Friday, April 5, 2013

Samsung affirmatively says U.S. import ban would affect only older iPhones and iPads

In the previous post I discussed a revelation contained in Apple's response to the United States International Trade Commission's questions relating to remedies and the public interest in the investigation of Samsung's complaint. A ruling is due on May 31 (unless postponed again), and it's pretty clear that the ITC is inclined to hold Apple to have infringed one or more claims of U.S. Patent No. 7,706,348, an allegedly UMTS-essential patent. One of the questions raised by the Commission in March relates to the scope of an import ban, should one be ordered:

"4. With respect to the '348 patent, Samsung’s infringement case before the Commission relied upon accused third and fourth generation Apple products that operate on the AT&T wireless network. If the Commission were to issue remedial orders covering articles covered by the asserted claims of the ’348 patent, would such an order cover (a) Apple products that operate on other wireless networks in the United States, and (b) later generation Apple products (e.g., iPhone 5, later iPad versions)?"

In the proceedings before the ALJ Samsung accused only older Apple products of infringement of the '348 patent: the AT&T models of the iPhone 4 (but not the 4S or 5), 3GS and 3, and of the iPad 3G and iPad 2 3G.

Apple's response was written without knowing what position Samsung would take. Apple felt that Samsung couldn't enforce an exclusion order against newer Apple products, arguing that those don't infringe for technical reasons and that, in any event, the components in those products that implement the relevant invention are Qualcomm baseband chips, resulting in patent exhaustion as Qualcomm is licensed. The Office of Unfair Import Investigations ("ITC staff") acknowledged that there is no evidence in the record concerning other networks or newer Apple products, and "agreed with Apple that any exclusion order issued in this investigation should include a certification provision to assist in enforcing the order", presumably designed to avoid that customs officers mistakenly hold shipments of current-generation iPhones and iPads. But the ITC staff argued that "Apple could have presented evidence at the hearing concerning unaccused products in an effort to demonstrate that they do not infringe", pointing to the fact that Samsung did the same in the investigation of Apple's complaint (with a view to the problems this course of actions raises, let me refer you to a post I wrote a few months ago).

Furthermore, the ITC staff wouldn't want the exclusion order itself to be limited to particular model numbers and wrote that taking a position on devices not at issue in the investigation "would be tantamount to issuing a pre-exclusion order 'advisory opinion,' for which the Commission Rules do not provide". Instead, "the question of whether such products would be within the scope of a remedial order based on the '348 patent would have to be determined in the future on a case-by-case basis, either by the U.S. Bureau of Customs and Border Protection through a certification process or scope ruling, or by the Commission in an advisory or enforcement proceeding". This is inconsistent with the ITC staff limiting its whole public interest argument to the specifically-accused AT&T versions of older iPhones and iPads: the analysis would be different, and potentially lead to a different result, if the scope of the import ban goes beyond the exemplary infringing devices. would not be acceptable to Apple given the commercial uncertainty it causes at the enforcement stage. Apple, before it knew what Samsung would say, wanted to achieve that the Commission would at least remand the investigation to the Administrative Law Judge in order to clarify these infringement issues.

Samsung has now taken the position that not only the AT&T versions of the accused iPhones and iPads but also versions sold by other carriers infringe and should fall within the scope of an import ban -- but newer products incorporating Qualcomm chips (the mentioning of Qualcomm is redacted, but having watched this dispute for a while, I can figure) would clearly fall outside its scope:

"At the time the complaint was filed, Apple's iPhones and iPads with UMTS connectivity were only available through AT&T. Since then, Apple has expanded its sales to other UMTS carriers. Because all iPhone 4 (UMTS version) and iPad 2 (UMTS version) devices infringe the asserted claims of the '348 patent, regardless of carrier customer, they would be subject to the Commission's remedial orders. However, AT&T remains the largest UMTS iPhone 4 carrier by volume. [...].

Based on Samsung's understanding, the current configurations of the iPhone 4 (CDMA version), iPhone 4S, iPhone 5, iPad 2 (CDMA version), iPad (third and fourth generations) and iPad mini contain [REDACTED]. Accordingly, unless these devices are altered to incorporate [REDACTED], they would not be subject to an exclusion order or cease and desist order. Similarly, future devices incorporating [REDACTED] would not be subject to an exclusion order or cease and desist order."

In commercial terms the second part -- where Samsung confirms that Apple products incorporating Qualcomm baseband chips are fine -- is far more important than the first one (other carriers). Should there be an import ban of older iPhones and iPads, Apple will only be affected at the low end and in the repair business. The problem could be solved for the most part by a delay before an import ban takes effect. In the meantime, there will be another generation of devices, and the oldest devices currently still on sale will then be replaced as entry-level devices by the second-oldest ones. I still don't believe the ITC will actually ban any Apple products, given that courts and regulators have concluded that Samsung failed to comply with its FRAND licensing obligations, but if it happens nevertheless, its impact will be very limited.

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