Friday, October 21, 2011

ITC staff dismisses public interest concerns over possible ban of HTC Android devices

Are Apple and Android engaged in a battle to death, and who will go down? That's the big discussion topic du jour.

The Associated Press published excerpts from Steve Jobs's biography according to which he vowed to "destroy" Android even if he had to spend the last penny of Apple's mountain of cash, viewed Android as a "stolen" product and ruled out a comprehensive patent license (a fact that I reported on a few days ago based on information I discovered in Australian court document, as noted by GigaOM today). For my comments on the AP's story, please check this BBC News article.

The first Android company Apple sued was HTC. An import ban against HTC's Android-based products could be ordered before the end of the year, followed by a 60-day presidential review period. In mid-July, an Administrative Law Judge (ALJ) at the US International Trade Commission (ITC) found HTC in infringement of two Apple patents. The Commission (the six-member decision-making body at the top of the ITC) is now reviewing that determination with a December 6, 2011 target date for a final decision. After an ALJ finds a violation, the ITC routinely encourages public interest statements on the possible impact of an import ban.

While Google and T-Mobile submitted public interest statements that predicted doom for the U.S. job market and the ability of first responders to deal with emergencies, the staff at the ITC's Office of Unfair Import Investigations (OUII) just dismissed any such concerns and supported Apple's argument that there are alternative products running Android as well as other operating systems, including that HTC itself offers Windows Phone handsets. Here's the related section from the OUII's statement (all emphasis -- except for the section headline -- mine):

C. Public Interest

Before issuing relief against a respondent, the Commission must consider the effects of such relief on the public health and welfare, competitive conditions in the U.S. economy, the production of like or directly competitive articles in the United States, and U.S. consumers. Section 337(d) and (f). OUII is unaware of any public interest concerns that would preclude issuance of the exclusion order proposed by OUII in this investigation.

OUII is of the view that the exclusion of imports of [HTC's] accused products is unlikely to have any significant impact on the public interest considerations identified in Section 337(d). See Certain Compact Multipurpose Tools, Inv. No. 337-TA-416, USITC Pub. No. 3239, Commission Opinion at 9 (September 1999). The public interest favors the protection of U.S. intellectual property rights by excluding infringing imports. Certain Two-Handle Centerset Faucets and Escutcheons, and Components Thereof, Inv. No. 337-TA-422, USITC Pub. No. 3332, Commission Opinion at 9 (July 2000). Public interest considerations have generally not been found sufficient to preclude issuance of relief. However, there have been a few investigations in which public interest concerns have led to the denial of relief after a violation of section 337 has been found. For example, in Certain Automatic Crankpin Grinders, Inv. No. 337-TA-60, the Commission denied relief on the basis of an overriding national policy in maintaining and increasing the supply of fuel efficient automobiles and the domestic industry's inability to meet domestic demand for such vehicles. Crankpin Grinders, USITC Pub. No. 1022 (1979) at 18-20 (1979). However, a key consideration in these investigations was the complainant’s inability to meet consumer demand if the respondent's products were excluded. Here, there is no evidence that U.S. demand for the accused products cannot be met by numerous other entities, including [Apple] or its licensees.

At present, smartphones represent 40% of the U.S. mobile device market. While Android-based smartphones account for approximately 40% of that market, HTC's smartphones running the Android operating system only represent 14% of that Android-based smartphone market. Motorola, Samsung and others companies account for the remaining share of the market. Id. Moreover, Apple, Nokia, RIM, Samsung –and even HTC – supply smartphones utilizing operating systems other than Android. These non-Android-based smartphones account for over 60% of the U.S. smartphone market. See n. 6 supra. Thus, because the proposed limited exclusion order in this investigation is directed solely to infringing HTC smartphones running the Android operating system (and not all smartphones using the Android operating system), the exclusion of the accused Android-based HTC smartphones would not affect the sale of smartphones running Android (other than HTC's products) or any other smartphones using alternative operating systems.

