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Case 5:17-md-02773-LHK Document 620 Filed 07/19/18 Page 1 of 19

1 Kalpana Srinivasan (237460)


SUSMAN GODFREY L.L.P.
2 1900 Avenue of the Stars, Suite 1400
Los Angeles, CA 90067-6029
3 Telephone: (310) 789-3100
Facsimile: (310) 789-3150
4 Email: ksrinivasan@susmangodfrey.com
5 Joseph W. Cotchett (36324)
COTCHETT, PITRE & McCARTHY, LLP
6 840 Malcolm Road, Suite 200
Burlingame, CA 94010
7 Telephone: (650) 697-6000
Facsimile: (650) 697-0577
8 Email: jcotchett@cpmlegal.com
9 Plaintiffs’ Interim Co-Lead Counsel
10

11 UNITED STATES DISTRICT COURT

12 NORTHERN DISTRICT OF CALIFORNIA

13 SAN JOSE DIVISION

14

15 IN RE: QUALCOMM ANTITRUST Case No. 5:17-md-02773-LHK


LITIGATION
16 The Honorable Lucy H. Koh

17
PLAINTIFFS’ REPLY TO DEFENDANT
18 QUALCOMM’S OPPOSITION TO
MOTION FOR PRELIMINARY
19 INJUNCTION

20
CLASS ACTION
21
Date: Thursday, August 30, 2018
22 Time: 1:30 p.m.
Place: Courtroom 8
23
First Amended Consolidated
24 Class Action Complaint filed June 13, 2018

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1 TABLE OF CONTENTS
2

3 I. Plaintiffs Have Not Delayed ................................................................................................ 1


4 II. Qualcomm’s Anticompetitive Conduct Has Harmed Plaintiffs And An Exclusion Order
5 Would Magnify That Harm.................................................................................................. 3
6 III. The Court Has Jurisdiction Under The All Writs Act To Grant Relief ............................... 8
7 IV. Plaintiffs Need Not Satisfy The Requirements Of Rule 65 ............................................... 10
8 V. Qualcomm’s Effort to Exclude Only Intel-Based Chipsets Is Anticompetitive ................ 11
9 VI. The Noerr-Pennington Doctrine Does Not Apply ............................................................. 13
10 VII. Conclusion ......................................................................................................................... 14
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TABLE OF CONTENTS
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1 TABLE OF AUTHORITIES
2

3
FederalCases
4
Ashlow Ltd. v. Morgan Const. Co.,
5 672 F.2d 371 (4th Cir. 1982)........................................................................................................ 8
Balsley v. San Jose Dev. Corp.,
6 1995 WL 108207, at *3 (N.D. Cal. Mar. 3, 1995) ..................................................................... 11
7 Bates v. United Parcel Serv., Inc.
511 F.3d 974, 985 (9th Cir. 2007) ............................................................................................... 3
8 Blue Shield of Va. v. McCready,
457 U.S. 465, 482 (1982) ............................................................................................................ 4
9
Boardman v. Pac. Seafood Grp.,
10 822 F.3d 1011 (9th Cir. 2016)...................................................................................................... 6
Cal. Motor Transp. Co. v. Trucking Unlimited,
11 404 U.S. 508 (1972) ................................................................................................................... 13
12 Cheminor Drugs, Ltd. v. Ethyl Corp.,
168 F.3d 119 (3d Cir. 1999) ....................................................................................................... 13
13 City of Los Angeles v. Lyons,
461 U.S. 95, 111 (1983) .............................................................................................................. 3
14
Federated Conservationists of Westchester Cty., Inc. v. City of Yonkers,
15 117 F. Supp. 2d 371 (S.D.N.Y. 2000) ........................................................................................ 11
Hazardous Waste Treatment Council v. S.C.,
16 945 F.2d 781 (4th Cir. 1991)........................................................................................................ 6
17 Huawei Tech., Co. Ltd. v. Samsung Elec. Co., Ltd.,
Case No. 3:16-cv-02787-WHO, Dkt. 280 (N.D. Cal. Apr. 13, 2018) ....................................... 10
18 In re Baldwin-United Corp.,
770 F.2d 328 (2d Cir. 1985) ....................................................................................................... 10
19
In re BRCA1-, BRCA2-Based Hereditary Cancer Test Patent Litig.,
20 3 F. Supp. 3d 1213 (D. Utah) ....................................................................................................... 7
In re Cathode Ray Tube (CRT) Antitrust Litig. (“CRT”),
21 738 F. Supp. 2d 1011, 1023 (N.D. Cal. 2010) ............................................................................ 4
22 In re Convertible Rowing Exerciser Patent Litig.
616 F. Supp. 1134 (D. Del. 1985) ................................................................................................ 8
23 In re Netflix Antitrust Litigation,
506 F. Supp. 2d 308 (N.D. Cal. 2007) ......................................................................................... 3
24
In re TFT-LCD (Flat Panel) Antitrust Litig.,
25 586 F. Supp. 2d 1109, 1120-24 (2008) .................................................................................... 3-4
In re Uranium Antitrust Litig.,
26 617 F.2d 1248 (7th Cir. 1980)...................................................................................................... 8
27 In re Volkswagen "Clean Diesel" Mktg., Sales Practices, & Prod. Liab. Litig.,
No. MDL 2672 CRB (JSC), 2017 WL 2212783, at *27 (N.D. Cal. May 17, 2017) ................... 8
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TABLE OF AUTHORITIES
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1 In re Jimmy Johns Overtime Litig.,


877 F.3d 756 (7th Cir. 2017)...................................................................................................... 10
2
Kaisha v. Bombardier, Inc.,
3 2001 WL 1388911, at *2 (C.D. Cal. Mar. 9, 2001) ..................................................................... 8
Microsoft Corp. v. Motorola, Inc.,
4 871 F. Supp. 2d 1089 (W.D. Wash. 2012) ................................................................................. 10
5 New York ex rel. Schneiderman v. Actavis PLC,
787 F.3d 638 (2d Cir. 2015) ......................................................................................................... 7
6 Realtek Semiconductor Corp. v. LSI, Corp.
946 F. Supp. 2d 998 (N.D. Cal. 2013) .......................................................................................... 10
7
Schiavo ex rel. Schindler v. Schiavo,
8 403 F.3d 1223 (11th Cir. 2005).................................................................................................. 11
Theme Promotions, Inc. v. News Am. Mktg. FSI,
9 546 F.3d 991 (9th Cir. 2008)...................................................................................................... 13
10 United States v. BNS Inc., 848 F.2d 945 (9th Cir.),
supplemented, 858 F.2d 456 (9th Cir. 1988)............................................................................ 7, 9
11 United States v. E.I. du Pont de Nemours & Co.,
366 U.S. at 316 (1961) ........................................................................................................... 6, 10
12
United States v. Western Pa. Sand and Gravel Association,
13 114 F.Supp. 158 (W.D. Pa. 1953) ................................................................................................ 8
Winter v. Nat. Res. Def. Council, Inc.,
14 555 U.S. 7 (2008) ....................................................................................................................... 11
15

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TABLE OF AUTHORITIES
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1 As the ITC proceedings between Qualcomm and Apple draw to a close, the prospect of an
2 exclusion or cease and desist order threatens this Court’s flexibility to afford Plaintiffs
3 meaningful relief.1 Plaintiffs and Class Counsel—on behalf of a putative class of indirect
4 purchasers—need to safeguard against marketplace changes sought by Qualcomm that could
5 perpetuate and further entrench the anticompetitive conduct raised before this Court. If an
6 exclusion or cease and desist order were issued, in the short term, this would result in great
7 financial harm to the consumers whom Plaintiffs represent who want to purchase cellular devices.
8 In the long term, an exclusion order would perpetuate Qualcomm’s continued position as a
9 monopoly power in the premium LTE and emerging 5G markets for baseband processors, and
10 thereby stagnate innovation, drive up costs, and reduce the welfare of the Plaintiffs and class
11 members.
12 Testimony in the first of the ITC proceedings has recently concluded, and there is now a
13 very real threat that the ITC will issue an exclusion or cease and desist order at the expense of
14 Plaintiffs, who will suffer direct economic harm as a result. To preserve this Court’s flexibility to
15 fully remedy the harm Plaintiffs have already suffered and to prevent continued harm in the
16 future, Plaintiffs request the Court invoke the All Writs Act to prevent Qualcomm from enforcing
17 an exclusion or cease and desist order, should one issue. Such action is needed to protect this
18 Court’s exclusive jurisdiction over Plaintiffs’ Sherman Act claims until this case is resolved.
19 I. Plaintiffs Have Not Delayed
20 At the time Plaintiffs filed their initial public interest statement in conjunction with the
21 ITC proceeding, they were aware of the potential for the ITC proceeding to impact the Court’s
22 flexibility to fashion effective relief for Qualcomm’s antitrust violations. However, the ITC trial
23 was nearly a year away and there were numerous ways that the ITC proceeding could have ended
24 (e.g., based on a motion to dismiss or settlement by the parties). Plaintiffs continued to monitor
25
1
An initial ruling is expected in September with a final judgment in early 2019, which is why this
26 issue is ripe for review. Declaration of Kalpana Srinivasan (“Srinivasan Decl.”), Ex. 1; Chuck
Stanley, “Apple Pushes Monopoly Concerns in ITC Fight,” Law 360, June 19, 2018, available at:
27 https://www.law360.com/articles/1055440/apple-pushes-monopoly-concerns-in-qualcomm-itc-
fight.
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1 the proceedings to determine whether a finding of infringement was imminent before bringing the
2 issue to the Court’s attention. The issue is now appropriately before the Court; the ITC staff
3 attorneys have indicated that a finding of infringement as to one of the patents is likely and Judge
4 Pender has stated that “[i]t’s very likely there will be a violation found.” Srinivasan Decl., Ex. 2,
5 Susan Decker, “Apple, Qualcomm Hearing Hinges on 5G and National Security,” BLOOMBERG,
6 available at: https://www.bloomberg.com/news/articles/2018-06-15/apple-qualcomm-trade-
7 hearing-hinges-on-5g-and-national-security (June 15, 2018).
8 The ITC proceeding—as well as the development of discovery and expert analyses in this
9 case—have highlighted numerous issues regarding the public interest considerations that are also
10 directly related to this Court’s jurisdiction, including the imminent and irreparable harm to
11 competition in 4G and 5G that will harm the Class (and consumers) in the form of increased
12 prices and decreased innovation. The ITC staff lawyers have acknowledged Plaintiffs’ concerns.
13 Staff lawyer Lisa Murray commented: “If Intel is taken out of the 5G race, this would slow the
14 pace of U.S. innovation.” Id. She recommended exempting future iPhones from a potential
15 import ban so that “Apple and Intel would have continued incentive to invest in 5G.” Id. While
16 the ITC is cognizant of these issues, it is unclear whether the ITC will find those public interest
17 issues sufficient to preserve the status quo. Id. (“Whether or not the public interest will be
18 sufficient to outweigh that, I can’t predict that. I don’t see a result here being perfect for
19 anyone.”).
20 The ITC’s evaluation of public interest factors, of course, differs from this Court’s
21 exclusive jurisdiction over Plaintiffs’ Sherman Act claims. If the ITC were to find entry of an
22 exclusion or cease and desist order appropriate notwithstanding public interest considerations, the
23 impact of such an order would irreparably harm the competitive landscape for the baseband
24 processor market and would hinder this Court’s flexibility to effectuate relief under the Sherman
25 Act. Plaintiffs’ decision to respect the Court’s and the parties’ resources by waiting to seek an
26 injunction until (1) the ITC proceeding actually reached a stage in which it was likely the
27 Administrative Law Judge would make a determination; and (2) there was an indication that the
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1 determination could be to issue an exclusion or cease and desist order, was appropriate. And
2 given that Plaintiffs seek only to place the enforcement of such an order on hold, there is no
3 substantive difference to Qualcomm whether Plaintiffs moved now or 11 months ago.
4 Moreover, Qualcomm’s arguments in its Opposition contradict each other. On the one
5 hand, Qualcomm argues that Plaintiffs waited too long to try to halt the ITC proceedings. On the
6 other hand, Qualcomm asserts that Plaintiffs have run afoul of the Noerr-Pennington doctrine by
7 attempting to halt Qualcomm from seeking redress from the government. In fact, Plaintiffs
8 perfectly timed this Motion; Plaintiffs have given Qualcomm the opportunity to present its ITC
9 arguments consistent with Noerr-Pennington, but then have immediately sought this limited relief
10 upon the conclusion of that ITC hearing.
11 II. Qualcomm’s Anticompetitive Conduct Has Harmed Plaintiffs And An Exclusion
12 Order Would Magnify That Harm
13 Qualcomm’s arguments that Plaintiffs do not have standing because they have failed to
14 demonstrate how they would be harmed by an exclusion or cease and desist order is belied by the
15 twelve pages of evidence and argument provided in Plaintiffs’ opening brief detailing how
16 Qualcomm’s anticompetitive conduct has harmed Plaintiffs (e.g., increased prices, decreased
17 innovation) and how such an order would further entrench Qualcomm’s monopoly and thereby
18 continue (and indeed exacerbate) those harms. To establish standing for prospective injunctive
19 relief, Plaintiffs must demonstrate that are “threatened with a ‘concrete and particularized’ legal
20 harm ... coupled with ‘a sufficient likelihood that [they] will again be wronged in a similar way.’
21 ” Bates v. United Parcel Serv., Inc. 511 F.3d 974, 985 (9th Cir. 2007) (quoting City of Los
22 Angeles v. Lyons, 461 U.S. 95, 111 (1983)). Plaintiffs unquestionably meet this standard.
23 The fact that Apple and Intel are also impacted by Qualcomm’s antitrust violations is no
24 matter – Plaintiffs are representing their own interests and that of a putative class. See In re TFT-
25 LCD (Flat Panel) Antitrust Litig., 586 F. Supp. 2d. 1109, 1120-24 (2008) (rejecting defendants’
26 argument that indirect purchasers were not injured because there were a “variety of
27

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1 manufacturing, distribution, and retail sales channels separat[ing] the indirect plaintiffs’ alleged
2 injury from the allegedly restrained markets”).
3 Qualcomm’s claim that Plaintiffs are merely “standing in the shoes” of Intel and Apple
4 ignores the direct economic impact of an exclusion order on Plaintiffs. See Blue Shield of Va. v.
5 McCready, 457 U.S. 465, 482 (1982) (“an increase in price resulting from a dampening of
6 competitive market forces is assuredly one type of injury for which [the Clayton Act] potentially
7 offers redress”)); In re Cathode Ray Tube (CRT) Antitrust Litig. (“CRT”), 738 F. Supp. 2d 1011,
8 1023 (N.D. Cal. 2010) (indirect purchasers’ purchases “at inflated prices due to Defendants’
9 unlawful conduct . . . is the type of injury the antitrust laws were intended to address”). For
10 example, the American Consumer Institute for Citizen Research estimates that consumers would
11 face $9.9 billion in harm, or would pay an extra $47 per unit sold if Qualcomm secured an
12 exclusion order. Srinivasan Decl., Ex. 3, “ITC Decision Could Be Costly For Consumers,”
13 American Consumer Institute for Citizen Research, available at:
14 http://www.theamericanconsumer.org/wp-content/uploads/2017/11/Costly-for-Consumers.pdf.
15 According to the CCIA, 29.3 million Apple smartphones would be banned under the exclusion
16 order, which would create a sizeable shortage in the market. Id. It would take manufacturers at
17 least six months to make up this shortage, and even then, they would only be able to do so by
18 manufacturing phones that contain Qualcomm chips. Id.
19 And while consumers would feel an immediate impact of the cellular phone shortage, the
20 long-term ramifications on them would be even more severe. If the ITC were to grant Qualcomm
21 the relief it seeks—exclusion of Intel-based chipsets—then Qualcomm would effectively be the
22 only supplier of premium LTE chipsets in the United States. That de facto monopoly will create
23 the same harms and anticompetitive conditions that existed in the past. Even Qualcomm
24 witnesses in the ITC were forced to acknowledge the harms to Plaintiffs and other consumers:
25 Q. In fact, you agree that having Intel as a competitor in that market is good for
competition; correct? A. I do agree. Q. Having Intel as a competitor in that
26 premium chipset market is good for quality of chipsets; correct? A. Generally
competition is good, yeah. Q. And competition from Intel in particular is good;
27 correct? A. Yes. Q. It’s good for pricing; correct? A. Yes. Q. It’s good for
28 innovation; correct? A. Yes. Q. Good for innovation as we move into 5G; right?

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1 A. Yes. Q. Which is an absolutely critical market for the country as a whole;


correct? A. Certainly for Qualcomm, yeah. We believe it is, yeah. Q. And it’s good
2 to have Qualcomm in that market; right? A. Yeah, that’s right. Q. And it’s good to
3 have Intel there too? A. Yes. Q. It’s good for the public? A. I agree. Q. Good for
the public interest? A. I agree.
4
Srinivasan Decl., Ex. 4, Tr. [Thompson] at 1605:1-1606:3 (emphases added); see also Srinivasan
5
Decl., Ex. 5, Tr. [Sidak] at 516:13-517:24 (“Q. . . . Two companies competing in this premium
6
baseband chipset market in the U.S. is better than one monopolist for the public interest; correct?
7
A. Well, as a general proposition, yes.”).2 Significantly for purposes of this motion, if Intel is
8
forced to exit the market, there will be no way to establish a competitive market potentially for
9
years to come. For example, Qualcomm’s Dr. Thompson agreed that it takes “an enormous
10
amount of research, development and hard work” to develop a premium baseband chipset; a
11
process which is “expensive” and can take “three or four years.” Srinivasan Decl., Ex. 4, Tr.
12
[Thompson] at 1539:25-1541:4.
13
Qualcomm knows this is not just speculative harm. In addition to the unchallenged
14
evidence and testimony cited in Plaintiffs’ opening brief, during the ITC proceeding, Steven
15
Bowers, Intel’s Assistant Director of Intel Product Assurance and Security, testified that Intel was
16
highly likely to exit the market for premium baseband chipsets—both LTE and 5G—if
17
Qualcomm’s proposed exclusion order issues. As Mr. Bowers explained: “if in any given year,
18
Apple chooses not to use Intel for its iPhone products,” Intel will “exit the market.” Srinivasan
19
Decl., Ex. 10, Tr. [Bowers] at 1157:11-1158:21.
20

21

22

23

24

25
2
While Plaintiffs’ experts have prepared detailed analysis identifying the substantial economic
26 harm to Plaintiffs of Qualcomm’s monopoly power, Qualcomm’s own witnesses
acknowledgment that Intel’s exit from the market will have an effect on these interests justifies
27 delaying the implementation of an exclusion order that will create those very harms until after this
Court has decided the issue and determined a remedy.
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4 The end impact here is on consumers – who are left with lower quality, higher price
5 devices but the ongoing anticompetitive conduct. Dr. Scott Morton, Apple’s expert in the field
6 of economics and competition, including entry and exits into markets, testified about the harm
7 consumers would face if an exclusion order were issued. Srinivasan Decl., Ex. 6, Tr. [Morton] at
8 1282:3-10 (“Q. Now, you say that consumers will be harmed by the proposed exclusion order
9 here because they would sacrifice new features and upgraded performance that comes with the
10 latest release of the iPhone; is that correct? A. That’s one reason, yes. Q. And in your public
11 interest analysis, that constitutes harm; correct? A. Yes.”). Id. at 1285:25-1286:3 (“Q. Now you
12 said, I believe, that an increase in OEM's costs would be passed on to consumers in the form of
13 higher price -- higher device prices; correct? A. That’s right.”).
14 Further, an exclusion or cease and desist order that effectively leaves Qualcomm as the
15 only competitor in the premium LTE baseband chipset market threatens to hamper the relief
16 Plaintiffs seek in this action: an end to Qualcomm’s monopolistic practices and greater
17 competition among chip manufacturers. Subjecting Intel-based Apple products to an exclusion
18 order would force Apple back into an exclusive relationship with Qualcomm—the very
19 circumstances that have led to multiple pending antitrust lawsuits and investigations. If the ITC
20 excludes all Apple mobile electronic devices that do not incorporate a Qualcomm brand baseband
21 processor modem, the effect will be to further entrench Qualcomm’s monopoly and recreate
22 Qualcomm’s exclusive relationship with Apple.
23 Enforcement of an exclusion or cease and desist order will frustrate the court’s flexibility
24 to provide an antitrust remedy, which includes providing “measures effective to restore
25 competition.” United States v. E.I. du Pont de Nemours & Co., 366 U.S. 316, 326 (1961). See
26 also, Doc. No. 507-6 (Intel ITC Publ. Int. St.) at 4 (Intel will be “fence[d] . . . out”); Doc. No.
27 507-10 (CCIA ITC Publ. Int. St.) at 5. The high barriers to entry, including the time it takes to
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1 redesign a product to use a different baseband processor, could require years for Intel or a new
2 competitor to reenter, even if the Court curtails Qualcomm’s illegal anticompetitive conduct.
3 Plaintiffs have an interest in having the opportunity for the Court to address its claims and
4 provide proper relief in a timely manner. Boardman v. Pac. Seafood Grp., 822 F.3d 1011, 1024
5 (9th Cir. 2016) (“The ‘purpose of a preliminary injunction is to preserve the status quo ante litem
6 pending a determination of the action on the merits.’”) (citations omitted); see also, Hazardous
7 Waste Treatment Council v. S.C., 945 F.2d 781, 788 (4th Cir. 1991) (“‘The rationale behind a
8 grant of a preliminary injunction has been explained as preserving the status quo so that a court
9 can render a meaningful decision after a trial on the merits’” (citations omitted)).
10 In addition to these specific harms, courts have also found that excluding a competitor
11 from the market constitutes irreparable harm. See, e.g., United States v. BNS Inc., 848 F.2d 945,
12 947 (9th Cir.), supplemented, 858 F.2d 456 (9th Cir. 1988) (“The court found that its jurisdiction
13 under the APPA would be hindered and irreparable harm to competition in the aggregate market
14 threatened if the transaction was completed before it reviewed the consent decree.”); In re
15 BRCA1-, BRCA2-Based Hereditary Cancer Test Patent Litig., 3 F. Supp. 3d 1213, 1250 (D.
16 Utah), aff'd and remanded sub nom. In re BRCA1- & BRCA2-Based Hereditary Cancer Test
17 Patent Litig., 774 F.3d 755 (Fed. Cir. 2014) (“Simply put, in a BRCA testing market where
18 Myriad had been the lone seller, the introduction of new competitors offering alternative testing
19 will force Myriad to choose between lowering its price or losing customers.”); New York ex rel.
20 Schneiderman v. Actavis PLC, 787 F.3d 638, 651 (2d Cir. 2015) (“The district court did not abuse
21 its discretion in granting a prealiminary injunction because New York has demonstrated a
22 substantial likelihood of success on the merits of its monopolization and attempted
23 monopolization claims under § 2 of the Sherman Act, see Beal, 184 F.3d at 123, and has made a
24 strong showing that Defendants' conduct would cause irreparable harm to competition in the
25 memantine-drug market and to consumers, Doe, 666 F.2d at 773.”). That analysis applies here in
26 evaluating harm to consumers, where Intel is effectively the only competitor in the U.S. premium
27 LTE baseband chipset market.
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1 III. The Court Has Jurisdiction Under The All Writs Act To Grant Relief
2 The Court has the ability to exercise its jurisdiction under the All Writs Act in this case
3 because the entry of an exclusion order in the ITC proceeding would directly impact Plaintiffs’
4 Sherman Act claims, over which this Court retains exclusive jurisdiction. Counsel for Qualcomm
5 agreed in the ITC proceeding that the matter did not involve adjudication of antitrust issues. See,
6 e.g., Srinivasan Decl., Ex. 11, Tr. at 81:10-12 (“We're not asking your Honor to adjudicate the
7 antitrust issues. We agree with you, that's for someone else to adjudicate.”).
8 The cases cited by Qualcomm in its Opposition are inapposite because they deal with
9 factually distinguishable circumstances where a district court has overlapping jurisdiction with
10 the ITC. There is simply no case that Plaintiffs are aware of in which a monopolist, such as
11 Qualcomm, attempted to circumvent an ongoing antitrust litigation by seeking an injunction in
12 the ITC of the only products of its only emerging competitor in a market with massive barriers to
13 entry.
14 For example, in Ashlow, the court analyzed whether it should order the ITC to withdraw
15 its order requiring a bond before entry of allegedly infringing goods where the district court had
16 determined the patent to be invalid. Ashlow Ltd. v. Morgan Const. Co., 672 F.2d 371 (4th Cir.
17 1982). The validity of the patent in question was an issue in both cases. Id. The Fourth Circuit’s
18 reasoning focused on the conflicting jurisdiction of the district court and the ITC. Id. at 374.3
19 Here, by contrast, the Court has exclusive jurisdiction over Plaintiffs’ Sherman Act
20 claims. Other courts have recognized the propriety of invoking the All Writs Act to preserve the
21 court’s jurisdiction in such circumstances. See, e.g., In re Uranium Antitrust Litig., 617 F.2d
22 1248, 1259 (7th Cir. 1980) (“The Act has been relied on for the entry of injunctive relief when
23 necessary to preserve the jurisdiction of the district court over a Sherman Act claim.”)4; United
24
3
In re Convertible Rowing Exerciser Patent Litig. 616 F. Supp. 1134, 1137 (D. Del. 1985) and
25
Kaisha v. Bombardier, Inc., 2001 WL 1388911, at *2 (C.D. Cal. Mar. 9, 2001) similarly involved
26 parallel patent proceedings and so provide little guidance for the Court.
4
Qualcomm’s effort to distinguish Uranium is unavailing. While Qualcomm claims the Court
27 “expressly” noted that the All Writs Act has no role to play absent “a final decree of the Court,”
the cited passage was distinguishing De Beers Mines Ltd. v. United States, 325 U.S. 212, 65 S.Ct.
28
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1 States v. Western Pa. Sand and Gravel Association, 114 F.Supp. 158 (W.D. Pa. 1953) (holding
2 that All Writs Act authorized the entry of a preliminary injunction to preserve the Court’s
3 jurisdiction over Sherman Act claims). Similarly, other courts have enjoined conduct potentially
4 harmful to consumers based on the authority conferred by the All Writs Act. See, e.g., In re
5 Volkswagen "Clean Diesel" Mktg., Sales Practices, & Prod. Liab. Litig., No. MDL 2672 CRB
6 (JSC), 2017 WL 2212783, at *27 (N.D. Cal. May 17, 2017) (enjoining Class Members who had
7 not opted out from participating in any state court litigation relating to the Released Claims). And
8 other courts have relied on the All Writs Act when granting injunctive relief to prevent
9 anticompetitive conduct because of the irreparable harm that would otherwise result. See, e.g.,
10 BNS, 848 F.2d at 947 (“We conclude that the district court had authority to issue a preliminary
11 injunction to preserve its APPA jurisdiction under the All Writs Act, 28 U.S.C. § 1651 (1982).
12 Control by BNS of Koppers’ aggregate operation and related facilities in Irwindale during the
13 pendency of the court’s proceedings could conceivably result in irreparable anticompetitive
14 harm.”).5
15 Qualcomm fails to appreciate the significance of the Court’s exclusive jurisdiction over
16 Plaintiffs’ antitrust claims. Here, there is no concern of duplicative proceedings, with courts
17 reaching different conclusions as to validity or infringement. Rather, the concern is the potential
18 for an ITC exclusion order to limit this Court’s flexibility in effectuating relief. If Qualcomm’s
19 monopoly is further entrenched before this action is resolved on the merits, certain forms of relief
20 Plaintiffs are seeking, i.e., enjoining Qualcomm’s exclusivity agreements, will be less effective in
21 mitigating the harmful effects of Qualcomm’s monopoly power. For that reason, unlike the
22

23
(… cont’d)
24 1130, 89 L.Ed. 1566 (1945) from Uranium on the grounds that the Supreme Court suggested an
injunction would have been proper in De Beers if the court had entered judgment against the
25
defendants. Here, like in Uranium, an injunction is appropriate to protect the Court’s jurisdiction.
5
26 Bennett v. Medtronic, Inc., 285 F.3d 801, 805 (9th Cir. 2002) is inapposite because Plaintiffs are
not asking the Court to enjoin the ITC proceeding. Plaintiffs’ requested relief is narrow and
27 would only involve enjoining enforcement of an exclusion order – should one issue – until this
case is adjudicated on the merits.
28
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1 patent cases cited by Qualcomm, this is precisely the type of case for which the All Writs Act is
2 an appropriate vehicle to protect the Court’s jurisdiction.
3 Qualcomm’s analysis of Realtek Semiconductor Corp. v. LSI Corp., 946 F. Supp. 2d 998
4 (N.D. Cal. 2013) similarly misses the mark. Qualcomm attempts to draw a distinction between a
5 case involving standard essential patents and one involving non-standard essential patents. But
6 whether the ITC proceeding involves standard essential patents or non-standard essential patents,
7 Qualcomm’s intent is anticompetitive. Indeed, injunctive relief is even more appropriate in this
8 case than in Realtek because Qualcomm is not merely trying to impose supra-FRAND royalties.
9 In addition to forcing competitors to pay supra-FRAND royalties, Qualcomm is seeking an
10 anticompetitive ban on Intel chipsets, with the goal of furthering Qualcomm’s monopoly power
11 as the only viable premium LTE baseband processor chip supplier in the U.S. market. The
12 significant harm that such an exclusion order would have on the baseband processor market
13 justifies injunctive relief in this case. See also, Microsoft Corp. v. Motorola, Inc., 871 F. Supp.
14 2d 1089, 1100-1101, 1104 (W.D. Wash. 2012), aff’d, 696 F.3d 872 (9th Cir. 2012) (barring
15 Motorola from “enforcing any injunctive relief it may receive in [a foreign] Action” until it could
16 “determine whether injunctive relief is an appropriate remedy . . . .”); Huawei Tech., Co. Ltd. v.
17 Samsung Elec. Co., Ltd., Case No. 3:16-cv-02787-WHO, Dkt. 280 (N.D. Cal. Apr. 13, 2018)
18 (following Microsoft and enjoining Huawei from enforcing injunction orders issued by the
19 Shenzhen Court).
20 IV. Plaintiffs Need Not Satisfy The Requirements Of Rule 65
21 Qualcomm’s citation to an FLSA case, In re Jimmy Johns Overtime Litigation, for the
22 proposition that Plaintiffs must satisfy the requirements of Rule 65 in order to obtain injunctive
23 relief is incorrect.6 Plaintiffs urge the Court to invoke the All Writs Act to protect its jurisdiction,
24

25 6
In Jimmy Johns, a franchisor sought to enjoin opt-in plaintiffs from pursuing their lawsuits
against franchisee employers until their claims against a franchisor were resolved. 877 F.3d 756
26 (7th Cir. 2017). The district court failed to identify the All Writs Act as the basis for its authority,
and the Seventh Circuit detailed how an injunction would not be proper under the All Writs Act
27 because the opt-in plaintiffs lawsuits’ would not impact the court’s ability to reach and resolve the
merits of the franchisor lawsuit.
28
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1 including the ability to adequately and effectively restore competition in the market. E.I. du Pont,
2 366 U.S. at 326.
3 Importantly, courts have noted a key distinction between injunctions under Rule 65 and
4 injunctions issued under the All Writs Act:
5 While the issuance of the injunction here did not comply with the requirements
that Fed. R. Civ. P. 65 prescribes for the issuance of preliminary injunctions, this
6 is not a fatal defect. Injunctions issued under the authority of the All-Writs Act
stem from very different concerns than those motivating preliminary injunctions
7 governed by Fed. R. Civ. P. 65. Preliminary injunctions under Rule 65 are
designed to preserve the status quo between the parties before the court pending
8 a decision on the merits of the case at hand. In contrast, injunctions such as that
issued here are needed to prevent third parties from thwarting the court’s ability
9 to reach and resolve the merits of the federal suit before it.
10 In re Baldwin-United Corp. (Single Premium Deferred Annuities Ins. Litig.), 770 F.2d 328, 338-
11 39 (2d Cir. 1985) (enjoining states from bringing actions that would impact rights of class
12 members in securities class action); Federated Conservationists of Westchester Cty., Inc. v. City
13 of Yonkers, 117 F. Supp. 2d 371, 384 (S.D.N.Y. 2000), aff'd, 26 F. App'x 84 (2d Cir. 2002)
14 (“Injunctions made pursuant to the All Writs Act do not have to satisfy the traditional
15 requirements of Fed.R.Civ.P. 65(d). . . Instead, all that is necessary is that the injunction be
16 ‘necessary or appropriate’ to prevent the frustration of a court’s previous remedial order.”).
17 Thus, there is no need to address the preliminary injunction factors set forth in Winter v. Nat. Res.
18 Def. Council, Inc., 555 U.S. 7, 20 (2008).
19 Like Jimmy Johns, Schiavo ex rel. Schindler v. Schiavo, 403 F.3d 1223, 1229 (11th Cir.
20 2005) and Balsley v. San Jose Dev. Corp., 1995 WL 108207, at *3 (N.D. Cal. Mar. 3, 1995) are
21 similarly distinguishable. In Schiavo, the court merely stated that it was improper to rely on the
22 All Writs Act where other remedies at law were available. And in Balsley, while the court
23 analyzed the Rule 65 factors, it did not hold that a litigant was required to satisfy the Rule 65
24 factors when seeking relief under the All Writs Act. In any event, as detailed in Section II, above,
25 Plaintiffs have demonstrated how failure to enjoin Qualcomm’s enforcement of an exclusion
26 order would lead to irreparable harm.
27 V. Qualcomm’s Effort to Exclude Only Intel-Based Chipsets Is Anticompetitive
28
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1 Qualcomm claims that seeking to block the sale of only Intel-based chipsets is not
2 anticompetitive. But consumers will suffer. Intel is the only real competitor for Qualcomm in the
3 U.S. Qualcomm’s experts acknowledged that the Intel-based iPhone “is the only top-tier phone
4 that currently uses a competing company’s chip.” Srinivasan Decl., Ex. 8, Chuck Stanley, “Apple
5 Pushes Monopoly Concerns in ITC Fight,” Law 360, June 19, 2018, available at:
6 https://www.law360.com/articles/1055440/apple-pushes-monopoly-concerns-in-qualcomm-itc-
7 fight; see also Srinivasan Decl., Ex. 4, Tr. [Thompson] at 1550:17-19 (agreeing that the “two
8 premium chipset providers based right here in the U.S. are Qualcomm and Intel.”.).
9 Qualcomm conflates Plaintiffs’ market power allegations, which relate to the worldwide
10 premium LTE market, with Qualcomm’s competitors in the U.S. By cutting Intel out of the
11 market, Qualcomm would be the only remaining third-party chipset supplier. Qualcomm’s
12 Opposition identifies Plaintiffs’ reference to Samsung’s Exynos chips in their interrogatory
13 responses, but Samsung’s self-supply primarily impacts international products and has a limited
14 impact on the U.S. market.7 Qualcomm’s own experts acknowledge that “every top-echelon
15 smartphone that could potentially serve as a consumer substitute for iPhones blocked from the
16 U.S. uses Qualcomm’s modem chip, with the exception of some Samsung phones that use chips
17 built in-house.” Id. In fact, when limiting Qualcomm’s analysis to competitive alternatives in
18 the U.S. market, Qualcomm’s expert acknowledged that there were only two baseband suppliers,
19 Qualcomm and Intel. See Srinivasan Decl., Ex. 5, Tr. [Sidak] at 515:22-516:5 (“Q. So with
20 respect to the set of accused products and the competitive alternatives identified by Qualcomm,
21 there’s two baseband suppliers; right? A. Yes. A. Intel only supplies to the accused products;
22 correct? A. Correct. Q. Qualcomm supplies to all the rest; right? A. Yes.”).
23

24

25 7
The Samsung exception is particularly narrow in the U.S. For example, only the AT&T
Samsung Galaxy S6 devices contain an Exynos System-on-a-Chip. The Verizon and Sprint
26 Samsung devices contain Qualcomm chips. Mike Freedman, “Samsung Ditching Qualcomm
Modem in Galaxy S6?” Srinivasan Decl., Ex. 9, SAN DIEGO UNION TRIBUNE, available at:
27 http://www.sandiegouniontribune.com/business/technology/sdut-Samsung-Qualcomm-Galaxy-
smartphone-Intel-2015apr06-story.html (April 6, 2015).
28
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1 Qualcomm also contends


2 that its conduct is not anticompetitive because its allegations in the ITC proceeding pertain only
3 to non-standard essential patents. But Qualcomm’s ITC proceedings merely reflect artful
4 pleading to achieve the end result of excluding competitors and reinforcing its monopoly power
5 with regard to premium LTE modem chips.8 Indeed, Qualcomm’s patent infringement
6 allegations pertain to all iPhones, but the exclusion order it seeks would apply only to those
7 phones that contain an Intel-based chipset. As detailed in Plaintiffs’ Motion, Qualcomm’s
8 decision to exclude only those phones that contain a competitor chipset is designed to further
9 Qualcomm’s monopoly power. Though Qualcomm characterizes Intel’s exit from the market as
10 hypothetical, the evidence suggests otherwise. See Mot. at 17. And Qualcomm’s
11 characterization of enforcing its patent rights as “pro-competitive” is belied by the fact that
12 Qualcomm only seeks to enforce its patent rights for a subset of Apple devices.
13 VI. The Noerr-Pennington Doctrine Does Not Apply
14 The Noerr-Pennington Doctrine does not apply because Plaintiffs are not trying to prevent
15 Qualcomm from participating in an ITC proceeding; to the contrary, Plaintiffs waited to file this
16 motion until the ITC testimony had concluded. Plaintiffs’ requested relief seeks only to preserve
17 the status quo and prevent Qualcomm from enforcing an exclusion order prior to this Court
18 reaching a determination in this action. The cases Qualcomm cites for its claim that the Noerr-
19 Pennington Doctrine somehow protects it are inapposite. They merely reflect the rule that
20 litigants are protected when threatening litigation. Theme Promotions, Inc. v. News Am. Mktg.
21 FSI, 546 F.3d 991, 1006 (9th Cir. 2008) involved the dismissal of a claim for intentional
22
8
Qualcomm has also maintained its monopoly in part by refusing to license competitors like Intel
23 to its SEPs, despite its FRAND obligation to do so, in an attempt to avoid patent exhaustion.
Srinivasan Decl., Ex. 4, Tr. [Thompson] at 1556:1-10 (“Q Qualcomm does not grant patent
24 licenses to chipset competitors like Intel; correct? A It's done at the device level, so no -- not the
chipset level. So there's no chipset company that has to pay anything. Q And the answer is you
25 don't give licenses to Intel; correct? A That's correct. Unless they did a device, a phone or
something like that.”); Srinivasan Decl., Ex. 6, Tr. [Mulhern] 1465:19-1466:1 (“Q And one of the
26 requirements when you have a standards essential patent is that you agree to license it on fair,
reasonable and nondiscriminatory terms; correct? A That's right. Q And yet Qualcomm has not
27 licensed a single chip manufacturer under those standards essential patents; correct? A I'm not
aware of any such licenses.”).
28
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1 interference. Cal. Motor Transp. Co. v. Trucking Unlimited, 404 U.S. 508, 510 (1972) stands for
2 the unremarkable proposition that the right to petition extends to “all departments of the
3 government” but neither discusses ITC proceedings nor the All Writs Act. Finally, Cheminor
4 Drugs, Ltd. v. Ethyl Corp., 168 F.3d 119, 127 (3d Cir. 1999) held that litigants were protected
5 from antitrust liability based on their petitioning the government for redress. While the Noerr-
6 Pennington doctrine preserves Qualcomm’s right to petition, it does not impact the right to secure
7 relief. Plaintiffs are not questioning whether Qualcomm has First Amendment rights to bring a
8 proceeding before the ITC. The issue is whether the relief requested by Qualcomm will interfere
9 with this Court’s flexibility to fashion an appropriate remedy for the anticompetitive harm
10 suffered by consumers.
11 VII. Conclusion
12 For the foregoing reasons, Plaintiffs respectfully request the Court to issue an injunction
13 to prevent Qualcomm from seeking to enforce any ITC exclusion order until this action is
14 resolved.
15 July 19, 2018 By: /s/ Kalpana Srinivasan
Kalpana Srinivasan
16 Marc M. Seltzer
Steven G. Sklaver
17 Amanda K. Bonn
Oleg Elkhunovich
18 Krysta Kauble Pachman
SUSMAN GODFREY L.L.P.
19 1900 Avenue of the Stars, Suite 1400
Los Angeles, CA 90067
20 Telephone: (310) 789-3100
Facsimile: (310) 789-3150
21 Email: ksrinivasan@susmangodfrey.com
Email: mseltzer@susmangodfrey.com
22 Email: ssklaver@susmangodfrey.com
Email: abonn@susmangodfrey.com
23 Email: oelkhunovich@susmangodfrey.com
Email: kpachman@susmangodfrey.com
24
Joseph Grinstein
25 SUSMAN GODFREY L.L.P.
1000 Louisiana Street, Suite 5100
26 Houston, TX 77002
Telephone: (713) 651-9366
27 Facsimile: (713) 654-6666
Email: jgrinstein@susmangodfrey.com
28
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1
By: /s/ Joseph W. Cotchett
2 Joseph W. Cotchett
Adam J. Zapala
3 Brian Danitz
Mark F. Ram
4 Michael A. Montaño
COTCHETT, PITRE & MCCARTHY
5 840 Malcolm Road, Suite 200
Burlingame, CA 94010
6 Telephone: (650) 697-6000
Facsimile: (650) 697-0577
7 Email: jcotchett@cpmlegal.com
Email: azapala@cpmlegal.com
8 Email: bdanitz@cpmlegal.com
Email: mram@cpmlegal.com
9 Email: mmontano@cpmlegal.com
10 Plaintiffs’ Co-Lead Counsel
11 By: /s/ Steve W. Berman
HAGENS BERMAN SOBOL SHAPIRO LLP
12 1918 Eighth Avenue, Suite 3300
Seattle, WA 98101
13 Telephone: (206)268-9320
Facsimile: (206)623-0594
14 Email: steve@hbsslaw.com
15 Jeffrey D. Friedman
Rio S. Pierce
16 HAGENS BERMAN SOBOL SHAPIRO LLP
715 Heart Avenue, Suite 202
17 Oakland, CA 94618-1245
Telephone: (510)725-3000
18 Facsimile: (510)725-3001
Email: jeff@hbsslaw.com
19 Email: riop@@hbsslaw.com
20 Plaintiffs’ Steering Committee
21

22

23

24

25

26

27

28
5921789v1/015494 15 Case No. 5:17-md-02773-LHK
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Case 5:17-md-02773-LHK Document 620-1 Filed 07/19/18 Page 1 of 3

1 Kalpana Srinivasan (237460)


SUSMAN GODFREY L.L.P.
2 1900 Avenue of the Stars, Suite 1400
Los Angeles, CA 90067-6029
3 Telephone: (310) 789-3100
Facsimile: (310) 789-3150
4 Email: ksrinivasan@susmangodfrey.com
5 Joseph W. Cotchett (36324)
COTCHETT, PITRE & McCARTHY, LLP
6 840 Malcolm Road, Suite 200
Burlingame, CA 94010
7 Telephone: (650) 697-6000
Facsimile: (650) 697-0577
8 Email: jcotchett@cpmlegal.com
9 Plaintiffs’ Interim Co-Lead Counsel
10

11 UNITED STATES DISTRICT COURT

12 NORTHERN DISTRICT OF CALIFORNIA

13 SAN JOSE DIVISION

14

15 IN RE: QUALCOMM ANTITRUST Case No. 5:17-md-02773-LHK


LITIGATION
16 The Honorable Lucy H. Koh

17
KALPANA SRINIVASAN’S
18 DECLARATION IN SUPPORT OF
PLAINTIFFS’ REPLY TO DEFENDANT
19 QUALCOMM’S OPPOSITION TO
MOTION FOR PRELIMINARY
20 INJUNCTION

21
CLASS ACTION
22
Date: Thursday, August 30, 2018
23 Time: 1:30 p.m.
Place: Courtroom 8
24
First Amended Consolidated
25 Class Action Complaint filed June 13, 2018

26

27

28

5922302v1/102884 Case No. 5:17-md-02773-LHK


KALPANA SRINIVASAN’S DECLARATION IN SUPPORT OF PLAINTIFFS’ REPLY TO DEFENDANT
QUALCOMM’S OPPOSITION TO MOTION FOR PRELIMINARY INJUNCTION
Case 5:17-md-02773-LHK Document 620-1 Filed 07/19/18 Page 2 of 3

1 I, Kalpana Srinivasan, do hereby declare and state as follows:


2 1. I am an active member in good standing with the State Bar of California. I
3 maintain my office at 1900 Avenue of the Stars, Suite 1400, Los Angeles, California 90067. I am
4 a Partner of Susman Godfrey L.L.P., and one of the attorneys of record in this matter for
5 Plaintiffs. I have personal knowledge of the matters set forth in this declaration, and if called
6 upon as a witness I could and would testify competently.
7 2. I respectfully submit this declaration in Support of Plaintiffs’ Reply to Defendant
8 Qualcomm’s Opposition to Motion for Preliminary Injunction.
9 3. Attached as Ex. 1 is a true and correct copy of an article by Chuck Stanley titled
10 “Apple Pushes Monopoly Concerns In Qualcomm ITC Fight,” from Law 360, dated June 19,
11 2018.
12 4. Attached as Ex. 2 is a true and correct copy of an article by Susan Decker titled
13 “Apple, Qualcomm Hearing Hinges on 5G and National Security,” from Bloomberg, dated June
14 15, 2018.
15 5. Attached as Ex. 3 is a true and correct copy of an article by The American
16 Consumer Institute Center for Citizen Research titled “ITC Decision Could Be Costly for
17 Consumers.”
18 6. Attached as Ex. 4 is a true and correct copy of a transcript from the open session of
19 the Hearing before the United States International Trade Commission In the Matter of: Certain
20 Mobile Electronic Devices And Radio Frequency And Processing Components Thereof, Inv. No.
21 337-TA-1065, dated June 26, 2018.
22 7. Attached as Ex. 5 is a true and correct copy of a transcript from the open session
23 of the Hearing before the United States International Trade Commission In the Matter of: Certain
24 Mobile Electronic Devices and Radio Frequency And Processing Components Thereof, Inv. No.
25 337-TA-1065, dated June 19, 2018.
26 8. Attached as Ex. 6 is a true and correct copy of a transcript from the open session of
27 the Hearing before the United States International Trade Commission In the Matter of: Certain
28

1 Case No. 5:17-md-02773-LHK


KALPANA SRINIVASAN’S DECLARATION IN SUPPORT OF PLAINTIFFS’ REPLY TO DEFENDANT
QUALCOMM’S OPPOSITION TO MOTION FOR PRELIMINARY INJUNCTION
Case 5:17-md-02773-LHK Document 620-1 Filed 07/19/18 Page 3 of 3

1 Mobile Electronic Devices and Radio Frequency And Processing Components Thereof, Inv. No.
2 337-TA-1065, dated June 25, 2018.
3 9. Attached as Ex. 7 is a true and correct copy of the excerpts from the Deposition of
4 Kevin Constantine, Volume I, dated February 15, 2018. This document was designated as
5 containing Intel Confidential Business Information Subject to the Protective Order, Inv. No. 337-
6 TA-1065.
7 10. Attached as Ex. 8 is a true and correct copy of an article by Chuck Stanley titled
8 “Apple Pushes Monopoly Concerns In Qualcomm ITC Fight,” from Law 360, dated June 19,
9 2018.
10 11. Attached as Ex. 9 is a true and correct copy of an article by Mike Freeman titled
11 “Samsung ditching Qualcomm modem in Galaxy S6?” from The San Diego Tribune, dated April
12 6, 2015.
13 12. Attached as Ex. 10 is a true and correct copy of a transcript from the open session
14 of the Hearing before the United States International Trade Commission In the Matter of: Certain
15 Mobile Electronic Devices and Radio Frequency And Processing Components Thereof, Inv. No.
16 337-TA-1065, dated June 22, 2018.
17 13. Attached as Ex. 11 is a true and correct copy of a transcript from the open session
18 of the Hearing before the United States International Trade Commission In the Matter of: Certain
19 Mobile Electronic Devices and Radio Frequency And Processing Components Thereof, Inv. No.
20 337-TA-1065, dated June 15, 2018.
21 I declare under penalty of perjury under the laws of the United States of America that the
22 foregoing is true and correct.
23 Executed this 19th day of July, 2018, in Los Angeles, California.
24 /s/ Kalpana Srinivasan_________________
Kalpana Srinivasan
25

26

27

28

2 Case No. 5:17-md-02773-LHK


KALPANA SRINIVASAN’S DECLARATION IN SUPPORT OF PLAINTIFFS’ REPLY TO DEFENDANT
QUALCOMM’S OPPOSITION TO MOTION FOR PRELIMINARY INJUNCTION
Case 5:17-md-02773-LHK Document 620-2 Filed 07/19/18 Page 1 of 3

Exhibit 1
Apple Pushes Monopoly Concerns In Qualcomm ITC Fight - Law360 https://www.law360.com/articles/1055440/print?section=competition
Case 5:17-md-02773-LHK Document 620-2 Filed 07/19/18 Page 2 of 3

Portfolio Media. Inc. | 111 West 19th Street, 5th floor | New York, NY 10011 | www.law360.com
Phone: +1 646 783 7100 | Fax: +1 646 783 7161 | customerservice@law360.com

By Chuck Stanley

Law360 (June 19, 2018, 9:31 PM EDT) -- Apple attorneys questioned an expert witness for
Qualcomm on the potential competition effects of the chipmaker’s bid to ban Intel-equipped
iPhones from the U.S. during a hearing Tuesday at the International Trade Commission, pressing
a claim that a ban on imports of the phone could hand Qualcomm monopoly power and push Intel
out of 5G development.

Apple Inc., in an effort to fight off patent infringement claims related to Intel Corp.-made chips
used in some iPhones, has argued that banning phones with the Intel chips would leave
Qualcomm Inc. with an effective monopoly on the market for modem chips used in premium
smartphones.

Apple has further suggested Intel would likely drop its efforts to develop next-generation wireless
technology known as 5G if its chips were effectively locked out of the U.S. market, diminishing the
influence of U.S. companies on standards for the new technology, an issue that has been flagged
by U.S. policymakers as a national security concern.

The expert witness, Gregory Sidak of consulting firm Criterion Economics, said he thought it was
unlikely Intel would abandon the entire 5G space over a setback to its business making chips for
handsets.

“I don’t think it’s credible,” said Sidak, Criterion's founding chairman. “[Intel] would be passing up
too great an opportunity aside from the smartphone business.”

Apple has said that a decision pushing Intel out of the 5G development game would undercut U.S.
investment in the emerging technology and cede leadership in the vital space to China.

Sidak also hit back at Apple’s claim that a ban on imports of Intel’s chips would allow Qualcomm
to raise prices for the chips and the costs would be passed on to consumers.

Sidak said Apple’s buying power would offset any putative monopoly power handed to Qualcomm,
and that a jump in prices for the chips would drive the tech giant to seek other sources for
advanced chips, incentivize makers of lower-performance chips to develop top-tier modem chips
and increase consumer demand for phones that use less-expensive modem chip designs.

According to an economic analysis Sidak performed for Qualcomm, every top-echelon smartphone
that could potentially serve as a consumer substitute for iPhones blocked from the U.S. uses
Qualcomm's modem chip, with the exception of some Samsung phones that use chips built in-
house.

The Intel-equipped iPhone, Sidak said, is the only top-tier phone that currently uses a competing
company's chip.

Sidak, in response to questioning from Apple attorneys, conceded that it is “generally true” that

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competition between two companies is better than a monopoly for consumer pricing, quality and,
in this case, national security issues.

However, he said that respect for Qualcomm’s intellectual property rights in the instant case
weighs against the general preference for competition.

“You’re trading the competitive benefits on one hand, and the protection of the company holding
the infringed patent on the other,” he said.

The ITC can issue a decision effectively banning the import of goods that violate U.S. patents, but
it has to find that such a decision is in the public interest.

The case is part of a larger dispute between the two companies over roughly 70 patents, playing
out in multiple jurisdictions around the world, including two patent infringement suits in
California federal court.

The instant case, which turns on three patents that cover chip design features that improve
energy efficiency, is the first to get a hearing at the ITC. An ITC administrative law judge is
scheduled to hear another case on a second group of patents in September.

Qualcomm launched the suit after Apple stopped reimbursing contracting manufacturers of
iPhones for royalty payments made by the individual companies to Qualcomm under individual
licensing agreements that allow them to produce the chips.

At Apple’s direction, Qualcomm claims, the contracting manufacturers stopped making the royalty
payments for iPhones, stripping Qualcomm of a major revenue source, even as they continued to
make the payments for phones they made for other device makers using the same Qualcomm
technology.

Apple’s vice president of procurement, Tony Blevins, said at the hearing that Qualcomm’s request
for a licensing agreement with Apple was one reason the company went with another chipmaker
when it produced the first version of the iPhone.

Blevins disputed Qualcomm’s claim that Apple directed manufacturers to withhold royalty
payments.

Rather, he said, Apple made “three very specific statements” to the contracting manufacturers.

Apple, according to Blevins, told the manufacturers it would only reimburse them for tech
royalties they were “required” to pay; that the contracting manufacturers were not required to
pay any royalties to Qualcomm for the modem chips; and that the contracting manufacturers
should do “whatever they want” with regard to the royalty payments.

Arguments in the case are expected to go through June 26, with an initial ruling expected in
September and a final determination in early 2019.

Qualcomm is represented by Quinn Emanuel Urquhart & Sullivan LLP.

Apple is represented by Fish & Richardson PC.

The case is In the Matter of Certain Mobile Electronic Devices and Radio Frequency and Processing
Components Thereof, case number 337-TA-1065, in the U.S. International Trade Commission.

--Additional reporting by Dave Simpson. Editing by Aaron Pelc.

All Content © 2003-2018, Portfolio Media, Inc.

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ITC Decision Could Be Costly for Consumers


Consumers are at risk of paying higher prices for smartphones because of a
potential shortage that could hit the market, if the International Trade
Commission (ITC) decides to block the importation of some popular devices.
This ConsumerGram will explore how an importation ban of certain Apple
smartphones will affect competition, increase market concentration and lead to
higher retail prices. We estimate consumer welfare would decrease by $9.9
billion, if the ITC imposes an importation ban.

A Patent Dispute and the ITC


Qualcomm claims that certain features and functions used in Apple’s smartphones with
Intel chips infringe on several of its non-essential patents, an allegation that Apple denies. With
over 250,000 active patents relating to smartphones and tablets, the value of any one patent to
the final product can be small, so disputes can arise. 1 For that reason, patent disputes are
often resolved by the parties getting together and settling them, usually by negotiating terms
and price.

When the parties can’t agree on a price or if disputes arise as to whether there is
infringement, the issue can be settled in court. However, parties generally think of court as a

1
Daniel O’Connor, “One in Six Active Patents Pertain to Smartphone,” Project Disco, October 17, 2012 at
http://www.project-disco.org/intellectual-property/one-in-six-active-u-s-patents-pertain-to-the-
smartphone/#.VmWjjzZdE2w.
Case 5:17-md-02773-LHK Document 620-4 Filed 07/19/18 Page 3 of 10
2

last resort for resolving a patent dispute, because litigation is both an expensive and inefficient
means of determining prices.

Sometimes, a party can file a complaint for patent infringement with the International
Trade Commission (ITC). The ITC is the same federal commission that investigates foreign
companies for dumping subsidized products in the U.S. Parties resort to the ITC far less
frequently than to district courts because it offers only a single remedy: it can only exclude
foreign goods from entering the United States or being sold in the United States. Even more
significant is that this is a “one size fits all” remedy: no matter how valuable or trivial a patent is
to a product, the ITC will bar the entire product from the U.S. market, if it finds infringement.

Qualcomm’s decision to seek relief before the ITC is particularly unusual here for two
reasons. First, it has selectively asserted patents that are not central to the iPhone’s innovation
or demand, yet it seeks to exclude them entirely from the U.S. market based on these patents.
Second, Qualcomm has only targeted certain Apple iPhones – those that contain Intel (rather
than Qualcomm) Chipsets, despite the fact that Qualcomm’s infringement assertions appear to
apply equally to iPhones that contain Qualcomm chipsets. 2 Therefore, if the ITC finds a patent
violation, it could impose an exclusion order that would effectively block the importation of a
significant number of Apple iPhones, unless the ITC finds that such an exclusion order is not in
the public interest. 3

Qualcomm’s choice to file this dispute in the ITC provides no leeway between two polar
outcomes. On the one hand, if the ITC finds that Apple has not infringed on any Qualcomm
patent, it would dismiss the complaint. Alternatively, if the ITC finds an infringement, it could
immediately block the offending devices from importation. The latter option would lead to
adverse consequences that would affect the immediate availability of smartphones, as well as
what consumers pay for them, and have a dramatic impact on consumer welfare.

2
Ted Greenwald and Tripp Mickle, “Qualcomm Steps Up Fight Against Apple,” Wall Street Journal, July 6, 2017.
3
Under Section 337 of the Tariff Act of 1930, as stated at http://usitc.gov/intellectual_property.htm.
Case 5:17-md-02773-LHK Document 620-4 Filed 07/19/18 Page 4 of 10
3

Background: Qualcomm’s Pattern of Anticompetitive Behavior


Qualcomm’s potentially anticompetitive behavior has sparked allegations and
condemnations from antitrust and competitive regulators around the world. One of the many
components in smartphones and other cellular devices is a baseband processor chipset that
enables these devices to connect to a standardized wireless telecommunications network.
While Qualcomm has amassed a near monopoly in the baseband processor chipset market, the
cellular patents essential to the technology standard are required to be licensed under fair,
reasonable and nondiscriminatory terms (FRAND). However antitrust regulators and
electronics manufacturers argue that Qualcomm has attempted to protect and abuse its
monopoly by shutting out its competitors and overcharging smartphone and tablet
manufacturers through sky-high royalty rates, violating their obligations under FRAND.

The challenges against Qualcomm are numerous. Early this year, the U.S. Federal Trade
Commission filed a complaint with the U.S. District Court in the Northern District of California,
citing, among other issues, Qualcomm’s refusal to license its competitors (“no license – no
chips”), excessive royalties demands, and exclusivity deals that give rebates to manufacturers
who refuse to buy chipsets from competitors.4 Late last year, Korean’s antitrust regulator, the
South Korean Fair Trade Commission (KFTC), fined Qualcomm $865 million for licensing
abuses.5 Before this, the Chinese antitrust regulator fined Qualcomm $975 million and
required them to lower their royalty fees. 6 Just last month, the Taiwan Fair Trade Commission
levied a $774 million fine on Qualcomm for antitrust violations. 7 In addition, competition
authorities in Japan and Europe also appear to be taking a closer look at Qualcomm’s business
practices. 8

4
Steven Titch, “FTC vs. Qualcomm: No License, No Chips,” Computerworld, June 12, 2017; and Aaron Tilly,
“Qualcomm Strong-Armed Apple into Buying Its Chips, US Gov Says,” Forbes, January 17, 2017.
5
Corinne Reichert, “Qualcomm fined $865m by South Korean Antitrust Regulator, ZDNet, December 28, 2016.
6
Don Clark, “Qualcomm to Pay $975 Million Antitrust Fine to China,” Wall Street Journal, February 10, 2015.
7
“Taiwan Fines Qualcomm $774 for Antitrust Violations,” Reuters, October 11, 2017, at
https://www.reuters.com/article/us-qualcomm-taiwan-fine/taiwan-fines-qualcomm-774-million-for-antitrust-
violations-idUSKBN1CG1RF.
8
Mike Freeman, “Qualcomm Asks Judge to Toss FTC’s Antitrust Lawsuit,” San Diego Union Tribune, April 4, 2017;
“Qualcomm Faces Investigation by Taiwan’s Fair Trade Commission,” Reuters, December 8, 2015; and Tom Fairless
and Don Clark, “EU Launches Antitrust Investigations into Qualcomm, Wall Street Journal, July 16, 2015.
Case 5:17-md-02773-LHK Document 620-4 Filed 07/19/18 Page 5 of 10
4

Electronics manufactures are also taking aim at Qualcomm’s questionable business


practices. Samsung, Intel, the Computer & Communications Industry Association (CCIA), and
the App Association have all filed statements before the ITC arguing that Qualcomm
overcharges its customers. 9 And, in January, Apple filed a $1 billion lawsuit against Qualcomm,
claiming that it engages in anticompetitive tactics, refuses to pay rebates, and overcharges for
use of its patents.10

Considering what appears to be a pattern of mounting evidence of anticompetitive


practices, Qualcomm’s ITC complaint of patent infringement may simply be a distractive ploy to
further its market power or a retaliatory reaction against a series of allegations, lawsuits and
regulatory investigations into its irregular licensing practices. Indeed, some analysts recognized
that Apple was likely moving away from Qualcomm’s baseband processor chipsets and
therefore targeting only those devices that use its competitor’s devices is a not-so-subtle
attempt by Qualcomm to force Apple back to using its products. 11

Blocking Smartphone Imports Will Create a Significant Shortage


Qualcomm’s ITC complaint seeks to block imports of certain Apple devices – iPhone 7s
with Intel Chips – and sales of those devices already in the country. Not surprisingly, Qualcomm
only singles out blocking those devices that use its competitor’s baseband chipsets.

9
For various public interest statements, see: “In the Matter of Certain Mobile Electronic Devices and Radio
Frequency and Processing Components Thereof,” Intel, Docket No. 3235, filed with the United States International
Trade Commission, July 20, 2017; “In the Matter of Certain Mobile Electronic Devices and Radio Frequency and
Processing Components Thereof,” Computer & Communications Industry Association, Docket No. 3235, filed with
the United States International Trade Commission, July 12, 2017; and “In the Matter of Certain Mobile Electronic
Devices and Radio Frequency and Processing Components Thereof,” App Association, Docket No. 3235, filed with
the United States International Trade Commission, July 20, 2017.
10
“Apple Says Qualcomm Overcharged For Chips and It’s Suing for $1 Billion,” Reuters, January 22, 2017.
11
For example, market analysts estimate that Apple is likely to shift over 70% of its baseband chip orders to other
suppliers by 2018. See Mitchel Broussard, “Intel Gaining Larger Foothold in iPhone LTE Chip Supply Chain as Apple
Distances Itself from Qualcomm,” MacRumors, June 1, 2017.
Case 5:17-md-02773-LHK Document 620-4 Filed 07/19/18 Page 6 of 10
5

One criteria the ITC regulators will consider in determining whether to block Apple
products from the U.S. market is whether such an action would have adverse effects on
consumers. In its complaint, Qualcomm claims that blocking Apple devices would have no
consumer impact. However, any time supply is reduced, prices go up. Even if substitutes
eventually come onboard, these devices will have Qualcomm chips. In this way, the ban would
preserve Qualcomm’s monopoly and raise consumer prices. In addition, blocking smartphones
products would reduce consumer choice.

Smartphone Shortage and Market Breakdown Will Lead to Higher Prices


Along with Android-based smartphones, like Samsung, Apple is a leading national seller
of smartphones, accounting for approximately 40% of the U.S. market share. 12 This means that
a sizable importation ban will result in a significant national shortage of devices. We estimate
that Apple sold approximately 90.4 million smartphones in the U.S. during the last four
quarters. 13 Of these imports, 81% or 73.4 million represent the newest model smartphones
entering the U.S. 14 Based on CCIA’s estimate that 30% to 50% premanufactured smartphones
with Qualcomm chips would be affected by an importation ban, we estimate the total market
reduction of these newer models to be approximately 40% – or 29.3 million Apple smartphones
that would be banned. 15

If Qualcomm succeeds in obtaining an exclusion order, neither Qualcomm, Apple, nor


third-parties can snap their fingers and seamlessly replace the sudden removal of smartphones

12
See Philip Elmer-DeWitt, “About Apple’s 40% Share of the U.S. Smartphone Market, Fortune, February 11, 2016
at http://fortune.com/2016/02/11/apple-iphone-ios-share/.
13
Apple’s U.S. revenue was 42% of its worldwide revenue from the 4th quarter of 2016 to the 3rd quarter of 2017.
During the same period, it sold 215.6 million smartphones worldwide or, by extrapolation, approximately 93.7
million in the U.S. See Apple Inc., various quarterly financial reports at https://www.apple.com/newsroom/. Based
on this quantity and the 40% share, the total number of units sold in the U.S. can be estimated.
14
This represents a rough sales estimate of new models, based on iPhone 7 and iPhone 7 Plus sale during the
three-month period ending July 1st. See, Don Reisinger, “Apple’s iPhone 7 is Way More Popular than Older
Models,” Fortune, July 25, 2017.
15
“In the Matter of Certain Mobile Electronic Devices and Radio Frequency and Processing Components Thereof,”
Computer & Communications Industry Association, Statement of Third Party, July 12, 2017, citing Mitchel
Broussard, “Intel Gaining Larger Foothold in iPhone LTE Chip Supply Chain as Apple Distances Itself from
Qualcomm, July 1, 2017, at https://www.macrumors.com/2017/06/01/intel-iphone-lte-apple-qualcomm/.
Case 5:17-md-02773-LHK Document 620-4 Filed 07/19/18 Page 7 of 10
6

containing Intel chips from the market. Therefore, an importation ban of Apple products would
create a sizable shortage in the market. Considering the long lead times necessary to design,
produce and ship smartphone to the market, it will likely take six months or longer for
manufacturers to utilize what excess capacity may be available in sufficient scale to makeup the
shortage. Concurring, CCIA predicts:

In the event an exclusion order were to issue, 30-50% of the pre-manufactured


stock would be unavailable, resulting in supply shortages as Apple attempted to
manufacture enough Qualcomm-based devices to meet demand. Third parties
are also manufacturing-constrained and may not be able to ramp up the
necessary production in a commercially reasonable time. 16

A secondary but perhaps even more significant and longer-term effect of a selective
exclusion order is the elimination of Qualcomm’s only competitor in the premium LTE baseband
market. If Apple can no longer purchase premium LTE baseband processors from Intel, that
would almost certainly cause Intel leave the market altogether. 17

With no other actual or potential competitors capable of challenging Qualcomm’s


premium LTE baseband chipset monopoly in the foreseeable future, its monopoly power will
likely remain in place for years. With the only remaining competition forced out of the market,
Apple and other smartphone equipment manufacturers will have no choice but to again
purchase premium LTE baseband processors exclusively from Qualcomm, which will force them
to again acquiesce to whatever alleged anticompetitive contractual terms Qualcomm imposes,
thus deepening their monopoly position. 18 The looming threat of Qualcomm selectively
asserting its patents to prevent emerging competitors from gaining a foothold in the market

16
CCIA Public Interest Statement, p. 3, at http://www.ccianet.org/wp-content/uploads/2017/07/2017-07-20-
Public-Interest-Comments-of-CCIA-in-Qualcomm-v.-Apple-ITC.pdf.
17
Intel’s public interest statement, p. 4.
18
CCIA’s public interest statement notes that all other competitors were forced out of the market by Qualcomm, p.
4.
Case 5:17-md-02773-LHK Document 620-4 Filed 07/19/18 Page 8 of 10
7

signals to all smartphone manufacturers to avoid market disruption or else face the
consequences.

Viewed together, a potential ITC exclusion order pushing Intel out of the premium LTE
market and the resulting shortage of smartphones would affect the price of Apple devices and
all other competitive devices. This means that consumers would pay more for scarcer Apple
products or pay more for substitutes, some with less features, or not buy smartphones at all.

Welfare Losses from an Importation Ban


Removing mobile devices from the market reduces consumer choice and has been
shown to reduce consumer welfare. 19 Similarly, the decrease in consumer welfare from an
exclusion order can be estimated based on the resulting increase in prices and repression in
quantity demanded – both determinants of the price elasticity of demand for smartphones. For
illustration, we assume a price elasticity of demand for smartphones to be -1.12.20 Weighting
iOS and android phone prices, the average price of higher-end smartphones is approximately
$405.21

The consumer welfare change resulting from the importation ban is depicted below in
Figure 1. As noted earlier, the decrease from the initial quantity (Q1 to Q2) will result in 29.3
million fewer Apple smartphones. With the initial price (P1) of $405, the shortage will result in
a $47 average price increase per unit sold. As a result of lower quantities and higher prices,
total consumer welfare would decrease by approximately $9.9 billion, or an area equal to the
trapezoid BCED (labeled consumer surplus decrease). While this assumes a shortage lasting one
year, the sheer size of the welfare losses demonstrates that even a shortage lasting just a few

19
Ying Fan and Chenyu Yang, “Competition, Product Proliferation and Welfare: A Study of the U.S. Smartphone
Market,” May 27, 2017, abstract available at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2506423.
20
This estimate comes from Thomas W. Hazlett and Roberto E. Munoz, “A Welfare Analysis of Spectrum Allocation
Policies,” The Rand Journal of Economics, Vol. 40:1, Autumn 2009, pp. 424-454.
21
Apple devices average $691, while Android devices, such as Samsung and Pixel, average $215. Given Apple’s
share of 40%, and the weighted average of a device is $405. See Philip Elmer-DeWitt, “The Apple iOS and Android
Price Gap Just Gets Wider,” Fortune, February 15, 2016, http://fortune.com/2016/02/15/apple-android-asps/.
Case 5:17-md-02773-LHK Document 620-4 Filed 07/19/18 Page 9 of 10
8

months would produce significant harm to consumers. Moreover, while this figure depicts
losses from disruption in the smartphone market, the ramifications of an exclusion order will
produce additional losses not estimated here, because of indirect and induced benefits enabled
by smartphones by way of various online and video services, applications, software and public
safety.

Figure 1: As Price Increases,


Consumer Benefits Decrease

A Consumer Surplus
Price
Decrease
B C (shaded Area)
P2
P1 E
D
Demand

Q2 Q1
Quantity

Conclusion
The ITC’s remedies differ dramatically from a federal district court. While other courts
can potentially tailor any remedy to fit the violation, the ITC cannot. If the ITC finds Apple has
infringed on any of Qualcomm’s patents, no matter how negligible, it has only one choice to
make – block the importation into the U.S. of Apple smartphones with Intel chips. Such an
action will indisputably create a significant and adverse impact on consumer welfare by
strengthening Qualcomm’s monopoly as the exclusive supplier of premium chipsets, which is
contrary to the public interest.

Based on this analysis, an ITC exclusion order blocking the importation of certain Apple
iPhones would translate into fewer choices and higher prices for consumers. Anyone
concerned with consumer welfare should hope such an outcome is avoided.
Case 5:17-md-02773-LHK Document 620-4 Filed 07/19/18 Page 10 of 10
9
Case 5:17-md-02773-LHK Document 620-5 Filed 07/19/18 Page 1 of 119

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Case 5:17-md-02773-LHK Document 620-5 Filed 07/19/18 Page 3 of 119
1509

1 UNITED STATES OF AMERICA

2 BEFORE THE

3 INTERNATIONAL TRADE COMMISSION

5 - - - - - - - - - - - - - - - - - X

6 IN THE MATTER OF: : Investigation Number

7 CERTAIN MOBILE ELECTRONIC DEVICES : 337-TA-1065

8 AND RADIO FREQUENCY AND PROCESS :

9 COMPONENTS THEREOF :

10 - - - - - - - - - - - - - - - - - X

11

12 HEARING

13

14 Tuesday, June 26, 2018

15 Courtroom B

16 U.S. International Trade

17 Commission

18 500 E Street, SW

19 Washington, DC

20

21

22 The Hearing commenced, pursuant to notice of the

23 Judge, at 8:45 a.m., before the Honorable Thomas B. Pender,

24 Administrative Law Judge for the United States

25 International Trade Commission.

Ace-Federal Reporters, Inc.

202-347-3700
Case 5:17-md-02773-LHK Document 620-5 Filed 07/19/18 Page 4 of 119
1510

1 APPEARANCES:

3 DAVID A. NELSON, ESQ.

4 NATHAN HAMSTRA, ESQ.

5 Quinn, Emanuel, Urquhart & Sullivan LLP

6 500 West Madison Street, Suite 2450

7 Chicago, Illinois 60661

8 312.705.7400

9 On Behalf of Complainant Qualcomm, Incorporated

10

11 SEAN PAK, ESQ.

12 Quinn, Emanuel, Urquhart & Sullivan LLP

13 50 California Street, 22nd Floor

14 San Francisco, California 94111

15 415.875.6600

16 On Behalf of Complainant Qualcomm, Incorporated

17

18 RICHARD W. ERWINE, ESQ.

19 KEVIN JANG, ESQ.

20 Quinn, Emanuel, Urquhart & Sullivan LLP

21 51 Madison Avenue, 22nd Floor

22 New York, New York 10010

23 212.849.7000

24 On Behalf of Complainant Qualcomm, Incorporated

25 - continued -

Ace-Federal Reporters, Inc.

202-347-3700
Case 5:17-md-02773-LHK Document 620-5 Filed 07/19/18 Page 5 of 119
1511

1 APPEARANCES (CONTINUED):

3 PATRICK T. SCHMIDT, ESQ.

4 Quinn, Emanuel, Urquhart & Sullivan LLP

5 865 South Figueroa Street, 10th Floor

6 Los Angeles, California 90017

7 213.443.3000

8 On Behalf of Complainant Qualcomm, Incorporated

10 S. ALEX LASHER, ESQ.

11 Quinn, Emanuel, Urquhart & Sullivan LLP

12 1300 I Street, NW, Suite 900

13 Washington, DC 20005

14 202.538-8000

15 On Behalf of Complainant Qualcomm, Incorporated

16

17 BRETT N. WATKINS, ESQ.

18 Quinn, Emanuel, Urquhart & Sullivan LLP

19 711 Louisiana Street, Suite 500

20 Houston, Texas 77002

21 713.221.7000

22 On Behalf of Complainant Qualcomm, Incorporated

23

24

25 - continued -

Ace-Federal Reporters, Inc.

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1512

1 APPEARANCES (CONTINUED):

3 JAMES T. BAILEY, ESQ.

4 Law Office of James T. Bailey

5 504 West 136th Street, #1B

6 New York, New York 10031-7976

7 917.626.1356

8 On Behalf of Complainant Qualcomm, Incorporated

10 DAVID R. MARRIOTT, ESQ.

11 ANDREI HARASYMIAK, ESQ.

12 Cravath, Swaine & Moore LLP

13 Worldwide Plaza, 825 Eighth Avenue

14 New York, New York 10019-7475

15 212.474.1430

16 On Behalf of Complainant Qualcomm, Incorporated

17

18 TOM M. SCHAUMBERG, ESQ.

19 DEANNA TANNER OKUN, ESQ.

20 Adduci, Mastriani & Schaumberg LLP

21 1133 Connecticut Avenue, NW

22 Washington, DC 20036

23 202.467.6300

24 On Behalf of Complainant Qualcomm, Incorporated

25 - continued -

Ace-Federal Reporters, Inc.

202-347-3700
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1513

1 APPEARANCES (CONTINUED):

2 WILLIAM F. LEE, ESQ.

3 JOSEPH J. MUELLER, ESQ.

4 LOUIS W. TOMPROS, ESQ.

5 DOMINIC E. MASSA, ESQ.

6 RICHARD W. O'NEILL, ESQ.

7 Wilmer, Cutler, Pickering, Hale and Dorr LLP

8 60 State Street

9 Boston, Massachusetts 02109

10 617.526.6556

11 On Behalf of Respondent Apple Inc.

12

13 NINA S. TALLON, ESQ.

14 Wilmer, Cutler, Pickering, Hale and Dorr LLP

15 1875 Pennsylvania Avenue, NW

16 Washington, DC 20006

17 202.663.6365

18 On Behalf of Respondent Apple Inc.

19

20 JAMES M. DOWD, ESQ.

21 Wilmer, Cutler, Pickering, Hale and Dorr LLP

22 350 South Grand Avenue, Suite 2100

23 Los Angeles, California 90071

24 213.443.5309

25 On Behalf of Respondent Apple Inc. - continued -

Ace-Federal Reporters, Inc.

202-347-3700
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1514

1 APPEARANCES (CONTINUED):

3 RUFFIN B. CORDELL, ESQ.

4 Fish & Richardson P.C.

5 1000 Maine Avenue, SW

6 Washington, DC 20024

7 202.783.5070

8 On Behalf of Respondent Apple Inc.

10 LISA M. MURRAY, ESQ.

11 CLAIRE COMFORT, ESQ.

12 ANNE GOALWIN, ESQ.

13 Office of Unfair Trade Investigations

14 United States International Trade Commission

15 500 E Street, SW

16 Washington, DC 20436

17 202.205.2158

18 On Behalf of Commission Investigative Staff

19

20

21

22

23

24

25

Ace-Federal Reporters, Inc.

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1515

1 P R O C E E D I N G S

2 JUDGE PENDER: First thing I want to talk about

3 are the briefs. My math gets me 375 pages of briefing by

4 each side. Not going to happen. Not even close. 100

5 pages for the first brief, 75 pages for the next brief and

6 30 pages for the next brief.

7 And remember, the way it goes is Complainants

8 have only responsibility for infringement and public

9 interest on the first brief, Respondents only have

10 responsibility for validity and public interest on the

11 first brief. And you rebut.

12 Then what you have the burden of proof on is

13 your final brief, you know.

14 It strikes me that -- you know, and if you think

15 you're weak on something, zotz it out. Don't spend text

16 where you don't need to spend text. You know what the

17 evidence is.

18 Here's an idea. If it's presented to me after

19 the hearing, I'll approve it. And that is if you guys want

20 to put five pages or 10 pages of jointly agreed facts,

21 stipulated facts, we can do that.

22 I don't see any reason why we shouldn't do that,

23 for heaven's sakes. Facts that both of you know that are

24 true that are beyond the cavil of worth arguing about, like

25 that slide there or that large chart there, where things

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1516

1 come from, how many billions of dollars that Intel has

2 lost, things like that.

3 And it occurred to me too that as I'm briefing,

4 I would get that stuff -- I would start my argument just as

5 a thought, and you guys may have better ideas than me, just

6 say on the public interest, for instance, put a big bold

7 facts first, the facts that you want to catch attention to

8 first, both sides, you know.

9 And as for -- I'll address invalidity and

10 infringement later.

11 The Staff, you take -- you guys have always run

12 under, you make your briefs as long as you want to make

13 them, you know. But keep them to the same guidelines. I'm

14 not going to tell you what to do. You know what to do. As

15 long as you stay on the total page count, I'll be happy.

16 And if you guys can think of something, if Staff

17 can think of something to stipulate things and cut down,

18 that would be great.

19 Also, don't review what's happened in the case

20 to date. Just talk about -- we don't need that. The first

21 20 pages of the prehearing briefs, it's not necessary now.

22 Let's just, you know, get into it. First argument is

23 invalidity for them, first argument for you guys is

24 infringement, and go right to it.

25 Don't worry about it. I mean, allegedly by now,

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1 I should be an expert in patent law. Many years ago when I

2 was interviewed by one of the lawyers in this room for this

3 job, I freely admitted that my experience was as a

4 government contract litigator, you know. And, you know, I

5 knew that stuff. But I worked hard on it.

6 I can remember Wayne Harrington asking me how I

7 was going to learn this stuff, and I said long nights.

8 But the bottom line is anyone, especially

9 Ms. Chow, for instance, has a lot of experience. So the

10 general propositions, you can state it. But if you can

11 find -- I worked for a wonderful appeals court judge when I

12 was a clerk in Georgia who would say to me, find a blue

13 elevator case. In other words, if you've got a personal

14 injury arising in a blue elevator, find another case where

15 the elevator where the injury occurred was blue, you know.

16 Be as specific as you can be with the law.

17 Let's not take any chances with the logic

18 either, you know. Does it make sense? Don't have an echo

19 chamber effect with your briefs. Find somebody who is a

20 good devil's advocate in the firm or who didn't like the

21 case to begin with. There's always somebody at the firm

22 who tells you, you know, this is a stinker.

23 So find that person and get them to tell you

24 what's wrong with it or what's right with it or where they

25 would place emphasis, and think about what they say.

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1 It's a good chance to get it done. We have --

2 Ms. Chow and I have opinions about what we've heard.

3 They're not intractable, for the most part. A few of them

4 may be. But I want -- it strikes me, and I've heard some

5 what I consider to be important cases in the last several

6 years. But this one may be a little more important than

7 the average.

8 So we have an opportunity to be outstanding

9 here, all of us. And that's normal course of events for

10 most of you, you're outstanding. And I'm not using

11 hyperbole there, it's the truth.

12 So let's just make -- you know, like if you're

13 writing for the Supreme Court, you know that you can't say

14 extra words and you have those little tiny pages that you

15 can write on anyway with the real small counts.

16 I'm looking at Mr. Marriott there, and I'm

17 thinking one of the early members of Cravath was William O.

18 Douglas; correct?

19 MR. MARRIOTT: That's right, your Honor.

20 JUDGE PENDER: Yeah. And he used to say that 85

21 percent of what made it into the briefs in front of the

22 Supreme Court -- well, I won't finish the sentence, but he

23 said it was a waste of time, you know.

24 But most briefs that I see don't have to be a

25 waste of time. But if you have a really important point,

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1 don't be afraid to drive it home a little bit.

2 But you can say this is important. Don't be

3 afraid to say that. And use logic to explain why you think

4 it's important, why it's important. I think I understand

5 why most people think the arguments are important.

6 As for Staff, I want to mention, where you want

7 to go with the remedy here if there is an exclusion order

8 is uncharted territory, it's an experiment.

9 I have to be upfront with you, I'm not sold on

10 it. I don't see its efficacy. I think the switch here has

11 to be on or off. I don't believe in trying to gamble when

12 so much is at stake.

13 I think what you're trying to do is commendable,

14 but ultimately fruitless. I wish it was -- I wish I felt

15 differently about that.

16 It's funny, the only thing I really disagreed

17 with in the Staff brief prehearing was the proposed remedy.

18 Not necessarily then, but as the hearing has gone along,

19 I've become less, enthralled with it, let's say.

20 The other stuff that was in there was incredibly

21 helpful. Your claim construction briefs were incredibly

22 helpful in this case.

23 Look at the remedy. You may be able to tweak

24 it, it may be able to be useful. But the evidence I heard

25 seems to be binary, you know? And I don't know whether

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1 that's true or not. But they say trial lawyers, which all

2 of us are, are gamblers, you know? And I used to make a

3 statement, trial lawyers think they're gamblers. Real

4 gamblers are farmers, you know.

5 But I don't think you need to gamble with these

6 briefs. A lot of the stuff I've heard has been excellent,

7 it's been well presented, it's been thoughtful. I'm sorry,

8 I can never pronounce his name, Dr. Annavaram, for

9 instance. What a thoughtful man, you know?

10 There have been other thoughtful witnesses too.

11 I thought that Ms. Evans was extraordinary. In my

12 experience, if all corporate officers were like her, the

13 world would be a better place.

14 I thought the gentleman from Apple was

15 incredibly interesting. But what I would expect from

16 Apple, you know? I wish I had seen somebody from Qualcomm,

17 you know, it would have been interesting to me.

18 I thought that the -- Dr. Apsel was interesting.

19 I just saw so many fantastic witnesses this time. Probably

20 on the whole the best lineup of witnesses from both sides

21 that I've seen. Some, there's always a couple of witnesses

22 who like the old witch test, they sink, you know?

23 (Laughter.)

24 But on the whole, nobody here needs to be

25 unhappy with performance of the witnesses, what they have

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1 done or anything like that.

2 And I can think of some failures on my own part

3 over the years and the thought of there but by the grace of

4 God go I. But I just -- I'm prayerful that what we'll get

5 here is the best briefing in the history of the ITC,

6 because the case deserves it. And succinctness is merited

7 and has its own reward, because you don't lose the message

8 in there, you know?

9 And if you -- all of a sudden you decide, oh,

10 what the heck, they nailed me on the '558 patent, why

11 bother to brief it, you know, then don't, you know. Make

12 that -- take that gamble.

13 And that way maybe you can spend a little more

14 time explaining the logic behind what's strong.

15 I'm sure you've heard speeches like this before,

16 but I really, really, really believe it. As a government

17 lawyer, I always had the option of deciding what was

18 presented and what wasn't presented. I didn't have to

19 worry about the clients. These generals, you know, I had a

20 couple of them, became four stars, said they liked me

21 because I didn't take up oxygen, that I would, you know, do

22 the hard things.

23 I think there's enough of you in this room know

24 how to do the hard thing and do it well and get it done

25 right. I'm confident that the briefs this time are going

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1 to be special and that -- let's think of this as the

2 beginning of the process, because we all know there's going

3 to be requests for review no matter what I do, we all know

4 that whatever the Commission does will make it to the

5 Federal Circuit. And somebody may ask for certiorari, for

6 all I know. That's fruitless. I don't know that the

7 Supreme Court has ever taken one of our cases.

8 But anyway, thank you for listening. And we

9 have two witnesses, correct, Mr. Thompson and is it a

10 Mr. Aberle?

11 MR. MARRIOTT: We have just one, your Honor, and

12 that's Dr. Thompson.

13 JUDGE PENDER: We're not going to put on another

14 witness, just one?

15 MR. MARRIOTT: That's correct, your Honor.

16 JUDGE PENDER: Oh, goodness. I thought we were

17 going to put on Mr. Aberle. You're just going to put on

18 his testimony or what are you going to do?

19 MR. NELSON: No, your Honor, we talked about

20 this yesterday afternoon. And what I had said is that I

21 thought, for the reasons we discussed yesterday afternoon

22 regarding your Honor's statements concerning some of the

23 FRAND and antitrust issues that you didn't think were

24 relevant, I thought that I would streamline that and that's

25 what we decided.

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1 JUDGE PENDER: I don't think they're that

2 relevant. I understand everything -- you know, you guys

3 are throwing rocks at one another in one place here. The

4 public interest here is fairly narrowly focused. And what

5 it comes down to is -- what it comes down to is, when you

6 think about it -- let me find this if I can, please give me

7 a break.

8 What if I made a finding of fact more likely

9 than not that Intel will exit the premium baseband chip

10 market for phones if they cannot sell chips for Apple to

11 sell to U.S. customers, for instance?

12 I mean, I consider that a possible finding of

13 fact by me. But does that mean -- if that fact were true,

14 does that mean that it's against the public interest to do

15 an exclusionary order?

16 You see, you've got a layered argument here.

17 You can argue first of all the facts or the impact of the

18 facts, and the next thing is okay, even if those facts are

19 true, is that really against the public interest to enforce

20 a patent?

21 As I've explained numerous times, I'm literal.

22 I came into this courtroom, like I explained, thinking,

23 hmm, I don't know what's in the public interest here. I

24 can understand certainly if something terrible, terrible

25 was going to happen, stopping -- not doing an exclusionary

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1 order. But before I came into this courtroom, I didn't

2 truly understand the scope of what the terrible could be,

3 for instance.

4 So what's the next finding of fact? More likely

5 than not that a monopoly in baseband chips will exist if

6 Intel exits the broadband chip market.

7 You get enough of those kind of facts together,

8 you can argue that, you cannot argue that.

9 I thought it was interesting how that comes

10 down. But none of that has anything to do with antitrust.

11 Mr. Nelson, you nailed it, you know. I don't know how --

12 and I point out, I do reiterate, that maybe Ms. Goalwin

13 knows more about the facts than I do, for instance, in

14 1002. And that was the case where the Commission

15 ultimately wrestled with what needed to be pled for

16 antitrust at the Commission.

17 And I think they decided that you had to go

18 through the whole rigmarole, you know.

19 So absent that kind of thing, I think you're not

20 going to get anywhere. The other thing is I just don't see

21 that argument as being where the focus of the testimony I

22 heard in this courtroom was.

23 The focus of the testimony, the witness

24 statements I've read is definitely on public interest

25 factors, you know. And to the extent a public interest

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1 factor would bleed into antitrust, it hasn't been pled, in

2 my opinion.

3 Ms. Murray, you follow what I'm saying?

4 MS. MURRAY: Yes, your Honor.

5 JUDGE PENDER: Would you agree with my thought

6 there? Antitrust hasn't been pled as a public interest

7 factor, adequately anyway.

8 MS. MURRAY: Correct, your Honor, it hasn't been

9 pled as an antitrust matter, it's just been pled as

10 competitive conditions.

11 JUDGE PENDER: Right. Which I think you can't

12 have one without the other. I think you need to plead it,

13 because antitrust is not simple. That's an understatement,

14 isn't it. Yeah.

15 So I'm never surprised by how smart you guys

16 are. And I think that's a brilliant move on your part,

17 Mr. Nelson.

18 MR. NELSON: Thank you, your Honor.

19 JUDGE PENDER: Okay.

20 MR. NELSON: But so we will -- your Honor had

21 said you would like to hear from somebody from Qualcomm.

22 That's exactly what we have.

23 JUDGE PENDER: I'd love it, I'd love it.

24 MR. LEE: And, your Honor, just by way of

25 clarification, there have been some other witnesses for

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1 whom the statements have gone in without cross. Our

2 agreement on Mr. Aberle and Mr. Sidak is their statements

3 are just being withdrawn and won't go into the record at

4 all.

5 JUDGE PENDER: They won't go into the record at

6 all.

7 MR. LEE: Yes.

8 MR. NELSON: That's correct, your Honor.

9 JUDGE PENDER: Since I haven't admitted them,

10 that's sine qua non right there; right?

11 MR. LEE: I hope so.

12 JUDGE PENDER: Okay. All right, great. And

13 everybody, thanks again for listening. If we're

14 interactive with one another, maybe your clients can't be

15 interactive with one another or whatever reasons, but you

16 guys can be interactive with one another. And sometimes

17 you can inform your clients that the boat is sinking, you

18 know? That noise glug, glug, glug usually doesn't mean

19 anything else.

20 So we're ready to role are the next witness.

21 Mr. Marriott.

22 MR. MARRIOTT: Yes, your Honor, thank you.

23 Qualcomm calls Dr. James Thompson. We have already passed

24 out binders, your Honor.

25 JUDGE PENDER: Okay, great.

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1 Sir, give me a minute, I'll get right to you.

2 MR. MARRIOTT: Your Honor, would you like to

3 swear the witness?

4 Whereupon,

5 JAMES THOMPSON

6 was called as a witness and, having first been duly sworn,

7 was examined and testified as follows:

8 JUDGE PENDER: Thank you. Please be seated,

9 state your name for the court reporter.

10 THE WITNESS: My name is James Thompson.

11 DIRECT EXAMINATION

12 BY MR. MARRIOTT:

13 Q Good morning, Dr. Thompson. Would you please

14 introduce yourself to his Honor.

15 A So my name is James Thompson. I work for

16 Qualcomm. I'm the executive vice president of engineering

17 and chief technology officer.

18 Q And would you describe for us, please, your

19 educational background, Dr. Thompson.

20 A Yes. So I grew up in Wisconsin, and my dad was

21 a professor at the University of Wisconsin. So I pretty

22 much grew up on campus, actually lived in campus housing

23 when I was a little kid.

24 So when I was younger, I was very interested in

25 computers. That was kind of when computers first came out.

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1 And also semiconductor was becoming a big thing. I was

2 interested in math and physics.

3 So when I went to the university, I decided to

4 major in electrical engineering. I ended up graduating,

5 got a bachelor's and then I stayed on for a master's. I

6 loved being at the university.

7 Then I took a job in the Bay Area as an IC

8 designer, did that for a little while, but I missed being

9 in Madison. So I went back and worked on a PhD.

10 Originally my intention was to be a professor like my dad,

11 but then I decided that I wanted to go work for industry

12 and make things versus teach.

13 And so I graduated in '91 with my PhD in

14 electrical engineering and then ended up going to Qualcomm

15 from there.

16 Q What are your duties and responsibilities as

17 chief technology officer of Qualcomm?

18 MS. MURRAY: Excuse me, your Honor, two points.

19 I believe we should be on the public record and I'm not

20 sure that the witness's microphone is on.

21 JUDGE PENDER: Right. In fact, Ms. Chow

22 reminded me before we went into the hearing room that we

23 need to go on the public record. If you don't mind please,

24 Carmen.

25 He's soft-spoken.

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1 THE WITNESS: Is this better? Okay. So I have

2 got to get closer.

3 Sorry, yes?

4 BY MR. MARRIOTT:

5 Q Yes. Tell us please what your duties and

6 responsibilities are as chief technology officer of

7 Qualcomm?

8 A Okay. So think of me as head of all of

9 engineering for Qualcomm. There's about 20,000 engineers

10 at Qualcomm. That's about two-thirds of the company. The

11 company is maybe 30,000, so about 20,000 are part of my

12 group.

13 I oversee -- really you can think of the 20,000

14 as roughly a thousand that do research and maybe 19,000

15 that do products primarily in semiconductor or maybe all in

16 semiconductor.

17 So on the research side, I'll start there, we do

18 wireless research, so that would be things like mobile,

19 Wi-Fi, things like that. And then we do research in

20 artificial intelligence, and we also do research in

21 multimedia, so things like video compression, things like

22 that, image compression, audio and so forth.

23 Then we also do processors for -- we do research

24 for processors that are special in that they do some of the

25 functions that maybe a computer does, but we add extensions

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1 to make them very, very good at doing math for signal

2 processing.

3 So think of linear algebra. So we create these

4 math engines, and we have research there.

5 Then the other 19,000 people really work on

6 products, and that's products for mobile, for automotive,

7 for something we call IOT, where -- you know, things like

8 security cameras and, you know, things like that. We do

9 access points for Wi-Fi, so if we have Wi-Fi in this

10 building here, there's a reasonable chance that it came

11 from Qualcomm. So things like that.

12 Q How many engineers does Qualcomm have in the

13 United States, Doctor?

14 A It's roughly 10,000, so roughly half the

15 engineering staff is in the U.S. And we have a global

16 business, so we have engineers all over the world.

17 Q And how would you characterize the role or the

18 importance of engineers within Qualcomm's business?

19 A It's -- Qualcomm is -- our business is really

20 about technology leadership. And so, in fact, that's how

21 we can afford to have so many engineers in the U.S., is

22 because it's about intellectual property that we develop

23 and we try to lead. If we're not leading, then it's really

24 tough to pay for engineers in the U.S.

25 Q I think you said you joined Qualcomm in the

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1 early '90s. Give us a sense, if you would, of what you did

2 when you first joined the company.

3 A Okay. So after I finished my PhD, I came to

4 Qualcomm. And I originally thought I was going to be

5 working on a satellite transceiver, but they assigned me to

6 a small project called CDMA, which, you know, at the time I

7 was like, well, what is this. But it was really the

8 beginning of the transition from analog cellular to digital

9 cellular. And it was for me an amazing project to actually

10 just fall into. Great learning experience.

11 Because I look at what we did back then, so it's

12 not just making the quality better and the capacity much

13 higher, which is what made cellular cheap today, but also

14 we started mobile data. And at the time people thought we

15 were crazy, but we were very involved in the Internet at

16 the time.

17 So we actually started what is now, you know,

18 the mobile data that we have today.

19 So I view what we did as being the foundation

20 for the mobile explosion that happened and that we're

21 living through today.

22 Q And just at a very high level, what did you do

23 in the years that followed before becoming chief technology

24 officer?

25 A Okay. So immediately after the CDMA

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1 development, the company broke into really three pieces.

2 One was phones, infrastructure for cellular. And then the

3 other was Globalstar. I chose to -- Globalstar was a low

4 earth orbit satellite system based on CDMA. I chose to go

5 there because I would be on the ground floor of developing

6 a system and then deploying it, so I would see every phase

7 of the development. And so that's how I chose that

8 project.

9 Ultimately, I became the lead of that project.

10 And then when that project ended -- and actually, there was

11 a retirement within the company, one of the early people in

12 the company left the chip division, which was very small at

13 the time, I moved over and took over as head of hardware

14 and systems engineering in the chip division. And this was

15 around 2001.

16 And then shortly after that, I took over all of

17 engineering, so I oversaw software, hardware, everything.

18 And at the time we were relatively small, we

19 were in one building. And now -- so basically, I oversaw

20 the growth of the chip business going from a relatively

21 small, obscure company, or at least semiconductor business,

22 to now we're the third largest semiconductor company in the

23 world behind Intel and Samsung.

24 So I'm very proud of that actually.

25 Q Are you an inventor of any patents?

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1 A I've got 10 patents. I think 10.

2 Q And how much of your job actually involves

3 chipset development?

4 A Virtually all of my job. That's -- that's my

5 main focus.

6 Q And which phases of the process of chip

7 development are you involved in?

8 A So I've been involved in every phase. So early

9 technology development, putting together roadmaps both for

10 technologies to intersect products and then products. And

11 I'm very -- deeply involved with our suppliers.

12 So semiconductor foundries, TSMC, Samsung, are

13 our main foundries, but also Global Foundries and other

14 foundries.

15 And all the way through integrating these

16 part -- these chipsets. They're actually quite complex. A

17 chipset, like the main processor could have 5 billion

18 transistors, many, many transistors. And then there's many

19 chips that wrap around it.

20 So there's RF chips and there's Wi-Fi chips and

21 power management chips and so there's -- it's quite, quite

22 complex.

23 Q Have you been involved in chipset development

24 for Apple?

25 A Yes. I oversee all of the chipset development,

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1 and so in effect, the custom parts we do for Apple are part

2 of my -- what I oversee.

3 Q Have you prepared a witness statement in

4 connection with this investigation?

5 A Yes.

6 Q Would you look, please, at the binder which is

7 there in front of you. You should find CX-4767C behind the

8 first tab.

9 Tell us if you would, please, what that is.

10 A That's a rebuttal witness statement.

11 Q And is it your rebuttal witness statement?

12 A Yes.

13 Q And look, please, at CX-4767.21 and tell us

14 whether that's your signature.

15 A Yes.

16 Q And does your witness statement contain true and

17 accurate answers to questions put to you by counsel?

18 A Yes.

19 Q And do you adopt your witness statement as your

20 testimony in this proceeding?

21 A Yes.

22 MR. MARRIOTT: Your Honor, we would request that

23 CX-4767C and the exhibits thereto be admitted into

24 evidence.

25 MR. MUELLER: No objection, your Honor.

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1 MS. COMFORT: No objection, your Honor.

2 JUDGE PENDER: There being no objection, Exhibit

3 CX-4767C for identification along with its list of

4 accompanying exhibits listed herein are admitted to the

5 record as evidence. A copy of the list will be provided to

6 the court reporter if not already provided.

7 (Exhibit CX-4767C and accompanying exhibits

8 received.)

9 MR. MARRIOTT: Thank you, your Honor. With that

10 I will tender the witness for cross-examination.

11 JUDGE PENDER: Before you start there, so you

12 were a systems engineer. Isn't that radical putting the

13 systems engineers in charge of other folks?

14 THE WITNESS: No, actually, I think --

15 JUDGE PENDER: I think it's a good idea. That's

16 why --

17 THE WITNESS: It's the right way to do it.

18 Because we deliver a system. And actually, generally if

19 you look at Qualcomm, because we deliver a system and

20 there's a significant hardware component which is pretty

21 complex, having systems engineer with hardware backgrounds,

22 they tend to be the ones who lead the cross-functional

23 projects. Not exclusively, but that's generally how it's

24 done.

25 JUDGE PENDER: And they don't mess it up?

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1 THE WITNESS: Yeah, yeah.

2 JUDGE PENDER: Are you a corporate officer of

3 Qualcomm? I notice the title executive vice president.

4 THE WITNESS: Yes, I am -- executive vice

5 president is -- I think that's the title that makes me an

6 officer, but yes, I am an officer in the company.

7 JUDGE PENDER: And do you still get involved in

8 technical decisions?

9 THE WITNESS: Yes, very much so. I am -- okay.

10 What I should say is that we cover a range of things that

11 it's impossible for a human to understand everything. But

12 there are certain things that I go into deeply where I

13 think -- where we're doing something new or I think

14 something is in trouble.

15 So it really depends. I have to pick my

16 battles, but I try to keep up with the various technologies

17 that we pursue so I have a reasonable understanding of

18 them.

19 Because it's -- you have to make a lot of

20 trade-offs.

21 JUDGE PENDER: What do you like doing the most?

22 THE WITNESS: Actually, what I like doing the

23 most is -- okay. So what -- why I go -- I still come in to

24 work is that I'm just surrounded by super smart people.

25 And for me, it's like having a bunch of professors at my

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1 beck and call. Anything I want to know about, I can bring

2 somebody into my office and then they can teach me or

3 direct me to something, you know, some way of me -- of

4 learning about a particular topic.

