This past Wednesday, April 3 was the deadline for the parties and the public to submit responses to the U.S. International Trade Commission’s request for additional briefing in Inv. No. 337-TA-794 (Samsung-Apple). In addition to Apple and Samsung, several other parties submitted responses, including:
- Cisco, Hewlett-Packard, and Micron Technology
- The Retail Industry Leaders’ Association
- The Business Software Alliance
- The Association for Competitive Technology
- The ITC’s Office of Unfair Import Investigations (OUII)
In a later post, we will summarize the submissions from Apple, Samsung, and the various third parties. But in this post we’ll address the brief submitted by the OUII (or ITC “Staff”) — a third party that represents the public interest in many ITC cases (and who, as we recently noted, has taken a keen interest in SEP-related issues of late).
Notably, OUII expresses the view that public interest considerations do not bar the issuance of an exclusion order based on Apple’s alleged infringement of Samsung’s 3G-essential technology. In OUII’s view, even if Samsung has FRAND obligations with respect to the standard-essential patents at issue, Apple has not carried its burden to show that Samsung violated these obligations.
Exclusion Order-Related Issues
One issue relating to the public interest is the quantitative and qualitative effect on the market for infringing (and similar) products. The Staff notes that because only Apple products operating on AT&T’s network would be affected by any exclusion order, this would only affect 20% of U.S. smartphones and 3% of U.S. tablets. According to OUII, there’s no evidence that demand for these products couldn’t be met by other competitors such as Samsung, Motorola, etc. — and in OUII’s view, products sold by these companies would be “acceptable substitutes” for Apple’s infringing iPhones and iPads. Thus, this alone would not preclude an exclusion order.
OUII does acknowledge, however, that any harm that an exclusion order might cause to competitive conditions in the U.S. could be mitigated by delaying the effective date of the exclusion order for 4-6 months, allowing AT&T vendors time to switch to substitute products. (This is similar to the route taken by the Commission in a prior case involving Apple’s infringement claims against HTC (Inv. No. 337-TA-710).) Lastly, as far as whether the scope of the exclusion order might act to bar later generations of Apple products that were not specifically named in Samsung’s complaint, the Staff is of the opinion that this would have to be addressed on a case-by-case basis by U.S. Customs and Border Protection (who enforces ITC exclusion orders).
Unfortunately, much of OUII’s brief relating to FRAND issues has been redacted due to the presence of confidential licensing information. However, OUII does describe its opinion of which of the Georgia-Pacific factors are most relevant to a determination of FRAND terms. These include:
- The royalties received by the patentee for licensing of the patent in suit (Factor 1).
- The rates paid by the licensee for the use of other comparable patents (Factor 2).
- The portion of profit or selling price customary in the industry paid by licensees for similar inventions (Factor 12).
- The portion of profit that should be credited to the invention as distinguished from non-patentable elements or features (Factor 13).
- The amount the parties would have agreed on if, at the time infringement began, both parties attempted to negotiate an agreement (an amount acceptable to patentee, but one that still allows the licensee to make a reasonable profit) (Factor 15).
OUII also notes that factors 6 (effect on convoyed sales), 7 (duration of patent/term of license), 8 (commercial success of patented product), and 14 (expert testimony) may be somewhat relevant to a FRAND royalty. As for all of the other factors, OUII argues that these are either likely not relevant or definitely not relevant.
(Note — in footnote 17 on p. 20 of the brief, OUII argues that this case “does not involve a true FRAND situation because, as the Final ID found, it is possible to practice the relevant industry standard [UMTS] without infringing the asserted ’348 patent.” It will be very interesting to see how — if at all — the Commission deals with this particular issue.)
Finally, OUII addresses the application of Georgia-Pacific to the facts here. But OUII actually argues that the G-P factors are of little use to the “unusual circumstances” of Samsung-Apple dispute (as well as to Section 337 cases generally)! OUII explains that it believes Apple has not carried its burden of proof concerning FRAND issues (although it acknowledges that the parties may submit additional evidence along with their briefs that were due on April 3), and reiterates its belief that the ’348 patent is not standard-essential and therefore not subject to FRAND obligations. But even assuming that Samsung has a FRAND obligation, OUII argues that “Apple has not established that Samsung’s overall course of conduct demonstrates a failure to license the ’348 patent for a reasonable royalty of the type contemplated in Georgia-Pacific.”
Next week, we’ll summarize and address the briefs filed by Apple, Samsung, and the other third parties.