FOSS PATENTS: U.S. Department of Justice investigating Samsung’s use of standard-essential patents against Apple
An Apple filing with the International Trade Commission, a U.S. government agency with quasi-judicial authority that can impose import bans on patent-infringing products, reveals another ongoing antitrust investigation concerning suspected abuse of FRAND-pledged standard-essential patents. Apple said this much in its statement on public interest considerations relevant to the investigation of Samsung’s complaint. In that statement, which was filed with the ITC on Monday and entered the public record today, Apple avers that “the [United States] Department of Justice has opened an investigation into the manner in which Samsung has used–or misused–its declared-essential patents”. Here’s the relevant passage (click on the image to enlarge):
I have no doubt that Apple’s representation is accurate because Apple would otherwise risk major problems with the ITC and the DoJ. Also, this is consistent with (but more definitive than) what an unidentified source told Bloomberg in June. According to that June 30 report, “U.S. antitrust regulators have agreed the FTC will focus on Motorola Mobility and the Justice Department will scrutinize Samsung Electronics Co.’s handling of industry-standard patent claims”. The source couldn’t tell Bloomberg if any information demands have been issued. Apple’s filing with the ITC suggests that this has meanwhile occurred. Most likely, the DoJ investigation is at a preliminary stage now but could result in the launch of full-blown investigation anytime.
As Apple notes, the European Commission already started a formal investigation of Samsung’s use of SEPs in late January (followed by the launch of two similar investigations of now-Google-subsidiary Motorola Mobility’s conduct in April). On Friday, one of Samsung’s German counsel expressed doubts in open court over the speed and resolve of the EU’s top competition enforcer.
In early September it became known that South Korea’s Fair Trade Commission is also investigating Samsung’s use of SEPs.
On Friday (October 19), the Wall Street Journal reported, citing an unidentified source, that Google is contemplating a settlement with the U.S. Federal Trade Commission with respect to its wholly-owned subsidiary Motorola Mobility’s pursuit of injunctive relief based on SEPs.
U.S. and EU antitrust authorities, Korea’s Fair Trade Commission and competition regulators from other parts of the world also participated in a patent roundtable hosted two weeks ago by the International Telecommunication Union (ITU), a United Nations agency.
Regulators are rightly concerned about the aggressive use of SEPs by companies whose ultimate goal is to force others into broad cross-license agreements involving non-standard-essential product differentiation patents.
The context of the filing: public interest considerations in ITC investigation of Samsung’s complaint against AppleApple told the ITC about the DoJ investigation as part of its defense against Samsung’s request for a U.S. import ban against Apple’s core products. Samsung filed the related ITC complaint in June 2011. In September 2012, an Administrative Law Judge made an initial determination clearing Apple of violation of any of Samsung’s four remaining patents-in-suit. Meanwhile, Samsung and the Office of Unfair Import Investigations (OUII, frequently referred to as “the ITC staff”) filed petitions for a review of this preliminary ruling by the six-member Commission, the top decision-making body at the ITC. In my analysis of the detailed version of the initial determination I concluded that an allegedly UMTS-essential patent, “U.S. Patent No. 7,706,348 on an “apparatus and method for encoding/decoding transport format combination indicator in CDMA mobile communication system”, looked like “Samsung’s best shot at the review stage”.
Apple can’t rely on the initial determination being the last word (though that may be the case). If there’s a review and if Samsung prevails on one or both of its SEPs-in-suit, there’s a high risk of a U.S. import ban, which is the only remedy the ITC can order. There is profound concern over the possibility of ITC import bans based on FRAND-pledged SEPs among regulators and major industry players, and even on Capitol Hill. Apple’s filing also recalls two congressional hearings on this issue and public interest statements filed in the meanwhile-remanded investigations of Motorola’s separate complaints against Apple and Microsoft.
Samsung also filed a public interest statement yesterday. Basically, Samsung argues that implementing a FRAND standard without a license to all patents is an infringement, and importing such products into the U.S. market constitutes an act of unfair competition that the ITC should stop. Samsung argues that it made a FRAND offer (claiming that its 2.4% royalty demand is appropriate) and that Apple’s products should be banned since it doesn’t pay. At first sight, 2.4% may look like a small amount, but if one extrapolates the figure based on Samsung’s share of UMTS-essential patents, it becomes clear that no one could make any money selling wireless devices if every SEP holder made similar demands. Samsung’s position that Apple should face an import ban unless it meets the 2.4% demand validates what University of Iowa College of Law Professor Herbert J. Hovenkamp wrote in the abstract of a paper he filed earlier this month: “Permitting the owner of a FRAND-encumbered patent to have an injunction against someone willing to pay FRAND royalties is tantamount to making the patent holder the dictator of the royalties, which once again is the same thing as no FRAND commitment at all.”