5 I mean, like, for example, artificial

6 intelligence is something that's relatively new. I

7 shouldn't say it's new, but there's been an explosion of it

8 in the last few years.

9 And so maybe a couple of years ago, I started

10 teaching myself about deep neural networks, because really

11 that's -- when people talk about artificial intelligence

12 today, it's really all about deep learning or deep neural

13 networks.

14 So I spent a bunch of time understanding it.

15 Now, I wouldn't consider myself the expert on it for sure,

16 but it afforded me an opportunity to understand it and then

17 understand how it applies to our products, how it applies

18 to -- from a customer point of view, what we think our

19 customers will want.

20 And so anyway, it's fun.

21 JUDGE PENDER: Okay. Thank you.

22 Mr. Mueller, please proceed.

23 MR. MUELLER: Thank you, your Honor.

24 CROSS-EXAMINATION

25 BY MR. MUELLER:

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1 Q Good morning, Dr. Thompson. My name is Joe

2 Mueller. I'd like to ask you a few questions, if I could.

3 A Sure.

4 Q Dr. Thompson, you would agree that there's a

5 class of baseband chipsets called premium baseband

6 chipsets; right?

7 A There's a tier, a global market for what -- a

8 tier called premium, which is really defined by Apple and

9 Samsung.

10 Q And you would agree that premium baseband

11 chipsets tend to support the more recent releases of

12 cellular standards for lower tier baseband chipsets?

13 A Premium chips -- that's really where you

14 introduce all the new features.

15 Q And you've anticipated my next question, which

16 is the premium baseband chipsets are where companies like

17 Qualcomm introduce the new and advanced features; correct?

18 A Yes.

19 Q And that would include the most recent versions

20 of cellular standards; right?

21 A Yes.

22 Q And can you give us some other examples of the

23 advanced features that are first introduced premium

24 baseband chipsets.

25 A Yeah. So, for example, we do a lot of work

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1 on -- we consider ourselves a leader in imaging, for

2 example. So whenever we develop new image processing

3 techniques, it's first introduced into the -- our premium

4 products. Same thing with graphics, with video, with

5 audio.

6 We also, like from a process technology point of

7 view, we -- the latest node we enter at the premium tier.

8 So we really -- you think of the premium tier as where we

9 introduce all these new features and we take a lot of risk.

10 Q And then eventually, those new features that are

11 first introduced in the premium tier will waterfall down to

12 other tiers of chipsets. Is that fair?

13 A Yeah, that's fair.

14 Q And so, for example, what's in a premium chipset

15 today, next year, the year after it might be in a mid-tier

16 baseband chipset?

17 A Correct.

18 Q Now, someday when 5G technology is commercially

19 available, the first chipsets to offer that will be premium

20 baseband chipsets; correct?

21 A Yes.

22 Q And you would agree that the premium baseband

23 chipset tier is a very important tier of products; correct?

24 A Yes.

25 Q Now, to make a premium baseband chipset takes an

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1 enormous amount of research, development and hard work?

2 A Yes, correct.

3 Q And, in fact, I think you've described for us in

4 your deposition that it could take on the order of 50,000

5 months of engineering time and other employee time to

6 develop a premium baseband chipset. Is that fair?

7 A Yeah, our premium MSM, maybe to be more

8 specific, we estimate the development cost at around 1.8

9 billion every year.

10 Q I'm sorry, sir?

11 A That's every year we spend.

12 Q 1.8 billion annually to develop a premium

13 baseband chipset?

14 A Premium with -- not baseband. Baseband has a

15 specific connotation. I'm also including all the

16 multimedia and process technology and all those other

17 things is included in my 1.8 billion approximate.

18 Q And the process of developing a premium baseband

19 chipset can take three or four years; correct?

20 A Yes.

21 Q And so a chip that will be available for 5G, for

22 example, could take years to develop; correct?

23 A Yes. Anybody who -- 5G is going to launch next

24 year, and pretty much everybody who is doing 5G chips

25 started a number of years back and they will be launching

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1 next year.

2 Q Bottom line, sir, is there are very high

3 barriers to entry for premium baseband chipsets; correct?

4 A Yeah, it's expensive.

5 Q Now, sir -- may I approach the placard, your

6 Honor?

7 We have here a table, and this is actually one

8 of the exhibits that was admitted along with your witness

9 statement. If you need to refer to it, feel free to.

10 But I will represent to you that this table was

11 produced to us by Qualcomm during discovery, and it lists

12 certain representative products that Qualcomm has

13 represented are competitive with the products at issue in

14 this case.

15 You've seen this before; right?

16 A Yes.

17 Q And you would agree that these products use

18 premium baseband chipsets; correct?

19 A Yes.

20 Q And you'd also agree that Qualcomm supplies

21 premium baseband chipsets to each and every one of them;

22 correct?

23 A Yes.

24 Q And furthermore, Intel supplies premium baseband

25 chipsets to the Apple products at issue in this case, but

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1 not the other products; correct?

2 A That's correct.

3 Q Is that right, sir?

4 A Yes.

5 Q And today in the premium baseband chipset market

6 in the U.S., the two open market suppliers are Qualcomm and

7 Intel; correct?

8 A Open -- what do you mean, open market? I don't

9 know what that means.

10 Q Sure, let me be clear. I am trying to

11 distinguish, for example, that Samsung has self-supplied

12 some chips for the phones listed on this chart; is that

13 right?

14 A So -- yes. So if you're ask -- is your question

15 who supplies premium chips? Is that your question?

16 Q That's right. In the U.S. market, including the

17 phones that Qualcomm identified, two open market suppliers

18 are Qualcomm and Intel?

19 A So Samsung also supplies chips. If you look

20 at -- Samsung uses about 60 percent of their own and about

21 40 percent of us. And then also they actually compete with

22 us for all those sockets as well. And then also with the

23 pixel, for example, I'll give you an example. Pixel -- or

24 I should say Google has told us --

25 MR. MARRIOTT: Your Honor, I apologize, I think

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1 we may need to go on the confidential record at this point.

2 JUDGE PENDER: Okay. Just means it's business

3 information that you have to be cleared to see.

4 MR. MARRIOTT: More specifically, your Honor, I

5 believe this is Qualcomm confidential.

6 JUDGE PENDER: Okay. Just wait a second, sir.

7 THE WITNESS: Okay.

8 MR. MARRIOTT: And I'm told, your Honor, Google

9 confidential.

10 JUDGE PENDER: Okay.

11 (Confidential session follows.)

12

13

14

15

16

17

18

19

20

21

22

23

24

25

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1 OPEN SESSION CONTINUED

2 BY MR. MUELLER:

3 Q Dr. Thompson, you have just described for us the

4 importance of Qualcomm leadership in Qualcomm's view for

5 5G; correct?

6 A Yes.

7 Q And it was so important that you made arguments

8 to the government about the significance of Qualcomm's

9 research and development for 5G?

10 A Yeah, for standards specifically, yes.

11 Q For standards. When you say standards, you mean

12 cellular standards; correct?

13 A Yeah, 3GPP, 5G standards, yes.

14 Q And in your view, it's important that we have

15 that Qualcomm American leadership as we move into 5G;

16 correct?

17 A Yes.

18 Q Raises national security implications; correct?

19 A I think standards leadership is incredibly

20 important, yes.

21 Q And the answer is yes?

22 A Yes.

23 Q That -- I'm sorry, you've got to wait until I

24 finish my question.

25 A I'm sorry.

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1 Q Standards leadership, cellular standards

2 leadership, is so significant that it raises national

3 security implications; correct?

4 A Yes. Well, national security, I leave that to

5 other people to decide. But I believe it's very important,

6 yeah.

7 Q Now, you would agree that Intel is also an

8 American company; correct?

9 A Yes.

10 Q Just like Qualcomm?

11 A Yes.

12 Q Unlike Samsung, which is based in Korea;

13 correct?

14 A That's right.

15 Q Unlike Huawei, which is based in China; correct?

16 A Correct.

17 Q The two premium chipset providers based right

18 here in the U.S. are Qualcomm and Intel; correct?

19 A That's correct.

20 Q Now, I understand that you think Qualcomm makes

21 better chipsets than Intel, and I'm not going to debate you

22 on that. But you would agree that Intel is a strong

23 technology company based right here in America?

24 A Yeah. Products, yes. Not standards though.

25 Q I'm sorry?

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1 A I would make that clear that it's -- they make

2 good products for sure. Standards are not a significant

3 contributor.

4 Q Well, sir, you do understand that Intel also

5 goes to cellular standards standard-setting organizations?

6 A Yeah, of course.

7 Q And they also make proposals too?

8 A Sure, yes.

9 Q And again, I understand that you think Qualcomm

10 is better. But Intel is there, they are making

11 contributions as well; correct?

12 A Yeah, that's -- and there's many other American

13 companies that make contributions as well, so --

14 Q But two American companies that make premium

15 baseband chipsets; correct?

16 A Right.

17 Q And those premium baseband chipsets are

18 important today, they will be important tomorrow; right?

19 A Yes.

20 Q So important they raise national interest;

21 correct?

22 A I think you're mixing up product and standards.

23 So there's -- they're different things, so I just want to

24 make it clear.

25 Q Fair enough. Cellular technology of the type

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1 that's in premium baseband chipsets is an extraordinarily

2 important technology; correct?

3 A Yes.

4 Q And I think you testified earlier that the

5 premium baseband chipsets are where the latest releases of

6 standards are made; correct?

7 A Yes, that's correct.

8 Q The very first 5G products -- 5G standards will

9 be offered in premium baseband chipsets; correct?

10 A Yeah. The first release came out this year,

11 release 15. And that's what initial 5G chips will be based

12 on, yeah.

13 Q So you would agree, premium baseband chipset and

14 the cellular standards in those premium baseband chipsets

15 are absolutely critical to the U.S.?

16 A Okay. So I think you're conflating these two

17 things. I'm not saying they're not important, but what

18 came out in the CFIUS ruling had to do with standards

19 development, not products.

20 Q Let's take it piece by piece. The latest

21 generation cellular standards are absolutely critical to

22 the United States; correct?

23 A The standards, yes, yeah.

24 Q And the first place those standards will be

25 offered in the consumer marketplace is premium baseband

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1 chipsets; correct?

2 A Yes, yes.

3 Q Now, his Honor may conclude that Qualcomm is a

4 wonderful company that is doing wonderful work, and you

5 would agree, based on your own experience in the industry

6 he could reasonably conclude it's important to have another

7 company in that same sector?

8 A Sure. I think competition is good.

9 Q Two is better than one?

10 A Two -- yeah, competition is good, yes.

11 Q And from the perspective of the country, the

12 U.S., it would be a gamble to put all of our chips on

13 Qualcomm and to remove another competitor from this

14 critical premium baseband market?

15 A I guess I'm not -- I think -- I'll just say

16 competition is good, I agree with that.

17 Q Now, this complaint that Qualcomm has brought in

18 this case is targeting Apple products that contain Intel

19 chipsets; correct?

20 A Yes.

21 Q And you've also sued Apple, not Intel, but Apple

22 in Germany over 10 times seeking to enjoin iPhones

23 containing Intel chipsets?

24 A We have a global IP battle -- Apple is not

25 paying for IP, and that's all we want them to do.

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1 Q Sir, can you just stay with my question?

2 A Okay.

3 Q You've sued Apple in Germany over 10 times

4 seeking to enjoin iPhones containing Intel chipsets;

5 correct?

6 A I'm not familiar with all the cases that we

7 have, so I -- I know we have cases around the world, but I

8 don't -- I'm not familiar with what the cases are.

9 Q You have cases around the world; right?

10 A Yes.

11 Q And any suggestion that Intel could just go sell

12 freely overseas without fear of litigation, that's not

13 true, is it?

14 A I believe that is true, they can. I mean, there

15 may be certain markets, but I -- but I'm not -- I don't

16 know -- I'm not a lawyer or whatever and I'm not involved

17 in any of this stuff.

18 Q You're a corporate officer for Qualcomm?

19 A Sure.

20 Q And you know Qualcomm has sued Apple many times

21 in Germany and China, for example, seeking to shut down

22 iPhones containing Intel chipsets?

23 A Yeah. What I know is we have this global IP

24 battle because they're not paying.

25 Q And I think what you said is you want money; is

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1 that right?

2 A Well, they're not paying us, yeah. I mean, it's

3 hurting our company a lot.

4 Q You want royalties?

5 A Right.

6 Q You understand, sir, that for the patents at

7 issue in this case, there's a parallel district court case

8 where Qualcomm could obtain those royalties that you just

9 said you want; right?

10 A Okay. I'm not aware of any of the cases, so I

11 don't know the specifics. I was brought in to talk about

12 this case.

13 Q You do understand that Qualcomm has a policy of

14 not licensing chipset competitors like Intel; correct?

15 A They don't need a license. It's license-free.

16 Q Sir, Qualcomm has a policy of not giving

17 licenses to chipset suppliers that compete with Qualcomm,

18 including Intel?

19 A They -- they're specifically not required to pay

20 to increase competition in the chipset provider. That's

21 actually how -- what the policy is.

22 Q Just stay with my question, sir.

23 JUDGE PENDER: I don't think he understands your

24 question.

25 MR. MUELLER: I'll try it again.

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1 BY MR. MUELLER:

2 Q Qualcomm does not grant patent licenses to

3 chipset competitors like Intel; correct?

4 A It's done at the device level, so no -- not the

5 chipset level. So there's no chipset company that has to

6 pay anything.

7 Q And the answer is you don't give licenses to

8 Intel; correct?

9 A That's correct. Unless they did a device, a

10 phone or something like that.

11 Q Last few questions, sir. On this board here you

12 have the premium smartphones in the U.S. market that were

13 identified by Qualcomm in this case; correct?

14 A Yes.

15 Q Qualcomm supplies to each and every one of them;

16 correct?

17 A Yes.

18 Q Competition is a good thing; correct?

19 A That's right.

20 Q Two premium chipset suppliers is better than

21 one; correct?

22 A Yes.

23 Q Two American chipset suppliers for premium

24 baseband chips is better than one; correct?

25 A Yes.

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1 MR. MUELLER: No further questions. Thank you,

2 sir.

3 JUDGE PENDER: Staff. Ms. Comfort?

4 CROSS-EXAMINATION

5 BY MS. COMFORT:

6 Q Good morning, Dr. Thompson.

7 A Good morning.

8 Q I am Claire Comfort with the Office of Unfair

9 Import Investigations.

10 A Nice to meet you.

11 Q Is CFIUS an abbreviation for the United States

12 Treasury Department Committee n Foreign Investment in the

13 United States?

14 A Yes.

15 Q As an initial matter, does Qualcomm compete with

16 Intel in any other markets an chipsets for mobile phone

17 devices?

18 A We're trying to break into the laptop market as

19 well. So we have -- our first offering in that area. So

20 they clearly have a very, very, very strong position in

21 laptops, PCs, things like that. And so we're trying to

22 compete there.

23 And then there's other competition, like some of

24 these IOT markets I talked about, things like drones and

25 security cameras and things like that. So --

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1 Q Does the laptop market include baseband chipsets

2 for laptop devices?

3 A Generally not. But -- but they -- at least our

4 objective in the future is, especially with 5G, is that

5 they would -- everybody would want connectivity all the

6 time, and so hopefully in the future they will include, and

7 Intel is pursuing the same thing too, yeah.

8 Q Do you know what the projected size of the

9 market is for baseband chipsets in laptop products and IOT

10 devices?

11 A I don't -- well, okay. So today the mobile

12 market is roughly 1.5 billion chips a year, baseband --

13 baseband processors a year. And then there's a significant

14 hundreds of millions outside of that, but I don't -- today

15 I don't know exactly what that is. But it's probably

16 approaching -- the total market is probably -- especially

17 when you get into 5G, fairly early on I think it will

18 approach, this is my view, a couple billion a year.

19 Q Would you know what the projected size of the

20 market for chipsets in laptop and IOT devices, how it

21 compares to the current market for flat modems in mobile

22 phone devices?

23 A It's -- it's smaller. I don't -- well, yeah,

24 yeah, sure. It's definitely smaller. But I think it's --

25 that's one segment, but there's also automotive, there's,

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1 like I said, these security cameras and all sorts of other

2 types of devices. So it's -- it's hundreds of millions.

3 It's not over a billion, for example, yeah.

4 Q Within any iPhone product line, does Qualcomm

5 sell a single chipset product to Apple for its use

6 globally?

7 A Yeah. I mean, we -- what we sell, we always

8 sell to this global market because it is a global market.

9 The U.S. market, for example, is not different than -- to

10 any great degree than the Korean market or the Japanese

11 market or the European market.

12 So you've got to think of it as a global market,

13 because it's all the same standard.

14 Q Maybe -- I was probably a little unclear.

15 A Yes, sorry.

16 Q When you use supply chipsets to Apple for the

17 iPhone 7 line of products, for example, do you provide them

18 with a single chipset product for their use globally?

19 A Yeah, it's one chipset, and that works

20 everywhere in the world.

21 Q Does Apple have the responsibility for

22 certifying and allocating the chipsets for different

23 markets?

24 A Yeah. We help them a lot, but yeah, ultimately

25 it's their responsibility.

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1 Q In question 7 of your direct witness statement,

2 you stated that on an annual basis, we, meaning Qualcomm,

3 have historically devoted 20 to 25 percent of our revenues

4 back into R&D?

5 A Yes.

6 Q Is that high for the industry?

7 A It's kind of high, yeah. A little high.

8 Q And that's revenues, not profits; right?

9 A That's revenues, yes.

10 Q In question 18 of your direct witness statement,

11 you state that Intel is also a competitor, although its

12 chipsets are less advanced than those of Qualcomm, Samsung

13 and Huawei.

14 How are they less advanced?

15 A Just from a feature set point of view, from a

16 performance point of view. So they tend to lag a bit in

17 particular on the feature set. They have been getting

18 better on performance, now that they have been in Apple for

19 the last couple of years, they have been improving.

20 Q In your view, is Intel presently contributing

21 any technology to the baseband chipset market that Qualcomm

22 is not?

23 A I don't -- I don't think so. We're clearly

24 ahead. So they're playing catch-up.

25 Q In question 20 of your direct testimony, you

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1 state that "MediaTek is competing for future sales of

2 advanced chipsets."

3 A Yes.

4 Q How does MediaTek's most advanced chipset

5 product offering compare to Intel's?

6 A It's a little bit -- from a feature point of

7 view, it's a little bit behind them. But from a

8 performance point of view, it's ahead.

9 Q In question 17 of your direct witness statement,

10 you state that Apple has disabled features of Qualcomm

11 chipsets Apple uses in iPhones, even though Apple's

12 competitors have mobile devices in the market with these

13 features.

14 A Yes.

15 Q What are the main features found in the Qualcomm

16 chipsets used in the iPhone 7, 8 and X products that Apple

17 has not enabled?

18 A Well, the latest one is the iPhone 8 and X. The

19 main feature --

20 MR. MUELLER: I'm not sure exactly what he's

21 going to say, but I would ask that we go on the

22 confidential record.

23 THE WITNESS: It's public. It's been -- okay.

24 (Confidential session follows.)

25

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1 OPEN SESSION CONTINUED

2 MR. MUELLER: May I proceed, your Honor?

3 JUDGE PENDER: Please.

4 MR. MUELLER: Thank you.

5 RECROSS-EXAMINATION

6 BY MR. MUELLER:

7 Q Dr. Thompson, you accused Apple of attacking

8 Qualcomm in your testimony a few moments ago; correct?

9 A Yes.

10 Q You accused Apple of engaging in unfair

11 competition; right?

12 A I don't think I said that.

13 Q Okay. Well, you just talked about the types of

14 competition that are fair and unfair; right?

15 A I don't remember exactly what I said, but sure.

16 Q Okay. Let's try it this way. The Federal Trade

17 Commission is currently litigating against Qualcomm for

18 what it considers Qualcomm's unfair competitive activities;

19 correct?

20 A Yes.

21 Q The Korea Fair Trade Commission found Qualcomm

22 to have engaged in anticompetitive behavior; correct?

23 A I think that's been resolved actually but I -- I

24 think that's resolved.

25 Q Sir, the Korea Fair Trade Commission reached a

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1 decision that found Qualcomm to have engaged in

2 anticompetitive conduct; correct?

3 A I guess I'm not -- I don't know, so yeah, sorry.

4 Q European Commission has concluded that Qualcomm

5 has engaged in anticompetitive conduct; correct?

6 A Yes.

7 Q Taiwanese Fair Trade Commission has concluded

8 that Qualcomm has engaged in anticompetitive conduct?

9 A Yes.

10 Q Japanese Fair Trade Commission has concluded

11 that Qualcomm has engaged in anticompetitive conduct;

12 correct?

13 A I'm not familiar with that.

14 Q Now, in terms of the chronology, the Federal

15 Trade Commission case started last January in 2017;

16 correct?

17 A I -- I guess I know that there was some order or

18 some allegation that was issued in January. That's what I

19 know, yeah.

20 Q Apple brought a suit against Qualcomm shortly

21 thereafter alleging that Qualcomm has engaged in

22 anticompetitive activity; correct?

23 A I think it was the next day in fact, yeah.

24 Q And you understand in that case, Apple is not

25 asking for a penny; they're simply asking for Qualcomm to

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1 cease its anticompetitive activity; correct?

2 A I -- I don't know what they're asking, so I

3 don't know.

4 Q Now, last summer, starting last summer, Qualcomm

5 began filing patent cases against Apple all over the world;

6 right?

7 A I -- I know that we've been filing cases, but

8 I'm not familiar with -- I'm familiar with this case.

9 Q Seeking to -- seeking to enjoin or stop the

10 sales of Apple products containing Intel chipsets; correct?

11 A I know there are cases, but I don't -- I don't

12 know the details of them.

13 Q And I'm not going to ask you about the details.

14 But Mr. Marriott just asked you if you could choose between

15 the rest of the world and the U.S., which would you choose.

16 Do you recall that question?

17 A Yeah, the rest of the world.

18 Q You're not here to say Qualcomm would let Intel

19 sell in the rest of the world with freedom; correct?

20 A Say that again?

21 Q You're not here to say that Qualcomm would

22 permit Intel to sell to Apple in the rest of the world;

23 correct?

24 A I guess I'm not sure. I'm not -- I'm here to

25 testify in this case. I'm having trouble understanding

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1 where -- sorry.

2 Q Sir, you are an officer in the company; correct?

3 A Yes.

4 Q And you're not here as an officer of the company

5 to say that Qualcomm would permit Intel to sell premium

6 baseband chipsets to Apple for phones overseas; correct?

7 You are not making that commitment?

8 A I'm here talking about the U.S.

9 Q And quite the contrary, Qualcomm has sued Apple

10 all over the world to try to prevent Apple from selling

11 phones overseas with Intel chipsets; correct?

12 A I don't -- I wouldn't describe it as all over

13 the world. There are a handful of venues that I'm -- that

14 I know of, that's it.

15 Q In any event, the suggestion that Intel could

16 sell premium chipsets to Apple with freedom overseas is

17 simply wrong; correct?

18 A No. I think this is solved very easily by just

19 working around those patents, very simple actually.

20 Q Sir, if you just stay with my question.

21 Qualcomm is seeking to shut down sales overseas of iPhones

22 containing Intel chipsets; correct?

23 A There are some -- one or two, I'm not familiar

24 with the cases.

25 Q Ms. Comfort --

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1 A I'm not involved with those cases.

2 Q Are you finished?

3 A Yes. Yep.

4 Q Ms. Comfort asked you some questions about

5 Intel's practice -- I'm sorry, Qualcomm's practice of

6 charging royalties on products that contain Qualcomm

7 chipsets.

8 Do you recall those questions?

9 A Yes.

10 Q I just want to make sure we have the facts

11 straight on that. Qualcomm's practice is to sell chipsets

12 as one of its businesses; correct?

13 A That's right.

14 Q Those chipsets go into devices like phones;

15 correct?

16 A Yes.

17 Q And then Qualcomm charges royalties on top of

18 the chipset sales price it previously received; correct?

19 A That's correct.

20 Q Now, you made some allegations in your answers

21 to Ms. Comfort's questions and Mr. Marriott's questions,

22 suggesting that Apple had taken information from Qualcomm

23 and given it to Intel; correct?

24 A Yes.

25 Q Sir, you don't cite a shred of evidence or one

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1 specific example in your witness statement; correct?

2 A That's right.

3 Q Now, you refer to --

4 JUDGE PENDER: Mr. Mueller, I'm not considering

5 that argument. You know, I don't consider it before me one

6 way or the other. And if there had been some smoke there,

7 I would have seen it.

8 MR. MUELLER: Thank you, your Honor. I'll move

9 on then.

10 JUDGE PENDER: All right. Thank you.

11 BY MR. MUELLER:

12 Q You critiqued Apple's products that contain

13 Intel chipsets and you said the performance was not as

14 good; right?

15 A Yes.

16 Q You critiqued Intel chipsets as not as good as

17 Qualcomm's; correct?

18 A Yes.

19 Q You said Qualcomm's are better; right?

20 A Yes.

21 Q Now, you're not suggesting to his Honor that

22 your view that Qualcomm's chipsets are better would be

23 reason for his Honor to give Qualcomm a 100 percent

24 monopoly in the premium chipset market; right?

25 A No.

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1 Q In fact, you agree that having Intel as a

2 competitor in that market is good for competition; correct?

3 A I do agree.

4 Q Having Intel as a competitor in that premium

5 chipset market is good for quality of chipsets; correct?

6 A Generally, competition is good, yeah.

7 Q And competition from Intel in particular is

8 good; correct?

9 A Yes.

10 Q It's good for pricing; correct?

11 A Yes.

12 Q It's good for innovation; correct?

13 A Yes.

14 Q Good for innovation as we move into 5G; right?

15 A Yes.

16 Q Which is an absolutely critical market for the

17 country as a whole; correct?

18 A Certainly for Qualcomm, yeah. We believe it is,

19 yeah.

20 Q And it's good to have Qualcomm in that market;

21 right?

22 A Yeah, that's right.

23 Q And it's good to have Intel there too?

24 A Yes.

25 Q It's good for the public?

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1 A I agree.

2 Q Good for the public interest?

3 A I agree.

4 MR. MUELLER: I have no further questions.

5 RECROSS-EXAMINATION

6 BY MS. COMFORT:

7 Q Dr. Thompson, I believe you testified earlier

8 that Apple's contract manufacturers are presently not

9 paying on their patent license agreements with Qualcomm?

10 A Yes, that's correct.

11 Q In the event of an exclusion order, would

12 Qualcomm be willing to supply chipsets to Apple for up to

13 all of its requirements, even if Apple's contract

14 manufacturers continue to not pay the royalties that are

15 due under those patent license agreements?

16 A Yes.

17 (Confidential session follows.)

18

19

20

21

22

23

24

25

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1 C O N T E N T S

2 VOIR

3 WITNESSES: DIRECT CROSS REDIRECT RECROSS DIRE

4 JAMES THOMPSON

5 by Mr. Marriott 1527 1589/1612

6 by Mr. Mueller 1537 1599

7 by Ms. Comfort 1557 1606

10

11 CONFIDENTIAL SESSIONS: Pages 1544-1548, 1562-1598,

12 1607-1622

13

14

15

16 E X H I B I T S

17 EXHIBITS: IDENTIFIED RECEIVED

18 CX-4767C 1535

19 CX-7C 1618

20

21

22 Exhibit No.

23 CX-1440C

24 CX-2341C

25 CX-2459

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16 CX-2485C

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10 CX-4554

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14 CX-4603C

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1 CX-2364C

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Case 5:17-md-02773-LHK Document 620-5 Filed 07/19/18 Page 89 of 119
1653

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Case 5:17-md-02773-LHK Document 620-5 Filed 07/19/18 Page 90 of 119
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Ace-Federal Reporters, Inc.

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Case 5:17-md-02773-LHK Document 620-5 Filed 07/19/18 Page 91 of 119
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Case 5:17-md-02773-LHK Document 620-5 Filed 07/19/18 Page 92 of 119
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Case 5:17-md-02773-LHK Document 620-5 Filed 07/19/18 Page 93 of 119
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Case 5:17-md-02773-LHK Document 620-5 Filed 07/19/18 Page 94 of 119
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Case 5:17-md-02773-LHK Document 620-5 Filed 07/19/18 Page 95 of 119
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Case 5:17-md-02773-LHK Document 620-5 Filed 07/19/18 Page 96 of 119
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Case 5:17-md-02773-LHK Document 620-5 Filed 07/19/18 Page 97 of 119
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Case 5:17-md-02773-LHK Document 620-5 Filed 07/19/18 Page 98 of 119
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Case 5:17-md-02773-LHK Document 620-5 Filed 07/19/18 Page 99 of 119
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Case 5:17-md-02773-LHK Document 620-5 Filed 07/19/18 Page 101 of 119
1665

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Case 5:17-md-02773-LHK Document 620-5 Filed 07/19/18 Page 102 of 119
1666

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Case 5:17-md-02773-LHK Document 620-5 Filed 07/19/18 Page 103 of 119
1667

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Case 5:17-md-02773-LHK Document 620-5 Filed 07/19/18 Page 104 of 119
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Case 5:17-md-02773-LHK Document 620-5 Filed 07/19/18 Page 107 of 119
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Case 5:17-md-02773-LHK Document 620-5 Filed 07/19/18 Page 110 of 119
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5 172

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Case 5:17-md-02773-LHK Document 620-5 Filed 07/19/18 Page 111 of 119
1675

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Case 5:17-md-02773-LHK Document 620-5 Filed 07/19/18 Page 112 of 119
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Case 5:17-md-02773-LHK Document 620-5 Filed 07/19/18 Page 113 of 119
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Case 5:17-md-02773-LHK Document 620-5 Filed 07/19/18 Page 114 of 119
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Case 5:17-md-02773-LHK Document 620-5 Filed 07/19/18 Page 115 of 119
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Case 5:17-md-02773-LHK Document 620-5 Filed 07/19/18 Page 116 of 119
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Case 5:17-md-02773-LHK Document 620-5 Filed 07/19/18 Page 117 of 119
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Case 5:17-md-02773-LHK Document 620-5 Filed 07/19/18 Page 118 of 119
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Case 5:17-md-02773-LHK Document 620-5 Filed 07/19/18 Page 119 of 119
1683

CERTIFICATE OF REPORTER
TITLE: In The Matter Of: Certain Mobile Electronic Devices
and Radio Frequency and Processing
Components Thereof

INVESTIGATION NOS: 337-TA-1065


HEARING DATE: 06-26-18
LOCATION: Washington, DC
NATURE OF HEARING: Hearing

I hereby certify that the foregoing/attached


transcript is a true, correct and complete record
of the above-referenced proceeding(s) of the U.S.
International Trade Commission.
DATE: 06-26-2018

SIGNED: Mark A. Jagan


Signature of the Contractor or the
Authorized Contractor's Representative

I hereby certify that I am not the Court Reporter


and that I have proofread the above-referenced
transcript of the proceedings of the U.S.
International Trade Commission, against the
aforementioned Court Reporter's notes and
recordings, for accuracy in transcription in the
spelling, hyphenation, punctuation and speaker
identification and did not make any changes
of a substantive nature. The
foregoing/attached transcript is a true,
correct and complete transcription of the
proceedings.
SIGNED: Christopher Weiskircher
Signature of Proofreader

I hereby certify that I reported the


above-referenced proceedings of the U.S.
International Trade Commission and caused
to be prepared from my tapes and notes of
the proceedings a true, correct and
complete verbatim recording of the
proceedings.
SIGNED: Carmen Smith
Signature of Court Reporter

Ace-Federal Reporters, Inc.

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Case 5:17-md-02773-LHK Document 620-6 Filed 07/19/18 Page 1 of 153

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1 UNITED STATES OF AMERICA

2 BEFORE THE

3 INTERNATIONAL TRADE COMMISSION

5 - - - - - - - - - - - - - - - - - X

6 IN THE MATTER OF: : Investigation Number

7 CERTAIN MOBILE ELECTRONIC DEVICES : 337-TA-1065

8 AND RADIO FREQUENCY AND PROCESS :

9 COMPONENTS THEREOF :

10 - - - - - - - - - - - - - - - - - X

11

12 HEARING

13

14 Tuesday, June 19, 2018

15 Courtroom B

16 U.S. International Trade

17 Commission

18 500 E Street, SW

19 Washington, DC

20

21

22 The Hearing commenced, pursuant to notice of the

23 Judge, at 8:47 a.m., before the Honorable Thomas B. Pender,

24 Administrative Law Judge for the United States

25 International Trade Commission.

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1 APPEARANCES:

3 DAVID A. NELSON, ESQ.

4 NATHAN HAMSTRA, ESQ.

5 Quinn, Emanuel, Urquhart & Sullivan LLP

6 500 West Madison Street, Suite 2450

7 Chicago, Illinois 60661

8 312.705.7400

9 On Behalf of Complainant Qualcomm, Incorporated

10

11 SEAN PAK, ESQ.

12 Quinn, Emanuel, Urquhart & Sullivan LLP

13 50 California Street, 22nd Floor

14 San Francisco, California 94111

15 415.875.6600

16 On Behalf of Complainant Qualcomm, Incorporated

17

18 RICHARD W. ERWINE, ESQ.

19 KEVIN JANG, ESQ.

20 Quinn, Emanuel, Urquhart & Sullivan LLP

21 51 Madison Avenue, 22nd Floor

22 New York, New York 10010

23 212.849.7000

24 On Behalf of Complainant Qualcomm, Incorporated

25 - continued -

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1 APPEARANCES (CONTINUED):

3 PATRICK T. SCHMIDT, ESQ.

4 Quinn, Emanuel, Urquhart & Sullivan LLP

5 865 South Figueroa Street, 10th Floor

6 Los Angeles, California 90017

7 213.443.3000

8 On Behalf of Complainant Qualcomm, Incorporated

10 S. ALEX LASHER, ESQ.

11 Quinn, Emanuel, Urquhart & Sullivan LLP

12 1300 I Street, NW, Suite 900

13 Washington, DC 20005

14 202.538-8000

15 On Behalf of Complainant Qualcomm, Incorporated

16

17 BRETT N. WATKINS, ESQ.

18 Quinn, Emanuel, Urquhart & Sullivan LLP

19 711 Louisiana Street, Suite 500

20 Houston, Texas 77002

21 713.221.7000

22 On Behalf of Complainant Qualcomm, Incorporated

23

24

25 - continued -

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1 APPEARANCES (CONTINUED):

3 JAMES T. BAILEY, ESQ.

4 Law Office of James T. Bailey

5 504 West 136th Street, #1B

6 New York, New York 10031-7976

7 917.626.1356

8 On Behalf of Complainant Qualcomm, Incorporated

10 DAVID R. MARRIOTT, ESQ.

11 ANDREI HARASYMIAK, ESQ.

12 Cravath, Swaine & Moore LLP

13 Worldwide Plaza, 825 Eighth Avenue

14 New York, New York 10019-7475

15 212.474.1430

16 On Behalf of Complainant Qualcomm, Incorporated

17

18 TOM M. SCHAUMBERG, ESQ.

19 DEANNA TANNER OKUN, ESQ.

20 Adduci, Mastriani & Schaumberg LLP

21 1133 Connecticut Avenue, NW

22 Washington, DC 20036

23 202.467.6300

24 On Behalf of Complainant Qualcomm, Incorporated

25 - continued -

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1 APPEARANCES (CONTINUED):

2 WILLIAM F. LEE, ESQ.

3 JOSEPH J. MUELLER, ESQ.

4 LOUIS W. TOMPROS, ESQ.

5 DOMINIC E. MASSA, ESQ.

6 Wilmer, Cutler, Pickering, Hale and Dorr LLP

7 60 State Street

8 Boston, Massachusetts 02109

9 617.526.6556

10 On Behalf of Respondent Apple Inc.

11

12 NINA S. TALLON, ESQ.

13 Wilmer, Cutler, Pickering, Hale and Dorr LLP

14 1875 Pennsylvania Avenue, NW

15 Washington, DC 20006

16 202.663.6365

17 On Behalf of Respondent Apple Inc.

18

19 JAMES M. DOWD, ESQ.

20 Wilmer, Cutler, Pickering, Hale and Dorr LLP

21 350 South Grand Avenue, Suite 2100

22 Los Angeles, California 90071

23 213.443.5309

24 On Behalf of Respondent Apple Inc.

25 - continued -

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1 APPEARANCES (CONTINUED):

3 RUFFIN B. CORDELL, ESQ.

4 Fish & Richardson P.C.

5 1000 Maine Avenue, SW

6 Washington, DC 20024

7 202.783.5070

8 On Behalf of Respondent Apple Inc.

10 LISA M. MURRAY, ESQ.

11 CLAIRE COMFORT, ESQ.

12 DAVID LLOYD, ESQ.

13 Office of Unfair Trade Investigations

14 United States International Trade Commission

15 500 E Street, SW

16 Washington, DC 20436

17 202.205.2158

18 On Behalf of Commission Investigative Staff

19

20

21

22

23

24

25

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1 P R O C E E D I N G S

2 JUDGE PENDER: Good morning, Doctor. You are

3 still under oath, sir. And you have not talked with

4 anybody about your testimony; right?

5 THE WITNESS: No, sir.

6 JUDGE PENDER: Good. Thank you.

7 Mr. Massa?

8 MR. MASSA: Thank you, your Honor.

9 So we are on the confidential record, at least

10 for the start of this, we're only on Apple CBI. So that's

11 the state of the record.

12 (Confidential session follows.)

13

14

15

16

17

18

19

20

21

22

23

24

25

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1 OPEN SESSION CONTINUED

2 BY MS. MURRAY:

3 Q Doctor, just to confirm, your infringement

4 testimony only addresses the iPhone 8, 8 Plus and 10;

5 correct?

6 A That's correct.

7 Q There is no opinion that the iPhone 7 or 7 Plus

8 infringes the '936?

9 A No.

10 Q I'd like to ask you about the term "graphics

11 instruction" which appears in the asserted claims of the

12 '936 patent. Is it your opinion that any instruction

13 that's used to operate on graphics data becomes a graphics

14 instruction?

15 A Yes, ma'am.

16 Q What is the basis for your view?

17 A If you have an instruction that is executing in

18 a GPU, it would be a graphics instruction because it's

19 operating on that graphics data within the GPU.

20 Q Can an instruction be both an arithmetic

21 instruction because it performs something like a multiplier

22 and add, and a graphics instruction because it operates on

23 graphics data?

24 A So if the add instruction is in a CPU and just

25 doing traditional computation of two numbers, that would be

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1 simply an arithmetic instruction. But if it is operating

2 on data streams like pixels and vertices, that's when it is

3 considered to be graphics instruction.

4 Without such -- it's not possible to actually

5 have a separation in that case.

6 MS. MURRAY: Now, your Honor, I have confirmed

7 that the next few questions are considered public by both

8 Apple and Qualcomm, I just want to make that clear.

9 BY MS. MURRAY:

10 Q Apple uses both a front-end compiler and a

11 back-end compiler to compile the software that runs on the

12 accused products; correct?

13 A Yes, they are the two-step compilation process,

14 correct.

15 Q And the front-end compiler is not installed on

16 the iPhone, is it?

17 A Not to my understanding, no.

18 Q It uploads intermediate Apple intermediate

19 representation, or AIR files, to the Apple app iStore, not

20 the iPhone; correct?

21 A It uploads the AIR files to the app store, which

22 then gets downloaded to the phone.

23 Q The back-end compiler on the iPhone does not

24 compile an intermediate file into executable code until run

25 time; correct?

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1 A That's my understanding, correct.

2 Q Is it fair to say, then, that the front-end

3 compiler compiles graphics application instructions while

4 the back-end compiler generates executable instructions?

5 A That's correct. But it's all connected in --

6 Q So you refer to a single compilation chain in

7 your testimony; correct?

8 A That's correct.

9 Q The '936 patent nowhere refers to a compilation

10 chain, does it?

11 A It just refers to compiler.

12 Q How separated would a front-end and a back-end

13 compiler have to be before you consider them to be two

14 different compilers?

15 A As somebody who has practiced in the field,

16 compiler to me means you take a high-level programming

17 language application and generate the executable. And you

18 may take multiple steps, multiple machines, it doesn't

19 matter. That's the definition of a compiler.

20 Q So it doesn't matter if they're on two different

21 machines?

22 A No, ma'am.

23 Q It doesn't matter if their steps are done a

24 decade apart?

25 A It's unusual, but yes, it doesn't matter.

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1 Q In your view, claim 19 of the '936 patent does

2 not require the entire compiler to be located on the

3 practicing device itself; correct?

4 A That is correct.

5 Q And claim 19 is not a method claim, is it?

6 A It is an apparatus claim, I believe.

7 Q Right. If the apparatus does not contain each

8 element of the claim, then the apparatus does not practice

9 the claim; is that correct?

10 A I don't have the legal understanding of that.

11 Q Do you have an understanding of what's required

12 to find infringement?

13 A Right. The device must be configured in certain

14 ways.

15 Q And the device must practice each element of an

16 apparatus claim in order to infringe; correct?

17 A That's correct.

18 Q Is it possible for a developer to write source

19 code, test it and then decide not to implement that code in

20 the final product?

21 A Yes.

22 Q In fact, that would be part of any typical

23 development process, wouldn't it?

24 A Certainly possible, yes.

25 Q And the fact that a test file exists says

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1 nothing about whether the code being tested was used in the

2 final version of the product, does it?

3 A It does not.

4 Q Now, in your analysis, if the conversion

5 instructions for either the accused products or the

6 domestic products, if they were never executed on a real

7 device, then any opinion based on those instructions would

8 be incorrect, wouldn't it?

9 A My understanding of an apparatus is it has to be

10 configured, but I also mentioned that I see them in various

11 contexts.

12 Q In fact, at your deposition, you said that in

13 that case, "we both wasted our time"; correct?

14 A I mentioned that I spent 11, 12 days at Apple

15 computers, and if everything that is provided there has no

16 relationship to the iPhone, I said it would be a waste of

17 everybody's time.

18 Q So if the code that you examined had no relation

19 to what is executed on a real device, then we've all wasted

20 our time; correct?

21 A I would certainly hope, that is true.

22 MS. MURRAY: Thank you.

23 No further questions.

24 THE WITNESS: Thank you.

25 MR. HAMSTRA: Your Honor, may I approach? And

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1 your Honor, if I may approach once more.

2 REDIRECT EXAMINATION

3 BY MR. HAMSTRA:

4 Q Dr. Annavaram, good morning.

5 A Good morning.

6 Q So you were asked some questions about Exhibits

7 CX-28 -- actually, we're going to have to go on the Apple

8 confidential record, your Honor.

9 JUDGE PENDER: Okay. Apple confidential.

10 Confidential record nevertheless.

11 (Confidential session follows.)

12

13

14

15

16

17

18

19

20

21

22

23

24

25

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1 OPEN SESSION CONTINUED

2 MR. LASHER: Your Honor, as Mr. Nelson mentioned

3 yesterday, we're starting to move into the economic prong

4 section. We have four fact witnesses, one expert witness.

5 Qualcomm -- excuse me, Apple has agreed to forgo cross on

6 three of the Qualcomm fact witnesses, so I would like to

7 offer those witness statements into evidence at this point.

8 There is -- one of those exhibits is impacted by

9 Order 42, as I mentioned yesterday, with respect to the

10 investment totals. There was the motion in limine on

11 several of the DI products. So what we have done is we've

12 created a corrective version. That one we'll not move into

13 evidence just at this moment because we haven't cleared it

14 with Apple yet. The other ones there is no change to so we

15 should be good to go on those. Those would be CX-6C and

16 associated exhibits, as well as CX-9C and associated

17 exhibits.

18 JUDGE PENDER: CX-6C plus -- and what's the

19 other, CX-9C?

20 MR. LASHER: Correct, your Honor.

21 JUDGE PENDER: You're going to put on live

22 CX-8C?

23 MR. LASHER: Correct, Mr. Saroff, yes.

24 JUDGE PENDER: Who is 6?

25 MR. LASHER: 6 is Mr. Martin.

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1 JUDGE PENDER: Okay. His name is not even on

2 the list anyway. All right, yeah?

3 MR. LASHER: And 9 is Mr. Chiniga. And I

4 believe those were taken off the list because of this very

5 reason.

6 JUDGE PENDER: Would you spell the last person's

7 name, please.

8 MR. LASHER: Your Honor, I don't have the exact

9 spelling in front of me.

10 MR. NELSON: I think it's C-h-i-n-i-g-a, your

11 Honor.

12 JUDGE PENDER: Okay. So is there any objection?

13 MR. LEE: No objection, your Honor. This is

14 subject to the agreement Mr. Nelson and I mentioned

15 yesterday that there will be -- we will forgo

16 cross-examination, but there may be deposition designations

17 in lieu of the cross-examination.

18 JUDGE PENDER: That seems fair to me. I take it

19 these would be Qualcomm employees anyway?

20 MR. LASHER: Correct, your Honor.

21 JUDGE PENDER: All right. All right then. So

22 you want me to -- Ms. Murray, is this okay with you?

23 MS. MURRAY: No objection, your Honor.

24 JUDGE PENDER: All right. There being no

25 objection, then, Exhibit CX-6C plus its accompanying

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1 exhibits is admitted to the record as evidence, and then

2 CX-9C plus its accompanying exhibits are admitted to the

3 record.

4 (Exhibits CX-6C and CX-9C received.)

5 (Exhibits received here to be listed in index.)

6 MR. LASHER: Thank you, your Honor. Mr. Watkins

7 will put up Mr. Saroff, our next witness.

8 MR. LEE: And your Honor, Mr. Dowd will handle

9 the witness for us.

10 JUDGE PENDER: I'm sorry, what was that?

11 MR. LEE: Mr. Dowd will handle the witness for

12 us.

13 JUDGE PENDER: All right, thank you.

14 Whereupon,

15 RANDY SAROFF

16 was called as a witness and, having first been duly sworn,

17 was examined and testified as follows:

18 JUDGE PENDER: Thank you. Please be seated.

19 State your name for the record.

20 THE WITNESS: Randy Saroff.

21 JUDGE PENDER: We're going to have to have it a

22 lot louder than that.

23 THE WITNESS: Randy Saroff.

24 JUDGE PENDER: Okay. The resonance of his voice

25 is going to be tough for some reason, so let's everybody

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1 pay attention to that, all right?

2 Please proceed, Mr. Watkins.

3 DIRECT EXAMINATION

4 BY MR. WATKINS:

5 Q Good morning, Mr. Saroff. What is your current

6 title at Qualcomm?

7 A I am a senior director of program management.

8 Q And how long have you held that position?

9 A Approximately 10 years.

10 Q You have a binder in front of you. Could you

11 please turn to Exhibit CX-8C. That's the first tab. Do

12 you see that's a copy of your witness statement?

13 A Yes.

14 Q And does Exhibit CX-8C contain your answers to

15 questions posed by counsel?

16 A Yes.

17 Q Are your answers true and correct to the best of

18 your knowledge?

19 A Yes.

20 MR. WATKINS: Your Honor, at this time Qualcomm

21 offers CX-8C and the exhibits cited therein for admission.

22 JUDGE PENDER: Okay. Objection?

23 MR. DOWD: No objection, your Honor.

24 MS. MURRAY: No objection, your Honor.

25 JUDGE PENDER: All right. There being no

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1 objection, Exhibit CX-8C-1 is admitted to the record as

2 evidence along with its accompanying list of documents,

3 which has been provided to the court reporter; correct?

4 MR. WATKINS: That's correct. Thank you, your

5 Honor.

6 JUDGE PENDER: You're welcome.

7 (Exhibit CX-8C received.)

8 MR. WATKINS: With that, we pass the witness for

9 cross-examination.

10 MR. DOWD: May I proceed?

11 JUDGE PENDER: Yes, Mr. Dowd. You don't have

12 any binders or you're not worried about it or whatever?

13 MR. DOWD: Actually, your Honor, we took your

14 Honor's guidance and over the break have been placed out

15 already. So you should have the cross-examination binder

16 and Mr. Saroff and the Staff and private parties should as

17 well.

18 JUDGE PENDER: I do.

19 MR. DOWD: Wonderful, thank you.

20 CROSS-EXAMINATION

21 BY MR. DOWD:

22 Q Good morning, Mr. Saroff.

23 A Good morning.

24 Q Could you please turn to tab 3 in your

25 cross-examination binder. You should find there CDX-14C.

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1 And if we could turn to page 2.

2 Do you have that?

3 A Yes.

4 Q This lists domestic industry products; right?

5 A Correct.

6 Q The products on this list were selected by the

7 legal team; correct?

8 A Correct.

9 Q You were not involved; correct?

10 A Correct.

11 Q So you don't know how these products were

12 selected; right?

13 A Correct.

14 Q Let's put CX-2660C on the screen. That's at tab

15 5 in your binder. And if we could go to page 2?

16 MR. WATKINS: Your Honor, I think we're getting

17 into Qualcomm confidential information.

18 MR. DOWD: That's fair. If we could go to the

19 confidential record on Qualcomm confidential information.

20 (Confidential session follows.)

21

22

23

24

25

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1 OPEN SESSION CONTINUED

2 Whereupon,

3 WILLIAM KERR

4 was called as a witness and, having first been duly sworn,

5 was examined and testified as follows:

6 JUDGE PENDER: Thank you. Please be seated,

7 state your name for the record.

8 THE WITNESS: My name is William Kerr.

9 MR. LASHER: May I proceed, your Honor?

10 JUDGE PENDER: Yes.

11 DIRECT EXAMINATION

12 BY MR. LASHER:

13 Q Good morning, Dr. Kerr.

14 A Good morning.

15 Q Can you please briefly describe your academic

16 credentials for the Court.

17 A Yes. I have a PhD in economics from the New

18 School for Social Research. My areas of specialization in

19 education -- in my educational career were international

20 economics, industrial organization, labor economics.

21 Q Can you briefly describe your professional

22 experience as well.

23 A Yes. I taught economics at the university level

24 for several years. I joined an economic policy group as

25 the chief economist that did regional economic research

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1 both in New York and Washington.

2 And then subsequent to that, I joined a

3 consulting firm, Arthur Young and Company, and did economic

4 policy analysis and a number of different arenas,

5 environmental, antitrust and others.

6 And subsequently ended up with a -- in a

7 litigation practice, in an economics litigation practice.

8 The work that I was doing lent itself to the questions that

9 were being asked in antitrust and intellectual property

10 cases.

11 Q Can you briefly describe your authorship of

12 articles and publications?

