When two companies assert FRAND-pledged standard-essential patents (SEPs) against each other in the ITC and accuse each other of SEP abuse (1, 2), it's not as easy as in some other cases to figure out who the "villain" is. From my point of view they're both culpable of some wrongdoing, but that doesn't mean that they're equally abusive. I've said before that I give both parties the benefit of the doubt, though I've found Samsung's demands from Apple so outrageous that I wouldn't be utterly surprised to find out that it's also the less reasonable party in the dispute with Ericsson. The parties' demands haven't come to light yet, but the longer they litigate, the more we'll find out. I saw a recent notice to the ITC that they've held settlement meetings, and the lists of participants looked like they seriously try to reach an agreement, but they haven't yet.
Ericsson has just issued a statement on a motion it filed yesterday with the ITC:
"After more than two years of negotiations with Samsung, we have now filed a motion and asked the [United States] International Trade Commission (ITC) to review the terms of our proposed license agreement with Samsung to determine if it meets FRAND commitments.
The ITC is well-suited to determine FRAND terms and can also make exclusion orders conditional on the licensee's refusal to accept a license on such terms. Having a determination from the Commission on our licensing agreement will help show how the ITC procedures align with the position of the U.S. Trade Representative on import bans.
Ericsson's commitment to the global support of technology and innovation is undisputed. It is unfair for Samsung to benefit from our substantial R&D investment globally without paying a reasonable license fee for our technology. We look forward to working with Samsung to reach a mutually fair and reasonable conclusion, just as we do with all of our licensees."
This motion is basically consistent with a submission Ericsson made last week in connection with a case to which it's not a party (investigation of InterDigital's mid-2011 complaint against Nokia, Huawei, and ZTE), suggesting that one appropriate conclusion from the Presidential veto in the Samsung-Apple case is that import bans can still issue if a respondent refuses to pay a FRAND rate determined by the ITC. I commented negatively on that proposal. Unlike Ericsson, I don't think the ITC is the right forum for FRAND determinations. Professor Thomas Cotter, author of the Comparative Patent Remedies book and related blog, concurs with me that "calculating damages is something the ITC has never done before and it may not be advisable to have them start doing so now, given the federal court option".
I continue to believe that Ericsson should have sued Samsung only for monetary damages in federal court in the first place. But the fact that Ericsson has started this initiative is noteworthy and suggests to me that Ericsson strongly believes in the FRAND-liness of its royalty demands from Samsung, and is serious about its belief that Samsung's demands are outside the FRAND ballpark (otherwise it wouldn't make sense to propose a procedure that could ultimately entitle both parties to an import ban).
This motion does up the ante for Samsung. It can oppose it, and for structural reasons I would/will support Samsung's opposition. But opposing one proposal is not the same as coming up with a better suggestion. Should Samsung's alternative proposal be that exclusion orders should issue the way the ITC wanted to do it in the Samsung-Apple case, it would advocate a framework that harms consumers and innovation. In that scenario there would be a club of SEP holders, and they could force each other into stalemates with the help of the ITC, and everyone outside the club would be at their mercy. Consumer choice would be compromised, even if probably just temporarily with respect to large companies' products, just because of some disagreements on royalties and infringement/validity issues. SEP royalty rates would go up, and the cost would be passed along to consumers. Apart from all these policy considerations, that proposal would be plainly unrealistic and squarely irreconcilable with the United States Trade Representative's veto letter. It's now Samsung's turn to propose an alternative to Ericsson's course of action that makes sense in light of the veto, overall developments in FRAND case law, and antitrust rules. The discussion has moved past the simple formula of an infringement finding necessarily resulting in an ITC exclusion order. Let's see what contribution Samsung makes to the discussion at this stage. Since its SEP-based strategy against Apple has failed in the U.S. and multiple other jurisdictions, it may become more constructive now. I think it should, and I'm sure it could if it wanted.
[Update] Ericsson's filing, styled as a notice of new authority (though it's sort of a motion), has meanwhile become publicly accessible:
13-08-14 Ericsson Notice of New Authority in Samsung ITC Case
As you can see in the above document, Ericsson argues that the Administrative Law Judge should adjudicate the question of FRAND license terms, which it says is relevant to the public interest in light of the Samsung-Apple veto. [/Update]
If you'd like to be updated on the smartphone patent disputes and other intellectual property matters I cover, please subscribe to my RSS feed (in the right-hand column) and/or follow me on Twitter @FOSSpatents and Google+.
Share with other professionals via LinkedIn:
