Free Reply to Response to Motion - District Court of California - California

Case 3:08-cv-00655-WQH-LSP

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EVAN R. CHESLER (pro hac vice) PETER T. BARBUR (pro hac vice) ELIZABETH L. GRAYER (pro hac vice) CRAVATH, SWAINE & MOORE LLP 825 Eighth Avenue New York, NY 10019 Telephone: (212) 474-1000 Facsimile: (212) 474-3700 WILLIAM S. BOGGS (Bar No. 053013) BRIAN A. FOSTER (Bar No. 110413) TIMOTHY S. BLACKFORD (Bar No. 190900) DLA PIPER US LLP 401 B Street, Suite 1700 San Diego, CA 92101-4297 Telephone: (619) 699-2700 Facsimile: (619) 699-2701 Attorneys for Defendant QUALCOMM INCORPORATED UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA JESSE MEYER, an individual, on his own behalf and on behalf of all similarly situated, Plaintiff, v. QUALCOMM INCORPORATED, a Delaware corporation, Defendant. Case No. 08cv0655-WQH (LSP) QUALCOMM INCORPORATED'S REPLY MEMORANDUM IN FURTHER SUPPORT OF ITS MOTION TO DISMISS NO ORAL ARGUMENT UNLESS REQUESTED BY THE COURT Date: Time: Judge: August 4, 2008 11:00 a.m. Hon. William Q. Hayes

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I.

INTRODUCTION As set forth in Qualcomm's opening brief ("Mem."), Plaintiff's Complaint should be

dismissed because (i) he lacks standing and (ii) his Complaint fails to state a claim under Sections 1 and 2 of the Sherman Act, the Cartwright Act and California's Unfair Competition Law ("UCL"). None of the arguments offered in Plaintiff's Opposition ("Opp.") has any merit. First, Plaintiff argues incorrectly that the standing analysis set forth in Associated General Contractors ("AGC") does not apply to his claims under Section 16 of the Clayton Act and the Cartwright Act. Plaintiff then misapplies the only two AGC factors on which Qualcomm relies-- remoteness and antitrust injury--by incorrectly analogizing his case to that of a "stereotypical" indirect purchaser who purchases a product resold by a distributor and then sues the manufacturer. That analogy fails in light of Plaintiff's expressly pleaded theory of causation, according to which Plaintiff's alleged injury is at least three levels removed from Qualcomm's alleged conduct: Qualcomm is alleged to license cellular chipset manufacturers, which then sell chipsets to handset manufacturers, which then sell handsets to vendors, which finally sell to customers such as Plaintiff at prices subsidized by cell phone service providers. (Compl. ¶ 70.) Plaintiff cannot and does not cite any case in which a court has found antitrust standing based on an injury anywhere near this remote. In addition, Plaintiff has not suffered an "antitrust injury" because Qualcomm has not sold--at any stage of the supply chain--the cell phone that Plaintiff purchased. These defects are fatal to Plaintiff's entire Complaint. Second, Plaintiff cannot state a claim for violation of Section 1 of the Sherman Act or the Cartwright Act based upon his theory of "involuntary conspiracy". Plaintiff's attempt to suggest that such a theory is generally available after the Supreme Court's Monsanto decision is simply wrong. In any event, even if such a claim were legally viable in theory, Plaintiff cannot and does not explain away his failure to allege the necessary facts. Third, Plaintiff's Sherman Act Section 2 claim that Qualcomm monopolized the cell phone market is defective for the simple reason that Qualcomm is not alleged to supply cell phones. No matter how many times Plaintiff's Opposition brief or Complaint asserts in conclusory terms that Qualcomm has "market power" in the cell phone market, the law is clear -1WEST\21479658.1

