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Case 3:17-cv-00108-GPC-MDD Document 77 Filed 06/19/17 PageID.

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1 Juanita R. Brooks (SBN 75934)


brooks@fr.com
2 Seth M. Sproul (SBN 217711)
sproul@fr.com
3 FISH & RICHARDSON P.C.
4 12390 El Camino Real
San Diego, CA 92130
5 Telephone: (619) 678-5070
Facsimile: (619) 678-5099
6
7 Ruffin B. Cordell (DC Bar No. 445801; admitted pro hac vice)
cordell@fr.com
8 Lauren A. Degnan (DC Bar No. 452421; admitted pro hac vice)
degnan@fr.com
9 FISH & RICHARDSON P.C.
1425 K Street, N.W., 11th Floor
10 Washington, DC 20005
11 Telephone: (202) 783-5070
Facsimile: (202) 783-2331
12
William A. Isaacson (DC Bar No. 414788; admitted pro hac vice)
13 wisaacson@bsfllp.com
14 Karen L. Dunn (DC Bar No. 1002520; admitted pro hac vice)
kdunn@bsfllp.com
15 BOIES SCHILLER FLEXNER LLP
1401 New York Avenue, N.W.
16 Washington, DC 20005
Telephone: (202) 237-2727
17 Facsimile: (202) 237-6131
18
Attorneys for Plaintiff Apple Inc.
19
UNITED STATES DISTRICT COURT
20
SOUTHERN DISTRICT OF CALIFORNIA
21
APPLE INC., Case No. 17-cv-0108-GPC-MDD
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Plaintiff, APPLE INC.S NOTICE OF
23 MOTION AND PARTIAL MOTION
vs. TO DISMISS QUALCOMMS FIRST
24 AMENDED COUNTERCLAIMS
25 QUALCOMM INCORPORATED, Judge: Hon. Gonzalo P. Curiel
Courtroom: 2D
26 Defendant. Date: September 29, 2017
Time: 1:30 p.m.
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APPLE INC.S NOTICE OF MTN & PARTIAL
MTN TO DISMISS CASE NO. 17-cv-0108-GPC-MDD
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QUALCOMM INCORPORATED, [FILED CONCURRENTLY WITH


1 MEMORANDUM OF POINTS AND
Counterclaim-Plaintiff, AUTHORITIES; REQUEST FOR
2 INCORPORATION BY REFERENCE
vs. OR JUDICIAL NOTICE;
3 DECLARATION OF GABRIEL R.
SCHLABACH]
4 APPLE INC.,
5 Counterclaim-Defendant.
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APPLE INC.S NOTICE OF MTN & PARTIAL
MTN TO DISMISS CASE NO. 17-cv-0108-GPC-MDD
Case 3:17-cv-00108-GPC-MDD Document 77 Filed 06/19/17 PageID.1298 Page 3 of 5

1 NOTICE OF MOTION AND MOTION


2 PLEASE TAKE NOTICE that on Friday, September 29, 2017 at 1:30 p.m.
3 or as soon thereafter as the matter can be heard, in the United States District Court,
4 Southern District of California, located at 211 West Broadway, San Diego,
5 California, 92101, before the Honorable Gonzalo P. Curiel, Counterclaim-
6 Defendant Apple Inc., by and through its counsel, will and hereby does move to
7 dismiss with prejudice Count X of the First Amended Counterclaims of
8 Counterclaim-Plaintiff Qualcomm Inc., pursuant to (i) Rules 9(b) and 12(b)(6) of
9 the Federal Rules of Civil Procedure for failure to state a claim upon which relief
10 can be granted, and (ii) California Business & Professions Code section 17204 for
11 lack of standing.
12 This Motion is based on this Notice of Motion and Motion, the
13 accompanying Memorandum of Points and Authorities, the Declaration of Gabriel
14 R. Schlabach and the exhibit thereto, the Motion for Incorporation by Reference or
15 Judicial Notice, and any other written and oral argument as may be presented to the
16 Court.
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APPLE INC.S NOTICE OF MTN & PARTIAL
MTN TO DISMISS CASE NO. 17-cv-0108-GPC-MDD
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1
June 19, 2017 Respectfully submitted,
2
By: /s/ William A. Isaacson
3
4 Juanita R. Brooks (SBN 75934)
brooks@fr.com
5 Seth M. Sproul (SBN 217711)
sproul@fr.com
6 FISH & RICHARDSON P.C.
7 12390 El Camino Real
San Diego, CA 92130
8 Telephone: (619) 678-5070
Facsimile: (619) 678-5099
9
Ruffin B. Cordell (DC Bar No. 445801;
10 admitted pro hac vice)
11 cordell@fr.com
Lauren A. Degnan (DC Bar No. 452421;
12 admitted pro hac vice)
degnan@fr.com
13 FISH & RICHARDSON P.C.
14 1425 K Street, N.W., 11th Floor
Washington, DC 20005
15 Telephone: (202) 783-5070
Facsimile: (202) 783-2331
16
William A. Isaacson (DC Bar No. 414788;
17 admitted pro hac vice)
18 wisaacson@bsfllp.com
Karen L. Dunn (DC Bar No. 1002520;
19 admitted pro hac vice)
kdunn@bsfllp.com
20 BOIES SCHILLER FLEXNER LLP
21 1401 New York Avenue, N.W.
Washington, DC 20005
22 Telephone: (202) 237-2727
Facsimile: (202) 237-6131
23
Attorneys for Plaintiff Apple Inc.
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APPLE INC.S NOTICE OF MTN & PARTIAL
MTN TO DISMISS CASE NO. 17-cv-0108-GPC-MDD
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1 CERTIFICATE OF SERVICE
2 I hereby certify that on June 19, 2017, the foregoing document was filed
3 electronically on the CM/ECF system, which caused all CM/ECF participants to be
4 served by electronic means.
5
6
/s/ William A. Isaacson
7 WILLIAM A. ISAACSON
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CERTIFICATE OF SERVICE CASE NO. 17-cv-0108-GPC-MDD
Case 3:17-cv-00108-GPC-MDD Document 77-1 Filed 06/19/17 PageID.1301 Page 1 of 27

1 Juanita R. Brooks (SBN 75934)


brooks@fr.com
2 Seth M. Sproul (SBN 217711)
sproul@fr.com
3 FISH & RICHARDSON P.C.
12390 El Camino Real
4 San Diego, CA 92130
Telephone: (619) 678-5070
5 Facsimile: (619) 678-5099
6 Ruffin B. Cordell (DC Bar No. 445801; admitted pro hac vice)
cordell@fr.com
7 Lauren A. Degnan (DC Bar No. 452421; admitted pro hac vice)
degnan@fr.com
8 FISH & RICHARDSONthP.C.
1425 K Street, N.W., 11 Floor
9 Washington, DC 20005
Telephone: (202) 783-5070
10 Facsimile: (202) 783-2331
11 William A. Isaacson (DC Bar No. 414788; admitted pro hac vice)
wisaacson@bsfllp.com
12 Karen L. Dunn (DC Bar No. 1002520; admitted pro hac vice)
kdunn@bsfllp.com
13 BOIES SCHILLER FLEXNER LLP
1401 New York Avenue, N.W.
14 Washington, DC 20005
Telephone: (202) 237-2727
15 Facsimile: (202) 237-6131
16 Attorneys for Plaintiff Apple Inc.
17 UNITED STATES DISTRICT COURT
18 SOUTHERN DISTRICT OF CALIFORNIA
19 APPLE INC., Case No. 17-cv-0108-GPC-MDD
20 Plaintiff, MEMORANDUM OF POINTS AND
AUTHORITIES IN SUPPORT OF
21 vs. APPLE INC.S PARTIAL MOTION
TO DISMISS
22
QUALCOMM INCORPORATED, Judge: Hon. Gonzalo P. Curiel
23 Courtroom: 2D
Defendant. Date: September 29, 2017
24 Time: 1:30 p.m.
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MEMO OF PS & AS ISO APPLE INC.S


PARTIAL MTN TO DISMISS CASE NO. 17-cv-0108-GPC-MDD
Case 3:17-cv-00108-GPC-MDD Document 77-1 Filed 06/19/17 PageID.1302 Page 2 of 27

1 QUALCOMM INCORPORATED, [FILED CONCURRENTLY WITH


NOTICE OF MOTION AND PARTIAL
2 Counterclaim-Plaintiff, MOTION TO DISMISS; REQUEST
FOR INCORPORATION OR
3 vs. JUDICIAL NOTICE; DECLARATION
OF GABRIEL R. SCHLABACH]
4
APPLE INC.,
5
Counterclaim-Defendant.
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MEMO OF PS & AS ISO APPLE INC.S


PARTIAL MTN TO DISMISS CASE NO. 17-cv-0108-GPC-MDD
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1 TABLE OF CONTENTS
2 PRELIMINARY STATEMENT ...............................................................................1
3 SUMMARY OF QUALCOMMS ALLEGATIONS ...............................................4
4 STANDARD OF REVIEW .......................................................................................6
5 ARGUMENT .............................................................................................................7
6 I. Qualcomm Lacks Standing To Bring A UCL Claim Against Apple. ..........8
7 II. Qualcomms UCL Claim Must Be Dismissed Because None Of The
Underlying Acts Qualcomm Alleges Are Actionable. ...............................12
8
A. Apple has broad discretion to make product design decisions.............12
9
B. Apple made no false or misleading statements. ...................................14
10
C. Apple may do business with whomever it chooses, absent an actual or
11 threatened harm to competition. ...........................................................15
12 III. Qualcomm Has Failed To Plead The Essential Elements Of A UCL Claim
Based On Unfairness. ..............................................................................17
13
CONCLUSION ........................................................................................................19
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TABLE OF AUTHORITIES
1
Cases
2
Alvarez v. Chevron Corp.,
3 656 F.3d 925 (9th Cir. 2011) ...............................................................................16
4 Ashcroft v. Iqbal,
556 U.S. 662 (2009) ............................................................................ 6, 11, 18, 19
5
Aspex Eyewear, Inc. v. Vision Serv. Plan,
6 389 Fed. Appx. 664 (9th Cir. 2010) .....................................................................16
7 Bardin v. Daimlerchrysler Corp.,
136 Cal. App. 4th 1255 (2006) ............................................................................13
8
Cel-Tech Commcns, Inc. v. L.A. Cellular Tel. Co.,
9 20 Cal. 4th 163 (1999) .............................................................................. 4, 17, 18
10 Chavez v. Whirlpool Corp.,
93 Cal. App. 4th 363 (2001) ................................................................................16
11
City and Cnty. of San Francisco v. Philip Morris, Inc.,
12 957 F. Supp. 1130 (N.D. Cal. 1997) ....................................................................11
13 Cullen v. Netflix, Inc.,
880 F. Supp. 2d 1017 (N.D. Cal. 2012) ...............................................................19
14
Davis v. HSBC Bank Nevada, N.A.,
15 691 F.3d 1152 (9th Cir. 2012) ...............................................................................5
16 Diamond Real Estate v. Am. Brokers Conduit,
No. 16-cv-03937-HSG, 2017 WL 412527 (N.D. Cal. Jan. 31, 2017) .................18
17
Durell v. Sharp Healthcare,
18 183 Cal. App. 4th 1350 (2010) ............................................................................10
19 Elias v. Hewlett-Packard Co.,
903 F. Supp. 2d 843 (N.D. Cal. 2012) .................................................................14
20
Figy v. Amys Kitchen, Inc.,
21 No. CV 13-03816 SI, 2013 WL 6169503 (N.D. Cal. Nov. 25, 2013) ...................9
22 Freeman v. Time, Inc.,
68 F.3d 285 (9th Cir. 1995) .......................................................................... 14, 15
23
Hall v. Time Inc.,
24 158 Cal. App. 4th 847 (2008) ......................................................................... 8, 13
25 Haskins v. Symantec Corp.,
654 Fed. Appx. 338 (9th Cir. 2016) .......................................................................7
26
Herron v. Best Buy Co.,
27 924 F. Supp. 2d 1161 (E.D. Cal. 2013) ...............................................................18
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In re Facebook PPC Advert. Litig.,


1 Nos. 5:09-cv-03043-JF, 5:09-cv-03519-JF, 5:09-cv-03430-JF, 2010 WL
3341062 (N.D. Cal. Aug. 25, 2010).......................................................................9
2
In re Firearm Cases,
3 126 Cal. App. 4th 959 (2005). ...............................................................................8
4 In re Pac. Gateway Exch., Inc. Sec. Litig.,
169 F. Supp. 2d 1160 (N.D. Cal. 2001) .................................................................5
5
In re Tobacco II Cases,
6 46 Cal. 4th 298 (2009) ...........................................................................................9
7 Kearns v. Ford Motor Co.,
567 F.3d 1120 (9th Cir. 2009) ...................................................................... 7, 8, 9
8
L.A. Taxi Coop., Inc. v. Uber Techs., Inc.,
9 114 F. Supp. 3d 852 (N.D. Cal. 2015) ......................................................... passim
10 Moran v. Prime Healthcare Mgmt., Inc.,
3 Cal. App. 5th 1131 (2016) ..................................................................................9
11
OConnor v. Uber Techs., Inc.,
12 58 F. Supp. 3d 989 (N.D. Cal. 2014) .............................................................. 9, 12
13 Pom Wonderful LLC v. Coca Cola Co.,
No. CV 08-06237 SJO (FMOx), 2013 WL 543361 (C.D. Cal. Feb. 13, 2013) ..16
14
Sateriale v. R.J. Reynolds Tobacco Co.,
15 697 F.3d 777 (9th Cir. 2012) .................................................................................9
16 Scripps Clinic v. Superior Court,
108 Cal. App. 4th 917 (2003) ..............................................................................18
17
Shwarz v. United States,
18 234 F.3d 428 (9th Cir. 2000) .................................................................................6
19 Stearns v. v. Select Comfort Retail Corp.,
No. 08-2746 JF (PVT), 2009 WL 4723366 (N.D. Cal. Dec. 4, 2009) ................19
20
Taylor v. Yee,
21 780 F.3d 928 (9th Cir. 2015) .................................................................................4
22 Tietsworth v. Sears,
720 F. Supp. 2d 1123 (N.D. Cal. 2010) ...............................................................18
23
Two Jinn, Inc. v. Govt Payment Serv., Inc.,
24 No. 09CV2701 JLS (BLM), 2010 WL 1329077 (S.D. Cal. Apr. 1, 2010) .. 12, 19
25 U.S. Legal Support, Inc. v. Hofioni,
No. CIV. S-13-01770 LKK/AC, 2013 WL 6844756 (N.D. Cal. Dec. 20, 2013) .9,
26 11, 12
27 United States v. Colgate & Co.,
250 U.S. 300 (1919) .............................................................................................16
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MEMO OF PS & AS ISO APPLE INC.S
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Vess v. Ciba-Geigy Corp. USA,


1 317 F.3d 1097 (9th Cir. 2003) ...............................................................................7
2 Zeppeiro v. Green Tree Servicing, LLC,
No. CV 14-01336 MMM (JCx), 2015 WL 12660398 (C.D. Cal. Apr. 15, 2015),
3 affd, No. 15-55747, 2017 WL 875803 (9th Cir. Mar. 6, 2017) ............................8
4
5
Statutes
6
Cal. Bus. & Prof. Code 17200 ......................................................................... 7, 18
7
Cal. Bus. & Prof. Code 17204 ............................................................... 8, 9, 11, 19
8
9 Rules

10 Fed. R. Civ. P. 9(b) ..................................................................................... 7, 8, 9, 19

11 Fed. R. Civ. P. 12(b)(6)............................................................................................19

12
13

14
15
16
17
18
19
20
21
22
23
24
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1 PRELIMINARY STATEMENT
2 Qualcomm Inc. (Qualcomm) has taken the remarkable step of suing its
3 own customer, Apple Inc. (Apple), under Californias Unfair Competition Law
4 (UCL) to further its objectives of eliminating competition from competing chip
5 suppliers. Qualcomms unfounded UCL counterclaim further shows why
6 governments around the world are condemning it for illegal, anticompetitive
7 practices. The claim, although nominally directed at Apple, blatantly targets
8 Qualcomms chief competitor in the market for premium LTE baseband chipsets,
9 Intel, who dared to try and compete with Qualcomm. Targeting Apple for dual-
10 sourcing its baseband processor chipsets is just the latest in a string of
11 anticompetitive and exclusionary acts designed to protect Qualcomms primacy in
12 the chipset market. Faced with Apples decision to add a second supplier after
13 years of operating under the heavy weight of Qualcomms exclusionary contract
14 terms, Qualcomm claims competitive harm as a result of Apple having the
15 temerity to standardize the user experience on the iPhone 7, explain publicly the
16 performance characteristics of its products, and prevent Qualcomm from spreading
17 misinformation in the marketplace.
18 Qualcomms complaints are not only factually meritless; they fail as a matter
19 of law. After years of restricting competition with a series of exclusivity
20 conditions, gag clauses, and more, Qualcomms resort to the UCL to stifle Apples
21 attempt to free itself from Qualcomms monopoly stands the UCL on its head.
22 In late 2016, Qualcomms agreements with Apple, which imposed draconian
23 anticompetitive penalties on Apple for using even a single non-Qualcomm chipset
24 in any of its products worldwide, were nearing expirationallowing Apple for the
25 first time in years to purchase chipsets from a competing supplier. Apple set
26 consistent specifications for the chipsets in the iPhone 7 to guarantee both high
27 performance and consistency across every iPhone 7, ensuring that its customers
28 had a uniform experience that took advantage of standardized LTE technology.
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1 With the iPhone 7, Apple procured baseband processor chipsets not only from
2 Qualcomm but also from its competitor Intel. But after the iPhone 7s release, a
3 methodologically unsound study questioned whether Apple had succeeded in its
4 effort to standardize performance across all iPhones. In a public response, Apple
5 truthfully stated that it had conducted its own studies, which showed consistent
6 performance under relevant parameters.
7 Apple disputes the factual allegations in Qualcomms counterclaim, but even
8 crediting Qualcomms alleged facts as true, Qualcomm has failed to state a claim
9 under any of the prongsfraudulent, unlawful, or unfairof the UCL.
10 First, Qualcomm lacks standing under the UCL. Although Qualcomm
11 attempts to plead its UCL claim under the unfair prong, Qualcomm plainly
12 alleges only that Apple has engaged in what Qualcomm (wrongly) considers
13 misrepresentations and omissions of fact. A party alleging fraudulent behavior
14 under the UCL must plead actual and direct reliance on the alleged
15 misrepresentations or omissions and may not rest its claim on the reliance of third
16 parties. Qualcomm does notand cannotcontend that it was deceived by any of
17 Apples actions, and admits throughout its pleadings that it knew the alleged
18 truth. Rather than properly pleading reliance and standing, Qualcomm instead
19 complains about competition and how it expects that consumers should be
20 insisting on what it erroneously believes are superior Qualcomm-based
21 iPhones. (Counterclaims 383) Moreover, because Qualcomm fails to plead facts
22 that plausibly suggest that customer behavior changed as a result of Apples
23 conduct, Qualcomm fails to allege injury in fact or loss of money or property.
24 Second, Qualcomm has failed to plead any actionable conduct by Apple
25 because Apple had the legal right to do each of the three things that Qualcomms
26 counterclaim alleges was wrongful. As its first theory of actionable conduct,
27 Qualcomm alleges that Apple acted unfairly by dual-sourcing chipsets for some
28 models of the iPhone 7, not using certain features of Qualcomm chipsets that
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1 Qualcomm thinks of as worthy of inclusion, and not disclosing Apples design


