Tuesday, January 29, 2013

Samsung says InterDigital jumped the gun with latest ITC complaint, requests dismissal or delay

InterDigital's latest patent enforcement effort against the global market leader in mobile devices, Samsung, may be delayed due to a result of a hastily-prepared complaint, which was filed and announced on January 2, 2013. InterDigital (frequently referred to as IDCC, its stock ticker symbol) may have to refile its complaint with respect to Samsung, or the institution of an investigation against Samsung may be delayed with respect to six of the seven patents-in-suit. Any such delay would almost certainly also benefit Nokia, Huawei and ZTE, the other responds to the relevant complaint, given that the ITC would presumably be very reluctant to put InterDigital's assertions against Samsung, which have substantial overlaps with the ones against the other three defendants, on a separate schedule.

The parties previously raised FRAND issues with the ITC in public interest statements discouraging the institution of an investigation. There is also a new development concerning Huawei's FRAND licensing issues with InterDigital (which I'll discuss in my next post).

Yesterday one of Samsung's counsel spoke with Lisa Barton, the Acting Secretary to the Commission (the six-member decision-making body at the top of the ITC), and subsequently filed a letter reiterating Samsung's position that "the Complaint is deficient because it fails to include any evidence of unlawful importation by Samsung of articles alleged to infringe six of the seven asserted patents".

Samsung had a license agreement in place with InterDigital until the end of last year, i.e., until two days before InterDigital filed its latest ITC complaint. It covered six of the seven asserted patents (all but U.S. Patent No. 7,941,151). Indeed, that license agreement is also mentioned in InterDigital's complaint (click on the image to enlarge or read the text below the image):

"This settlement resulted in a license between InterDigital and Samsung, which expired on December 31, 2012."

So InterDigital saw that its licensing negotiations with Samsung had not resulted in a renewed agreement, and decided to seek a U.S. import ban against Samsung right upon expiration of the existing agreement. It also wanted to up the pressure on Nokia, Huawei and ZTE with yet another complaint, and added them as respondents. But there's a problem with this tight schedule: if you lodge a complaint with the ITC, you must provide examples of unlawful importation by obtaining infringing goods in the United States. A licensed product is, by definition, not an infringing one. If InterDigital had purchased any products the day it filed the complaint, any imported devices would realistically have been imported while the license agreement was in place: a product won't be imported and end up on a retail shelf on the same day. The samples of Samsung devices that InterDigital's counsel purchased were even purchased prior to expiration. Here's my quick summary of what Exhibit 52 to InterDigital's complaint says about the purchase of Samsung product samples:

  • purchased one Galaxy Tab II (10.1) (wireless edition), two Galaxy Note II phablets, two Galaxy S III smartphones and two Galaxy Stellar low-end smartphones from a Verizon store in San Diego, California on December 6, 2012 and another Galaxy Tab II the following day

  • purchased two Galaxy Tab II (10.1) wireless devices, two Galaxy Note phablets and two Galaxy S III smartphones from an AT&T store in Palo Alto, California on December 11, 2012

  • purchased two Galaxy Note II phablets from a T-Mobile store in Sunnyvale, California on December 14, 2012

  • purchased two Galaxy Note 10.1 tablets from the Walmart website on December 11, 2012

Samsung now argues that it's not sufficient for InterDigital to purchase undoubtedly licensed devices and then claim that because of Samsung's continued sale of these devices after expiration of the license agreement, it's engaging in acts of unlawful importation. While there can be no doubt in my view that Samsung is continuing to import such devices into the U.S. market, ITC Rule 210.12(a)(3) requires complainants to "describe specific instances of alleged unlawful importations or sales".

If the Commission agrees with Samsung, InterDigital will have to send its counsel on another shopping tour, and given the considerable delay between importation and sale of such products, I'm not sure this could happen immediately. InterDigital may have to wait until it's a safe assumption that any devices it obtains in the U.S. market were imported after expiration of the license agreement. Even if the term of the license agreement relates (as it presumably does) to the sale of already-imported goods rather than importation into the United States, the ITC would be the wrong forum to adjudge unlicensed sales. Its competence is to prevent unlawful imports.

For practical considerations, I don't think that products released in 2012, such as the Galaxy Tab II (10.1), Note, Note II, S III and Stellar, are going to be useful for the purpose of proving unlicensed imports that occurred after the year 2012. Even if InterDigital purchased, for example, an S III in June 2013, whatever units it obtains might have been imported last year. I believe InterDigital will be on the safe side only if it waits until Samsung releases new products into the U.S. market, unless the ITC decides to decline or delay the institution of an investigation only if Samsung provides assurances that it won't continue to import products with cellular connectivity into the U.S. market without a license from InterDigital. Samsung doesn't say that it isn't doing this -- because it certainly is. It just says that there's a factual pleading standard in place that InterDigital has to meet.

Samsung was really the primary target of InterDigital's latest complaint. I don't think it would make sense for InterDigital to drop its allegations against Samsung at this stage. At some point, InterDigital will want to go after Samsung. It it does so before the ITC has concluded the investigation of the remaining parts of the complaint (targeting Nokia, Huawei and ZTE), or at least until an evidentiary hearing (trial) has been held, the ITC would be highly likely to consolidate a refiled complaint against Samsung into the case involving Nokia, Huawei and ZTE.

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