13 A Yes. I've written a number of articles on

14 antitrust and intellectual property issues. I am the

15 author of a book that's now in its 13th edition for

16 Thompson West called "The Economics of Intellectual

17 Property," calculating intellectual property damages.

18 MR. LASHER: Your Honor, Dr. Kerr's

19 qualifications are set forth in more detail in his witness

20 statement, but at this point we offer Dr. Kerr as an expert

21 in economic analysis.

22 JUDGE PENDER: That's a lovely broad term. What

23 do you think, Mr. Cordell?

24 MR. CORDELL: I'm always a little reticent of

25 these definitions of expertise, but we have no objection to

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1 Dr. Kerr offering opinions, how about that.

2 JUDGE PENDER: In what? Very cute.

3 MR. CORDELL: I tried. On the economic prong of

4 domestic industry, I think we would accept that.

5 JUDGE PENDER: I think that I'll accept him, if

6 Ms. Murray has no objection, as an expert in economic prong

7 of domestic industry.

8 MS. MURRAY: No objection, your Honor.

9 JUDGE PENDER: All right.

10 MR. LASHER: Thank you, your Honor.

11 BY MR. LASHER:

12 Q Dr. Kerr, can you just briefly describe your

13 role in this investigation.

14 A Yes. I was asked to examine the economic prong

15 of domestic industry and look at several remedy issues and

16 some others that might have come up.

17 Q You prepared a witness statement; is that

18 correct?

19 A I did.

20 Q And you also prepared a corrected witness

21 statement, is that also correct?

22 A Yes, I did.

23 Q Why did you prepare the second, the corrected

24 witness statement?

25 A The one that went in yesterday, the corrected

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1 witness statement reflects an opinion that the Court

2 issued, I think it was Order Number 42 that removed certain

3 products that were previously considered.

4 Q Can you please turn in your binder to CX-14C?

5 A I've got it.

6 Q Is this your corrected witness statement?

7 A Yes, it is.

8 Q Now, other than stripping out investments

9 associated with several categories -- or several domestic

10 industry products as identified by the Judge in Order 42,

11 is your corrected witness statement different in any

12 respect than your original witness statement?

13 A No, it's not.

14 Q Please turn to page 19 of your witness

15 statement?

16 A Yes, I have it.

17 Q Is that your signature?

18 A Yes, it is.

19 Q Does CX-14C contain all of your opinions in this

20 investigation?

21 A Yes.

22 Q And does CX-14C provide your true and correct

23 answers to questions posed by counsel?

24 A Yes.

25 MR. LASHER: At this time, your Honor, we would

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1 move into the record CX-14C and the accompanying exhibits.

2 MR. CORDELL: No objection.

3 MS. MURRAY: No objection, your Honor.

4 JUDGE PENDER: There being no objection, Exhibit

5 CX-14C is admitted to the record as evidence, along with

6 its list of accompanying documents, which has been provided

7 to the court reporter.

8 (Exhibit CX-14C received.)

9 MR. LASHER: Thank you, your Honor. We pass the

10 witness.

11 JUDGE PENDER: Mr. Cordell, before you even

12 start, Dr. Kerr, you heard Mr. Saroff's testimony, I

13 presume?

14 THE WITNESS: Yes, I did.

15 JUDGE PENDER: It's going to have some effect on

16 what you have in your statement; correct?

17 THE WITNESS: It may have. I'd have to look at

18 the numbers.

19 JUDGE PENDER: You don't know yet?

20 THE WITNESS: Yes, I don't know yet.

21 JUDGE PENDER: But you did hear it.

22 THE WITNESS: Yes.

23 JUDGE PENDER: And you have some concerns that

24 you would like to address at some point?

25 THE WITNESS: Yes, that's right.

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1 JUDGE PENDER: Thank you.

2 Mr. Cordell.

3 MR. CORDELL: Thank you, your Honor.

4 CROSS-EXAMINATION

5 BY MR. CORDELL:

6 Q Good morning, Dr. Kerr.

7 A Good morning.

8 Q My name is Ruffin Cordell. You understand I

9 represent Apple in this case?

10 A Yes.

11 Q I don't think we've met before, but I was struck

12 by something you said a moment ago, that you thought

13 economics at the university level. Did I understand you

14 correctly?

15 A Yes, I did.

16 Q Turns out you taught at C.W. Post College up in

17 Long Island?

18 A Yes, yes.

19 Q That was '75 through '78?

20 A Yes, I believe those were the years.

21 Q But you didn't get your PhD until '79; correct?

22 A I did.

23 Q Now, you're not an accountant; correct?

24 A No.

25 Q I know Judge Pender is not an accountant. And

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1 you understand the importance in these cases of us sorting

2 through this dense economic data so Judge Pender doesn't

3 have to; right?

4 A Yes, sure.

5 Q You're also not an engineer; correct?

6 A I'm not.

7 Q Now, you were not involved in the selection of

8 the domestic industry products in this case; right?

9 A That's right.

10 Q In fact, you weren't even hired until after

11 Qualcomm's lawyers picked the domestic industry products;

12 correct?

13 A I don't know.

14 Q Well, you know that they were picked before you

15 showed up; right?

16 A I -- I don't know when they picked them.

17 Q Okay. You know you weren't hired until sometime

18 in November of 2017; right?

19 A That's possible. I just don't remember.

20 Q Well, but again, just to make sure we are

21 crystal clear about this, you were not asked to provide

22 assistance or expert opinion regarding the selection of

23 domestic industry products in this case; correct?

24 A That's right.

25 Q Now, you rendered an expert report in this case;

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1 right?

2 A I did, yes.

3 Q On or about March 16, does that ring a bell?

4 A That's probably correct.

5 Q And before you rendered your expert report, you

6 did not review the expert report of the other technical

7 experts for Qualcomm; correct?

8 A No, they were issued on the same day, I believe.

9 Q So you did not look at Dr. Annavaram's report;

10 correct?

11 A That's right.

12 Q You didn't look at Dr. Kelley's report; correct?

13 A That's right.

14 Q You didn't look at Dr. Baker's report; correct?

15 A That's right.

16 Q But more than that, sir, you didn't even have a

17 conversation with the technical experts for Qualcomm before

18 you issued your report on March 16; correct?

19 A I did not, yes.

20 Q And for the purposes of the opinions you offered

21 on March 16, the Qualcomm lawyers asked you to assume that

22 the asserted patents in this case were infringed and valid;

23 correct?

24 A That's right.

25 Q And for the purposes of your opinions that you

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1 issued on March 16, the Qualcomm lawyers asked you to

2 assume that the domestic industry products that they had

3 chosen practiced the asserted patents in this case;

4 correct?

5 A Yes.

6 Q Now, one of the things you rely on in your

7 report is what we ITC lawyers call subprong C. Are you

8 familiar with that?

9 A I am familiar with subprong C, yes.

10 Q So Mr. Lee, please don't put this up on the

11 board because I'm trying to keep this public, your Honor.

12 But if you can turn in your binder there, it's -- I believe

13 it's tab C to your witness statement, we will see -- I'm

14 sorry, it's tab B. Go to paragraph 62.

15 A I'm sorry, what was the tab?

16 Q B, bravo.

17 A What was the page?

18 Q It's paragraph 62 on page -- it looks like it's

19 page 18.

20 A Yes, I have it.

21 Q Are you with me?

22 A Yes. Question 62.

23 Q Yes. You recall your analysis of subprong C of

24 the domestic industry portion of the statute?

25 A Yes.

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1 Q Okay. So one of the things that's required in a

2 subprong C analysis is you have to show some kind of nexus

3 between the research and development expenditures you're

4 relying on and the patented technology; correct?

5 A I believe that's a legal requirement, yes.

6 Q Well, you believe it is or it is, do you know?

7 A I'm not a lawyer.

8 Q Okay. You do say in the paragraph that you

9 address the nexus, if you look at the second-to-last line,

10 nexus between those patents and the DI products.

11 Do you see that?

12 A I'm sorry, that I said I believed?

13 Q I'm just reading from your witness statement,

14 response to question 62. Again, I'm trying not to publish

15 it so that we can keep this public.

16 A Well, I say in there that I understand that the

17 technical experts are addressing the nexus issue.

18 MR. CORDELL: Okay. Your Honor, I wonder if I

19 could ask counsel for Qualcomm whether we can display 62

20 just to make it easier. I don't think there's anything

21 confidential in it, but it is marked CBI.

22 MR. LASHER: Your Honor, if it's just that one

23 Q&A, I think that's fine. I don't see any figures in

24 there, so I think that would be all right.

25 MR. CORDELL: All right. Mr. Lee, we're in.

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1 BY MR. CORDELL:

2 Q So what you say in response to question 62 is --

3 MR. LASHER: Sorry, your Honor, I just saw that

4 there is one figure in there.

5 JUDGE PENDER: There is a figure in there?

6 MR. LASHER: It looks like --

7 JUDGE PENDER: Oh, the total figure?

8 MR. LASHER: Yes, your Honor.

9 JUDGE PENDER: All right. I'm going to address

10 this once more in this hearing, and it is we overuse CBI,

11 and we overuse it to the point that we annoy the living

12 daylights out of the Court of Appeals for the Federal

13 Circuit.

14 And I want everybody to give that some thought,

15 because I would almost guarantee one or both of you is

16 going to appeal the result in this case to the Court of

17 Appeals for the Federal Circuit.

18 So let's not annoy the circuit judges any more

19 than is necessary, and probably the Commissioners too. We

20 have a whole new bunch of Commissioners who may be annoyed

21 by this. And quite frankly, it annoys me too.

22 So a number like that, how does that help

23 anyone, hurt anyone, rhetorically speaking? I mean really.

24 MR. LASHER: It may not, your Honor. I just --

25 I don't have -- right now I don't have approval to

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1 broadcast it. I think ultimately that's correct, and we

2 can in briefing, et cetera, we can go back to our client

3 and get it approved. I just don't have it sitting here at

4 the moment.

5 JUDGE PENDER: I understand Apple's well known

6 paranoia about source code and stuff like that. I've lived

7 with it for seven years now and I've gotten used to it.

8 But these numbers, you know, any halfway good accountant

9 can figure it out looking from a publicly traded

10 corporation's, you know, 10B5 statements and stuff; right?

11 MR. LASHER: Agreed, your Honor.

12 MR. CORDELL: Our man Mr. Lee is very capable

13 and he can black out that number.

14 JUDGE PENDER: That would be lovely.

15 MR. LASHER: Thank you.

16 JUDGE PENDER: Please keep that in mind.

17 Because man, I'm sure all of you have read about what the

18 circuit Court says about CBI.

19 MR. CORDELL: I remember Judge Newman, I had an

20 appellate argument lecturing me for about half of the time,

21 about the size of the confidential record we delivered.

22 And she's right.

23 BY MR. CORDELL:

24 Q So just to reorient us, Dr. Kerr, this is your

25 witness statement; right?

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1 A Yes, it is.

2 Q Tell us a little bit about how you wrote your

3 witness statement. Just mechanically, how did you do it?

4 A I based it on my expert report. As you know, an

5 expert report is written in narrative form. And the

6 witness statement is written in Q&A form. So I had to cut

7 and paste my expert report so that it could reflect the

8 proper form.

9 Q You know, I was a little confused by that,

10 because Mr. Lasher just asked you whether this set forth

11 the answers that you gave to questions from counsel.

12 A Yes. The questions are asked by counsel, the

13 answers are part of my report.

14 Q Okay. But the other thing that confused me a

15 little bit is when I read this -- so you rely on the expert

16 reports of the technical experts, Annavaram, Baker, Kelley,

17 for the nexus requirement; right?

18 A Yes, that's right.

19 Q But the way you say it just struck me as a

20 little odd. This witness statement was executed on May 1,

21 right?

22 A The witness statement? No, it was executed

23 yesterday.

24 Q Oh, the supplemental one, you're right. But

25 originally, you executed on May 1; right?

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1 A That sounds right, yes.

2 Q Okay. You can look at the date, it's in your

3 binder. But the way you say it just struck me as odd. "I

4 understand that the expert reports of" these fellows, "are

5 addressing the technical aspects of the '936, '490, '558

6 patents."

7 Do you see that?

8 A Yes, that's right.

9 Q You say it prospectively, as if you expect them

10 to do this in the future; right?

11 A Right.

12 Q But they issued those reports back in March;

13 right?

14 A Yes.

15 Q Is it a fact that you never read the expert

16 reports of your technical colleagues?

17 A I never read them? No, I've read them.

18 Q And yet on May 1, when you wrote this

19 originally, you said prospectively you understand that they

20 will report on these issues; correct?

21 A I understand that they are addressing that

22 issue, and I read their report and saw that they were.

23 Q Doesn't strike you as a little odd? You could

24 have said, you know, the expert reports of, address these

25 features; correct?

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1 A Could have used different language, yes.

2 Q Okay. But to the best of your recollection, you

3 had actually read their expert reports?

4 A By the time I read -- wrote the witness

5 statement?

6 Q Yes.

7 A Yes.

8 Q But it is a fact, sir, that you never had a

9 conversation with them about the technology; correct?

10 A That's true, yes.

11 Q Even as of the writing of your witness statement

12 on May 1, or even yesterday?

13 A Yes, that's right.

14 Q So let's just talk a little bit about that.

15 Now, you did not attempt to determine whether there was any

16 nexus between the research and development you rely on and

17 the patented technology of the asserted patents; correct?

18 A That's right.

19 Q So if I asked you to describe for his Honor what

20 a PMOS transistor is, you couldn't do it; right?

21 A Not in any technical way, no.

22 Q And you couldn't tell us how a PMOS transistor

23 and an NMOS transistor might cooperate to create an

24 envelope tracking signal; correct?

25 A No.

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1 Q And you couldn't tell us what a conversion

2 instruction is; correct?

3 A Not with any detail, no.

4 Q And you couldn't tell us what it means to have

5 uplink data follow downlink data; correct?

6 A Again, I'm not a technical expert, so I wouldn't

7 portend to tell you.

8 Q You couldn't tell us whether the '490 patent

9 requires an application processor or not; correct?

10 A Not off the top of my head, no.

11 Q Do you even know what an application processor

12 is?

13 A Again, not from a technical perspective.

14 Q So you rely on the technical experts for their

15 analysis of the patents in this case. Fair?

16 A Oh, sure.

17 Q But with respect to the technical experts, what

18 they provided you was an analysis of how the alleged

19 research and development activities might relate to the

20 patents; right?

21 A I think that they were talking about the DI

22 products and how they relate to the patents.

23 Q That's fair enough. They looked at research and

24 development in, say, the MTP Fusion 4.5; right?

25 A I don't know what you mean by research and

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1 development. They were looking at products and determining

2 whether those products were products that practiced the

3 patented technology.

4 Q Let me just ask you this. What is the MTP

5 Fusion 4.5?

6 A I don't know it off the top of my head. There

7 are several hundred product codes in this case.

8 Q Do you know what the MTP, 9X45 is?

9 A No, I would have to go back and look at the

10 list.

11 JUDGE PENDER: Excuse me. Dr. Kerr, you said

12 whether something practices a patent or not. Are you aware

13 that has nothing to do with the nexus that Mr. Cordell is

14 asking about?

15 THE WITNESS: I don't know. That's a legal

16 issue I think. I thought his question --

17 JUDGE PENDER: I'm going to withdraw my

18 certification of this person as an expert witness. He has

19 just admitted that he doesn't know something critical and

20 core to the -- to what is domestic industry here at the

21 ITC. I'll give you an opportunity to rehabilitate him,

22 Mr. Lasher, but as of this moment, I am withdrawing my

23 finding that he is an expert witness on domestic industry.

24 He could not answer that question, and that is a critical,

25 critical question.

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1 MR. CORDELL: If I can ask just a couple of

2 follow-ups, your Honor.

3 BY MR. CORDELL:

4 Q It is a fact, Dr. Kerr, that you did not look

5 into a nexus between all of the domestic industry

6 expenditures you rely on and the technology covered by the

7 asserted patents; correct?

8 A Yes, I did not look at the nexus issue.

9 MR. CORDELL: Thank you.

10 Nothing further.

11 JUDGE PENDER: Ms. Murray.

12 CROSS-EXAMINATION

13 BY MS. MURRAY:

14 Q Sir, in your testimony, you refer to engineering

15 research and development and sustaining.

16 Do you recall that?

17 A Yes.

18 Q What do you mean by sustaining?

19 A Sustaining is a term that's used by Qualcomm for

20 engineering and other activities that relates to the

21 ongoing support of an existing product.

22 Q What do you mean by ongoing support?

23 A Once a product is issued in the market, there is

24 often a requirement to do some modification to it, to do

25 some updating of the software, that's the sustainment

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1 portion of their business.

2 Q Does any part of sustaining activity involve

3 sales and marketing?

4 A No.

5 Q Now, you've classified -- you just looked at

6 question 62 of your testimony, and there you classified the

7 expenses that you discuss falling under subprongs A and B

8 of the domestic industry requirement.

9 Do you recall that?

10 A Yes.

11 Q And what are subprongs A and B?

12 A Subprong A is the prong that relates to

13 expenditures on plant and equipment. And subprong B is the

14 one that's designated labor and capital.

15 Q Why did you classify expenses under A and B,

16 rather than under subprong C?

17 A It was my understanding that it was appropriate

18 to do so. The plant and equipment goes to subprong A, and

19 so those expenditures that related to things like occupancy

20 and rent, live equipment, that sort of thing, went into

21 subprong A. And the labor component of the spending was in

22 subprong B.

23 There were some issues about whether there

24 should be other small items in subprong B, but in the end,

25 we separated them according to labor and plant and

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1 equipment.

2 MS. MURRAY: I'm trying to see if there's

3 anything else I can do on the public record, your Honor.

4 And since it's not my information, I think it would be

5 safer to go Qualcomm confidential.

6 JUDGE PENDER: All right. Thank you. We'll go

7 to the confidential record.

8 (Confidential session follows.)

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

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1 OPEN SESSION CONTINUED

2 REDIRECT EXAMINATION

3 BY MR. LASHER:

4 Q Dr. Kerr, due to this discussion, I just wanted

5 to ask you a couple of background questions. You're not a

6 lawyer?

7 A Sure, no.

8 Q Correct? You are not a technical expert; is

9 that correct?

10 A That's right.

11 Q You're not offering any legal opinions in this

12 investigation; is that correct?

13 A That's right.

14 MS. MURRAY: Excuse me, your Honor. Should we

15 be back on the public record?

16 JUDGE PENDER: Sure. And we'll start on the

17 public record at the point of the redirect by Mr. Lasher,

18 okay, Carmen? Thank you.

19 Thank you very much, Ms. Murray.

20 BY MR. LASHER:

21 Q Dr. Kerr, you are not offering a technical

22 opinion in this case; correct?

23 A That's right.

24 Q So let me ask you, and if you need to turn to

25 your witness statement at question 19, this is kind of the

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1 focus, what were you asked to do in this investigation in

2 particular?

3 A Well, I was asked to look at the expenditures

4 and investments that Qualcomm made in connection with the

5 domestic industry prong of the determination of a domestic

6 industry.

7 Q What's your understanding of what the Commission

8 evaluates when it's determining whether the economic prong

9 has been satisfied?

10 A They evaluate the extent to which those

11 expenditures can be shown, whether those expenditures are

12 appropriately linked to the domestic industry products, and

13 of course, whether the domestic industry products

14 themselves are those that are related to the patented

15 technology.

16 Q So if I refer to subprongs A, B and C, do you

17 understand what I'm referring to?

18 A Yes.

19 Q So what's your understanding of the standard by

20 the Commission in showing economic prong under A and B,

21 subprongs A and B?

22 A Under subprongs A and B, as I mentioned before,

23 plant and equipment is the kind of spending that goes into

24 A and B -- into A. In B, the designation is labor and

25 capital. Now, those are not economic concepts; those are

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1 again legal issues. What I end up doing is first do the

2 economic work, find the expenditures, and then place them

3 into categories, A, B and C.

4 Q Right. Can you describe how you quantified

5 Qualcomm's domestic industry expenditures in this case?

6 A Sure. What I did was I took the domestic

7 industry products as they were identified at the time when

8 I began my work, and as they have evolved over time,

9 identifying the products, and then went into Qualcomm's

10 financial information. They have an excellent financial

11 and management reporting system for their costs.

12 And I was able to relate expenditures of various

13 kinds, including labor, plant and equipment and materials,

14 to individual DI products and was able, therefore, to take

15 the DI products that were associated with the different --

16 with each of the patents and figure out the total amount of

17 spending over the period on labor, plant and equipment and

18 materials.

19 Q And were there any particular categories of

20 investments that you considered in your economic analysis

21 of Qualcomm's investments?

22 A Sure. It was -- there are three basic

23 categories. One category was the provision of engineering

24 services in the United States that relate to the DI

25 products, the ongoing provision and operation that Qualcomm

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1 has to get those DI products to market. That generally was

2 called ERD in Qualcomm's financial reports, engineering

3 research and development.

4 In addition, I looked to be able to determine

5 what plant and equipment was used in that operation. So we

6 had labor and we had plant and equipment that was related

7 to ERD.

8 We also had customer engineering, which is a

9 group of engineers, many of whom were located in the United

10 States, and these are the ones we counted, the ones who are

11 domestic, and they provide engineering support on an

12 ongoing basis to customers after they purchase Qualcomm's

13 products. So we counted those.

14 Again, counted labor, materials and plant and

15 equipment for that group.

16 And then finally, the manufacturing operation

17 that Qualcomm uses to produce test platforms in -- is

18 located in California, in San Diego. And I was able to

19 calculate with a great deal of specificity the costs that

20 went into that operation. Again, it was labor, materials

21 and plant and equipment.

22 Q What types of sources did you rely on for your

23 economic analysis?

24 A I went to the financial reporting system, the

25 regular course financial reporting system that Qualcomm

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1 uses. And because of the way their system is set up, it is

2 a cumbersome set of calculations, but a -- but once you get

3 past the math, it's relatively easy to track expenditures

4 on an individual labor hour basis from the time they are

5 incurred to which products those hours of labor and

6 ultimately the other nonlabor components, how they track to

7 individual products.

8 Q Did you do any independent analysis beyond the

9 source data that was provided by Qualcomm in the ordinary

10 course of business?

11 A Yes. And generally, there were two types. One

12 is -- one happens because the regular course business is

13 intended to answer management and financial recording

14 questions. It's not intended to answer the questions that

15 are asked here.

16 So I was -- I had to do some analysis of that.

17 I had to, for example, make sure that I was not including

18 costs that related to other patents or to -- to other -- to

19 products that were not on the DI product, even though they

20 might have been aggregated that way.

21 And in other cases, again, in large part because

22 they don't need to have certain information that we need to

23 have, I was able -- I worked with the Qualcomm staff to get

24 estimates of certain features.

25 We just had a question about that 70 percent,

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1 for example. That was something that I had to obtain from

2 Qualcomm and then had to do a verification of that by

3 looking at the data that we did have and show that the 70

4 percent was reasonable.

5 Q Judge Pender pointed out that you'd been an

6 economic expert in multiple ITC cases; correct?

7 A Yes.

8 Q And the analysis that you performed with respect

9 to Qualcomm's investments here, is that a typical type of

10 analysis that an economic expert performs or that you have

11 performed?

12 A Oh, absolutely.

13 Q Okay. You were also asked some questions about

14 the nexus requirement?

15 A Yes.

16 Q Okay. Do you have a general understanding of

17 what the nexus requirement is?

18 A Yes.

19 Q And what is your general understanding?

20 A My general understanding is that the

21 expenditures in the DI -- that are reported to the DI

22 products under subprong C must be related to the patented

23 technology.

24 Q And, again, you're not a technical expert;

25 correct?

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1 A No.

2 Q So you weren't asked to try to match up

3 investments to particular technology in the patents;

4 correct?

5 A That's right. I was not asked to do that.

6 Q Your job was to analyze the data?

7 A Yes.

8 Q And the investments; correct?

9 A Yes.

10 Q What's your understanding of the legal

11 requirement under A and B, is there a nexus requirement?

12 A No.

13 Q Can you give me your general understanding of

14 what the investments -- how the investments fall into A and

15 B?

16 A You mean the numbers?

17 Q Meaning do they need to relate to the product,

18 do they need to relate to the patent, et cetera.

19 A You mean the numbers or --

20 Q I'm sorry, it was a poorly phrased question.

21 Under -- under subprongs A and B --

22 MR. CORDELL: Your Honor, I think it's actually

23 a good question and I'm afraid counsel is going to lead him

24 now.

25 JUDGE PENDER: Yes, yes, yes, yes. But we've

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1 all been -- I think you're fine now. I think you

2 rehabilitated him enough. And Ms. Murray will back me up

3 on this.

4 Aren't the costs that matter in this case in A

5 and B anyway?

6 MS. MURRAY: Under current Commission precedent,

7 yes, your Honor.

8 JUDGE PENDER: Okay.

9 MR. LASHER: Your Honor, I think that is going

10 to be largely the legal fight between A, B and C.

11 JUDGE PENDER: But you want to put some in C as

12 well because of the current who knows how some things are

13 going to turn out. Okay, I'm following you.

14 MR. LASHER: That's correct, your Honor.

15 Your Honor, I have no further questions.

16 JUDGE PENDER: Thank you, Mr. Lasher. I

17 appreciate it.

18 Are we done with this witness or do you need

19 some more recross, Mr. Cordell?

20 MR. CORDELL: A handful of questions, to quote

21 Mr. Massa?

22 JUDGE PENDER: Okay. Then we'll cut out, we'll

23 end around noon, I guess.

24 RECROSS-EXAMINATION

25 BY MR. CORDELL:

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1 Q So, Dr. Kerr, I took some heart in your

2 statement that you're not here to offer legal opinions;

3 right?

4 A Yes.

5 Q And you're not here to tell Judge Pender how to

6 classify expenses under the statute; right?

7 A If that's a legal opinion, no.

8 Q Okay. But when I look at your witness

9 statement, if you can turn with me to section 8, which

10 reads "assignment of investments in DI products to

11 subprongs A through C," that seems an awful lot like you're

12 offering Judge Pender legal advice; right?

13 A No, I'm not offering legal advice.

14 Q So just to be absolutely clear, you're not here

15 to tell Judge Pender that any particular expenditure is

16 appropriate under any section of the statute; correct?

17 A I am not -- I do not interpret the statute.

18 Q Well, more than that, you are here to count the

19 numbers; right?

20 A Yes.

21 Q And you're here to count the numbers associated

22 with a particular set of products or things; right?

23 A Yes.

24 Q And then you're leaving it to Judge Pender to

25 decide which prong of the statute to apply those at; right?

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1 A Except that I was asked to do that, and I --

2 with an understanding of what goes into A, B and C, and

3 those numbers are in the report, in the witness statement.

4 Q So that may be the problem. So you can't tell

5 us how to take a particular expenditure and what the

6 criteria are that are used to allocate it between A, B or

7 C; correct?

8 A I cannot tell you that from a legal perspective.

9 I can tell you that from an economic perspective.

10 Q Well, more than that, sir, when -- one of the

11 domestic industry products that you considered was the

12 Snapdragon; right?

13 A There are a number of Snapdragon products, yes.

14 Q Do you recall any of them?

15 A I'm sorry?

16 Q Can you recall any of them?

17 A I recall a lot of them. I don't recall any

18 specifically.

19 Q Are you familiar with the SDM660?

20 A There's hundreds of products. I don't know any

21 of them in particular.

22 Q Are you aware that the SDM660 literally has

23 thousands of functional blocks in it?

24 A I don't know what it has.

25 Q It does everything from communications to

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1 applications to making toast. Are you aware of that?

2 A To making toast?

3 Q Really heats up.

4 A I would doubt that, but yes.

5 Q But the point here is that there are thousands

6 of functions baked into that chip; right?

7 A Are there? Yes, I'll take your word for it.

8 Q You just don't know one way or the other?

9 A No, no.

10 Q And yet, you're able to take all of the expenses

11 associated with the Snapdragon SDM660 and put them into a

12 category; right?

13 A Exactly. If the -- if the product you're

14 talking about is properly a DI product, I understand the

15 role of the economist in this case is to look at the

16 expenses and attribute them to the DI product.

17 Q So in your view, if I've got a patent on a tire

18 that goes onto a Buick, it would be -- it would be

19 perfectly acceptable to include the entirety of the Buick

20 within your domestic industry analysis?

21 MS. MURRAY: Objection, your Honor.

22 Mr. Cordell's entire line of questioning was that this

23 witness is not entitled to offer legal opinions. Here he's

24 asking him for another legal opinion as to what goes into

25 the economic prong.

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1 JUDGE PENDER: Mr. Cordell will do something

2 different.

3 MR. CORDELL: I will rephrase it.

4 BY MR. CORDELL:

5 Q As an economist, you would count the entirety of

6 the Buick in that analysis. If some lawyer told you that

7 the tire is covered by the patent, then you would say I'm

8 going to put all of the Buick into my economic analysis;

9 right?

10 A You know, it -- I can't imagine that being the

11 case. If the tire is what's covered, the tire would be the

12 DI product.

13 MR. CORDELL: Okay. Thank you.

14 Nothing further, your Honor.

15 JUDGE PENDER: I note that that's a very common

16 situation, I mean and I've had several cases on that,

17 whether you count the entire unit as being part of domestic

18 industry or just the parts that go into it.

19 And in every instance where I found the entire

20 unit to be domestic industry, I've been upheld. So --

21 MR. CORDELL: We'll work at that, your Honor.

22 JUDGE PENDER: I do -- I'm very careful about

23 that.

24 MR. CORDELL: Well, there's an abstraction that

25 has to obtain; right? There has to be a limit.

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1 JUDGE PENDER: Right. But you need to make the

2 arguments and I appreciate that. It's now noon. We get

3 back around 1:15. And it looks to me like we're doing well

4 schedulewise, and there's no reason Dr. Kerr cannot be

5 excused or has he got rebuttal or anything, Mr. Lasher?

6 MR. LASHER: No rebuttal from Dr. Kerr, your

7 Honor.

8 JUDGE PENDER: Dr. Kerr, thank you for your

9 patience and tolerance.

10 THE WITNESS: Thank you, your Honor.

11 JUDGE PENDER: Have a good rest of the day, sir.

12 See you all at 1:15.

13 (Whereupon, at 11:58 a.m., the hearing was

14 recessed, to be reconvened at 1:15 p.m. this same day.)

15

16

17

18

19

20

21

22

23

24

25

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1 AFTERNOON SESSION (1:17 p.m.)

2 JUDGE PENDER: Mr. Nelson, the next witness, of

3 course, is Mr. Sidak; right?

4 MR. NELSON: Yes.

5 JUDGE PENDER: And then after that Krishna?

6 MR. NELSON: No. See, your Honor, those are the

7 349 witnesses. Remember we had the agreement, because

8 coverage from Apple's side on Dr. Baker, as well as

9 Mr. Leucht-Roth that needed to go on Wednesday, so we

10 accommodated them and Mr. Krishna would go then.

11 JUDGE PENDER: Okay. I don't mind. I mean, you

12 know --

13 MR. NELSON: Yeah. My understanding, your

14 Honor, is that if -- which I suspect that Dr. Sidak is not

15 going to take the rest of the afternoon, although I'm not

16 doing the cross so I can't say that for sure.

17 JUDGE PENDER: I only show 70 minutes of time

18 there. But anyway, we will see.

19 MR. NELSON: Right. And then I believe it would

20 be to Mr. Blevins. Because we would start with Apple's

21 witnesses. And then there were two -- two what I would

22 call prior art -- excuse me, then Mr. Polak; is that

23 correct, from Intel.

24 Then there were two prior art witnesses. I

25 actually looked at those things over lunch and I conferred

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1 with the Staff and Apple. I'm not going to cross those, so

2 we can just take those witness statements in, your Honor.

3 Those would be Mr. Choi and Choudhury. And then I believe

4 it would go to Dr. Apsel; is that correct?

5 MR. LEE: Right.

6 JUDGE PENDER: So we're doing well. I like how

7 you said Mr. Choi. Remember that conversation I had with

8 your partner, Mr. Pak, and how that's pronounced Choi. So

9 we have Americanized it to C-h-o-i, but in Korea if you

10 call somebody Choi, they won't look at you.

11 MR. NELSON: Yeah, I'm -- that's the

12 pronunciation we've been using throughout the

13 investigation, but I understand, your Honor. I do recall

14 that conversation.

15 JUDGE PENDER: Yes, all right. I just -- the

16 reason I'm doing this is because I want to make sure this

17 case stays on time and everything like that. I don't want

18 to lose a bubble or anything. I know you guys will do

19 that, but it's part of my nature to make sure that nothing

20 is going wrong.

21 MR. LEE: And we have all the witnesses here

22 that Mr. Nelson mentioned, so we can move through them as

23 quickly as we get to them. There will be no downtime, your

24 Honor.

25 JUDGE PENDER: Thank you, Mr. Lee.

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1 You know, so far, and I don't want to jinx it,

2 but I've been very pleased with the way things have been

3 going, you know, timewise and the conduct of everybody.

4 And so if we can have a hearing like this, we'll have a

5 beautiful record, which would be really nice, okay.

6 MR. NELSON: Agreed, your Honor.

7 JUDGE PENDER: Thank you.

8 MR. LEE: Your Honor, Mr. Mueller will be doing

9 the next witness for us.

10 JUDGE PENDER: Okay. And that's Mr. Sidak?

11 MR. NELSON: Sidak.

12 JUDGE PENDER: And he is standing over there

13 waiting to come?

14 MR. MARRIOTT: He is, your Honor. Good

15 afternoon.

16 JUDGE PENDER: Good afternoon.

17 MR. MARRIOTT: David Marriott from Cravath Swain

18 and Moore for Qualcomm. We call Mr. Sidak, your Honor.

19 And we have already passed out, your Honor, witness books.

20 I believe you have four for Mr. Sidak as well as a

21 cross-examination book in front of your Honor.

22 JUDGE PENDER: I should have noticed that, yeah.

23 We're not just killing trees in this case, we're killing

24 whole national forests, huh?

25 MR. MARRIOTT: I think that is probably right,

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1 your Honor.

2 JUDGE PENDER: That way Mr. Cordell will not be

3 able to go out and hunt in that part of Virginia. You

4 don't even need trees. I was out over the weekend and

5 there was a whole herd of whitetail right in the middle of

6 my cornfield.

7 MR. CORDELL: Eating is better there.

8 JUDGE PENDER: There's three fewer now. I have

9 that any time, any number permit, you know?

10 (Laughter.)

11 Mr. Mueller, you may start, please.

12 MR. MARRIOTT: Thank you, your Honor.

13 Whereupon,

14 J. GREGORY SIDAK

15 was called as a witness and, having first been duly sworn,

16 was examined and testified as follows:

17 THE WITNESS: I would just like to correct for

18 the record, though, that I'm not Dr. Sidak.

19 JUDGE PENDER: You're not? Just plain old Mr.?

20 THE WITNESS: No, that's right, just plain

21 old Mr.

22 JUDGE PENDER: Go ahead and turn the volume up

23 for me when you talk. Don't be afraid to kind of talk

24 loud.

25 MR. NELSON: I think that was my error, your

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1 Honor. I think I misled you. It came out. I wasn't

2 trying to elevate the witness. So it wasn't an intent to

3 mislead, but that's my fault.

4 JUDGE PENDER: I didn't even notice until you

5 reminded me, you know? We get in trouble when we remind

6 people, things.

7 MR. NELSON: You know, I'm an honest guy, your

8 Honor. I admit mistakes.

9 MR. MARRIOTT: May I proceed, your Honor?

10 JUDGE PENDER: Please.

11 MR. MARRIOTT: Thank you.

12 DIRECT EXAMINATION

13 BY MR. MARRIOTT:

14 Q Mr. Sidak, would you please introduce yourself.

15 A My name is J. Gregory Sidak.

16 Q And how are you employed, Mr. Sidak?

17 A I am employed at Criterion Economics here in

18 Washington, DC.

19 Q Tell us a little bit, if you would, please,

20 about Criterion.

21 A I missed the last part, I'm sorry.

22 Q Tell us a little bit, please, about Criterion.

23 A Criterion Economics is a consulting firm that I

24 started in 1999. I'm the chairman of the firm. We work on

25 economic analysis used in complex legal disputes. That

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1 could include trials in Federal Court or arbitrations or

2 matters in front of regulatory proceedings.

3 Q What is your educational background, Mr. Sidak?

4 A I attended Stanford University, where I got a

5 bachelor's degree in economics, a master's degree in

6 economics, and a law degree.

7 Q Just give us, if you would, a little sense of

8 your employment history as it relates to this matter and

9 the opinions you express in this matter.

10 A Sure. Well, I got out of school in 1981, and by

11 about 1986, I started working in -- at that time in

12 government on issues relating to the telecommunication

13 industry. And over the years, I've worked at the Council

14 of Economic Advisers in the White House, at the Federal

15 Communications Commission. I've worked in academia at the

16 American Enterprise Institute for 13 years.

17 And along the way, I developed my consulting

18 practice, which focuses mainly on intellectual property,

19 competition and regulatory issues involving

20 telecommunications media and the Internet.

21 Q Tell us if you would, please, about any

22 publications you may have.

23 A I've published six books and about 150 articles

24 in academic journals or volumes.

25 Q And have you previously studied the mobile

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1 device industry?

2 A Yes, I have.

3 Q And have you previously testified as an expert

4 on public interest issues in the ITC?

5 A I have, yes.

6 MR. MARRIOTT: Your Honor, we offer Mr. Sidak as

7 an expert in the field of economics.

8 MR. MUELLER: No objection, your Honor.

9 MS. MURRAY: No objection, your Honor.

10 JUDGE PENDER: Okay. I accept Mr. Sidak as an

11 expert in economics. But Mr. Sidak, where is your greatest

12 comfort area? Where do you feel most comfortable?

13 THE WITNESS: My greatest comfort?

14 JUDGE PENDER: Yes, as far as professionally.

15 THE WITNESS: Oh, economics.

16 JUDGE PENDER: Economics?

17 THE WITNESS: Yes.

18 JUDGE PENDER: Can you give me an example of an

19 area, maybe a case where you talked about public interest

20 where you think you made a difference, for instance?

21 THE WITNESS: Well, I worked on two disputes

22 here at the ITC between Ericsson and Samsung, 862 and 866.

23 And I gave expert economic testimony relating to the FRAND

24 obligation in those two matters.

25 And so that was -- the use of economic analysis

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1 to try to help answer a legal question. In practical

2 economic terms, what was the nature of the obligation of

3 the licensor in those cases.

4 JUDGE PENDER: You've skillfully avoided me over

5 the years, huh?

6 (Laughter.)

7 All right, that's all. I just wanted to get a

8 feel for what the witness knows and doesn't and everything.

9 I don't have any problem with his qualifications. I just

10 needed a sense of him, sir.

11 Okay, Mr. Mueller, anything else?

12 MR. MARRIOTT: Thank you.

13 It's Mr. Marriott, your Honor.

14 JUDGE PENDER: Marriott, I'm sorry.

15 MR. MARRIOTT: Mr. Mueller is my colleague to

16 the right.

17 BY MR. MARRIOTT:

18 Q Have you prepared a witness statement in this

19 investigation, Mr. Sidak?

20 A Yes.

21 Q Would you look, please, at volume 1 in front of

22 you, and there I think you'll find CX-16C in the first tab

23 in the first binder. Let us know when you're there,

24 please.

25 What is Exhibit 16C?

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1 A This is my corrected direct witness statement in

2 this investigation.

3 Q And turn, if you would, to CX-16C.24.

4 A I'm there.

5 Q Is that your signature?

6 A Yes, it is.

7 Q And does your witness statement contain true and

8 accurate answers to the questions put to you by counsel?

9 A Yes, it does.

10 Q And do you adopt your witness statement as your

11 testimony in this investigation?

12 A Yes, I do.

13 MR. MARRIOTT: Your Honor, we would request that

14 Exhibit CX-16C and the exhibits thereto be admitted into

15 evidence.

16 MR. MUELLER: No objection, your Honor.

17 MS. MURRAY: No objection, your Honor.

18 JUDGE PENDER: Okay. There being no objection,

19 Exhibit CX-16C for identification along with its

20 accompanying exhibits, a list of which has been provided to

21 the court reporter, is admitted into evidence.

22 (Exhibit CX-16C received.)

23 (Exhibits received here to be listed in index.)

24 MR. MARRIOTT: Thank you, your Honor.

25 With that, I tender the witness for

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1 cross-examination.

2 MR. MUELLER: Your Honor, we already passed out

3 the cross-examination binder to your Honor and the witness.

4 I would just note that there's a couple placards that I

5 intend to use, and we have some easels over here. Just a

6 bit of a preview for later in the examination.

7 JUDGE PENDER: Okay. What you can do is you can

8 put them in front of the translator's desk, and that way --

9 okay?

10 MR. MUELLER: That sounds great, your Honor.

11 We'll do that. May I proceed?

12 JUDGE PENDER: Please.

13 CROSS-EXAMINATION

14 BY MR. MUELLER:

15 Q Good afternoon, Mr. Sidak. My name is Joe

16 Mueller, and I'm going to ask you a few questions, if I

17 could.

18 A Good afternoon.

19 Q Now, Mr. Sidak, Qualcomm's counsel just

20 introduced into evidence your direct witness statement;

21 correct?

22 A That's correct.

23 Q And your direct witness statement recites

24 certain opinions from your opening expert report; correct?

25 A Yes.

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1 Q You've also submitted a rebuttal witness

2 statement in this matter?

3 A That's correct.

4 Q And that rebuttal witness statement draws from

5 your rebuttal expert report; is that right?

6 A Yes, that's correct.

7 Q So today I'm going to confine my questions to

8 your opening expert report, and I'll ask you questions

9 about your rebuttal report the next time you're on the

10 stand, okay?

11 A Thank you.

12 Q Now, you mentioned a bit of your background with

13 Mr. Marriott. You are the owner of Criterion; correct?

14 A That's correct.

15 Q Chairman and owner; right?

16 A That's correct.

17 Q And you mentioned you've authored a number of

18 articles and books; is that correct, sir?

19 A Yes.

20 Q And those papers reflect your independent

21 judgment, your independent views; right?

22 A That's correct.

23 Q Each and every one of them?

24 A Yes.

25 Q Okay. We'll come back to that.

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1 I want to ask you about your opinions as recited

2 in your direct witness statement. And to start with,

3 you've referred to the exclusion and cease-and-desist

4 orders that Qualcomm is seeking as the requested orders,

5 right, as shorthand?

6 A That's correct.

7 Q And you've concluded that the requested orders,

8 in your view, will have no adverse consequences for the

9 statutory public interest factors; right?

10 A Yes.

11 Q In fact, you say the requested orders would

12 serve the public interest; correct?

13 A Yes.

14 Q Now, your analysis draws on what you call the

15 evidence that the accused articles, the iPhones at issue in

16 this case, represent a limited subset of mobile devices

17 available in the United States; correct?

18 A Yes, that's part of the basis for my opinions.

19 Q And you believe there are many reasonable

20 substitutes for the accused articles; correct?

21 A Yes, I do.

22 Q And in your direct witness statement, you've

23 listed 85 potential substitutes?

24 A Yes.

25 Q And, in fact, when you were asked at your

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1 deposition, you couldn't identify a single phone that you

2 believed would not be a reasonable substitute for the

3 accused articles in this case; correct?

4 A I don't recall that question in my deposition,

5 no.

6 Q Let me try to refresh your memory if I could.

7 And if you could turn to tab 8 in your binder, this is your

8 deposition transcript. And sir, if you could please turn

9 to page 191, line 11.

10 "Question: Can you --

11 A I'm sorry, I'm still --

12 Q I'm sorry, let me know when you're there.

13 A Page 191?

14 Q 191, line 11.

15 JUDGE PENDER: I think that you're not going to

16 get anything out of that, Counsel. What you're suggesting

17 in refreshing his memory is not attached to the gravamen of

18 the answer there.

19 MR. MUELLER: I'm sorry, sir?

20 JUDGE PENDER: I'm doing a sua sponte exception

21 to the form of the question. He basically, he can handle

22 it on his own there, but he says "so as a consequence, I

23 didn't spend any time trying to answer that question."

24 MR. MUELLER: That's all I was trying to elicit

25 is that he didn't try to --

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1 JUDGE PENDER: Mr. Sidak, do you agree with the

2 question and the answer as presented there?

3 THE WITNESS: In the deposition transcript?

4 JUDGE PENDER: Yeah.

5 THE WITNESS: I do, yes.

6 JUDGE PENDER: Okay. So in other words, you

7 can't identify any phone in the United States today that

8 would be a reasonable substitute for one of the accused

9 articles that operates on a 4G network because you didn't

10 spend any time trying to do that?

11 THE WITNESS: That's correct, your Honor.

12 JUDGE PENDER: All right.

13 Go ahead now.

14 BY MR. MUELLER:

15 Q So I want to focus on what you did spend your

16 time on. You developed a list of 85 phones; correct?

17 A That's correct.

18 Q And in compiling that list, you looked at

19 certain features and functionality; right?

20 A Yes, I did.

21 Q And one of those features that you used was

22 high-speed LTE connectivity; correct?

23 A Correct.

24 Q LTE is a cellular standard?

25 A Is that a question?

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1 Q It is; right?

2 A Yes, it is.

3 Q And it's a fourth generation or 4G cellular

4 standard; correct?

5 A Correct.

6 Q So you considered whether potential substitutes

7 supported this 4G standard LTE; correct?

8 A Yes.

9 Q Now, for your opening report from which your

10 direct witness statement was drawn, you also considered 5G

11 technologies as part of your analysis; correct?

12 A Yes, but not for purposes of drawing up that

13 list of reasonable substitutes for the accused articles.

14 Q Understood. But you're familiar with 5G

15 technologies as well, and you studied it for this case;

16 correct?

17 A That's correct.

18 MR. MUELLER: Your Honor, may I approach the

19 first placard I intend to use? And your Honor, with your

20 permission, may I stand here?

21 JUDGE PENDER: Sure. The only people you're

22 blocking is your co-counsel, so --

23 MR. MARRIOTT: May I stand behind here, your

24 Honor?

25 JUDGE PENDER: Yes, of course. Make yourselves

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1 comfortable with the situation. Everybody can come around,

2 I don't mind.

3 BY MR. MUELLER:

4 Q So, sir, you see here on this diagram a

5 depiction of multiple generations of cellular standards.

6 And do you see there's 2G or second generation right here?

7 A Yes, I do see that.

8 Q And 2G included standards like GSM, for example;

9 correct?

10 A Yes.

11 Q And second generation standards supported phone

12 calls and applications like text messages; right?

13 A Yes.

14 Q And at the bottom here, just to orient

15 ourselves, we have a cell phone.

16 Do you see that, sir?

17 A Yes.

18 Q And you understand that the critical chip or

19 computer chip inside of the cell phone to perform cellular

20 processing is called the baseband chipset?

21 A Yes.

22 Q And let's just assume, I'll represent to you,

23 that we're intending to depict a baseband chipset here.

24 Do you see that, sir?

25 A I do see it, yes.

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1 Q Okay. So if we go beyond 2G, we arrive at 3G.

2 And for 3G speeds went up; correct?

3 A Correct.

4 Q Additional applications were enabled; right?

5 A Yes.

6 Q Streaming music was one example?

7 A Yes.

8 Q Sending and receiving photos?

9 A Yes.

10 Q Maps?

11 A Yes.

12 Q Now, phones evolved and arrived at 4G; correct?

13 A Yes.

14 Q And that's where we are today, in terms of

15 what's presently on the market?

16 A That's right.

17 Q 4G includes LTE; correct?

18 A Correct.

19 Q One of the characteristics you used in compiling

20 your list of 85 phones; right?

21 A Yes.

22 Q Now, 4G includes additional functionality beyond

23 those in 3G; right?

24 A Yes, it does.

25 Q Higher data speeds?

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1 A Is that a question?

2 Q It is.

3 A Yes.

4 Q Mobile games, for example?

5 A Yes.

6 Q Some ability to use your phone to communicate

7 with appliances within your home, your thermostat, for

8 example?

9 A Yes.

10 Q Smart watches?

11 A Yes.

12 Q Communicate with your car to receive phone

13 calls, as an example?

14 A Yes.

15 Q Streaming movies and streaming sports?

16 A Yes.

17 Q Video chatting?

18 A Yes.

19 Q Now, those are all built upon the foundation of

20 3G and 2G; correct?

21 A Are you saying those applications or the 4G

22 standard itself?

23 Q The 4G technologies are built on that earlier

24 foundation; right?

25 A Yes.

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1 Q And, for example, a 4G LTE phone today also

2 needs to be able to support 3G; correct?

3 A Yes.

4 Q Now, tomorrow or at some point in the future, we

5 will arrive at 5G; correct?

6 A Yes.

7 Q And that's in development right now through the

8 research and hard work of a number of companies; correct?

9 A Yes.

10 MR. MARRIOTT: Your Honor, may I just briefly

11 object? Counsel had represented that this examination

12 would be limited to Mr. Sidak's direct report, his opening

13 report. I don't believe there's any reference to 5G in

14 Mr. Sidak's opening report. 5G is the subject of his

15 rebuttal report, which I understood to be the testimony --

16 the subject of testimony when Mr. Sidak next takes the

17 Stan. So I flag that as beyond the scope of the direct.

18 MR. MUELLER: Two responses, your Honor. First,

19 5G was referenced in the opening statement -- opening

20 report, expert report, from which the direct witness

21 statement was drawn.

22 Second, I'm doing this to orient ourselves with

23 respect to the list of 85 substitutes, which I am going to

24 return to in a moment after briefly reviewing 5G.

25 JUDGE PENDER: Right, right. One thing to point

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1 out, 5G is speculative, okay. Everybody keep that in mind.

2 MR. MUELLER: May I continue, your Honor?

3 JUDGE PENDER: Please continue.

4 MR. MUELLER: Thank you, sir.

5 BY MR. MUELLER:

6 Q Now, for 5G there's various technologies that

7 are in development; correct?

8 A Yes.

9 Q It's intended to support higher data speeds?

10 A That's correct.

11 Q It's intended to increase connectivity with

12 various types of applications; correct?

13 A Yes.

14 Q And some of the use cases involve government

15 agencies?

16 A I imagine that's true.

17 Q Electrical grids?

18 A Yes.

19 Q Self-driving cars?

20 A Yes, definitely.

21 Q Drones?

22 A Yes.

23 Q First responders?

24 A I'm not sure exactly what you're thinking about

25 in terms of a first responder application but --

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1 Q Health applications?

