In my previous post I published the dissenting views of Commissioner Pinkert, one of the six chiefs of the United States International Trade Commission (USITC, or just ITC), from the majority decision granting Samsung (unless vetoed by the United States Trade Representative or reversed by the United States Court of Appeals for the Federal Circuit) an exclusion order against older iPhones and iPads. Commissioner Pinkert's dissent is the only silver lining in a ruling of which I've obtained the final, public redacted version and which is actually much worse than even the worst German FRAND-related ruling I saw. I didn't expect this to happen, least in the U.S.
In certain parts of the world, antitrust professionals admire America as the "cradle of competition law" (for example, you can find those very words in this European Commission document). The ITC ruling on Samsung's complaint against Apple -- apart from the aforementioned dissenting views -- does not really contribute to that reputation. Nor does the unwillingness of U.S. antitrust authorities to intervene.
Price fixing may be the most basic antitrust concept, but tying is no less central to competition law. Tying means strings unfairly attached to a deal. Think of a city somewhere in the desert where only one company supplies water because it controls the only well in the area. And this monopolist now refuses to provide you any water unless you additionally agree to buy one smartphone per year. You may not want or need a smartphone; and even if you do, you would like to have a choice where to buy it. But what can you do without water? Short of relocating to another region, you're going to have to accept this condition. Hobson's choice.
Let's take this one step further. After everyone acceded to the smartphone/tablet clause, the water supplier comes up with the next scheme. Now it requires every customer to work for this company two days per month. It offers some compensation, which most residents consider unacceptably low. Some others wouldn't want to do that kind of work at all. As a result, many people complain and want a "cash-only option": they want a contract for their water that comes with no such requirements. They just want to pay, and nothing else. The water supplier offers such a deal. The only problem is that in this case the price is a huge multiple of what a fair market price would be.
The totally hypothetical water supplier would not get away with any of this. Wholly apart from whatever regulations the water supply business may be subject to, antitrust law would prohibit any of the above. No overcharging in a cash-only scenario. No requirement to buy unrelated goods. No requirement to work for the company if you don't choose to.
Regrettably, a majority of the current ITC has no problem with Samsung doing all of the above, and more, to Apple. Five of the six leaders of this U.S. government agency reconcile intellectual property and competition law in such a way that Apple's engineers and designers in Cupertino and elsewhere have to, practically speaking, work for their company's fiercest rival in the sense that the fruits of their creativity and hard work shall be available for Samsung to use in its own, competing, products. (This is even worse than the water supplier analogy, which just imposes requirements on citizens who don't compete with it.)
This ITC majority says Samsung may seek an exclusion order against Apple's products because (even if Apple had proven its FRAND defense to the Administrative Law Judge) Samsung met its FRAND licensing obligation by making a new offer in December 2012 conditioned on Apple granting Samsung, under the deal, a license to its non-SEPs. There is also a cash-only offer on the table: the infamous 2.4% demand, which didn't prevent the European Commission from issuing a Statement of Objections and was easily identified by a Dutch court as being far outside the FRAND ballpark.
In its ruling on Samsung's complaint against Apple, this ITC majority has taken the notion of intellectual property as an exclusionary right to such an extreme that the net effect is... the expropriation of innovators by extortionists. Anyone wielding standard-essential patents (SEPs) could abuse his gatekeeper role by requiring everyone else, at the threat of total exclusion from the market, to grant a license covering his non-SEPs as a condition for being allowed to operate at all. So a right to exclude could be abused in order to force others to give up their legitimate right to exclude. (A further net effect of this would be that no new entrant would ever have a chance to enter this market with a differentiated, innovative product at a competitive price, but let's focus on Apple and Samsung here.)
