Monday, February 7, 2022

In its replies to Apple's public interest statements, Ericsson points the ITC to Apple's 30% app tax and market definition in Epic Games case

The renewed Ericsson v. Apple patent dispute--which is ultimately just a patent royalty dispute--has been going on for only three weeks, but it's been a reasonably eventful and interesting three weeks. In the Eastern District of Texas, Ericsson's jurisdictional and procedural arguments appear more compelling than Apple's. And with respect to the ITC, import bans against smartphones have happened there before, but base stations are critical infrastructure equipment, even more so for the rollout of 5G, that only a few vendors can provide.

Apple should be forever grateful to the ITC for allowing ACT | The App(le) Association to file a public interest statement--technically out of time because they needed to correct a font size, but the real issue is that they did not tell the ITC that Apple contributes infinitely more money to ACT than those small app developers and IoT device makers the organization claims to represent. (Any number divided by zero equals infinity.)

Former U.S. standards czar Walter Copan has replied (PDF on Scribd) to Apple's, the Fair Standard Alliance's, and the Apple Association's statements. Mr. Copan explains that under certain circumstances (where an implementer is simply unwilling to pay a fair royalty), SEP injunctions should issue. That point is also driven home by four U.S. law professors in their submission (PDF on Scribd): Kristen Osenga (University of Richmond), Adam Mossoff (George Mason University), Richard Epstein (New York University), and Jonathan Barnett (University of Southern California).

That kind of support may indeed help Ericsson further down the road. For now, they still have miles to go before they can win an import ban. But if the dispute isn't settled in a year and a half from now, who knows...

I'm glad to see is that Ericsson, too, calls Apple out on the contradictions between its positions on SEP enforcement on the one hand and App Store antitrust issues on the other hand. When I saw Apple claim last week that the iPhone was irreplaceable even by Android phones, I noted that Apple says exactly the opposite in the App Store context, including (but not limited to) Epic Games v. Apple. It's the "Epicsson" dilemma. In connection with the two of its three ITC complaints against Apple where Ericsson is asserting non-SEPs, Ericsson explains that Apple makes no credible tying argument (according to which Ericsson would use non-SEPs in order to charge supra-FRAND royalties for its SEPs), but also highlights what positions takes on the substitutive capabilities of Android-based and other devices in its own SEC filings as well as the Fortnite case:

Footnote 10: "Apple argued '[t]he iPhone competes with dozens of smartphones designed andmarketed by multiple well-funded smartphones manufacturers.' Epic Games, Inc. v. Apple Inc., No. 4:20-cv-05640-YGR (N.D. Cal. Apr. 8, 2021), Defendant Apple[] Inc.'s Proposed Findings of Fact and Conclusions of Law PFF 394.1 at 89. 'By some estimates, as many as 78 million people in the United States may purchase a new smartphone each year. [] Apple competes withAndroid smartphone manufacturers for each of those purchases. [] Switching costs between iOSand Android devices have declined over time.' Id. at 399.1-399.2, pp. 92–93"

Ericsson's reply to Apple's statement concerning Ericsson's SEP complaint recalls that "Apple chooses to maintain a monopolyover its closed system and its App Store, which it uses to charge up to a 30% markup to app developers," and that Apple argued in Epic v. Apple that "iOS is not unique because there is a broad market for game distribution, such that the “Fortnite” gamein question could be played on many other alternative platforms in addition to iOS, including Samsung phones, Windows PCs, or Microsoft Xboxes" (quoting Ericsson's accurate summary of Apple's position, not an Apple filing).

Below you can find Ericsson's two replies to Apple's public interest statements (first the one filed in the two non-SEP cases, and then the one relating to SEPs).

22-02-04 Ericsson Reply to ... by Florian Mueller

22-02-04 Ericsson Reply to ... by Florian Mueller

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