DLA Piper LLP (US) 2000 University Avenue East Palo Alto, California 94303-2214 www.dlapiper.com Aaron Wainscoat aaron.wainscoat@dlapiper.com T 650.833.2442 F 650.687.1135 The Honorable Lisa R. Barton Secretary to the Commission U.S. International Trade Commission 500 E Street, SW, Room 112 Washington, D.C. 20436 Re: Docket No. 337-3106: Certain RF Capable Integrated Circuits and Products Containing Same Dear Secretary Barton: In response to the Commission s Solicitation of Comments Relating to the Public Interest (80 Fed. Reg. 79,359 (December 15, 2015)) we submit the following comments on behalf of proposed respondents Samsung Electronics Co., Ltd., Samsung Electronics America, Inc. and Samsung Semiconductor, Inc. (collectively, Samsung ). 1 Samsung is a leading supplier of consumer electronics in the United States and offers a broader array of products than any other manufacturer. 2 Samsung has made and continues to make productive contributions to the United States economy. Complainant ParkerVision, Inc. ( ParkerVision ) seeks to exclude certain radio frequency ( RF ) capable integrated circuits that it alleges infringe its patents, as well as certain downstream smartphone and tablet products sold in the United States by proposed respondents Samsung, Apple and LG based on their incorporation of such allegedly infringing RF circuits. In the critical smartphone product line alone, the requested relief could bar more than 80% of the U.S. market by excluding smartphones by the top three providers in the U.S. in 2015 (Samsung, Apple and LG). 3 The proposed respondents cumulative market share in the tablet market is likewise high, with Samsung and Apple alone reported to account for over one-third of the tablet computer market in 2015. 4 Samsung denies ParkerVision s allegations, including that there has been any violation of Section 337 or that ParkerVision is entitled to any remedy. Assuming, however, that ParkerVision could show any violation, ParkerVision s requested remedies against Samsung are against the public interest. The Requested Remedies Are Against The Public Interest An important mission of the ITC is to protect a domestic industry from unfair competition through the importation of infringing goods, but only after considering the effect of any exclusionary remedy on the public interest. 19 U.S.C. 1337(d)(1), (f)(1). Section 337 s legislative history makes clear that the public 1 Samsung Telecommunications America, LLC has been merged into Samsung Electronics America, Inc. and no longer is a separate legal entity. Accordingly, it is not a proper respondent. 2 See e.g., Certain Electronic Devices, Including Wireless Communication Devices, Portable Music and Data Processing Devices, and Tablet Computers, Inv. No. 337-TA-794, Comm n Op. 102-105 (July 5, 2013). 3 http://www.comscore.com/insights/market-rankings/comscore-reports-october-2015-us-smartphone- Subscriber-Market-Share. 4 http://www.crn.com/slide-shows/mobility/300078671/idc-top-5-tablet-vendors-with-the-highest-shipmentsin-q3.htm.
Page 2 interest must be the overriding consideration[] in the Commission s decision on whether to issue an exclusion order. S. Rep. No. 93-1298, 93rd Cong., 2d Sess. 197(1974). Here, the public interest weighs against excluding Samsung s mobile phones and tablets because exclusion would cause a void in the market to the significant detriment of public health and welfare, competitive conditions in the US economy and consumers a void that ParkerVision and third parties could not fill. 1. How The Accused Articles Are Used In The United States Mobile devices provide internet on demand and the internet revolution has forever changed the U.S. economy and society. As President Obama noted: Access to high-speed broadband is no longer a luxury; it is a necessity for American families, businesses, and consumers. Affordable, reliable access to high-speed broadband is critical to U.S. economic growth and competitiveness. High-speed broadband enables Americans to use the Internet in new ways, expands access to health services and education, increases the productivity of businesses, and drives innovation throughout the digital ecosystem. 5 Increasingly, this access is through mobile devices. Samsung is the largest provider of mobile phones and Android tablets in the United States. For many families their only connectivity to the Internet is through Samsung s mobile phones and tablets. The varying price points and diverse carrier sales channels through which Samsung s mobile phones and tables are sold assists consumers who may not have access to other mobile phones and tablets to stay connected. Beyond basic communication, Americans increasingly rely on Samsung mobile phones and tablets to access and communicate health and medical information, report and respond to emergencies, find and keep a job, run a business, get an education, access government, and stay in contact with children and the elderly. 6 2. The Requested Remedy Will Have An Adverse Impact On Public Health, Safety, And Welfare Samsung has the largest breadth of distribution for its products in the United States. Samsung sells its mobile phones and tablets to nearly every national, regional, and local wireless carrier, including the big four carriers AT&T, Sprint, T-Mobile, and Verizon and many local and regional carriers e.g., U.S. Cellular and MetroPCS. Many of these carriers rely heavily on Samsung s product catalog to serve the needs of their customers and at their target price points. These carriers have recognized that excluding Samsung s mobile phones would harm the public interest. 7 No other manufacturer offers Samsung s diverse array of products to such a broad array of consumers, including rural and economically-disadvantaged customers. Indeed, Samsung s competitors tend to focus on a narrower line of product offerings. 5 Presidential Memorandum -- Expanding Broadband Deployment and Adoption by Addressing Regulatory Barriers and Encouraging Investment and Training, March 23, 2015: https://www.whitehouse.gov/thepress-office/2015/03/23/presidential-memorandum-expanding-broadband-deployment-and-adoption-addr. 6 U.S. Smartphone Use in 2015, Pew Research Center, April 1, 2015; http://www.pewinternet.org/files/2015/03/pi_ Smartphones_0401151.pdf 7 See, e.g., Submission of CTIA The Wireless Association Regarding the Public Interest, Inv. No. 337- TA-932, Dkt. No. 3030 (November 16, 2015).