In an article published yesterday and entitled "Apple and Samsung: Some Phones Are Smarter Than Others", the Wall Street Journal's Heard on the Street column discusses how "[t]he specter of commoditization haunts smartphone makers". The article also discusses what happened to HTC, which is just one of many Android device makers. It notes toward the end that "Apple's unique operating system at least sets its mobile devices and computers apart". But the ITC does not allow Apple to make and keep iOS unique. Without a right to exclude from using its non-SEPs, there's no way Apple can enforce uniqueness against a copyist or plagiarist. The ITC denies this right to exclude by allowing Samsung to make exclusionary use of its SEPs unless Apple accedes to a cross-license.
Commentary on the passage of the ITC ruling concerning a reciprocal non-SEP license
Further below you can find the full text of the final, public redacted version of the ITC's portrayal and analysis of (SEP) licensing negotiations, which I converted to HTML format for easy reference and quoting (and because it proves that the European Commission accurately described Apple as a willing licensee). Before publishing that long passage I'm now going to quote the critical section on tying of non-SEP reciprocal licenses to SEP licenses upfront and will then discuss in further detail why it's dangerous and wrong and not supported by any major authority on antitrust.
"Apple also criticizes Samsung's attempt to negotiate a cross-license of both parties' mobile telephone patent portfolios. We cannot say that Samsung's offers in this regard are unreasonable. The record contains evidence of more than 30 Samsung licenses that cover the '348 and '644 patents. See RX-173C, RX-178C, RX-188, RX-189C, RX-191C, RX-193C to -209C, RX-42 IC, RX-423C. All of those licenses include a cross-license to the licensee's portfolio. That evidence supports a conclusion that a portfolio cross-license offer is typical in the industry and reasonable.
Apple has offered no evidence to suggest that such portfolio cross-licenses are atypical in the industry. In fact, Apple's own witness on ETSI policies affirmed that ETSI anticipates cross-licensing may be part of the process of negotiating a FRAND license between two parties. See Tr. at 1443 (Walker). Additionally, the negotiating history recounted above shows that Apple has made cross-license offers to Samsung.
We also note that commentators have stated that an offer to cross-license both parties' patents may be consistent with a FRAND obligation, for example:
The obligation to make a FRAND offer does not prevent the standard-essential patent owner from entering into an alternative licensing arrangement, such as a portfolio cross license, with an implementer of the standard. It will often make sense for private parties to enter into a deal that reflects their specific circumstances.
***
[A] FRAND offer to a party that owns standard-essential patents can be made conditional on the would-be licensee itself making a reciprocal FRAND offer.
Lemley, Mark A. and Shapiro, Carl, A Simple Approach to Setting Reasonahle Royalties for Standard-Essential Patents Stanford Public Law Working Paper No. 2243026, 5-6, 17 (March 20,2013), available at http://ssrn.com/abstract=2243026. That approach appears consistent with the expectations of ETSI, as has been explained on the record in this investigation. See Tr. at 1443 (Walker). Moreover, the ETSI declarations Samsung executed specifically contemplate that a FRAND license will involve "terms and conditions," not just a royalty rate. See RX-723."
This passage of the ITC ruling fails to distinguish between what consenting parties may do voluntarily and what a litigant has to do to comply with a FRAND pledge before seeking/enforcing injunctive relief.
There's no question that total portfolio cross-licenses are more efficient than parties having a SEP deal on the one hand and a non-SEP deal on the other hand. That's why it's done most of the time. If parties agree in a situation in which neither one faces an anticompetitive threat of exclusion, let them agree. But when there's a dispute, a SEP-only license on cash-only terms must be offered.
The correct approach for the ITC would have been to limit its analysis of the negotiations between the parties (whether those should even play a role or whether a FRAND commitment is irreconcilable with injunctive relief is a separate question, so let's just assume for the sake of the argument that negotiations do play a role) to those "offers" -- a euphemism for "demands" in this context -- that Samsung made in full compliance with antitrust law. Any demand that came with a condition concerning non-SEPs would have to be ignored because, even though such a deal may very well be the outcome of negotiations, it constitutes anticompetitive tying.