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that a firm cannot monopolize a market in which it does not compete. Fourth, having failed to state a claim under the antitrust laws, Plaintiff's allegations cannot support a claim under the UCL. II. PLAINTIFF LACKS STANDING. A. Plaintiff Concedes That the Proximate Cause and Antitrust Injury Tests Apply Fully to Determining Whether He Has Standing. Plaintiff does not dispute that, to survive a motion to dismiss, his Complaint must allege facts establishing proximate cause and antitrust injury. The Complaint fails to do so, and Plaintiff's argument that it passes muster under some "relaxed" standing analysis applicable to his claims for equitable relief and violations of the Cartwright Act (Opp. at 3-4, 10) is entirely without merit. First, Qualcomm's motion to dismiss does not in any way rely on the AGC factors that are relevant only to Sherman Act claims for damages. Rather, Qualcomm's standing argument relies on the AGC tests for proximate cause and antitrust injury, which are fully applicable to determining whether Plaintiff has standing under both Section 16 of the Clayton Act and the Cartwright Act. (See Mem. at 9.)1 Indeed, Plaintiff repeatedly concedes that these two tests are applicable to his claims. (E.g., Opp. at 3 ("[A]ntitrust injury remains an element of antitrust standing under Section 16" and that injury must "proximately result[] from the alleged antitrust violation".); id. at 10 ("A Cartwright Act plaintiff must demonstrate [that] an antitrust violation was the proximate cause of his injuries and antitrust injury.").) Second, as Qualcomm explained in its opening brief, Section 16 and the Cartwright Act "relax" the antitrust standing requirements only insofar as they remove the absolute bar to indirect purchaser claims established in Illinois Brick. (Mem. at 10-11.)2 Thus, even when an indirect The law is clear that, under both Section 16 and the Cartwright Act, proximate cause and antitrust injury remain critical requirements for antitrust standing. See City of Pittsburgh v. W. Penn. Power, 147 F.3d 256, 268 (3d Cir. 1998) (under Section 16, "[t]he absence of antitrust injury and causal connection clearly defeat [plaintiff's] standing"); Morrison v. Viacom, Inc., 66 Cal. App. 4th 534, 548-49 (1998) (Cartwright Act standing requires "antitrust injury" and "that an antitrust violation was the proximate cause of [plaintiff's] injuries"); Vinci v. Waste Mgmt., Inc., 36 Cal. App. 4th 1811, 1814-16 (1995) (applying AGC factors under the Cartwright Act). 2 The only other difference is that, for Section 16 cases, a plaintiff need show only a "threat of injury" rather than an accrued injury. W. Penn. Power, 147 F.3d at 268. But that distinction is -2WEST\21479658.1 1

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purchaser brings suit under Section 16 or the Cartwright Act, courts can--and often do--dismiss for lack of standing based upon remoteness or upon the plaintiff's failure to allege an antitrust injury. See, e.g., Kingray, Inc. v. NBA, Inc., 188 F. Supp. 2d 1177, 1200 (S.D. Cal. 2002) (no standing under Section 16 because injury was too speculative); Morrison v. Viacom, Inc., 66 Cal. App. 4th 524, 548-49 (1998) (no Cartwright Act standing where customers had "failed to allege antitrust injury"). Plaintiff's Complaint likewise should be dismissed based upon these two factors. B. Plaintiff's Express Theory of Causation Precludes Standing.

To have antitrust standing, a plaintiff must allege an injury that is proximately caused by an antitrust violation. Plaintiff's only theory of causation is expressly pleaded as follows: "UMTS chipset manufacturers pass [Qualcomm's] UMTS Licensing costs down to UMTS device manufacturers, UMTS device manufacturers pass those costs down to their vendors, and the vendors ultimately pass those costs on to end consumers, such as Plaintiff." (Compl. ¶ 70.)3 Plaintiff cannot and does not cite any case in which a court found antitrust standing based upon a theory of injury anywhere near this remote. Indeed, in the only cited case in which the facts resemble those alleged here--In re Dynamic Random Access Memory (DRAM) Antitrust Litigation--the court properly found that consumers lacked antitrust standing because their alleged injury was too remote. 516 F. Supp. 2d 1072, 1090-91 (N.D. Cal. 2007) (finding that computer customers lacked standing to challenge conduct in the market for DRAM computer memory because DRAM is merely one component in "all manner of personal electronic devices", each of which "contains numerous other components, all of which collectively determine the final price paid by plaintiffs"). Nor can Plaintiff save his claims by labeling himself an "indirect purchaser" and relying

immaterial in this case because a plaintiff cannot obtain an injunction against a threatened injury for which he would not be entitled to compensation if the injury actually occurred. Cargill, Inc. v. Monfort of Colorado, Inc., 479 U.S. 104, 112 (1986). 3 Relying on facts nowhere pleaded in the Complaint, the Opposition asserts that Qualcomm is also a chipset manufacturer and, therefore, that there are really two instead of three intermediaries in the supply chain. (Opp. at 6 & n.9.) For the reasons discussed in Section II.B., infra, the existence of two rather than three intermediaries could in no way save Plaintiff's claims. -3WEST\21479658.1

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on cases that stand for the unremarkable proposition that some such indirect purchasers may have standing under the Cartwright Act or Section 16. (Opp. at 6-7, 13-14.) In each of the "indirect purchaser" cases cited by Plaintiff, the defendant sold a finished, unbundled product to a single middleman, which then resold it to the plaintiff at a price that allegedly included an overcharge traceable to the antitrust violation. For instance, in the principal case relied upon by Plaintiff--In re Warfarin--pharmaceutical customers were found to have standing to sue the manufacturer of their prescription drug, even though they purchased the drug through a distributor. See In re Warfarin Sodium Antitrust Litig., 214 F.3d 395, 399 (3d Cir. 2000). The Third Circuit held that the drug's consumers had antitrust standing because they purchased the exact drug that the defendant manufactured--albeit through middlemen--and were therefore "the target of [the defendant's] antitrust violations". Id. at 401. The Third Circuit described this fact pattern as the "stereotypical" indirect purchaser claim. Id. at 399.4 Plaintiff's claim is anything but "stereotypical". Unlike each defendant in the cases cited by Plaintiff, Qualcomm does not supply--even indirectly--the product that Plaintiff purchased (i.e., cell phones and service). Rather, according to the Complaint, Qualcomm licenses "some" of the technology incorporated into a cellular chipset, which is then combined with other parts into a cell phone and sold to a vendor. The finished cell phone is finally purchased by the end customer at a price that is subsidized in part by the service provider. (Compl. ¶ 70.) Thus, Plaintiff's end consumer "injury" must be traced through three levels of a supply chain, disaggregated from a multitude of manufacturing, licensing and component costs, and then offset by the subsidy provided by cellular carriers.5 This theory is too remote to support standing. Similarly, the Cartwright Act cases cited in the Opposition (Opp. at 13-14) are all in this "stereotypical" indirect purchaser mold. See In re Cipro Cases I & II, 121 Cal. App. 4th 402, 407 (plaintiffs purchased drug manufactured by defendant from a distributor); B.W.I. Custom Kitchen v. Owens-Illinois, Inc., 191 Cal. App. 3d 1341, 1345-46 (1987) (plaintiff bought glass container manufactured by defendant from a distributor); Crown Oil Corp. v. Super. Ct., 177 Cal. App. 3d 604, 606 (1986) (defendant, manufacturer of coconut oil, sold coconut oil indirectly to plaintiffs). 5 Instead of addressing the remoteness of his injury for standing purposes, Plaintiff cites several cases (Opp. at 7) that simply restate the standard for proximate cause. See Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100, 114 n.9 (1969); In re Cardizem CD Antitrust Litig., 105 F. Supp. 2d 618, 649 (E.D. Mich. 2000). The standard found in these cases--that the defendant's misconduct must be the proximate or "material" cause of the plaintiff's injury--is precisely why, on these allegations, Plaintiff's injury is too remote. -4WEST\21479658.1 4

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C.

Plaintiff Has Not Suffered an Antitrust Injury.

