UNITED STATES INTERNATIONAL TRADE COMMISSION WASHINGTON, D.C.

In the Matter of
CERTAIN ELECTRONIC DEVICES, INCLUDING MOBILE PHONES AND TABLET COMPUTERS, AND COMPONENTS THEREOF Investigation N0- 337-TA-847

THIRD PARTY SPRINT SPECTRUM, L.P.S STATEMENT REGARDING THE PUBLIC INTEREST

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Third party Sprint Spectrum, L.P.l (Sprint) respectfully submits this Statement Regarding the
Public Interest in response to the Commissions October 18, 2013 Notice requesting same. If the

Commission finds that the accused technology is a small component of a smart phone, it should not grant

an exclusion order absent exceptional circumstances. If the Commission grants an exclusion order, it
should include a significant transition period not less than twelve months, a provision to allow for

refurbished or replacement handsets, and clear guidance for smartphone manufacturers and Customs to
support successful design-arounds.
Sprint is a national provider of wireless voice, messaging, and data services and together with

other entities in the Sprint Nextel family of companies serves nearly 56 million customers throughout the
nation. Sprints customers use a variety of multi-functional devices with Sprints voice and data services,
including devices manufactured by HTC, as well as other strategic partners. Sprint respects intellectual

property rights and takes no position on the merits of the dispute between Nokia and HTC. Sprint would

take the same position in this Public Interest Statement if the litigants were reversed or replaced by other

handset manufacturers.

I.

IF HTC IS CORRECT THAT THE ACCUSED TECHNOLOGY IS A SMALL COMPONENT OF A SMART PHONE, THEN AN EXCLUSION ORDER IS LIKELY TO HARM THE PUBLIC INTEREST
As Sprint understands it, HTC contends that the accused technology is a small component of a

smart phone. Sprint takes no position on the merits of this claim. But if the Commission agrees with

HTC on this point, then an exclusion order is likely to harm the public interest and should not issue absent

exceptional circumstances.
[T]he Commission must balance the damage to the patent holders rights against the adverse
impact of the remedy on the public health and welfare and the assurance of competitive conditions in the

I Sprint Spectrum L.P. is owned by Sprint Nextel Corporation. Sprint Spectrum, L.P. is the primary Sprint-related entity that sells various smartphone devices and corresponding services to end users in the United States, including smartphones manufactured by HTC and other smartphone manufacturers.
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United States economy.2 As this standard implicitly recognizes, granting a patentee a remedy beyond
the contribution of his or her patent harms competitive conditions.3

Federal courts are increasingly recognizing this principle and denying injunctive relief in
industries like the smartphone industrywhich sells complex devices encompassing thousands of
patented features. Justice Kennedy, joined by three other Justices, observed in eBay that injunctions for
patent infngement may not serve the public interest in cases where the patented invention is but a

small component of the product the companies seek to produce and the threat of an injunction is

employed simply for undue leverage in negotiations.

District courts have acted on this observations

And the Federal Circuit likewise recently used a smartphone case to tighten the standards for preliminary
injunction.6

These developments in federal jurisprudence bear directly on the Commissions analysis of what
remedy to impose in Section 337 Investigations. In fact, the President recently discussed the so-called

Smartphone Patent Wars and set a policy goal of harmonizing the Commissions standard for granting
exclusion orders With the federal judiciarys standard for granting injunctions.7 Indeed, when the

Commission recently issued an exclusion order in an investigation involving FRAND-encumbered

patentsdespite Warnings that an injunction on such patents would not likely be available in federal

courtsthe United States Trade Representative vetoed the order.8

2 Certain Inclined-Field Acceleration Tubes and Components Thereof, Inv. No. 337-TA-67, Cornmn Op. at 22, USITC Pub. No. 1119 (Dec. 1980) (intemal citation omitted). 3See Colleen V. Chien & Mark A. Lemley, Patent Holdup, the ITC, and the Public Interest, 98 CORNELL L. REV. 1, 6 (2012) (Eliminating a big product from the market because of a small patent harms consumers, and blocking a large number of lawful components and features from the market along with the infringing one distorts competition) ' 4 eBay Inc. v. MercExchange, L.L.C, 547 U.S. 388, 396-97 (2006) (Kennedy, 1., concurring) (internal citations omitted). 5See Chien & Lemley at 13-14 and cases cited in n.66-68. 6 See Apple Inc. v. Samsung Elecs. C0., 695 F.3d 1370, 1374 (Fed. Cir. 2012). 7 Fact Sheet, The White House, Office of the Press Secretary, White House Task Force on High-Tech Patent Issues, (June 4, 2013), available at http://www.whitehouse.gov/the-press-office/2013/06/O4/fact sheet-white-house-task-force-high-tech-patent-issues. 8See August 3, 2013 letter from United States Trade Representative, RE: Disapproval of the U.S. International Trade Commissions Determination in the Matter of Certain Electronic Devices, Including -2

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II.