In this case, that means the December 2012 offer doesn't matter. It didn't impress the European Commission. Now we know at least one reason why that offer didn't matter to the EU.
Unlike the ITC majority, dissenting Commissioner Pinkert points to the pertinent sentence from the same Lemley-Shapiro paper:
"While the issue is not free from doubt, we think that an offer made conditional on the would-be licensee licensing any patents other than standard-essential patents reading on the standard at issue is not a FRAND offer."
(emphasis in original)
The ITC majority takes the sentence about reciprocity completely out of context. The sentence Commissioner Pinkert quotes makes clear how narrowly reciprocity has to be defined: SEPs reading on the same standard. For example, the Mannheim Regional Court's Seventh Civil Chamber, which handles numerous smartphone patent cases but also adjudicates competition cases, expressed concern at a recent trial over Google requiring Apple to license other wireless SEPs than the ones of the particular standard at issue in that German dispute.
If read properly, the most mileage the ITC gets out of the Lemley-Shapiro statements on reciprocity is that they say "the issue is not free from doubt", without actually substantiating that doubt. Their paper is, however, overtly biased against Apple and very much promotes Google's interests (which in this context is the same as being pro-Samsung).
So let's focus on independent, unbiased authorities. I mentioned the Mannheim Regional Court. In fact, even the most extreme requirements imposed on implementers under the German Orange-Book-Standard framework (the most SEP-holder-friendly regime prior to this ITC proposal) never required anyone to license non-SEPs. How about the United States Federal Trade Commission? Its proposed Google (Motorola Mobility) consent decree clearly requires Google to make cash-only offers, at most requiring reciprocity with respect to the same standard. Anything else doesn't count under that deal.
The European Commission's announcement of its Statement of Objections speaks for itself.
I don't know any example of a case in which an antitrust authority or court of law considered anything other than a cash-only demand to be a FRAND demand. Again, a FRAND demand made at the threat of exclusion is something different than a voluntary FRAND agreement. The citizens of that desert town I mentioned further above are also free to buy smartphones from, or work for, their water supplier. If they so elect.
The ITC accurately notes that Apple made some licensing offers to Samsung that involved non-SEPs. But a deal that Apple is willing to do is not the same thing as a deal it would be forced to do at the threat of exclusion.
I don't mean to hold it against Samsung that it offered Apple a comprehensive cross-license. Not at all. This just isn't a way to comply with its FRAND licensing obligation (unless Apple voluntarily, without coercion, accepts it). If Samsung had made Apple a lower cash-only offer in December than the original 2.4% deal and proposed as an alternative a deal involving some or all of Apple's non-SEPs, then the second option doesn't matter -- but the first option is the one that the ITC would have had to look at.
History and analysis of Apple-Samsung licensing negotiations
I'm now going to publish a text-only (HTML) version of the passage(s) of the ITC ruling discussing and analyzing the history of Apple-Samsung patent licensing negotiations. As you might imagine, it's heavily redacted, but there's still some useful information in it.
Where the ITC talks about a memorandum of understanding (MOU) that Apple and Samsung's negotiators drafted and agreed to take back to their senior executives, I recommend caution. This was a draft, not an actual MOU. So far it hasn't led anywhere. And the context is discussions that were "focused" on something (that "something" is redacted out), so this could have been less than a comprehensive license deal involving SEPs and non-SEPs alike. This is not about antitrust issues now. It's about whether the parties were actually close to global peace earlier this year. Maybe they were. Maybe they weren't. I wouldn't jump to conclusions from the ITC ruling.
I strongly recommend reading Commissioner Pinkert's well-considered dissenting views before the majority opinion.
