Late last week, the ITC finally released the public version of its Final Determination and Commission Opinion in In the Matter of Certain Electronic Devices, Including Wireless Communication Devices, Portable Music and Data Processing Devices, and Tablet Computers (Inv. No. 337-TA-794) — the case where the Commission last month issued a controversial exclusion order based on Apple’s infringement of a Samsung 3G-essential patent. The document, linked to below, includes both the Commission’s determination of a violation of Section 337 and its decision to issue an exclusion order despite the fact that Samsung had previously pledged to license the patent at issue on FRAND terms, along with a dissent by Commissioner Dean A. Pinkert from the decision to issue an exclusion order.
[337-TA-794 Commission Opinion (Public Version)]
As you can see, the Commission’s opinion is long and detailed, and we are in the midst of preparing an annotated version of the opinion that we’ll be posting later this week (similar to what we did with the Microsoft-Motorola RAND opinion). But after the jump, we’ll give you a quick overview of the Commission’s determination and the dissent’s views on the FRAND and SEP-related public interest issues.
Pages 41-66 of the Commission’s opinion address Apple’s FRAND-based affirmative defenses — defenses that generally boil down to Apple’s claim that Samsung waived its right to an exclusion order by undertaking a FRAND commitment (although the Commission also addressed Apple’s arguments relating to breach of contract). The Commission, however, found that Apple failed to carry its burden of proof on these FRAND-related defenses.
As to waiver of exclusionary relief, the Commission found that Apple failed to cite to any case showing that the ITC lacked jurisdiction over cases involving FRAND-pledged SEPs (or where it declined to issue a remedy on a similar basis). The Commission also faulted Apple’s proof of the elements of a contractual defenses (i.e., parties, offer, acceptance, consideration, terms) — let alone the specific contractual obligations that flow from Samsung’s FRAND commitments. Additionally, the Commission found that there were still disputed issues concerning the patent at issue was even actually essential to the standard (and therefore whether a FRAND or disclosure obligation applied at all).
Furthermore, the Commission noted that even if Apple had teed up the FRAND issue properly, it would not have prevailed. The Commission analyzed the history of negotiations between Apple and Samsung (this portion is heavily redacted) to see if Apple showed that Samsung failed to negotiate “in good faith,” and found that Apple failed to do so. Notably, the Commission dismissed Apple’s arguments that (1) Samsung’s initial offer was so high as to show bad faith, and (2) Samsung’s attempts to get a cross-license to Apple’s non-SEPs violated its FRAND commitments. (Note that this type of good faith analysis is what we can expect the upcoming Microsoft-Motorola trial to center around).
The Commission also addressed the public interest vis-a-vis Samsung’s FRAND obligations (see pp. 107-114), and noted that there is no basis in Section 337 for a per se ban on exclusion orders for FRAND-encumbered standard-essential patents. Furthermore, the Commission found that because the FRAND issues had been addressed in the affirmative defense analysis, they should not be revisited as part of the public interest — stating that FRAND affirmative defenses should be treated like all other types of affirmative defenses (e.g., inequitable conduct), which are not revisited as part of the public interest analysis.
Dissenting Views of Commission Pinkert
Commissioner Pinkert’s dissent, which begins on p. D1 of the Commission’s Opinion (p. 153 of the PDF copy linked to above), shows that Commissioner Pinkert believes that in this case, Samsung’s FRAND obligations and the public interest should preclude issuance of an exclusion order. Interestingly, he comes to this conclusion despite also concluding that Apple failed to prove its FRAND-based affirmative defenses.
Instead, Commissioner Pinkert seems to shift the public interest burden to Samsung to demonstrate that the terms it offered to Apple for either the patent at issue or its SEP portfolio “satisfied an objective standard of reasonableness.” He emphasizes his opinion that the patent at issue represents a “tweak” to the relevant 3G wireless standard, and the fact that there are many other patent holders in this space who could also demand SEP-related royalties. But Commission Pinkert also carefully avoids a categorical rule against SEP or FRAND-related exclusion orders, noting that his opinion is limited to the specific facts of the Samsung-Apple situation.
One other noteworthy nugget from this case happened last week — Apple asked the Commission to stay its remedial orders pending an appeal to the Federal Circuit (presumably in case the U.S. Trade Representative decides not to veto the exclusion order). If neither the USTR nor the ITC acts, it’s a good bet that Apple will ask the Federal Circuit to stay the exclusion order pending resolution of the appeal, as well.
[UPDATE] For those interested, here’s the public version of Apple’s motion: 337-TA-794 Apple Motion for Stay Pending Appeal. In it, Apple notes that AT&T — the carrier who would be most adversely affected by the ITC’s exclusion order — has joined Apple in asking the U.S. Trade Representative to veto the ITC’s decision to exclude Apple’s products. [/UPDATE]