Page 3 As to public health and welfare, the August 2015 Broadband Opportunity Council Report, issued jointly by the Departments of Commerce and Agriculture, concluded that broadband increasingly becomes more integral to the daily lives of Americans and to the mission and work of the Federal government and its agencies and noted the following benefits of broadband: Broadband enables greater civic participation, provides tools for open government and streamlines government processes; Broadband enables changes in how we access educational resources, collaborate in the educational process, conduct research and continue to learn anytime, anyplace and at any pace; Broadband enables improved healthcare access, treatments and information; Broadband enables new business models, creates business efficiencies, drives job creation, and connects manufacturers and store-fronts to clients and partners worldwide; Broadband can also help bring communities together and improve public safety, create a greener planet, and make our transportation systems more resilient and efficient. 8 As another example, Price Waterhouse Coopers recently reported that [i]n 2016, millions of American consumers will have their first video consults; be prescribed their first health apps and use their smartphones as diagnostic tools for the first time. 9 Such advances cannot happen without a wide variety of readily accessible smartphones and tablets. Samsung s mobile phones and tablets also are critical for bridging the digital divide, which refers to the problem of low income individuals and families, rural communities, and minority groups having markedly lower levels of access to, use of, and knowledge of information and communications technology. These groups disproportionately rely upon lower cost mobile phones as their primary access to the internet. 10 No competitor could truly replace Samsung s mobile phones and tablets in the event of an exclusion order, particularly as to these groups. Remarkably, ParkerVision asserts that none of the accused devices relate to medical needs, scientific research, or important national interests. 11 This statement is particularly incredible given that ParkerVision s counsel served as counsel for Complainant Enterprise Systems in Inv. No. 337-TA-925, and knows full well the vast extent to which the accused products are used for medical and health applications (e.g., Samsung's customized smartphone to remotely monitor and calibrate implanted cardiovascular defibrillators and Samsung s customized tablets to access home health care and hospital medical records) as well as national interests served by Samsung smartphones with KNOX and SAFE security that are deployed by the Department of Defense and other agencies. 8 Broadband Opportunity Council Report, August 20, 2015, at 6 https://www.whitehouse.gov/sites/default/files/broadband_opportunity_council_report_final.pdf 9 See, http://www.pwc.com/us/en/health-industries/top-health-industry-issues.html 10 http://www.pewinternet.org/2013/09/16/main-findings-2/. 11 See ParkerVision s Statement on the Public Interest ( Statement ), p. 2 (emphasis added).