Now, finally, the excerpt from the ITC majority opinion:
The Factual History of Negotiations Between Samsung and Apple [12, 13]
The history of negotiations between Samsung and Apple relating to the '348 and '644 Patents is largely undisputed. Apple released its first UMTS phone, the iPhone 3G, on July 11, 2008. At that time Samsung and Apple had an ongoing business relationship in which Samsung supplied Apple with a number of components for its products, including the iPhone 3G. Samsung introduced its first Android-based smartphone in 2009. On August 4, 2010, Apple accused Samsung of infringing Apple's patents.
On October 5, 2010, Samsung and Apple met in Washington, D.C. At the meeting, Apple proposed that the parties enter into a cross-license under their respective patent portfolios with Samsung to make a recurring payment of a running royalty on its smartphone and tablet sales, and the royalty to depend on the type of device sold. Apple structured the proposed royalty as $30 per smartphone and $40 per tablet, with the following discounts: (1) a 20 percent discount for Apple's cross-license to Samsung's portfolio; (2) a 40 percent discount if the device used an operating system licensed by Apple (i.e., Windows Mobile); (3) a 20 percent discount for using Apple-licensed processors; and (4) a 20 percent discount for "Not Using Proprietary Features" that Apple defined as "distinctive industrial designs, software platforms or feature sets." Apple's offer was set forth in a presentation shown at the meeting, although the hard copy that Apple provided to Samsung after the meeting omitted the financial terms. CX-0394C.0015. At the conclusion of the meeting, Apple informed Samsung [REDACTED| at the party's next meeting, which was scheduled for November 4, 2010 in Seoul, Republic of Korea.
On November 4, 2010, the parties met in Seoul. At the meeting, Samsung provided [REDACTED]. Samsung proposed [REDACTED]. Based on Samsung's view that [REDACTED], Samsung proposed that [REDACTED] Samsung's offer would result in [REDACTED]. Apple did not accept this offer.
On April 15, 2011, Apple sued Samsung in the Northern District of California seeking, among other things, damages for alleged patent infringemcnt, as well as an injunction that would prevent Samsung from selling Android-based devices and other products in the United States. Samsung filed suit against Apple in the Northern District of California on April 27, 2011. In that action, Samsung asserted a number of patents, including several that Samsung had declared may be considered essential to the UMTS standard.
On April 29, 2011, Apple sent Samsung a letter requesting specific terms for a unilateral FRAND license for declared-essential UMTS patents (i.e., a license to Samsung's patents without a cross-license of Apple's patents). This was the first time since the parties' discussions had begun that Apple had expressed an intcrcst in obtaining tcrms for a license limited solely to Samsung's declared-essential UMTS patents. Until then, the discussions had focused exclusively on [REDACTED]. At the time of Apple's request, Samsung had never been asked for a unilateral license to its declared-essential UMTS patents.
On July 25, 2011, Samsung sent a letter that offered Apple a license under all Samsung patents "that are essential to comply with past/current UMTS/WCDMA Standards . . . at a royalty of 2.4 percent for each relevant end product." The offer included a license to the '348 and '644 patents assertcd in this investigation. The offer letter also indicated Samsung's preference for a negotiated cross-license agreement.
Meanwhile, the Commission instituted this investigation on July 27, 2011, based on a complaint filed by Samsung that alleges, inter alia, infringement of the '348 and '644 patents. Apple, in turn, filed a complaint with the Commission, asserting infringement of seven Apple patents. In response to Apple's complaint, the Commission instituted Investigation No. 337-TA-796 on August 2, 2011. That investigation remains pending.
Apple sent negotiation letters to Samsung on August 18, 2011; October 31, 2011; and December 24, 2011. Apple's letters [REDACTED] Samsung continued to engage Apple through letters dated January 31, 2012; April 9, 2012; April 25, 2012; and May 11, 2012.
On September 7, 2012, after the close of briefing in this investigation and the completion of the trial in the Northern District of California litigation, Apple offered [REDACTED]. Apple proposed [REDACTED].
