Monday, December 24, 2012

Samsung hits back at Ericsson with its own request for U.S. import ban over wireless patents

Samsung's fighting spirit is well-known to everyone who follows its Earth-spanning patent dispute with Apple. Its overly aggressive assertions of standard-essential patents (SEPs) against Apple in Europe have just netted it a Statement of Objections (SO) from the European Commission's Directorate-General for Competition, and Samsung continues to assert non-SEPs against Apple: on Friday it also became known that a new lawsuit had been filed in Korea over the iOS notification center.

It was obvious that Samsung was going to respond to Ericsson's two late-November U.S. lawsuits, followed by an ITC complaint (request for U.S. import ban) mirroring one of the two federal lawsuits, both defensively and offensively. In this business, Christmas is not a time for forgiving.

The defensive part began with a letter Samsung sent to the ITC on December 14, arguing that the import ban requested by Ericsson would be against the public interest and discouraging an investigation of Ericsson's complaint. I will talk some more about Samsung's letter, which is particularly interesting in light of the situation concerning Apple, and Ericsson's response further below.

On Friday (by coincidence the same day that the European Commission issued the aforementioned SO and that the notification center lawsuit in Korea became known), Samsung also went on the expected counteroffensive against Ericsson. The law firm of Kirkland & Ellis, which unlike Quinn Emanuel is not the driving force behind Samsung's SEP assertions against Apple, filed an ITC complaint targeting "Certain Wireless Communication Equipment and Articles Therein" imported by Ericsson into the United States. The complaint itself has not entered the public record yet. If it does later today, I will update this post accordingly; otherwise I will do a follow-up post to list the patents.

In my previous reports on Ericsson's patent assertions against Samsung I did not mention something I found out in the meantime: while the two companies are no longer competing in the wireless gadgets market, Samsung is now also building a telecommunications infrastructure business. Samsung's foray into Ericsson's market is much less talked about than its Galaxy phones and tablets, but it's starting to show results. For example, in August 2012, Samsung announced an LTE infrastructure deal with a UK carrier named Three, which it described as its "first commercial mobile network roll-out in Europe", Ericsson's home continent.

I'm sure that at this point no one in the industry would underestimate Samsung's ability to become a significant player, if not the leader, in a new segment of the overall market for telecommunications hardware. This certainly adds a more strategic dimension to the Ericsson-Samsung dispute. The amount of royalties paid by a company to a direct competitor always has implications going beyond a mere financial transaction.

From a tactical point of view, Ericsson can accuse Samsung's infrastructure business in its infancy as well as its hugely profitable consumer devices business, while Samsung has to focus on Ericsson's infrastructure products, which are, however, a huge target all by themselves.

Samsung would rather keep its gadgets out of the dispute. On December 14, the law firm of Fish & Richardson sent the aforementioned public interest statement on Samsung's behalf to the ITC. The letter argued that "exclusion [of Samsung's products from importation into the Unnited States] would create a void in the marketplace, harming consumers and wireless carriers, that neither Ericsson nor its licensees can fill", claiming that "Samsung currently sells more mobile phones, smartphones, and Android-powered tablet computers in the United States than any other company", pointing to "more than 2,000 U.S. personnel involved in commercializing and supporting these devices in the U.S. market", and boasting "the largest breadth of distribution for its products in the United States" (the "big four" carriers -- AT&T, Sprint, T-Mobile, and Verizon -- as well as "many local and regional carriers, such as US Cellular and MetroPCS"). Some of the same arguments are also made by Samsung against the import ban requested by Apple -- but this paragraph here is, on its face, an argument that Apple makes against Samsung:

"Finally, consumers and competitive conditions in the U.S. economy would be adversely affected by an exclusion order in this instance because the record will demonstrate that Ericsson has failed to discharge its FRAND obligations for the purportedly standards essential patents asserted in its complaint."

Just to be clear: while the European Commission's SO, which is a preliminary ruling following about a year of investigations, as well as some national court rulings suggest that Samsung has not lived up to its FRAND promise in its dealings with Apple, none of that proves (or strongly suggests) that Samsung has done the same vis-à-vis Ericsson. And in particular, whatever misconduct there may have been in Samsung's dispute with Apple is factually unrelated to the question of whether Ericsson is honoring its FRAND pledge in its dealings with Samsung. As the dispute unfolds, more facts will become known about the mutual FRAND issues between Ericsson and Samsung. Samsung's letter does not elaborate on the allegation of FRAND non-compliance, and Ericsson dignified it only with a footnote that flatly disputes Samsung's "conclusory and unsupported assertion".

Ericsson's reply stresses that its licensees, specifically naming Apple and Google's Motorola Mobility, can fill any void left by an exclusion of Samsung devices from the U.S. market.

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