13-06-11 Apple Submission on Public Interest

7/28/2019 13-06-11 Apple Submission on Public Interest

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UNITED STATES INTERNATIONAL TRADE COMMISSIONWASHINGTON, DC

In the Matter of:Investigation No. 337-TA-796

Certain Electronic Digital Media Devices andComponents Thereof

COMPLAINANT APPLE INC.S SUBMISSION

ON REMEDY, BOND, AND PUBLIC INTEREST

PUBLIC VERSION


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TABLE OF CONTENTS

Page

I. INTRODUCTION ............................................................................................................. 1

II. THE COMMISSION SHOULD ACCEPT THE ALJS RECOMMENDATIONTO ISSUE A PERMANENT LIMITED EXCLUSION ORDER ..................................... 6

A. Consistent With Its Standard Practice, the Commission Should Issue aPermanent Limited Exclusion Order Directed to Samsungs InfringingArticles ................................................................................................................... 6

B. Samsungs Arguments for a Narrowed Limited Exclusion Order LackMerit ....................................................................................................................... 7

1. Samsungs request that a limited exclusion order apply only tocertain product categories is contrary to Commission precedent .............. 7

2. Samsungs request that a limited exclusion order include specialguidance is unsupported and unnecessary................................................ 8

III. CEASE-AND-DESIST ORDERS ..................................................................................... 9

IV. THE COMMISSION SHOULD ACCEPT THE ALJS RECOMMENDATIONSWITH RESPECT TO THE AMOUNT OF BOND ......................................................... 12

V. REMEDIAL ORDERS ARE IN THE PUBLIC INTEREST .......................................... 14

A. Remedial Orders Would Benefit the Public Interest by EncouragingDomestic Innovation Through Protection of Intellectual Property Rights .......... 16

B. Remedial Orders Directed to Samsungs Infringing Products Are

Consistent With the Public Interest ...................................................................... 18

1. Remedial orders would not conflict with public health, safety, andwelfare...................................................................................................... 18

2. Remedial orders would not adversely affect the production of likeor directly competitive articles in the U.S. .............................................. 20

3. Remedial orders would not adversely affect competitive conditionsin the U.S. economy ................................................................................. 21

4. Remedial orders would not adversely affect U.S. consumers ................. 26

C. The Commission Need Not Tailor Remedial Orders to Permit anyContinued Infringement by Samsung .................................................................. 27

VI. THE EXPIRATION DATES OF THE PATENTS ......................................................... 28

VII. HTSUS NUMBERS FOR SAMSUNGS INFRINGING ARTICLES ........................... 29

VIII. CONCLUSION ................................................................................................................ 29


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TABLE OF AUTHORITIES

CASES

Certain Automated Mech. Transmissions For Medium-Duty and Heavy-Duty Trucks &

Components Thereof, 337-TA-503, Commn Op.,2007 ITC LEXIS 1300 (May 5, 2005, published Aug. 2007) ...................................................9

Certain Automatic Crankpin Grinders,Inv. No. 337-TA-60, Commn Op., 1979 ITC LEXIS 130 (Dec. 1979) .................................15

Certain Baseband Processor Chips & Chipsets, Transmitter & Receiver (Radio) Chips,

Power Control Chips, & Prods. Containing Same, Including Cellular Tel. Handsets,Inv. No. 337-TA-543, Commn Op.,2007 ITC LEXIS 621 (June 19, 2007) .....................................................................................16

Certain Digital Televisions & Certain Products. Containing Same & Methods of Using

Same, Inv. No. 337-TA-617, Commn Op.,2009 ITC LEXIS 2465 (Apr. 23, 2009) .......................................................................15, 19, 26

Certain EPROM, EEPROM, Flash Memory, & Flash Microcontroller Semiconductor

Devices & Prods. Containing Same,337-TA-395, Commn Op. (Dec. 11, 2000) ............................................................................12

Certain Flash Memory & Prods. Containing Same,Inv. No. 337-TA-685, ID, 2011 ITC LEXIS 589 (Feb. 28, 2011) .............................................7

CertainFluidized Supporting Apparatus & Components Thereof,

Inv. Nos. 337-TA-182/188, 184 ITC LEXIS 256 (Oct. 1984) ................................................15

Certain Ground Fault Circuit Interrupters & Prods. Containing Same,Inv. No. 337-TA-739, Commn Op., 2012 ITC LEXIS 1458 (June 8, 2012) .........................16

Certain Hair Irons & Packaging Thereof,Inv. No. 337-TA-637, Commn Op., 2009 ITC LEXIS 1221 (June 20, 2009) .................12, 14

Certain Hardware Logic Emulation Sys. & Components Thereof,Inv. No. 337-TA-383, Commn Op., 1998 ITC LEXIS 138 (March 1998) ..............................6

CertainInclined-Field Acceleration Tubes and Components Thereof,

Inv. No. 337-TA-67, Commn Op., 1980 ITC LEXIS 118 (Dec. 1980) .................................15

Certain Ink Cartridges & Components Thereof,Inv. No. 337-TA-565, Commn Op., 2007 ITC LEXIS 1441 (Nov. 7, 2007) .........................12

Certain Inkjet Ink Cartridges with Printheads & Components Thereof,Inv. No. 337-TA-723, Commn Op. (Dec. 1, 2011) ................................................................14


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Certain Liquid Crystal Display Modules, Prods. Containing Same, & Methods for Using

the Same, Inv. No. 337-TA-634, LEO,2009 ITC LEXIS 1964 (Nov. 9, 2009) ......................................................................................7

Certain MEMS Devices & Prods. Containing Same,

Inv. No. 337-TA-700, Commn Op., 2011 ITC LEXIS 878 (May 13, 2011) ...........................7

Certain Mobile Devices, Associated Software, & Components Thereof,Inv. No. 337-TA-744, Commn Op., 2012 ITC LEXIS 2177 (June 5, 2012) ...................16, 18

Certain Personal Data & Mobile Commcns Devices & Related Software,Inv. No. 337-TA-710, 2011 ITC LEXIS 2874 (Dec. 29, 2011) ............................19, 20, 26, 27

Certain Power Supply Controllers & Prods. Containing the Same,Inv. No. 337-TA-541, Commn Op.,2008 ITC LEXIS 771 (Aug. 29, 2006 published May 2008) ..................................................14

Certain Semiconductor Chips Having Synchronous Dynamic Random Access MemoryControllers & Prods. Containing Same,Inv. No. 337-TA-661, Commn Op., 2011 ITC LEXIS 2689 (August 10, 2010) ...................11

Spansion, Inc. v. ITC,629 F.3d 1331 (Fed. Cir. 2010), cert. denied, 123 S. Ct. 758 (2011) ........................................6

STATUTES

19 U.S.C. 1337(d)(1) .........................................................................................................................6, 14

1337(f)(1) ..........................................................................................................................9, 14 1337(j)(3) ..............................................................................................................................12

OTHER AUTHORITIES

76 Fed. Reg. 47,610 (2011) .............................................................................................................7


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TABLE OF ABBREVIATIONS

Full Name Abbreviation

Apple Inc. Apple

Samsung Electronics Co., Ltd. SEC

Samsung Electronics America, Inc. SEASamsung Telecommunications America, LLC STA

SEC, SEA, and STA Samsung

Commission Investigative Staff Staff

Apples Prehearing Brief CPre.

Samsungs Prehearing Brief RPre.

Staffs Prehearing Brief SPre.

Apples Initial Posthearing Brief CIB

Samsungs Initial Posthearing Brief RIB

Staffs Initial Posthearing Brief SIB

Apples Reply Posthearing Brief CRB

Samsungs Reply Posthearing Brief RRB

Staffs Reply Posthearing Brief SRB

U.S. Patent No. D618,678 The D678 patent

U.S. Patent No. D558,757 The D757 patent

U.S. Patent No. 7,749,949 The 949 patent

U.S. Patent No. RE41,922 The 922 patent



The D678, D757, 949,922, 501, and 697 patents

The Patents-at-Issue

U.S. Patent and Trademark Office PTOGraphical User Interface GUI

Limited Exclusion Order LEO

CX Complainants Exhibit

RX Respondents Exhibit

JX Joint Exhibit

Hearing Transcript Tr.


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I. INTRODUCTIONIn his Initial Determination, the ALJ found that Samsung has violated section 337 by

importing mobile phones, media players, and tablet computers that infringe Apples asserted

D678, 949, 922, and 501 patents, which protect Apples innovative ornamental design, user

interface, and audio interface technology associated with its ground-breaking iPhone, iPad, and

iPod touch products. The ALJ further found that Samsung realized that the iPhones user

interface was a game-changer with consumers, and consequently intentionally copied Apples

patented technology. (ID at 223.)

In his Recommended Determination on Remedy and Bond (RD), the ALJ recommended

that the Commission should (1) issue a permanent limited exclusion order against SEC, SEA,

and STA; (2) issue cease-and-desist orders against SEA and STA; and (3) require that Samsung

post a bond of 88%, 32.5%, and 37.6% of the entered value for Samsungs mobile phones, media

players, and tablet computers, respectively, imported during the Presidential review period.