Plaintiff also cannot allege the necessary "antitrust injury" because, as an "end consumer" of cell phones, he is not a consumer in any market in which an alleged antitrust violation took place (i.e., "markets for WCDMA technology" (Compl. ¶ 42)), or even in any market in which Qualcomm sells a product. (See Mem. at 14-16.) Glossing over this deficiency, Plaintiff argues that the law is different for claims under Section 16 and the Cartwright Act. Plaintiff is incorrect on both counts. First, even when seeking equitable relief under Section 16, a customer must purchase a product in the market in which he alleges a Sherman Act violation took place. See, e.g., Elliott Indus. Ltd. v. BP Am. Prod. Co., 407 F.3d 1091, 1122-25 (10th Cir. 2005) (under Section 16, "the injured party [must] be a participant in the same market as the alleged malefactors" (citing R.C. Dick Geothermal Corp. v. Thermogenics, Inc., 890 F.2d 139, 148 (9th Cir. 1989) (en banc)).6 Second, although California state courts have not confronted this question directly, Plaintiff offers no reason why this Court should depart from the California federal decisions uniformly holding that consumers who purchase in a market secondary to the market in which the defendant sold a product lack standing under the Cartwright Act. See Mem. at 15; see also In re Napster, Inc. Copyright Litig., 354 F. Supp. 2d 1113, 1125-26 (N.D. Cal. 2005) ("[C]ourts interpreting the Cartwright Act's antitrust standing requirement have consistently followed the `market participant' rule.").7 ///// Plaintiff cites several cases that he claims "contradict Qualcomm's characterization of the market participant requirement" (Opp. at 9-10), but in each of those cases courts found an antitrust injury because the plaintiff participated as a customer in the market where the defendant sold a product. See Freeman v. San Diego Ass'n of Realtors, 322 F.3d 1133, 1145 (9th Cir. 2003) (subscribers to real estate listing service sued upstream provider of listings and therefore had standing as indirect purchasers); Lucas Auto. Eng'g v. Bridgestone/Firestone, Inc., 140 F.3d 1228, 1237 (9th Cir. 1998) (plaintiff had standing as an "active participant" in the market in which defendant sold a product). 7 None of the authorities cited by Plaintiff supports his assertion that "California courts have refused to adopt a market participant requirement for antitrust injury and have found that the Cartwright Act applies to anyone injured by the reduction of competition from a Cartwright Act violation". (Opp. at 11.) Plaintiff relies principally on Cellular Plus, Inc. v. Superior Court, 14 Cal. App. 4th 1224 (1993). But Cellular Plus simply holds that the Cartwright Act's broader definition of antitrust injury was intended to repeal the Illinois Brick decision. Accordingly, while Cellular Plus recognized the Cartwright Act's express provision allowing indirect purchasers to seek damages, it by no means held that indirect purchaser status is all that must be demonstrated in order to establish antitrust standing. -5WEST\21479658.1 6

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Effectively conceding that he is not a consumer in any relevant market, Plaintiff attempts to fall back on a so-called "exception to the market participant requirement", under which antitrust standing can exist where a plaintiff's injuries are "inextricably intertwined with the injuries of market participants". (Opp. at 9.) However, "the simple invocation of [the phrase `inextricably intertwined'] . . . will not allow a plaintiff to avoid the fundamental requirement for antitrust standing that he or she have suffered an injury of the type--almost exclusively suffered by consumers or competitors--that the antitrust laws were intended to prevent." Steamfitters Local Union No. 420 Welfare Fund v. Philip Morris, Inc., 171 F.3d 912, 926 n. 8 (3d Cir. 1999). The narrow exception referenced by Plaintiff applies only when a person can be considered the "direct victim" of a conspiracy or the "necessary means" by which the conspiracy was carried out. Ostrofe v. H.S. Crocker Co., Inc., 740 F.2d 739, 744-47 (9th Cir. 1984) (citing Blue Shield v. McCready, 457 U.S. 465, 479, 483-84 (1982)).8 Here, Plaintiff does not and cannot allege that he was a "direct victim" or the "necessary means" of Qualcomm's alleged conduct. To the contrary, he expressly alleges that others--"UMTS chipset and UMTS device manufacturers"--are the ones that "suffer direct anticompetitive harm". (Compl. ¶ 70 (emphasis added).) Because Plaintiff was not injured in the same market as the alleged anticompetitive conduct, his alleged injury is not an antitrust injury. D. Plaintiff Lacks Standing Under the UCL.