2 A Yes.

3 Q Now, these 5G technologies in development are

4 being built on the foundation of 4G; correct?

5 A Yes.

6 Q And, in fact, many of the enhancements in LTE

7 are essential building blocks for 5G; correct?

8 A Yes, I think that's -- that's correct.

9 Q The present 4G industry is driving the future 5G

10 innovation; correct?

11 A I'm not sure I completely understand what you

12 mean by driving. In a technological -- well, I'll let you

13 clarify.

14 Q Well, you'd agree, sir, from an economic

15 perspective, present industry can drive future innovation;

16 correct?

17 A Yes, but I still don't understand what you mean

18 by drive. Are you talking about developing the technology

19 or -- are you talking about an economic phenomenon, apart

20 from the technology?

21 Q Let me try it this way. The technological

22 foundation for 5G will be 4G. 4G is the foundation on

23 which 5G is being built?

24 A Right.

25 Q Correct?

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1 A Yes.

2 Q Now, with that background in mind, let's go back

3 to your list of reasonable substitutes, and these include

4 some flagship products made by companies like Samsung and

5 LG; right?

6 A Well, they include phones made by Samsung, LG

7 and others. I'm reluctant to describe them as flagship or

8 give them any other kind of label. They're phones with a

9 great deal of capability.

10 Q The highest-performing phones made by those

11 companies are on your list; correct?

12 A That's right.

13 Q And someday it will be phones like that that

14 will be the first phones to support 5G; correct?

15 A I don't know that for a fact.

16 Q You would agree with me, sir, that the highest

17 performing phones offered at any moment in time will be the

18 first phones to support 5G?

19 A That the highest performing phone at any time,

20 even before the 5G standard has been issued in.

21 Q No, sir. I mean when 5G is unveiled, it would

22 first be unveiled in those flagship, top of the line

23 phones; correct?

24 JUDGE PENDER: Excuse me, Counsel. I -- I have

25 a problem with this line of testimony because it's

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1 speculative. And I have a messed up record if I allow

2 speculative questions about what might occur in the future.

3 I mean, you know, stuff that you can project

4 from, I'm nervous about this, you know. I don't know how

5 much credibility I'm going to give to anybody about this,

6 you know?

7 MR. MUELLER: That's fine, your Honor. I can

8 take it right back to the phones on his list of today.

9 JUDGE PENDER: Right, right.

10 BY MR. MUELLER:

11 Q Why don't we do that, sir. With respect to the

12 phones on your list, these 85 models, I think you said

13 you're reluctant to use the term "flagship"?

14 A Yes.

15 Q Now, you do understand that's a term used in the

16 cellular industry, including by cellular chip suppliers by

17 Qualcomm, they use the term "flagship smartphone," right?

18 A Yes.

19 Q And they also use the term "premium smartphone,"

20 correct?

21 A Yes.

22 Q And they use those terms interchangeably; right?

23 A I don't know that for a fact.

24 Q Well, you understand that a gentleman named

25 Keith Kressin from Qualcomm was deposed in this case as a

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1 corporate designee on behalf of Qualcomm?

2 A Am I aware that he was deposed? Yes.

3 Q He's the vice president of product management;

4 right?

5 A That's my understanding, yes.

6 Q Let's take a look at what Mr. Kressin said as a

7 corporate designee. This is at tab 10 in your binder, sir.

8 If you could let me know when you're at page 22. Line 22.

9 Are you there?

10 A I'm just reading it. Yes, I'm there.

11 Q "Question: Have you heard the term flagship

12 smartphone?

13 "Answer: Yes.

14 "Question: And what is a flagship smartphone?

15 "Answer: Usually we use that anecdotally to

16 refer to the -- either the best or one of the best handsets

17 that an OEM would make available to their customers.

18 "Question: And have you also heard the term

19 premium smartphone?

20 "Answer: Yes.

21 "Question: And does it also refer to the same

22 class of flagship products?

23 "Answer: Yes. Different people may use the

24 terms interchangeably, but it's a very similar idea. Yes."

25 Now, sir, you don't disagree with the testimony

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1 of Qualcomm's corporate designee, do you?

2 A I don't disagree with his testimony. I'm

3 simply -- these particular labels are not things that

4 mattered for purposes of my compiling the list of

5 reasonable substitutes in my testimony.

6 Q So your list of 85 substitutes included some of

7 these flagship premium smartphones; correct?

8 A Yes.

9 Q But also included some less powerful, lower cost

10 phones as well; right?

11 A That's correct.

12 Q So, for example, you included the LG K3, which

13 is priced at $99.99; correct?

14 A Yes.

15 Q And that's not a flagship or premium smartphone;

16 right?

17 A Not according to the definition that you're

18 referencing here.

19 Q Your group of 85 phones is much broader than

20 premium smartphones; correct?

21 A Yes.

22 Q Now, you understand that Qualcomm presented two

23 corporate designees in this case to offer testimony on

24 behalf of the company on the topic of which phones are

25 competitive with the accused Apple iPhones?

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1 Do you understand that, sir?

2 A Yes.

3 Q One was Mr. Kressin, we just looked at a portion

4 of his testimony, and the other was the president of

5 Qualcomm Incorporated, Mr. Amon. You know that, sir?

6 A Yes, I do.

7 Q Now, they presented a list, actually brought a

8 list to Mr. Amon's deposition of the phones -- or

9 illustrative phones competitive with the iPhones accused in

10 this case.

11 Do you recall that, sir?

12 A Yes, I do.

13 Q So why don't we take a look at the list that was

14 brought. This is at tab 12 in your binder, sir. If you

15 could let me know when you're there.

16 Mr. Lee, if we could put this up, this is

17 CX-2344C, which was Deposition Exhibit Number 6 at

18 Mr. Amon's deposition.

19 Mr. Sidak, are you there?

20 A I am.

21 Q Now, this included a pair of charts. And do you

22 see they are under the title, if we go to the next page,

23 "alternatives to excluded iPhones."

24 Do you see that, sir?

25 A I do.

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1 Q As context, you've identified 85 phones as

2 reasonable substitutes, right?

3 A Yes. The 85 include the 21 that Mr. Amon

4 identified.

5 Q Right. Mr. Amon identified a much smaller set,

6 and they are shown here in the second chart; correct, sir?

7 A Yes.

8 Q For the iPhone 7 and 7 Plus that are accused in

9 this case, he identified as potential alternatives those

10 products in the far right column; right?

11 A Yes, the upper right segment there.

12 Q I'm sorry, sir, are you done?

13 Each and every one of those phones is a premium

14 smartphone; correct?

15 A Within your definition, yes.

16 Q For the iPhone 8, 8 Plus and 10, Mr. Amon

17 identified another set of competitive alternatives;

18 correct?

19 A Yes, he did.

20 Q And each and every one of those was a premium

21 smartphone as well; right?

22 A Yes, within your definition of premium.

23 MR. MUELLER: Now, your Honor, may I put up

24 another placard, please?

25 JUDGE PENDER: Excuse me?

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1 MR. MUELLER: May I put up another placard?

2 JUDGE PENDER: Yes.

3 BY MR. MUELLER:

4 Q What I've done, Mr. Sidak, is taken that second

5 chart and put it on a board. Do you see it's the exact

6 same text that we just looked at a moment ago?

7 A Yes.

8 Q What I want to explore now is who supplies the

9 baseband chip for these phones that Qualcomm identified as

10 the competitive alternatives to the accused products. Do

11 you have that subject in mind?

12 A Yes.

13 Q Now, if you go back to Mr. Kressin's deposition,

14 I think this might be helpful to us, and this is at tab 10

15 in your binder, and I'm going to ask you if you could to

16 turn to page 78 and let me know when you're there.

17 A Okay. I'm at 78.

18 Q Now, Mr. Kressin was also offered as a corporate

19 designee on the same subject as Mr. Amon. He was also

20 offered as a corporate designee on this chart. Do you

21 understand that, sir?

22 A Yes.

23 Q And I want to focus your attention on the

24 questions that begin at line 12 on page 78. And do you see

25 Mr. Kressin was asked about the Samsung products that

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1 Qualcomm had identified as alternatives to the accused

2 iPhones in the top portion of the chart?

3 Do you see that, sir?

4 A Yes, I do.

5 Q The question at line 18 was, if we could put

6 that up, "Does Qualcomm supply cellular chips for those

7 premium smartphones?"

8 And the answer was, "Qualcomm is a provider for

9 Samsung in these four. I don't know the exact mix of

10 where Exynos is used and Snapdragon is used, but yes,

11 Snapdragon is used in those devices."

12 Do you see that, sir?

13 A I do see that.

14 Q Now, what he's referring to -- your Honor, may I

15 approach the board?

16 What he's referring to is that for these Samsung

17 phones, Samsung self-supplies some of the baseband chipsets

18 for some of these phones; correct?

19 A Yes.

20 Q The remainder are supplied by Qualcomm; correct?

21 A I don't know for a fact that all of the

22 remainder is supplied by Qualcomm.

23 Q Well, we'll come back to that. We'll come back

24 to that.

25 If you could look, sir, at page 79, where

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1 Mr. Kressin was asked about the Google phones starting at

2 line 6. And do you see he was asked, "If we go down one

3 row, we have Google and the listed products are Pixel and

4 Pixel XL; right?

5 "Answer: Yes.

6 "Question: Does Qualcomm supply the cellular

7 chips for the Pixel and Pixel XL?

8 "Answer: Yes.

9 "Question: And as far as you know, Qualcomm is

10 the only supplier for those products of cellular chips?"

11 Do you see that, sir?

12 A I see that.

13 Q And he was then asked about each and every one

14 of the phones on the list. And we can march through them

15 as much as you'd like or as slowly as you'd like. But I

16 think you'll see if you look at that page, he confirmed

17 that Qualcomm is the sole supplier of the cellular chips

18 for every premium phone in the top half of the chart.

19 JUDGE PENDER: Excuse me, Counsel, where are we

20 going here? I hear a lot of testimony by you, but I don't

21 hear any questions to the witness.

22 MR. MUELLER: I'm just setting the stage, your

23 Honor, I'm going to be there in just one moment.

24 JUDGE PENDER: Mr. Marriott, I don't mind that

25 you stand up and object for the same reason I just pointed

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1 out. In fact, I would prefer that you would.

2 MR. MARRIOTT: Understood, your Honor. Thank

3 you.

4 BY MR. MUELLER:

5 Q Let's try this. Mr. Sidak, for each of the

6 phones in the table, with the exception of some percentage

7 of the Samsung phones that Samsung self-supplies cellular

8 chips, is it true --

9 A I'm sorry, I lost you already.

10 Q For each of the phones in the table, with the

11 exception of some percentage of the Samsung phones, for

12 which Samsung self-supplies baseband chips, Qualcomm is the

13 sole supplier of cellular chips for these premium

14 smartphones; correct?

15 A I don't know that for a fact unless we go

16 through the testimony here.

17 Q Well, let me take you to line 21 on page 83.

18 JUDGE PENDER: Why is it proper for you to prove

19 this using this deposition testimony with this witness?

20 MR. MUELLER: It is a corporate designee on

21 behalf of Qualcomm.

22 JUDGE PENDER: I know he's a corporate designee

23 on behalf of Qualcomm, but it's still hearsay, isn't it?

24 What's going on here?

25 MR. MUELLER: Your Honor, 30(b)(6) or the

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1 equivalent in the ITC, is usable for any purpose including

2 cross-examining the expert. And my question to the expert

3 is does he have any reason to disagree with the corporate

4 designee.

5 MR. MARRIOTT: The objection is improper

6 impeachment. I don't think there's been any statement made

7 as to which this testimony can be properly used as

8 impeachment.

9 JUDGE PENDER: I tend to agree. The problem is

10 I don't know where you're going. You have the evidence, so

11 what do you need to do with this witness?

12 MR. MUELLER: Well, your Honor, I'll get there

13 in a matter of minutes if I could. I just want to

14 establish what the chipsets are for the phones that

15 Qualcomm identified as the competitive alternatives for the

16 accused products.

17 MR. MARRIOTT: And those issues, your Honor, I

18 think are not in dispute, as you pointed out. The

19 testimony is what it is, and if it's been designated from,

20 it's been designated from.

21 JUDGE PENDER: Yes. So what's the point?

22 MR. MUELLER: Your Honor, the point I am

23 arriving at is that his opening report and his opening

24 expert witness statement don't examine the implications of

25 an exclusion order for the chipset market. As Ms. Murray

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1 pointed out in her opening statement last Friday, that is

2 part of a proper public interest inquiry in this case.

3 And it's certainly relevant --

4 JUDGE PENDER: Are your point obviously is that

5 if we exclude the Intel chips, it will a priori increase

6 Qualcomm's share.

7 MR. MUELLER: Not just that, your Honor. If you

8 exclude the Apple iPhones with the Intel chips, the U.S.

9 market for premium smartphones as defined by Qualcomm,

10 there will be a complete monopoly, 100 percent.

11 JUDGE PENDER: For the broadband -- for the big

12 chips.

13 MR. MUELLER: For the premium smartphones and

14 premium baseband chips. This chart, which came from their

15 own corporate witness, demonstrates there would be a

16 complete monopoly.

17 JUDGE PENDER: You got what amounts to an expert

18 here. Shouldn't you be framing a hypothetical question,

19 based upon this, if this, then what?

20 MR. MUELLER: That's fine, your Honor, I'm happy

21 to do it that way.

22 JUDGE PENDER: Yeah.

23 MR. MUELLER: May I approach the board?

24 JUDGE PENDER: That would be easier and cleaner.

25 MR. MUELLER: That's fine.

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1 JUDGE PENDER: If you're right, the 30(b)(6)

2 testimony establishes it.

3 MR. MARRIOTT: One additional point, your Honor,

4 if I may by way of objection. I think the point is that

5 the witness didn't in his direct testimony talk about

6 baseband chipsets. Well, the direct testimony and the

7 witness statement is what it is.

8 JUDGE PENDER: Right. This isn't in there.

9 MR. MARRIOTT: And instead, your Honor, it is

10 dealt with at great length in the rebuttal report, which is

11 the subject of testimony next week.

12 JUDGE PENDER: Which I haven't heard yet.

13 Ms. Murray, I really want to hear from you too.

14 MS. MURRAY: Your Honor, as you know, the Staff

15 is allowed to elicit additional direct testimony from a

16 witness. Given the order that we do things here, I'll be

17 doing that second. But I do intend to discuss baseband

18 processors with this witness.

19 JUDGE PENDER: Right. Find out what he knows.

20 Ms. Murray, let's not go dig too deeply in here. If we

21 have 30(b)(6) testimony that says, hey, these are all

22 Qualcomm chips, I mean, I think we can all draw the same

23 conclusion from that; right?

24 MS. MURRAY: Well, the expert doesn't seem to be

25 willing to do so, your Honor, so evidently there's a

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1 question.

2 JUDGE PENDER: Well, that's his problem, isn't

3 it?

4 MS. MURRAY: Yes, your Honor.

5 JUDGE PENDER: Do we have to give him any

6 credibility?

7 MS. MURRAY: No, your Honor. Maybe a little.

8 JUDGE PENDER: Maybe a little. All right. Keep

9 going.

10 MR. MUELLER: Ms. Murray is really making the

11 same point I'm intending to make.

12 JUDGE PENDER: I'm getting it, that's the whole

13 point. You're trying to roll craps the hard way. There's

14 an easier way to do it.

15 MR. MUELLER: Fair enough.

16 BY MR. MUELLER:

17 Q Mr. Sidak, I will ask you to assume for purposes

18 of this question that the competitive premium smartphones

19 identified by Qualcomm, each and every one of them uses

20 Qualcomm baseband chips with the exception of some Samsung

21 phones for which Samsung self-supplies.

22 Do you have that assumption in mind?

23 A I do.

24 Q And do you further understand, sir, can I ask

25 you to assume, that for the accused products in this case,

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1 Intel supplies some of the baseband chipsets for those

2 phones, sir?

3 A Yes.

4 Q So out of the competitive premium smartphones

5 identified by Qualcomm and the accused products in this

6 case, the only premium smartphones for which Intel supplies

7 a portion of the chips are the iPhones at issue in this

8 case; right?

9 A Yes.

10 Q And if Qualcomm prevails on obtaining the

11 requested exclusion orders, for the U.S. market and the

12 premium smartphones that Qualcomm identified, Qualcomm

13 would have a complete monopoly on the baseband chipsets for

14 those phones; correct?

15 A Not necessarily as a matter of economics.

16 JUDGE PENDER: Excuse me. What was that? I

17 didn't hear it, that's my problem.

18 MR. MUELLER: He said not as a matter of

19 economics.

20 JUDGE PENDER: Let's think for a minute. If you

21 have 90 percent of the market, is that a monopoly?

22 THE WITNESS: It depends on how --

23 JUDGE PENDER: Is 90 percent of the market a

24 monopoly?

25 THE WITNESS: Not necessarily. It depends on

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1 how quickly their supply response is through entry or

2 production expansion.

3 JUDGE PENDER: I hear what you're saying. Let's

4 clear the courtroom for a minute. I want counsel only.

5 Counsel only.

6 MR. NELSON: Do you want us to come up there,

7 your Honor?

8 JUDGE PENDER: Yes, that's good, that's good.

9 Witnesses out, et cetera, et cetera.

10 (Courtroom cleared of all noncounsel.)

11 (Confidential session follows.)

12

13

14

15

16

17

18

19

20

21

22

23

24

25

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1 OPEN SESSION CONTINUED

2 (Noncounsel individuals returned to courtroom.)

3 MR. MARRIOTT: Your Honor, if I may, just one

4 item, which is I believe at the beginning of your Honor's

5 remarks, when we thought were on confidential session, we

6 are now in public. So if we could just have that

7 confidential, I think that would be advisable.

8 JUDGE PENDER: Whatever you want, that's fine by

9 me.

10 MR. MARRIOTT: Thank you.

11 JUDGE PENDER: I just felt I had a more

12 understanding audience. And plus I didn't want the witness

13 to hear it until after he's done testifying. After he's

14 done testifying, I don't mind.

15 For those of you that had to move out, I

16 appreciate your patience and courtesy about that as well.

17 Thank you.

18 MR. MUELLER: May I proceed, your Honor?

19 JUDGE PENDER: Please, sir.

20 MR. MUELLER: Thank you.

21 BY MR. MUELLER:

22 Q Mr. Sidak, we have reviewed the list of

23 competitive premium smartphones identified by Qualcomm, and

24 I've asked you to make some assumptions about the baseband

25 chip supplier; right?

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1 A That's right.

2 Q Now, I want to talk about the exclusion orders

3 being sought in this case, and I'm going to ask you if you

4 agree with the following statement.

5 Do you agree that the requested remedy is

6 specifically designed to effect competition not in the

7 smartphone market but in the baseband processor market?

8 A I don't understand your question.

9 Q You don't understand it?

10 A I don't understand your question.

11 Q Do you understand the remedy at issue in this

12 case is tied to the identity of the chipset within an

13 iPhone?

14 A Yes.

15 Q Qualcomm chipset not subject to exclusion, Intel

16 chipset would be subject to exclusion; right?

17 A I do.

18 Q And you don't believe that it's relevant to the

19 public interest issues in this case whether an exclusion

20 order would lead Intel to shut down its baseband chipset

21 business; right?

22 A I think my opinion is a little different from

23 that. I don't think that that's at all likely. And it's

24 not clear to me if it does occur, why it dominates the

25 protection of Qualcomm's patent rights.

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1 Q Well, more than that, sir, you believe the

2 question of whether Intel would shut down its chip business

3 is not relevant to the public interest inquiry; correct?

4 A In my initial report, I focus on the effect of

5 the exclusion order with respect to reasonable substitutes

6 for accused products, yes. So I am focusing on the

7 smartphone market, not the baseband processor modem market,

8 which I don't think of as the primary focus of the analysis

9 of the public interest factors.

10 Q Sir, if you could please turn to your deposition

11 to page 30, line 10. And let me know when you're there,

12 please.

13 A Can you remind me which tab is --

14 Q Yes. It's tab 8 in your binder, I apologize.

15 A Did you say page 30, line 10?

16 Q Page 30, line 10. It's also up on the screen,

17 if that's easier. Okay? Are you there?

18 A No, I'm not, I'm sorry.

19 Q Are you there now, sir?

20 A Page 30, line 10, yes.

21 Q Line 10.

22 "Question: And that's one of the issues

23 relevant here, the question of whether Intel would shut --

24 shut down its chip business; correct?

25 "Answer: I don't agree.

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1 "Question: Well, you agree it's an issue that

2 Apple has -- has raised?

3 "Answer: I agree that it's an issue that Apple

4 has raised, but I don't agree that it's relevant."

5 Were you asked those questions and did you give

6 those answers?

7 A Yes, I did.

8 Q Now, you've had a relationship with Qualcomm for

9 quite some time; correct?

10 A Yes.

11 Q You've worked on behalf of Qualcomm at various

12 times since 2007?

13 A Yes, that's correct.

14 Q Over a decade?

15 A Yes.

16 Q I asked you at the beginning of your examination

17 if all of your papers reflected your own independent views.

18 Do you recall that?

19 A Yes.

20 Q And you said they did; right?

21 A That's right.

22 Q Now, it's true, is it not, that Qualcomm has

23 compensated you for your work in drafting certain papers?

24 A It's true that Qualcomm has paid me for my time,

25 yes.

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1 Q And so over a decade-plus of working with

2 Qualcomm in different capacities, some of that work has

3 been drafting papers; correct?

4 A Yes.

5 Q And you've been paid by Qualcomm more than a

6 million dollars for that work; right?

7 A That's correct.

8 Q Now, if we focus just on this case, I also asked

9 you about your ownership of Criterion, a consulting firm.

10 You're the owner; right?

11 JUDGE PENDER: Excuse me, Counsel. More than a

12 million dollars?

13 MR. MUELLER: That's right, your Honor.

14 BY MR. MUELLER:

15 Q Let's be clear. That's more than a million

16 dollars for work on papers drafted over the last 10 years;

17 correct?

18 A Yes.

19 Q Now I want to focus on your work on this

20 particular investigation. Do you have that subject in

21 mind?

22 A I do.

23 Q And you're the owner of Criterion; correct?

24 A That's right.

25 Q And Criterion has been paid for strictly this

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1 case between 3 and $4 million; correct?

2 A We have invoiced for that amount. We haven't

3 necessarily been paid for all of it yet.

4 Q May not have been paid all of it quite yet.

5 You've invoiced between 3 and $4 million for your work on

6 this investigation alone?

7 A That's correct.

8 MR. MUELLER: No further questions.

9 JUDGE PENDER: Ms. Murray.

10 MR. MUELLER: Your Honor, I can take this down.

11 MS. MURRAY: Yes, thank you.

12 Your Honor, I'm going to begin with just a few

13 questions that involve third-party confidential

14 information. It will just take a few minutes, and then we

15 can go right back on the public record.

16 JUDGE PENDER: Okay, great.

17 (Confidential session follows.)

18

19

20

21

22

23

24

25

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1 OPEN SESSION CONTINUED

2 BY MS. MURRAY:

3 Q So then let me ask you that question. Are there

4 premium tier third-party alternatives that could substitute

5 for the devices that would be excluded if a remedy took

6 place in this case?

7 A Yes.

8 Q What are those alternatives?

9 A Well, I have -- in my witness statement, I have

10 identified a list of third-party smartphones that are

11 manufactured that have comparable or better camera, battery

12 life, pixelation and so forth. It's a judgment call where

13 you conclude the last phone is on that list that would

14 satisfy the need of some consumer who would be buying it in

15 lieu of an excluded article.

16 But I think that there are in the -- at least in

17 the tens, if not, you know, the scores of a number of

18 reasonable substitutes. Even Professor Scott Morton

19 identifies 19 reasonable substitutes. And I think that

20 that is a large enough number to make the likelihood of

21 harm to consumers very small if the exclusion order were

22 issued.

23 Q Are there significant switching costs that would

24 prevent a consumer from switching from an Apple iPhone to a

25 third-party alternative?

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1 A Not in my opinion.

2 Q And why not?

3 A Because among other things, Android-based phones

4 have been offered to consumers in a way to make it as easy

5 as possible to switch from Apple phones. Many of the --

6 well, in addition, the hardware-related switching costs are

7 relatively trivial, the cords and the chargers and so

8 forth, are relatively trivial compared to the price of the

9 phone, so I don't think that's a significant impediment to

10 consumers switching.

11 The applications that are used on smartphones

12 are pretty much readily available and not tied to the

13 individual device. And if there is something like iTunes

14 that's unique to the Apple ecosystem, there's a similar

15 application offered on a Samsung smartphone.

16 And then there are the applications that are

17 available regardless of the device. And in my reports, I

18 identify what the most popular apps are. And those are

19 ones that consumers could readily download and use if they

20 switched from one of the accused devices to a different OEM

21 device.

22 Q Could you look in your binder at tab 5, SX-5.

23 A Yes.

24 Q Which fortunately is both public and larger than

25 the previous exhibits. This is a survey that asks the

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1 question, "before owning your current smartphone, have you

2 owned a phone from the same manufacturer?"

3 And looking at this chart, how many people owned

4 a phone from a different manufacturer before they purchased

5 their current phone?

6 A It looks like 29 percent.

7 Q So that would indicate that the 29 percent of

8 the consumers surveyed did not have a problem with

9 switching costs that prevented them from switching

10 providers; correct?

11 A That's what I would draw from this, yes.

12 Q And is that figure roughly consistent with your

13 understanding of the smartphone industry?

14 A Yes.

15 Q Okay. We can turn off the ELMO if you'd like.

16 Are users able to distinguish between the

17 accused iPhones and the nonaccused iPhones?

18 A Did you say are consumers able to distinguish?

19 Q Yes, yes, consumers.

20 A No. It's not outwardly apparent in any way.

21 Q Would consumers be able to use the nonaccused

22 versions of the iPhone on any U.S. network carrier?

23 A Yes.

24 Q What would the effect, if any, of an exclusion

25 order be on users who used the accused devices for

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1 healthcare purposes?

2 A I don't think the -- that there would be any

3 adverse effect on use of the accused devices for healthcare

4 purposes.

5 JUDGE PENDER: Excuse me. What about senior

6 citizens who don't have money to buy new phones, people on

7 limited or fixed incomes? Did you think about them for a

8 second?

9 THE WITNESS: Well, your Honor, all of the

10 phones that currently have been -- that are currently in

11 use obviously continue to be in use after the exclusion

12 order. The health applications that would be used by

13 people who don't yet own a phone could be supported by

14 many, if not all, of the reasonable substitutes that I

15 identified in my witness statement.

16 And many of those phones are offered at lower

17 prices than the accused articles are.

18 So if there's an affordability problem, I don't

19 think that the accused articles are doing anything to

20 make -- make those health applications more affordable to

21 consumers.

22 JUDGE PENDER: Ms. Murray.

23 BY MS. MURRAY:

24 Q Are there any premium tier smartphones that are

25 currently manufactured in the United States?

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1 A Not to my knowledge.

2 Q Now, it's reasonable to assume as a matter of

3 economic theory, is it not, that an exclusion order would

4 likely result in some increase in the cost to Apple of

5 Qualcomm baseband processors; correct?

6 A I think the answer depends on the time frame.

7 My understanding is that Apple and Qualcomm currently have

8 a supply contract that specifies prices, and that Qualcomm

9 would not have the liberty simply to unilaterally raise the

10 price of modems to Apple.

11 Over a longer period of time, this would be the

12 usual competitive forces that would influence the pricing

13 decisions of Qualcomm.

14 Q And in this case, it would be the lack of

15 competitive forces; correct?

16 A Yes. If there were not entry by another firm or

17 if by that point in the future, if the -- a license had not

18 been taken on -- by Intel on the patents in suit, there

19 could be an effect on the price that Qualcomm could charge.

20 Now, whether it would charge a higher price or not is a

21 different question. They may have some separate business

22 justification for forbearing from doing so.

23 Q So in your view, if there were an increase in

24 the cost of a baseband processor, would this lead to an

25 increase in retail prices for Qualcomm-based iPhones?

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1 A Not necessarily. It would depend on whether

2 Apple passed through any increase in the cost of its

3 baseband processor modems.

4 Q What is the current difference in price between

5 an Intel-based iPhone and a Qualcomm-based iPhone?

6 A Currently there is no difference in price, even

7 though the two baseband processor modems don't cost the

8 same.

9 Q Could you turn to I believe it's question 28 in

10 your direct report. I'm sorry, it's in your rebuttal

11 report, so I will wait and ask that question when you come

12 back on rebuttal.

13 Now, you understand that in this case, there's

14 been an allegation made that Intel may exit the market for

15 premium LTE baseband processor chipsets in the event of an

16 exclusion order.

17 Do you recall that?

18 A Yes.

19 Q If that were to happen, and I'd like you to

20 assume for the moment that it would happen, I understand

21 it's a contested issue, if that happened, it's fair to say

22 that there would be a loss of the benefits of competition

23 on the development of future baseband processor technology

24 for smartphones, isn't it?

25 A There could be, but for there to be, you would

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1 have to assume that there would be no competition between

2 thin modems and system on a chip configurations. In other

3 words, despite the difference in design, there is in effect

4 competition between the two kinds of modem designs, in the

5 sense that the phones that use the chips themselves have to

6 compete with one another.

7 And so the derived demand for the chipset is

8 subject to competitive effects as well.

9 Q Who currently sells system on a chip modems in

10 the market for premium LTE baseband processor chipsets?

11 A Well, I think virtually all the manufacturers

12 that we were discussing earlier do.

13 Q Do they all sell premium baseband processor

14 chips?

15 A I'm not sure how you're defining premium for

16 these purposes. But there are the most elite smartphones

17 sold by a given manufacturer that do contain system on a

18 chip configurations.

19 Q In fact, they contain Qualcomm system on a chip

20 configurations, don't they?

21 A Among other manufacturers.

22 Q And Samsung premium system on a chip chipsets

23 are only present in Samsung phones; correct?

24 A My understanding was that Samsung was supplying

25 Meizu in China, I believe that's how it's pronounced.

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1 Q In China?

2 A Yes.

3 Q I see.

4 A So to the extent it demonstrates an ability to

5 supply an OEM in one geographic market, I think, is

6 evidence that would be indicative of Samsung's ability to

7 supply OEMs elsewhere in the world.

8 Q And HiSilicon supplies chips only in China as

9 well; correct?

10 A That's my understanding currently.

11 Q And MediaTek and Spreadtrum do not produce

12 premium LTE baseband processor chipsets; correct?

13 A Yes, and -- yes.

14 Q And Intel currently produces only thin modems

15 which are modems without the application processor;

16 correct?

17 A Yes, that's my understanding.

18 Q So if Intel exits the market for premium LTE

19 baseband processor chipsets, the result would be a Qualcomm

20 monopoly in LTE modems sold in the merchant market;

21 correct?

22 A You're using terms that have special connotation

23 in antitrust law, and so I'm -- I'm pausing before giving

24 you a yes or no.

25 If there were no competition faced by the chips

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1 that you've just described, it could be a monopoly. But

2 the question is, is -- do those chips themselves have to

3 compete against other kinds of chips, is it really just --

4 is it a true market in an economic sense, as would be

5 analyzed using competitive economic tools, or are we just

6 talking about a customized product that has been made for

7 one particular customer, according to its specifications?

8 Q So if we currently have merchant market premium

9 LTE baseband processor chipsets from Qualcomm and Intel and

10 Intel chipsets are excluded or the Intel chipsets sold to

11 Intel's customer Apple are excluded, you're not willing to

12 say that would result in a Qualcomm monopoly?

13 A I don't think that you define a market by

14 looking at only one purchaser of the product. So no, I

15 wouldn't characterize that as a monopoly.

16 Q How many other purchasers of thin modems are

17 there?

18 A I don't know off the top of my head.

19 Q Standard economic theory provides that

20 monopolies reduce innovation and result in higher prices;

21 correct?

22 A Did you say produce or reduce?

23 Q Reduce innovation and result in higher prices.

24 Is that the effect of a monopoly?

25 A I think it's ambiguous whether monopolies

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1 increase or decrease innovation. There is the theory

2 associated with Joseph Schumpeter about creative

3 destruction, that it's the lure of achieving a monopoly for

4 a limited period of time that drives innovation and that

5 competition basically takes the form of successive

6 iterations of monopoly, where one firm displaces another,

7 which displaces another.

8 So I wouldn't -- I wouldn't generalize quite

9 that way.

10 Q Have you read the witness statement of Dr. Scott

11 Morton?

12 A Yes, I have.

13 Q Dr. Scott Morton testifies that "without Intel

14 to counteract Qualcomm's influence, it would become easier

15 for Qualcomm to steer 5G standards toward more proprietary,

16 Qualcomm-inspired solutions."

17 Do you agree with that statement?

18 A No, I don't.

19 Q And why not?

20 A Because Qualcomm is only one of a large number

21 of firms that are participating in standard-setting

22 organizations, and in my opinion, it's not realistic to

23 think that the -- a diminished influence on Intel's part

24 would somehow disrupt the workings of those

25 standard-setting organizations to Qualcomm's benefit.

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1 Q Is that because you believe Intel's influence is

2 small or Qualcomm's influence is small or some other reason

3 for your conclusion?

4 A I think it's, number one, because Intel's

5 influence is relatively small, and second, there are other

6 significant participants in those standard-setting

7 organizations besides Qualcomm that have a significant

8 influence on the decisions about which technologies will be

9 chosen for future standards.

10 Q So those other significant participants, how

11 many of them are U.S. companies?

12 A Well, first of all, I don't know which

13 standard-setting organization you're talking about, so

14 they -- the membership could vary. So I don't think I know

15 quite how to answer your question.

16 Q Well, you knew how to answer my question when

17 the question was whether Intel's influence was small. So

18 just to clarify, I'm talking about standard-setting

19 organizations that are working on 5G technology.

20 A Yes. Well, the CFIUS letter, for example, said

21 Qualcomm is the nation's leader in the development of 5G,

22 so there are presumably other American companies that would

23 have been of interest to CFIUS, but they have a lesser

24 influence on that process in the government's opinion.

25 JUDGE PENDER: You said presumably other

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1 American companies. What are they? Who are they?

2 MS. MURRAY: Yes, exactly. That is the pending

3 question, your Honor.

4 BY MS. MURRAY:

5 Q Who are the other U.S. companies who are

6 significant participants in standard-setting for 5G?

7 A Well, it's a continuing process. I don't think

8 we know the ultimate answer to the question yet.

9 Q Who are the current significant participants in

10 standard-setting for 5G that are U.S. companies?

11 A Well, Qualcomm, I would say, is the -- one of

12 the -- the leading company, if not -- well, probably the

13 leading company. I remember at my deposition, you

14 introduced a chart that had various percentages of

15 contributions and the like by different companies and we

16 went through this exercise.

17 So I don't recall them off the top of my head.

18 I remember some of the other companies, like Nokia and

19 Ericsson, but of course, they're not based in -- they're

20 not headquartered in the United States.

21 Q They're not headquartered in the United States,

22 you said?

23 A That's correct.

24 Q And you said that Qualcomm is the leading

25 participant, is that what you just testified?

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1 A Well, that's what the CFIUS letter said, yes.

2 Q Without Intel to counteract Qualcomm's

3 influence, wouldn't it be easy for Qualcomm to steer G5's

4 development in a way that favored Qualcomm?

5 A Well, not necessarily. I think you're ignoring

6 Samsung, Huawei, Ericsson and Nokia, Google, Microsoft,

7 other companies that are participants. So I don't think it

8 necessarily follows that the exit of Intel from the

9 production of baseband processor modems would have a big

10 impact, really any significant impact, on 5G development.

11 And of course, there are other uses of 5G

12 besides smartphones that Intel may continue to want to

13 pursue.

14 Q Yes. In fact, you've testified that ample

15 evidence suggests that devices other than smartphones that

16 use LTE modems will experience rapid growth throughout 2018

17 and beyond.

18 Do you recall that testimony?

19 A I do.

20 Q Which evidence are you referring to in that

21 statement?

22 A Projections of demand for the number of

23 interconnected devices that will use wireless connections,

24 Internet of things that are connected by mobile

25 communications. There are a number of estimates by

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1 Ericsson and other companies about how many billions of

2 interconnected devices there will be by 2025 or 2030 or

3 2040.

4 Q And please tell me if you can't answer the next

5 question without confidential information, because I don't

6 want to release anything on the public record.

7 What is the basis for your statement that

8 smartphones might be only a minor part of Intel's future

9 baseband processor modem business? Is that a question you

10 can answer on the public record?

11 A I don't know that it is one that I could answer

12 on the public record.

13 Q Okay. Let's set that aside, then.

14 A Okay.

15 Q You also testified that because the requested

16 orders address only Apple's accused articles, Intel could

17 still supply LTE baseband processor modems to other OEMs;

18 correct?

19 A Yes, it could.

20 Q What other OEMs purchase premium LTE thin

21 modems?

22 A Well, my understanding is right now, none of

23 them do other than -- apart from Apple.

24 Q Is it fair to say that the loss of revenue

25 resulting from exiting the market for premium LTE modems

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1 would at least hinder Intel's efforts to expand into

2 adjacent markets?

3 A I don't think -- I don't find that very likely.

4 I mean, there was testimony by one of the Intel witnesses

5 that the profits earned by -- on its thin modem business

6 were not very substantial.

7 So if that's what they forgo by exiting, then

8 it's not a very big loss of income.

9 Q So Intel could give up its sales to Apple and

10 there would be no impact on its research and development

11 with regard to 5G in markets other than baseband processor

12 markets?

13 A Well, I can't speak to what Intel's R&D plans

14 are, but I can only comment from the outside in terms of

15 what economic analysis would say their options are.

16 One thing that is important to bear in mind, if

17 Intel were to exit the thin modem business, it presumably

18 would sell -- well, it would sell that business to somebody

19 else. It's not just going to abandon the business if it

20 has some economic value. And so some other company that's

21 interested in developing that product and the future

22 technologies associated with the product will continue.

23 Q You mentioned the CFIUS letter earlier. That's

24 a letter by a division of the U.S. Treasury Department

25 regarding Qualcomm; correct?

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1 A Yes, CFIUS is composed of Treasury, Defense and

2 other cabinet agencies to review -- it's the Committee on

3 Foreign Investment in the United States.

4 Q And Qualcomm has produced that letter as Exhibit

5 CX-1929, which unfortunately I don't have in your binder,

6 but I just wanted to ask about a particular sentence.

7 Do you agree with CFIUS that "a shift to Chinese

8 dominance in 5G would have substantial negative national

9 security consequences for the United States?"

10 A I have not studied -- well, I'm not sure I

11 completely understand the full scope of what national

12 security consequences are here, whether it means the

13 compromising of American networks and infiltrate -- and

14 surveillance of communications or the like. But -- and I

15 would distinguish that from simply economic advantages to

16 American companies that might be lost to Huawei and other

17 Chinese companies.

18 But I don't have any reason to dispute this

19 sentence, no.

20 Q So you have to opinion one way or the other on

21 the question of whether a shift to Chinese dominance in 5G

22 would have national security consequences, is that --

23 A No, that's not what I said. I said I have no

24 reason to dispute this sentence.

25 Q I see, I see. I apologize.

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1 If Intel was forced to reduce its level of

2 investment in 5G technology, as a matter of mathematics,

3 overall there would be fewer U.S. resources devoted to 5G,

4 wouldn't there?

5 A All other things being equal, yes.

6 Q And at the same time, the level of foreign

7 investment would not be affected -- in 5G, would not be

8 affected by a U.S. exclusion order; correct?

9 A I'm sorry, could you repeat the question?

10 Q Yes. At the same time the level of foreign

11 investment in 5G would not be affected one way or the other

12 by a U.S. exclusion order, would it?

13 A Okay. My confusion was whether you meant

14 foreign investment in the United States or foreign

15 investment overseas.

16 Q Overseas.

17 A I agree it would not -- foreign investment

18 overseas would not be affected by the exclusion order.

19 Q So is it fair to say that logically, the U.S.

20 would be less of a leader in the area of 5G than it was

21 before Intel's exit, if such an exit did occur?

22 A I think that that's getting speculative, because

23 it's assuming that every dollar invested in the development

24 of 5G technologies is equally productive, regardless of who

25 is making the investment. So if Intel has struggled up to

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1 this point to develop its business in mobile devices and

2 chipsets for mobile devices, maybe a dollar that it invests

3 in 5G is not going to be as productive as a dollar invested

4 by some other company.

5 JUDGE PENDER: Ms. Murray, how much longer?

6 MS. MURRAY: Excuse me, your Honor?

7 JUDGE PENDER: We've been at it for a couple

8 hours now. How much longer?

9 MS. MURRAY: This is the last question, your

10 Honor, as soon as I get an answer to it.

11 JUDGE PENDER: Then we'll break. Thank you.

12 THE WITNESS: So I think you would have to

13 qualify your conclusion by asking how likely it is that

14 each dollar invested by a number of different companies

15 would be equally productive in terms of generating useful

16 R&D.

17 BY MS. MURRAY:

18 Q So it is speculative, as you say, as any

19 exclusion order public interest analysis is necessarily

20 speculative, but is it your opinion that a dollar invested

21 by Intel in 5G is less productive than a dollar invested by

22 another company?

23 A Yes.

24 MS. MURRAY: Nothing further, your Honor.

25 JUDGE PENDER: We'll be back at 3:30 real-time.

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1 (Recess.)

2 JUDGE PENDER: Your redirect, sir.

3 MR. MARRIOTT: Thank you, your Honor. Again,

4 David Marriott for Qualcomm.

5 REDIRECT EXAMINATION

6 BY MR. MARRIOTT:

7 Q Mr. Sidak, you were asked about whether an

8 exclusion order would give Qualcomm a monopoly in baseband

9 chip sets. Do you recall those questions?

10 A Yes.

11 Q You said I believe that it depends. Let me ask

12 you to -- begin by asking you what you understand and

13 believe to be the relevant geographic marketplace for any

14 evaluation of competition relating to baseband chipsets.

15 A Worldwide.

16 Q Why do you say that, sir?

17 A Because these products are sold to companies

18 throughout the world who manufacture smartphones that are

19 shipped throughout the world.

20 Q And why did you say it depends in response to

21 the question about whether an exclusion order would give

22 Qualcomm a monopoly?

23 A If I remember the context of the question

24 correctly, I was concerned about attaching economic

25 conclusions to a factual description that doesn't support a

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1 true finding of monopoly.

2 I know this is not an antitrust case, and I'm

3 not trying to suggest that we introduce a lot of antitrust

4 principles. But in an antitrust case, you don't simply say

5 something is a monopoly, you have to go about defining a

6 relevant market, establishing whether a particular firm has

7 market power or not, before you could ever get to the

8 conclusion that there was a monopoly.

9 And there are both opportunities for

10 substitution on the consumer side, the buyer side, and also

11 on the producer side in terms of entry and --

12 JUDGE PENDER: Excuse me, Mr. Mueller. What

13 does any of this have to do with the statutory factors? I

14 mean, why is it relevant that it's a worldwide market

15 versus -- the statutory factors only address what happens

16 in the United States.

17 MR. MARRIOTT: Your Honor, you mean

18 Mr. Marriott?

19 JUDGE PENDER: I'm sorry.

20 MR. MARRIOTT: I just want to make sure you're

21 not --

22 JUDGE PENDER: I'm asking you. My point is

23 let's ask relevant questions. I don't -- I don't care

24 whether it's a worldwide market. Worldwide market is

25 irrelevant to statutory factors as affecting the United

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1 States.

2 MR. MARRIOTT: Your Honor, respectfully, I would

3 submit to you the fact that the market is a worldwide

4 market is not irrelevant to the statutory factors, insofar

5 as the competitive conditions worldwide affect what

6 happens --

7 JUDGE PENDER: I understand all that. But my

8 point is I don't think it's nearly as relevant as you think

9 it is. I don't think there's going to be a lot of care or

10 concern on the Commission or at the USTR about the

11 worldwide market. They're going to be worried about the

12 market in the United States.

13 MR. MARRIOTT: Understood, your Honor.

14 JUDGE PENDER: Let's focus on that.

15 BY MR. MARRIOTT:

16 Q So Mr. Sidak, what is your opinion as to whether

17 an exclusion order would have an adverse impact on baseband

18 chipsets in the United States?

19 A My opinion is that it would not have an adverse

20 effect.

21 Q And why is that? What is the basis of that

22 opinion, sir?

23 A Because Qualcomm is able to supply baseband

24 chipsets and pick up any unmet demand if the exclusion

25 order led to reduction in production of baseband chipsets

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1 by Intel.

2 Q Have you identified any other potential

3 suppliers of baseband chipsets within the United States

4 marketplace? Who else besides Qualcomm could provide

5 baseband chip sets to Apple for the iPhone in the event of

6 an exclusion order?

7 A Well, potentially, the existing manufacturers of

8 system on a chip baseband processors could develop their

9 own versions of thin modems. And indeed, some of the other

10 OEMs have thin modems that they have designed for products

11 other than smartphones. So it's not as though they haven't

12 made that kind of baseband processor modem in other

13 contexts.

14 JUDGE PENDER: Potentially, what actual

15 suppliers are there in the United States?

16 BY MR. MARRIOTT:

17 Q What actual suppliers are there, Mr. Sidak, to

18 Apple? What potential actual suppliers are there to Apple

19 for baseband chipsets in the event of an exclusion order

20 besides Qualcomm?

21 A Again, I think all of the companies that

22 currently make other kinds of baseband processors.

23 Q Who does that include?

24 A Well, Samsung, HiSilicon, MediaTek, the

25 companies that were on that chart earlier that Ms. Murray

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1 put up.

2 Q You were asked, Mr. Sidak, whether an exclusion

3 order would result in the increase in the price of baseband

4 chips, independent of whether there is a contract between

5 Qualcomm and Apple related to the prices of baseband chips.

6 What, if any, other constraints have you identified that

7 would constrain Qualcomm's ability to raise the prices of

8 baseband chip sets in the event of an exclusion order?

9 A Well, if Qualcomm raises the price of baseband

10 chipsets and if that leads to a price increase for Apple

11 over the longer term, that would create an incentive for

12 Apple to shift towards other kinds of designs, and it would

13 also increase demand for other kinds of smartphones due to

14 some relative price change that incorporate system on a

15 chip configurations instead.

16 Q You were asked, Mr. Sidak, about what's been

17 called the merchant market for premium LTE baseband

18 chipsets. Do you recall those sorts of questions?

19 A Yes.

20 Q Are you aware of any definition of premium

21 baseband chipset that's generally accepted?

22 A I'm sorry, could you repeat the phrase again?

23 Premium --

24 Q Sure. What, if any -- is there any definition

25 of what constitutes a premium LTE baseband chipset?

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1 A No, it's strictly an idiosyncratic definition.

2 Different people will use different parameters to define

3 what they think such a chipset is.

4 Q You were asked, Mr. Sidak, about 5G.

5 A Yes.

6 Q And the potential exit of Intel from 5G

7 activities. Do you have a viewpoint or an opinion as to

8 whether it is economically plausible that Intel would

9 abandon its efforts to develop 5G technologies in the event

10 of an exclusion order?

11 A I don't think it's credible. They would be

12 passing up too great an opportunity, quite apart from the

13 smartphone business.

14 Q And what, if anything, have you determined about

15 the size of the potential Apple business that Intel could

16 enjoy outside of the United States in the event of an

17 exclusion order?

18 A Well, Apple could -- once Apple is capable of

19 supporting -- I'm sorry, once Intel is capable of

20 supporting CDMA through its chips, then Apple could be

21 selling in other countries around the world, some of them

22 with very large populations, that it's not feasible for it

23 to sell to now.

24 Q And where are Apple iPhones manufactured,

25 Mr. Sidak?

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1 A They are manufactured in China.

2 Q And when Qualcomm or Intel sells a chipset for

3 iPhones, does it know what country an iPhone with that

4 chipset will end up in?

5 A No.

6 Q You were asked about your opinion that an

7 exclusion order would be in the public interest. Why do

8 you believe that an exclusion order would be in the public

9 interest?

10 A Because it would vindicate the patent rights

11 that Qualcomm has in the asserted patents, and by doing so,

12 protect its ability and incentive to continue investing in

13 new technologies, including 5G technologies.

14 MR. MARRIOTT: Thank you, Mr. Sidak.

15 Thank you, your Honor. That's all I have for

16 now.

17 JUDGE PENDER: All right.

18 MR. MUELLER: Brief redirect, your Honor --

19 recross? Thank you.

20 RECROSS-EXAMINATION

21 BY MR. MUELLER:

22 Q Mr. Sidak, briefly on where you just left off

23 with Mr. Marriott --

24 A I can't hear you.

25 Q I'm sorry. To briefly return to where you just

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1 left off with Mr. Marriott, you understand that there's

2 also a district court case in which Qualcomm has asserted

3 the same patents against Apple? Excuse me.

4 A That's my understanding.

5 Q And that case was not stayed; correct?

6 A That's my understanding, yes.

7 Q Qualcomm will have an ability to pursue

8 remedies, including money damages, if it were to prevail in

9 that case; correct?

10 A That's my understanding, yes.

11 Q This is not the only remedy available for its

12 patents; correct?

13 A This meaning an exclusion order?

14 Q Exclusion order of the type requested by

15 Qualcomm is not the only remedy available to Qualcomm;

16 correct?

17 A Yes, but it's not my understanding that Qualcomm

18 has to elect its remedies. It has its remedies under the

19 patent act and it has its remedies here.

20 Q Sir, my point is simply it's not the only remedy

21 that Qualcomm has available; correct?

22 A Correct.

23 Q And here in the ITC, the ITC is empowered to

24 investigate the public interest; correct?

25 A Yes.

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1 Q And that's what his Honor and all of us are

2 focused on in this trial, whether the public interest would

3 be served by Qualcomm's requested exclusion order; correct?

4 A Yes.

5 Q Now, if we could go back to the chart that

6 Ms. Murray put up during her examination of you. This is

7 titled "2017Q1" --

8 MS. MURRAY: Excuse me, your Honor, this is

9 confidential information.

10 MR. MUELLER: I apologize. I can go back on the

11 confidential record briefly, your Honor.

12 JUDGE PENDER: Back on the confidential record.

13 MS. MURRAY: And, your Honor, I believe it's

14 third-party confidential information. I believe.

15 JUDGE PENDER: So everybody has to get out.

16 (Confidential session follows.)