The Commission should adopt the ALJs remedy and bond recommendations. A

permanent limited exclusion order against all of Samsungs infringing articles is consistent with

Commission practice and is appropriate here. Cease and desist orders are also proper based on

the ALJs correct findings that SEA and STA maintain commercially significant inventories of

infringing devices in the United States. In addition, the ALJs recommended bond amounts are

necessary to protect Apple from Samsungs continued infringement during the Presidential

review period based on his findings that Apple and Samsung compete head-to-head and that the

recommended bond amounts are justified by price comparisons between Apples and Samsungs

competing devices.

The ALJs recommended remedial orders would have no deleterious effects on any of the

statutorily enumerated public interest factors. Instead, the recommended remedial orders would


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benefit the public interest by protecting Apples intellectual property, which protects designs and

technology that differentiate Apples products in the marketplace, and is thus the type of

intellectual property that enhances consumer choice and competition, by safeguarding Apples

ability to reap the fruits of its substantial investment in researching and developing such product-

differentiating innovations. Conversely, declining to issue remedial orders, or tailoring them in

such a way to allow some degree of continued infringement by Samsung, would sanction and

implicitly subsidize Samsungs unfair acts, thus undermining Apples investment in research and

development and discouraging innovation in the U.S.

As shown below, the U.S. markets for mobile phones, media players, and tablet

computers are robust, such that excluding Samsungs infringing articles would not significantly

harm the public health or welfare, the production of like or directly competitive articles in the

U.S., competitive conditions in the U.S. economy, or U.S. consumers. As the supporting

declaration of Dr. Stephen Prowse demonstrates, many suppliers apart from Samsung (including

at least twenty vendors of smartphones alone) supply like or directly competitive devices for the

U.S. markets, such that consumers, retailers, and carriers would have ample choices of substitute

devices that could replace Samsungs infringing articles. Indeed, Samsung itself has stated that it

anticipate[s] rapid growth and intense competition in both the smartphone and tablet markets.

(Prowse Decl. at 29 (quoting Samsung 2011 Annual Report).)

There is no public interest reason why these remedial orders should not immediately take

effect. It is more than seven months since the ALJ found that Samsung violated section 337 with

respect to four of Apples Patents-at-Issue. Samsung, retailers, carriers, and other market

participants have had more than enough time to plan for exclusion of Samsungs infringing

devices, including by redesigning its devices so that they no longer infringe. Plainly, Samsung


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can design and sell device that do not infringe Apples design patents a smartphone need not

look any particular way to be functional. And Samsung itself has contended that it has

redesigned some of the infringing features in its devices to avoid Apples other asserted patents.

Indeed, as the supporting declaration of Dr. Ravin Balakrishnan describes, Samsung can remove

aspects of its electronic digital media devices that infringe the 949 and 922 patents, which both

protect Apples innovative user interface, by implementing software changes. Based on these

and other facts described below, the Commission need not delay implementation of any remedial

orders it issues.

Finally, an exclusion order against all of Samsungs infringing products to go into effect

as soon as practicable is particularly appropriate here, where Samsung continues to appropriate

Apples intellectual property despite repeated findings of infringement. The ALJ concluded in

his Initial Determination that Samsung devices infringe the D678 patent in October 2012, and a

Northern District of California jury found that Samsung devices infringe a companion patent to

the D678 patent in August 2012. Despite these findings, Samsung continues to import devices

that infringe the D678 patent into the U.S., as shown below:


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D678Patent

Fig.3

GalaxySIISkyrocket

(FoundinfringinginID) GalaxyNoteII(Currentinfringingproduct)

Similarly, the ALJ concluded in his Initial Determination that Samsung devices infringe claims

of the 922 patent through the use of translucent zoom buttons. Despite this finding, newer

Samsung continues to import devices that infringe the 922 patent by incorporating translucent

buttons, as shown below:


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FascinateSGHI500

(FoundinfringinginID) GalaxySIIISPHL710(Currentinfringingproduct)

As this persistent infringement shows, Samsung has no intention of stopping its trespass

on Apples asserted intellectual property rights, and remedial orders from the Commission are

therefore necessary to protect Apples Patents-at-Issue and secure its investment in developing

innovative, product-differentiating designs and technologies. Accordingly, Apple respectfully

requests that the Commission adopt the ALJs recommendations to issue a permanent limited

exclusion order and cease-and-desist orders, to go into effect as soon as practicable, and require

that Samsung post bond in the recommended amounts to continue importing infringing devices

during the Presidential review period.


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II. THE COMMISSION SHOULD ACCEPT THE ALJS RECOMMENDATION TOISSUE A PERMANENT LIMITED EXCLUSION ORDER

A. Consistent With Its Standard Practice, the Commission Should Issue aPermanent Limited Exclusion Order Directed to Samsungs Infringing

Articles

Section 337 provides that, upon a finding of violation, the Commission shall direct that

the articles concerned, imported by any person violating the provision of this section, be

excluded from entry into the United States, unless it determines that such exclusion would not

be in the public interest based on four enumerated statutory factors. 19 U.S.C. 1337(d)(1); see

also Spansion, Inc. v. ITC, 629 F.3d 1331, 1358 (Fed. Cir. 2010) (By statute, the Commission is

required to issue an exclusion order upon the finding of a Section 337 violation absent a finding

that the effects of one of the statutorily-enumerated public interest factors counsel otherwise.),

cert. denied, 123 S. Ct. 758 (2011). [T]he central purpose of remedial orders is to ensure

complete relief to the domestic industry. Certain Hardware Logic Emulation Sys. &

Components Thereof, Inv. No. 337-TA-383, Commn Op., 1998 ITC LEXIS 138, at *32 (March

1998). Limited exclusion orders typically extend to all models of infringing products that are

imported at the time of the Commissions determination and to all such products that will be

imported during the life of the remedial orders. Id.

Here, the ALJ recommended that the Commission issue a permanent limited exclusion

order directed to Samsungs infringing electronic media devices. (RD at 2.) Because, as

discussed below, there are no cognizable public interest concerns that warrant forgoing or

tailoring relief, the Commission should follow its standard practice and adopt the ALJs

recommendation to issue such a limited exclusion order. Included in Appendix A is a proposed

permanent limited exclusion order that prohibits importation of infringing electronic media

devices manufactured abroad by or on behalf of, or imported by or on behalf of Respondents, or


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any of their affiliated companies, parents, subsidiaries, or other related business entities, or their

successors or assigns. (App. A at2.) The Commission should issue a permanent limited

exclusion order in the form of Apples proposed order. See,e.g., Certain Liquid Crystal Display

Modules, Prods. Containing Same, & Methods for Using the Same, Inv. No. 337-TA-634, LEO,

2009 ITC LEXIS 1964, at *4-5 (Nov. 9, 2009).

B. Samsungs Arguments for a Narrowed Limited Exclusion Order Lack MeritSamsung has raised two arguments regarding the scope of a limited exclusion order.

Both of these arguments are without merit.

1. Samsungs request that a limited exclusion order apply only to certainproduct categories is contrary to Commission precedentSamsung has argued that a limited exclusion order should apply only to particular

product categories accused by Apple, rather than to all infringing electronic digital media devices.

(RIB at 275-276.) But this argument is contrary to Commission precedent and its standard

practice of crafting exclusion orders to encompass all infringing products within the scope of the

investigation, rather than only particular products or product categories. See Certain Flash

Memory & Prods. Containing Same, Inv. No. 337-TA-685, ID, 2011 ITC LEXIS 589, at *141

(Feb. 28, 2011) ([T]he scope of an ITC investigation is defined by the notice of investigation.

Thus, any exclusion order may cover all products within that scope, i.e., the articles

concerned. (internal citations omitted)); Certain MEMS Devices & Prods. Containing Same,

Inv. No. 337-TA-700, Commn Op., 2011 ITC LEXIS 878, at *41-42 (May 13, 2011) (rejecting

carve-out from exclusion order for products made using non-accused processes).

Here, in the Notice of Investigation, the Commission defined the scope of this

investigation to include electronic digital media devices. 76 Fed. Reg. 47,610 (2011).

Therefore, consistent with the Commissions precedent and its standard practice, a limited


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exclusion order should cover all of Samsungs infringing electronic digital media devices. Doing

otherwise would arbitrarily cabin Apples relief by permitting Samsung to continue infringing

Apples Patents-at-Issue, so long as it avoids doing so for a select few product categories.

Moreover, affording Apple full relief against Samsungs infringing products is particularly

important because, as noted above, Samsung has continued to infringe Apples asserted

intellectual property rights to this day, and evidence shows that Samsung introduces 50 or more

models of mobile devices in the United States per year, such that it has ample opportunities to

import new models that infringe Apples patents. (RX-3442C (Denison) at 6, Q18.) On such

facts, there is quite simply no basis in Commission law or practice to deny Apple the full scope

of relief from Samsungs infringement.

2. Samsungs request that a limited exclusion order include specialguidance is unsupported and unnecessary

Samsung has requested that a limited exclusion order include special guidance to

Customs with respect to Apples asserted design patents. (RIB at 277.) As the ALJ observed,

Samsung has offered no special guidance in its pre- or post-hearing briefs for the ALJ to

consider or for Apple to have responded. (RD at 3.) By failing to propose any special

guidance in its briefs, Samsung has failed to show that any such guidance is necessary.

Furthermore, design patents do not present more difficult enforcement problems for

Customs than do utility patents. If anything, the opposite is true. In contrast with utility patents,

which often involve complex technology such that determining infringement requires in-depth

analysis and testing or dismantling of products, identifying articles that infringe a design patent

may be accomplished through a simple visual inspection.

By failing to proffer any proposed special guidance in its briefs, and by failing to

explain why design patents are inherently difficult for Customs to administer, even though


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infringing devices can be readily identified through a visual inspection, Samsung has failed to

show that any special guidance is necessary in this Investigation. Consequently, Samsungs

request for special guidance should be denied.

III. CEASE-AND-DESIST ORDERSUnder section 337(f)(1), the Commission may issue cease-and-desist orders in addition to

an exclusion order. 19 U.S.C. 1337(f)(1). Issuance of cease-and-desist orders is appropriate

against respondents that hold commercially significant inventory in the U.S. Certain

Automated Mech. Transmissions for Medium-Duty & Heavy-Duty Trucks & Components

Thereof, 337-TA-503, Commn Op., 2007 ITC LEXIS 1300, at *7-8 (May 5, 2005, published

Aug. 2007).

Here, the ALJ correctly found that both SEA and STA each hold commercially

significant inventories of infringing products in the United States. (RD at 5-6.) Samsung

witnesses testified that SEA and STA maintain distribution centers in the United States where

infringing products are warehoused after importation and before shipment to customers. (CX-

2503C, Denison Dep. at 138:13-141:20; CX-2553C, Sheppard Dep. at 98:14-23, 100:25-101:15,

101:20-102:13; CX-2557C, Merrill Dep. at 59:23-62:25, 65:19-66:9.) SEAs American

Distribution Center operates warehouses in Chicago, Illinois, and Los Angeles, California. (CX-

2557C, Merrill Dep. at 59:23-62:25.) Travis Merrill, SEAs director of marketing for its Galaxy

Tab and Galaxy Player products, testified that SEAs American Distribution Center ships

accused tablets and media players to customers from these warehouses via ground and air

transportation. (CX-2557C, Merrill Dep. at 66:22-68:15.) Exhibit CX-128C shows that SEAs

American Distribution Center (ADC) maintained on-hand inventory consisting of more than

26,000 units of the infringing Galaxy Tab GT-P7510 worth more than $10.5 million. (CX-128C


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at 1-2.) Samsung failed to offer any argument that SEA does not maintain commercially

significant inventories of accused products at its American Distribution Center warehouses. (See,

e.g., RIB at 277-79; RRB at 111-12.)

Similarly, STA operates distribution centers in Coppell, Texas, and Chicago, Illinois.

(CX-2553C, Sheppard Dep. at 98:14-23, 100:25-101:15, 101:20-102:13.) While STAs Coppell

distribution center is located within a foreign trade zone (FTZ) (CX-2553C, Sheppard Dep. at

154:24-156:14), its Chicago distribution center is within U.S. customs territory and stores

infringing products that have cleared customs (id. at 144:9-19). STAs Chicago warehouse

receives significant volumes of infringing products. (CX-112C121C; CX-130C.) STAs

controller, Tim Sheppard, testified that Exhibits CX-112C through CX-121C show actual and

estimated dates on which STAs Chicago and Coppell warehouses receive infringing products.

(CX-2553C. Sheppard Dep. at 177:25-178:15) Exhibits CX-116C, CX-117C, and CX-118C

show that STAs Chicago distribution center regularly receive shipments of the infringing

products Nexus 4G SGH-D720, Replenish SPH-M580, and Intercept SPH-M910, respectively,

comprising thousands of units and worth hundreds of thousands of dollars. (CX-116CCX-

118C.) Mr. Sheppard further testified that, at its distribution centers, STA loads accused mobile

phones and tablets onto trucks bound for its customers receiving docks and that title to these

products passes only after customers receive them. (CX-2553C, Sheppard Dep. at 159:18-

160:8.)

Record evidence confirms that STA maintains commercially significant domestic

inventory. Exhibit CX-78C, an STA audited financial statement, shows that STA possessed

more than $550 million in inventory as of September 30, 2011 (CX-78C at 19), and that this

inventory comprised products such as wireless terminal phones (id. at 12). Apples expert, Dr.


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Stephen Prowse, testified that accused products account for approximately 60% of STAs sales,

so that it would be reasonable to deduce that 60% of STAs $550 million in inventory consists of

accused products. (6/4/12 Hearing Tr. at 1298:22-1299:16.) In addition, Exhibit CX-79C,

STAs 2012 business plan, shows actual inventory of wireless terminal phones for 2010 valued

at more than $271 million and held for nearly two weeks, and forecasted inventory of wireless

terminal phones for 2011 valued at more than $220 million and held for more than one week.

(CX-79C at 18; see also CX-2554C, Sheppard Dep. at 125:22-128:17.)

Samsung has argued that STAs Chicago distribution center does not maintain

commercially significant inventory based on an argument that its business philosophy is to

maintain zero inventory. (See RX-3629C (Denison) at 4, Q40 (emphasis added).) As the ALJ

correctly found, however, Samsungs argument ignores the substantial record evidence showing

that STA maintains commercially significant inventory. Moreover, as the ALJ noted, Samsung

failed to present evidence that its zero-inventory philosophy is anything more than a business

philosophy. (RD at 6.) Samsungs argument concerning its zero-inventory philosophy is

entitled to little weight.

In view of this evidence concerning inventory held by SEA and STA at their U.S.

distribution centers, and the absence of any persuasive evidence to the contrary, the Commission

should issue cease-and-desist orders to SEA and STA, consistent with the ALJs

recommendation. See Certain Semiconductor Chips Having Synchronous Dynamic Random

Access Memory Controllers & Prods. Containing Same, Inv. No. 337-TA-661, Commn Op.,

2011 ITC LEXIS 2689, at *127 (August 10, 2010) (determining to issue cease and desist orders

against those respondents found by the ALJ to maintain a commercially significant inventory of

infringing products in the United States, the sale of which could undermine an exclusion order.).


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Apple therefore requests that the Commission issue cease-and-desist orders against SEA and

STA in the form provided in Appendix B.

IV. THE COMMISSION SHOULD ACCEPT THE ALJS RECOMMENDATIONSWITH RESPECT TO THE AMOUNT OF BOND

Section 337(j)(3) provides that if an exclusion order is issued respondents may, upon

payment of bond, continue to import products subject to exclusion until the expiration of the 60-

day Presidential review period. Certain EPROM, EEPROM, Flash Memory, & Flash

Microcontroller Semiconductor Devices & Prods. Containing Same, 337-TA-395, Commn Op.

at 87 (Dec. 11, 2000). The bond is to be set in an amount determined by the Commission to

protect the complainant from any injury. Certain Ink Cartridges & Components Thereof, Inv.

No. 337-TA-565, Commn Op., 2007 ITC LEXIS 1441, at *94 (Nov. 7, 2007) (citing 19 U.S.C.

1337(j)(3)). In setting the amount of the bond to be imposed during the period of Presidential

review, the Commission often considers the differential in prices between the patented product

made by the domestic industry and the lower price of the infringing imported product. Certain

Hair Irons & Packaging Thereof, Inv. No. 337-TA-637, Commn Op., 2009 ITC LEXIS 1221, at

*8 (June 20, 2009);Ink Cartridges, Inv. No. 337-TA-565, 2007 ITC LEXIS 1441, at *94 (setting

bond based on price differential of average sales prices of complainants and respondents

products).

Here, the ALJ recommended that the Commission should require a bond of 88%, 32.5%,

and 37.6% of the entered value for mobile phones, media players, and tablet computers,

respectively, based on his findings that Apples domestic industry products and Samsungs

infringing products compete head-to-head and that the price differentials between these Apple

and Samsung products justified these bond rates. (RD at 9-10.)


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The ALJs findings are correct and should be adopted. First, substantial record evidence

demonstrates that Apples and Samsungs relevant products compete head-to-head. For example,

Justin Denison, STAs chief strategy officer, identified Apple as STAs primary #1 smartphone

competitor for 2011 in an email to STAs leadership team (CX-1440C at 3; 6/4/12 Hearing Tr.

at 1356:17-1357:19). In a presentation to Samsungs CFO, Mr. Denison stated that the U.S.

mobile phone market was becoming a Two Horse Race Between Apple & Samsung. (CX-

1610C at 8; see also 6/4/12 Hearing Tr. at 1358:21-1359:25.) And Exhibit CX-124C, a

presentation entitled IPHONE 5 COUNTER STRATEGY, shows that STA viewed its

smartphones as competing with Apples iPhone products across all price tiers and sales channels,

and favored a strategy of pricing its products to undercut Apple. (CX-124C at 11-20.)

Second, as the ALJ recognized, Apples expert economist, Dr. Prowse, correctly

calculated price differentials of between Apples and Samsungs mobile

phones, media players, and tablets, respectively. (CX-2434C (Prowse) at 26-28, Q90-97; CDX-

181C186C.) He did so by calculating the average sales prices for each category of Apples and

Samsungs domestic industry products and comparing the parties average sales prices. Any

criticisms of Dr. Prowses methodology by Samsung are misguided, in that Samsung has

implicitly endorsed Dr. Prowses approach. An STA presentation entitled

(CX-1440C; 6/4/12

Hearing Tr. at 1360:1-7; 6/7/12 Hearing Tr. at 2183:2-2185:2.)

Third, the ALJ properly rejected Samsungs proposed bond amount of 4.9% based on a

reasonable royalty. (RD at 10.) As the ALJ found, Samsung failed to offer any evidence that

Apple had ever licensed its patents at such a royalty rate. (Id.)


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As the ALJ concluded, the lack of any evidence that Apple has licensed the Patents at

Issue at a royalty rate comparable to 4.9% precludes adoption of Samsungs recommended bond

amount. Certain Power Supply Controllers & Prods. Containing the Same, Inv. No. 337-TA-

541, Commn Op., 2008 ITC LEXIS 771, at *118 (Aug. 29, 2006, published May 2008)

(refusing to base bond on reasonable royalty where the complainant had not entered into a

licensing arrangement where a comparable royalty rate has been established.).

Finally, if Samsung persists in contending that a price comparison between Apples

domestic industry products and Samsungs infringing products is not possible, as the ALJ

recommended, the Commission should require a bond of 100% of entered value based on its

long-standing Commission precedent. See Hair Irons, Inv. No. 337-TA-637, 2009 ITC LEXIS

1221, at *8 (When there is insufficient evidence [to perform a price comparison], the

Commissions practice is to impose a bond of 100% of the entered value of the accused

product.).

V. REMEDIAL ORDERS ARE IN THE PUBLIC INTERESTThe Commission must issue remedial orders against a person found to be violating

section 337 unless, after considering certain enumerated public interest factors, it determines that

such remedial orders are contrary to the public interest. 19 U.S.C. 1337(d)(1), (f)(1). These

public interest factors are the public health and welfare, competitive conditions in the United

States economy, the production of like or directly competitive articles in the United States, and


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United States consumers. Id.; see also Certain Inkjet Ink Cartridges with Printheads &

Components Thereof, Inv. No. 337-TA-723, Commn Op. at 25-26 (Dec. 1, 2011).

Instances in which public interest factors warrant denying or limiting relief to an

aggrieved complainant are exceedingly rare. The Commission has declined to grant a prevailing

complainant relief based on public interest considerations in only three instances, see Certain

Digital Televisions & Certain Prods. Containing Same & Methods of Using Same, Inv. No. 337-

TA-617, Commn Op., 2009 ITC LEXIS 2465, at *21-22 (Apr. 23, 2009) (discussing Certain

Automatic Crankpin Grinders, Inv. No. 337-TA-60, USITC Pub. 1022, Commn Op. (Dec.

1979); Certain Inclined-Field Acceleration Tubes & Components Thereof, Inv. No. 337-TA-67,

USITC Pub. 1119, Commn Op. (Dec. 1980); Certain Fluidized Supporting Apparatus &

Components Thereof, Inv. Nos. 337-TA-182/188, USITC Pub. 1667 (Oct. 1984)), and it has not

done so for nearly 30 years. Moreover, each of these instances presented an unusually

compelling case of overriding public policy, national security, or public health concerns. See

Automatic Crankpin Grinders, Inv. No. 337-TA-60, 1979 ITC LEXIS 130, at *42-43 (relief

denied due to overriding national policy in maintaining and increasing supply of fuel efficient

automobiles during energy crisis where domestic suppliers could not meet Congressionally

mandated fuel economy standards);Inclined-Field Acceleration Tubes , Inv. No. 337-TA-67,

1980 ITC LEXIS 118, at *115-18 (relief denied due to overriding public interest in atomic

research using imported acceleration tubes); Fluidized Supporting Apparatus, Inv. Nos. 337-TA-

182/188, 184 ITC LEXIS 256, at *37 (relief denied because domestic producer could not meet

demand for hospital beds for burn patients within reasonable time and no therapeutically

comparable substitutes were available).


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In this Investigation, remedial orders will benefit the public interest by protecting Apples

product-differentiating intellectual property, as well as its substantial U.S. investment in research

and development associated with products that practice the Patents-at-Issue. And, as shown

below, no public interest considerations suggest that the Commission should decline to issue

remedial orders or should narrowly tailor such orders.

A. Remedial Orders Would Benefit the Public Interest by EncouragingDomestic Innovation Through Protection of Intellectual Property Rights

Remedial orders would benefit the public interest by protecting and promoting innovation,

through both vindicating intellectual property rights that set Apples products apart from its

competitors thereby giving consumers more options and choice for their purchases and

maintaining incentives to invest in research and development, and also encouraging development

of new non-infringing designs and technologies. See Certain Baseband Processor Chips &

Chipsets, Transmitter & Receiver (Radio) Chips, Power Control Chips, & Prods. Containing

Same, Including Cellular Tel. Handsets, Inv. No. 337-TA-543, Commn Op., 2007 ITC LEXIS

621, at *243 (June 19, 2007) (exclusion order will provide increasing market-based incentives

to [respondent], handset manufacturers, and service providers to either design around

[complainants] patent, obtain a license to it, or utilize non-infringing products); Certain

Ground Fault Circuit Interrupters & Prods. Containing Same, Inv. No. 337-TA-739, Commn

Op., 2012 ITC LEXIS 1458, at *171 (June 8, 2012) (determining that competitive conditions in

the U.S. economy are advanced by the consistent enforcement of valid U.S. patent rights.);

Certain Mobile Devices, Associated Software, & Components Thereof, Inv. No. 337-TA-744,

Commn Op., 2012 ITC LEXIS 2177, at *57 (June 5, 2012) ([W]e note that the public interest

favors protection of U.S. intellectual property rights.).


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The innovations covered by Apples Patents-at-Issue are designs and technologies that

help differentiate Apples products in the market the ornamental design of the iPhones front

face, the intuitive touchscreen interface that uses heuristics to distinguish commands for one-

dimensional scrolls from commands for two-dimensional pans, the graphical user interface that

combines overlapping translucent images with underlying opaque images in a persistent

arrangement, thus conserving space on the screens of smaller, portable devices, and an audio

interface that uses a particular configuration of circuitry to determine whether an inserted plug

corresponds to a headphone or headset. These are notstandard-essential patents intended for

common use and committed to licensing on fair, reasonable, and non-discriminatory terms.

There is no serious contention by Samsung or by any third party that every functioning

smartphone or tablet must have these features. Quite the contrary these areproduct-

differentiating inventions that help set Apples products apart from others in the marketplace,

and which

. Samsungs infringement of the Patents-at-Issue is thus a particularly

egregious form of trespass that risks the dilution of Apples core brand.

If companies like Apple cannot protect the inventions that make their products unique,

the result will be rampant copying and harm to the public a reduced range of choices for

consumers in the marketplace. The only way to prevent this reduced consumer choice is through

exclusionary remedies of the type afforded by the Commission, remedies that protect these

product-differentiating designs and technologies and require competitors to develop their own

unique approaches, to the benefit of competition and consumers. Preventing the trespass of

patents covering such product-differentiating innovations and thereby preventing the harmful


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impact on competition and consumer choice that results is a vital aspect of the Commissions

statutory mandate.

The public interest benefit of vindicating U.S. intellectual property rights is particularly

compelling here where, as the ALJ found, Apple invested more than on research and

development for articles protected by the Patents-at-Issue in fiscal year 2011 alone, with the vast

majority of this research and development conducted in the United States. (ID at 456-457;

Prowse Decl. at 72.) Remedial orders in this Investigation would enable Apple to recoup this

substantial R&D investment by eliminating Samsungs free-riding on Apples innovation, and

thus would promote Apples continued efforts to innovate. (Prowse Decl. at 73-74.)

Conversely, declining to issue remedial orders would effectively subsidize and encourage

Samsungs unfair competition by allowing it to benefit from research and development activities

for which it paid not a penny, which in turn would discourage Apple (and other intellectual

property rights holders) from continuing to invest in innovation in the United States. (Prowse

Decl. at 74.) Such a subsidy would be a particularly appalling result in this Investigation in

view of the ALJs finding that Samsung deliberately copied the technology protected by Apples

Patents-at-Issue. (ID at 223.)

B. Remedial Orders Directed to Samsungs Infringing Products Are ConsistentWith the Public Interest

Against this backdrop of the strong public interest in vindicating U.S. intellectual

property rights, the Commission must consider the four enumerated public interest factors. As

shown below, none of these factors suggests that the Commission should decline to issue

remedial orders against Samsung or that any narrow tailoring of such orders is necessary.


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1. Remedial orders would not conflict with public health, safety, andwelfare

Remedial orders against Samsung would have no detrimental effects on the public health,

safety, and welfare. The products potentially subject to such orders Samsungs smartphones,

media players, and tablet computers do not have any specialized public health, safety, or

welfare applications, nor are they the types of products that affect public health and welfare. See

Mobile Devices, Inv. No. 337-TA-744, 2012 ITC LEXIS 2177, at *56-57 (finding no significant

adverse impact on the public health, safety, or welfare due to exclusion of respondents

infringing mobile phones); Digital Televisions, Inv. No. 337-TA-617, 2009 ITC LEXIS 2465, at

*24 (concluding that concerns of public health and welfare are not implicated here because

[digital televisions] are not the type of products that affect public health and welfare.).

In its Response to the Commissions Request for Comments on the Public Interest,

Samsung attempts to show that its infringing products are significant to public health and

welfare, asserting without support that consumers and health and safety workers use Samsung

mobile phones and connected tablet computers to access medical information, communicate

regarding emergencies, and communicate with children and the elderly and that families use

Samsung mobile phones and tablets to connect to the internet. (Samsung Resp. to Commn

Request for Comments on the Public Interest at 3 (Dec. 3, 2012) (hereinafter, Samsung Public

Interest Comments).) But the Commission has found that nearly identical arguments fail to

demonstrate[] cognizable public health and welfare effects that would result from the exclusion

of [a respondents] smartphones. Certain Personal Data & Mobile Commcns Devices &

Related Software, Inv. No. 337-TA-710, 2011 ITC LEXIS 2874, at *119-21 (Dec. 29, 2011). As

the Commission has observed, [t]hat mobile phones may play a critical role in public health


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and safety does not mean that [the respondents] smartphones play a critical role in public health

and safety that other smartphones cannot. Id. at *119.

Here, any public health or welfare functions that smartphones or tablet computers provide

can be fulfilled with the ample alternatives to Samsungs infringing devices that are available in

the U.S. In 2012, at least twenty vendors supplied smartphone to the U.S. market. (Prowse

Decl. at 14.) Such vendors include Apple, HTC, Nokia, Motorola, Research in Motion, LG,

Alcatel, Huawei, Pantech, Sony, Sharp, and ZTE. (Id.) These vendors smartphones provide

similar, if not identical, public health and welfare functionality as provided by Samsungs

infringing devices. (Id. at 15-17.) Samsung itself, which introduces fifty-some new

smartphone models a year (RX-3442C (Denison) at 6, Q18), as well as multiple tablet models,

could quickly and easily provide non-infringing substitutes. Consequently, a robust set of

alternatives will remain available to meet the public health and welfare needs of U.S. consumers

and healthcare and safety workers following the Commissions exclusion of Samsungs

infringing smartphones and tablets. Accordingly, there are no public health or welfare

considerations that weigh against issuance of remedial orders.

2. Remedial orders would not adversely affect the production of like ordirectly competitive articles in the U.S.

Remedial orders would not have significant adverse effects on the production of like or

directly competitive articles in the United States. As Samsung has conceded, all of its infringing

smartphones, media players, and tablet computers are manufactured abroad and imported into the

United States. (CX-2557C, Merrill Dep. at 52:20-23, 53:10-19, 55:20-56:13, 64:14-65:11; CX-

2553C, Sheppard Dep. at 70:4-15, 104:21-105:17; see also Samsung Public Interest Comments

at 3 (Samsungs devices, like others in the market, are manufactured abroad.).) Absent evidence

of domestic production, exclusion of Samsungs infringing devices would not diminish the


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production of like or directly competitive articles in the United States. See Personal Data &

Mobile Commncs Devices, Inv. No. 337-TA-710, 2011 ITC LEXIS 2874, at *124 (There is no

evidence of domestic production of smartphones. . . . Accordingly, we agree with [complainant]

that the issuance of an exclusion order would not result in a deficiency in the production of like

or directly competitive articles in the United States.).

Moreover, evidence shows that excluding Samsungs infringing articles could potentially

increase domestic operations in the smartphone and tablet markets by causing consumers to

switch away from Samsung, which has relatively small domestic operations in those markets,

and towards vendors such as Apple, Motorola, Microsoft, Nokia, and Research in Motion, which

have comparatively large domestic operations. (Prowse Decl. at 20-24.) For example,

Apples domestic operations comprise more than 50,000 employees, more than 250 retail stores,

and its Cupertino, California headquarters, where Apple conducts most of its research and

development activities. (Id. at 22.) In addition, Motorola plans to manufacture its new Moto X

phone at a 500,000 square foot facility in Fort Worth, Texas. (Id. at 24.) U.S. consumers may

be inclined to substitute Apple, Motorola, and other domestically researched, designed, or

produced smartphones, media players, and tablets for Samsungs infringing devices, thus

encouraging further investment on researching, designing, and manufacturing smartphones,

media players, and tablets in the U.S. (Id. at 25.)

Remedial orders against Samsungs infringing articles will not adversely impact the

production of like or directly competitive articles because Samsung does not manufacture any of

such infringing articles in the United States. Instead, remedial orders may promote the domestic

production of like or directly competitive articles by causing consumers to substitute

domestically researched, designed, developed, or manufactured articles for excluded, infringing


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articles. Accordingly, this factor does not weigh against granting Apple relief from Samsungs

violations of section 337.

3. Remedial orders would not adversely affect competitive conditions inthe U.S. economy

Remedial orders against Samsungs infringing devices would not adversely affect

competitive conditions in the smartphone, media player, or tablet markets. Numerous

competitors exist that offer devices that are reasonable substitutes for Samsungs infringing

devices, and these competitors have the capacity to replace Samsungs devices subject to an

exclusion order.

a. Competition in the smartphone, media player, and tabletmarkets is robust, even absent Samsungs infringing devices

As Samsung has acknowledged, it

and it anticipate[s] rapid

growth and intense competition in both the smartphone and tablet markets (Prowse Decl. at 29

(quoting Samsung 2011 Annual Report)). Moreover, several of Samsungs competitors have

made similar statements concerning the intensity of competition in the U.S. smartphone market.

(Id. at 30-31.)

The robustness of the smartphone, media player, and tablet markets is based not only on

the intensity of the competition, but on the sheer number of competitors. In 2012, at least twenty

vendors sold smartphones in the U.S. market. (Prowse Decl. at 29.) More than forty vendors

sold tablet computers in the U.S. market, with Samsung accounting for only 7% of that market.

(Id. at 55.) Of these numerous smartphone and tablet vendors, only Samsungs infringing


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devices would be subject to an exclusion order, thus leaving consumers, retailers, providers, and

other market participants with ample choices following exclusion of such infringing devices.

These numerous vendors devices are suitable substitutes for Samsungs infringing

devices. For example, as discussed above, the ALJ found that Samsungs infringing devices

compete head-to-head with Apples domestic industry products. (RD at 9-10.) Such head-to-

head competition suggests that Apples domestic industry products could readily replace

Samsungs excluded devices. In addition, at least seventeen of the twenty smartphone vendors

discussed above offer devices based on the Android operating system, including Samsung.

(Prowse Decl. at 29.) Because virtually all of Samsungs infringing devices are based on

Android, at least sixteen other vendors could provide smartphones that are very close substitutes

for Samsungs infringing devices. (Id.) Further, several providers currently offer or are

developing alternative operating systems to Android. In addition to Apple, such providers

include Microsoft, Nokia, Research in Motion, Huawei, LG, and ZTE. (Id. at 31-34.) Mobile

devices running these alternative operating systems sold by vendors other than Samsung are

additional alternatives that would not be subject to any remedial orders issued in this

Investigation, and market participants may turn to these alternatives to replace excluded

Samsung devices.

In its Public Interest Comments, Samsung argues that, because of the range of price

points and number of sales channels that Samsungs mobile phone, media players, and tablets

address, no competitor could truly replace Samsungs affected articles in the event that an

exclusion order issues. (Samsung Public Interest Comments at 4.) But Samsung has not

explained why it is necessary for any one competitor to replace all of Samsungs affected articles,

and Samsung must concede that there are numerous competitors in the market who could


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collectively replace Samsungs infringing devices across all price points and sales channels.

(Prowse Decl. at 28.) Significantly, vendors such as Apple, Research in Motion, HTC, Nokia,

and LG supply smartphones to each of the Big Four national carriers AT&T, Verizon, Sprint,

and T-Mobile and these carriers comprise more than 89% of the smartphone market. (Prowse

Decl. at 57.) Even with respect to carriers other than the Big Four, many alternatives to

Samsung exist, such that no national, regional, or local carrier would be deprived of a supply of

smartphones due to an exclusion order against Samsungs infringing devices. (Id. at 59.)

Consequently, Samsungs contention that its affected articles could not be replaced by any single

competitor warrants little consideration.

b. Other competitors have sufficient capacity to replaceSamsungs infringing devices

Apple and other vendors already have or could quickly add sufficient capacity to replace

all excluded Samsung smartphones, media players, and tablet computers.

At the threshold, Samsungs devices subject to remedial orders comprise a relatively

small share of the smartphone, media player, and tablet markets. Samsung mobile

communication devices represented less than of all such devices sold in 2011 and less than

20% of all such devices sold in 2012. (Prowse Decl. at 40.) Accordingly, the vast majority of

mobile communication devices sold in the United States would not be subject to the

Commissions remedial orders in this Investigation. (Id.) Moreover, analyzing the number of

Samsung devices subject to an exclusion order in terms of the number of devices found to

infringe each Patent-at-Issue further shows that a relatively small share of the market will be

affected. (Id. at 42.) In 2012, Samsungs devices found to infringe the D678 patent accounted

for only about of the U.S. smartphone market and its devices found to infringe the 501

patent accounted for only about of that market. (Id.) And while Samsungs devices found to


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infringe the 949 and 922 patents accounted for approximately of the smartphone market in

2012, a substantially smaller share may be affected following issuance of an exclusion order

because Samsung can remove features that infringe Apples 949 and 922 patents from its

electronic digital media devices. (Balakrishnan Decl. at 4-7.) Indeed, Samsung has

contended that it has already implemented redesigns for three of the user-interface features found

to infringe the 949 and 922 patents. (Id. at 4-6.)

In view of the small portion of the smartphone, media player, and tablet markets likely to

be affected by remedial orders in this Investigation, the many competitors in the smartphone,

media player, and tablet markets could readily increase output to meet demand should the

Commission exclude Samsungs infringing articles.

First, Apple has sufficient capacity to satisfy increased demand for its electronic digital

media devices following issuance of remedial orders against Samsungs infringing devices.

(T. Blevins Decl. at 5.)

and industry observers have recognized Apple as the leading supply chain

company in the world (id.). Apple has also diversified its supply chain (id. at 6), including by

adding a second manufacturing provider, Pegatron, for portions of its iPhone and iPad product

lines (Prowse Decl. at 48).

Second, the many other vendors in the smartphone, media player, and tablet markets are

able to meet demand for such products following exclusion of Samsungs infringing devices.

Several of these competing vendors have stated that they have excess capacity or have

announced plans to increase capacity. (See Prowse Decl. at 49-50, 52.) Moreover, history

shows that vendors are capable of significantly increasing capacity in a short timeframe. Apple

experienced a increase in sales over a two-year period, thus showing that it was capable of


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quickly increasing output to satisfy demand. (Id. at 51.) And IDC, one of the leading market

research firms in the mobile device industry, forecasts that smartphone providers will increase

production by more than from 2012 to 2017, with greater than a increase anticipated in

2012-2013 and greater than an increase in 2013-2014, thus suggesting that vendors are

capable of ramping up production over short spans of time. (Id. at 53.)

In sum, remedial orders against Samsung would not significantly affect competitive

conditions in the United States due to the numerous vendors beyond Samsung that could satisfy

demand for any excluded devices. Accordingly, this factor does not weigh against issuing

remedial orders in this Investigation.

4. Remedial orders would not adversely affect U.S. consumersFinally, remedial orders would not adversely affect U.S. consumers. First, as explained

in Section V.A., exclusion of Samsungs infringing articles would promote innovation, thereby

increasing the range of options available to consumers in the smartphone, media player, and

tablet markets. (Prowse Decl. at 63, 69.)

Second, as explained in Section V.B.3., the smartphone, media player, and tablet

computer markets are characterized by robust competition. Due to this robust competition,

exclusion of Samsungs infringing devices will not lead to higher prices or meaningfully

decreased choices. (Prowse Decl. at 66-68.) Sufficient alternatives to Samsungs infringing

devices exist both in terms of the price points and the feature sets available to consumers.

(Prowse Decl. at 67-68.)

Moreover, even if excluding Samsungs infringing articles would limit consumers

choices in the relevant markets to some degree, the Commission has recognized that, because the

Patent Act grants patentees the right to exclude competitors infringing products, the mere


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constriction of [consumer] choice cannot be a sufficient basis for denying the issuance of an

exclusion order. Personal Data & Mobile Commcns Devices, Inv. No. 337-TA-710, 2011 ITC

LEXIS 2874, at *111. Similarly, even in the unlikely event that excludingSamsungs infringing

devices were to have some effect on price, the Commission has consistently held the benefit of

lower prices to consumers does not outweigh the benefit of providing complainants with an

effective remedy for an intellectual property-based section 337 violation. Digital Televisions,

337-TA-617, 2009 ITC LEXIS 2465, at *26.

Accordingly, the potential effects of remedial orders on U.S. consumers do not weigh

against granting Apple meaningful relief from Samsungs infringement of the Patents-at-Issue.

C. The Commission Need Not Tailor Remedial Orders to Permit any ContinuedInfringement by Samsung

Tailored remedial orders are neither necessary nor appropriate based on the

circumstances in this Investigation.

The Commission need not tailor remedial orders by delaying implementation to provide

time for Samsung or other market participants to transition to non-infringing alternatives.

Samsung has had more than fair notice that its products infringe Apples asserted patents. The

ALJ issued his Initial Determination that Samsung has violated section 337 in October 2012 (see

generally, ID (Oct. 24, 2012)). Samsung has therefore already had more than seven months to

transition to non-infringing designs and technology for its articles subject to an exclusion order.

Moreover, Samsung contends that it has redesigned several of the infringing features found

within its products to avoid Apples Patents-at-Issue, and Samsung could implement these and

other redesigned features relatively quickly. (Balakrishnan Decl. at 3-7.) Finally, Samsung

has provided testimony that it introduces 50 or more models of mobile devices in the United


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States per year. (RX-3442C (Denison) at 6, Q18.) Given the number of new devices Samsung

releases, it has had ample opportunity to introduce non-infringing designs or technology.

Delayed implementation is also unnecessary to accommodate other market participants,

such as wireless carriers or retailers. Unlike Personal Data and Mobile Communications

Devices, Inv. No. 337-TA-710, in which the Commission ordered a four-month transition period

due to concerns that non-party T-Mobile would be disparately impacted by remedial orders, no

carriers would be disproportionately affected by remedial orders in this Investigation. 2011 ITC

LEXIS 2874, at *131-32. As stated above, alternatives exist to Samsungs infringing devices for

each of the Big Four carriers, which collectively represent more than of the U.S.

smartphone market. (Prowse Decl. at 57.) Each Big Four carrier can switch to Apple

smartphones, among several other supplier options, to replace excluded Samsung smartphones.

(Prowse Decl. at 79.) Other national, regional, and local carriers also have alternatives to

Samsungs infringing devices, such that they would not be disproportionately affected by

remedial orders. (Id. at 59.) Accordingly, delayed implementation is not necessary in the

circumstances of this Investigation to accommodate these market participants.

Finally, delayed implementation would deprive Apple of significant benefits of remedial

orders. By the time the Commission issues its Final Determination, this Investigation will be

nearly two years old. During this entire length of this Investigation, Samsung has continued

importing electronic digital media devices that infringe Apples Patents-at-Issue, and Samsung is

still importing such infringing devices. During the entire length of this Investigation, Apple has

been significantly harmed by these unabated unfair acts. Further delay in providing Apple relief

would effectively subsidize Samsungs continued infringement of Apples intellectual property,

thus creating perverse incentives for infringers, such as Samsung, and disincentives for


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companies that have committed to innovation through domestic investment in research and

development, such as Apple. The Commission should therefore decline to tailor remedial orders

to delay implementation and should instead provide for such orders to go into effect as soon as

possible.

VI. THE EXPIRATION DATES OF THE PATENTSThe Patents-in-Suit expire on the following dates:

D678 patent: May 26, 2023 D757 patent: May 26, 2023 949 patent: September 6, 2026 922 patent: June 6, 2017 501 patent: January 5, 2027 697 patent: May 29, 2028

VII. HTSUS NUMBERS FOR SAMSUNGS INFRINGING ARTICLESSamsungs infringing articles are imported within at least the following headings of the

Harmonized Tariff Schedule of the United States (HTSUS): 8517.12, 8471.30, 8528.59.1500.

These HTSUS headings are intended for illustration only and are not exhaustive of Samsungs

infringing articles.

VIII. CONCLUSIONFor the foregoing reasons, the Commission should issue a permanent limited exclusion

order against SEC, SEA, and STA and cease-and-desist orders against SEA and STA, should

require that Samsung post bond of 88%, 32.5%, and 37.6% of the entered value for Samsungs

mobile phones, media players, and tablet computers, respectively, imported during the

Presidential review period, and should decline to tailor such exclusion and cease-and-desist


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orders to permit Samsung to continue unfair acts in violation of section 337 to any extent

following issuance of the Commissions final determination on violation.

Dated: June 11, 2013 Respectfully submitted,

/s/ Kristin L. Yohannan

Alexander J. [email protected]. Brian [email protected] L. [email protected]

Joshua A. [email protected] D. [email protected] &FOERSTERLLP2000 Pennsylvania Ave., NW, Suite 6000Washington, DC 20006Telephone: (202) 887-1500Facsimile: (202) 887-0763

Harold J. McElhinny

[email protected] A. [email protected] [email protected] Lee [email protected] I. [email protected] &FOERSTERLLP425 Market St.

San Francisco, California 94105Telephone: (415) 268-7000Facsimile: (415) 268-7522


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Charles S. [email protected] &FOERSTERLLP707 Wilshire BoulevardLos Angeles, California 90017-3543

Telephone: (213) 892-5200Facsimile: (213) 892-5454

Scott F. [email protected] &FOERSTERLLP370 Seventeenth Street 5200 Republic PlazaDenver, Colorado 80202-5638Telephone: (303) 592-1500Facsimile: (303) 592-1510

Counsel for Complainant Apple Inc.


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Appendix A


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UNITED STATES INTERNATIONAL TRADE COMMISSION

WASHINGTON, DC

Before The Honorable Thomas B. Pender

Administrative Law Judge

In the Matter of:

Investigation No. 337-TA-796

Certain Electronic Digital Media Devices and

Components Thereof

LIMITED EXCLUSION ORDER

This Commission has determined that there is a violation of section 337 of the Tariff Act

of 1950, as amended, in the unlawful importation and sale by Respondents Samsung Electronics

Co., Ltd., 416 Maetan-3dong, Yeongtong-gu, Suwon-City, Gyeonggi-do, Korea 443-742;

Samsung Electronics America, 85 Challenger Road, Ridgefield Park, New Jersey 07660; and

Samsung Telecommunications America LLC, 1301 Lookout Drive, Richardson, TX 75082, of

certain electrical digital media devices by reason of infringement of one or more of claims 1, 4-6,

and 9-20 of U.S. PatentNo. 7,479,949 (the 949 patent); claims 29-35 of U.S. Patent No. RE

41,922 (the 922 patent); claims 13 and 14 of U.S. Patent No. 7,789,697 (the 697 patent);

claims 1-4, and 8 of U.S. Patent No. 7,912,501 (the 501 patent); the claim of U.S. Patent No.

D558,757 (the D757 patent); and the claim of U.S. Patent No. D618,678 (the D678 patent) .

Having reviewed the record in this investigation, including the written submissions of the

parties, the Commission has made its determination on the issues of remedy, the public interest,

and bonding. The Commission has determined that the appropriate form of relief is a limited

exclusion order prohibiting the unlicensed entry of infringing electrical digital media devices that

are manufactured abroad by or on behalf of, or imported by or on behalf of, the Respondents.

The Commission has also determined that the appropriate form of relief includes a cease and


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desist order directed against Samsung Electronics America and Samsung Telecommunications

America LLC.

The Commission has determined that the public interest factors enumerated in 19 U.S.C.

1337(d) and (f) do not preclude issuance of the limited exclusion order or cease and desist

order, and that the bond during the Presidential review period shall be the amount of 88%, 32.5%,

and 37.6% of the entered value for mobile phones, media players, and tablet computers,

respectively, that are subject to this Order.

Accordingly, the Commission hereby ORDERS that:

1. Electronic digital media devices that infringe one or more of claims 1, 4-6, and 9-

20 ofthe 949 patent; claims 29-35 of the 922 patent; claims 13 and 14 of the 697 patent;

claims 1-4, and 8 of the 501 patent; the claim of the D757 patent; and the claim of the D678

patent, and that are manufactured abroad by or on behalf of, or imported by or on behalf of

Respondents, or any of their affiliated companies, parents, subsidiaries, or other related business

entities, or their successors or assigns, are excluded from entry for consumption into the United

States, entry for consumption in the United States from a foreign trade zone, or withdrawal from

a warehouse for consumption in the United States, for the remaining term of the patents, except

under license of the patent owner, as provided by law.

2. Notwithstanding paragraph 1 of this Order, the aforesaid products are entitled to

entry for consumption into the United States, entry for consumption in the United States from a

foreign trade zone, or withdrawal from a warehouse for consumption in the United States, under

bond in the amount of 88%, 32.5%, and 37.6% of the entered value for mobile phones, media

players, and tablet computers, respectively, pursuant to subsection (j) of Section 337 of the

Tariff Act of 1930 (19 U.S.C. 1337(j)) from the day after this Order is received by United

States Trade Representative as delegated by the President, 70 Fed. Reg. 43251 (July 21, 2005),


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until such time as the United States Trade Representative notifies the Commission that this

action is approved or disapproved but, in any event, not later than sixty (60) days after the date of

receipt of this action.

3. In accordance with 19 U.S.C. 1337(1), the provisions of this Order shall not

apply to infringing electronic digital media devices that are imported by and for the use of the

United States, or imported for, and to be used for, the United States with the authorization or

consent of the Government.

4. The Commission may modify this Order in accordance with the procedures

described in Rule 210.76 of the Commission's Rules of Practice and Procedure, 19 C.F.R.

210.76.

5. The Secretary shall serve copies of this Order upon each party of record in this

investigation and upon the Department of Health and Human Services, the Department of

Justice, the Federal Trade Commission, and U.S. Customs and Border Protection.

6. Notice of this Order shall be published in the Federal Register.

By Order of the Commission.

________________________________Lisa R. Barton

Acting Secretary to the Commission

Issued:


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Appendix B


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UNITED STATES INTERNATIONAL TRADE COMMISSION

WASHINGTON, DC

Before The Honorable Thomas B. Pender

Administrative Law Judge

In the Matter of:

Investigation No. 337-TA-796

Certain Electronic Digital Media Devices and

Components Thereof

CEASE AND DESIST ORDER

IT IS HEREBY ORDERED THAT Respondents Samsung Electronics America, 85

Challenger Road, Ridgefield Park, New Jersey 07660; and Samsung Telecommunications

America LLC, 1301 Lookout Drive, Richardson, TX 75082, cease and desist from conducting

any of the following activities in the United States: importing, selling, marketing, advertising,

demonstrating, using, distributing, warehousing for distributing, offering for sale, licensing,

transferring (except for exportation), and soliciting U.S. agents or distributors for, certain

electrical digital media devices that are covered by one or more of claims 1, 4-6, and 9-20 of U.S.

PatentNo. 7,479,949 (the 949 patent); claims 29-35 of U.S. Patent No. RE 41,922 (the 922

patent); claims 13 and 14 of U.S. Patent No. 7,789,697 (the 697 patent); claims 1-4, and 8 of

U.S. Patent No. 7,912,501 (the 501 patent); the claim of U.S. Patent No. D558,757 (the

D757 patent); and the claim of U.S. Patent No. D618,678 (the D678 patent), in violation of

section 337 of the Tariff Act of 1930, as amended, 19 U.S.C. 1337.

I.

DEFINITIONS

As used in this Order:

(A) Commission shall mean the United States International Trade Commission.(B) Complainant shall mean Apple Inc., 1 Infinite Loop, Cupertino, California

95014.


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(C) Respondents shall mean Samsung Electronics America, 85 Challenger Road,Ridgefield Park, New Jersey 07660; and Samsung Telecommunications America LLC, 1301

Lookout Drive, Richardson, TX 75082.

(D) Person shall mean an individual, or any non-governmental partnership, firm,association, corporation, or other legal or business entity or its majority owned or controlled

subsidiaries, successors, or assigns.

(E) United States shall mean the fifty States, the District of Columbia, andPuerto Rico.

(F)

The terms import and importation refer to importation for entry for

consumption under the Customs laws of the United States.

(G) The term covered products shall mean certain electronic digital media devicesthat infringe one or more of claims 1, 4-6, and 9-20 ofthe 949 patent; claims 29-35 of the 922

patent; claims 13 and 14 of the 697 patent; claims 1-4, and 8 of the 501 patent; the claim of the

D757 patent; and the claim of the D678 patent.

II.

APPLICABILITY

The provisions of this Cease and Desist Order shall apply to Respondents and to any of

its principals, stockholders, officers, directors, employees, agents, licensees, distributors,

controlled (whether by stock ownership or otherwise) and majority-owned business entities,

successors, and assigns, and to each of them, insofar as they are engaging in conduct prohibited

by Section III, infra, for, with, or otherwise on behalf of Respondents.


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III.

CONDUCT PROHIBITED

The following conduct of Respondents in the United States is prohibited by the Order.

For the remaining term of the 949 patent; the 922 patent; the 697 patent; the 501 patent; the

D757 patent; and the D678 patent, Respondents shall not:

(A) import or sell for importation into the United States covered products;(B) market, distribute, warehouse for distribution, offer for sale, sell, license, or

otherwise transfer (except for exportation), in the United States imported covered products;

(C) advertise, demonstrate, or use imported covered products;(D) solicit U.S. agents or distributors for imported covered products; or(E) aid or abet other entities in the importation, sale for importation, sale after

importation, transfer (except for exportation), or distribution of covered products.

IV.

CONDUCT PERMITTED

Notwithstanding any other provision of this Order, specific conduct otherwise prohibited

by the terms of this Order shall be permitted if, in a written instrument, the owner of the 949

patent; the 922 patent; the 697 patent; the 501 patent; the D757 patent; and the D678 patent

licenses or authorizes such specific conduct, or such specific conduct is related to the importation

or sale of covered products by or for the United States.

V.

REPORTING

For purposes of this reporting requirement, the reporting periods shall commence on

January 1 of each year and shall end on the subsequent December 31. However, the first report

required under this section shall cover the period from the date of issuance of this Order through

December 31, 2013. This reporting requirement shall continue in force until such time as


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Respondents will have truthfully reported, in two consecutive timely filed reports, that it has no

inventory of covered products in the United States.

Within thirty (30) days of the last day of the reporting period, Respondents shall report to

the Commission the quantity in units and the value in dollars of covered products that

Respondents have imported or sold in the United States after importation during the reporting

period and the quantity in units and value in dollars of reported covered products that remain in

inventory in the United States at the end of the reporting period.

Any failure to make the required report or the filing of any false or inaccurate report

shall constitute a violation of this Order, and the submission of a false or inaccurate report may

be referred to the U.S. Department of Justice as a possible criminal violation of 18 U.S.C.

1001.

VI.

RECORD-KEEPING AND INSPECTION

(A) For the purpose of securing compliance with this Order, Respondents shall retainany and all records relating to the sale, offer for sale, marketing, or distribution in the United

States of covered products, made and received in the usual and ordinary course of business,

whether in detail or in summary form, for a period of three (3) years from the close of the fiscal

year to which they pertain.

(B) For the purpose of determining or securing compliance with this Order and for noother purpose, and subject to any privilege recognized by the federal courts of the United States,

duly authorized representatives of the Commission, upon reasonable written notice by the

Commission or its staff, shall be permitted access and the right to inspect and copy in

Respondents principal offices during office hours, and in the presence of counsel or other

representatives if Respondents so choose, all books, ledgers, accounts, correspondence,


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memoranda, and other records and documents, both in detail and in summary form as are

required to be retained by subparagraph VI(A) of this Order.

VII.

SERVICE OF CEASE AND DESIST ORDER

Respondents are ordered and directed to:

(A) Serve, within fifteen (15) days after the effective date of this Order, a copy of this

Order upon each of its respective officers, directors, managing agents, agents, and employees

who have any responsibility for the importation, marketing, distribution, or sale of imported

covered products in the United States;

(B) Serve, within fifteen (15) days after the succession of any persons referred to insubparagraph VII(A) of this Order, a copy of the Order upon each successor; and

(C) Maintain such records as will show the name, title, and address of each personupon whom the Order has been served, as described in subparagraphs VII(A) and VII(B) of this

Order, together with the date on which service was made.

The obligations set forth in subparagraphs VII(B) and VII(C) shall remain in effect

until the date of expiration of the 949 patent; the 922 patent; the 697 patent; the 501

patent; the D757 patent; and the D678 patent , whichever is later.

VIII.

CONFIDENTIALITY

Any request for confidential treatment of information obtained by the Commission

pursuant to Sections V and VI of this Order should be in accordance with the Commissions

Rules of Practice and Procedure 201.6, 19 C.F.R. 201.6. For all reports for which confidential

treatment is sought, Respondents must provide a public version of such report with confidential

information redacted.


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IX.

ENFORCEMENT

Violation of this Order may result in any of the actions specified in section 210.75 of the

Commissions Rules of Practice and Procedure, 19 C.F.R. 210.75, including an action for civil

penalties in accordance with section 337(f) of the Tariff Act of 1930, 19 U.S.C. 1337(f), and

any other action as the Commission may deem appropriate. In determining whether

Respondents are in violation of this Order, the Commission may infer facts adverse to

Respondents if Respondents fail to provide adequate or timely information.

X.

MODIFICATION

The Commission may amend this Order on its own motion or in accordance with the

procedure described in section 210.76 of the Commissions Rules of Practice and Procedure,

19 C.F.R. 210.76.

XI.

BONDING

The conduct prohibited by Section III of this Order may be continued during the sixty

(60) day period in which this Order is under review by the United States Trade Representative

as delegated by the President, 70 Fed Reg43251 (July 21, 2005), subject to Respondentsposting a bond of 88%, 32.5%, and 37.6% of the entered value for mobile phones, media

players, and tablet computers, respectively. This bond provision does not apply to conduct that

is otherwise permitted by Section V of this Order. Cover products imported on or after the

date of issuance of this Order are subject to the entry bond as set forth in the limited exclusion

order issued by the Commission, and are not subject to this bond provision.

The bond is to be posted in accordance with the procedure established by the

Commission for the posting of bonds by complainants in connection with the issuance of

temporary exclusion orders. See Commission Rule 210.68, 19 C.F.R. 210.68. The bond and


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any accompanying documentation is to be provided to and approved by the Commission prior to

the commencement of conduct which is otherwise prohibited by Section III of this Order.

The bond is to be forfeited to Complainant in the event that the United States Trade

Representative approves, or does not disapprove within the review period, this Order, unless the

U.S. Court of Appeals for the Federal Circuit, in a final judgment, reverses any Commission

final determination and order as to Respondents on appeal, or unless Respondents export the

products subject to this bond or destroy them and provide certification to that effect satisfactory

to the Commission.

The bond is to be released in the event the United States Trade Representative

disapproves this Order and no subsequent order is issued by the Commission and approved, or

not disapproved, by the United States Trade Representative, upon service on Respondents of an

order issued by the Commission based upon application therefore made by Respondents to the

Commission.

By Order of the Commission.

________________________________

Lisa R. Barton

Acting Secretary to the Commission

Issued:


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CERTIFICATE OF SERVICE

I hereby certify that a copy of the COMPLAINANT APPLE INC.S SUBMISSION

ON REMEDY, BOND, AND PUBLIC INTEREST has been served on June 11, 2013,as indicated on the following:

The Honorable Lisa Barton

Acting Secretary

U.S. International Trade Commission

500 E. Street, S.W., Room 112AWashington, DC 20436

Via First Class MailVia Hand Delivery

Via Overnight DeliveryVia FacsimileVia Electronic Delivery

Not Served

Honorable Thomas B. PenderAdministrative Law Judge


500 E Street, S.W., Room 317

Washington, DC 20436

Via First Class MailVia Hand Delivery 2 CopiesVia Overnight DeliveryVia Facsimile

Via Electronic MailNot Served

Gregory MoldafskyAttorney Advisor


500 E Street, S.W.

Washington, DC [email protected]

Via First Class MailVia Hand DeliveryVia Overnight DeliveryVia Facsimile


Reginald Lucas

The Office of Unfair Import InvestigationsU.S. International Trade Commission

500 E Street, SW., Suite 401

Washington, D.C. [email protected]

Via First Class MailVia Hand DeliveryVia Overnight DeliveryVia FacsimileVia Electronic MailNot Served


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Charles K. VerhoevenQuinn Emanuel Urquhart & Sullivan, LLP

50 California Street, 22nd

Floor

San Francisco, CA 94111-4788

[email protected]

Counsel for Samsung Electronics Co., Ltd., Samsung

Electronics America, Inc. and Samsung

Telecommunications America, LLC

Via First Class MailVia Hand DeliveryVia Overnight DeliveryVia Facsimile


/s/ Russell W. Warnick

Russell W. Warnick

Paralegal


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CERTIFICATE OF SERVICE

I hereby certify that a copy of the PUBLIC VERSION OF COMPLAINANT APPLE

INC.S SUBMISSION ON REMEDY, BOND, AND PUBLIC INTEREST has beenserved on June 12, 2013, as indicated on the following:

The Honorable Lisa Barton

Acting Secretary


500 E. Street, S.W., Room 112AWashington, DC 20436

Via First Class MailVia Hand Delivery

Via Overnight DeliveryVia FacsimileVia Electronic Delivery

Not Served

Honorable Thomas B. PenderAdministrative Law Judge


500 E Street, S.W., Room 317

Washington, DC 20436

Via First Class MailVia Hand Delivery 2 CopiesVia Overnight DeliveryVia Facsimile

Via Electron

Documents

13-06-11 Apple Submission on Public Interest