For the same reasons that Plaintiff lacks antitrust standing, he also lacks standing to prosecute a claim under California's UCL. Again, Plaintiff ignores the unique remoteness of his claim and instead simply relies on cases from the UCL context upholding claims that fit the "stereotypical" indirect purchaser mold. See In re Ditropan XL Antitrust Litig., 529 F. Supp. 2d 1098, 1102-05 (N.D. Cal. 2007) (consumers purchased defendant's pharmaceutical through a middleman); Shersher v. Super. Ct., 154 Cal. App. 4th 1491, 1500 (2007) (consumers purchased The classic example was the plaintiff in McCready, a patient who sued her healthcare provider after it refused to reimburse her as part of its conspiracy to boycott certain psychologists. Although it was the plaintiff's employer, and not her, who was a consumer in the market for health plans, the plaintiff's injury was considered "inextricably intertwined" with the conspiracy because it could not have been carried out without injuring her; she was thus a "necessary step in effecting the ends of the alleged illegal conspiracy". 457 U.S. at 483-84. -6WEST\21479658.1 8

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Microsoft computer equipment through a retailer). Even those cases acknowledge that, for UCL standing, "a showing of causation is required as to each representative plaintiff". Ditropan, 529 F. Supp. 2d at 1105-06. Indeed, in the UCL context, Plaintiff's "`injury in fact' must be fairly traceable to the challenged conduct of the defendant, and it must be likely, as opposed to merely speculative, that the injury will be redressed by a favorable decision". Stickrath v. Globalstar, Inc., 527 F. Supp. 2d 992, 995 (N.D. Cal. 2007). For all the reasons that Plaintiff's theory of causation is too remote to support antitrust standing, it also is insufficient under the UCL. III. THE COMPLAINT FAILS TO STATE A CLAIM. A. Plaintiff Does Not Allege an Actionable Conspiracy.

Plaintiff makes three arguments for why his claim based on an "involuntary conspiracy" should survive notwithstanding Monsanto v. Spray-Rite Serv. Corp., 465 U.S. 752 (1984). None of them has any merit. First, Plaintiff argues that Monsanto cannot foreclose his claim under the Cartwright Act. To the contrary, the Cartwright Act is expressly modeled on the Sherman Act and therefore "decisions under the latter are applicable to the former". G.H.I.I. v. MTS, Inc., 147 Cal. App 3d 256, 265 (1983). For this reason, Plaintiff is unable to cite any California case after Monsanto upholding a Cartwright Act claim based on his theory of involuntary conspiracy. (Opp. at 19-22.) Second, each of the post-Monsanto federal decisions that Plaintiff claims support his theory (Opp. at 20 & n.19) is inapposite. One of the cases actually undercuts Plaintiff's theory. See City of Vernon v. S. Cal. Edison Co., 955 F.2d 1361, 1371 (9th Cir. 1992) (finding no coerced conspiracy despite threats). Plaintiff's other Ninth Circuit cases involve tying arrangements,9 which are recognized as a narrow exception to Monsanto. See Nat'l Assoc. of Freelance Photographers v. Assoc. Press, 1997 WL 759456, at *9 (S.D.N.Y. 1997) (recognizing "the narrow exception whereby franchisees alleging an illegal `tying' arrangement can satisfy the joint action requirement by charging a `conspiracy'--really `unwilling compliance'--between Cascade Health Solutions v. PeaceHealth, 515 F.3d 883, 917 (9th Cir. 2008); Datagate, Inc. v. Hewlett-Packard Co., 60 F.3d 1421, 1426-27 (9th Cir. 1995) (explaining that Section 1's concerted action requirement "is satisfied in tie-in cases by the coerced sales contract for the tied item"); see also Black Gold, Ltd. v. Rockwool Indus., Inc., 732 F.2d 779, 780 (10th Cir. 1984). -7WEST\21479658.1 9