2 decisions to the public. (Id. 241243) This claim fails as a matter of law because
3 the UCL does not permit courts to delve into the product design decisions here.
4 The UCL does not require Apple to procure chipsets exclusively from Qualcomm,
5 to implement every feature Qualcomm may offer, or to disclose its design
6 decisions regarding baseband chipsetsor any of the multitude of other
7 components incorporated in each iPhone.
8 Qualcomms next theory is that Apple wrongfully stated that Apples
9 internal and carrier partner testing revealed no discernible difference in cellular
10 performance between iPhones using Qualcomm and Intel chipsets. (Id. 248)
11 Apples iPhones are compliant with the LTE standard regardless of which
12 baseband chipset they contain, and Apple is legally entitled to disclose the results
13 of its internal cellular testing to the public. That other studies using different
14 methodologies may reach different conclusions does not contradict the accuracy of
15 Apples description of its own test results.
16 Qualcomms third theory of wrongful conduct is that Apple made
17 threaten[ing] statements that it would retaliate if Qualcomm made public
18 statements about the cellular performance of the iPhone 7. (Id. 243) Apple has
19 the right to make its own business decisions even if they adversely affect
20 Qualcomm, including the decision to limit or cease doing business with Qualcomm
21 entirely, and to make plain to Qualcomm that its actions could impact Apples
22 decisions. Qualcomm has failed to allegeand cannot plausibly suggestthat
23 Apples conduct harmed competition in the premium baseband processor chipset
24 market as required by the UCL.
25 Third, Qualcomm has failed to plead the necessary elements of an unfair
26 UCL claim, a claim available either to competitors or consumers, under any of the
27 accepted bases for such a claim. If Qualcomm claims the title of competitor,
28 Qualcomm fails to make the required allegation that any conduct threatens an
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1 incipient violation of an antitrust law, or violates the policy or spirit of one of those
2 laws because its effects are comparable to or the same as a violation of law, or
3 otherwise significantly threatens or harms competition. Cel-Tech Commcns, Inc.
4 v. L.A. Cellular Tel. Co., 20 Cal. 4th 163, 187 (1999). Qualcomms claim is
5 likewise deficient under any of the three tests applicable to consumer actions.
6 Each of these pleading defects independently requires the complete
7 dismissal of Qualcomms UCL claim (Count X).
8 SUMMARY OF QUALCOMMS ALLEGATIONS
9 As is required, the following facts are taken from the face of Qualcomms
10 Counterclaims, and are accepted as true only for purposes of this motion. Taylor v.
11 Yee, 780 F.3d 928, 935 (9th Cir. 2015).
12 Apple is the leading innovator in the consumer device industry, having
13 introduced some of the most successful consumer products in history, including
14 the iPhone. (Counterclaims 2) Each iPhone contains a baseband processor
15 chipset, which allows the iPhone to connect to cellular networks. (Id. 134, 136
16 137) Qualcomm is the dominant supplier of premium baseband processor chipsets.
17 (Id. 134 (alleging that Qualcomm is a major supplier of chips)) Between 2011
18 and September 2016, Apple exclusively used Qualcomms baseband processor
19 chipset in each new iPhone model. (Id. 137, 238) With the launch of the iPhone
20 7 in 2016, Apple began dual-sourcing chipsets from both Qualcomm and Intel. (Id.
21 238)
22 Qualcomm claims that Apple committed fraud in an effort to convince
23 customers that iPhones with Qualcomm and Intel chipsets perform comparably.
24 Qualcomm rests its fraud claim on three alleged actions.
25 First, Qualcomm claims that Apple chose not to utilize certain high-
26 performance features of the Qualcomm chipsets for the iPhone 7. (Counterclaims
27 4, 4041, 237238) Qualcomm pleads that this was an Apple design decision:
28 Apple effectively chose to limit the performance of the Qualcomm-based
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1 iPhones. (Id. 40) The performance is enabled by enhanced, or optional,


2 features of Qualcomms chipset, which Qualcomm claims enabled its chips to
3 download data at a theoretical 600 megabits per second (Mbps), versus Intels 450.
4 (Id. 240242) Qualcomm claims that Apples actions were made in an effort to
5 match the slower speeds of Intels chipsets in other iPhone 7 models. (Id. 40,
6 237). Qualcomm does not allege that consumers expected the 600 Mbps download
7 speed, or that Apple made public statements that the iPhone could download at 600
8 Mbps. Instead, Qualcomm claims that Apples decision to ensure equal
9 performance across all iPhone 7 models harmed everyone who depends on the
10 cellular industry and led to a potential ripple effect across an unnamed network.
11 (Id. 242, 386)
12 Next, Qualcomm claims that Apple stated that, if Qualcomm publicly
13 disclosed the alleged speed disparity to the public, Qualcomms prospects of
14 supplying any chipsets to Apple in the future and its standing as a supplier to
15 Apple might be jeopardize[d]. (Id. 243) This would supposedly be
16 accomplished through Apples marketing organization. (Id.)
17 Finally, Qualcomm claims that after the iPhone 7 was released, some
18 independent studies identified performance differences between the Intel and
19 Qualcomm chipsets. (Id. 245) Citing a Bloomberg article that contained various
20 reports of these studies (Declaration of Gabriel R. Schlabach [Schlabach Decl.]
21 Ex. 1 (Bloomberg article)),1 Qualcomm alleges that third parties found that
22 Qualcomm chipsets outperformed Intels under unverified conditions and
23
24 1
The Court may consider Exhibit 1 because Qualcomm cites to and quotes from
the document in its pleadings (Counterclaims 248249, 383), and Qualcomms
25 misrepresentation claim necessarily relies on a quotation attributed to an Apple
spokesperson in the document. Davis v. HSBC Bank Nevada, N.A., 691 F.3d 1152,
26 116061 (9th Cir. 2012); see also In re Pac. Gateway Exch., Inc. Sec. Litig., 169 F.
Supp. 2d 1160, 1164 (N.D. Cal. 2001). Out of an abundance of caution, Apple is
27 also filing a concurrent Motion for Incorporation by Reference or Judicial Notice.
28
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1 methodologies; claimed that the Qualcomm-chipset-bearing iPhone was not as


2 fast as it could be; and compared the iPhone with Samsung phones.
3 (Counterclaims 245247) Qualcomm does not allege that these studies or
4 reports are methodologically sound or correct. Yet Qualcomm claims that Apple
5 falsely stated in response to these studies that In all of our rigorous lab tests
6 based on wireless industry standards, in thousands of hours of real-world field
7 testing, and in extensive carrier partner testing, the data shows there is no
8 discernible difference in the wireless performance of any of the models. (Id.
9 248249, 383) Qualcomm does not claim as false that (a) Apple did conduct
10 such internal tests, field studies, and carrier testing; or (b) those internal tests, field
11 studies, and carrier testing showed no discernible difference between the iPhone
12 models. Qualcomm also does not allege that customers were aware of Apples
13 statement to Bloomberg or made purchasing decisions based on that statement.
14 (Id. 383385 (claiming only harm to Qualcomm)).
15 At bottom, Qualcomms counterclaim is an abuse of the UCL designed to
16 limit competition from Intel and discourage Apple and other handset
17 manufacturers from doing business with Qualcomms competitors.
18 STANDARD OF REVIEW
19 The Court must dismiss any claim that does not contain sufficient factual
20 matter, accepted as true, to state a claim to relief that is plausible on its face.
21 Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citation omitted). To meet this
22 threshold, a plaintiff must plead factual content that allows the court to draw the
23 reasonable inference that the defendant is liable for the misconduct alleged. Id.
24 Threadbare recitals of the elements of a cause of action, supported by mere
25 conclusory statements, do not suffice. Id. A court need not accept as true
26 allegations contradicted by judicially noticeable facts. Shwarz v. United States, 234
27 F.3d 428, 435 (9th Cir. 2000).
28
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1 Californias Unfair Competition Act prohibits business practices that are


2 unlawful, unfair or fraudulent. CAL. BUS. & PROF. CODE 17200. Each
3 prong of the UCL is a separate and distinct theory of liability. Kearns v. Ford
4 Motor Co., 567 F.3d 1120, 1127 (9th Cir. 2009).
5 When a claim is raised in federal court under the fraudulent prong of the
6 UCL, or where a party alleges a unified course of fraudulent conduct under any
7 UCL prong and relies entirely on that course of conduct as the basis of a claim,
8 the claim is said to be grounded in fraud or to sound in fraud, and the pleading
9 of that claim as a whole must satisfy the particularity requirement of Rule 9(b).
10 Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 110304 (9th Cir. 2003). Federal
11 Rule of Civil Procedure 9(b) requires a party alleging fraud or mistake to state
12 with particularity the circumstances constituting fraud or mistake. Rule 9(b)
13 mandates that when averments of fraud are made, the circumstances constituting
14 the alleged fraud must be specific enough to give defendants notice of the
15 particular misconduct . . . so that they can defend against the charge and not just
16 deny that they have done anything wrong. Vess, 317 F.3d at 1106 (citation
17 omitted). Each element of fraud, including reliance, must be pled with
18 particularity. Kearns, 567 F.3d at 112627; see also Haskins v. Symantec Corp.,
19 654 Fed. Appx. 338, 339 (9th Cir. 2016) (affirming dismissal of UCL claim where
20 plaintiff failed to allege reliance with particularity).
21 ARGUMENT
22 Although Qualcomm artfully avoids using the word fraud and attempts to
23 plead its UCL claim under the unfair prong (Counterclaims 382), Qualcomms
24 allegations are grounded in fraud.2 Qualcomm alleges that Apple attempted to
25
2
Qualcomm does not identify any law violated by any of Apples actions, so it has
26 failed to allege actionable acts under the unlawful prong of the UCL. Zeppeiro v.
Green Tree Servicing, LLC, No. CV 14-01336 MMM (JCx), 2015 WL 12660398,
27 at *7 (C.D. Cal. Apr. 15, 2015), affd, No. 15-55747, 2017 WL 875803 (9th Cir.
28
7
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1 cover up the performance differences between Qualcomm and Intel-based iPhone


