Qualcomm late Tuesday asked a San Jose federal judge to put on hold last week's stinging antitrust judgment while it appeals, arguing that enforcing the stiff remedies now would cause irreversible damage while an appeal is pending.
The San Diego company is seeking an expedited motion to stay a ruling by U.S. District Judge Lucy Koh, who found that Qualcomm violated monopoly laws in a case brought by the U.S. Federal Trade Commission. The company intends to appeal to the Ninth Circuit within the next 60 days.
Qualcomm argues that Koh's ruling "threatens to upend the entire wireless communications industry, including the licensing practices of other major Standard Essential Patent holders like Ericsson, Nokia and InterDigital."
In its motion Qualcomm also contends granting a stay is in the public interest in part because of national security concerns over how the remedies Koh handed down could impact U.S. leadership in 5G technologies.
"Qualcomm is crucial to our nation's efforts to maintain and advance American leadership in the development of cellular systems and 5G standard setting," the company said in the filing.
Last week, Koh ruled that Qualcomm strangled competition for years through a series of business practices that allowed it to leverage its dominant market share in cellular processors to overcharge smartphone makers to license its cellular patents.
The decision is a massive victory for the FTC, with Koh adopting virtually all of its arguments on why Qualcomm's business practices harmed rival chip makers, the smartphone market and consumers.
While she ordered several remedies, the main ones require Qualcomm to renegotiate hundreds of patent licenses with smartphone makers, to sell modem chips to smartphone makes who don't have patent licenses and to offer exhaustive licenses to rival chip makers � which essentially leads to chip level licensing.
Up until now, Qualcomm and the rest of the cellular industry has licensed standard essential patents based on a percentage of the price of the smartphone, not the chips inside it. (A standard essential patent is needed to implement a standardized technology.)
It is unclear whether Koh will grant the motion to shelve her ruling pending appeal, especially since she thoroughly rejected Qualcomm's justifications for its business model.
She noted that Qualcomm's anti-competitive licensing practices are continuing. In addition, she said the company is likely to gain monopoly power again with the roll out of 5G, where it has a technology lead over rivals.
"It makes little sense for the court, having found that Qualcomm's patent licenses are the product of anti-competitive conduct, to leave those licenses in place," she wrote in the decision.
If Koh rejects the stay, Qualcomm can ask the Ninth Circuit to grant it. That process would take two or three months. The appeal itself could last 15 to 20 months.
"Unwinding their whole business, which is what happened here, before we know what the result of the appeal is doesn't seem fair, so you would think this should be stayed," said Jorge Contreras, a law professor with antitrust expertise at the University of Utah, in a recent interview.
Koh found Qualcomm's patent fees "unreasonably high" and inconsistent with federal law. "It is generally required that royalties be based not on the entire product, but instead on the smallest salable patent-practicing unit," said Koh. "Thus, Qualcomm is not entitled to a royalty on the entire handset."
Qualcomm contends language such as this, along with other findings in the decision, would cast a cloud over any patent license renegotiations, causing it harm that can't be reversed if the company were to win on appeal.
"After radically restructuring its business relationships, Qualcomm will not be able to return to its pre-injunction business in an orderly fashion, nor will it be able to unwind licensing agreements it has renegotiated in the shadow of an order that was later overturned," the company argued.
The company said it is in the public interest to maintain the status quo during an appeal, as its business model generates the investments necessary to make the U.S. a leader in cellular technologies.
Finally, Qualcomm argues that Koh's decision raises complex legal questions, including the scope of the company's obligation to license patents under reasonable terms, the viability of the FTC's legal theory of how Qualcomm's business practices harmed consumers, the standard of evidence required to determine its patent fees were too high and so on.
The FTC is expected to file a brief in response to Qualcomm's stay request.
Qualcomm's shares ended trading down 1.2% at $65.37. The company has shed more than $14 billion in market value since Koh's ruling last week.