17

18

19

20

21

22

23

24

25

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1 OPEN SESSION CONTINUED

2 MR. MUELLER: Your Honor, may I approach the

3 placard?

4 BY MR. MUELLER:

5 Q Just a few final questions, Mr. Sidak. This is

6 the chart that we looked at earlier, it's RDX-28.4. And do

7 you recall that we started with a list of what Qualcomm

8 identified as the potential alternatives to the accused

9 products?

10 Do you recall we started with that?

11 A Yes.

12 Q And then I added the baseband suppliers for each

13 of those phones; correct?

14 A Yes.

15 Q These phones are offered in the U.S. market that

16 we need to focus on; correct?

17 A That's right.

18 Q Each and every one of them is a premium

19 smartphone; correct?

20 A Yes, although as I've said, I'm not using these

21 particular characterizations as part of my determination of

22 the list of potential reasonable substitutes.

23 Q Not focused on your list. I'm saying that for

24 the list that Qualcomm gave us during discovery, each and

25 every one of these is a premium smartphone; correct?

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1 A Yes, that's how they characterized it.

2 Q Qualcomm is the sole supplier for every phone,

3 every non-Apple phone, with the exception of Samsung

4 self-supplying some portion of baseband chips to itself;

5 correct?

6 A Did you say it's the sole supplier?

7 Q Qualcomm is the sole supplier -- your Honor, may

8 I approach?

9 Qualcomm is the sole supplier to every premium

10 smartphone identified by Qualcomm itself as a competitive

11 alternative, with the exception of Samsung self-supplying

12 some chips for its own phones; correct?

13 A Yes.

14 Q Intel sells to only one of these companies, and

15 that's Apple; right?

16 A I'm sorry, when you said "these companies," I

17 don't see Apple listed there.

18 Q For these premium smartphones on Qualcomm's

19 chart, Intel supplies baseband chips only to Apple;

20 correct?

21 A Yes.

22 Q So with respect to the set of accused products

23 and the competitive alternatives identified by Qualcomm,

24 there's two baseband suppliers; right?

25 A Yes.

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1 Q Intel only supplies to the accused products;

2 correct?

3 A Correct.

4 Q Qualcomm supplies to all the rest; right?

5 A Yes.

6 Q Now, at this time, Intel is trying to compete --

7 at this moment in time, right now, Intel is trying to

8 compete with Qualcomm in the premium baseband market in the

9 U.S.; correct?

10 A Well, yes, but subject to the caveats I've made

11 earlier about whether this is a market for competitive

12 analysis purposes.

13 Q Last few questions. Two companies competing is

14 better than one monopolist for prices; correct?

15 A As a general rule, yes.

16 Q Two companies competing is better than one

17 monopolist for innovation; correct?

18 A I would say generally, yes, but it is -- there's

19 some ambiguity in the economic research on the subject.

20 Q Two companies competing is better than one

21 monopolist for the development of 5G technologies; correct?

22 A Probably, yes.

23 Q Two companies competing is better than one

24 monopolist for the national security interests implicated

25 by 5G; correct?

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1 A Yes.

2 Q Two companies competing is better than one

3 monopolist for the public interest factors; correct?

4 A Well, there it raises the question is the -- is

5 one of the competitors the party whose patents have been

6 infringed and has brought the 337 case in the first place.

7 So you're -- you would be trading off the

8 competitive benefit of competition between two firms on the

9 one hand versus the benefit of protecting the patent rights

10 of one of the firms, one of those two firms.

11 So I think it's -- it's not as clear cut as you

12 make it out to be.

13 Q Sir, if you would stay with my question. Two

14 companies competing in this premium baseband chipset market

15 in the U.S. is better than one monopolist for the public

16 interest; correct?

17 A Well, as a general proposition, yes.

18 MR. MUELLER: Nothing further.

19 JUDGE PENDER: What about quality, Mr. Sidak?

20 THE WITNESS: I'm sorry?

21 JUDGE PENDER: Isn't it better to have two

22 companies competing with one another rather than a

23 monopolist for a better quality product?

24 THE WITNESS: Generally, I think that's true.

25 JUDGE PENDER: Thank you.

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1 Are we done?

2 MS. MURRAY: Nothing further from the Staff,

3 your Honor.

4 MR. MARRIOTT: Just briefly, your Honor, if I

5 may.

6 May I approach the diagram?

7 JUDGE PENDER: Yes.

8 FURTHER REDIRECT EXAMINATION

9 BY MR. MARRIOTT:

10 Q Mr. Sidak, do you have an understanding that

11 this was provided at the deposition of Mr. Amman of

12 Qualcomm; correct?

13 A I understand that the -- this chart before the

14 various stick-on labels were attached to it was part of his

15 deposition, yes.

16 Q And do you have any understanding as to whether

17 this list of representative products was provided as a

18 comprehensive list of potential -- of alternatives to the

19 iPhone?

20 A My understanding was that it was presented all

21 along as a nonexhaustive list.

22 Q All right. So would an exclusion order here

23 prevent Intel from competing for Samsung's business for the

24 Galaxy S7 and the S7 Plus?

25 A No.

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1 Q And would an exclusion order prevent Intel from

2 competing for Google's business?

3 MR. MUELLER: Your Honor, I object to the

4 leading.

5 THE WITNESS: No, it would not.

6 MR. MUELLER: I object to the leading.

7 MR. MARRIOTT: I don't know that that's leading

8 but --

9 JUDGE PENDER: Well, it's not surprising anyway.

10 I'll allow it.

11 MR. MARRIOTT: Thank you, your Honor.

12 BY MR. MARRIOTT:

13 Q Would an exclusion order prohibit Intel from

14 competing for LG's business?

15 A No.

16 Q Would it prohibit Intel from competing for the

17 business of any OEMs listed on RDX-28.4?

18 JUDGE PENDER: That's a bridge too far, Counsel.

19 You've gone a little too far.

20 BY MR. MARRIOTT:

21 Q So who made the decision, Mr. Sidak, that Intel

22 would supply baseband chipsets only for Apple's iPhone?

23 A Intel made the decision.

24 MR. MARRIOTT: Nothing further, your Honor.

25 JUDGE PENDER: All right. Anything further for

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1 this witness?

2 MR. MUELLER: Nothing further, your Honor. I do

3 have photographs of these two placards that we can give to

4 your Honor and counsel.

5 JUDGE PENDER: You're going to do better than

6 that. You're going to give us the placards.

7 MR. MUELLER: We will do it, your Honor. We

8 will do it.

9 JUDGE PENDER: But the photographs would be

10 important, because that way if something falls off one of

11 them, we'll know what is on it, okay?

12 MR. MUELLER: May I approach, your Honor, just

13 to hand the --

14 JUDGE PENDER: Yes.

15 Any reason this witness may not be excused?

16 MR. MUELLER: He will be back for rebuttal. But

17 no, your Honor. Thank you.

18 MR. MARRIOTT: No reason here, your Honor.

19 Thank you.

20 JUDGE PENDER: Mr. Sidak, you are excused.

21 Thank you for your testimony.

22 THE WITNESS: Thank you.

23 (Witness excused.)

24 JUDGE PENDER: We have time to start at least

25 another witness; correct?

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1 MR. LEE: I hope so, your Honor. We have

2 Mr. Blevins. This is where we start to go out of order to

3 accommodate the scheduling.

4 JUDGE PENDER: Right. That's fine, good.

5 MR. LEE: Mr. Blevins is out of the room. We

6 will bring him right in.

7 MR. MUELLER: Your Honor, while he is, may I

8 move in just the two exhibit numbers, RDX-28.3 and

9 RDX-28.4?

10 JUDGE PENDER: No objection; correct?

11 MR. MARRIOTT: No, your Honor.

12 MS. MURRAY: No objection, your Honor.

13 JUDGE PENDER: Since you asked questions about

14 him, it would be tough to -- both are admitted to the

15 record in this case as evidence. I'm not going to admit

16 them as demonstrative evidence because they were testified

17 about, okay?

18 MR. MUELLER: Thank you, your Honor.

19 (Exhibits RDX-28.3 and RDX-28.4 received.)

20 MR. LEE: May I proceed, your Honor? Thank you.

21 JUDGE PENDER: You may, sir, please.

22 MR. LEE: Good afternoon, Mr. Blevins.

23 JUDGE PENDER: We need to swear him in.

24 Whereupon,

25 TONY J. BLEVINS

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1 was called as a witness and, having first been duly sworn,

2 was examined and testified as follows:

3 JUDGE PENDER: Please be seated, state your name

4 for the record.

5 THE WITNESS: My name is Tony J. Blevins.

6 DIRECT EXAMINATION

7 BY MR. LEE:

8 Q Mr. Blevins, would you speak into the microphone

9 so we can all hear you.

10 A Yes. Is that better?

11 Q I think so.

12 Mr. Blevins, where are you employed?

13 A I am employed by Apple headquarters in

14 Cupertino, California.

15 Q How long have you worked at Apple?

16 A I have worked at Apple for approximately 18

17 years. Prior to that, I was employed by IBM for

18 approximately 11 years, in its personal computing products

19 division. So I have roughly 29 years of experience in

20 consumer electronics.

21 Q What is your current position at Apple?

22 A My title is vice president of procurement.

23 Q What do you do as vice president of procurement?

24 A My responsibilities are to acquire the

25 materials, components, goods and other services that Apple

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1 needs in order to build and fulfill its products to

2 consumers.

3 Q How long have you held the position vice

4 president of procurement?

5 A I've held this position for approximately seven

6 years.

7 Q To whom do you report at Apple?

8 A I report to Mr. Jeff Williams, who is Apple's

9 chief operating officer, as well as senior vice president

10 of watch engineering.

11 Q And by category, who do you work with at Apple?

12 A I work with a wide range of functions at Apple,

13 primarily engineering finance and our new products

14 organization.

15 Q Who do you work with outside of Apple?

16 A Outside of Apple, I interact with our supplier

17 base that we currently use about 1200 suppliers in

18 developing and building our products, and so I interact

19 with the senior executives at those suppliers.

20 Q Who is the person responsible for these 1200 or

21 so interactions?

22 A That would be myself, along with my team, which

23 is approximately 1100 persons currently.

24 Q Have you been asked to prepare a witness

25 statement setting forth your testimony in this case?

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1 A Yes, I have.

2 Q If you would turn in the notebook to the witness

3 statement at the front. Do you find RX-1?

4 A Yes, sir, I see it.

5 Q Mr. Blevins, is RX-1 your witness statement in

6 this case?

7 A Yes, I believe it is.

8 Q Does the statement contain your sworn responses

9 to questions posed by counsel?

10 A Yes.

11 Q Is it true and correct, to the best of your

12 knowledge and belief?

13 A Yes.

14 Q And if you turn to page 26, do you have that

15 before you?

16 A Yes, I do.

17 Q Is that your signature?

18 A Yes, I believe so.

19 MR. LEE: Your Honor, we offer RX-1 and the

20 accompanying exhibits offered in -- referred to in RX-1.

21 MR. MARRIOTT: No objection, your Honor.

22 MS. COMFORT: No objection, your Honor.

23 JUDGE PENDER: There being no objection, RX-1C,

24 along with its list of accompanying exhibits which have

25 been provided to the court reporter, are admitted to the

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1 record as evidence.

2 (Exhibit RX-1C received.)

3 (Exhibits received here to be listed in index.)

4 MR. LEE: Thank you, your Honor. We pass the

5 witness.

6 MR. MARRIOTT: Your Honor, as you can see, we

7 have more exhibits.

8 May I proceed, your Honor?

9 JUDGE PENDER: You may.

10 MR. MARRIOTT: Thank you.

11 CROSS-EXAMINATION

12 BY MR. MARRIOTT:

13 Q Good afternoon, Mr. Blevins.

14 A Good afternoon, sir.

15 Q We have not met. My name is David Marriott. I

16 represent Qualcomm.

17 So Apple has said that Qualcomm engaged in

18 anticompetitive monopolistic practices over 15 years, and

19 in your direct testimony, you depict Qualcomm as a

20 misbehaving monopolist; correct?

21 A I believe that would be a fair assessment, yes.

22 Q And you refer, I believe, to what you call the

23 open market for premium LTE baseband chipsets; correct?

24 A Yes, I recall using that term.

25 Q And you say that the premium LTE baseband

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1 chipsets are generally found in premium smartphones;

2 correct?

3 A Yes, that's correct.

4 Q And identifying a smartphone's tier is a purely

5 subjective rating; correct?

6 A Yes, I would agree that that is subjective.

7 Q And there is, in fact, no type of metric in the

8 smartphone industry to establish tiers; correct?

9 A Within the industry, I would agree. But within

10 Apple, we do have metrics.

11 Q Well, isn't it true, sir, that within Apple, 20

12 people in Apple in the same room could probably have 20

13 different opinions on that issue? Isn't that a fact?

14 A No, I wouldn't agree with that.

15 Q Okay. Do you recall giving a deposition in

16 this -- in this matter, Mr. Blevins?

17 A Yes.

18 Q All right. Why don't we have you -- you can

19 find it in the binder, we will bring it up on the screen

20 which may be easier for you. Counsel, this is the 3/15/18

21 deposition at 206:5 through 13.

22 "Question: And if I were to ask you sitting

23 here today to identify smartphones in the high tier other

24 than iPhones, could you identify any?

25 "Answer: I think that's purely a subjective

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1 rating. There is nothing in the industry, there is no type

2 of metric, and so I think any of us in this room would have

3 a different opinion, and if I got 20 people in Apple in the

4 same room, there would probably be 20 different opinions."

5 Did you give that answer to that question, sir?

6 A Yes.

7 Q In your direct testimony, Mr. Blevins, you

8 referred to what you called Qualcomm's market dominance;

9 correct?

10 A Yes.

11 Q And, in fact, sir, it is Apple that has

12 significant buying power in what Apple calls the open

13 market for premium LTE baseband chipsets; correct?

14 A I believe that Apple does have buying power, I

15 agree.

16 Q And that's because Apple is, in fact, the only

17 buyer of what you call thin premium LTE modems for

18 smartphones in the open market; correct?

19 A I don't know if we're the only one, but I would

20 definitely agree that we are the largest.

21 Q So far as you know, Intel doesn't tell what you

22 call premium LTE thin modems for any other smartphone

23 manufacturer; correct?

24 A I have been told that they sell them to LGE, but

25 I'm not absolutely certain. I know LGEs volumes would be

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1 much less than Apple's.

2 Q So far as you know, Qualcomm doesn't sell what

3 you call thin premium LTE modems to any other manufacturer

4 of smartphones; correct?

5 A That I don't specifically know one way or the

6 other.

7 Q And it is Apple, is it not, sir, who decides

8 what suppliers it will use for thin modems; correct?

9 A Yes, I think Apple would choose its suppliers.

10 Q Okay. So is it -- is it fair to say,

11 Mr. Blevins, that Apple exercises significant influence

12 over its suppliers?

13 A I think it would depend on the commodity. In

14 some commodities we do, and in some others we have less.

15 Q Well, let's focus on baseband chipsets, all

16 right? And let's focus on smartphones, okay? Is it fair

17 to say that Apple exercises significant influence over its

18 suppliers?

19 A I think generally speaking, I would agree with

20 that.

21 Q And, in fact, Apple uses contract manufacturers

22 in Asia to produce iPhones for the United States; correct?

23 A Yes, that is definitely correct.

24 Q And Apple persuaded its contract manufacturers

25 to stop paying Qualcomm royalties; correct?

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1 A No, I disagree with that.

2 Q So it's your testimony, is it, then, sir, that

3 Apple did nothing to cause its contract manufacturers to

4 withhold royalty payments from Qualcomm?

5 A We made three very specific statements to them.

6 Q And those specific statements were, sir, were

7 they not, that so far as Apple was concerned, they had no

8 obligation whatever to pay royalties to Qualcomm; correct?

9 A That was one of the statements.

10 Q Okay. And the other statement was that they

11 should do whatever they wanted to do; correct?

12 A Yes.

13 Q And what was the third statement, Mr. Blevins?

14 A The third statement was actually the first in

15 sequence, which is we intended to reimburse them what they

16 were required to pay.

17 Q So, in fact, you indicated you would reimburse

18 them whatever they were required to pay, but you told them

19 they were, in your view, required to pay nothing; correct?

20 A Yes.

21 Q So help me with the chronology a little bit

22 here, sir. Qualcomm has entered into licensing

23 agreements -- licensing agreements with each of Apple's

24 contract manufacturers, and it did that before Apple ever

25 sold an iPhone with a Qualcomm chipset in it; correct?

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1 A I believe that to be true, based on what

2 Qualcomm has told me. But I've never seen the agreements.

3 I believe it to be true.

4 Q And Apple's contract manufacturers actually paid

5 royalties to Qualcomm for use of those patents for many

6 years; isn't that right?

7 A Yes, I believe that's right.

8 Q And Apple reimbursed those contract

9 manufacturers for those payments for many years; correct?

10 A Yes.

11 Q And then a dispute arose between Qualcomm and

12 Apple in or about 2016; correct?

13 A Yes, I think that's right.

14 Q And you and one of your colleagues, Mr. Watrous,

15 went and visited the contract manufacturers in the fall of

16 2016; correct?

17 A Yes, that's correct.

18 Q And following that visit, your contract

19 manufacturer ceased paying royalties to Qualcomm on the

20 iPhone; correct?

21 A Yes, I think that's correct.

22 Q And you understand, however, that they continue

23 to pay Qualcomm royalties for other OEMs' devices; correct?

24 A That I don't know one way or the other.

25 Q But what you do know is that Apple has entered

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1 into an indemnification agreement with each of the contract

2 manufacturers to indemnify them for nonpayment?

3 MR. LEE: Your Honor, I think we're on the

4 confidential Apple record now.

5 MR. MARRIOTT: Oh, I apologize.

6 JUDGE PENDER: Are you going to stay there or

7 have you made your point?

8 MR. MARRIOTT: Your Honor --

9 JUDGE PENDER: Is this in evidence somewhere

10 else, or do you have to get this out of Mr. Blevins?

11 MR. MARRIOTT: I believe I have to get it from

12 Mr. Blevins, your Honor.

13 JUDGE PENDER: All right. Then you need to go

14 on the confidential record.

15 MR. MARRIOTT: I do, please. Thank you.

16 (Confidential session follows.)

17

18

19

20

21

22

23

24

25

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1 OPEN SESSION CONTINUED

2 MR. MARRIOTT: May I proceed, your Honor?

3 BY MR. MARRIOTT:

4 Q So Mr. Blevins, let me see if I can put in

5 perspective some of the statements that you've made in your

6 direct testimony about Qualcomm's alleged dominance.

7 In 2005, Qualcomm expressed an interest in

8 supplying chipsets for the first iPhone; correct?

9 A No, I would not put it that way.

10 Q Why wouldn't you put it that way? Let me

11 withdraw that question.

12 Isn't it a fact that Qualcomm responded to an

13 RFP to provide a baseband chipset for what became the first

14 iPhone?

15 A No, I believe a more correct depiction is Apple

16 approached Qualcomm and asked them to provide a quotation

17 and some samples, and they responded they couldn't do so

18 unless there was a license agreement. That's my

19 recollection.

20 Q And, in fact, Apple did not select Qualcomm to

21 provide a baseband chip for the first iPhone; correct?

22 A No, we stopped the evaluation essentially at

23 that point.

24 Q Apple instead selected Infineon; correct?

25 A That is correct.

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1 Q And Infineon was later -- Infineon baseband

2 business was later acquired by Intel; correct?

3 A Yes, that is correct.

4 Q And Apple first selected Qualcomm to supply a

5 baseband chipset for iPhones released in 2011; correct?

6 A Yes, I think it was January or February of 2011,

7 that's correct.

8 Q But at that time, Qualcomm's chipsets were in

9 fact superior to the alternatives; isn't that true?

10 A No, I wouldn't put it that way at all. We

11 needed a CDMA chipset for Verizon, and Qualcomm was the

12 only provider of such a chipset. So I wouldn't say it was

13 superior. I would say it was the only one available.

14 Q It's fair to say, is it not, that Qualcomm was

15 the only supplier of multimode chipsets that supplied CDMA

16 that could meet Apple's needs; correct?

17 A We believed they were the only one at that point

18 in time, and I think we were correct.

19 Q And then in 2013, Apple decided to add a second

20 supplier of baseband chipsets for the iPhone; correct?

21 A I'm sorry, you said 2013?

22 Q I did. In 2013, Apple decided to add a second

23 supplier for baseband chipsets for the iPhone; correct?

24 A We were evaluating alternatives in 2013, but we

25 didn't implement a second supplier in 2013.

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1 Q Second supply came later, but the decision to go

2 with a second supplier was made in 2013; correct?

3 A I would say it would be fair to say that we

4 desperately wanted a second supplier as early as 2013, but

5 we weren't certain who that second supplier might be at

6 that stage.

7 Q And in the end, Apple awarded Intel a portion of

8 the supply of chipsets for the iPhone 7 and 7 Plus which

9 were released in 2016; correct?

10 A Yes. And I believe we came to that decision

11 sometime in mid to late 2014 if memory serves me correctly.

12 Q And in July or August of 2017, Apple decided on

13 Intel as the only supplier for the 2018 iPhones; correct?

14 A We actually desired two suppliers, Intel and

15 Qualcomm. Qualcomm essentially withdrew, leaving us with

16 only one.

17 Q So you selected Intel as the sole supplier for

18 the 2018 iPhones, correct?

19 A That wasn't our plan, but we wound up with them

20 as a single source.

21 Q So Qualcomm has been awarded no portion of the

22 iPhone business for the 2018 iPhones; correct?

23 A Qualcomm has refused to submit a valid bid for

24 2018.

25 Q Can I have you try focus on my question, sir?

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1 Let me try that one more time. Apple awarded Qualcomm no

2 portion of its chipset business for the 2018 iPhones;

3 correct?

4 A Yes.

5 Q All right. So in explaining, Mr. Blevins, why

6 you believe Qualcomm has engaged in anticompetitive

7 practices, you refer to several agreements between Qualcomm

8 and Apple; correct?

9 A Yes.

10 Q You cite a marketing incentive agreement;

11 correct?

12 A Yes.

13 Q And you cite a transition agreement; correct?

14 MR. LEE: If we're going to go into agreements,

15 we need to be on the confidential record.

16 MR. MARRIOTT: I'm at a general level.

17 THE WITNESS: Yes, that's correct.

18 (Confidential session follows.)

19

20

21

22

23

24

25

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1 OPEN SESSION CONTINUED

2 BY MR. MARRIOTT:

3 Q In your direct testimony, Mr. Blevins, you said

4 that Qualcomm paid Apple what you call rebates, which you

5 say forced Apple to buy from Qualcomm exclusively; correct?

6 A Yes.

7 Q And, in fact, sir, it is Apple that proposed the

8 provisions you referred to as rebates to Qualcomm; correct?

9 A No, my recollection is Qualcomm proposed it.

10 Q But the payments in question didn't actually

11 force Apple to do anything, did they, say?

12 A Technically, no.

13 Q What you mean by that is Qualcomm made Apple an

14 offer Apple felt it could not decline; correct?

15 A I think that's correct. We didn't want to forgo

16 those financial incentives because they were quite large.

17 Q And the provisions in question, they actually

18 resulted in effectively lower prices to Apple; correct?

19 A I'm sorry, lower than what?

20 Q Lower -- lower than they would have been without

21 the provisions about which you complain; correct?

22 A I think that's correct, yes.

23 Q In your direct testimony, you said that

24 Qualcomm's royalty rates greatly exceed what Apple views as

25 FRAND rates; correct?

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1 A Yes, that's correct.

2 Q But FRAND obligations apply only to standard

3 essential patents; correct?

4 A That's my understanding.

5 Q And the patents at issue in this investigation

6 are, in fact, not standard essential patents; correct?

7 A I'm sorry, could you repeat that?

8 Q I could. The patents at issue in this

9 investigation are, in fact, not standard essential patents;

10 correct?

11 A Yes, that's my understanding, correct.

12 Q And the royalty payments that you complain were

13 too high, they provided Apple's contract manufacturer --

14 JUDGE PENDER: Excuse me, let me interrupt you.

15 If these were not standard essential patents,

16 why is FRAND even in play here, Mr. Blevins?

17 THE WITNESS: Your Honor, I'm not an attorney,

18 but in my deposition, I made comments about the license for

19 FRAND SAPs. My understanding is this case is not about

20 SAP -- SAPs at all.

21 JUDGE PENDER: Thank you for that.

22 Excuse me, sir. And please continue.

23 MR. MARRIOTT: No problem. Thank you, your

24 Honor.

25 BY MR. MARRIOTT:

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1 Q The royalties that you -- that you say were too

2 high, Mr. Blevins, those royalties provided Apple's

3 contract manufacturers with access to a large number of

4 Qualcomm patents; correct?

5 A I believe that's correct, yes.

6 Q And in fact, sir, you understand that Qualcomm's

7 patent portfolio exceeds 100,000 patents; correct?

8 A I don't know exactly.

9 Q Sound about like what you understand the volume

10 of Qualcomm patents to be?

11 A I don't specifically know, but I certainly

12 wouldn't doubt it.

13 Q You certainly understand it's tens of thousands;

14 correct?

15 A I know it's a very large portfolio, but I don't

16 know how many.

17 Q And, in fact, Qualcomm has a strong IP

18 portfolio; isn't that a fact, sir?

19 A I believe that's probably true.

20 Q And Apple has assessed Qualcomm's patent

21 portfolio as strong; correct?

22 A That I don't know, if we have or not. I

23 certainly wasn't a participant if we did.

24 MR. MARRIOTT: Your Honor, I have a document I

25 might go to, which is CBI. Perhaps this is a good time to

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1 break for the day or I can do the document if you like.

2 JUDGE PENDER: Okay. That's great. Than we can

3 start on the confidential record tomorrow morning, how does

4 that sound?

5 MR. MARRIOTT: Thank you very much.

6 JUDGE PENDER: Thank you.

7 We'll see everyone tomorrow morning at 8:45.

8 Please be about your business.

9 (Whereupon, at 4:23 p.m., the hearing was

10 adjourned, to be reconvened at 8:45 a.m., on Wednesday, June

11 20, 2018.)

12

13

14

15

16

17

18

19

20

21

22

23

24

25

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1 C O N T E N T S

2 VOIR

3 WITNESSES: DIRECT CROSS REDIRECT RECROSS DIRE

4 MURALI ANNAVARAM

5 by Mr. Massa 293 348

6 by Ms. Murray 317 351

7 by Mr. Hamstra 327

8 RANDY SAROFF

9 by Mr. Watkins 357 377

10 by Mr. Dowd 358 379

11 by Ms. Murray 374

12 WILLIAM KERR

13 by Mr. Lasher 385 414

14 by Mr. Cordell 390 421

15 by Ms. Murray 402

16 J. GREGORY SIDAK

17 by Mr. Marriott 431 502/518

18 by Mr. Mueller 436 508

19 TONY J. BLEVINS

20 by Mr. Lee 522

21 by Mr. Marriott 525

22

23

24

25 -- continued --

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1 C O N T E N T S (Continued)

3 CONFIDENTIAL SESSIONS: Pages 293-321, 328-353, 360-384,

4 405-413, 464-465, 472-483,

5 511-513, 532-533, 538-544

9 E X H I B I T S

10 EXHIBITS: IDENTIFIED RECEIVED

11 CX-628C 316

12 CX-630 333

13 CX-631 333

14 CX-4923C 334

15 CX-6C 356

16 CX-9C 356

17 CX-8C 358

18 CX-14C 389

19 CX-16C 435

20 RDX-28.3 472

21 RDX-28.4 472

22 RDX-28.3 521

23 RDX-28.4 521

24 RX-1C 525

25

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CERTIFICATE OF REPORTER
TITLE: In The Matter Of: Certain Mobile Electronic Devices
and Radio Frequency and Processing
Components Thereof

INVESTIGATION NOS: 337-TA-1065


HEARING DATE: 06-19-18
LOCATION: Washington, DC
NATURE OF HEARING: Hearing

I hereby certify that the foregoing/attached


transcript is a true, correct and complete record
of the above-referenced proceeding(s) of the U.S.
International Trade Commission.
DATE: 06-19-2018

SIGNED: Mark A. Jagan


Signature of the Contractor or the
Authorized Contractor's Representative

I hereby certify that I am not the Court Reporter


and that I have proofread the above-referenced
transcript of the proceedings of the U.S.
International Trade Commission, against the
aforementioned Court Reporter's notes and
recordings, for accuracy in transcription in the
spelling, hyphenation, punctuation and speaker
identification and did not make any changes
of a substantive nature. The
foregoing/attached transcript is a true,
correct and complete transcription of the
proceedings.
SIGNED: Christopher Weiskircher
Signature of Proofreader

I hereby certify that I reported the


above-referenced proceedings of the U.S.
International Trade Commission and caused
to be prepared from my tapes and notes of
the proceedings a true, correct and
complete verbatim recording of the
proceedings.
SIGNED: Carmen Smith
Signature of Court Reporter

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Case 5:17-md-02773-LHK Document 620-7 Filed 07/19/18 Page 3 of 141
1254

1 UNITED STATES OF AMERICA

2 BEFORE THE

3 INTERNATIONAL TRADE COMMISSION

5 - - - - - - - - - - - - - - - - - X

6 IN THE MATTER OF: : Investigation Number

7 CERTAIN MOBILE ELECTRONIC DEVICES : 337-TA-1065

8 AND RADIO FREQUENCY AND PROCESS :

9 COMPONENTS THEREOF :

10 - - - - - - - - - - - - - - - - - X

11

12 HEARING

13

14 Monday, June 25, 2018

15 Courtroom B

16 U.S. International Trade

17 Commission

18 500 E Street, SW

19 Washington, DC

20

21

22 The Hearing commenced, pursuant to notice of the

23 Judge, at 8:46 a.m., before the Honorable Thomas B. Pender,

24 Administrative Law Judge for the United States

25 International Trade Commission.

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1 APPEARANCES:

3 DAVID A. NELSON, ESQ.

4 NATHAN HAMSTRA, ESQ.

5 Quinn, Emanuel, Urquhart & Sullivan LLP

6 500 West Madison Street, Suite 2450

7 Chicago, Illinois 60661

8 312.705.7400

9 On Behalf of Complainant Qualcomm, Incorporated

10

11 SEAN PAK, ESQ.

12 Quinn, Emanuel, Urquhart & Sullivan LLP

13 50 California Street, 22nd Floor

14 San Francisco, California 94111

15 415.875.6600

16 On Behalf of Complainant Qualcomm, Incorporated

17

18 RICHARD W. ERWINE, ESQ.

19 KEVIN JANG, ESQ.

20 Quinn, Emanuel, Urquhart & Sullivan LLP

21 51 Madison Avenue, 22nd Floor

22 New York, New York 10010

23 212.849.7000

24 On Behalf of Complainant Qualcomm, Incorporated

25 - continued -

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1 APPEARANCES (CONTINUED):

3 PATRICK T. SCHMIDT, ESQ.

4 Quinn, Emanuel, Urquhart & Sullivan LLP

5 865 South Figueroa Street, 10th Floor

6 Los Angeles, California 90017

7 213.443.3000

8 On Behalf of Complainant Qualcomm, Incorporated

10 S. ALEX LASHER, ESQ.

11 Quinn, Emanuel, Urquhart & Sullivan LLP

12 1300 I Street, NW, Suite 900

13 Washington, DC 20005

14 202.538-8000

15 On Behalf of Complainant Qualcomm, Incorporated

16

17 BRETT N. WATKINS, ESQ.

18 Quinn, Emanuel, Urquhart & Sullivan LLP

19 711 Louisiana Street, Suite 500

20 Houston, Texas 77002

21 713.221.7000

22 On Behalf of Complainant Qualcomm, Incorporated

23

24

25 - continued -

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1 APPEARANCES (CONTINUED):

3 JAMES T. BAILEY, ESQ.

4 Law Office of James T. Bailey

5 504 West 136th Street, #1B

6 New York, New York 10031-7976

7 917.626.1356

8 On Behalf of Complainant Qualcomm, Incorporated

10 DAVID R. MARRIOTT, ESQ.

11 ANDREI HARASYMIAK, ESQ.

12 Cravath, Swaine & Moore LLP

13 Worldwide Plaza, 825 Eighth Avenue

14 New York, New York 10019-7475

15 212.474.1430

16 On Behalf of Complainant Qualcomm, Incorporated

17

18 TOM M. SCHAUMBERG, ESQ.

19 DEANNA TANNER OKUN, ESQ.

20 Adduci, Mastriani & Schaumberg LLP

21 1133 Connecticut Avenue, NW

22 Washington, DC 20036

23 202.467.6300

24 On Behalf of Complainant Qualcomm, Incorporated

25 - continued -

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1 APPEARANCES (CONTINUED):

2 WILLIAM F. LEE, ESQ.

3 JOSEPH J. MUELLER, ESQ.

4 LOUIS W. TOMPROS, ESQ.

5 DOMINIC E. MASSA, ESQ.

6 RICHARD W. O'NEILL, ESQ.

7 Wilmer, Cutler, Pickering, Hale and Dorr LLP

8 60 State Street

9 Boston, Massachusetts 02109

10 617.526.6556

11 On Behalf of Respondent Apple Inc.

12

13 NINA S. TALLON, ESQ.

14 Wilmer, Cutler, Pickering, Hale and Dorr LLP

15 1875 Pennsylvania Avenue, NW

16 Washington, DC 20006

17 202.663.6365

18 On Behalf of Respondent Apple Inc.

19

20 JAMES M. DOWD, ESQ.

21 Wilmer, Cutler, Pickering, Hale and Dorr LLP

22 350 South Grand Avenue, Suite 2100

23 Los Angeles, California 90071

24 213.443.5309

25 On Behalf of Respondent Apple Inc. - continued -

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1 APPEARANCES (CONTINUED):

3 RUFFIN B. CORDELL, ESQ.

4 Fish & Richardson P.C.

5 1000 Maine Avenue, SW

6 Washington, DC 20024

7 202.783.5070

8 On Behalf of Respondent Apple Inc.

10 LISA M. MURRAY, ESQ.

11 CLAIRE COMFORT, ESQ.

12 ANNE GOALWIN, ESQ.

13 Office of Unfair Trade Investigations

14 United States International Trade Commission

15 500 E Street, SW

16 Washington, DC 20436

17 202.205.2158

18 On Behalf of Commission Investigative Staff

19

20

21

22

23

24

25

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1 P R O C E E D I N G S

2 JUDGE PENDER: Mr. Eisenach or Dr. Eisenach was

3 being cross-examined; correct? Or are we finished?

4 MR. MARRIOTT: I had finished, your Honor, and

5 Staff was in their examination.

6 JUDGE PENDER: That's right, I'm with it. I

7 didn't write down in my notes there. You wanted to

8 continue, right, Ms. Comfort?

9 MS. COMFORT: Yes, I had a little bit more.

10 JUDGE PENDER: All right. Please do that, then.

11 Dr. Eisenach, you are still under oath, sir.

12 THE WITNESS: Thank you. Yes, sir.

13 MR. MARRIOTT: Just for clarity, are we on the

14 confidential record?

15 MS. COMFORT: We should go on the confidential

16 record, especially since Dr. Eisenach has reviewed all

17 parties' information. I think that's safest, so we will

18 need to clear the room.

19 JUDGE PENDER: All right. We're on the

20 confidential record. And that's what it says on the thing.

21 If we are, people should understand that's what that means.

22 (Confidential session follows.)

23

24

25

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1 OPEN SESSION CONTINUED

2 BY MR. MUELLER:

3 Q What do you teach at Yale?

4 A I teach two classes. One is called competitive

5 strategy and one is called advanced competition economics.

6 Q Can you tell us a bit about the nature of those

7 courses and the subject matter.

8 A Yes, they are economics courses that focus

9 primarily on competition, issues like prices, quantities,

10 entry, exit, R&D choices, patenting, scope of the firm,

11 those types of topics.

12 Q In addition to your association with Yale, do

13 you have any other professional affiliations?

14 A Yes. I am a member of the NBER, which is an

15 economics think tank. I am a visiting professor at

16 Edinborough University. And I am a senior consultant at

17 Charles River Associates.

18 Q Did you teach at other universities before

19 joining Yale?

20 A Yes. I was assistant professor at the Stanford

21 University Graduate School of Business and then also a

22 couple of years later at the University of Chicago Graduate

23 School of Business.

24 Q Now, have you ever worked for the U.S.

25 government?

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1 A I have.

2 Q Could you explain.

3 A Between 2011 and 2012, I was deputy assistant

4 attorney general for economic analysis in the Antitrust

5 Division of the Department of Justice.

6 Q Now, you're not a lawyer; right?

7 A That's correct.

8 Q What was the nature of your position at deputy

9 assistant attorney general for economic analysis in the

10 Antitrust Division at the Department of Justice?

11 A That long title is usually shortened to chief

12 economist. The chief economist is the outside academic who

13 comes in to work at the division and supervise the

14 approximately 50 PhD economists who serve in the Antitrust

15 Division, doing the economic analysis for antitrust cases.

16 Q What are some types of matters, categories of

17 matters, that you worked on in that position as chief

18 economist?

19 A Lots of mergers, of course, but also unilateral

20 conduct by which -- that means all the cases where there's

21 a dominant firm and the division is investigating whether

22 there is some anticompetitive harm from actions of that

23 company.

24 Q What today is the focus of your academic

25 research?

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1 A Today I work on competition economics in the

2 antitrust context and also in -- just in the market

3 context, looking at outcomes like prices and quantities and

4 entry and exit.

5 Q Does your competition work include study of

6 entry and exit into markets?

7 A Absolutely.

8 Q Have you authored any books or academic

9 articles?

10 A Yes, I have.

11 Q And have you received any awards or honors for

12 your work?

13 A Yes, I've received a number of grants and prizes

14 and things like that.

15 MR. MUELLER: Your Honor, at this point I offer

16 Dr. Scott Morton as an expert in the economics of

17 competition, including entry and exits into markets.

18 MR. MARRIOTT: No objection here, your Honor.

19 MS. MURRAY: No objection, your Honor.

20 JUDGE PENDER: There being no objection, I find

21 Dr. Scott Morton to be an expert on competition economics.

22 MR. MUELLER: Thank you, your Honor.

23 BY MR. MUELLER:

24 Q Dr. Scott Morton, if you turn to the first

25 binder before you and the tab which includes Exhibit

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1 RX-11C.

2 A I see that.

3 Q Do you recognize this?

4 A Yes. It's my -- it's my report.

5 Q And does this include questions that were posed

6 to you and your answers to those questions?

7 A Yes, it does.

8 Q Is the testimony in that witness statement

9 truthful and accurate?

10 A Yes.

11 Q Do you adopt that testimony as your own for

12 purposes of this investigation?

13 A Yes, I do.

14 Q Have you signed the witness statement on page

15 31?

16 A I did.

17 MR. MUELLER: Your Honor, at this point we offer

18 RX-11C and the associated exhibits cited in that exhibit

19 for entry into evidence.

20 MR. MARRIOTT: No objection.

21 MS. MURRAY: No objection, your Honor.

22 JUDGE PENDER: There being no objection, Exhibit

23 RX-11C for identification along with its referenced

24 exhibits are admitted to the record as evidence, a copy of

25 the admitted exhibits to be provided or has been provided

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1 to the court reporter.

2 MR. MUELLER: Thank you, your Honor.

3 (Exhibit RX-11C and accompanying exhibits

4 received.)

5 BY MR. MUELLER:

6 Q Dr. Scott Morton, if you could please turn to

7 the binder labeled "rebuttal witness statement." And turn

8 to Exhibit RX-1611C.

9 A I'm there.

10 Q Do you recognize this document?

11 A I do.

12 Q What is it?

13 A It's my rebuttal testimony.

14 Q And does this include additional questions that

15 were posed to you and your answers to those questions?

16 A Yes, it does.

17 Q Is the testimony therein truthful and accurate?

18 A Yes, it is.

19 Q Do you adopt it as your own for this

20 investigation?

21 A Yes, I do.

22 Q Have you signed on page 5?

23 A I have.

24 MR. MUELLER: Your Honor, at this point we offer

25 RX-1611C as well as the exhibits cited therein into

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1 evidence.

2 MR. MARRIOTT: No objection.

3 MS. MURRAY: No objection, your Honor.

4 JUDGE PENDER: There being no objection, Exhibit

5 RX-1611C for identification, along with its list of

6 accompanying exhibits, is admitted to the record as

7 evidence, a copy of the list of accompanying exhibits to be

8 provided to the court reporter or has been provided to the

9 court reporter.

10 (Exhibit RX-1611C and accompanying exhibits

11 received.)

12 MR. MUELLER: Thank you, your Honor. At this

13 point I pass the witness.

14 MR. MARRIOTT: May I proceed, your Honor?

15 JUDGE PENDER: Yes, Mr. Marriott.

16 CROSS-EXAMINATION

17 BY MR. MARRIOTT:

18 Q Good morning, Dr. Scott Morton.

19 A Good morning.

20 Q You should have near you there a

21 cross-examination binder.

22 Do you see that?

23 A Yes.

24 Q This is not the first matter in which you have

25 worked on behalf of Apple; is that right?

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1 A That's correct.

2 Q And you've worked for Apple in connection with a

3 litigation that's pending in the Northern District of

4 California; is that correct?

5 A I think it's the Southern District of

6 California, but yes, the other --

7 Q And you've provided information to Apple in

8 connection with the litigation pending --

9 JUDGE PENDER: Excuse me. Would everybody talk

10 a little louder, please. There's something wrong with it.

11 THE WITNESS: Sorry, your Honor.

12 MR. MARRIOTT: Sure.

13 BY MR. MARRIOTT:

14 Q You've worked with Apple in connection with

15 litigation pending in the Southern District of California;

16 correct?

17 A I have.

18 Q And you've done work for Apple on other matters,

19 but you can't disclose the particulars of those matters; is

20 that right?

21 A That's right.

22 Q And you've also worked for Intel; is that

23 correct? In the past?

24 A Very briefly, yes.

25 Q Now, your -- in this case, you were engaged by

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1 Apple to speak to public interest issues; is that right?

2 A That's correct.

3 Q And you have testified before Congress on issues

4 concerning the International Trade Commission; correct?

5 A I have.

6 Q And specifically the focus of your remarks was

7 on reforming the ITC. Is that fair to say?

8 A In the context of standard essential patents,

9 that's right.

10 Q And in your view, the availability of exclusion

11 orders from the ITC in cases in which an injunction would

12 not be granted by the federal courts runs contrary to the

13 public interest. Is that fair to say?

14 A The policy context in which I said that was

15 about standard essential patents. So I would qualify my

16 answer to say yes, in the context of standard essential

17 patents.

18 Q Fair enough. And as you see it, Dr. Scott

19 Morton, where the remedy in federal court is going to fully

20 compensate the patentholder for intellectual property, then

21 what an exclusion order does is simply deny products to

22 consumers without benefiting innovation markets. Is that

23 fair?

24 A In the context of standard essential patents, I

25 think that's right, yes. Because there's a FRAND

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1 commitment that the patent owner voluntarily agreed to

2 upfront.

3 Q Now, you say that consumers will be harmed by

4 the proposed exclusion order here because they would

5 sacrifice new features and upgraded performance that comes

6 with the latest release of the iPhone; is that correct?

7 A That's one reason, yes.

8 Q And in your public interest analysis, that

9 constitutes harm; correct?

10 A Yes.

11 Q And Mr. Blevins testified last week, and I

12 believe you were in the courtroom for his testimony; is

13 that right?

14 A For some of it, yes.

15 Q You understand that he testified last week that

16 there is no significant hardware difference between the

17 2017 products and the expected 2018 products? Did you hear

18 that testimony?

19 A Yes, I did.

20 Q And you don't have any --

21 MR. MUELLER: I would just ask if we're going to

22 refer to Mr. Blevins's confidential testimony, we go back

23 on the confidential record. I'm not sure what Mr. Marriott

24 has in mind.

25 MR. MARRIOTT: I have no mind nothing further

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1 than that, your Honor.

2 JUDGE PENDER: All right.

3 BY MR. MARRIOTT:

4 Q You have no reason to dispute the testimony you

5 heard from Mr. Blevins; correct?

6 A That's correct.

7 Q And you, in fact, don't know what the particular

8 features and functions will be of the 2018 upcoming iPhone;

9 correct?

10 A That's correct.

11 Q Let's talk a little bit, if we may, about the

12 public interest factors in the accused devices here. One

13 of the public interest factors includes health, welfare and

14 safety; correct?

15 A That's correct.

16 Q To the best of your knowledge, there is no

17 functionality or capability relevant to the public health,

18 safety and welfare supported by an accused iPhone model

19 that is not also supported by the corresponding nonaccused

20 iPhone model; correct?

21 A I agree.

22 Q And you understand that the public interest

23 analysis requires examination of competitive conditions;

24 correct?

25 A I do.

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1 Q And would you further agree that the market for

2 smartphones, including iPhones, is highly competitive?

3 A Yes, I would.

4 Q And you would agree that that marketplace

5 includes many large participants; correct?

6 A Yes, I would.

7 Q And it includes a lot of experienced

8 participants; correct?

9 A Yes.

10 Q Would you also agree that the markets for

11 Apple's products are characterized by frequent product

12 introductions and rapid technological changes?

13 A Yes, I would.

14 Q Now, other OEMs could, in fact, try to replace

15 the accused iPhone by expanding production of nonaccused

16 iPhones in the event of an exclusion order; correct?

17 A Excuse me, can you repeat the question?

18 Q Sure. Other OEMs could try to expand production

19 to replace the accused iPhones in the event of an exclusion

20 order; correct?

21 A They could.

22 Q And is it true that less than two years after

23 the launch of the iPhone 7, Intel will be supplying Apple

24 with 100 percent of the chips for Apple's latest iPhone,

25 2018 iPhone?

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1 A That's my understanding.

2 Q Now, the public interest inquiry requires

3 considering whether an exclusion order would harm

4 consumers. Is that fair to say?

5 A Yes, it is.

6 Q And you would agree, would you not, that

7 consumers have a lot of smartphones to choose from?

8 A They do.

9 Q In fact, in the premium segment, about 30-odd

10 percent of consumers find other competing handsets to be

11 superior to the iPhone; correct?

12 A That's right.

13 Q Is it also right that a user switching from an

14 Intel-powered iPhone to a Qualcomm-powered iPhone would

15 incur no or minimum switching costs, provided that the

16 phone costs the same?

17 A If we're talking about the same model of phone,

18 then yes, I agree.

19 Q And many non-Apple content providers also allow

20 consumers to access content across platforms; correct?

21 A I haven't studied that issue.

22 Q Have you determined whether carriers offer

23 programs to promote switching from competing devices?

24 A I don't know.

25 Q Now, you said, I believe, that an increase in

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1 OEM's costs would be passed on to consumers in the form of

2 higher price -- higher device prices; correct?

3 A That's right.

4 Q And the premium LTE baseband chipsets, those

5 account for a very small share of the retail price of a

6 premium smartphone; correct?

7 A That's right.

8 Q And, in fact, the premium LTE baseband chipsets

9 account for a very small share of the retail price of the

10 premium smartphone, roughly 3 percent; correct?

11 A I haven't done the division, but I agree it's

12 small.

13 Q And would you agree that a price increase of 10

14 percent, 15 percent on baseband chipsets would increase the

15 price of the phone by less than 11 percent?

16 A Something like that, yes.

17 Q Is it -- is it fair to say, Dr. Scott Morton,

18 that you didn't ask anybody at Apple as part of your

19 inquiry in connection with this matter whether or not it

20 passes through increases or decreases in inputs to

21 consumers?

22 A I did not ask that question, no.

23 Q And you didn't determine the economic profits of

24 the iPhone; correct?

25 A That's correct.

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1 Q You didn't determine the -- you didn't determine

2 the gross profits of the iPhone; correct?

3 A That's correct.

4 Q And you didn't do any profit analysis with

5 respect to the iPhone; correct?

6 A That's right.

7 Q Another public interest factor concerns the

8 production of like or directly competitive articles.

9 That's consistent with your understanding; correct?

10 A Yes, it is.

11 Q And iPhones are manufactured by Apple

12 outsourcing partners in Asia; right?

13 A They are assembled there, yes.

14 Q And Apple benefits significantly from that

15 choice, correct, to assemble outside the United States?

16 A I assume that that's why they chose to do it

17 that way, yes.

18 Q Let me talk with you, if we may, a little bit

19 about chipsets. You described the relevant market as being

20 the merchant market for premium LTE baseband chipsets. Is

21 that fair?

22 A Yes, it is.

23 Q And you define premium as LTE baseband chipsets

24 that incorporate leading edge features; correct?

25 A That's right.

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1 Q And is it also right that you don't consider

2 yourself an expert in baseband chipsets or modems as a

3 technical matter?

4 A I am not a technical expert, that's right.

5 Q And you don't consider yourself an expert in the

6 mobile device industry as a technical matter; correct?

7 A Not as a technical matter.

8 Q Now, the use of a baseband chip in a premium

9 cellular device doesn't make that chip by itself premium;

10 correct?

11 A Not by itself, it does not make that chip

12 premium, correct.

13 Q And as a technical matter, chips sold in premium

14 LTE handsets may also be used in nonpremium handsets;

15 correct?

16 A They would be an expensive choice, but yes, you

17 could do that.

18 Q As you define the relevant market here, it

19 includes both thin modems and SOCs; is that right?

20 A Yes, it does.

21 Q And Apple only uses thin modems in the iPhone;

22 correct?

23 A That's right.

24 Q Doesn't use any SOCs; right?

25 A That's correct.

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1 Q And Apple is, in fact, the only customer of thin

2 modems for mobile devices of any -- of any significant

3 market size; correct?

4 A Yes, that's right.

5 Q Samsung uses SOCs; correct?

6 A Yes.

7 Q Motorola uses SOCs; correct?

8 A I'm not sure about the rest of them.

9 Q Do you know whether HTC uses SOCs?

10 A I remember Ms. Evans talked about LG using thin

11 modems. That's the other example I know.

12 Q And you would agree, would you not, that SOCs

13 and thin modems are not interchangeable with one another?

14 A That's correct.

15 Q Now, the market for LTE baseband chipsets is a

16 highly competitive marketplace. Is that fair?

17 A It depends on the market structure. When

18 there's a monopoly, no, it would not be a highly

19 competitive.

20 Q The price of LTE chipsets has declined over

21 time; correct?

