companies doesn’t just happen by accident — fair cooperation and collaboration between inventors, manufacturers, and industry competitors is the lynchpin to the innovation economy.
The Qualcomm case is about patents, and commitments to standards organizations to license them on fair, reasonable, and nondiscriminatory (FRAND) terms. Standards organizations play an important role in developing and maintaining industry standards for technologies deemed essential or critical to any particular technology.
Properly engaged, standards foster powerful innovation, but to do this, they have to operate in a way that preserves competition. The effective development and implementation of industry standards depends upon all industry participants playing by the same rules when licensing the patents critical to a technology standard.
But over time, a divide has grown between the licensing approach taken by Qualcomm, one of the most significant holders of essential patents, and the licensing approach taken by nearly all other industry players. This disruption is threatening to unmoor this successful and largely self-sustaining system. The divide is generating business and legal disputes among many well-known companies and has prompted investigations by antitrust enforcers all over the world, including the FTC — the expert U.S. competition authority.
In January, the FTC filed a complaint in U.S. District Court against Qualcomm, alleging that the company is employing anti-competitive business tactics to maintain its monopoly on the supply of semiconductors that are commonly used in cellular phones and other connected devices.
These are complex issues at the intersection of antitrust law and intellectual property regarding industry standards and how patent holders license standards that are essential to other would-be innovators or manufacturers. These are issues too important to be left unresolved. The FTC case is critical to bringing to light important facts and answering essential questions as it plays out legally.
Further uncertainty risks undermining innovation and industry growth, and will only continue to spawn more litigation. Those resources are much better spent towards innovations that will help drive the development of new technologies, bring new benefits to consumers, and create jobs and economic activity. Answering these questions will encourage investment and the adoption of new technologies.
There are some who suggest that the FTC should withdraw its complaint once the Senate has confirmed the full complement of commissioners. I disagree.
The FTC is an independent law enforcement agency with a long track record of protecting consumer interests by investigating anticompetitive business practices. This case offers the FTC a chance to force Qualcomm to explain its actions in U.S. District Court in our impartial judicial system that is respected worldwide. Both sides of this case deserve the chance to be heard in a forum where arguments and evidence from all sides will be thoughtfully considered.
As a matter of good government, we should not encourage independent agencies to change course in the middle of an ongoing case based on political considerations, nor should we politicize antitrust enforcement, which has for many years consistently been enforced in an even-handed, nonpartisan way.
An investigation commenced by a Democratic president and ended by a Republican president would invite unwelcome politics into antitrust enforcement — making the public think that the law is at the whim of the administration and inviting shady backroom deals to support candidates who will make corporations’ legal problems go away.
The cloud of doubt surround Qualcomm’s practices have become disruptive throughout the technology sector. It’s time that these issues be thoroughly investigated and resolved. It’s up to the courts to resolve this complex issue and to interpret the law so as to provide the rulebook for innovation going forward.
The continued growth and evolution of the technology sector is critical to our country’s future and global competitiveness, but to ensure our continued prosperity, it’s imperative that inventors have fair and uninterrupted access to technology standards. With U.S. District Judge Lucy Koh’s ruling late last month denying Qualcomm’s motion to dismiss, the continuation of the FTC case will play an important role in bringing these issues to light.
David Balto is an antitrust attorney based in Washington, D.C. He previously served as policy director at the U.S. Federal Trade Commission and as an attorney in the antitrust division of the U.S. Department of Justice. He is an expert in antitrust, consumer protection, financial services, intellectual property, and healthcare competition.
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