Page 4 3. There Are Insufficient Like Or Directly Competitive Articles And Capacity As an initial matter, ParkerVision admits that it does not offer directly competitive RF integrated circuits that could replace the accused RF chips incorporated into the accused mobile phones and tablets. 12 ParkerVision also has not licensed the patents-in-suit to any third parties. Nevertheless, ParkerVision asserts, without any support, that other companies provide similar RF chips and such companies could quickly fill any void created by the requested remedial orders. 13 The only company identified by ParkerVision is MediaTek, and its MT6169V RF chip, which allegedly is incorporated into the Obsidian Z820 smartphone made by ZTE. 14 But ParkerVision does not explain how any allegedly substitutable RF chip could replace the accused Qualcomm and Samsung RF chips without significant costs and delays incurred while the products were extensively re-designed to accommodate the new chips. Even if it were possible, companies like MediaTek would require many months to ramp up capacity to produce the tens of millions of chips needed to meet the annual market share that the accused Qualcomm chips currently maintain. Notably, ParkerVision does not contend that these companies could fill the void within a commercially reasonable time. Indeed, foreclosing supply of the Samsung downstream products for the many months needed to meet the supply and redesign challenges cannot be said to be commercially reasonable; and all the more so when the accused devices of the other proposed respondents are considered. Finally, ParkerVision does not state that MediaTek s RF chips do not infringe its patents. Rather, ParkerVision only says that it is not seeking an exclusion order against MediaTek or products that incorporate MediaTek chips in this investigation. 15 Similarly, with respect to the accused downstream mobile phones and tablets, ParkerVision summarily states that Microsoft, Motorola and HTC will not be affected by any remedial orders and will be able to supply the U.S. market with replacement products. 16 There is no support for any claim (which ParkerVision does not even make) that any of these companies could provide their so-called replacement products in a commercially reasonable time. 17 It is unfathomable that these companies, with at most a combined market share of 11% in the smartphone market, could increase their production to replace Samsung s 28% market share, let alone the combined respondents 81% market share in a commercially reasonable time. Moreover, sufficient quantities of substitutes would not diminish the harm to the public interest. As Commissioner Pinkert has previously explained: The availability of substitutes does not necessarily mean the consumer s desire for quality and variety can be satisfied in the absence of infringing devices.... Excluding devices from such a market could be significantly detrimental to economic welfare, 12 Statement, p. 3. 13 Statement, p. 4. 14 Statement, p. 4. 15 Statement, p. 4. 16 Statement, p. 4. 17 To this point, in a recent investigation, the complainant s expert conceded that the exclusion of Samsung devices from the U.S. market would lead to market shortages for 3-6 months. See Certain Electronic Devices Including Certain Wireless Communication Devices, Tablet Computers, Media Players and Televisions, and Components Thereof, Inv. No. 337-TA-862, Weinstein, Tr. 2340, EDIS Doc ID 519323 (Sept. 25, 2013). While such shortages would undoubtedly last longer, ParkerVision s assertions evidence its failure to legitimately consider the effects that an exclusion order would have on the public interest.
Page 5 regardless of whether substitutes are available. 18 The effect on the public interest of excluding the accused products is easy to envision no competitor could meet the demand of all of the carriers, price points and markets that Samsung serves. Excluding Samsung the market leader in Android mobile phones and tablets undoubtedly will negatively impact the Android ecosystem and hinder further innovation in that space. 4. Competition And Consumers Would Be Adversely Affected As the leading supplier of mobile phones and Android-based tablets in the United States, Samsung s exclusion from the market would affect competition. Smaller carriers for whom Samsung provides a greater proportion of the product offerings will be most affected by the shortage of mobile devices caused by an LEO and will be hindered in their ability to compete. The adverse effects on competition are only increased when considering the exclusion of Apple and LG products as well. Reduced competition in the mobile phone and tablet market may further result in restricted Internet access, product shortages, fewer innovations, and higher prices for consumers. 19 As set forth above, all of these detrimental effects will exacerbate the harm to American consumers. 2. Conclusion Because there is a strong public interest associated with the requested remedial orders, the Commission should delegate consideration of the public interest to the ALJ for full adjudication. Respectfully submitted, DLA Piper LLP (US) /s/ Aaron Wainscoat Aaron Wainscoat Counsel for proposed respondents Samsung Electronics Co., Ltd., Samsung Electronics America, Inc. and Samsung Semiconductor, Inc. 18 Certain Personal Data and Mobile Communications Devices and Related Software, Inv. No. 337-TA- 710, Add l Views of Pinkert at 2 (Dec. 19, 2011) 19 Sudden decreases in supply of hi-tech products often leads to a significant price increase to consumers. See, e.g., http://www.reuters.com/article/2011/10/28/us-thai-floods-drivesidustre79r66220111028) (30% reduction in hard disc drive supply due to flooding in Thailand resulted in price increases of 20-40%); http://www.computerworld.com/article/2484614/data-storagesolutions/after-hynix-plant-fire--spot-market-dram-prices-jump-20-.html (10% decrease in DRAM supply due to fire in Hynix factory resulted in price increases of 20%).
Certain RF Capable Integrated Circuits Investigation No. 337-TA- : Docket No. 3106 and Products Containing Same CERTIFICATE OF SERVICE I, Matthew Salcedo, hereby certify that on, a copy of SAMSUNG S RESPONSE TO THE COMMISSION S SOLICITATION OF COMMENTS RELATING TO THE PUBLIC INTEREST was served on the following as indicated: The Honorable Lisa R. Barton Secretary U.S. International Trade Commission 500 E Street, S.W. Washington, D.C. 20436 Via Hand Delivery (8 copies) Via Overnight Courier Via E-Filing /s/ Matthew Salcedo Matthew Salcedo Senior Paralegal DLA Piper LLP (US) 2000 University Avenue East Palo Alto, CA 94303 Telephone: 650-833-2000 Facsimile: 650-833-2001 WEST\266924159.1 1