22 A That's correct.

23 Q And the production of chipsets has increased

24 over time; correct?

25 A That's correct.

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1 Q And the quality of chipsets has increased across

2 time and across suppliers; correct?

3 A Yes.

4 Q Is it also true that Qualcomm's share of the LTE

5 modem chip sales has declined from about 93 percent in 2013

6 to below 50 percent in unit terms in 2017?

7 A Are you asking about all LTE baseband chipsets

8 or premium LTE baseband chipsets?

9 Q I'm asking about all LTE baseband chipsets.

10 A Yes, I agree.

11 Q And you said that Qualcomm and Intel are the

12 only suppliers of thin modems for the iPhone; correct?

13 A Yes.

14 Q But it is consistent with your understanding, is

15 it not, that Apple has considered and is considering other

16 suppliers; correct?

17 A Mr. Blevins explained that they -- whenever they

18 have a new model --

19 MR. MUELLER: Your Honor, I'm sorry, I think at

20 this point we are going to have to go on the confidential

21 record to the extent we're going to get into Mr. Blevins's

22 testimony on the subject.

23 MR. MARRIOTT: It sounds like we may a little.

24 JUDGE PENDER: Are you going to continue with

25 this? If you're going to get -- Doctor, if you are going

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1 to volunteer testimony that you heard on a confidential

2 basis, we have to go off the public record.

3 THE WITNESS: Okay. I understand, your Honor.

4 That would be -- excuse me. That would be part of my

5 answer to his question, that's right.

6 MR. MARRIOTT: Your Honor, I think I can -- I

7 think I can move beyond that segment. We have the record

8 that we have so --

9 JUDGE PENDER: All right. So we'll strike the

10 question and the answer, okay?

11 MR. MARRIOTT: That's fine, thank you, your

12 Honor.

13 BY MR. MARRIOTT:

14 Q Now, you understand that MediaTek produces a

15 multimode LTE CDMA baseband processor; correct?

16 A I do.

17 Q And you understand that they began manufacturing

18 LTE chips in the second quarter of 2014; correct?

19 A I'm not aware when they began manufacturing.

20 Q Irrespective of when they began, are you aware,

21 Dr. Scott Morton, that by 2017, MediaTek had already

22 captured more than 21 percent of sales in unit terms in the

23 broader LTE baseband chipset market?

24 A I know their share is significant, yes.

25 Q Now, R&D matters, does it not, to innovation in

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1 any proposed market?

2 A Yes, it does.

3 Q And you've, in fact, seen evidence, have you

4 not, that Qualcomm has spent in excess of $40 billion on

5 R&D in this space?

6 A I know it's a large amount.

7 Q And you have no reason to doubt that it's in the

8 multibillion dollars; correct?

9 A No, I don't.

10 Q And would you agree that a patent system that

11 rewards innovation is good for consumers?

12 A Yes, it is.

13 Q And would you further agree that consumers and

14 the economy are worse off if intellectual property rights

15 are violated?

16 A Yes, that's right.

17 Q Let me talk to you a little, if I may, about

18 Intel. In your direct testimony, you said that an

19 exclusion order would cause Intel to exit from the baseband

20 processor business and that there would be a number of

21 detrimental effects that would follow.

22 JUDGE PENDER: Mr. Marriott.

23 MR. MARRIOTT: Yes, your Honor.

24 JUDGE PENDER: Isn't that confidential?

25 MR. MARRIOTT: I believe that portion, your

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1 Honor, has been said on the public record.

2 JUDGE PENDER: I'm trying to -- I'm wracking my

3 memory. I don't know that -- I think we've been really,

4 really careful about that.

5 MR. MUELLER: In some of the specific supporting

6 facts certain we have been on the confidential record. To

7 the extent we're going to go into this subject, I think we

8 need to go --

9 JUDGE PENDER: You mean the general subject is

10 okay?

11 MR. MUELLER: I think the statement that there

12 would be the prospect of exit in the event of an exclusion

13 order has been stated publicly, but the supporting reasons

14 why have been on the confidential record.

15 MR. MARRIOTT: I have no difficulty going to the

16 confidential record, your Honor.

17 JUDGE PENDER: All right. Then let's go on the

18 confidential record, insofar as Intel. And what about

19 Apple as well? Because the relationship is intertwined.

20 MR. MUELLER: I think Apple can stay for this

21 portion, your Honor.

22 JUDGE PENDER: All right. Thank you,

23 Mr. Mueller.

24 (Confidential session follows.)

25

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1 OPEN SESSION CONTINUED

2 JUDGE PENDER: I want to be clear about

3 something. I don't remember any antitrust pleading in this

4 case. Isn't that correct?

5 MR. MARRIOTT: Did you say pleading, your Honor?

6 JUDGE PENDER: I mean, you know, antitrust, if

7 you just think for a moment, the 1002 case just made it

8 very, very clear that the Commission says if you're going

9 to fool around with antitrust here, it's got to be pled

10 specifically. There's a lot of things that need to be

11 pled.

12 So why is it relevant? Why is anything having

13 to do with antitrust relevant in front of me right now?

14 MR. MARRIOTT: Your Honor, I don't believe it is

15 in any way relevant, but Dr. Scott Morton's direct

16 testimony has passages that discuss antitrust issues.

17 JUDGE PENDER: Well, see where we go with it.

18 But you know what I mean?

19 MR. MARRIOTT: I absolutely know what you mean.

20 I don't believe it's relevant, but --

21 JUDGE PENDER: I'm not going to go anywhere with

22 it in the ID, I can promise you that.

23 MR. MARRIOTT: I will be very brief. In view of

24 what the direct testimony is, if I could complete the

25 record, that would be helpful.

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1 BY MR. MARRIOTT:

2 Q There are other government agencies whose

3 existence is intended to address anticompetitive behavior;

4 right?

5 A That's right.

6 Q And you cite in your testimony a pending action

7 by the FTC; correct?

8 A Yes, I do.

9 Q But you are aware of disagreements within the

10 FTC about whether or not to pursue an action against

11 Qualcomm; isn't that right?

12 A Yes, I am.

13 Q And you referred in your direct testimony to

14 what you call Qualcomm's no license, no chip policy;

15 correct?

16 A That's right.

17 Q Is it also right that you didn't identify any

18 OEM that elected not to develop or invest in standard

19 compliant products because of Qualcomm's no license no chip

20 policy?

21 A That's right.

22 Q And you say that Qualcomm charges above FRAND

23 royalties for its standard essential patents; correct?

24 A Yes.

25 Q None of the patents involved in this matter is a

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1 standard essential patent; correct?

2 A That's right.

3 Q And FRAND refers to fair, reasonable and

4 nondiscriminatory rates; correct?

5 A Yes.

6 Q You didn't calculate a nondiscriminatory royalty

7 rate for Qualcomm's intellectual property; correct?

8 A Correct.

9 Q And you didn't calculate a reasonable royalty

10 for Qualcomm's intellectual property; correct?

11 A Correct.

12 Q And you've never valued a patent portfolio;

13 correct?

14 A That's right.

15 Q And you've never valued Qualcomm's patent

16 portfolio in particular; correct?

17 A That's right.

18 Q And you've never unpacked a license agreement;

19 right?

20 A Not myself, no.

21 Q And you don't know how many persons or entities

22 have licensed Qualcomm technology over time; correct?

23 A I don't know that number.

24 Q And you don't know whether Qualcomm's royalty

25 rates changed since the adoption of CDMA standards;

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1 correct?

2 A I don't have a quantification of that, no.

3 Q And you don't know whether there were any

4 material changes in Qualcomm's royalty rates since the

5 adoption of the WCDMA standard, including LTE; correct?

6 A Correct.

7 Q And you didn't make any effort here to determine

8 how the average royalty rate in Qualcomm's LTE-only

9 contracts compare to the average royalty rates in license

10 agreements signed before Qualcomm began selling LTE

11 chipsets; correct?

12 A Correct.

13 Q And am I also correct that you didn't

14 investigate the history of Qualcomm's licensing with

15 Wistron, Foxconn, Compal or Pegatron; correct?

16 A That's correct.

17 Q And you don't know whether Apple's contract

18 manufacturers agreed to their royalty rates with Qualcomm

19 before Qualcomm could have any alleged market power with

20 respect to LTE baseband chipsets; correct?

21 A Correct.

22 Q Now, you also criticize what you refer to as a

23 no challenge provision in two agreements between Apple and

24 Qualcomm; correct?

25 A That's correct.

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1 Q That's the so-called transition agreement and

2 the so-called business cooperation and patent agreement;

3 correct?

4 A That's right.

5 Q Neither of those agreements is still in force;

6 correct?

7 A That's correct.

8 Q Now, you looked at the business cooperation and

9 patent agreement, or BCPA, between Qualcomm and Apple;

10 correct?

11 A I did.

12 Q Specifically, you cite a provision there that

13 allowed the agreements to terminate if Apple challenged

14 Qualcomm's royalty rates in court; correct?

15 A That's right.

16 Q The BCPA was signed -- it was not signed until

17 2013; correct?

18 A I think that's right, yes.

19 Q And so far as you know, Apple never challenged

20 Qualcomm's royalty rates during the period between 2007 and

21 2013; correct?

22 A That's right.

23 Q Now, am I right that you didn't investigate the

24 extent to which provisions of the kind you challenge are

25 used within the cellular communications industry generally?

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1 A Can you be more specific about the provisions I

2 challenge?

3 Q Well, the no license no chip provision, the

4 so-called no challenge provision, the supposed policy of

5 not licensing competitors. The provisions mentioned in

6 your direct testimony. You haven't testified to what

7 extent those provisions are common within the cellular

8 industry; correct?

9 A I have.

10 Q You have or have not?

11 A I have.

12 Q And by the time of your deposition, you had not;

13 isn't that right?

14 A That could be true.

15 Q And by the time you submitted your reports in

16 this case, you had not; correct?

17 A That might be true, yes.

18 Q Now, you made no effort to determine whether

19 Intel is a party to any agreement that contains a so-called

20 no challenge provision; correct?

21 A I don't know about that.

22 Q And you made no effort to determine whether

23 Apple was a party to any agreements with parties other than

24 Qualcomm that contained no challenge provisions; correct?

25 A Correct.

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1 Q Now, I believe you said that Qualcomm's decision

2 not to license baseband chipset rivals is anticompetitive;

3 is that right?

4 A That's right.

5 Q But, again here, none of the patents here is a

6 standard essential patent; correct?

7 A That's correct.

8 Q And standard-setting organizations do not

9 require patentholders to license nonstandard essential

10 patents to competitors; correct?

11 A That's correct.

12 Q You understand that it is Qualcomm's practice

13 not to assert patents against chipset competitors; correct?

14 A I don't know about that.

15 Q You didn't investigate whether Qualcomm's

16 practices save chipset makers the cost of licensing

17 Qualcomm's patent portfolio; correct?

18 A Excuse me, could you say that again?

19 Q Sure. You did not investigate whether

20 Qualcomm's practices saved chip makers the cost of

21 licensing Qualcomm's patent portfolio; correct?

22 A I did not investigate that.

23 Q Now, you understand that the Qualcomm patent

24 portfolio includes patents that may be infringed by only

25 one component; correct?

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1 A Yes.

2 Q And you understand that it includes patents that

3 may be infringed by multiple components; correct?

4 A Yes.

5 Q And assuming that not all of Qualcomm's standard

6 essential patents are embodied in chipsets, then even if

7 Qualcomm licensed to other chip makers, OEMs would still

8 need to have a license to Qualcomm's patent portfolio;

9 correct?

10 A That sounds a little bit like a legal and

11 technical issue. I'm not sure I know the answer to it.

12 Q You've not studied the effect that multilevel

13 licensing would have on price negotiations between chip

14 makers and OEMs; correct?

15 A I have not.

16 Q And you agree, however, that licensing IP at the

17 device level is a very common practice in the cellular

18 communications industry; correct?

19 A It's common, yes.

20 Q And, in fact, you understand that Ericsson and

21 Motorola, Nokia and Alcatel and Samsung license portfolio

22 of cellular patents at the device level; correct?

23 A I don't know the practices of all those firms.

24 Q And you've not considered whether Apple itself

25 licenses its own IP at the device level; correct?

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1 A I don't know.

2 Q Now, you criticized Qualcomm for paying what you

3 call loyalty rebates; is that right?

4 A That's right.

5 Q And the payments about which you complain were

6 made under agreements dated between 2011 and 2016; correct?

7 A That's right.

8 Q And here again, none of those agreements is in

9 effect; correct?

10 A Today?

11 Q Today.

12 A That's my understanding.

13 Q And none of the payments are being made;

14 correct?

15 A The agreements are finished is my understanding.

16 Q And the economic literature, Doctor, that says

17 that economic payments can have pro competitive effects

18 when they align the parties' incentives; correct?

19 A That's a very general statement, so I'm not sure

20 what specific question you're after in this --

21 Q Do you recall telling us at your deposition that

22 economic literature says that incentive payments can have

23 pro competitive effects when they align both parties'

24 incentives?

25 A As a general matter, that's right.

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1 Q You suggested that Qualcomm's payments coerced

2 Apple into sourcing its chips exclusively from Qualcomm;

3 correct?

4 A That's correct.

5 Q And, in fact, however, Apple sourced its chips

6 exclusively from Infineon from 2007 to 2011; correct?

7 A Yes, that's right.

8 Q And for the vast majority of the life of the

9 iPhone, Apple has had a single source for its baseband

10 chips; correct?

11 A Yes, although Mr. Blevins was quite clear that

12 he was unhappy about that. But I agree.

13 Q Now, Apple has market power in the market for

14 the iPhone; correct?

15 A Yes.

16 Q And it has market power in what you call the

17 market for premium mobile devices; correct?

18 A Yes, because it sells a differentiated product.

19 Q And can we agree, Dr. Scott Morton, that patent

20 production incentivizes firms to invest in the expensive

21 and uncertain process of research and developing new

22 products and services?

23 A Yes.

24 Q And you're not offering here any opinions about

25 the patents that are involved in this investigation;

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1 correct?

2 A That's right.

3 Q But you have had conversations with Apple's

4 technical experts; correct?

5 A I have.

6 Q And they told you that the incentive -- that the

7 inventive contribution of the patents here is small;

8 correct?

9 A That's what they said, yes.

10 Q And they told you that the patents cover only

11 minor features of a chip in a phone; correct?

12 A That's right.

13 MR. MARRIOTT: Your Honor, I have no further

14 questions.

15 JUDGE PENDER: Okay. Based on a question you

16 asked, which I thought was interesting, Doctor, I take it

17 you don't like the role of the ITC in granting an

18 exclusionary remedy when you're dealing with a standard

19 essential patent; correct?

20 THE WITNESS: Yes, your Honor, because the

21 standard essential patentholder has voluntary committed to

22 FRAND, which means that they want royalty income. So they

23 could -- the ITC doesn't have the ability to give them that

24 royalty income; a regular court does. So that's the reason

25 for my concern that they should seek their money in that

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1 venue.

2 JUDGE PENDER: Well, how do you feel that the

3 ITC's role in nonstandard essential patents?

4 THE WITNESS: Oh, that's completely different,

5 your Honor. I think there's a very important power that

6 the ITC has to exclude infringing products where there

7 isn't a route to money damages. That's critical.

8 JUDGE PENDER: Made more important by the

9 inability of the federal courts to do injunctions; correct?

10 THE WITNESS: They're certainly slower at doing

11 injunctions, yes, that's right.

12 JUDGE PENDER: Well, do you understand what I

13 mean by inability? Because of the circuit court decisions

14 examine Supreme Court decisions limiting their ability to

15 grant injunctions. Are you aware of those?

16 THE WITNESS: Right, under -- I'm not a lawyer,

17 but there's an eBay test and they have to abide by that,

18 that's right.

19 JUDGE PENDER: Okay. Thank you.

20 MR. MARRIOTT: Thank you, your Honor.

21 MS. MURRAY: Your Honor, we have a new binders

22 to pass out.

23 JUDGE PENDER: Please, let's pass them out.

24 MS. MURRAY: And could I have the ELMO, please.

25 Thank you.

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1 May I proceed, your Honor?

2 JUDGE PENDER: Please.

3 CROSS-EXAMINATION

4 BY MS. MURRAY:

5 Q Good morning, Doctor.

6 A Good morning.

7 Q I'd like to start by just establishing a few

8 data points. If you could look in your binder --

9 JUDGE PENDER: Ms. Murray, it just occurred to

10 me, have we -- have you introduced yourself to the doctor

11 or does she already know you from a deposition or something

12 like that?

13 MS. MURRAY: Yes, we have met, your Honor.

14 JUDGE PENDER: Okay. Then it's not clear on the

15 record, of course. Thank you. Please proceed.

16 MS. MURRAY: I apologize. I apologize.

17 JUDGE PENDER: No sweat, no big deal. Just a

18 nicety, good thing to do occasionally.

19 BY MS. MURRAY:

20 Q And, Doctor, you recall that we've met before at

21 your deposition?

22 A I do.

23 Q And my name is Lisa Murray.

24 A Yes, thank you.

25 Q And if you could turn in your binder, please, to

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1 SX-16, which is an article by Recon Analytics, entitled

2 "How America's 4G Leadership Propelled the U.S. Economy."

3 A I see that.

4 Q If you could turn to page 3. And on page 3, do

5 you see the headline "Europe Wins in the 2G Era"?

6 A I do.

7 Q Do you agree or disagree that Europe led the

8 development of 2G?

9 A I agree that Europe led the development of 2G,

10 yes.

11 Q And if you could look at the next page, please,

12 page 4. All right, at the bottom of page 4 there's a

13 headline that reads "Japan Takes the Lead in 3G."

14 Do you see that?

15 A I do.

16 Q Do you agree or disagree that in the context of

17 3G, Japan was the leading player?

18 A Japan was certainly an important leading player

19 in 3G, absolutely.

20 Q And finally, if you could turn to page 6. Do

21 you see the headline, "The US Comes on Strong and Leads

22 4G"?

23 A I do.

24 Q Do you agree or disagree that the U.S. was a

25 leader in the development of 4G technology?

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1 A Absolutely the U.S. was a leader in the

2 development of 4G, yes.

3 Q Thank you. If you could turn, please, in your

4 binder to SX-14. SX-14 is published by CTIA and is

5 entitled "The Global Race to 5G."

6 A I see that.

7 Q Is it consistent with your understanding of the

8 industry to estimate that the U.S. industry has invested

9 about 300 billion in deploying next-generation networks

10 over the past 10 years?

11 A Yes, it is.

12 Q Is it consistent with your understanding that

13 another 275 billion is forecasted specifically for 5G

14 development?

15 A Yes, it is.

16 Q If you could turn, please, to SX-18. SX-18 is

17 from the Congressional Research Service, entitled "US

18 Semiconductor Manufacturing: Industry Trends, Global

19 Competition, Federal Policy."

20 Do you see that?

21 A I do.

22 Q And on page 9 of that document, there is a table

23 entitled "Global Wafer Fabrication Capacity."

24 Do you see that?

25 A I do.

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1 Q Is it consistent with your understanding of the

2 industry to estimate that North America is responsible for

3 13 percent of wafer production used to manufacture baseband

4 processor chipsets?

5 A Yes, it is.

6 Q And some of those wafers are produced by Intel;

7 correct?

8 A That's correct.

9 Q And finally, if you could turn to SX-11, page

10 10. I'd just like to ask you if you agree with the

11 definition of 5G services.

12 A Yes, I do. The one in the highlight, I agree

13 with that.

14 Q Okay. And that reads, "5G services are broadly

15 considered as being of three main types: Very high speed

16 mobile and wireless broad band services, ultra reliable,

17 low latency communications and massive IOT or machine-type

18 connections."

19 Is that consistent with your understanding of

20 the industry?

21 A Yes, it is.

22 MS. MURRAY: Your Honor, at this point we need

23 to go on the Intel confidential record.

24 JUDGE PENDER: Okay. Intel confidential record,

25 then.

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1 (Confidential session follows.)

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

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1 OPEN SESSION CONTINUED

2 MS. TALLON: Good morning, your Honor. Before

3 Respondents conclude their case, we do want to just attend

4 to the testimony of Dr. Yalamanchili. You may recall that

5 Apple's expert had a serious medical issue that prevented

6 him from being here. I just wanted to make sure that we

7 move in evidence his witness statements and the associated

8 exhibits, if I could.

9 JUDGE PENDER: Okay. Did you put those up there

10 on the podium or what's going on there?

11 MS. TALLON: I think those are left over from

12 the last examination, your Honor.

13 JUDGE PENDER: Okay.

14 MS. TALLON: The first is RX-7C, the direct

15 testimony of Sudhakar Yalamanchili on behalf of Respondent

16 Apple and associated exhibits.

17 JUDGE PENDER: So you are moving that into

18 evidence and no one objects.

19 MR. NELSON: Yes, your Honor, pursuant to our --

20 the agreement we worked out, we had designated some

21 additional deposition testimony that will be in the

22 deposition --

23 JUDGE PENDER: You've seen all the accompanying

24 exhibits too, Mr. Nelson?

25 MR. NELSON: We have, your Honor.

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1 JUDGE PENDER: Ms. Murray, what about you?

2 MS. COMFORT: No objection from the Staff, your

3 Honor.

4 JUDGE PENDER: All right. Then RX- -- Exhibit

5 RX-7C for identification along with its accompanying

6 exhibits has been moved into evidence and is accepted into

7 evidence and you are going to give a copy of the

8 accompanying exhibits or referenced exhibits to the court

9 reporter; correct?

10 MS. TALLON: We will, your Honor.

11 (Exhibit RX-7C and accompanying exhibits received.)

12 MS. TALLON: There is also a rebuttal witness

13 statement from Dr. Yalamanchili, and that is RX-1607C and

14 accompanying exhibits. We would move those in evidence as

15 well, your Honor.

16 MR. NELSON: No objection, your Honor.

17 MS. COMFORT: No objection from the Staff, your

18 Honor. I assume the deposition transcript is also coming

19 in?

20 MS. TALLON: I believe Complainants will move

21 those in.

22 MR. NELSON: Yeah, we will -- what we have done,

23 your Honor, is include those with the other depositions

24 that have been designated and are coming into evidence.

25 JUDGE PENDER: Okay. So then Exhibit RX-1607C

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1 for identification along with its accompanying exhibits has

2 been moved into -- well, it's been move into evidence, so

3 there being no objection, I am accepting it into evidence,

4 along with its list of exhibits, a copy of which has been

5 provided to the court reporter.

6 (Exhibit RX-1607C and accompanying exhibits

7 received.)

8 JUDGE PENDER: And I also understand Mr. Nelson

9 will move in a list of deposition designations in lieu of

10 cross-examination?

11 MR. NELSON: That's correct, your Honor.

12 JUDGE PENDER: Okay. And understand I'll be

13 fairly liberal there since the witness isn't around, okay?

14 MR. NELSON: Understood, your Honor.

15 JUDGE PENDER: In fact, I think in terms of, it

16 happened to me once during my career, I moved a

17 deposition -- moved to have a deposition transcript

18 admitted and the judge couldn't understand why I wanted it

19 until I explained that the person was deceased and that was

20 the outer limits of unavailability.

21 (Laughter.)

22 So all right, we'll accept the transcript under

23 these circumstances too, okay?

24 MR. NELSON: Thank you, your Honor.

25 MS. TALLON: Thank you, your Honor.

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1 JUDGE PENDER: Is that all the housekeeping?

2 MS. TALLON: I believe it is, your Honor.

3 JUDGE PENDER: I have a little teeny

4 housekeeping. Tomorrow morning I want from everybody a

5 proposal on how long the various posthearing briefs should

6 be. Put it in paper. You don't have to send it formally,

7 but so that Ms. Chow and I have it to look at. And then

8 I'll look at it and figure out whether I can just agree

9 with it or I need to modify it a little bit. If I need to

10 modify it, we'll have a discussion, okay?

11 MR. NELSON: Yes, your Honor.

12 JUDGE PENDER: Mr. Lee.

13 MR. LEE: Your Honor, with that, Apple rests.

14 JUDGE PENDER: Okay.

15 MR. ERWINE: Good morning, your Honor, Richard

16 Erwine on behalf of Qualcomm for our rebuttal case.

17 Your Honor, we are currently on the confidential

18 record. I believe we can go to the public record.

19 JUDGE PENDER: Right. We should be on the

20 public record insofar as when we first started talking

21 after the break.

22 Do you want to go on the confidential record

23 with the next witness or what?

24 MR. ERWINE: Not as part of my direct, but I'm

25 sure Apple may wish to do so, sir.

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1 So, your Honor, Qualcomm calls Dr. Arthur Kelley

2 back for rebuttal testimony.

3 Whereupon,

4 ARTHUR KELLEY

5 was called as a witness and, having first been duly sworn,

6 was examined and testified as follows:

7 JUDGE PENDER: All right. Please be seated,

8 sir.

9 MR. ERWINE: May I proceed, your Honor?

10 JUDGE PENDER: Yes.

11 DIRECT EXAMINATION

12 BY MR. ERWINE:

13 Q Welcome back, Dr. Kelley.

14 A Thank you.

15 Q In addition to the witness statement that was

16 the subject of your previous testimony, were you also asked

17 to prepare a witness statement setting forth your testimony

18 in response to Apple's testimony concerning the validity of

19 U.S. Patent Number 8,698,558?

20 A That's right.

21 Q Have you prepared the witness statement in front

22 of you for submission and consideration to Judge Pender and

23 the Commission in this investigation?

24 A I have.

25 Q Dr. Kelley, I believe you have before you in

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1 your binder CX-20C.

2 Do you see that?

3 A This binder?

4 Q Yes.

5 A I see it.

6 Q Dr. Kelley, is that your rebuttal witness

7 statement?

8 A Yes, it is.

9 Q Can you please turn to page 51 of your rebuttal

10 witness statement?

11 A Okay.

12 Q Dr. Kelley, is that your signature?

13 A That is my signature.

14 Q And does the rebuttal witness statement contain

15 your true and correct answers to the questions set forth by

16 counsel?

17 A It does.

18 Q Do you adopt your rebuttal witness statement as

19 your testimony here in this investigation?

20 A I do.

21 Q Your Honor, at this point, I request that CX-20C

22 and all exhibits identified therein be admitted as

23 evidence.

24 MR. LEE: No objection, your Honor.

25 MS. COMFORT: No objection, your Honor.

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1 JUDGE PENDER: There being no objection, Exhibit

2 CX-20C for identification is admitted to the record as

3 evidence, along with its list of accompanying documents. A

4 copy of which has been provided for the court reporter or

5 will be provided to the court reporter. Thank you.

6 Let's proceed, Mr. Erwine.

7 (Exhibit CX-20C and accompanying exhibits

8 received.)

9 MR. ERWINE: Thank you very much, your Honor.

10 With that I pass the witness.

11 MR. LEE: Your Honor, I believe that you and

12 Staff and Qualcomm's counsel have the notebook that I'm

13 going to work out of before you, and I think we have to go

14 on the confidential record.

15 JUDGE PENDER: You want to go on the

16 confidential record?

17 MR. LEE: Yes. It's Qualcomm confidential

18 information, your Honor.

19 (Confidential session follows.)

20

21

22

23

24

25

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1 OPEN SESSION CONTINUED

2 MR. HAMSTRA: David Hamstra for Qualcomm. We

3 call Dr. Annavaram for his rebuttal testimony.

4 Whereupon,

5 MURALI ANNAVARAM

6 was called as a witness and, having first been duly sworn,

7 was examined and testified as follows:

8 JUDGE PENDER: Please be seated.

9 DIRECT EXAMINATION

10 BY MR. HAMSTRA:

11 Q Welcome back, Dr. Annavaram.

12 A Thank you.

13 Q In addition to your other witness statements you

14 testified on earlier in this hearing, have you prepared a

15 rebuttal validity witness statement?

16 A That's correct.

17 Q And have you prepared that witness statement in

18 front of you in that binder, CX-18C?

19 A Yes.

20 Q And is this your rebuttal witness statement

21 regarding the validity of U.S. Patent Number 8,633,936?

22 A That's correct.

23 Q Can you turn to page 62 of your rebuttal witness

24 statement, Dr. Annavaram.

25 A Yes.

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1 Q Is that your signature, Dr. Annavaram?

2 A Yes, that is my signature, Mr. Hamstra.

3 Q Does this rebuttal witness statement contain

4 your true and correct answers to the questions set forth by

5 counsel?

6 A That's correct.

7 Q And do you adopt your rebuttal witness statement

8 as your testimony here in this investigation?

9 A That's correct.

10 MR. HAMSTRA: Your Honor, I request that CX-18C

11 and the exhibits cited therein be admitted as evidence.

12 MR. MASSA: No objection, your Honor.

13 MS. MURRAY: No objection, your Honor.

14 JUDGE PENDER: There being no objection, Exhibit

15 CX-18C for identification plus its accompanying exhibits

16 are admitted to the record as evidence, a copy of the list

17 of accompanying exhibits or documents are to be provided to

18 the court reporter if they have not done so already.

19 (Exhibit CX-18C and accompanying exhibits

20 received.)

21 MR. HAMSTRA: Thank you, your Honor. I tender

22 the witness for cross-examination.

23 MR. MASSA: Good morning, your Honor, may I

24 proceed?

25 JUDGE PENDER: Yes.

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1 CROSS-EXAMINATION

2 BY MR. MASSA:

3 Q Good morning, Dr. Annavaram.

4 A Good morning.

5 Q Welcome back. Dr. Annavaram, in responding to

6 Dr. Davis's invalidity testimony, you considered several

7 prior art products; correct?

8 A That is correct.

9 Q I'd like to focus this morning on the NV35. Do

10 you have that in mind?

11 A Yes.

12 Q The NV35 was manufactured by a company called

13 nVIDIA; right?

14 A That's correct.

15 Q And nVIDIA is a developer of graphics processing

16 units and video cards, among other things; correct?

17 A That is correct.

18 JUDGE PENDER: Please speak up, Doctor.

19 BY MR. MASSA:

20 Q Dr. Annavaram, you do not dispute that the

21 nVIDIA NV35 was on sale in the United States more than a

22 year before the filing of the '936 patent; right?

23 A I don't have any evidence of that. I don't deny

24 that.

25 Q Okay. And the NV35 was a graphics processing

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1 unit; correct?

2 A That's correct.

3 Q And it operated on graphics data; right?

4 A It's operated on graphics data, yes.

5 Q One area where you and Dr. Davis disagree is

6 whether the NV35 is a programmable streaming processor;

7 right?

8 A That's one of the areas, correct.

9 Q And you understand that his Honor has

10 interpreted the phrase "programmable streaming processor"

11 as it appears in the claims of the '936; right?

12 A That is my understanding.

13 Q You understand that one of the elements of a

14 programmable streaming processor is that it is

15 instruction-based; correct?

16 A That is correct.

17 Q And you do not dispute that the NV35 was an

18 instruction-based processor; correct?

19 A No, I do not.

20 Q Your disagreement with Dr. Davis is over the

21 question of whether the NV35 is capable of concurrently

22 executing threads of instructions on multiple data streams;

23 correct?

24 A That is correct.

25 Q And that's the second part of his Honor's

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1 construction; correct?

2 A That is correct.

3 Q Okay. So let's focus on that issue. Are you

4 with me?

5 A Yes.

6 Q Now, his Honor's construction does not require

7 simultaneous execution of threads; correct?

8 A That is correct.

9 Q And one of the examples of concurrent execution

10 that his Honor said falls within the phrase is an

11 interleaved execution of threads.

12 Do you recall that?

13 A I do.

14 Q And interleaved execution of threads, for

15 example, is when the processor executes thread 1 at a

16 certain point in time and then switches to execute thread 2

17 and then might switch back to thread 1; correct?

18 A Yeah, that is interleaved execution of threads,

19 correct.

20 Q Now, you contend that the NV35 has a single

21 pipeline. Is that your position?

22 A It has a single pipeline from the block diagram

23 that Dr. Davis pointed to.

24 Q Okay. Now, you agree that the pipeline in the

25 NV35 that you agree exists, it switches between threads on

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1 different clock cycles; correct?

2 A That is correct.

3 Q And just so we're on the same page, a clock

4 cycle refers to when a particular electronic device is

5 active; is that right?

6 A Yes.

7 Q And, for instance, we've heard about processors

8 operating at some number of megahertz. You've heard that

9 phrase; right?

10 A Yes, of course.

11 Q And that refers to a million clock cycles per

12 second; right?

13 A Yes, 1 megahertz is a million clocks per cycle

14 -- per second.

15 Q When we talk about clock cycles, that's when

16 certain processing is taking place in a device; right?

17 A That is how the CMOS works, yes.

18 Q And you would agree that the NV35 switches

19 between threads on subsequent clock cycles; correct?

20 A That is correct.

21 Q Okay. So you don't dispute that the NV35

22 performed interleaved processing of threads; correct?

23 A I don't dispute that, yes.

24 Q Now, you agree that the NV35 processed at least

25 one thread on at least one data stream; correct?

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1 A That is correct.

2 Q Your dispute with Dr. Davis is whether there are

3 multiple pipelines in the NV35; right?

4 A That is one of the disagreements, correct.

5 Q If we could have RX-909, which is at tab 12 in

6 your binder, but we'll show it on the screen as well. This

7 is one of the documents that Dr. Davis pointed to in his

8 testimony regarding the issue of whether there are multiple

9 pipelines.

10 Do you recall that?

11 A Yes, I do.

12 Q Now, if we look at the device that's being

13 discussed at the top, the third line down, you will see it

14 says "GPU: NV35."

15 Do you see that?

16 A I do.

17 Q And this is a public document; correct?

18 A That is my understanding.

19 Q And it's from a group called the GPU Review;

20 right?

21 A I don't remember the exact source. Yes, thank

22 you.

23 Q Well, you see the document is titled "GPU

24 Review"; correct?

25 A That is correct.

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1 Q And it's discussing the nVIDIA NV35 GPU; right?

2 A That's correct.

3 Q And if we go down to where it says "details,"

4 you will see a heading "fragment pipelines" with an

5 indication that there are four pipelines; correct?

6 A That's correct.

7 Q And you have no reason to dispute the accuracy

8 of this document; correct?

9 A I don't dispute this document, but I don't see

10 the four pipeline diagram in the nVIDIA documents. That's

11 what I was mentioning.

12 Q But you have no reason to dispute the review of

13 the NV35 says that it has four pipelines; correct?

14 A No, I don't dispute this document.

15 Q Okay. Let's look at another document, this is

16 RX-907, it's at tab 10. This is a review of nVIDIA's

17 GeForce FX 5900.

18 Do you see that?

19 A Yes.

20 Q You understand this was a graphics card that

21 incorporated the nVIDIA NV35 GPU; right?

22 A Yes, it's the same 5900 from the previous slide,

23 yes.

24 Q And you will see the date of this document was

25 December 12, 2003; correct?

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1 A That's correct.

2 Q That's some four years or more before the filing

3 of the '936 patent; correct?

4 A Correct.

5 Q I'm sorry; is that correct?

6 A Correct. Correct, yes.

7 Q Thank you. Now, you'll see, if we scroll down

8 to the GPU, again this indicates this is the NV35; correct?

9 A That's correct.

10 Q And if we see pixel pipelines, it indicates that

11 there's four pixel pipelines; correct?

12 A That's correct.

13 Q And there's an asterisk there. If we turn to

14 the next page of the document, you will see that the

15 asterisk says "the NV35 graphics chip renders four

16 conventional (color plus Z) pixels per clock."

17 Do you see that?

18 A That is correct.

19 Q All right. And you understand Dr. Davis's

20 testimony is that that indicates that there are four

21 pipelines in the NV35; correct?

22 A That is correct.

23 MR. MASSA: Thank you.

24 CROSS-EXAMINATION

25 BY MS. MURRAY:

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1 Q Good morning, Dr. Annavaram.

2 A Good morning.

3 Q Can a processor ever act on two streams of pixel

4 data at the same time?

5 A If it acts on two streams of pixel data, that

6 would be a single stream of pixels in that case.

7 Q Well, my question was not whether it can act on

8 a single data stream but whether it can act on two streams

9 at the same time.

10 A Same time as in the same clock?

11 Q Can a processor ever act on two streams of pixel

12 data at the same time?

13 A So if the processor has a single execution unit

14 as a sequential, then in any clock, only one thing can

15 execute in that part. But if it has multiple execution

16 units, it is possible to operate on multiple pixel streams,

17 provided the computations on one stream of pixels and the

18 computation on the second stream of pixels are different

19 computations.

20 If they are identical computation, then it will

21 effectively become a single stream in that case.

22 Q So if you have two pipelines operating on two

23 sets of data but they happen to be performing the same

24 computation, it's actually a single stream of data?

25 A That is how the stream definition is. It is a

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1 set of data attributes that have a same computational

2 requirements. And that means it's not like in a particular

3 clock, there may be an add that just happens to be. No,

4 that's not what I'm saying.

5 If the processing of the two streams is done

6 through a single kernel, for example, that's a commonly

7 used term in GPUs, then that would be considered to be a

8 single stream of pixels where the kernel is operating on

9 these two sets of pixels coming in.

10 Q Let me ask you a true or false question.

11 A Sure.

12 Q True or false, the fact that all units within a

13 set must be of the same type does not mean that all units

14 of the same type must fall within the same set? Do you

15 need that again?

16 A Yes, please.

17 Q I thought you might.

18 (Laughter.)

19 So the fact that all units --

20 A Is it possible to put that question on the

21 reader so I can actually read it?

22 Q Yes, I can do that.

23 A Yes, thank you very much.

24 MS. MURRAY: Could I have the Elmo, please.

25 BY MS. MURRAY:

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1 Q I'll just cover up all of the confidential

2 information. Okay. Let's see if this works. Okay. The

3 question is, true or false, the fact that all units within

4 a set must be of the same type does not mean that all units

5 of the same type must fall within the same set?

6 A That is true, from what I understand. It's very

7 difficult word play, but yes.

8 MS. MURRAY: Okay. Thank you very much.

9 I have no further questions.

10 THE WITNESS: Thank you.

11 MR. HAMSTRA: Your Honor, a few questions on

12 redirect here.

13 JUDGE PENDER: Go ahead.

14 REDIRECT EXAMINATION

15 BY MR. HAMSTRA:

16 Q Dr. Annavaram, you were asked some questions by

17 Ms. Murray about whether a stream is really multiple

18 streams and that sort of thing. With respect to his

19 Honor's construction of programmable streaming processor,

20 how are you able to determine whether data is, in fact, a

21 single stream or multiple streams?

22 A So the notion of stream has to be perceived from

23 the context of the hardware, from the -- from the view of

24 the hardware as the claim actually -- as the language

25 states. It's a processor operating on multiple data

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1 streams. And so the stream is viewed from the hardware

2 perspective.

3 Q And where does that hardware-based perspective

4 come from?

5 A It's in the construction of the term itself.

6 It's a processor that is capable of doing operations on

7 multiple data streams. So the streams here is relating to

8 the notion of the hardware in this case.

9 Q Now, Dr. Annavaram, Mr. Massa also asked you

10 some questions about there potentially being four pixel and

11 fragment pipes in the NV35 GPU.

12 Do you recall those questions?

13 A Yes, I do.

14 Q Now, Dr. Annavaram, if Dr. Davis were right and

15 the pixel pipeline were, in fact, instantiated four times,

16 does that impact your opinion of whether the NV35 art

17 discloses a programmable streaming processor?

18 A As I have explained in my rebuttal witness

19 statement, no, it doesn't.

20 Q And why is that, Dr. Annavaram?

21 A It relates to the question about stream. In

22 this particular context, there are four pipelines

23 effectively, and those four pipelines nonetheless are

24 operating on quad stream. So it's essentially a quad, but

25 now you can operate on four quads instead of one quad. So

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1 you have a better throughput. But that doesn't satisfy

2 multiple data streams. It's not like you have one extreme

3 in one and quad stream in another one and so on and so

4 forth. It is still one stream.

5 Q Now, Dr. Annavaram, what stream specifically

6 does Dr. Davis point to in the NV35 prior art?

7 A He was pointing to what they call the quad

8 stream or sometimes referred to as pixel stream.

9 Q And what is a quad?

10 A A quad is nothing but a block of 2-by-2 pixels.

11 Q And if my math is right, that's four pixels,

12 Dr. Annavaram?

13 A Yes.

14 Q And you saw, I believe it was RX-909, put up by

15 Mr. Massa, that mentioned something about four pixels per

16 clock?

17 A That is correct.

18 Q What does that suggest to you regarding whether

19 the NV35 would be processing a single quad in that quad

20 stream, four pixels each clock cycle?

21 A So in the documents that were cited, it is all

22 referring to pixels only. So you can have multiple

23 instantiation of the pipeline, but they are all operating

24 on the same data stream, in this case the quad stream. So

25 that's effectively more throughput, but it doesn't match

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1 the requirement that you operate on multiple data streams.

2 Q Dr. Annavaram, one last question. Can four

3 pixels be part of one quad?

4 A That's correct.

5 MR. HAMSTRA: No further questions, your Honor.

6 MR. MASSA: Nothing further, your Honor.

7 MS. MURRAY: Nothing further, your Honor.

8 JUDGE PENDER: Well, Dr. Annavaram, it seems

9 that you may be excused, sir. Thank you for your

10 testimony.

11 THE WITNESS: Thank you, sir.

12 (Witness excused.)

13 MR. PAK: Good morning, your Honor.

14 JUDGE PENDER: Good morning, Mr. Pak.

15 MR. PAK: We have Dr. Jacob Baker who will be

16 testifying on behalf of Qualcomm on the validity issues

17 relating to the '490 patent. We're going to hand up the

18 binders, your Honor.

19 JUDGE PENDER: You're armed with water this

20 time, Dr. Baker?

21 THE WITNESS: Yes, your Honor.

22 Whereupon,

23 RUSSEL JACOB BAKER

24 was called as a witness and, having first been duly sworn,

25 was examined and testified as follows:

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1 JUDGE PENDER: Please be seated. State your

2 name again for the record.

3 THE WITNESS: My name is Russel Jacob Baker.

4 MR. PAK: Mr. Matthews, can we get one binder up

5 for his Honor?

6 May I proceed, your Honor?

7 JUDGE PENDER: Please.

8 DIRECT EXAMINATION

9 BY MR. PAK:

10 Q Welcome back, Dr. Baker.

11 A Thank you.

12 Q So in addition to the infringement-related

13 opinions that you set forth in your first witness

14 statement, have you prepared a rebuttal witness statement

15 regarding validity issues relating to the '490 patent?

16 A Yes.

17 Q And if you turn to your binder and take a look

18 at CX-19C, is this the witness statement that you prepared

19 rebutting the opinions set forth by Apple's expert on the

20 '490 patent?

21 A Yes.

22 Q And does this witness statement contain true and

23 accurate answers to questions asked by counsel?

24 A Yes.

25 Q Would you turn to the last page. Is that your

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1 signature on this witness statement?

2 A Yes, on page 57.

3 Q And, Dr. Baker, do you adopt the witness

4 statement as your sworn testimony for the purpose of this

5 investigation?

6 A Yes.

7 MR. PAK: At this point, your Honor, I move into

8 evidence CX-19C and all accompanying exhibits thereto.

9 MS. TALLON: No objection, your Honor.

10 MS. COMFORT: No objection, your Honor.

11 JUDGE PENDER: There being no objection, Exhibit

12 CX-19C for identification plus its accompanying referenced

13 documents are admitted to the record as evidence, a copy of

14 the list of the accompanying documents to be provided to

15 the reporter.

16 MR. PAK: Yes, your Honor.

17 (Exhibit CX-19C and accompany exhibits received.)

18 MR. PAK: Pass the witness for

19 cross-examination.

20 MS. TALLON: May I proceed, your Honor?

21 JUDGE PENDER: Please.

22 CROSS-EXAMINATION

23 BY MS. TALLON:

24 Q Good morning, Dr. Baker.

25 A Good morning.

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1 Q I'd like to start, if we could, with RX-1146.

2 And if we could pull that up. That's in tab 6 of the

3 binder you just received. And this is U.S. patent number

4 9,329,671.

5 Do you recognize this exhibit?

6 A Yes.

7 Q And will you understand if I refer to RX-1146 as

8 Heinrich for our discussion today?

9 A Yes.

10 Q Now, Dr. Yalamanchili, Apple's expert, says that

11 Heinrich discloses the hardware configuration required by

12 claim 31 of the '490 patent; correct?

13 A I don't recall those exact words, but I think

14 that that's a reasonable -- reasonable conclusion.

15 Q Okay. I'd like to turn, if we could, to figure

16 1 of Heinrich. If we could enlarge that on the screen,

17 please. Thank you.

18 Figure 1 shows a user device 102 which can be a

19 mobile phone; correct?

20 A Yes.

21 Q And figure 1 of Heinrich also discloses a

22 baseband processor 104; correct?

23 A Yes.

24 Q The baseband processor of Heinrich is a modem

25 processor. You would agree with that; correct?

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1 A Yes.

2 Q And figure 1 of Heinrich also discloses an

3 application processor, which is labeled 106; correct?

4 A Yes.

5 Q Now, Heinrich also discloses a bus coupling the

6 application processor to the modem processor; correct?

7 A Yes, that's labeled "IPC" in figure 1 of

8 Heinrich.

9 Q Thank you. The baseband processor in Heinrich

10 can hold downlink data for later transmission to the

11 application processor; correct?

12 A Yes.

13 Q And the application processor in Heinrich can

14 hold uplink data for later transmission to the baseband

15 processor; correct?

16 A Yes.

17 Q Heinrich also discloses a scheduler, which is

18 labeled 120, within the baseband processor; correct?

19 A Yes.

20 Q And that scheduler in Heinrich controls the

21 scheduling of IPC activities in both directions between the

22 processors; correct?

23 A That's mentioned in Heinrich, but there isn't a

24 lot of detail on how the scheduling would be controlled in

25 both directions.

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1 Q But you agree that that scheduler 120 controls

2 the scheduling of IPC activities in both directions between

3 the two processors; correct?

4 A Well again, there's not much detail on how it

5 would schedule the activities, because Heinrich teaches

6 that the only time data is held and it's not real-time

7 sensitive data but logging information and nonreal-time

8 sensitive data is when the other processor is off and thus

9 not accumulating or holding data.

10 So again, there isn't much detail there, but

11 yes, it does mention there would be scheduling in both

12 directions.

13 Q And IPC activities are communications between

14 the baseband processor and the application processor in

15 either direction; correct?

16 A Yes.

17 Q Heinrich also discloses what it calls a lazy

18 timer; correct?

19 A Yes.

20 Q And when the lazy timer expires, the baseband

21 processor will transmit its aggregated downlink data to the

22 application processor; correct?

23 A In the instance where the application processor

24 is off and there's no real-time sensitive data so there's

25 accumulating nonreal-time sensitive data, the lazy timer

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1 would wake up the application processor and transfer the

2 data, yes.

3 Q Now, the IPC interface in Heinrich is the

4 circuitry that interfaces with an IPC bus; correct?

5 A If I understand what you're saying correctly,

6 there would be an IPC interface on, for example, the modem

7 processor, baseband processor, yes.

8 Q And in Heinrich, the physical IPC interface can

9 be in either an awake state or a low-power state; correct?

10 A I think it would be more correct to say that the

11 processor can be in an awake state or a sleep state.

12 Q And another word for a sleep state is a

13 low-power state; correct?

14 A Yes, I think that's reasonable.

15 Q I want to turn to another prior art reference

16 that Dr. Yalamanchili discussed in his testimony, and that

17 is RX-106. This is in tab 8 of your binder.

18 This is U.S. patent number 8,160,000 to

19 Balasubramanian; correct?

20 A Yes.

21 Q And Dr. Yalamanchili says that Balasubramanian

22 discloses the pulling after transmission feature of claim

23 31; correct?

24 A I believe that's correct, yes.

25 Q Let's take a look at figure 1 of

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1 Balasubramanian, please. Figure 1 discloses user equipment

2 labeled 102; correct?

3 A Yes.

4 Q And there is a transceiver 110 inside user

5 equipment 102 that provides a physical layer interface that

6 handles the transmission of packets to and from the user

7 equipment; correct?

8 A Yes.

9 Q You'd agree that Balasubramanian teaches that

10 user equipment 102 can hold or store packets for later

11 transmission; correct?

12 A Yes.

13 Q And when the transceiver 110 is transitioned to

14 an awake state, the stored packets can be transmitted to

15 the network interface labeled 112; correct?

16 A Yes, following the normal protocols associated

17 with a shared medium like Wi-Fi, yes.

18 Q We'll come back to that in a minute.

19 Balasubramanian also teaches that the user interface 112

20 can hold or store packets for later transmission to the

21 user equipment 102; correct?

22 A Yes, with the same caveats about following the

23 protocols associated with the shared user communication

24 medium.

25 Q Now, when the transceiver 110 is transitioned to

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1 an awake state, the network interface 112 can send its held

2 packets to the transceiver; correct?

3 A Is that the same question you just asked?

4 Because yes, it can, but it has to follow the same

5 protocols associated with whatever the shared medium is.

6 Q And Balasubramanian teaches that transceiver 110

7 can transmit its stored data to the network interface after

8 a configurable amount of time; correct?

9 A Yes.

10 Q And that configurable amount of time would be

11 determined by a timer; correct?

12 A I think that's reasonable. There may be other

13 things that determine the configurable amount of time. But

14 a timer is a reasonable way of determining that, yes.

15 Q I'd like to pull up, if we could, figure 2 of

16 Balasubramanian and a portion of column 7 at lines 1 to 11,

17 please. Okay. We have those on the screen.

18 Now, here in this excerpt of the Balasubramanian

19 specification, Balasubramanian discloses that the

20 transceiver receives any downlink data packets from the

21 network interface; correct?

22 A Are you pointing to block 210 in figure 2 of the

23 flow diagram?

24 Q And you can see the text, sir, beginning around

25 line 4 of the excerpt that we've highlighted, 4 to 6?

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1 A Yes.

2 Q And that happens during the same single wake

3 state in which the transceiver transmits its stored data to

4 the network interface; correct?

5 A Yes. However, what this is saying is that when

6 the transceiver in Balasubramanian is powered up, we want

7 to upload the information and then send the downlinks,

8 again following the normal protocols associated with the

9 shared medium.

10 Q Your answer was yes; correct?

11 A Yes.

12 Q Now, Balasubramanian also discloses that the

13 transceiver 110 may send a message to the network interface

14 112 requesting transmission of all queued packets; correct?