2 7s (omissions), stated that there was no discernible difference between those
3 phone models (misrepresentation), and threatened Qualcomm to prevent it from
4 disclosing such omissions and misrepresentation. (Id. 237251, 383)
5 Accordingly, Qualcomms pleadings are governed by Rule 9(b)s particularity
6 requirement and the standing requirements for a fraud-based UCL claim. Kearns,
7 567 F.3d at 1127 (rejecting argument that claim under unfair prong of UCL
8 could avoid heightened pleading because the complaint alleged a unified course
9 of fraudulent conduct and was grounded in fraud and thus the entire complaint
10 must therefore be pleaded with particularity); L.A. Taxi Coop., Inc. v. Uber
11 Techs., Inc., 114 F. Supp. 3d 852, 867 (N.D. Cal. 2015) (applying standing
12 requirement from fraudulent UCL prong to unfair prong claim premised on
13 misrepresentation). Qualcomms claim also fails even if considered under the
14 unfair prong, no matter which test the Court applies to that prong.
15 I. Qualcomm Lacks Standing To Bring A UCL Claim Against Apple.
16 To establish standing under any prong of the Unfair Competition Law, a
17 private plaintiff must plead facts demonstrating injury in fact and the loss of money
18 or property as a result of the defendants unfair competition. CAL. BUS. & PROF.
19 CODE 17204 (private actions for relief under the UCL may be brought only by a
20 person who has suffered injury in fact and has lost money or property as a result of
21 the unfair competition); Hall v. Time Inc., 158 Cal. App. 4th 847, 859 (2008); In
22 re Firearm Cases, 126 Cal. App. 4th 959, 981 (2005).
23 Californias voters imposed this standing requirement by proposition in
24 2004, in an effort to reduce misuse of the UCL by private plaintiffs who had not
25
26
Mar. 6, 2017) (A plaintiff must identify the underlying law on which his UCL
27 claim is based to plead a claim based on the unlawful prong sufficiently).
28
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1 suffered any injury from defendants actions. Prop. 64, 1(e) (2004).
2 When a UCL claim involves an alleged misrepresentation or omission, the
3 California Supreme Court has held that the phrase as a result of in section 17204
4 imposes an actual reliance requirement on plaintiffs prosecuting a private
5 enforcement action. Figy v. Amys Kitchen, Inc., No. CV 13-03816 SI, 2013 WL
6 6169503, at *3 (N.D. Cal. Nov. 25, 2013) (quoting In re Tobacco II Cases, 46 Cal.
7 4th 298, 326 (2009)); see also Sateriale v. R.J. Reynolds Tobacco Co., 697 F.3d
8 777, 793 (9th Cir. 2012) (citation omitted) (Because the plaintiffs UCL claim
9 sounds in fraud, they are required to prove actual reliance on the allegedly
10 deceptive or misleading statements).
11 Where, as here, the claim is based on allegations of fraud, the failure to
12 allege reliance with specificity is fatal, under either the fraudulent or unfair
13 prong of the UCL. In re Facebook PPC Advert. Litig., Nos. 5:09-cv-03043-JF,
14 5:09-cv-03519-JF, 5:09-cv-03430-JF, 2010 WL 3341062, at *911 (N.D. Cal.
15 Aug. 25, 2010) (dismissing UCL unfair and fraudulent prong claims involving
16 alleged misrepresentations because plaintiffs failed to plead reliance); see also
17 Kearns, 567 F.3d at 1127 (applying Rule 9(b) particularity requirement to a
18 misrepresentation claim pled under the UCLs unfair prong).
19 To satisfy the reliance requirement, the alleged reliance must be by the
20 plaintiff itselfnot a third-party. L.A. Taxi, 114 F. Supp. 3d at 86667 (joining
21 majority of courts in concluding that plaintiffs who do not plead their own
22 reliance on alleged misstatements lack standing to seek relief under the UCLs
23 fraud prong); OConnor v. Uber Techs., Inc., 58 F. Supp. 3d 989, 1002 (N.D. Cal.
24 2014) (UCL fraud plaintiffs must allege their own reliancenot the reliance of
25 third partiesto have standing under the UCL (emphasis in original)); U.S. Legal
26 Support, Inc. v. Hofioni, No. CIV. S-13-01770 LKK/AC, 2013 WL 6844756, at
27 *15 (N.D. Cal. Dec. 20, 2013) (same); Moran v. Prime Healthcare Mgmt., Inc., 3
28 Cal. App. 5th 1131, 1144 (2016) (a plaintiff must show actual reliance on the
9
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1 alleged misrepresentation, rather than a mere factual nexus between the businesss
2 conduct and the consumers injury (quoting Durell v. Sharp Healthcare, 183 Cal.
3 App. 4th 1350, 1355 (2010)). The requirement that a party must itself rely on an
4 alleged misstatement applies regardless of whether the claim is nominally pled
5 under the fraudulent, unfair, or unlawful prong of the UCL. L.A. Taxi, 114 F. Supp.
6 3d at 867 (Because Plaintiffs claims under the UCLs unfair and unlawful prongs
7 are predicated on the same misrepresentation theory, they similarly lack standing
8 to seek relief under those prongs).
9 Far from alleging any reliance on any Apple statement or omission
10 concerning the comparative performance of Qualcomm and Intel chipsets,
11 Qualcomm alleges precisely the opposite: that it knew the supposed truth all along.
12 Qualcomm alleges that its chipsets have been superior to the competition for years,
13 that they remain superior, and that a Qualcomm executive discussed the public
14 disclosure of their superiority with an Apple executive in August 2016before
15 Apple even launched the iPhone 7 or made any public representations about its
16 performance. (Counterclaims 239240, 243, 248) Therefore, Qualcomm cannot
17 plausibly claim that it relied on Apples alleged omissions or misrepresentation.
18 Qualcomm may not seek to limit competition through this UCL claim by
19 urging that consumers would have purchased more iPhones with Qualcomm
20 chipsets as compared to iPhones with Intel chipsets. In the absence of any claim
21 that it relied on any alleged Apple omission or misrepresentation, Qualcomm may
22 not retreat to claims that Apples customers relied on Apples alleged omissions
23 and misrepresentation, indirectly harming Qualcomm through loss of sales. The
24 counterclaim improperly alleges this indirect injury without alleging consumer
25 reliance. (Id. 251, 383, 385) But even if consumer reliance were alleged with the
26 required particularity, this is precisely the type of indirect reliance that is
27 foreclosed under the UCL. L.A. Taxi, 114 F. Supp. 3d at 86667.
28
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1 In L.A. Taxi Cooperative v. Uber Technologies, Inc., plaintiff taxi companies


2 alleged that Uber misled potential customers through a public advertising
3 campaign touting the safety of its services. Id. at 85759. The plaintiffs claimed
4 that Ubers public statements that it provided the safest rides on the road, used
5 the strictest safety standards possible, and had best in class safety and
6 accountability standards were false and misleading because the plaintiff taxi
7 companies employed stricter safety standards. Id. But (as here) the plaintiffs did
8 not allege that they were themselves misled by Ubers advertising campaign;
9 instead, they claimed that they were indirectly harmed because customers chose
10 to use Uber rather than taking a taxi, causing Plaintiffs to lose significant revenue
11 and suffer reputational injury. Id. at 859. The court held that the taxi companies
12 had pleaded themselves out of court. Because the plaintiffs had failed to allege
13 their own reliance on the alleged misrepresentations, rather than the reliance of
14 third parties, the court dismissed the claim under all three prongs of the UCL,
15 noting the general rule that a fraud action cannot be maintained based on a third
16 partys reliance. Id. at 86667 (quoting City and Cnty. of San Francisco v. Philip
17 Morris, Inc., 957 F. Supp. 1130, 1142 (N.D. Cal. 1997)); see also U.S. Legal
18 Support, 2013 WL 6844756, at *1415 (dismissing with prejudice a
19 misrepresentation-based claim under the UCL where plaintiff was not a consumer
20 of Defendants services and therefore cannot demonstrate reliance on
21 Defendants fraudulent statements in order to establish standing).
22 Under any prong of the UCL, Qualcomms claim also fails to plausibly and
23 concretely plead injury in fact and the loss of money or property as a result of the
24 alleged unfair competition. CAL. BUS. & PROF. CODE 17204; Iqbal, 556 U.S. at
25 678. Qualcomm conclusorily pleads that Absent Apples conduct, Qualcomms
26 chipsets would be in higher demand. (Counterclaims 383) However,
27 Qualcomms counterclaim is bereft of any allegations to support that claim.
28 Qualcomm does not plead facts that would show that consumers would or could
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1 choose an iPhone with a Qualcomm chip over an Intel chip in the absence of
2 information of what chip is actually contained in the iPhone. Indeed, Qualcomm
3 admits that Intel and Qualcomm chips are used for different networks, so that the
4 consumer choice is actually between iPhones that are equipped for different
5 carriers, such as AT&T on the one hand and Verizon on the other. (Counterclaims
6 238, 246) Qualcomms counterclaim does not identify a single customer whose
7 purchasing decision would have been different, or allege facts sufficient to explain
8 how consumer behavior would favor iPhones with a Qualcomm chipset when that
9 choice is also informed by a consumers choice of carrier. See Two Jinn, Inc. v.
10 Govt Payment Serv., Inc., No. 09CV2701 JLS (BLM), 2010 WL 1329077, at *3
11 (S.D. Cal. Apr. 1, 2010) (dismissing plaintiffs conclusory claim that customers
12 certainly would have chosen its service absent defendants alleged misconduct as
13 attenuated and conjectural where plaintiff did not point to any potential
14 customers who would have changed their behavior).
15 Because Qualcomm has admitted that it knew the truth about Apples
16 alleged omissions and misrepresentation (Counterclaims 239240, 243, 248),
17 Qualcomm is precluded from alleging its reliance on Apples actions. Accordingly,
18 Qualcomms UCL claim should be dismissed with prejudice. OConnor, 58 F.
19 Supp. 3d at 100203, 1008 (dismissing with prejudice UCL fraud claim predicated
20 on third-party customers reliance); U.S. Legal Support, 2013 WL 6844756, at
21 *1415 (same); L.A. Taxi, 114 F. Supp. 3d at 86667 (direct reliance required for
22 standing for misrepresentation-based theory under any UCL prong).
23 II. Qualcomms UCL Claim Must Be Dismissed Because None Of The
24 Underlying Acts Qualcomm Alleges Are Actionable.

