APPLE INC.’S WRITTEN SUBMISSION TO THE TRADE POLICY STAFF COMMITTEE ITC Inv. No. 337-TA-794 June 19, 2013
PUBLIC VERSION
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TABLE OF CONTENTS Page
I.
Introduction ..........................................................................................................................1
II.
Background ..........................................................................................................................2
A.
Standards ..................................................................................................................3
B.
Patent “Hold-Up” .....................................................................................................3
C.
FRAND ....................................................................................................................4
D.
Overview Of The ITC Case And The Patent At Issue .............................................5
III.
Policy Considerations Compel USTR Disapproval Of The ITC Decision ..........................7
A.
The ITC Determination Is Inconsistent with Administration Policy And Would Undermine United States Foreign Relations, By Upsetting The International Consensus Against FRAND Abuse. ...................................................7
1.
Conflict With White House Policy ..............................................................8
2.
Conflict With Department Of Justice Policy ...............................................9
3.
Conflict With Federal Trade Commission Policy And Actions ................10
4.
Conflict With Congressional Statements ...................................................10
5.
Conflict With Patent Office Policy ............................................................11
6.
Conflict With Decisions Of United States Courts .....................................11
7.
Conflict With European And Asian Courts And Regulators .....................12
B.
The Statutory Public Interest Factors Require Disapproval ..................................13
1.
The ITC Did Not Meaningfully Engage With The Public Interest— And Particularly The Long-Term Consequences Of Its Decision .............13
2.
The ITC’s Decision Would Harm Competitive Conditions In The United States Economy By Removing Products And Chilling Incentives To Innovate In Standards-Based Markets ................................14
3.
The ITC Decision Would Harm United States Consumers By Imposing Higher Prices And Depriving Them Of The Diversity Of Products That Standards Are Intended To Promote ..................................15
4.
The ITC Decision Would Undercut The Production Of Like Or Directly Competitive Articles In The United States ..................................17
5.
The ITC Decision Would Harm The Public Welfare ................................17
IV.
Requested Action ...............................................................................................................17
V.
Conclusion .........................................................................................................................19
1
I.
Introduction
Policy considerations compel the United States Trade Representative (USTR) to exercise the power delegated to it pursuant to 19 U.S.C.§ 1337(j)(2) to disapprove the exclusion order issued by the International Trade Commission (ITC) on June 4, 2013. This investigation marks the first time that the Commission has approved an exclusion order for the infringement of a standard-essential patent (SEP). As Commissioner Pinkert’s dissent recognized, this decision will have grave consequences if left unchanged. Commissioner Aranoff explicitly invited the President to “decid[e] whether to disapprove the remedy the Commission is issuing today,” and Apple respectfully requests that the USTR, as the President’s delegate, accept that invitation and disapprove the remedy. When a patent holder declares a patent essential to a standard, the patent holder makes an irrevocable commitment to license that patent on “fair, reasonable, and non-discriminatory” (FRAND) terms as a
quid pro quo
for participating in setting industry standards. The patent holder receives the benefit of reasonable assured royalty payments—if the patent is valid and truly infringed by those who use the standard—but forgoes the ability to pursue certain legal remedies. The ITC decision threatens to render meaningless a FRAND commitment made to a standard-setting organization. To be sure, the ITC plays an important role in the United States trade regime, as a critical defense against the importation of goods that will result in unfair competition in the domestic market. But that role is circumscribed by the terms of Section 337—which explicitly requires the ITC to consider the public interest implications of any exclusion order—and the commitments the U.S. has made to its international trading partners. When Congress amended Section 337 in 1974 to give the ITC responsibility for issuing exclusion orders, it made clear that the “public health and welfare and the assurance of competitive conditions in the United States economy must be the
overriding considerations
in the administration of this statute.”
1
In defending Section 337 as consistent with its international trade obligations, the United States justified the Section 337 exclusion order remedy as the “functional equivalent” of a district court injunction against a domestic manufacturer, made necessary where the supplier of the accused infringing products is outside the jurisdiction or otherwise difficult to reach or identify.
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Yet here, the ITC issued a remedy that sharply diverged from any that a district court could properly order for a FRAND patent. Given the special considerations that attend FRAND patents, the public interest dictates that the ITC could properly issue an exclusion order on a FRAND patent only in limited circumstances—such as where the accused infringer is a foreign entity not subject to jurisdiction in a United States court, or where the alleged infringer had refused to pay FRAND royalties previously set by a court or arbiter. This case presented no such circumstances, and the ITC exceeded its statutory mandate by issuing an exclusion order here. The USTR should disapprove the decision because:
The decision is plainly inconsistent with Administration policy.
On the very same day the ITC issued the exclusion order, the White House issued a set of legislative proposals related to patent litigation, including one to make it more difficult for a patent holder to obtain an exclusion order at the ITC. The ITC decision would do the opposite. The National Economic Council and the Council of Economic Advisors issued a report that same day acknowledging the potential policy concerns raised by an exclusion order issued on a SEP. The ITC decision is the realization of those same concerns.
1
S. Rep. 93-1298, at 197 (1974) (emphasis in original) (quoted with approval in U.S. Dep’t of Justice & U.S. Patent & Trademark Office, Policy Statement on Remedies for Standard-Essential Patents Subject to Voluntary F/RAND Commitments at 10 (Jan. 8, 2013),
available at
http://www.justice.gov/atr/public/guidelines/290994.pdf (“DOJ/PTO Statement”)).
2
GATT Panel Report,
United States Section 337 of the Tariff Act of 1930
, L/6439, adopted Nov. 7, 1989, BISD 36S/345, paras. 5.31-5.33.