In letters dated October 16 and November 14, 2012, Apple also proposed [REDACTED]. On November 22, 2012, Samsung proposed that the parties meet face-to-face in December to [REDACTED]. In the event such efforts failed, Samsung stated that it would be willing to [REDACTED]. Samsung proposed that [REDACTED].
On December 3, 2012, Samsung responded to [REDACTED] that Apple had proposed in its September 7, 2012, letter. Specifically, Samsung counter-proposed that [REDACTED] . The letter referred to [REDACTED].
The parties then held face-to-face meetings in Seoul on December 12, 2012, at which they agreed to discuss [REDACTED] at another meeting that month. On December 17, 2012, Apple proposed [REDACTED]. Apple also proposed [REDACTED] . The following day, December 18, 2012, Samsung made a new proposal, whereby [REDACTED]. Samsung's offer [REDACTED].[14] The parties also discussed [REDACTED]. The parties, however, were unable to reach agreement and opted to meet again in January 2013.
On January 14, 2013, Samsung and Apple met for another face-to-face negotiation. At this meeting, Apple proposed [REDACTED]. Samsung rejected Apple's counter-offer because [REDACTED]. Although the parties were not able to reach agreement, they arranged to meet the following month.
Samsung and Apple met again in person on February 7, 2013. At this meeting, the parties focused on [REDACTED]. The parties drafted a memorandum of understanding that they agreed to take back to managcment reflecting this arrangement, [REDACTED].
After [REDACTED], Apple brought a counterproposal to a meeting with Samsung on February 20,2013.[15] Samsung declined the counterproposal. Apple's representatives called Apple management [REDACTED]. Apple's representatives informed Samsung that [REDACTED]. Samsung understood Apple's representatives [REDACTED].
On March 22, 2013, Samsung wrote to Apple and asked that it reopen negotiations. To our knowledge, Apple has not responded to that letter. Samsung asserts that its December 18, 2012, offer, as reflected in its March 22, 2013, letter, remains available to Apple.[16]
Apple submitted in its briefing to the Commission a report from its expert Mr. Donaldson. Mr. Donaldson calculated a FRAND royalty of, at most, $[REDACTED] per device for the '348 patent. Mr. Donaldson asserts that his caiculation uses the baseband processor chip, not the end device, as the royalty base because it is the baseband processor that incorporates the functionality ciaimcd in the '348 patent. Mr. Donaldson also states that his royalty rate reflects what the aggregate royalty bürden would be if all essential patent holders took the same approach (in order to avoid the so-called royalty stacking problem). Apple appears willing to pay this royalty (S[REDACTED] per device)[17] if Samsung obtains a section 337 violation determination from the Commission and prevails on an appeal of that determination to the Federal Circuit.
2. Analysis of the Parties' Negotiations
In light of the negotiations above, Apple has not proved a faiiure by Samsung to negotiate in good faith.[18] Apple does not dispute that on September 7, 2012, Apple proposed [REDACTED]. Apple indicated that [REDACTED]. On a unit by unit basis, such a valuation would result in [REDACTED]. Apple's December 17, 2012, offer also [REDACTED]. By December 18, 2012, Samsung was offering [REDACTED]. While we recognize that these offers have some ambiguity concerning the respective sales volumes of the two parties, we cannot say that Samsung's royalty offers have been unreasonable or lacking good faith. Moreover, the fact that representatives for both parties were able to reach a memorandum of understanding on February 7,2013, that [REDACTED] indicates that Samsung is ncgotiating in good faith and, to be colloquial, is playing in the same ballpark as Apple. In light of these fects, we cannot say that Apple has proven that Samsung is violating any assumed FRAND obligation.