25 A. Apple has broad discretion to make product design decisions.


26 Qualcomm alleges that Apple, after deciding to source competitive chips
27 from Intel for the iPhone 7, made design decisions about which chipset features to
28 activate in the iPhone 7 in order to ensure consistency in the user experience,
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1 without regard to whether a particular phone incorporated an Intel or Qualcomm


2 chip. (Counterclaims 40, 237241, 383 (Apple chose not to use certain
3 features in the Qualcomm chipset)) Regardless of the alleged reason for Apples
4 choices, Apples actions were not actionable under the fraudulent and unfair
5 prongs of the UCL. It does not violate either prong for Apple to make design
6 tradeoffs in deciding what product to bring to market. That is all the more so here
7 when Apple sourced baseband chipsets that are compliant with an industry LTE
8 standard.
9 Under well-established California precedent, a UCL claim cannot be
10 premised on a companys decision to bring a particular product to market, provided
11 that the decision does not result in a breach of warranty or a safety issue (and there
12 is no such claim here). Bardin v. Daimlerchrysler Corp., 136 Cal. App. 4th 1255,
13 127073 (2006). In Bardin, the California Court of Appeal court rejected a claim
14 under the unfair and fraudulent prongs of the UCL that was premised on
15 Daimlerchryslers decision to use tubular steel in the exhaust manifolds of certain
16 of its vehicles instead of more durable and more expensive cast iron. Id. at 1260.
17 The court held that Daimlerchryslers decision was not actionable under the
18 unfair prong because plaintiffs failed to allege that the use of tubular steel
19 affected consumer safety, breached a warranty, or was otherwise immoral or
20 unethical. Id. at 1260, 127073.
21 Nor has Qualcomm stated a claim for fraud, or fraudulent omission, based
22 on Apples design choices following Apples decision to use both Intel and
23 Qualcomm chipsets that are compliant with the LTE standard. In Bardin, plaintiffs
24 failed to state a claim under the fraudulent prong where there was no allegation
25 that consumers expected or assumed that the more durable steel was used. Id. at
26 127475; see Hall v. Sea World Entertainment, Inc., No. 3:15-CV-660-CAB-RBB,
27 2015 WL 9659911, at *1, 67 (S.D. Cal. Dec. 23, 2015) (dismissing a UCL fraud
28 claim premised on the allegation that Sea Worlds advertising failed to disclose
13
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1 that its killer whales were unhappy and unhealthy, noting that California courts
2 have generally rejected a broad obligation to disclose). Here, Qualcomm does not
3 (and cannot) allege that Apple told the public that the iPhone 7 could support a
4 theoretical maximum speed of 600 megabits per second, such that consumers
5 expected something different than they received. See also Elias v. Hewlett-Packard
6 Co., 903 F. Supp. 2d 843, 856 (N.D. Cal. 2012) (in a fraudulent nondisclosure
7 case, a manufacturers duty to consumers is limited to its warranty obligations
8 absent either an affirmative misrepresentation or a safety issue).
9 B. Apple made no false or misleading statements.
10 Qualcomm next seeks to limit competition by Intel by alleging that Apples
11 statement about the uniform performance of the iPhone 7 was false, but Qualcomm
12 fails to plead this allegation with the required particularity.
13 An allegedly false or misleading statement must be evaluated in context, and
14 statements are not actionable where a reasonable consumer would not be
15 deceived. Freeman v. Time, Inc., 68 F.3d 285, 289 (9th Cir. 1995). Qualcomm
16 cites only a single Apple statement (Counterclaims 248, 383). As reported by
17 Bloomberg, an Apple spokesperson stated:
18 Every iPhone 7 and iPhone 7 Plus meets or exceeds all of Apples
19 wireless performance standards, quality metrics, and reliability
testing. In all of our rigorous lab tests based on wireless industry
20 standards, in thousands of hours of real-world field testing, and in
21 extensive carrier partner testing, the data shows there is no discernible
difference in the wireless performance of any of the models.
22
23 (Schlabach Decl. Ex. 1)
24 Qualcomm relies on two so-called third-party studies for its claim that
25 Apples statement was false, but provides no factual allegations concerning the
26 conditions under which these tests were performed or otherwise demonstrating
27 their reliability or trustworthiness. (Counterclaims 245246) As an initial
28 matter, it is apparent from the face of the Bloomberg article Qualcomm cites that
14
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1 the methodology of these studies is questionable. The article states that


2 measuring phone data speeds is difficult because performance can be influenced
3 by weather and other factors beyond the control of wireless providers and phone
4 makers. (Schlabach Decl. Ex. 1)
5 Even accepting such studies findings at face value, however, they do not
6 contradict Apples statement. Apple explained the basis for its statement that there
7 was no discernible difference between iPhones: rigorous lab tests based on
8 wireless industry standards, thousands of hours of real-world field testing, and
9 extensive carrier partner testing. (Id.) The allegation that other, non-Apple tests
10 reached different results than the tests Apple conducted does not contradict the
11 accuracy of Apples description of its own and its partners tests. Qualcomm does
12 not (and cannot) allege any facts demonstrating that Apples description of its own
13 test results was inaccurate. Freeman, 68 F.3d at 290 (dismissing misrepresentation
14 claim on the pleadings where promotion was not false when read reasonably and
15 in context). Nor did Apple describe any tests comparing the performance of
16 iPhones bearing Qualcomm chipsets to Samsung phones; such a study thus has no
17 bearing on the truth of Apples statement.
18 C. Apple may do business with whomever it chooses, absent an actual or
threatened harm to competition.
19
20 Qualcomms allegation that Apple violated the UCL by coercing
21 Qualcomms silence must also be dismissed. Qualcomm is again arguing that it has
22 a legal right not to lose business to Intel. Qualcomm points to two supposed
23 threats on a single phone call, and neither is actionable under the unfair or
24 fraudulent prong of the UCL.
25 First, Qualcomms claim that Apple violated the UCL by warning
26 Qualcomm that its actions would severely impact Qualcomms standing as a
27 supplier (Counterclaims 243) is directly precluded by the Colgate doctrine,
28 which affords a manufacturer the right to select with whom to do business and on
15
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1 what terms. Chavez v. Whirlpool Corp., 93 Cal. App. 4th 363, 370, 375 (2001)
2 (citing United States v. Colgate & Co., 250 U.S. 300 (1919)); see also Colgate,
3 250 U.S. at 307 (extending doctrine to both upstream and downstream business
4 decisions). In California, conduct that the courts have determined to be
5 permissible under the Colgate doctrine cannot be deemed unfair under the unfair
6 competition law. Chavez, 93 Cal. App. 4th at 375. Because Apple is absolutely
7 protected by the Colgate doctrine in deciding with whom it will deal, Qualcomm
8 cannot make out a claim under any prong of the UCL. E.g., Alvarez v. Chevron
9 Corp., 656 F.3d 925, 933 (9th Cir. 2011) (rejecting claim that consumers
10 unwittingly received a residual amount of lower-grade fuel when they purchased
11 premium-grade fuel under safe-harbor doctrine); Pom Wonderful LLC v. Coca
12 Cola Co., No. CV 08-06237 SJO (FMOx), 2013 WL 543361, at *1, 5 (C.D. Cal.
13 Feb. 13, 2013) (dismissing claim regarding false and misleading name and labeling
14 under safe-harbor doctrine).
15 Notably, the conduct Qualcomm alleges is less severe than the conduct
16 Chavez held to be lawful under the Colgate doctrine. In Chavez, Whirlpool
17 announced a minimum resale price policy for its KitchenAid products and
18 threatened retailers that there would be no second chances and that any single
19 violation of the price policy would result in the termination of sales to the
20 individual retail store and to all of the retailers other stores. Chavez, 93 Cal. App.
21 4th at 367.
22 Second, although it is unclear what Qualcomm means when it alleges that
23 Apple threatened to use its marketing organization to retaliate against Qualcomm
24 (Counterclaims 243), any such threat is also nonactionable. Under California
25 law, businesses have wide latitude under the UCL to take or threaten business
26 actions that would cause another company to suffer economic losses, absent proof
27 of some actual or threatened impact on competition. Aspex Eyewear, Inc. v. Vision
28 Serv. Plan, 389 Fed. Appx. 664, 66566 (9th Cir. 2010) (emphasis added)
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1 (defendants threats that plaintiff must drop patent infringement suits or lose in-
2 network vendor status was nonactionable under UCL). Qualcomm does not allege
3 that Apples threats, if acted upon, would result in diminish[ed] competition in
4 the [cellular device or chipset] marketnor could it. Id. at 666.
5 III. Qualcomm Has Failed To Plead The Essential Elements Of A UCL
6 Claim Based On Unfairness.

