Saturday, November 26, 2022

Solomonic ITC staff says Apple should not win untailored U.S. import ban in case it proves Ericsson's infringement of mmWave patents: carriers and consumers would be impacted

On Wednesday, two Ericsson v. Apple patent infringement hearings in Munich couldn't go forward (someone called in sick). There will be a couple of other such hearings next Wednesday as the court told me, and the court may then discuss with counsel when to hold the two postponed hearings. The most interesting Ericsson v. Apple hearing in Munich is still scheduled for December 21 and will be focused on FRAND.

Meanwhile the United States International Trade Commission (USITC, or just ITC) has uploaded to the agency's electronic docket the public redacted versions (filed with the agency on Wednesday) of Apple's, Ericsson's, and the Office of Unfair Import Investigations' (OUII, commonly referred to as the "ITC staff") prehearing briefs ahead of next month's evidentiary hearing (i.e., trial) in a case in which Apple is seeking a U.S. import ban on Ericsson's base stations over three mmWave-related patents.

On Wednesday it became known that Apple even opposes mobile telecommunications carriers' right to repair. Apple asked Administrative Law Judge (ALJ) Monica Bhattacharyya of the United States International Trade Commission (USITC, or just ITC) to strike Ericsson's argument (which Apple argues was made untimely) that any exclusion order Apple might win should, at minimum, feature a "service and repair" carve-out.

The three pre-hearing briefs shed more light on the parties' argument. Obviously, the private parties take positions at the opposite end of the spectrum:

Apple wants to make maximum impact on Ericsson's business and wants an immediate and untailored import ban:

ITC Investigation No. 337-TA-1302: Apple's prehearing brief

Ericsson argues that mmWave is really critical: "Because mmWave has a shorter geographic range than other technologies, it is targeted to more densely populated areas, such as urban and suburban areas, and to applications that require high density connectivity, where the benefits of high speed and low latency can be maximized for the most users in a smaller geographic area." Should any exclusion order issue nonetheless, it should come with "at least a two-year delay to enforcement of any remedial orders to allow U.S. network operators time to attempt to put viable alternatives into place" and with the carve-out for service and repair that I mentioned further above, as well as a certification provision "to certify to Customs that the components in question were either (a) accused but found to be non-infringing and/or (b) to be used in non-Accused Products":

ITC Investigation No. 337-TA-1302: Ericsson's prehearing brief

It comes as no surprise that the private parties disagree. So what does the ITC staff say? Here's its really interesting brief on public interest and remedy:

ITC Investigation No. 337-TA- 1302: Commission Investigative Staff's Prehearing Brief

The ITC staff recognizes the importance of protecting intellectual property, but "the evidence will demonstrate that an untailored remedy would have troubling adverse effects on competitive conditions among network providers and between different geographic regions of the United States, as well as on U.S. consumers in regions currently served by Ericsson mmWave equipment." The ITC staff does not see that Nokia and Samsung can easily replace those components, and Ericsson explains in its brief that depending on the level of customization, it can take years to mix infrastructure products from different vendors in a given location. Also, the ITC staff notes that a redacted (but apparently significant percentage) of the accused Ericssion based stations "produced in the United States in Lewisville, Texas, using components imported from Estonia"--and, by contrast, "there will be no evidence that any Nokia or Samsung mmWave cellular base station communication equipment (or components thereof) is manufactured in the United States."

The Staff appears to lend significant credence to expert testimony that "three types of consumers [...] will be most affected by a delay in the rollout of mmWave capabilities: 1) those utilizing mmWave 5G in congested areas, such as dense urban cores, stadiums, and airports and transit hubs; 2) those reliant on ultra reliable, low-latency applications, such as Chicago’s Rush University Medical Center; and 3) those relying on fixed wireless access ('FWA')." A footnote explains that "FWA enables network operators to provide a broadband internet experience throughout a customer’s location via a cellular network instead of via fiber, cable satellite, or telephone lines."

Then the ITC staff makes a distinction based on whether a given area is already serviced by Nokia and Samsung base stations or not:

"[T]he potential harm to U.S. consumers runs parallel to the harm to competitive conditions, in that the 45 million consumers in areas currently serviced by Ericsson mmWave equipment would bear the brunt of any loss of, or delay in the development of, mmWave capabilities, while consumers in areas serviced by Nokia and Samsung would be largely unaffected."

The ITC staff then "proposes a carve out that would allow network providers to continue to purchase Ericsson Accused Products for installation in geographic areas where existing Ericsson equipment is already physically installed as of the effective date of the Commission’s remedial orders:"

"Under the Staff’s proposed exemption, Ericsson would not be permitted to sell or service Accused Products for installation in any area currently served by another supplier of mmWave cellular base station communication equipment or in any area that does not already have mmWave 5G service. Within areas already served by Ericsson mmWave equipment, however, the carve out would enable Ericsson to repair or replace existing equipment, to upgrade installed mmWave equipment, to add mmWave equipment to an existing 4G installation using Ericsson equipment, and to in-fill its existing territories with a greater density of mmWave installations. In other words, Ericsson would be able to keep mmWave service within existing 'Ericsson' territories on par with mmWave service offered in other regions of the United States, but would not be allowed to import Accused Products for the purpose of expanding the geographical borders of those territories beyond the status quo."

Therefore, the ITC staff says "any remedy should be tailored to permit Ericsson to continue to sell and service Accused Products for installation in geographic areas where existing Ericsson mmWave equipment is physically installed as of the effective date of the Commission’s remedial orders."

I'm not taking a position on who's right, just on whether certain positions can be taken on a reasonable basis. The ITC staff's recommendation strongly suggests that what Apple wants goes too far. The question is then whether the staff's Solomonic proposal is the answer, or whether some further modifications such as a grace period are needed--and whether the fact that Ericsson actually does make equipment in the U.S. should be given more weight as it is really the ITC's task to protect any domestic industry. I'd rather wait until the carriers (with Verizon having invested particularly heavily in Ericsson equipment according to the ITC staff) file their public interest statements at a subsequent procedural stage. For the time being, however, the ITC staff's approach is a noteworthy development in its own right.