A couple of weeks ago, the ITC commenced a thorough review of an initial determination that found Apple to violate a 3G standard-essential Motorola (i.e., Google) patent. Most of the review questions related to issues surrounding FRAND-pledged standard-essential patents (SEPs).
On Monday, a number of third parties sent statements to the ITC. While Apple (and, in a parallel investigation, Microsoft) previously received an enormous level of support from lawmakers, the Federal Trade Commission, major companies and industry associations, most of the third-party submissions that came in at this stage of the investigation are from stakeholders who want to get undue leverage from their SEPs.
The Office of Unfair Import Investigations (OUII), frequently referred to as "the ITC staff", also filed a statement. The OUII participates in many ITC investigations as a third party. I am now going to comment on the public interest statements that have shown up so far (maybe there are some more that will enter the public record these days), starting with the ITC staff.
Office of Unfair Import Investigations (OUII, "ITC staff")
With so many ITC complaints being filed nowadays (and taking longer than in the past to get settled), the OUII can no longer follow all of them. It stopped following this investigation shortly before the evidentiary hearing (trial). But the FRAND issues this case presents could (though it need not) result in a decision of transcendental impact on ITC investigations involving SEPs. That's why the OUII's interest in this particular investigation was reignited.
The OUII is, as I said before, a third party to the proceedings. It's not a decision-making body; neither an Administrative Law Judge nor the Commission (the six-member panel at the top of the ITC) are required to adopt its positions, and they frequently don't. Most of the time, the weight of those staff recommendations is overestimated by observers, but the OUII can be influential. Officially, its job is to defend the public interest in those investigations. As far as the Motorola/Apple case is concerned, the OUII's statement has much less to do with the public interest (which would be to curb SEP abuse) than with an institutional interest in defending the ITC's jurisdiction over cases in which SEPs are asserted. That set of priorities is transparent, and the decision on whether the ITC can order import bans over SEPs will be decided at a level far above the OUII. In fact, the Judiciary Committee of the United States Senate just held a hearing on exclusion orders over SEPs.
The part of the OUII statement that Apple should be somewhat concerned about is the ITC staff's assertion that "Respondent Apple has waived its right to assert that Complainant Motorola failed to offer a license on RAND terms". One of the review questions also relates to this theory of a potential waiver of the FRAND defense. Should Google/Motorola prevail on the patent that the Administrative Law Judge deemed violated, a finding that it didn't raise the FRAND defense in time would be a problem for Apple. The OUII argues that "an evidentiary record concerning the RAND issues was not developed before the Judge".
I'm surprised that the OUII alleges a waiver of this theory in a July 20, 2011 letter that Apple sent to the other parties, which purportedly stated that "Apple will not be pursuing as part of the 745 investigation any affirmative defenses based on Motorola’s failure to make a FRAND offer". At that time, Apple had already brought FRAND counterclaims in this ITC investigation, which were immediately removed (in accordance with ITC rules) to a district court (in that case, the Western District of Wisconsin, where some summary judgment motions are pending). The ITC staff says that it wanted to exclude an Apple expert on FRAND issues from the proceedings earlier on, but Apple then withdrew its defense, and the related expert. But now, in the public interest context, Apple raises the FRAND issue again, and "has submitted an affidavit by the same expert that OUII originally moved to preclude".
In my opinion, injunctive relief over SEPs is contrary to the public interest and doesn't require as much of an evidentiary record as the OUII statement suggests.
19 economics and law professors
One of the new submissions was made by 19 economics and law professors, led by Santa Clara University's Colleen Chien. The 19 professors have collectively "published over 100 scholarly articles, casebooks, treatises, and book chapters, on the subjects of standards, competition policy, patent remedies, patent licensing, administrative law, and the International Trade Commission."
This submission argues that "the ITC should not grant exclusion orders based on SEPs subject to [F]RAND commitments" and highlights that "SEPs subject to [F]RAND commitments differ from other patents". Therefore, "excluding products that practice SEPs adversely impacts competitive conditions and consumers", and the appropriate remedy would be "money damages, not injunctions". That last point is a very powerful argument which was also made by Senator Mike Lee (R.-Utah) at today's hearing.
Samsung and InterDigital
Samsung and InterDigital, a non-practicing entity, have lodged complaints over SEPs that the ITC is currently investigating. Samsung is using SEPs against Apple, and InterDigital against Nokia, Huawei and ZTE. It comes as no surprise that these companies support Motorola because a bright-line rule that import bans aren't available on the basis of SEPs would be dispositive of their own SEP assertions at the ITC. As a result, Samsung would lose pretty much all the potential leverage it may ever (if ever) have over Apple (Samsung's non-standard-essential patents are innocuous). Oddly, Samsung used to be a target of IDCC's SEP assertions years ago and took pro-FRAND positions at the time -- some of which have been quoted by Apple in its defense against Samsung's various lawsuits.
Microsoft, which also has to deal with Google subsidiary Motorola Mobility's SEP assertions, supports Apple. Microsoft's letter quotes Judge Posner extensively.
Verizon, Cisco and HP
Verizon is generally against import bans on wireless devices but has now joined Cisco and HP, who have previously made submissions on this issue (even in this same investigation). The three companies stress that "issuing an exclusion order in a case involving a standard-essential patent subject to a RAND commitment will always be contrary to the public interest" and quote Judge Posner's take on SEP injunctions.
HP and Verizon previously counted on RIM as an ally in the fight for FRAND. But RIM has changed its position as a result of the decline of its product business and due to an apparent lack of faith in the strength of its non-standard-essential patents.
While Ericsson's operating business is obviously in far better shape than RIM's, the Swedish company is extremely interested in patent monetization. Ericsson "believes that a standard-essential patent should be eligible for entry of an exclusion order" unless "the patent holder has failed to abide by its commitment to offer a license on reasonable and non-discriminatory ('RAND') terms, as prescribed by the relevant standard-setting organizations". Ericsson calls this policy "an optimal middle ground between the more extreme positions advocated by others", but that's not true.
Even the most "extreme" position that any stakeholders favoring import bans over SEPs take don't go beyond, or at least not far beyond, Ericsson's position. Even someone like Motorola wouldn't claim that import bans and other kinds of injunctions should be generally available on the basis of SEPs. They all argue that it should only be the case under certain circumstances, or even just exceptional circumstances, but at the same time they happen to conclude that all of the cases in which they assert SEPs are exceptional cases in which import bans and injunctions are warranted.
I don't know what demands Ericsson makes when it discusses SEP licensing. I'll give Ericsson the benefit of the doubt and assume that it's a very reasonable company. It may very well be -- at least I have no reason to think that it's not. In that case, Ericsson may think that it should have access to import bans if its reasonable offers are rejected by other parties. But in order for Ericsson to have this remedy available, any number of unreasonable SEP holders would be provided with a loophole to do exactly what got this whole discussion started in the first place.
The law and the ways in which the law is applied must be designed to curb abuse by someone who wants to take advantage of loopholes. The relevant criterion is not whether a rule works if everyone behaves like Ericsson does (or at least claims to do). The question is how to do deal with a Samsung or Motorola.
Ericsson quotes a statement from the European Commission's Google-Motorola merger clearance decision, according to which "it may be legitimate for the holder of [SEPs] to seek an injunction against a potential licensee which is not willing to negotiate in good faith on FRAND terms". It's true that the European Commission doesn't advocate a clear "no injunction" rule at this stage, though it remains to be seen what it will do in the future. That's mostly because there isn't any national statutory law or case law in Europe that rules out SEP-based injunctions without any exception. To the extent that courts in Germany and the Netherlands denied injunctive relief at all, they always pointed out that it may still be available in other cases. The European Commission is simply hesitant to say in connection with an antitrust investigation that national statutory laws and national high court decisions are misguided. The EU would have the power to make SEP-based injunctions unavailable, but the European Commission and its antitrust division cannot do this: it would have to be done by an EU-level court applying EU law as it stands, or through new legislation.
Qualcomm's first argument is that a FRAND licensing commitment "is a creature of contract", and whether injunctive relief is available depends on the terms of the relevant standard-setting organization. In the Motorola-Apple case, the patent at issue is a 3G patent, and the SSO whose rules apply is ETSI. Qualcomm believes that "Motorola's FRAND commitment to ETSI does not categorically preclude the issuance of an exclusion order". Qualcomm holds huge numbers of ETSI-related patents and obviously wants to be free to enforce those aggressively.
Qualcomm was investigated in the past over its suspected abuse of SEPs.
Qualcomm is a supplier of baseband chips to Apple. It's quite possible that Apple primarily works with Qualcomm in order to have a patent exhaustion argument when dealing with Samsung and Motorola Mobility, which have patent cross-license agreements in place with Qualcommm which they tried to terminate with respect to Apple as a third-party beneficiary.
Lobby groups promoting the interests of aggressive patent enforcers have also chimed in. The "Innovation Alliance", which is backed by entities like Qualcomm and InterDigital, and a standards policy consultancy firm named GTW Associates deny that there is a widespread problem of SEP abuse and favor SEP-based import bans.
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