On Friday it became discoverable that Apple has filed a motion with the United States International Trade Commission (USITC, or just ITC) for a stay of remedial orders (import ban, cease and desist) pending an appeal to the United States Court of Appeals for the Federal Circuit. The related Commission ruling was announced on June 5 published yesterday. Previously I had published Commissioner Pinkert's dissenting views and the majority's portrayal and analysis of Apple-Samsung negotiations. Today the public redacted version of the motion for a stay has entered the public record (this post continues below the document):
13-07-08 Apple Motion for Stay of ITC Remedial Orders by Florian_Muelle_439
Apple's motion (obviously) reiterates some of the previously-heard arguments (which I support) against exclusion orders over FRAND-pledged standard-essential patents (SEPs). But there's a new angle here: the standard for a stay of a U.S. government action is considerably closer to the eBay v. MercExchange factors applied by U.S. district courts when deciding on injunction motions than the ITC's general rule that any violation results in exclusion. These are the four factors for a stay, which Apple lists in its motion, citing to an ITC ruling that, in turn, cited to a Federal Circuit decision:
the appeal's likelihood of success on the merits;
- whether the movant would suffer irreparable harm absent a stay;
whether issuance of a stay would substantially harm other parties; and
whether the public interest favors a stay
Given that harm plays such a role (factors 2 and 3), Apple's various references to rulings by Judges Posner and Robart (among others) aren't necessarily useless in this particular context even though the ITC declined to benefit from those judges' wisdom in its own ruling.
Apple concedes in its motion that it "is not aware of any investigation in which the Commission has stayed enforcement of an exclusion order". Usually, if a judicial (in this case, quasi-judicial) body makes a decision, it makes it because it believes in it -- and if it believes in it, why would it grant an immediate stay? Usually not. But this case is special. Apple recalls that Commissioner Pinkert noted in his dissenting views that this case raises "highly contested matters of first impression for this agency".
Apple points out that the ITC doesn't have to backtrack from its ruling in order to grant a stay. The mere fact that this appeal raises novel questions would be a sufficient basis for a stay, says Apple.
The motion warns against the effect of enforcement of the relevant remedial orders:
"[the] remedial orders [...] will create chaos in standard-dependent industries--both in the United States and throughout the world"
"immediate enforcement of the Orders will frustrate consumer choice, increase prices, and decrease incentives for innovation"
By contrast, Samsung is only entitled to a FRAND royalty. It will get one. In addition to the ITC investigation it filed a companion lawsuit in the District of Delaware, which is currently stayed (pending resolution of the ITC investigation including appeals).
The ITC's decision to reject Apple's public-interest arguments included a mentioning of the absence of a submission by AT&T (one of a few networks that actually use the technique Samsung claims to be covered by its patent). Apple now points to a letter AT&T more recently sent to th United States Trade Representative, to whom the White House has delegated the Presidential veto right concerning ITC exclusion orders (for Apple and Samsung's submissions to the USTR, see this recent post):
"In its Final Determination, the Commission noted that AT&T did not submit comments to the Commission. Comm'n Op. at 2. AT&T, however, submitted written comments to the U.S. Trade Representative explaining the substantial harm to the public interest from exclusion orders on FRAND-committed patents, including harm to the competitive marketplace, service providers such as AT&T, and consumers. Letter from Thomas A. Restaino, Chief Intellectual Property Counsel, AT&T, to Ambassador Michael Froman Regarding USTR Review of the Commission's Final Determination in Inv. No. 337-TA-794 at 1-2 (June 21, 2013)."
Apple's motion for a stay also quotes this paragraph from AT&T's letter to the USTR:
"[E]xclusion orders of this type are entirely inconsistent with the President's goal of ubiquitous broadband deployment, especially for low income citizens. The model of the iPhone that is subject to the exclusion order in this case is available to consumers at very low cost. The exclusion order would eliminate a future supply of this popular mobile broadband option for existing and potential AT&T customers."
Apple also points to letters from U.S. politicians to the ITC warning against the implications of SEP-based exclusion orders, such as this letter sent by six Senators to the ITC about a year ago (in connection with Motorola Mobility's SEP assertions, but the same logic applies to Samsung's pursuit of an exclusion order as well).
If the ITC declines this motion and if the USTR doesn't veto, then the exclusion order will take effect on August 5, 2013. In that case, Apple will immediately appeal the decision to the Federal Circuit and request it to stay enforcement. While the ITC has to Apple's knowledge not stayed enforcement of any of its own exclusion orders, the Federal Circuit has done so. Apple cites the following cases:
Broadcom Corp. v. Int'l Trade Comm'n, No. 2007-1164 (Fed. Cir. Sept. 12, 2007) (granting stay requested by wireless carriers and handset manufacturers);
Dynatec Int'l, Inc. v. Int'l Trade Comm'n, No. 99-1504, 1999 U.S. App. LEXIS 38842 (Fed. Cir. Sept. 24, 1999); and
Jazz Photo Corp. v. Int'l Trade Comm'n, No. 99-1431 (Fed. Cir. July 6, 1999)
Apple's motion indicates the broad lines of its appellate argument, though Apple reserves the right to appeal on other grounds as well:
"The Commission {...] reversed the [Administrative Law Judge]’s non-infringement finding by erroneously altering the claim construction"
"Even under the Commission's revised claim construction, Apple’s accused products do not infringe."
"[N]one of Samsung's domestic industry products containing a Qualcomm baseband processor chip practices claim 75 or 82 of the ’348 patent. [...] Nor do any of the Qualcomm-based products practice claim 82 [...]"
"There is no dispute that Samsung has licensed Intel to practice the ’348 patent and that the accused functionality in Apple's products is contained in a baseband processor chip that Apple purchases from Intel. The Commission’s rejection of Apple's exhaustion defense was based on its conclusion that sales of the baseband chips from Intel to Apple were not shown to take place in the United States. [...] That reasoning is at odds with the March 19, 2013, holding of the U.S. Supreme Court that, if authorized, extra-territorial sales of goods manufactured abroad exhaust intellectual property rights. See Kirtsaeng v. John Wiley & Sons, Inc., 133 S. Ct. 1351 (2013)"
"As construed, the asserted claims are not directed to patent-eligible subject matter under 35 U.S.C. § 101, because they merely claim an abstract mathematical relationship without any claim limitations that add anything inventive."; "also invalid [...] in view of the prior art"
The previous items are all about liability. Apple will also challenge the remedies imposed by the Commission. This is where FRAND comes into play.
By the way, Apple strongly disagrees with the Commission majority's characterization of its conduct as constituting "reverse hold-up". Apple points to the fact that the description of Apple-Samsung negotiations contained in the Commission opinion spans seven pages and that it is willing to pay a FRAND royalty.
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