Monday, October 14, 2013

Allegations of protectionism fail plausibility test in Samsung import ban context

I picked a perfect time for my week off. There was limited activity on the smartphone patents front (partly due to the U.S. government shutdown) and only one situation in which I had to resist the urge to chime in: when I saw baseless conspiracy theories in connection with a U.S. import ban against infringing Samsung devices that went into effect last week (Bloomberg, Reuters, IDG News Service).

In early August, two things had happened in short succession: the United States Trade Representative (USTR) vetoed a U.S. import ban Samsung had won over a standard-essential patent, and the ITC ordered one against Samsung over a couple of Apple patents. The latter decision was also subject to a Presidential review conducted by the USTR on behalf of the White House, and no veto came down, so the import ban is now in effect (and may give rise to an enforcement dispute).

Samsung's "smells like U.S. protectionism" propaganda (parroted by a Washington lobbyist whose organization is the most hypocritical industry group I've eve seen as far as "interoperability" is concerned and counts Google and Samsung among its members) succeeded in part -- but not entirely, because most reporters did realize that there's a difference between standard-essential patents (SEPs) such as the patent at issue in Samsung's offensive case and non-SEPs such as the ones underlying the import ban Apple won against Samsung.

This blog has talked so much about the difference between injunctive relief over SEPs and over non-SEPs that I don't need to repeat the basics here. But I do wish to look at those conspiracy theories from a different angle: plausibility.

It makes no sense to suggest that the U.S. government's stance on SEP injunctions is driven by protectionism rather than principle. Case in point: the American mobile phone company, Motorola, owned by an American Internet giant (Google), was investigated by the FTC. I'm not completely satisfied with the outcome of that investigation, but what the FTC did was at least enough to result in the withdrawal of a couple of remaining SEPs-in-suit from Motorola's ITC case against Microsoft.

By contrast, nothing has come out so far of the DoJ investigation of Samsung's use of SEPs against Apple.

Of course, if, for example, a U.S. company like InterDigital ultimately obtained an ITC exclusion order against Samsung (or Huawei, ZTE, or Nokia) over FRAND-pledged SEPs, then and only then there might be a basis for suspecting protectionism. But that hasn't happened yet and I don't believe it will ever happen.

Certain conspiracy theories, including this one, appear much less credible if one asks a simple question: if the theory were true, wouldn't there have been a much smarter way to implement the alleged agenda?

In this case, there would have been a number of much smarter ways to achieve the alleged objective. If the goal had been to tilt the scales in Apple's favor in this earth-spanning patent spat, it wouldn't have made sense to put the fate of Samsung's case against Apple in the hands of the USTR. The preliminary ITC ruling, by an Administrative Law Judge, had been a finding of no infringement. The Commission (the six-member decision-making body at the top of the U.S. trade agency) could simply have upheld that ruling. Only a very few people in the whole world would have understood the highly technical question that made the difference between infringement and non-infringement. In the end, this would have been just one more SEP Samsung would have asserted against Apple without success. This would not have been inconsistent with its worldwide track record. For example, in Germany, an undoubtedly neutral jurisdiction, Samsung had previously failed with four SEP assertions and not succeeded with a single one.

The ITC could also have handed Apple a more impactful win against Samsung. Compared to how other litigants performed at the ITC (and compared to Apple's case against HTC), Apple was rather successful with its two-patent victory, but the ITC could have given Apple a win over three or four patents, and/or over the same patents but based on really devastating claim constructions (particularly for the Steve Jobs patent). Instead, the ITC cleared various Samsung workarounds -- against Apple's procedural objections -- and the USTR has already said that enforcement disputes should be resolved in close cooperation between U.S. Customs and the ITC, a recommendation that will help Samsung avoid disruptions of its U.S. business.

Not only could the U.S. government have influenced these ITC processes in Apple's favor but it could also have used the investigative powers of one of its sister agencies, the DoJ, well ahead of the ITC ruling, let alone the USTR veto. In December 2012, the European Commission issued a Statement of Objections (SO), a preliminary antitrust ruling, against Samsung's pursuit of SEP-based sales bans of Apple products. In a last-ditch attempt to dissuade the EU from this step, Samsung unilaterally withdrew all of its European SEP-based injunction requests. It would have been quite easy for U.S. regulators, if there had been a protectionist agenda, to put antitrust pressure on Samsung and to obligate it to abandon its push for SEP-based bans in the U.S. as well, especially after Samsung argued that its withdrawal in Europe was good for consumers (without explaining why U.S. consumers should be treated differently than their European counterparts).

In light of these options, it's an insult to suggest that the U.S. government sought to give Apple unfair leverage over Samsung. There are clear signs that the U.S. government would have denied Apple a SEP-based U.S. import ban against Samsung as well (it's just that Apple hasn't asserted any SEPs in court against anyone), and that it wouldn't have vetoed a non-SEP-based import ban if Samsung had won one against Apple (its non-SEPs are too weak for that and have a 100% drop-out rate worldwide, however). I said it's an insult because it implies that an allegedly agenda-driven U.S. government was too stupid to see those readily identifiable alternative ways to give Apple leverage without any need for the USTR to veto the ban.

There's also some confusion out there concerning the scope of the ban. The scope of an ITC exclusion order is not limited to the exemplary infringing products identified in an investigation. Two months ago I published the letter the ITC sent to U.S. Customs, and you can see that it refers to product categories and their customs codes, and the patents underlying the ban, as opposed to product names. If newer products really don't infringe (due to technical changes, or -- not in this case -- licensing), then Samsung is fine, but only because they steer clear of infringement, not because the ITC didn't look at particular products during the course of the investigation.

If the scope of ITC import bans was limited to the exemplary accused products, HTC and Qualcomm wouldn't be trying to modify the HTC One so as to avoid infringement of a Nokia patent, and Google wouldn't have said that the new Moto X line of phones "will be assembled in the United States and are therefore not subject to the exclusion order" Microsoft won last year.

I'm going to do a round-up post tomorrow on various developments in the two California Apple-Samsung cases. Samsung appears to be in panic mode with respect to the scandal involving its lawyers' disclosure of the terms of the Apple-Nokia license agreement to its executives. It brought an emergency motion and request for a hearing last week, but Judge Koh won't hold a hearing and will presumably deny Samsung's motion soon. Meanwhile the parties are preparing for next month's damages retrial and next spring's trial over a new set of patents. With a view to the retrial, proposed jury selection questions (voir dire), jury instructions and verdict forms were published, and Apple clarified in which ways it will point the new jury to "copying". In the second case, both parties filed summary judgment motions and motions to exclude expert testimony. There's a mountain of documents and I found some interesting information in it, but none of this is urgent and this is likely going to be a slow week anyway, so I'll just write about it tomorrow.

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