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themselves and a franchisor"); see also Toscano v. PGA Tour, Inc., 70 F. Supp. 2d 1109, 1115 n.6 (E.D. Cal. 1999) (explaining that, because tie-ins are per se illegal, courts "`err on the side of over-inclusiveness in determining the presence of an agreement'" (citing 7 Areeda & Hovenkamp, Antitrust Law ¶ 1437)). In the remaining cases cited by Plaintiff, Monsanto simply was not at issue because there--unlike here--the allegedly coerced victims knowingly entered into an unlawful conspiracy.10 Plaintiff makes no allegation that Qualcomm's licensees knowingly conspired to restrain prices, whether voluntarily or not. Indeed, the Complaint alleges that the price restraints in fact were imposed upon them. (Compl. ¶ 126 ("[Qualcomm] impose[d] restraints upon otherwise uncooperative licensees.").) This is consistent only with unilateral conduct on the part of Qualcomm in deciding the terms on which it will deal with its customers-- conduct that cannot violate Section 1. See Toscano, 70 F. Supp. 2d at 1115. Third, recognizing the defects in his Complaint, Plaintiff asks the Court to ignore the lack of "factual detail about the coercive tactics Qualcomm used", arguing that these tactics are "irrelevant". (Opp. at 20.) They are in fact highly relevant. After Twombly, references to "specific time, place or person" are critical in providing notice to antitrust defendants before "allowing a potentially massive factual controversy to proceed". (Mem. at 8, 20.) Thus, even when entertaining a "coerced" conspiracy claim, courts require the plaintiff to plead "facts regarding the alleged compulsion and coercion--for example, who coerced whom, when the coercion took place, how the coercion was effected, and what comprised the conspiracy". Int'l Norcent Tech. v. Koninklijke Philips Elecs. N.V., No. 07-CV-00043, 2007 WL 4976364, at *9 (C.D. Cal. Oct. 29, 2007). Because Plaintiff fails to allege these facts, he cannot state a claim under Section 1 or the Cartwright Act. //// MCM Partners v. Andrews-Bartlett & Assocs., 62 F.3d 967, 975 (7th Cir. 1995) (coercion only if victim knew it was "acquiescing in conduct that was in all likelihood unlawful"); see also Spectators' Commc'n Network Inc. v. Colonial Country Club, 231 F.3d 1005 (5th Cir. 2000) (combination can be found when one conspirator "is enticed or coerced into knowingly curtailing competition by another conspirator who has an anticompetitive motive."); Dickson v. Microsoft Corp., 309 F.3d 193, 205 (4th Cir. 2002) (conspiracy may exist if the a coerced party "acquiesced in the restraint with the knowledge that it would have anticompetitive effects"); Fineman v. Armstrong World Indus., Inc., 980 F.2d 171, 214-15 (3d Cir. 1992) ("[C]o-conspirators must share a commitment to a common scheme which has an anticompetitive objective."). -8WEST\21479658.1 10

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B.

Plaintiff Cannot State a Claim Under Section 2 of the Sherman Act.