Apple argues that Samsung was obligated to make an initial offer to Apple of a specific fair and reasonable royalty rate. The evidence on record does not support Apple's position. Apple's witness on ETSI policy and practice testified the ETSI IPR Policy document has "no precise definition of FRAND" and that it is expected that parties arrive at a FRAND license through negotiation. Tr. at 1442:17-1443:14 (Walker). Further, there is no legal authority for Apple's argument. Indeed, the limited precedent on the issue appears to indicate that an initial offer need not be the terms of a final FRAND license because the SSO intends the final license to be accomplished through negotiation. See Microsoft Corp. v. Motorola, Inc., 864 F.Supp.2d 1023, 1038 (W.D. Wash. 2012) (because SSOs contemplated that RAND terms be determined through negotiation, "it logically does not follow that initial offers must be on RAND terms").
Apple also criticizes Samsung's attempt to negotiate a cross-license of both parties' mobile telephone patent portfolios. We cannot say that Samsung's offers in this regard are unreasonable. The record contains evidence of more than 30 Samsung licenses that cover the '348 and '644 patents. See RX-173C, RX-178C, RX-188, RX-189C, RX-191C, RX-193C to -209C, RX-42 IC, RX-423C. All of those licenses include a cross-license to the licensee's portfolio. That evidence supports a conclusion that a portfolio cross-license offer is typical in the industry and reasonable.
Apple has offered no evidence to suggest that such portfolio cross-licenses are atypical in the industry.[19] In fact, Apple's own witness on ETSI policies affirmed that ETSI anticipates cross-licensing may be part of the process of negotiating a FRAND license between two parties. See Tr. at 1443 (Walker). Additionally, the negotiating history recounted above shows that Apple has made cross-license offers to Samsung.
We also note that commentators have stated that an offer to cross-license both parties' patents may be consistent with a FRAND obligation, for example:
The obligation to make a FRAND offer does not prevent the standard-essential patent owner from entering into an alternative licensing arrangement, such as a portfolio cross license, with an implementer of the standard. It will often make sense for private parties to enter into a deal that reflects their specific circumstances.
***
[A] FRAND offer to a party that owns standard-essential patents can be made conditional on the would-be licensee itself making a reciprocal FRAND offer.
Lemley, Mark A. and Shapiro, Carl, A Simple Approach to Setting Reasonahle Royalties for Standard-Essential Patents Stanford Public Law Working Paper No. 2243026, 5-6, 17 (March 20,2013), available at http://ssrn.com/abstract=2243026. That approach appears consistent with the expectations of ETSI, as has been explained on the record in this investigation. See Tr. at 1443 (Walker). Moreover, the ETSI declarations Samsung executed specifically contemplate that a FRAND license will involve "terms and conditions," not just a royalty rate. See RX-723.
Apple also complains that Samsung's offer is unreasonable because [REDACTED]. Apple's argument lacks merit for several reasons. First, as has been articulated in comments to the Commission from Qualcomm, Ericsson, and Samsung, a FRAND license could encompass a range of reasonable terms. A reasonable cross-license with one competitor may involve a balancing payment to Samsung while a reasonable cross-license with another competitor may involve Samsung making a balancing payment. Both types of agreements may be reasonable, depending on the two portfolios at issue and each party's respective volume of sales. For example, if one of Samsung's competitors has a less comprehensive patent portfolio than Samsung but a higher sales volume, that competitor could reasonably expect to make a balancing payment to Samsung in a portfolio cross-license. The dozens of patent licenses of record in this investigation reflect this industry practice. Compare, e.g., RX-191C ([REDACTED]) with RX-203C ([REDACTED]). In view of the record, we cannot say Samsung has been unreasonable in its negotiations with Apple.
We have already touched on a second problem with Apple's argument that it should not have to pay Samsung because [REDACTED]. Apple focuses on specific offers made by Samsung to Apple that [REDACTED]. But, as one court has recognized, satisfaction of the obligation flowing from a FRAND declaration is not measured by a specific offer, "be it an initial offer or an öffer during a back-and-forth negotiation." Microsoft Corp. v. Motorola, Inc., 864 F.Supp.2d 1023, 1038 (W.D. Wash. 2012). Thus, even if it were true that a FRAND agreement that requires Apple to pay Samsung ultimately is not reasonable (an issue on which we have no opinion), the offers that Apple criticizes do not necessarily demonstrate that Samsung has violated its FRAND obligations by failing to negotiate in good faith.
