Earlier this month, the ITC issued a landmark decision and exclusion order, ruling that certain Apple products should be excluded from entry into the United States because they infringe a Samsung 3G-essential patent.  As we explained in a follow-up post, the ITC doesn’t have the final word, though — by law, the President has the power to disapprove of an exclusion order for public policy reasons.  (This power has since been delegated to the Office of the United States Trade Representative (USTR).)  In a high-stakes, high-profile case such as Samsung-Apple, you’d expect the parties to continue the fight at every level — and sure enough, that’s what has happened.

As noted by Florian Mueller of FOSS Patents, last week both Apple and Samsung submitted arguments to the USTR.  Mr. Mueller got his hands on public, redacted versions of the documents, which we’ve linked to below:

After the jump, we’ll take a more in-depth look at each party’s arguments.

Apple USTR Submission

Apple’s submission includes both a 20-page brief and two long exhibits — a public interest-related declaration that was previously submitted in the -794 case, and a submission on the public interest from several law professors that was submitted in Inv. No. 337-TA-745 (a case involving Motorola’s SEP-related claims against Apple).  After an introduction and recitation of the background of the case, Apple gets down to brass tacks — not surprisingly, it wants the USTR to veto the ITC’s exclusion order.

Apple makes several policy-related arguments to support its case, claiming that the exclusion order conflicts with policies espoused by: (1) the Obama Administration policy (including agencies such as the DOJ and FTC); (2) members of the U.S. Congress; (3) the U.S. Patent & Trademark Office; (4) U.S. district courts; and (5) foreign courts and regulators — citing various submissions, public statements, and decisions made by each.  Apple argues that the SEP-based exclusion order makes the ITC “an outlier among agencies and tribunals around the world.”  Apple even argues that the decision could upset U.S. foreign relations and lead to international trade concerns, because an exclusion order is the “functional equivalent” of a district court injunction, and an injunction would “decidedly not be available in similar circumstances against infringing domestic products in U.S. domestic courts.”  (This last point may be a bit of an overreach — while some district courts have recently applied eBay and found that SEP owners weren’t entitled to injunction relief, this issue is still highly disputed and is currently before the Federal Circuit).

Apple’s brief notes that the USTR has apparently requested briefing from the parties on the ITC’s public interest factors — and Apple takes issue with the ITC’s application of these factors, arguing that the ITC mistakenly focused only on the short-term effects of an exclusion order in this case, while ignoring the “dynamic and long-term harm that an exclusion order will bring to standard-setting activities and innovation.”  Apple asserts that the decision will have a chilling effect on innovation, reducing incentives for firms to invest in standards-compliant products.  Furthermore, Apple claims costs on consumers will increase, as FRAND SEP owners are able to leverage the threat of exclusion orders into higher prices (“hold-up”).

Apple disagrees with the ITC’s apparent conclusion that Apple was an unwilling licensee engaging in “reverse hold-up” (also known as licensee “hold-out” — where a standards-implementer refuses to take a FRAND license from an SEP owner).  Apple argues that it was entitled to refuse to pay a FRAND rate to Samsung until it had actually been adjudicated to infringe Samsung’s SEPs — it asserts that the ITC’s reasoning would mean an implementer would have to waive its right to contest validity and/or infringement in order to be entitled to a FRAND license, putting the implementer at an unfair disadvantage.

Finally, Apple asks the USTR to disapprove of the ITC’s decision on the ground that the exclusion order did not include the five-month delay requested by Apple (a provision supported by the Office of Unfair Import Investigations staff, but ultimately rejected by the Commission).

Samsung USTR Submission

The length and tone of Samsung’s brief stands in stark contrast with Apple’s — Samsung spends only 8 pages, with most of it focuses on non-SEP-related issues such as competition in the smartphone market, Apple’s relationships with various carriers, etc.  To this end, Samsung stresses that the exclusion order would have a limited impact on Apple’s business, let alone the competitive conditions in the market, because it is directed to older Apple products that are near the end of their lifecycles.

As to the standard-essential elephant in the room, Samsung urges the ITC to punt, arguing that this “is not the right case for a broad pronouncement about the enforceability of standards-related patents at the ITC.”  Samsung states that the Commission found that Apple’s position illustrates the problem of “reverse hold-up.”  Samsung states that the facts of the case show precisely why there should not be a bright line rule on the enforceability of SEPs at the ITC — in fact, Samsung even goes so far as to say injunctions or exclusion orders for FRAND-pledged SEPs should only be available in cases where the implementer is an unwilling licensee (as it believes Apple was here).

Of course, the question the USTR might ask is “If not now, when?”  Well, Samsung has an answer, noting that there are several pending ITC investigations involving SEPs with different facts, “including complaints filed by InterDigital and Ericsson” (not coincidentally, two cases in which Samsung is a respondent).  Samsung wants the USTR to take a wait-and-see approach, with an eye toward these other cases.  Samsung even suggests that the USTR make a public statement about the scrutiny it will give to exclusion orders based on SEPs, similar to a public statement it made several years ago in connection with Inv. No. 337-TA-543 involving Broadcom and Qualcomm.

We still don’t have a public version of the ITC’s opinion, but it could come out any day now.  Once it’s available, we’ll be sure to post a summary of that as well.  Stay tuned.