Tuesday, January 15, 2013

Apple to ITC: 'Samsung is now expanding its misconduct' from 3G to 4G essential patents

Toward the end of last week Apple filed a statement on the public interest with the United States International Trade Commission (ITC) in connection with Samsung's ITC complaint against Ericsson, parts of which also apply to Ericsson's own complaint against Samsung while other parts are specific to Samsung. I found the filing on the ITC document system today.

The five-page letter argues that "an exclusion order based on any declared standard-essential patents (SEPs) that Samsung has committed to license on fair, reasonable, and non-discriminatory (FRAND) terms would contravene the public interest". In Apple's view, "the Commission should decline to institute the proposed investigation", or at least ensure that the judge to whom an investigation will be assigned is authorized to develop an evidentiary record and make a recommendation on the public interest issues involved.

Very importantly, footnote 1 clarifies that "Apple's views on the public interest are equally applicable to any attempt by Ericsson to use its FRAND-committed patents to obtain an exclusion order against Samsung products" and that "Apple takes no position as to any non-standard-essential patents". The second part was obvious. The first part is key to show that it's all about the overarching issues, but why didn't Apple also file such a letter before the ITC decided to investigate Ericsson's complaint? I don't know. Given that Apple and Ericsson have a patent license agreement in place, there could be contractual restrictions. At any rate, it would be unreasonable to require Apple to voice general FRAND injunction concerns every time someone seeks such an injunction. It's possible that Apple, as a target of Samsung's SEP assertions in numerous jurisdictions, only took a sufficiently strong interest to write a letter when it saw Samsung's countersuit. As Apple notes in a footnote, "the public interest factors are, of course, not designed to protect respondents, but rather the public itself". In other words, it doesn't matter whether Apple likes Ericsson better than Samsung. Even if Apple's submission was largely an act of revenge (which I don't think is a factor here at all, but let's assume so for the sake of the argument), valid concerns are valid concerns and the ITC has to protect the U.S. economy and U.S. consumers.

Ericsson itself also filed a public interest statement accusing Samsung of FRAND abuse. But Samsung claims that Ericsson demands too high a royalty. I can't vouch for Ericsson's conduct at this stage. Until some more facts are made public, I don't even know whether I'll ultimately find Ericsson's conduct even more outrageous than Samsung's. But for now, Ericsson deserves the benefit of the doubt, while Samsung's 2.4% demand from Apple is well-documented and antitrust investigations on three continents, with a preliminary finding of a violation recently having issued in Europe, also indicate a problem. It's only a gut feeling at this stage, but I guess that Ericsson's demand is probably greater than what I think its SEPs are worth, but that Samsung's demand is disproportionately worse, possibly by a significant factor, just because Samsung has a bad track record due to the dispute with Apple and Ericsson has pretty much a clean shirt in this context -- for now at least.

Large parts of Apple's letter voice the usual concerns over FRAND SEP-based injunctions. The Samsung-specific argument mentions the company's assertions against Apple and the antitrust blowback they have triggered. Apple is also concerned about 4G (LTE) becoming the new battlefield for aggressive SEP assertions:

"Samsung's present complaint is particularly pernicious for another reason as well: Samsung is now expanding its misconduct from the third-generation telecommunications standard, UMTS, into the emergent fourth generation Long-Term Evolution (LTE) standard. Samsung's abusive conduct threatens to escalate the problem of SEP holdup and chill competition for products that comply with the new LTE standard just as such competition should be expanding and bringing vast benefits to competitive conditions in the U.S. economy and U.S. consumers."

What I would like to see is a stipulation between Ericsson and Samsung to withdraw all SEPs from their ITC complaints, and to drop all injunction requests in district court to the extent they relate to SEPs. They can both still sue for monetary damages in district court. They can also pursue injunctions in district court, and import bans in the ITC, over non-standard-essential patents. But the problem is that if one party to such a dispute believes its non-SEPs are weaker, it may not want to give up its best chance of reaching a state of mutually assured destruction. That's why it's really up to the ITC itself to prevent SEP abuse. It would be a very strong signal if the ITC declined to investigate the SEP-based parts of a complaint. But I doubt that it will.

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