HTC contends that the exclusion of the HTC Accused Devices from the U.S. market would not only eliminate the most popular brand of smartphones, but would also impact the public health, safety, and welfare concerns of individual U.S. consumers. See HTC's Statement on Public Interest (August 25, 2011). HTC argues that the HTC smartphones are compatible with hearing aids, comply with the Department of Homeland Security's requirements in connection with 'enhanced 911' or 'E911' location services, and provide Emergency Alert Services. Id. However, despite the useful nature of these HTC devices to key safety and emergency personnel, there is no indication that other smartphones could not serve as acceptable replacements or that there would be any lack of supply for such alternatives. Currently, there are at least four leading manufacturers of smartphones – other than HTC – that sell devices in the U.S., which account for 86% of the market that would not be subject to the exclusion order in this investigation. Furthermore, despite HTC's contention that consumers would be faced with significant diminishment in their preferred choices for smartphone features, functions, and prices, OUII submits that there continues to be a rising demand for smartphones and, thus, there will continue to be strong competition among manufacturers in this constantly varying market.

In sum, based upon the facts in this investigation, OUII is of the view that the exclusion of [HTC's] accused products will not have a significant public interest impact. Indeed, as noted above, even though Android is currently one of the leading platforms for smartphones, there are several alternative sources for Android-based smartphones other than HTC. Moreover, there are also numerous smartphones running alternative operating systems. [a related footnote says: "Other operating systems offered on various smartphones include: the iOS on the iPhone, Blackberry OS, and Microsoft Windows. Apple's Public Interest Statement"] Thus, it appears that there will be ample competition and alternative non-infringing sources for these devices. See n. 6 supra. Accordingly, OUII submits that the recommended relief is not contrary to the public interest.

Steve Jobs would have loved to read all of the above.

The whole purpose of the OUII is to represent the public interest in those investigations. It's neutral. In this case, it dismisses public interest concerns. The OUII doesn't believe there's an infringement of valid patents in this case, but if the Commission agrees with the ALJ and Apple, then the OUII believes that an import ban is perfectly appropriate and that the enforceability of intellectual property is an overarching public interest consideration.

The OUII's positioning on this public interest issue is of importance way beyond this particular ITC investigation. There are other ITC cases going on with respect to Android, including the investigations of Apple's and Microsoft's complaints against Motorola Mobility and Apple's complaint against Samsung.

Public interest issues were also raised in federal court in connection with Apple's motion for a preliminary injunction against four Android-based Samsung products. A decision on that motion is imminent as I write this post (I don't know if it will still come down today, but if not, then I believe we'll most likely see it next week). Verizon and T-Mobile submitted amicus curiae briefs in support of Samsung that raised very similar (and partly the very same) arguments as HTC's public interest statement.

Industry body preparing public interest statement likely to support Apple

An industry body named ACT (Association for Competitive Technology) also appears to be preparing a public interest statement in support of Apple. ACT president Jonathan Zuck asked for an extension of time until Monday (October 24, 2011), which the ITC granted. I have previously seen Jonathan at some patent policy events in Brussels. In February 2005 he "crushed" a press conference I gave in Brussels during the campaign against software patents I was running at the time. It was a pretty good event that generated coverage by the New York Times and other media. One of my panelists, Jerzy Buzek, later became (and currently is) the President of the European Parliament. To make a long story short, Jonathan consistently advocates that small and medium-sized technology companies depend on strong intellectual property protection. That's why I have no doubt that he's going to come down on Apple's side.

ACT's motion for an extension of time characterizes Google's public interest statement as being based on "sweeping contentions regarding terms of competition and other characteristics of the 'U.S. mobile ecosystem.'" That wording indicates that ACT considers Google's concerns about a possible import ban unfounded. ACT also argues that "the Commission should benefit from a robust exchange of views based on the complete universe of arguments proffered".

According to its website, "ACT represents nearly 3000 software developers, systems integrators, IT consulting and training firms, and e-businesses from across the country" and it lists five large companies are its "sponsors": eBay, Intel, Microsoft, Oracle, and Verisign. Those represent different perspectives on Android. While Microsoft and Oracle are asserting patents against Android and eBay alleges that Google stole some of its trade secrets, Intel cooperates closely with Google (as evidenced by Andy Rubin's appearance at the Intel Developer Forum last month).

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