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9th Circuit Stay Is Pro-Property Rights

The Ninth Circuit Court of Appeals has granted chipmaker Qualcomm’s requested stay in the firm’s appeal of a questionable federal district court ruling in a suspect Federal Trade Commission lawsuit. The stay elicits a deep sigh of relief from respecters of property rights.

The stay has “the effect of maintaining the status quo ante” while the appeal proceeds. The company noted that this “will allow Qualcomm to continue to invest in inventing the fundamental technologies at the heart of mobile communications at this critical time of transition to 5G.”

This FTC alleges anticompetitive patent licensing terms, denial of chips to competitors and practices counter to the requirements for patents that are essential to adopted technical standards involving smartphone microchips. A dissenting FTC commissioner at the instigation of the suit; the Justice, Defense and Energy Departments; and amici such as network equipment firm Ericsson and the retired chief judge of the Federal Circuit say otherwise.

This case sits at the nexus of intellectual property and antitrust law — treacherous ground, for patents secure exclusive private property rights while antitrust safeguards competition. The district court’s breathtaking ruling (ordering Qualcomm to license standard-setting chips to competitors including China’s Huawei, sell chips apart from a license and renegotiate all its licensing agreements with companies worldwide) has invited withering criticism, including from the Justice Department Antitrust Division, a sitting FTC commissioner and some of the greatest legal minds. The Wall St. Journal advises, “The FTC should drop the case before it loses on the merits.”

Among other things the adverse ruling puts at risk (e.g., our national security, American leadership in 5G wireless technology, U.S. economic competitiveness and fundamental elements of property rights) are innovation and the resulting dynamic competition. Assistant Attorney General Makan Delrahim has noted, “Rules that deprive a patent holder from exercising this right [of exclusivity] . . . undermine the incentive to innovate.”

Property rights are fundamental human rights. An individual or corporate entity has the right to use its property (e.g., land, belongings, money, creations) as he, she or it deems best. As the Apostle Paul put it in Romans 9, “Does not the potter have the right to make out of the same lump of clay some pottery for noble purposes and some for common use?”

The short answer — to St. Paul’s question, the FTC, errant courts and all who subject IP exclusivity to an at-best antiseptic antitrust reading — is yes, the patent owner should have broad leeway in determining an invention’s use, terms and those with whom to do business. After all, IP rights are essentially the right to exclude.

Qualcomm deserves the prerogative to hang a figurative “no trespassing” sign over the fruits of its labor. The same goes for independent inventors, biopharma companies and other IP owners, innovators and creators. And it applies to standard-essential patents.

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