7 Even if the standards for unfairness alone apply, Qualcomm fails to plead
8 a claim under the unfair prong of the UCL. The California Supreme Court has
9 articulated two types of tests for unfairnessthose that apply in competitor cases
10 and those that apply in consumer cases. Cel-Tech, 20 Cal. 4th at 18687 &
11 fn.1112. Qualcomms pleadings are inadequate under both.
12 Qualcomm alleges that it lost sales as a result of Apples single statement
13 concerning the relative performance of the iPhone 7 with Qualcomm and Intel
14 chipsets; those Intel chipsets compete with Qualcomm chipsets. (Counterclaims
15 239, 383, 385) Under Cel-Tech Communications, Inc. v. L.A. Cellular
16 Telephone Co., a direct competitor bringing a claim under the unfair prong of the
17 UCL must allege conduct that threatens an incipient violation of an antitrust law,
18 or violates the policy or spirit of one of those laws because its effects are
19 comparable to or the same as a violation of the law, or otherwise significantly
20 threatens or harms competition. 20 Cal. 4th at 187. Qualcomm fails to allege any
21 incipient violation of the antitrust laws, a violation of their policy or spirit, or any
22 other threat to competition. (Counterclaims 237251, 381387)
23 Even if the UCL standards applicable to consumers were to apply to
24 Qualcomm, Qualcomms pleading of its UCL claim remains deficient. California
25 courts have articulated three competing standards that may apply when consumers
26 bring UCL claims: (1) the modified Cel-Tech test (or tethering test), which
27 requires a consumer to identify a violation of public policy tethered to specific
28 constitutional, statutory, or regulatory provisions, Scripps Clinic v. Superior
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1 Court, 108 Cal. App. 4th 917, 940 (2003); (2) an older balancing test, which
2 requires that the harm of the alleged conduct outweigh the utility of the
3 defendants conduct, Herron v. Best Buy Co., 924 F. Supp. 2d 1161, 1177 (E.D.
4 Cal. 2013); and (3) the FTC test, which requires that the consumer injury is
5 substantial, is not outweighed by any countervailing benefit to consumers or to
6 competition, and is not an injury the consumers themselves could reasonably have
7 avoided.3 Tietsworth v. Sears, 720 F. Supp. 2d 1123, 1137 (N.D. Cal. 2010).
8 Because Qualcomm has failed to allege any violation of public policy
9 tethered to specific constitutional, statutory, or regulatory provisions, its UCL
10 claim cannot proceed under the tethering test. And while Qualcomm has alleged
11 that there is no utility to any of Apples unfair acts in an effort to satisfy the
12 balancing and/or FTC tests (Counterclaims 386), this allegation is nothing but a
13 legal conclusion. Qualcomm was required to plead specific facts supporting all
14 sides of the balancing or FTC test. Iqbal, 556 U.S. at 678; Tietsworth, 720 F. Supp.
15 2d at 1137 (dismissing unfair competition claim after concluding that plaintiffs
16
17 3
As noted by the court in Herron, the California Supreme Court in Cel-Tech
18 rejected the balancing test in anticompetitive practices cases involving competitors.
19 Following that decision, a split of authority has developed as to the continued
viability of the balancing and FTC tests. Herron, 924 F. Supp. 2d at 117778;
20 Diamond Real Estate v. Am. Brokers Conduit, No. 16-cv-03937-HSG, 2017 WL
21 412527, at *8 (N.D. Cal. Jan. 31, 2017) (Under the unfair prong, there is a split
of authority regarding which of three different tests should be applied
22 in consumer cases). The better view is that the balancing and FTC tests are
23 outdated and not viable because (1) the California Supreme Court construed the
term unfair in the UCL in Cel-Tech and there is only one term unfair in the
24 statue; and (2) the balancing test was vague and amorphous and thus did not
25 establish an identifiable and concrete injury. Stern, Rutter Group Practice Guide:
Business & Professions Code Section 17200 Practice 3:119 (The Rutter Group
26 2017) (it would be difficult for two reasons to continue to argue that the
27 older tests still apply).
28
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1 allegation that there there cannot be a benefit to consumers when a manufacturer


2 is permitted knowingly to market and sell a defective product was circular and
3 conclusory); Cullen v. Netflix, Inc., 880 F. Supp. 2d 1017, 102829 (N.D. Cal.
4 2012) (Cullen has not alleged facts about any potential utility of charging a higher
5 subscription fee for the more accessible DVD-by-mail plan than for the streaming-
6 only plan price. Thus, Cullen has not stated a plausible claim that the gravity of the
7 harm outweighs the utility of the conduct); Stearns v. v. Select Comfort Retail
8 Corp., No. 08-2746 JF (PVT), 2009 WL 4723366, at *13 (N.D. Cal. Dec. 4, 2009)
9 (Plaintiffs must set forth more than conclusory allegations that mirror the
10 elements of an unfair conduct claim).4
11 CONCLUSION
12 For the foregoing reasons, Apple respectfully requests that the Court dismiss
13 Qualcomms Unfair Competition Law claim (Count X) in the First Amended
14 Counterclaims with prejudice, pursuant to Rules 9(b) and 12(b)(6) of the Federal
15 Rules of Civil Procedure, for failure to state a claim, and California Business &
16 Professions Code section 17204, for lack of standing.
17
18 June 19, 2017 Respectfully submitted,
19 By: /s/ William A. Isaacson
20
Juanita R. Brooks (SBN 75934)
21 brooks@fr.com
Seth M. Sproul (SBN 217711)
22 sproul@fr.com
23
24 4
Qualcomms allegation about a potential network ripple effect across a whole
network is both conclusory and too speculative to make out an actionable claim.
25 Qualcomm does not identify any such network or even allege that such harm
occurred here, instead claiming that such an effect is potential. (Counterclaims
26 242, 386) This does not sufficiently allege any harm to the public. Iqbal, 556
U.S. at 678 (conclusory allegations will not do); Two Jinn, 2010 WL 1329077, at
27 *3 (conjectural allegations will not do).
28
19
MEMO OF PS & AS ISO APPLE INC.S
PARTIAL MTN TO DISMISS CASE NO. 17-cv-0108-GPC-MDD
Case 3:17-cv-00108-GPC-MDD Document 77-1 Filed 06/19/17 PageID.1326 Page 26 of 27

FISH & RICHARDSON P.C.


1 12390 El Camino Real
2 San Diego, CA 92130
Telephone: (619) 678-5070
3 Facsimile: (619) 678-5099
4 Ruffin B. Cordell (DC Bar No. 445801;
5 admitted pro hac vice)
cordell@fr.com
6 Lauren A. Degnan (DC Bar No. 452421;
admitted pro hac vice)
7 degnan@fr.com
FISH & RICHARDSON P.C.
8 1425 K Street, N.W., 11th Floor
9 Washington, DC 20005
Telephone: (202) 783-5070
10 Facsimile: (202) 783-2331
11 William A. Isaacson (DC Bar No. 414788;
12 admitted pro hac vice)
wisaacson@bsfllp.com
13 Karen L. Dunn (DC Bar No. 1002520;
admitted pro hac vice)
14 kdunn@bsfllp.com
BOIES SCHILLER FLEXNER LLP
15 1401 New York Avenue, N.W.
16 Washington, DC 20005
Telephone: (202) 237-2727
17 Facsimile: (202) 237-6131
18 Attorneys for Plaintiff Apple Inc.
19
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MEMO OF PS & AS ISO APPLE INC.S
PARTIAL MTN TO DISMISS CASE NO. 17-cv-0108-GPC-MDD
Case 3:17-cv-00108-GPC-MDD Document 77-1 Filed 06/19/17 PageID.1327 Page 27 of 27

1 CERTIFICATE OF SERVICE
2 I hereby certify that on June 19, 2017, the foregoing document was filed
3 electronically on the CM/ECF system, which caused all CM/ECF participants to be
4 served by electronic means.
5
6
/s/ William A. Isaacson
7 WILLIAM A. ISAACSON
8
Attorney for Plaintiff Apple Inc.
9
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1
CERTIFICATE OF SERVICE CASE NO. 17-cv-0108-GPC-MDD
Case 3:17-cv-00108-GPC-MDD Document 77-2 Filed 06/19/17 PageID.1328 Page 1 of 6

1 Juanita R. Brooks (SBN 75934)


brooks@fr.com
2 Seth M. Sproul (SBN 217711)
sproul@fr.com
3 FISH & RICHARDSON P.C.
12390 El Camino Real
4 San Diego, CA 92130
Telephone: (619) 678-5070
5 Facsimile: (619) 678-5099
6 Ruffin B. Cordell (DC Bar No. 445801; admitted pro hac vice)
cordell@fr.com
7 Lauren A. Degnan (DC Bar No. 452421; admitted pro hac vice)
degnan@fr.com
8 FISH & RICHARDSONthP.C.
1425 K Street, N.W., 11 Floor
9 Washington, DC 20005
Telephone: (202) 783-5070
10 Facsimile: (202) 783-2331
11 William A. Isaacson (DC Bar No. 414788; admitted pro hac vice)
wisaacson@bsfllp.com
12 Karen L. Dunn (DC Bar No. 1002520; admitted pro hac vice)
kdunn@bsfllp.com
13 BOIES SCHILLER FLEXNER LLP
1401 New York Avenue, N.W.
14 Washington, DC 20005
Telephone: (202) 237-2727
15 Facsimile: (202) 237-6131
16 Attorneys for Plaintiff Apple Inc.
17
18 UNITED STATES DISTRICT COURT
19 SOUTHERN DISTRICT OF CALIFORNIA
20 APPLE INC., Case No. 17-cv-0108-GPC-MDD
21 Plaintiff, REQUEST FOR INCORPORATION
BY REFERENCE OR JUDICIAL
22 vs. NOTICE IN SUPPORT OF
PLAINTIFF APPLE INC.S
23 PARTIAL MOTION TO DISMISS
QUALCOMM INCORPORATED,
24 Judge: Hon. Gonzalo P. Curiel
Defendant. Courtroom: 2D
25 Date: September 29, 2017
Time: 1:30 p.m.
26
27
28

REQUEST FOR JUDICIAL NOTICE CASE NO. 17-cv-0108-GPC-MDD


Case 3:17-cv-00108-GPC-MDD Document 77-2 Filed 06/19/17 PageID.1329 Page 2 of 6

1 QUALCOMM INCORPORATED, [FILED CONCURRENTLY WITH


NOTICE OF MOTION AND PARTIAL
2 Counterclaim-Plaintiff, MOTION TO DISMISS;
MEMORANDUM OF POINTS AND
3 vs. AUTHORITIES; DECLARATION OF
GABRIEL R. SCHLABACH]
4
APPLE INC.,
5
Counterclaim-Defendant.
6
7
8
9
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REQUEST FOR JUDICIAL NOTICE CASE NO. 17-cv-0108-GPC-MDD