"It is axiomatic that a firm cannot monopolize a market in which it does not compete." Discon, Inc. v. NYNEX Corp., 93 F.3d 1055, 1062 (2d Cir. 1996), vac'd on other grounds, 525 U.S. 128 (1998). The Complaint expressly alleges the relevant market as "cellular phones and service", but Qualcomm is not alleged to supply cell phones or cellular service. This is fatal to Plaintiff's claim based on Section 2. See, e.g., Aquatherm Indus., Inc. v. Florida Power & Light Co., 145 F.3d 1258, 1261 (11th Cir. 1998) (dismissing claim for monopolization of "pool-heater market" because "[plaintiff] does not assert that [defendant] ever competed in the pool-heater market"). Ignoring this basic defect, Plaintiff insists that Qualcomm has the "ability to influence" the relevant market for cell phones and service. (Opp. at 22.) But Plaintiff offers no authority for the proposition that mere "influence" by a non-competitor constitutes the exercise of monopoly power under Section 2. Courts have squarely rejected that argument. See, e.g., Olde Monmouth Stock Transfer Co. v. Depository Trust & Clearing Corp., 485 F. Supp. 2d 387, 393 (S.D.N.Y. 2007). C. Plaintiff Cannot State a UCL Claim.

Having failed to state a claim for violation of the antitrust laws, Plaintiff's UCL cause of action--which is based on identical allegations--cannot survive. First, Plaintiff cannot rescue his "unlawful" claim by reference to the Third Circuit's decision in Broadcom Corp. v. Qualcomm Inc., 501 F.3d 297, 315 (3d Cir. 2007). Although Plaintiff has copied much of Broadcom's 2005 complaint, he critically has alleged a different antitrust market. Broadcom's complaint defined the relevant market as "the market for Qualcomm's proprietary WCDMA technology", id. at 315, but Plaintiff defines the relevant market here as cellular "devices" and "service" (Compl. ¶¶ 68-84). Because, for all the reasons discussed above, Plaintiff's allegations in this case fail to state an antitrust claim, they also fail to state an "unlawful" UCL claim. See Webcaster Alliance, Inc. v. Recording Indus. Assoc. Am., Inc., No. 03-CV-3948, 2004 WL 1465722, at *6 (N.D. Cal. April 1, 2004) (dismissing "unlawful" claim based upon allegations that were insufficient to state an antitrust cause of action). ///// -9WEST\21479658.1

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Second, without an underlying antitrust violation, Plaintiff's claim under the "unfair" prong fails for the same reason and finds no support in the Cel-Tech decision.11 Plaintiff cannot state a UCL claim based upon the same allegations that fail to state an antitrust cause of action. See SC Mfr. Homes, Inc. v. Liebert, 162 Cal. App. 4th 68, 93 (2008) ("In that plaintiff cannot allege a Cartwright Act violation . . . the cause of action for a violation of the UCL also cannot stand."). Third, Plaintiff is unable to cite any case supporting his theory based on the "fraudulent" prong, which requires the deception of customers as opposed to the sophisticated SSOs that allegedly were deceived here. (Mem. at 22.) Nor does he even attempt to distinguish Qualcomm's cases, which hold squarely that "sophisticated" entities like standards organizations receive no protection under the UCL. (Mem. at 22-23.) In the one case cited by Plaintiff, it was the investing "public" that allegedly had been deceived. Overstock.com, Inc. v. Gradient Analytics, Inc., 151 Cal. App. 4th 688, 696 (2007). IV. CONCLUSION For all the foregoing reasons and the reasons set forth in Qualcomm's opening brief, Qualcomm's motion to dismiss should be granted. Dated: July 28, 2008 DLA PIPER US LLP By /s/ William S. Boggs [email protected] CRAVATH, SWAINE & MOORE LLP Evan R. Chesler Peter T. Barbur Elizabeth L. Grayer Attorneys for Defendant QUALCOMM INCORPORATED

See Cel-Tech Commc'ns, Inc. v. L.A. Cellular Tel. Co., 20 Cal. 4th 163, 187 n.12 (1999). The law in California is clear that, "[i]f the same conduct is alleged to be both an antitrust violation and an `unfair' business act or practice for the same reason--because it unreasonably restrains competition and harms consumers--the determination that the conduct is not an unreasonable restraint of trade necessarily implies that the conduct is not `unfair' toward consumers". Chavez v. Whirlpool Corp., 93 Cal. App. 4th 363, 375 (2001). -10WEST\21479658.1

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