ANY EXCLUSION ORDER SHOULD INCLUDE AT LEAST A TWELVE-MONTH TRANSITION PERIOD AND SHOULD FURTHER ALLOW FOR REPAIR AND REPLACEMENT OF HANDSETS ALREADY SOLD
The Commission has previously recognized that it is in the public interest to include a transition

period when issuing an exclusion order in the telecommunications industry.

For example, in

Investigation 337-TA-710, T-Mobile advised the Commission that four months would help prepare
design-around products for the market and thus avoid some harm to competitive conditions in the U.S.
economy.9 The Commission accepted this reconm1endation.1 Unfortunately, that recommendation

proved overambitious, and despite this four-month transition period, Customs blocked entry of some of

HTCs design-arounds. While Customs eventually found these to be successful design-around devices
and let them into the United States, the damage had already been done: HTC missed its release date in the

United States. Thus, the four-month transition period was not sufficient to protect the public from the
harm inherent to an exclusion order in a smartphone investigation.

When an exclusion order issues with an insufficient transition period it does not only damage the

parties in the dispute; it also exacerbates the harm to third-parties like Sprint.

Where such an order

excludes one of Sprints handset devices, like the HTC One in this case, it harms Sprints substantial
investment in its device portfolio and threatens irreparable harm to Sprints market share. The devices in

Sprints portfolio are not interchangeable.

Bringing a device to market takes hundreds of people

approximately 9-12 months. An exclusion order with an insufficient transition period leaves a void in

Sprints device portfolio that cannot be filled for many months, placing Sprint at risk of losing signicant

Wireless Communication Devices, Portable Music and Data Processing Devices, and Tablet Computers, Investigation 337-TA-794, available at http://www.ustr.gov/sites/default/files/08032013%20Letter_1.PDF 9 Certain Personal Dara and Mobile Communications Devices and Related Software, Inv. No. 337
TA-17010, Commn Op. at 81 (Dec. 29, 2011). Id.

H Clare Jim, HTC Shares Tumble as Patent Case Delays U.S. Sales, Reuters (May 16, 2012), available at http://www.reuters.com/article/2012/05/16/us-htc-idUSBRE84FO5L20120516. 12See id. (HTC shares closed down over 6 percent in a broader market down 2.2 percent). '3 Cf Sprint Spectrum, L.P.s Amicus Curiae Brief in Support of Reversal of Preliminary Injunction, dkt. 58-2, Apple Inc. v. Samsimg Electronics Ca, Ltd., 2012-1507 (Fed. Cir. July 23, 2012). -3

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sales and market share. It impacts the inventory of thousands of downstream distribution points, and it
tamishes Sprints reputation with its customers and potential customers. Such an order makes Sprint and

its retailers and customers unwitting victims in the cross-hairs of the parties dispute.

The Commission should also tailor any exclusion order to avoid harm to the public interest by
allowing providers, like Sprint, to repair and refurbish handsets already sold to its customers or provide

replacement handsets for an identical article imported before the exclusion order. As the Commission has
recognized in several other investigations, it serves the public interest to allow providers, like Sprint, to

honor any warranties or contractual commitments they might have made to their customers, including any

obligations to provide refurbished or replacement handsets for articles now covered by an exclusion order

that were originally imported before such order took effect.

Absent such exceptions for repair and

replacement, the consuming public is harmed because it may not be able to obtain bargained-for
replacements. Further, Sprint is harmed to the extent consumers impute the failure to provide repairs and
re Placements to SP rint, hanning goodwill with its customers. e SPrints hard-earned e

III.

ANY EXCLUSION ORDER SHOULD PROVIDE CLEAR GUIDANCE FOR THE SMARTPHONE INDUSTRY AND CUSTOMS
As Sprint understands it, HTC contends that an exclusion order could reach HTCs off-the

shelf Qualcomm RF transceiver chips, and could cause far-reaching interruption to the smart phone
market. If the Commission agrees with HTC, special guidance is warranted to support design-arounds
and prevent Widespread harm to the smart phone industry and its consumers. The President has

specically mentioned smartphones as a technology presenting unique challenges to the enforcement of

an exclusion order by Customs. Without precise objective guidance laying out the features that lead to a

'4 See, e.g., Certain Mobile Electronic Devices, Including Wireless Communication Devices, Portable Music and Data Processing Devices, and Tablet Computers, 337-TA-794, Issuance of a Limited Exclusion Order and Cease and Desist Order; Termination of the Investigation, at 3 llIV(A). (June 4, 2013). 15Fact Sheet, The White House, Office of the Press Secretary, White House Task Force on High Tech Patent Issues, (June 4, 2013), available at http://wWw.Whitehouse.gov/the-press office/2013/06/O4/fact-sheet-White-house-task-force-high-tech-patent-issues (Implementing [exclusion] orders present unique challenges given these shared responsibilities [between the ITC and Customs] and -4

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conclusion of infringement or non-infringement, neither the industry nor Customs will be empowered or
equipped to prevent the harms to the public. For example, due to new handsets frequently entering the

market in the smartphone industry, it may be necessary for the Commission to adjudicate whether specic

design-around models developed during the pendency of this Investigation should be excluded. Customs
is ill-equipped to make this determination in the rst instance. Absent clear guidance, the industry could

be mired in enforcement proceedings that could delay or impede lawful market dynamics, unnecessarily
harming third parties, such as Sprint.

November I3, 2013

Respectfully submitted,

/z
Jpnathan N. Zerger

.
-x
Z _

/]zerger@shb.com Jordan T. Bergsten jbergsten@shb.com SHOOK HARDY & BACON L.L.P. 2555 Grand Blvd. Kansas City, MO 64108 Phone (816) 474-6550 Fax (816)421-5547
Counsel for Third Party Sprint Spectmm, L.P.

the complexity of making this determination, particularly in cases in which a technologically sophisticated product such as a smartphone has been successfully redesigned to not fall within the scope of the exclusion order). -5

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j
Jamie D. Underwood Scott J. Pivnick Alston & Bird LLP The Atlantic Building 950 F. Street, NW Washington, D.C. 2004 NokiaITC847 @alston.com
701 13" Street, NW

In the Matter of CERTAIN ELECTRONIC DEVICES, INCLUDING MOBILE PHONES AND TABLET COMPUTERS, AND COMPONENTS THEREOF Investigation No. 337-TA-847 U.S. International Trade Commission; Before the Honorable Lisa R. Barton

Certicate of Service

I hereby certify that on November 13, 2013, I caused copies of the foregoing document to be served upon the following parties as indicated:

The Honorable Lisa R. Barton Acting Secretary U.S. International Trade Commission 500 E Street, S.W., Room 112 Washington, D.C. 20436

Via Electronic Filing (EDIS)

Via Electronic Mail

John M. Desmarais Alan S. Kellman Jason Berrebi Desmarais LLP 230 Park Avenue New York, NY 10169 1' desmarais @demaraislllgcom, akellman @desmaraisllp.com,

Counselfor Complainants Nokia Corporation, Nokia Inc. and Intellisync Corp.

Jack Q. Lever Shamita D. Etienne-Cummings Frank Morgan White & Case LLP Via Electronic Mail

Washington, D.C. 20005 Jeannine Yoo Sano

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Bij al V. Vakil White & Case LLP 3000 El Carnino Real 5 Palo Alto Square, 9th floor Palo Alto, CA 94306
WCGoogleITC847Team @Wl1llCCE1SC.COI11

Counselfor Intervenor GoogleInc.

Yar R. Chaikovsky, Esq. Terrence P. McMahon, Esq. S. Michael Song, Esq. Hong S. Lin, Esq. Jeremiah A. Armstrong, Esq. Nitin Garnbhir Esq. McDermott Will & Emery LLP 275 Middleeld Road, Suite 100 Menlo Park, CA 94025

Via Electronic Mail

Blair Jacobs, Esq. Christina A. Oderick, Esq. Christopher G. Paulraj, Esq. McDerm0tt Will & Emery The McDerm0tt Building 500 North Capitol Street, N.W. Washington, D.C. 20001
847N0kiaITC-HTC Q! I11'.".'C.COI11

Counselfor Respondent HTC Corporation, H TC America, Inc.

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