Case 3:17-cv-00108-GPC-MDD Document 77-2 Filed 06/19/17 PageID.1330 Page 3 of 6

1 Plaintiff Apple Inc. (Apple) requests that the Court incorporate by


2 reference or take judicial notice of an article that is quoted and referenced in
3 Qualcomm Inc.s (Qualcomms) First Amended Counterclaims, titled Apples
4 Chip Choices May Leave Some iPhone Users in Slow Lane and published by
5 Bloomberg. A true and correct copy of the article is attached as Exhibit 1 to the
6 concurrently filed Declaration of Gabriel R. Schlabach.
7 When a documents contents are alleged in a complaint or the plaintiffs
8 claim depends on [its] contents, and no party questions the documents
9 authenticity, a court may consider the document on a motion to dismiss without
10 converting the motion to one for summary judgment. Knievel v. ESPN, 393 F.3d
11 1068, 1076 (9th Cir. 2005) (citation omitted); Davis v. HSBC Bank Nevada, N.A.,
12 691 F.3d 1152, 115960 (9th Cir. 2012); In re Pac. Gateway Exch., Inc. Sec. Litig.,
13 169 F. Supp. 2d 1160, 1164 (N.D. Cal. 2001) (If a plaintiff fails to attach to the
14 complaint the documents on which it is based, defendant may attach to a 12(b)(6)
15 motion the documents referred to in the complaint to show that they do not support
16 plaintiffs claim). Qualcomm relies on the Bloomberg article to support its
17 Counterclaims (Counterclaims 246249, 383), including citing to the article by
18 title and URL, and referring to and quoting analyst reports and studies described in
19 the article. The Court may treat such a document as part of the complaint, and
20 thus may assume that its contents are true for purposes of a motion to dismiss
21 under Rule 12(b)(6). Davis, 691 F.3d at 1160 (9th Cir. 2012) (quoting United
22 States v. Ritchie, 342 F.3d 903, 908 (9th Cir. 2003)); see also Bell Atl. Corp. v.
23 Twombly, 550 U.S. 544, 568 n.13 (2007) (the District Court was entitled to take
24 notice of the full contents of the published articles referenced in the complaint,
25 from which the truncated quotations were drawn). Where a claim is grounded in
26 fraud, as Qualcomms Unfair Competition Law claim is, it is appropriate to
27 consider the entire allegedly fraudulent statement in context in order to determine
28 what a reasonable consumer would believe. E.g., Haskell v. Time, Inc., 857 F.
1
REQUEST FOR JUDICIAL NOTICE CASE NO. 17-cv-0108-GPC-MDD
Case 3:17-cv-00108-GPC-MDD Document 77-2 Filed 06/19/17 PageID.1331 Page 4 of 6

1 Supp. 1392, 139798 (E.D. Cal. 1994) (incorporating by reference exemplar


2 mailings on which misrepresentation claim was based); Patel v. Parnes, 253
3 F.R.D. 531, 547 (C.D. Cal. 2008) (taking judicial notice of earnings call transcripts
4 that provided full context in which the information was disclosed to the market).
5 Apple does not dispute the articles authenticity, norafter citing to it and quoting
6 from it directlycould Qualcomm dispute its authenticity.
7 Alternatively, Apple requests that the Court take judicial notice of Exhibit 1
8 pursuant to Federal Rule of Evidence 201(c)(2). Courts may take judicial notice of
9 newspapers and other publications to indicate what was in the public realm at the
10 time, not whether the contents of those articles were in fact true. Von Saher, 592
11 F.3d at 960 (citation omitted); see also Tadros v. Celladon Corp., No. 15cv1458
12 AJB (DHB), 2016 WL 5870002, at *7 (S.D. Cal. Oct. 7, 2016) (quoting Von
13 Saher, 592 F.3d at 960). Exhibit 1 is appropriate for judicial notice because it
14 became part of the public realm when published on November 18, 2016, and
15 Qualcomm relied on its contents to bring its Counterclaim. (Counterclaims 246
16 249, 383) The article can be readily accessed online, and its authenticity is not
17 reasonably disputable.
18 CONCLUSION
19 For the aforementioned reasons, Apple respectfully requests that the Court
20 incorporate Exhibit 1 by reference or take judicial notice of Exhibit 1.
21
22
23
24
25
26
27
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2
REQUEST FOR JUDICIAL NOTICE CASE NO. 17-cv-0108-GPC-MDD
Case 3:17-cv-00108-GPC-MDD Document 77-2 Filed 06/19/17 PageID.1332 Page 5 of 6

1 June 19, 2017 Respectfully submitted,


2 By: /s/ William A. Isaacson
3 Juanita R. Brooks (SBN 75934)
brooks@fr.com
4 Seth M. Sproul (SBN 217711)
sproul@fr.com
5 FISH & RICHARDSON P.C.
12390 El Camino Real
6 San Diego, CA 92130
7 Telephone: (619) 678-5070
Facsimile: (619) 678-5099
8
Ruffin B. Cordell (DC Bar No. 445801;
9 admitted pro hac vice)
10 cordell@fr.com
Lauren A. Degnan (DC Bar No. 452421;
11 admitted pro hac vice)
degnan@fr.com
12 FISH & RICHARDSON P.C.
1425 K Street, N.W., 11th Floor
13 Washington, DC 20005
14 Telephone: (202) 783-5070
Facsimile: (202) 783-2331
15
William A. Isaacson (DC Bar No. 414788;
16 admitted pro hac vice)
17 wisaacson@bsfllp.com
Karen L. Dunn (DC Bar No. 1002520;
18 admitted pro hac vice)
kdunn@bsfllp.com
19 BOIES SCHILLER FLEXNER LLP
1401 New York Avenue, N.W.
20 Washington, DC 20005
21 Telephone: (202) 237-2727
Facsimile: (202) 237-6131
22
Attorneys for Plaintiff Apple Inc.
23
24
25
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REQUEST FOR JUDICIAL NOTICE CASE NO. 17-cv-0108-GPC-MDD
Case 3:17-cv-00108-GPC-MDD Document 77-2 Filed 06/19/17 PageID.1333 Page 6 of 6

1 CERTIFICATE OF SERVICE
2 I hereby certify that on June 19, 2017, the foregoing document was filed
3 electronically on the CM/ECF system, which caused all CM/ECF participants to be
4 served by electronic means.
5
6
/s/ William A. Isaacson
7 WILLIAM A. ISAACSON
8
Attorney for Plaintiff Apple Inc.
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CERTIFICATE OF SERVICE CASE NO. 17-cv-0108-GPC-MDD
Case 3:17-cv-00108-GPC-MDD Document 77-3 Filed 06/19/17 PageID.1334 Page 1 of 4

1 Juanita R. Brooks (SBN 75934)


brooks@fr.com
2 Seth M. Sproul (SBN 217711)
sproul@fr.com
3 FISH & RICHARDSON P.C.
4 12390 El Camino Real
San Diego, CA 92130
5 Telephone: (619) 678-5070
Facsimile: (619) 678-5099
6
7 Ruffin B. Cordell (DC Bar No. 445801; admitted pro hac vice)
cordell@fr.com
8 Lauren A. Degnan (DC Bar No. 452421; admitted pro hac vice)
degnan@fr.com
9 FISH & RICHARDSON P.C.
1425 K Street, N.W., 11th Floor
10 Washington, DC 20005
11 Telephone: (202) 783-5070
Facsimile: (202) 783-2331
12
William A. Isaacson (DC Bar No. 414788; admitted pro hac vice)
13 wisaacson@bsfllp.com
14 Karen L. Dunn (DC Bar No. 1002520; admitted pro hac vice)
kdunn@bsfllp.com
15 BOIES SCHILLER FLEXNER LLP
1401 New York Avenue, N.W.
16 Washington, DC 20005
Telephone: (202) 237-2727
17 Facsimile: (202) 237-6131
18
Attorneys for Plaintiff Apple Inc.
19
UNITED STATES DISTRICT COURT
20
SOUTHERN DISTRICT OF CALIFORNIA
21
APPLE INC., Case No. 17-cv-0108-GPC-MDD
22
Plaintiff, DECLARATION OF GABRIEL R.
23 SCHLABACH IN SUPPORT OF
vs. APPLE INC.S PARTIAL MOTION
24 TO DISMISS
25 QUALCOMM INCORPORATED, Judge: Hon. Gonzalo P. Curiel
Courtroom: 2D
26 Defendant. Date: September 29, 2017
Time: 1:30 p.m.
27
28

DECLARATION OF GABRIEL R. SCHLABACH


ISO APPLE INC.S PARTIAL MTN TO DISMISS CASE NO. 17-cv-0108-GPC-MDD
Case 3:17-cv-00108-GPC-MDD Document 77-3 Filed 06/19/17 PageID.1335 Page 2 of 4

1 QUALCOMM INCORPORATED, [FILED CONCURRENTLY WITH


NOTICE OF MOTION AND PARTIAL
2 Counterclaim-Plaintiff, MOTION TO DISMISS,
MEMORANDUM OF POINTS AND
3 vs. AUTHORITIES; REQUEST FOR
INCORPORATION BY REFERENCE
4 OR JUDICIAL NOTICE]
APPLE INC.,
5
Counterclaim-Defendant.
6
7
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DECLARATION OF GABRIEL R. SCHLABACH


ISO APPLE INC.S PARTIAL MTN TO DISMISS CASE NO. 17-cv-0108-GPC-MDD
Case 3:17-cv-00108-GPC-MDD Document 77-3 Filed 06/19/17 PageID.1336 Page 3 of 4

1 I, Gabriel R. Schlabach, declare as follows:


2 1. I am an Associate with the law firm Boies Schiller Flexner LLP,
3 attorneys of record in this action for Counterclaim-Defendant Apple Inc.
4 (Apple). I am a member of good standing of the Bar of the State of California,
5 and I am admitted to practice before this Court. I have personal knowledge of the
6 matters set forth in this declaration, and if called upon to do so, I would testify
7 competently to them.
8 2. Counterclaim-Plaintiff Qualcomm Inc.s First Amended
9 Counterclaims (for example, Paragraphs 41, 246249, 383) cite to and quote from
10 a statement attributed to an Apple spokesperson in an online article entitled
11 Apples Chip Choices May Leave Some iPhone Users in Slow Lane and
12 published by Bloomberg on November 18, 2016. The article is accessible at
13 https://www.bloomberg.com/news/articles/2016-11-18/apple-chip-choices-may-
14 leave-some-iphone-users-in-slow-lane. A true and correct copy of this article is
15 attached as Exhibit 1.
16 I declare under penalty of perjury under the laws of the United States that
17 the foregoing is true and correct.
18 Executed this 19th day of June, 2017 in Oakland, California.
19
20
21 GABRIEL R. SCHLABACH

22
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DECLARATION OF GABRIEL R. SCHLABACH
ISO APPLE INC.S PARTIAL MTN TO DISMISS CASE NO. 17-cv-0108-GPC-MDD
Case 3:17-cv-00108-GPC-MDD Document 77-3 Filed 06/19/17 PageID.1337 Page 4 of 4

1 CERTIFICATE OF SERVICE
2 I hereby certify that on June 19, 2017, the foregoing document was filed
3 electronically on the CM/ECF system, which caused all CM/ECF participants to be
4 served by electronic means.
5
6
/s/ William A. Isaacson
7 WILLIAM A. ISAACSON
8
Attorney for Plaintiff Apple Inc.
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CERTIFICATE OF SERVICE CASE NO. 17-cv-0108-GPC-MDD
Case 3:17-cv-00108-GPC-MDD Document 77-4 Filed 06/19/17 PageID.1338 Page 1 of 5

EXHIBIT 1
5/24/2017Case Apple's ChipDocument
3:17-cv-00108-GPC-MDD Choices May Leave
77-4Some iPhone
FiledUsers in Slow Lane PageID.1339
06/19/17 - Bloomberg Page 2 of 5

Apple's Chip Choices May Leave Some iPhone Users in Slow Lane

byIan KingandScott Moritz


November18,2016,8:27AMPST

IPhone 7 on Verizon performs well below capability, tests show

Some iPhones use Intel modems, rather than Qualcomm chips

ItturnsoutnotalliPhone7sarecreatedequal.

ThelatestAppleInc.<https://www.bloomberg.com/quote/AAPL:US>smartphonesthatrunonVerizonCommunicationsInc.
<https://www.bloomberg.com/quote/VZ:US>snetworkaretechnicallycapableofdownloadingdatafasterthanthosefromAT&TInc.
<https://www.bloomberg.com/quote/T:US>Yetintesting,thetwophonesperformaboutthesame,accordingtoresearchersatTwinPrimeInc.
andCellularInsights.

Neitherrmisclearonthereason,butTwinPrimesaysitmaybebecauseAppleisntusingallthepotentialofacrucialcomponentinthe
Verizonversion.

ThedataindicatesthattheiPhone7isnottakingadvantageofallofVerizonsnetworkcapabilities,saidGabrielTavridis,headofproductat
TwinPrime.IdoubtthatAppleisthrottlingeachbitontheVerizoniPhone,butitcouldhavechosentonotenablecertainfeaturesofthe
networkchip.

EveryiPhone7andiPhone7PlusmeetsorexceedsallofAppleswirelessperformancestandards,qualitymetrics,andreliabilitytesting,
ApplespokeswomanTrudyMullersaid.Inallofourrigorouslabtestsbasedonwirelessindustrystandards,inthousandsofhoursofreal-
worldeldtesting,andinextensivecarrierpartnertesting,thedatashowsthereisnodiscernibledierenceinthewirelessperformanceofany
ofthemodels."

Itwouldbeanunusualstepforamajorphonecompanytorestrainitsdevices.Normally,companiesbattletomakethefastest,mostreliable
handsets.ApplemaybedoingthisbecauseitwantstoensureauniformiPhoneexperience,accordingtoanalysts.

"Theydontwantoneversiontogetthereputationthatitisbetter,"saidJanDawson,founderoftechnologyadvisoryrmJackdawResearch
LLC."IfApplehadaguidingprincipleitsthattheywanttomakesurecustomerswerehavingaconsistentperformance.

Butthemovecouldbackreifcustomersrealizetheirdeviceisntperformingtoitsfullpotential,orthatitslesscapablethanotherhandsets,
analystssaid.

"Thismaynotimpactthefanboys,butitmaymakeotherconsumersthinktwiceaboutbuyinganApplephone,especiallyiftheythinkthey
mightbepurchasingasub-standardproduct,"saidJimMcGregor,ananalystatTiriasResearch.Thermdoespaidanalysisforsmartphone
https://www.bloomberg.com/news/articles/2016-11-18/apple-chip-choices-may-leave-some-iphone-users-in-slow-lane 1/4
5/24/2017Case Apple's ChipDocument
3:17-cv-00108-GPC-MDD Choices May Leave
77-4Some iPhone
FiledUsers in Slow Lane PageID.1340
06/19/17 - Bloomberg Page 3 of 5
suppliers,includingQualcommInc.<https://www.bloomberg.com/quote/QCOM:US>andIntelCorp.
<https://www.bloomberg.com/quote/INTC:US>

Thecomponentattherootoftheperformancegapisthemodem,atinychipburieddeepinsideaphonesinnardsthatturnswirelesssignals
intodataandvoice.TheiPhone7istherstApplephoneforseveralyearstohaveversionswithdierentmodems.VerizonusersgetaniPhone
7withQualcommslatestX12modem--capableofdownloadingdataatupto600megabitspersecond.AT&Tcustomersgetahandsetwithan
Intelmodemthattopsoutat450megabitspersecond.

Applelikelywentwithmultiplesupplierstokeepcomponentcostsincheck.

IneldtestsbyTwinPrime,theVerizonversionisalittlefasterthanitsAT&Tstablemate--butnotasfastasitcouldbe.Thermprovedthisby
doingthesametestsontheSamsungGalaxyS7,whichalsorunsonVerizonsnetworkandusestheQualcommX12.TheS7wasabouttwiceas
fastastheiPhone7runningonthesamenetworkwiththesamemodemchip,TwinPrimefound.Thiswasbasedondatafrommorethan
100,000phonesdownloadinganimageinlargeU.S.cities.

QualcommsX12iscapableofdealingwithmorechannelsofdatasimultaneouslythanitsIntelrival,accordingtoareport
<http://cellularinsights.com/iphone7/>byMilanMilanovic,ananalystatCellularInsights,whichtestsphonesandnetworks.Appledidnt
enablethisfeature"toleveltheplayingeldbetweenQualcommandIntel,Milanovicwrote.

CellularInsightstestsphonesinlabswithequipmentthatcanvarythestrengthofthesignal,basicallyapproximatingaphonemovingfrom
goodcoveragetopoorcoverage.ThedierencesinperformancebetweenthehandsetsMilanovictestedweregreatestwhenthephonesignal
wasweakest,hesaid.

https://www.bloomberg.com/news/articles/2016-11-18/apple-chip-choices-may-leave-some-iphone-users-in-slow-lane 2/4
5/24/2017Case Apple's ChipDocument
3:17-cv-00108-GPC-MDD Choices May Leave
77-4Some iPhone
FiledUsers in Slow Lane PageID.1341
06/19/17 - Bloomberg Page 4 of 5
TwinPrimeandCellularInsightshavenorelationshipswithchipmakers,phonemakersorwirelesscarriers.Fourothernetworktestingrms
contactedbyBloombergNewssaidmeasuringphonedataspeedsisdicultbecauseperformancecanbeinuencedbyweatherandother
factorsbeyondthecontrolofwirelessprovidersandphonemakers.ThoughnoneoftheseotherrmsdisputedthendingsofTwinPrimeand
CellularInsights.

Happy Carriers

InadditiontocreatingauniediPhone7userexperience,levelingtheplayingeldwouldalsokeepwirelesscarriershappy,accordingtosome
industryanalysts.

ApplelikelyhassomeincentivetobalancetheperformanceofitsiPhonesacrossitsU.S.operatorpartners,"saidJeKvaal,ananalystwith
InstinetLLC."Itwouldbedicult,forexample,toexplaintoAT&T,whichremainstheU.S.carrierwiththemostiPhonesubscribers,why
Verizonisoeringasuperiorproduct."

RepresentativesofAT&T,Verizon,QualcommandInteldeclinedtocomment.

Companiesthat"de-featureorgowithaless-advancedmodem"maybeleftbehindasthenetworksoerfasterdataspeeds,QualcommCEO
StevenMollenkopfsaidinarecentconferencecall,withoutnamingspecicrms.

Qualcomm vs. Intel

AppleisinthissituationbecauseitchosedierentmodemsforthelatestiPhone.BypittingIntelagainstQualcomm,thecompanymaybe
tryingtoimproveitsnegotiatingpositiononprice.Qualcommsmodemshaveforyearsbeenalmostubiquitousinhigh-endsmartphones,
includingiPhones.Intelhasstruggledtobreakintothismarketandhasusedsubsidiestotrytowinshareinmobile.

SacricingperformanceinreturnforcheapercomponentsmaynotgodownwellwithAppleusers.

"Itwasprobablymultiplefactorsthatdrovethatdecision.Butintheend,itwasabaddecision,"saidMcGregor."Itisreallyhardtoarguefor
doingthisbecauseQualcommreallydoeshavethebestmodemtechnology."

Still,manyusersmaynotrealizetheiriPhoneisdierentfromtheirfriendsiPhones.Andeveniftheydo,theymaydecideAppleisnt
responsible.Mostconsumersblametheirwirelessserviceproviderwhenaphonedoesntworkwell,Milanovicsaid.

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https://www.bloomberg.com/news/articles/2016-11-18/apple-chip-choices-may-leave-some-iphone-users-in-slow-lane 3/4
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