Apple also criticizes Samsung for tying some of its license offers to the settlement of litigation. We find Apple's argument to be somewhat hypocritical. The following sentence from Apple's Submission to the Commission on April 10, 2013, indicateis that Apple has no intention of paying Samsung any royalties until after the conclusion of litigation:
If the Commission were to determine that the '348 patent is valid, infringed, and enforceable--and it should not for all the reasons the ALJ found and Apple previously briefed--and if that judgment were affirmed on appeal, Apple would stand ready to pay FRAND royalties.
Resp. Apple Inc.'s Reply Submission at 20 (April 10, 2013) (public version April 12, 2013).
Apple's position illustrates the potential problem of so-called reverse patent hold-up, a concern identifed in many of the public comments received by the Commission. In reverse patent hold-up, an implementer utilizes declared-essential technology without compensation to the patent owner under the guise that the patent owner's offers to license were not fair or reasonable. The patent owner is therefore forced to defend its rights through expensive litigation. In the meantime, the patent owner is deprived of the exclusionary remedy that should normally flow when a party refuses to pay for the use of a patented invention.
[section continues]
Footnotes
Footnote 12: Many of the facts recited in this section were presented to the ALJ and relied upon by him in concluding that Apple had not proved that Samsung breached a FRAND obligation. Other facts in this section were provided by the parties in response to the Commission's notice issued on March 13, 2013. Because Apple faiild to prove what Samsung's FRAND obligations may or may not be, our determination herein would be the same even if we limited our review to the negotiation history presented to the ALJ. In any event, the facts recited here appear to be undisputed and are now of record.
Footnote 13: Commissioner Aranoff dissented from the Commission's March 13, 2013, decision to seek additional writtcn submissions, including supplemental briefing and evidence regarding the course of license negotiations between Samsung and Apple. See Dissenting Memorandum, EDIS Doc. ID 505695 (March 13, 2013). Given that Apple failed to prove a FRAND-based affirmative defense before the ALJ, she does not believe Apple should have received a second opportunity to present evidence or argument regarding its course of dealing with Samsung related to licensing. Accordingly, while she does not necessarily disagree with the following discussion, she does not view it as a required element of her analysis in this investigation.
Footnote 14: Samsung contends that Apple's 2012 sales of smartphones and tablets are approximately [REDACTED] units per year. [REDACTED], Samsung's offer would require Apple to [REDACTED].
Footnote 15: The Commission is not aware of the terms of Apple's counter-proposal.
Footnote 16: Samsung reiterated in March 2013 that its [REDACTED] offer [REDACTED] of December 2012 remains open, and that the offer [REDACTED]. See Samsung Reply Br. in Resp. to March 13, 2013, Notice at 18 (April 10, 2013) (citing Exs. C44, C64, G).
Footnote 17: By way of comparison to Samsung's [[ ]] offer made on December 18, 2012, we calculate that if Apple sold [REDACTED] Mr. Donaldson's caiculated royalty of $[REDACTED] per device, Apple [REDACTED].
Footnote 18: We emphasize that our analysis of these negotiations is predicated on assumptions about Samsung's obligations flowing from its FRAND declarations.
Footnote 19: The Commission notes that none of the licenses submitted in this investigation are to a single declared-essential patent, rather they are all portfolio cross-licenses, in some instances covering [REDACTED]. See RX-173C, RX-178C, RX-188, RX-189C, RX-191C, RX-193C to 209C, RX-421C, RX-423C. In addition, [REDACTED], the record supports a conclusion that a common industry practice is to use the end-user device as a royalty base. Id.
Footnote 20: Commissioner Aranoff does not join this paragraph.
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