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June 11, 2013
VIA ELECTRONIC FILING

The Honorable Lisa R. Barton Acting Secretary
U.S. INTERNATIONALTRADE COMMISSION

500 E Street, S.W. Washington, DC 20436

Re:

Certain Electronic Digital Media Devices and Components Thereofi Inv. No. 337-TA-796

Dear Acting Secretary Barton:

The Associated Carrier Group (“ACG”), a national coalition of 36 wireless carriers

serving more than 4 million consumers in riual and traditionally-imderserved markets,
respectfully submits this response to the Con1mission’srequest for comments on the public

interest, remedy, and bonding. ACG takes no position on the merits of this investigation. ACG

writes out of concern for the potential market disruption and harm to ACG’s member carriers

and end consumers that this investigation poses if the Commission were to issue an overly-broad

exclusion order or one that does not provide sufiicient guidance to allow ACG members to

continue providing markebleading products.
E. ABOUT ACG

ACG was formed in 2005 as a national coalition of regional and rural wireless carriers.

ACG’s mission is to benefit both its members and consumers by facilitating the efficient
distribution and marketing of mobile devices, as Wellas increased competition. The consortium

enables its members to Workwith manufacturers, suppliers and other vendors to develop and

procure, for its customers, otherwise scarce or unobtainable products in a timely fashion through

economies of scale and the standardization of coding and other features.
ACG today has 36 members that serve more than 4 million consumers across America.

ACG members offer consumers cutting-edge smartphones, feature phones, and a variety of voice
and data plans. ACG members typically serve customers in rural areas or in other regions where

the larger, national wireless carriers do not devote sufficient resources of infrastructure. Many of
ACG’s members funded the construction of the wireless network infrastructure in their

respective markets and continue to pave the way for the roll-out of the latest technologies,
including 4G infrastructure. ACG members serve customers that otherwise would have little or
no choice in obtaining reliable wireless service. In some cases, ACG members are customers’

only resource for obtaining a mobile device and mobile data service.

It is critical that ACG members offer cutting-edge, attractive products to their customers.
ACG members work to erode the digital divide that separates customers in urban areas
dominated by the large, national carriers and more rural areas. Lna major step to bridge this

historical gap, ACG’s members began offering Android-powered devices in 2009. Today,

Android-powered smartphones are ACG’s best-selling devices. Sainsung is a critical part of this
success; today, Samsung devices account for more than 60% of ACG members’ totai sales.

II.

SCOPE OF AN EXCLUSION ORDER
ACG understands that this investigation involves patents alleged to cover the omarnental

design, hardware and software of certain Samsung electronic digital media devices. ACG further

understands that ALJ Pender found, for each category of asserted patents, some Samsung devices
to be infringing and others to be non-infiinging. In this respect, under ALJ Pender’s analysis

ACG members should continue to be able to purchase non-infringing or redesigned Samsung

devices that avoid all of the asserted patents. It also appears that even the broadest exclusion
order would not be intended to cover all of Samsung’s electronic digital media devices.

The mobile device business involves rapid product turnover. Especially with respect to a

supplier with Samsung’s popularity and market share, ACG members introduce and sell many
new models each year. Because of this rapid product life cycle, it is likely that ACG members
will no longer sell many of the Samsung devices examined by ALJ Pender at the hearing in May
2012 when the Commission issues its final determination. It is therefore also likely that many of

the Samsung devices sold by ACG members in August, when the final determination issues, will
not have been considered by the ALJ or the Commission.

Because neither the ALJ nor the Commission will have considered Whetherthe asserted
patents cover the Samsung electronic digital media devices likely to be sold by ACG members

when any exclusion order would issue, ACG understands that U.S. Customs & Border Protection
will ultimately be tasked with adjudicating whether these devices may be imported and sold.

Should the Commission determine to issue an exclusion order in this investigation, it should
provide substantial and meaningful guidance to Customs and the public on the scope of any

patent claims found to be infringed. This guidance is important for determinations on potential

new products to be applied in a consistent and predictable fashion. Without clear guidance from

the Commission, ACG members could face tremendous business uncertainty in the marketplace
regarding what Samsung devices can be purchased and sold to consumers.

III.

BONDING AND PRESIDENTIAL REVIEW
Samsung is a significant supplier to ACG members, with more than 60% total market

share among ACG-member sales. Samsung provides ACG members with a wide range of
devices, from inexpensive feature phones to high-end Android smartphones. ACG is concemed

that its members could not reallocate purchases fi'om Sarnsung to other manufacturers in the

short term because of the volume and variety of Samsung’s devices and the lead time required
for other suppliers to increase production. ACG estimates that it could take six months or longer
for its members to replace Samsung’s devices, if suitable replacements even exist and are
available (smaller carriers are rarely first in line). During this transition period, ACG members

risk substantial supply shortages if Samsung cannot reasonably continue to import under bond.
The potential need for Samsung to make technical changes in its products to avoid

infringement of one or more asserted patents would increase ACG members’ transition period, as
redesigned products may first require testing and approval prior to launch. ACG estimates that
such testing and approval could take an additional two months beyond the time it would take
Samstmg to implement technical changes.

For these reasons, the Commission’s traditional sixty-day bonding period is far too short

to allow ACG members to take any necessary steps to shift product lineups to non-infiinging
alternatives, whether from Samsung’s redesigned devices or from other suppliers. Should the
Commission determine to issues an exclusion order, it should extend the bonding period to 180

days to avoid adversely affecting ACG members’ business and consumers.

In addition, any bond the Commission sets must be reasonable if the bonding period is to
afford any transition time at all to ACG members. ACG members typically sell through
electronic digital media devices to consumers at a subsidized loss. A high bond rate (above five­

to-ten percent) would effectively eliminate any bonding period because neither Samsung nor
ACG members could absorb the additional cost and ACG members would be put at a further

competitive disadvantage with respect to larger wireless carriers who obtain devices at volume­

discount prices unobtainable by ACG members.

For the reasons stated above, a short or effectively-eliminated bonding period would
prove extremely disruptive to ACG members and, concurrently, end consumers due to

potentially-severe product shortages. Accordingly, if the Commission determines to issue an
exclusion order, it should set a bond rate no higher than a few percentage points and extend the
bonding period to 180 days to allow affected devices to continue to reach ACG members and

consumers while ACG members transition to non-infringing alternatives.
-it * *

ACG is composed of 36 regional carriers serving more than 4 million underserved
American consumers. To avoid disrupting the business of ACG’s members and, in turn, the

public, ACG respectfully requests that the Commission provide clear guidance to accompany
any exclusion order it may issue, extend the bonding period to at least 180 days, and set a bond

that would not effectively prevent importation during the bonding period.
Thank you for your careful attention to these comments. Please do not hesitate to contact
me with any questions regarding this submission.

Sincerely

Russ Lipinski