15 And you can see that around lines 8 to 11 on the screen.

16 A Yes.

17 Q The transceiver can receive these downlink data

18 packets after requesting them from the network interface;

19 correct?

20 A Yes, when the network interface sends the

21 packets to the transceiver, it receives them.

22 Q Now, you agree that a read request can start a

23 pull; right?

24 A No.

25 Q I'd like to pull up, if we could, your rebuttal

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1 witness statement, CX-19C. And that's in tab 5 of your

2 binder. And in particular, question 133, please. And we

3 can certainly show earlier questions for context, but I

4 wanted to refer you, sir, to the last line of your answer,

5 where you stated, "the read request starts the pull."

6 Do you see that?

7 A I don't know what specifically the context is

8 here, but just as a matter of common protocols in 802.11,

9 there has to be requests and then the device has to get

10 access to the -- to the shared medium that the transmission

11 is occurring on.

12 You simply can't pull data from one device to

13 another because there's things like collisions on the

14 shared medium. It's just not possible.

15 Q So I want to go back to my question before I

16 showed you this, Dr. Baker. And the question was a read

17 request can start a pull; correct?

18 JUDGE PENDER: Ms. Tallon, I want to see the

19 question before this as well.

20 MS. TALLON: Certainly. We can pull up that.

21 JUDGE PENDER: Now, Doctor, read that and see if

22 that helps.

23 BY MS. TALLON:

24 Q And this is tab 5 in your binder, if you need

25 more from your witness statement, Dr. Baker.

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1 A Well, give me a second I'll look in tab 5. But

2 just looking at this, it looks like it's talking about the

3 Wi-Fi modem pulling data from a DRAM perhaps from an

4 application processor prior to transmission out on the

5 Wi-Fi network. And the comments are related to the

6 delay -- difference in delays in how long it takes to

7 actually get data out on the Wi-Fi versus just pulling it

8 from DRAM associated with the application processor.

9 But I can -- I can put -- be more certain, maybe

10 this is related to the Centrino, I don't recall.

11 Q Maybe we can cut through it this way. The

12 testimony you gave in response to the questions in your

13 witness statement, RX- -- excuse me, CX-19C, that's all

14 true and correct; right?

15 A Yes.

16 Q Then we'll move on.

17 Now, in your opinion, a request for transmission

18 of all held data packets is not a pull; is that right?

19 A Yes.

20 Q You'd agree that the '490 patent does not

21 require the use of DMA to pull data; correct?

22 A I don't recall that being a requirement, but I

23 do recall that's the only embodiment or way that it's

24 discussed in the '490 patent.

25 But to answer your question, I don't remember

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1 that being required.

2 Q And you agree it's possible to perform a pull

3 without using a DMA engine; correct?

4 A I think so, but it would take me a little

5 thought to figure out how. But I would agree with that.

6 Q Now, you've offered the opinion that there would

7 be no motivation to combine Heinrich, which we talked about

8 a little bit earlier, and the Balasubramanian reference we

9 were just discussing; correct?

10 A Yes.

11 Q The '490 patent relates to interprocessor

12 communications; correct?

13 A Yes.

14 Q Heinrich relates to power savings for

15 interprocessor communications; correct?

16 A Yes.

17 Q Balasubramanian relates at least in part to

18 achieving power savings; correct?

19 A Yes.

20 Q And I want to focus on one particular aspect of

21 your opinions regarding motivation to combine. And this

22 relates to the testimony you were giving a few moments ago

23 about Wi-Fi.

24 Do you have that in mind?

25 A Yes.

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1 Q In Balasubramanian, we can agree that the

2 network interface 112 is coupled to the transceiver, which

3 was labeled 110, by a communication link, 116; correct?

4 A Well, to be more precise, the network interface

5 is coupled to multiple user -- pieces of user equipment,

6 for example phones or wireless modems, through a shared

7 medium, yes.

8 Q And that network interface is coupled to the

9 transceiver 110 that we saw in figure 1 of Balasubramanian;

10 correct?

11 A Of one of the transceivers and one of the pieces

12 of user equipment, yes.

13 Q And they're coupled by a communication link;

14 correct?

15 A Yes.

16 Q And in your witness statement, you testified

17 that when Balasubramanian uses that term "communication

18 link," it's referring to a virtual Wi-Fi radio channel;

19 correct?

20 A Basically, Balasubramanian talks about Wi-Fi or

21 AIR as the communication channel. There is some very minor

22 discussion of Ethernet, but Ethernet is also a shared

23 communication channel. It's a piece of cable where the

24 user equipment would tap into the pieces of cable at

25 various points.

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1 Q You would agree that Balasubramanian teaches

2 that the communication link it describes can be a wired

3 connection; right?

4 A Yes, the example I just gave was the one it

5 mentions is Ethernet.

6 Q And Balasubramanian discloses that its teachings

7 may be incorporated into a wire-based or wireless-based

8 communication system; correct?

9 A Yes.

10 Q And Balasubramanian discloses that its teachings

11 can apply to Wi-Fi and, quote, any other wired or wireless

12 platform; correct?

13 A Again, there's some minor comments like that,

14 but the majority of -- in Balasubramanian, the majority of

15 the comments are focused on Wi-Fi and particularly

16 voice-over IP. But yes, there are some comments like that.

17 Q Just to be clear, whether it's the majority of

18 the disclosure or not, my question was just that

19 Balasubramanian discloses that its teachings can apply to

20 Wi-Fi and any other wired or wireless platform; correct?

21 A Yes. But I think it's clear that any other

22 wired or wireless category would be a shared medium, like

23 Ethernet or Wi-Fi, where there's multiple pieces of user

24 equipment.

25 MS. TALLON: No further questions, thank you.

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1 JUDGE PENDER: Okay then. We'll break and we'll

2 be back at 5 minutes past 1:00. Thank you. If I run a

3 little late, it's because I have to sign an ID and I'm not

4 sure exactly how long that's going to be, okay?

5 MR. PAK: We understand, your Honor. Thank you.

6 JUDGE PENDER: Thank you.

7 (Whereupon, at 11:50 a.m., the hearing was

8 recessed, to be reconvened at 1:05 p.m. this same day.)

10

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1 AFTERNOON SESSION (1:09 p.m.)

2 Whereupon,

3 RUSSEL JACOB BAKER

4 resumed the stand and, having been previously duly sworn,

5 was examined and testified further as follows:

6 MR. NELSON: So, your Honor, before we get back,

7 I just want to give you a little update on schedule, where

8 things are.

9 JUDGE PENDER: Okay, good.

10 MR. NELSON: We're obviously moving faster now

11 than the time estimates on things.

12 JUDGE PENDER: We're not complaining, are we?

13 MR. NELSON: Oh, I'm not. I'm quite happy.

14 Ms. Mulhern will be the next witness, but then

15 given some comments your Honor has made at several points

16 through the hearing regarding antitrust, FRAND, some of

17 those issues, I'm not going to offer the rebuttal witness

18 statement of Mr. Sidak, because I believe it was directed

19 to those issues. That will streamline things a bit

20 further.

21 JUDGE PENDER: Just for a second, off the record

22 again.

23 (Discussion off the record.)

24 JUDGE PENDER: Back on the record, please.

25 Dr. Baker, where are we with Dr. Baker?

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1 MS. COMFORT: Staff is going to go, your Honor.

2 JUDGE PENDER: Staff, okay.

3 CROSS-EXAMINATION

4 BY MS. COMFORT:

5 Q Good afternoon, Dr. Baker.

6 A Good afternoon.

7 Q Is the scheduler in Heinrich equivalent to a DMA

8 controller?

9 A No.

10 Q What's the role of the scheduler?

11 A If one of the processors is off, it can't

12 accumulate data, that would mean the other processor is on

13 but not receiving real-time data. And so there would be

14 data such as log information or file system information

15 that isn't time critical.

16 So in that particular example the scheduler, say

17 with the lazy timer which is inaccurate by design, would

18 wait a certain time and wake up the other processor and

19 send that nonreal-time information to the other processor.

20 Q Is there any disclosure in Heinrich that the

21 scheduler has a role in uplink or -- in synchronizing

22 uplink and downlink data transfers?

23 A No, it's not possible in Heinrich, because while

24 Heinrich is concerned with interprocessor communications

25 and reducing power, Heinrich specifically indicates that

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1 it's the powers -- power of the processors that it's trying

2 to reduce, and that the power associated with the IPC bus

3 is of little concern.

4 But the key point to note is that when the

5 scheduler is useful or running, one of the processors is

6 off, and therefore not accumulating data. The other

7 processor is on, but not accumulating real-time data.

8 So -- if the other processor starts getting real-time data,

9 it wakes up the other processor, so it can transfer it

10 immediately. So the scheduler is not reason remotely

11 associated with synchronizing uplink/downlink data. And

12 neither -- there's no real-time holding of data on either

13 side of the bus in Heinrich.

14 Q So is there any disclosure in Heinrich related

15 to delaying or holding data at the remote processor?

16 A Only to the extent that it's information that's,

17 like, logging information, not real-time sensitive data,

18 not information that it would receive say from the an

19 application processor or through the wireless.

20 Just like information logging on when I received

21 this or what was received, that nonreal-time data is the

22 only thing that's held on one side. And that's only done

23 with the other processor is off and thus not holding data.

24 Q And is there any disclosure related to holding

25 or delaying at the other, the remote processor?

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1 A No. As soon as both processors are awake,

2 there's no holding, the data just goes -- both real-time

3 and nonreal-time data just goes straight across the bus.

4 Q And then in Balasubramanian, it's tab 8 in the

5 Respondents' binder, RX-106. And I wanted to ask you about

6 a particular paragraph. In column 5, lines 10 to 29. I

7 know that you may need a moment to read it.

8 A Okay.

9 Q In the context of the Balasubramanian patent,

10 what does it mean in this paragraph, column 5, lines 10 to

11 29, when it says "while components associated with upper

12 layers remain active to potentially provide packets for the

13 lower layers"?

14 A May we go to figure 1?

15 Q Sure, of course.

16 A So in figure 1 of Balasubramanian, there's

17 multiple pieces of user equipment, in the figure that would

18 be labeled 102 or 104, so this would be perhaps what's in

19 here.

20 And what that paragraph is talking about is

21 you -- each piece of user equipment can't always access the

22 communication medium here 116. So what Balasubramanian

23 teaches is turning off, like, this lower level transceiver

24 part, it calls it. And then the apps, if this was a phone,

25 for example, would then still queue information in the --

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1 the apps 108, for example, might still queue information in

2 the packet queuer 122.

3 But shutting off the lower level physical

4 components is what Balasubramanian teaches. So in 110 and

5 perhaps 102 would be shut off, but then the user equipment

6 104, the 110 in that piece of equipment would be on so that

7 it could talk to the network interface 112.

8 Q Okay. So to break this down a little, what are

9 the lower layers that the Balasubramanian is referring to?

10 A I believe in this particular example, that would

11 be like the transceiver.

12 Q And what are the upper layers that

13 Balasubramanian says must remain active?

14 A I believe that would be the applications 108,

15 the packet queuer 122, for example.

16 Q So is that everything that's downstream of the

17 Wi-Fi transceiver component?

18 A Yes, or upstream, depending on how you're

19 looking at it.

20 Q Is there any disclosure in Balasubramanian that

21 power saving technology for a Wi-Fi transceiver component

22 would have application to a PCIe or USB bus?

23 A No. In figure 1, for example, these are talking

24 about different stages in the -- in the pipeline, if you

25 will. So while Balasubramanian doesn't teach an

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1 application processor or modem processor, the IPC bus may

2 be located somewhere in the user equipment 102.

3 But Balasubramanian is not focused on that.

4 It's focused on the reducing of power in the shared -- you

5 know, the components that are communicating with the

6 network interface.

7 MS. COMFORT: Thank you.

8 No further questions.

9 MR. PAK: May I proceed, your Honor?

10 JUDGE PENDER: Yes, sir.

11 REDIRECT EXAMINATION

12 BY MR. PAK:

13 Q Good afternoon, Dr. Baker.

14 A Good afternoon.

15 Q Just to summarize your testimony, and I think

16 you gave very descriptive answers to the Staff's questions

17 on Heinrich, what is the power saving technique that's

18 utilized there?

19 A In Heinrich, the power saving technique is

20 putting the processor, either the application processor or

21 the modem processor, to sleep so that they don't burn

22 power.

23 Q And by contrast, what is the power technique

24 that's claimed in claim 31 of the '490 patent?

25 A In claim 31, it's focused on reducing power by

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1 minimizing the time the bus is in active state or the

2 transitions on the bus.

3 Q Is there any disclosure in Heinrich of

4 synchronizing the uplink and downlink data in a single

5 active cycle in order to minimize the power consumed by the

6 bus in Heinrich?

7 A No. Again, Heinrich teaches that the power

8 associated with communications over the IPC isn't a

9 significant concern. And in Heinrich, when the application

10 processor and the modem processor are on, the data goes

11 right across the bus, there's no holding.

12 Q Just to make the record clear on this point,

13 Mr. Jay, if we could pull up column 3 of the Heinrich

14 reference, United States patent 9,329,671.

15 And I would like to take you, Dr. Baker, to line

16 29 of column 3.

17 Under detailed description, it states, "the

18 disclosure recognizes that the overall power consumption

19 associated with IPC activities is dominated by latency" --

20 JUDGE PENDER: Excuse me, Mr. Pak.

21 Doctor, what does latency mean? The Commission

22 may be reading this and, you know.

23 MR. PAK: Absolutely, your Honor.

24 THE WITNESS: Latency in simple terms means

25 delay. But if it's a lot of times associated with a

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1 pipeline, and so all these computer engineering terms are

2 really simple, but they use the fancy language.

3 So a simple example would be if I go through the

4 drive through in McDonald's, there's a pipeline because I

5 give my order and there may be two or three cars in front

6 of me. So then the latency would be two or three cars. It

7 would be like the delay that I get until I get my food up

8 there. So that's a very simple way to look at pipelining

9 or latency. And it's a correct way.

10 So here we're using that term of how long it

11 takes to wake up the processor, which means it has to wake

12 up and it has to do a bunch of things like read in memory

13 and know its state and see what the status of things are.

14 Just different steps.

15 JUDGE PENDER: So you're saying you had to know

16 the prior art a little bit to understand what's going on

17 here, why this is an advantage, I'm sorry.

18 THE WITNESS: Yes. I think this is saying

19 that -- kind of that if you don't have your processor on,

20 like if you get on the airplane and you put it in airplane

21 mode, that your Wi-Fi is not going to be burning power

22 because it's not being used.

23 JUDGE PENDER: If I do that again, it's because

24 that, this is I think an important part of what's going on,

25 so --

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1 MR. PAK: Absolutely, your Honor. And I

2 appreciate the clarification.

3 JUDGE PENDER: Go ahead and start again.

4 MR. PAK: Yes.

5 BY MR. PAK:

6 Q So just to reorient ourselves, we're in the

7 Heinrich reference, '671 patent, column 3, line 29. And

8 there is a statement here that the disclosure in Heinrich

9 "recognizes that the overall power consumption associated

10 with IPC activities is dominated by latency, not by the

11 actual processing of information sent over the IPC."

12 Do you see that statement?

13 A Yes.

14 Q And can you explain to his Honor the

15 significance of that statement in terms of your earlier

16 testimony about the power saving technique that's taught in

17 Heinrich.

18 A So this is saying that the power associated with

19 the bus isn't a major concern. What's more of a concern is

20 the delay associated with the different stages of turning

21 the processor on, doing something and then turning it off,

22 for example, and they call that in computer engineering

23 latency. Basically, a delay in doing stuff.

24 Q And I think we can see some disclosure of that,

25 his Honor's questions about latency in column 6. If we

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1 turn to the bottom of column 6 at line 56. Dr. Baker, do

2 you see that there are a number of representative figures

3 that are given for various time periods in the Heinrich

4 system?

5 A Yes.

6 Q Can you explain to his Honor what is meant by TW

7 equals 600 milliseconds.

8 A If I remember correctly, that's the time it

9 takes the processor to wake up, .6 seconds.

10 Q 600 milliseconds?

11 A Yes, 600 milliseconds, .6 seconds.

12 Q If we look at TES, what does that stand for

13 there?

14 A That corresponds, when the processor is using

15 the USB, the amount of time that it takes the processor to

16 go to sleep.

17 Q So -- and that indicated on the order of 1

18 second; correct?

19 A Yes.

20 Q And I think we heard some testimony in this

21 investigation that when we were talking about the power

22 conservation techniques that are used, for example, in the

23 accused products, or on the domestic products, what was the

24 order of the time period that we're talking about there?

25 A Milliseconds. 1s and milliseconds.

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1 Q So 1s and milliseconds, that's the power state

2 of the various buses like the PCIe; is that correct?

3 A Yes.

4 Q Here we see orders of magnitude greater in terms

5 of the time it takes to wake up the processor versus the

6 time it takes to go down to sleep state; is that correct?

7 A Yes.

8 Q So, again, just to summarize this testimony, is

9 the Heinrich reference at all concerned about trying to

10 save power on the interconnectivity bus when those

11 processors are up and running?

12 A No.

13 JUDGE PENDER: Doctor, is there another

14 advantage? If you keep turning that chip on and off, on

15 and off, on and off, does that increase or decrease its

16 MTBF?

17 THE WITNESS: I would think that the longer the

18 chip is off, the better it would be for the lifetime of the

19 chip. It would be fewer failures. But there might be

20 associated with turning the chip on and off other things

21 that might result in failures.

22 JUDGE PENDER: If you leave the chip on all

23 along without powering it up and powering -- doesn't that

24 extend its life too?

25 THE WITNESS: If it's off, yes.

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1 BY MR. PAK:

2 Q So the other reference you were asked about

3 Dr. Baker, Mr. Nelson said he will give me a dollar if I

4 say this correctly. It's Balasubramanian, did I get that

5 right?

6 A Yes.

7 Q So the Balasubramanian reference. Can you

8 explain to his Honor what is the particular power technique

9 that is disclosed in that reference?

10 A Because the user equipment is communicating on a

11 shared communication medium, Balasubramanian teaches that

12 if it's not -- if parts of the user equipment, or perhaps

13 all of the user equipment, if it was, for example, a

14 wireless modem, aren't being used to power those parts off,

15 to reduce power. Where one of the user -- pieces of user

16 equipment would still have access, but then the others

17 would be powered off, and thus dissipate less power.

18 Q Again, is there any disclosure in

19 Balasubramanian of looking at the -- any kind of low power

20 state of a bus, an interconnectivity bus, to try to

21 optimize the power consumption of that bus?

22 A No. Again, it's a shared medium. So if it was

23 air for the example, it's not possible to shut off power to

24 air. If it's a piece of cable and ethernet, you can't shut

25 it off.

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1 Just as a practical matter, that medium that

2 things are being transmitted on, there's multiple pieces of

3 user equipment, you can't do something associated with that

4 bus to reduce power that would make it unusable to the

5 other pieces of equipment that are using the bus.

6 Q Now, I know you disagree with this proposition,

7 but even if somehow you were to combine these two different

8 systems, Heinrich and Balasubramanian, into one system,

9 would you get to what's taught in claim 31 of the '490

10 patent?

11 A No. There's several reasons. One, each are

12 focused on different portions of the communication system.

13 Heinrich doesn't teach holding the data, and

14 Balasubramanian does teach holding the data. However

15 that's just until it has access to the communication

16 channel. There's certain protocols that would have to be

17 followed.

18 But in both, synchronization is impossible.

19 Q Just to make the record clear on

20 Balasubramanian, I want to show you the same column that

21 Apple's counsel showed you, which was column 7.

22 JUDGE PENDER: Exhibit number, Counsel?

23 MR. PAK: Yes, your Honor, RX-106,

24 Balasubramanian. Column 7, line 4.

25 Apple's counsel asked you some questions about

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1 the wake state, do you recall that, what happens in

2 Balasubramanian when you're in the wake state?

3 Dr. Baker, can you just clarify for the record

4 what is the wake state that's being described in

5 Balasubramanian.

6 THE WITNESS: So that would be when, for

7 example, the transceiver is powered up in one of the pieces

8 of user equipment, and it can send its, again following

9 protocols associated with the shared medium, it can send

10 its information to the network interface, and then the

11 network interface would realize, hey, that transceiver and

12 that piece of user equipment is awake, let's go ahead and

13 when we -- again following the protocols, when we can, send

14 the information data while it's awake.

15 Q Is the transceiver in Balasubramanian at all

16 related to low power states of an interconnectivity bus as

17 claimed in the '490 patent?

18 A No.

19 Q And, again, remind us, what is the medium that

20 is shared in the Wi-Fi system of Balasubramanian to send

21 data?

22 A The majority of the discussion is Wi-Fi and

23 voice over Wi-Fi, so air. There is a few comments about

24 ethernet, where it would be a piece of capable, where the

25 user equipment would be tied into the piece of cable.

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1 Q In the area of testified you gave you talked

2 about this being a shared medium type of system, regardless

3 whether you're using vacuum or air in Wi-Fi or something

4 like a copper wire in ethernet. Is that -- is that your

5 testimony?

6 A Yes.

7 Q And again, just because one transceiver in a

8 user equipment may be powered down in a shared medium

9 architecture, does it imply anything about whether the

10 shared medium should be powered down as a whole?

11 A I think just a matter of common sense. If you

12 have multiple users trying to use a shared medium, you

13 wouldn't want to somehow disable that medium. But it's not

14 even possible.

15 Q So taking all this into account, I think his

16 Honor mentioned early on in the case about the motivation

17 to combine. What is the motivation to combine these two

18 references? What is the ultimate opinion on that question?

19 Would one skilled in the art at the time of the '490 patent

20 have considered these two different patents and sought to

21 combine them together into a single system?

22 A I don't think there's motivation to combine. I

23 mean, in Heinrich alone, the results are outstanding, and I

24 see no reason why someone would look to a wireless protocol

25 for a combination with what's taught in Heinrich. There's

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1 just no motivation to combine.

2 MR. PAK: Thank you, your Honor. I pass the

3 witness.

4 JUDGE PENDER: Ms. Tallon, it's your go on this

5 one?

6 MS. TALLON: I believe so, if your Honor will

7 allow.

8 RECROSS-EXAMINATION

9 BY MS. TALLON:

10 Q Good afternoon, Dr. Baker.

11 A Good afternoon.

12 Q I just heard you testify in response to Mr.

13 Pak's questions that, and I tried to write this down off

14 the real-time to make sure I got it right, Heinrich doesn't

15 teach holding data. Did I get that right?

16 A No, I didn't testify that. I testified that

17 when one of the processors is off, that Heinrich will hold

18 nonreal-time data on one side of the bus.

19 Q So just so we can be clear, because the record

20 may be a little muddled on that point, I want to follow up

21 on that.

22 The baseband processor in Heinrich can aggregate

23 downlink data; correct?

24 A It can -- it can aggregate nonreal-time data,

25 yes.

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1 Q It can aggregate downlink data; correct?

2 A That's really unclear in Heinrich. I -- I think

3 that's possible.

4 What Heinrich characterizes as data being held

5 is logging information or file system information. Now,

6 that could come over the wireless and be downlink data or

7 that data itself could be called downlink data.

8 So I think that that's reasonable. I think it's

9 reasonable to say that the nonreal-time sensitive data

10 could be downlink data.

11 Q You had your deposition taken in this case;

12 correct, sir?

13 A Yes.

14 Q And you gave truthful testimony in that

15 deposition; correct?

16 A I think so, yes.

17 Q I'd like to pull up a portion of that deposition

18 at page 217, lines 7 to 9.

19 You were asked the question I just asked you,

20 "Am I right that the baseband processor in Heinrich can

21 aggregate downlink data?" And your answer was yes.

22 You were asked that question at your deposition;

23 correct?

24 A Yes.

25 Q And that's the answer you gave; correct?

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1 A Yes.

2 Q Without qualification; correct?

3 A Yes, I'm not sure what was preceding that. And

4 I think my answer just now was consistent with that answer.

5 It may have been not as clear as I could have been.

6 JUDGE PENDER: Let's see what was before this,

7 Ms. Tallon.

8 MS. TALLON: Certainly. At line 2, the

9 question, your Honor, is about IPC activities in Heinrich.

10 JUDGE PENDER: Then scroll down so we can see --

11 MS. TALLON: If you could go to at least line

12 14, please. There's additional context.

13 JUDGE PENDER: Does that refresh your memory or

14 anything like that?

15 THE WITNESS: I think that's reasonable, your

16 Honor. What Heinrich specifies is being held as the

17 nonreal-time data, file system logging, which could be

18 downlink data, yes.

19 JUDGE PENDER: That's the third time I've heard

20 the expression, Ms. Tallon, "nonreal-time data." We need

21 to explain on the record what that means.

22 THE WITNESS: So there's information that's

23 generated, associated with communications that logs when

24 certain things happen, for example, but it doesn't send

25 that over like it would voice information over the IPC bus.

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1 It just holds it there.

2 So that if -- and I not critical that it gets

3 sent across. So in order to minimize power, Heinrich

4 teaches that when one of the processors is off, that

5 nonreal-time sensitive data can sit on the other processor.

6 And then after some time, which Heinrich teaches isn't

7 critical, it can wake up the processor -- the processor

8 that's on can wake up the other processor and transmit

9 that, just so it doesn't sit there too long.

10 JUDGE PENDER: It's not the same as voice

11 transmission, in other words.

12 THE WITNESS: Exactly, your Honor.

13 JUDGE PENDER: Thank you, Ms. Tallon, I

14 appreciate that. You clarified something else for me on

15 that.

16 MS. TALLON: Thank you, your Honor.

17 BY MS. TALLON:

18 Q Now, turning back to the question we were just

19 discussing about the baseband processor and Heinrich

20 aggregating downlink data, now, that means that the

21 baseband processor in Heinrich can hold downlink data for

22 later transmission to the application processor; correct?

23 A When the other processor wakes up -- when the

24 application processor wakes up, the downlink data will be

25 transmitted, yes.

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1 Q The application processor in Heinrich can hold

2 uplink data for later transmission to the baseband

3 processor; correct?

4 A Yes. But, again, keep in mind that whenever

5 both processors are on, the data just flies across, there's

6 no holding. It's only when one of the processors is off.

7 Q But you agree that the application processor in

8 Heinrich can aggregate uplink data; correct?

9 A Yes.

10 MS. TALLON: Thank you.

11 Nothing further, your Honor.

12 JUDGE PENDER: Now Staff, do you have anything?

13 MS. COMFORT: Nothing further from the Staff,

14 your Honor.

15 MR. PAK: Your Honor, I don't think anything

16 further unless your Honor has anything.

17 JUDGE PENDER: No, I appreciate your testimony,

18 Doctor. It seems that you may be excused.

19 MR. PAK: Yes, your Honor.

20 JUDGE PENDER: Thank you.

21 THE WITNESS: Thank you, your Honor.

22 (Witness excused.)

23 JUDGE PENDER: We're ready to go with the last

24 witness of the day, which is not too last, it's a long

25 time.

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1 MR. LASHER: That's correct, your Honor.

2 Qualcomm calls Ms. Carla Mulhern.

3 JUDGE PENDER: I like to have the first book so

4 I can see the witness statement.

5 MR. LASHER: Your Honor, Ms. Mulhern actually

6 has two witness statements, an initial and a rebuttal.

7 JUDGE PENDER: Good, thank you.

8 Whereupon,

9 CARLA S. MULHERN

10 was called as a witness and, having first been duly sworn,

11 was examined and testified as follows:

12 JUDGE PENDER: Please be seated, state your name

13 for the record. And make sure the microphone is on. And

14 you can talk as loud as you want, as long as it's loud.

15 THE WITNESS: Okay. My name is Carla S.

16 Mulhern.

17 MR. LASHER: May I proceed, your Honor?

18 JUDGE PENDER: Please, Mr. Lasher.

19 DIRECT EXAMINATION

20 BY MR. LASHER:

21 Q Ms. Mulhern, you may want to sit close to the

22 microphone because it's a little bitter. Who is your

23 current employer?

24 A Analysis Group, Incorporated.

25 Q What is your position at Analysis Group?

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1 A I am a managing principal in the Washington,

2 D.C., office.

3 Q What do you do at Analysis Group?

4 A I am an economist by training and I specialize

5 in the application of microeconomic principles to issues

6 arising to complex litigation.

7 Q And again, sit a little bit closer.

8 A Okay.

9 Q What do you mean by the application of

10 microeconomic principles to issues arising with complex

11 litigation?

12 A So generally speaking, microeconomics is the

13 field of economics where we look at economic

14 decision-making by individuals and firms. A lot of the

15 issues we look into has to do with factors that affect

16 supply and demand for products, the nature of competition

17 in product markets, as well as market structure.

18 Q If you could give a quick background, your

19 educational background.

20 A Sure. I have a bachelor's degree in mathematics

21 from Bucknell University and a master's degree in economic

22 from the London School of Economics and Political Science.

23 Q If you could describe your professional

24 experience following your master's degree for us, please.

25 A Sure. After finishing my master's degree, I

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1 came to Washington, D.C., and started working for NERA,

2 National Economic Research Associates. NERA is an economic

3 consulting firm, broadly speaking in the same space as my

4 current employer.

5 After a few years in NERA, I went then to

6 Putnam, Hayes & Bartlett, another firm in the same space.

7 And then in 1997, I joined Analysis Group and I have been

8 there for now more than 20 years.

9 Q Are you a member of any professional

10 association?

11 A I am, a member of the American Economic

12 Association as well as the Licensing Executive Society.

13 Q Have you authored any publications or given any

14 speeches?

15 A I have. I've authored a number of publications

16 on various tools involving the analysis -- the valuation of

17 intellectual property and I've given speeches on these

18 issues in a number of contexts.

19 Q Have any of your speeches or publications

20 involved issues dealing with the ITC?

21 A Yes, I have given speeches on topics relevant to

22 ITC or Section 337 litigation.

23 Q Have you previously provided expert testimony in

24 any litigations?

25 A Yes, on numerous occasions.

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1 Q Let's talk about your -- any at the ITC?

2 A Yes, many, many. I've testified at the ITC many

3 times.

4 Q Approximately how many investigations have you

5 provided testimony, whether it be deposition testimony or

6 hearing testimony?

7 A At deposition or trial, I've testified in ITC in

8 more than 35 ITC investigations over the past 13 years or

9 so.

10 Q And of those 35 or so, how many did you provide

11 hearing testimony?

12 A I think it's around close to 20, but maybe not

13 quite.

14 Q Have you provided any expert testimony at the

15 ITC regarding the issue of public interest?

16 A Yes, I have. I have testified on public

17 interest in I think something like eight previous

18 investigations.

19 Q Now, in your experience in your work, have you

20 studied the mobile communications industry?

21 A I have. Many of my projects have involved this

22 industry.

23 Q Can you give us some examples of what portions

24 of this industry you've studied.

25 A So my work has involved an analysis of the

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1 telecom or mobile communications industry at several

2 levels, from cellular communications equipment, such as

3 base stations and communication, the products used by

4 cellular carriers, as well as mobile devices, that's the

5 devices used by consumers, handsets and tablets, as well as

6 semiconductor devices, which are components that go into

7 the mobile devices themselves.

8 Q Have you offered testimony in any ITC cases

9 involving mobile devices or semiconductors or baseband

10 chips?

11 A Yes, I have. Much of my ITC work involves one

12 or more of those industries. I think it's more than 15 or

13 so, I don't have an exact count. But in many cases I have

14 been called upon to testify at the ITC on issues related to

15 mobile devices or cellular equipment or semiconductors.

16 Q Have you ever been qualified as an expert in a

17 U.S. district court case with respect to cellular

18 telecommunications or mobile devices?

19 A Yes, I have. I have testified also in district

20 court in cases involving cellular communications technology

21 as well as mobile devices.

22 MR. LASHER: Your Honor, at this point, Qualcomm

23 will tender Ms. Mulhern as an expert in the field of

24 applied microeconomics.

25 MR. CORDELL: No objection, your Honor.

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1 MS. COMFORT: No objection, your Honor.

2 JUDGE PENDER: There being no objection and her

3 qualifications being adequate, it seems that I will qualify

4 Ms. Mulhern as an expert in applied microeconomics.

5 MR. LASHER: Thank you, your Honor.

6 BY MR. LASHER:

7 Q Ms. Mulhern, did you prepare any witness

8 statements in this investigation?

9 A I did. I prepared an affirmative witness

10 statement and a rebuttal witness statement.

11 Q Let's turn to your direct witness statement

12 first. It should be in one of the two binders. And it's

13 marked as CX-15C?

14 A I see that.

15 Q Do you recognize this as your witness statement?

16 A Yes, I do.

17 Q If you could turn to page 21, I believe. Is

18 that your signature?

19 A Yes, it is.

20 Q Now, does CX-15C contain the true and correct

21 answers that you provided in response to counsel's

22 questions?

23 A It does.

24 MR. LASHER: Your Honor, at this point Qualcomm

25 would move for the admission of CX-15C and the accompanying

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1 exhibits.

2 MR. CORDELL: No objection.

3 MS. COMFORT: No objection, your Honor.

4 JUDGE PENDER: There being no objection, Exhibit

5 CX-15C for identification plus its accompanying or

6 referenced exhibits is admitted to the record as evidence.

7 A copy of the reference exhibits to be provided to the

8 court reporter.

9 MR. LASHER: Thank you, your Honor. Will do.

10 (Exhibit CX-15C and accompanying exhibits

11 received.)

12 BY MR. LASHER:

13 Q Ms. Mulhern, now if you could turn to your next

14 binder and find CX-21C. I believe that's your rebuttal

15 witness statement; is that correct?

16 A Yes, it is.

17 Q If you could turn to page 24 of your rebuttal

18 witness statement, let me know when you're there.

19 A Yes, I am.

20 Q Is that your signature?

21 A It is.

22 Q And does CX-21C contain your true and correct

23 answers to questions posed by counsel?

24 A Yes, it does.

25 MR. LASHER: And your Honor, at this time

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1 Qualcomm would seek to admit CX-21C and the accompanying

2 exhibits into evidence.

3 MR. CORDELL: No objection, your Honor.

4 MS. COMFORT: No objection, your Honor.

5 JUDGE PENDER: Okay. There being no objection,

6 exhibit CX-21C for identification plus its accompanying

7 exhibits is admitted to the record. A copy of the

8 accompanying exhibits -- or a list of the accompanying

9 exhibits will be provided to the court reporter.

10 (Exhibit CX-21 and accompanying exhibits received.)

11 MR. LASHER: Thank you, your Honor. I pass the

12 witness.

13 JUDGE PENDER: Before you go, Mr. Cordell, I've

14 got a question. If you would turn to your witness

15 statement, please, question number 74.

16 To borrow an expression from Mr. Cordell's

17 partner, Ms. Mulhern, you've got to help me out here a

18 little bit. You see there the question is "could Qualcomm

19 supply sufficient baseband processor chipsets to satisfy

20 the increased demand caused by replacing accused iPhones

21 with nonaccused iPhones?"

22 Do you see that.

23 THE WITNESS: Yes, I do.

24 JUDGE PENDER: Do you see I'm a little puzzled?

25 What does that question have to do with expertise in

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1 applied microeconomics?

2 THE WITNESS: That question goes to the ability

3 to Qualcomm to supply chips for nonaccused iPhones. It's a

4 question --

5 JUDGE PENDER: My point, though, how is that

6 question within your competence to answer?

7 THE WITNESS: This is the kind of question --

8 JUDGE PENDER: I'm going to strike that question

9 is what I'm telling you. And I'm using this as an example

10 that I am quite capable of going through these witness

11 statements and finding questions like this that don't have

12 anything to do with the price of eggs in China and striking

13 them.

14 This is not a proper question for this witness.

15 This witness has been qualified as an expert in applied

16 microeconomics. I don't know how a witness is an expert in

17 applied microeconomics could possibly answer a question

18 that requires expertise in purchasing and in production on

19 whether Qualcomm could supply parts or not.

20 Now, the other thing is, Ms. Mulhern, where did

21 you get the information that you used to answer this

22 question?

23 THE WITNESS: There were two sources of

24 information I used to answer this question. One is --

25 JUDGE PENDER: So you have no direct knowledge?

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1 THE WITNESS: I'm --

2 JUDGE PENDER: All right.

3 THE WITNESS: One is historical information

4 based on the sales of Qualcomm chips in the past, Qualcomm

5 chips used in iPhones relative to current sales, so I

6 looked at an analysis of sales data.

7 And the other is information provided by the

8 company.

9 JUDGE PENDER: I understand that. But my

10 question is do you know whether Qualcomm actually will

11 supply the chips or not?

12 THE WITNESS: I can't speak for Qualcomm.

13 JUDGE PENDER: Well, you can't -- but so you're

14 basically saying, without knowing whether Qualcomm will

15 supply the chips, that the event can occur?

16 THE WITNESS: I'm saying that the evidence I

17 reviewed suggests Qualcomm has the capacity to provide the

18 chips and I looked at a number of sources to inform that

19 opinion.

20 JUDGE PENDER: Right. And my point, everyone,

21 is why do we need an expert in applied microeconomics to

22 tell us whether or not Qualcomm has the capacity to do the

23 chips? I'm already -- the evidence is in the record on

24 that already, okay.

25 And Ms. Mulhern, I'm not attacking you, that's

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1 not the point here.

2 The point here is I'm looking for questions that

3 move the record along, that get us somewhere, get us to a

4 concrete point in these proceedings.

5 And the shoe is on everyone's foot here. I'm

6 just not picking on Ms. Mulhern or Qualcomm here. I'm --

7 I've been a bit reticent about this so far. But I'm very,

8 very concerned that we have a half question. Question

9 number 74 presumes something that's going to occur based on

10 capacity and not willingness. It's a theoretical question,

11 okay.

12 All right. Excuse me, everyone, on that.

13 Mr. Cordell, would you please proceed.

14 MR. CORDELL: Yes. Thank you, your Honor.

15 CROSS-EXAMINATION

16 BY MR. CORDELL:

17 Q Good afternoon, Ms. Mulhern.

18 A Good afternoon.

19 Q My name is Ruffin Cordell and I represent Apple

20 in this case. You understand that?

21 A I do.

22 Q You and I have been in a number of ITC cases

23 before; is that correct?

24 A You look familiar, but I don't recall the

25 specifics.

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1 Q I don't -- I won't ask you any more about that.

2 But I think this is the first time you and I

3 have ever had a chance to speak in open court. Is that

4 fair?

5 A That could be.

6 Q We've been in handset cases, you've testified on

7 behalf of Ericsson in a couple of cases; is that right?

8 A I don't think so.

9 Q Shows you -- too hard for me to figure it out.

10 But in any case, you testified a moment ago

11 you've done about 35 of these ITC cases; right?

12 A That's right.

13 Q You said you've testified several times on the

14 public interest issue; right? Is that right?

15 A Yes, that's right.

16 Q Now, you've said your area of expertise is

17 applied microeconomics, and that sounds like you apply

18 economic principles to specific markets; is that fair?

19 A That's fair.

20 Q So one of the --

21 JUDGE PENDER: Supply and demand curves;

22 correct? Isn't that the sine qua non of economics?

23 THE WITNESS: That's right.

24 JUDGE PENDER: I remember that from economics in

25 school many, many years ago. It was the part of economics

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1 I hated the most, Ms. Mulhern.

2 (Laughter.)

3 THE WITNESS: I'm sorry to hear that.

4 JUDGE PENDER: Macroeconomics was much easier,

5 the next semester. I get your point, please continue.

6 BY MR. CORDELL:

7 Q One of the things you consider in microeconomics

8 is when you have a specific market, you look at the fact

9 that there might be more than one competitor in that

10 market, fair?

11 A That's one thing you might look at.

12 Q In general, you would agree with me for any

13 specific market, having two competitors is better than

14 having just one; correct?

15 A As a general proposition, I think that's fair.

16 Q Now, you looked at the LTE baseband chipset

17 industry; correct?

18 A That's right.

19 Q And you believe that there is significant

20 competition in the LTE baseband chipset industry; right?

21 A That's right.

22 Q But in reality, if we're talking about premium

23 LTE chipsets, today there are really only two parties on

24 the merchant market; correct?

25 A On the merchant market. But I think in the

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1 market, in the premium market generally, it would be four.

2 Q Let's just stick to my question. In the

3 merchant market, the market that Apple can actually

4 participate in, there's only two possible suppliers;

5 correct?

6 A Two suppliers to Apple, that's correct.

7 Q In fact, that's true for any handset

8 manufacturer, unless you happen to have your own captive

9 semiconductor manufacturing process in-house; right? That

10 was a long question. Do you want me to try again?

11 A Yes, thank you.

12 Q The reason why you say there are four is because

13 you're pointing at Samsung because Samsung has its own

14 semiconductor manufacturing process; right?

15 A That's right.

16 Q They could make anything they want to; right?

17 A That's correct.

18 Q And the same is true for Huawei. They have

19 their own captive silicon manufacturing company, if you

20 want to call it that; right?

21 A That's right.

22 Q Okay. --

23 JUDGE PENDER: Another interruption, please

24 excuse me. Did you hear the testimony of Mr. Blevins?

25 THE WITNESS: I read the transcript. I wasn't

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1 able to be here.

2 JUDGE PENDER: You read the transcript, all

3 right.

4 Please remind me, Mr. Cordell, at the end of

5 this when can do it expeditiously, I'd like to ask her some

6 questions about Mr. Blevins.

7 MR. CORDELL: Your Honor, I was planning on

8 doing that. Maybe I'll --

9 JUDGE PENDER: Please, no, no, you may do a much

10 better job than I would. And I think we'll need to go on

11 the confidential record to do that because of what he said

12 about the interesting relationship that he had with

13 Samsung; correct?

14 MR. CORDELL: That is correct, your Honor.

15 JUDGE PENDER: All right.

16 MR. CORDELL: I will try to cover that.

17 BY MR. CORDELL:

18 Q Now, when Apple began making iPhones back in

19 2007, they used Infineon baseband processors; correct?

20 A That's right.

21 Q And then in 2011, Apple switched from Infineon

22 to Qualcomm for the baseband processors; right?

23 A That's right.

24 Q And eventually, Apple committed to Qualcomm as

25 the sole source in 2011 for the iPhone 4; correct?

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1 A That's right.

2 Q And it turns out that back in 2011, the only

3 source of baseband processors that were operable on a CDMA

4 network was Qualcomm; correct?

5 A I think that's right.

6 Q And the CDMA networks in the United States are

7 made up by Verizon and Sprint, and that represents about

8 half of the U.S. network; right? In terms of subscribers?

9 A That's probably close. I don't remember the

10 exact numbers.

11 Q It might be up or down a few percentage, but

12 it's a big chunk of the U.S. telecom market; right?

13 A A big chunk, yes.

14 Q So back in 2011, if you wanted to sell phones to

15 half of the U.S. market, the CDMA market, you had no choice

16 but to be to Qualcomm; right?

17 A I think Qualcomm was a leader in that area,

18 that's right.

19 Q So what Qualcomm did back in 2011 is they said,

20 you know Apple, if you want to sell in the CDMA market, we

21 want all of your business; right?

22 A I don't know how those conversations went down.

23 Q Okay. But what we do know is because of a

24 conversation in 2011, Apple then committed to Qualcomm as a

25 sole source; correct?

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1 A I saw some information that Apple preferred to

2 have one skew at that time, which was the Qualcomm chip.

3 Q Now, beginning with the iPhone 7, though, Apple

4 began using both Qualcomm and Intel for its baseband

5 processors; right?

6 A That's right.

7 Q Now, Mr. Marriott asked a bunch of questions,

8 and I understand you weren't here, but he asked a bunch of

9 questions about whether Apple wanted a sole source or

10 didn't want a sole source. Have you seen some of that

11 testimony?

12 A I have.

13 MR. CORDELL: And I'll try to keep this public,

14 your Honor.

15 BY MR. CORDELL:

16 Q But it is a fact that over the years, Apple has

17 pursued several other companies as a source of baseband

18 processors; correct?

19 A That's right.

20 Q So Apple pursued Renaissance back in the 2008 to

21 2010 time frame; correct?

22 A Yes.

23 Q And you know Renaissance is a joint venture

24 between Hitachi and Mitsubishi Electric; right?

25 A I don't recall the specifics of that.

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1 Q You know it's a very large international

2 semiconductor firm?

3 A I am aware of that.

4 Q Part of the Renaissance cellular businesses was

5 then acquired by Broadcom; correct?

6 A That's right.

7 Q And Apple considered using Broadcom in its

8 iPhone products; right?

9 A That's right.

10 Q But then Broadcom exited the baseband processor

11 business in 2014; right?

12 A That's right.

13 Q Apple also considered using Sony Ericsson, chip

14 manufacturer, TS Ericsson, as the supplier to the iPhone

15 for the baseband processor; right?

16 A That's right.

17 Q But Sony Ericsson also exited the business;

18 right?

19 A That's right.

20 Q And Apple considered using Texas Instruments for

21 the baseband processor for the iPhone; right?

22 A That's right.

23 Q But Texas Instruments is out of the market as

24 well; correct?

25 A That's right.

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1 Q We also had some discussion about whether a

2 company called MediaTek out of Taiwan might be a baseband

3 supplier. Are you familiar with any of that?

4 A Yes, I am.

5 Q But it is a fact that MediaTek has never sold a

6 baseband chipset to Apple; right?

7 A They haven't. They have been considered as a

8 supplier, but I don't think -- but they haven't made sales

9 at this point.

10 Q That's because Apple just doesn't believe

11 MediaTek's products are far enough along; right?

12 A At this point I think that's fair.

13 Q In fact, it's your assessment that MediaTek's

14 processor is not currently capable of offering the premium

15 features that characterize the premium baseband chipset

16 market; right?

17 A Not yet, that's right.

18 JUDGE PENDER: So who is left, Ms. Mulhern?

19 THE WITNESS: I think the suppliers that compete

20 in the premium segment at the moment are Samsung -- are

21 Qualcomm, Intel, Samsung and HiSilicon.

22 JUDGE PENDER: For the entire world; correct?

23 THE WITNESS: That's right.

24 JUDGE PENDER: And what do you know about

25 Samsung's practice about selling its baseband chips, do you

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1 know anything?

2 THE WITNESS: I do.

3 JUDGE PENDER: Beyond what was in Mr. Blevins

4 testimony that we're not going to talk about?

5 THE WITNESS: There's stuff in the record, I'll

6 be happy to talk about it.

7 JUDGE PENDER: We'll get to that, right,

8 Mr. Cordell?

9 MR. CORDELL: Why don't we go on the Apple

10 confidential record and we'll talk a little bit about what

11 Mr. Blevins said.

12 JUDGE PENDER: We'll go on the confidential

13 record.

14 (Confidential session follows.)

15

16

17

18

19

20

21

22

23

24

25

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1 OPEN SESSION CONTINUED

2 BY MR. CORDELL:

3 Q Now, in your direct witness statement, one of

4 the things that you press on is this notion that an

5 exclusion order in this case will assist Qualcomm in

6 obtaining a return on its R&D investment; right?

7 A That's right.

8 Q Question 5. Now, you performed no estimate of

9 the actual research and development costs associated with

10 the three patents in this case; right?

11 A That's fair.

12 Q You aren't offering an opinion of what a

13 reasonable return financially on these patents would be;

14 correct?

15 A No, I'm not.

16 Q Now, you know that there's a parallel district

17 court case out in San Diego on the same patents; right?

18 A I'm aware of that.

19 Q You know Qualcomm is pursuing damages in that

20 case; right?

21 A That's my understanding.

22 Q But you haven't done any analysis of what

23 damages Qualcomm might be entitled to if they were to win

24 out there; right?

25 A No, that's not relevant to the public interest.

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1 Q Focusing on the premium baseband chip market,

2 you actually didn't do any microeconomic analysis of the

3 impact of an exclusion order on the premium baseband

4 chipset market; correct?

5 A I'm not sure I know what you mean by your

6 question.

7 Q Well, your focus in your direct witness

8 statement was not on the baseband chipset market, it was on

9 the phone market; right?

10 A In my affirmative statement, that's correct.

11 Q You were looking at the premium smartphone

12 market; correct?

13 A I was looking at the smartphone industry

14 generally, yes.

15 Q And you identified buckets of alternatives to

16 the accused iPhones that you thought were reasonable

17 substitutes; right?

18 A That's right.

19 Q You said, you know, there are Qualcomm enabled

20 iPhones, and those would be reasonable substitutes; right?

21 A That's right.

22 Q And you said, you know, there are old iPhones,

23 and those would be reasonable substitutes in your opinion;

24 right?

25 A For some consumers, that's right.

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1 Q And then you had a few smartphones manufactured

2 by some other OEMs that you felt would be good substitutes;

3 right?

4 A That's right.

5 Q So if I can have Ms. Mulhern's demonstrative,

6 CDX-5C at page 4. Now, this is marked confidential, but --

7 I need page 4, thank you.

8 This is marked confidential, but is this

9 confidential, can you tell me quickly?

10 A This comes from Mr. Ammon's deposition exhibit

11 so I don't know.

12 Q This was your opinion that the phones on the

13 right are substitutes for the iPhones on the left; right?

14 A My -- this comes from Mr. Ammon's deposition

15 testimony in which he identified competing models to the

16 accused phones.

17 Q I wonder if counsel can confirm that these facts

18 are not confidential.

19 MR. LASHER: Your Honor, that's not

20 confidential. I believe it was marked because it was an

21 exhibit to a confidential deposition.

22 JUDGE PENDER: All right. We'll go with that.

23 Thank you, Mr. Lasher.

24 BY MR. CORDELL:

25 Q And you weren't here, but Mr. Mueller made a

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1 magnetic chart which we marked as RDX-28.4. Do you see it

2 behind you?

3 A I do.

4 Q I'm not going to risk the easel, because I

5 usually will dump it over on somebody. But I'll set it up

6 here.

7 JUDGE PENDER: You can get up, Mr. Lasher, and

8 look at it if that's what you want to do.

9 MR. LASHER: I've seen it, your Honor, thanks.

10 BY MR. CORDELL:

11 Q Now, Ms. Mulhern, you don't have any reason to

12 dispute, first of all, that the phones listed under

13 representative products are, in your view, in fact, the

14 competitive substitutes to the iPhone products listed on

15 the left?

16 A I agree with that.

17 Q I mean, this is your -- this is your chart

18 basically; right?

19 A That's right.

20 Q And you also had no reason to dispute that every

21 single one of the representative products utilizes a

22 Qualcomm baseband processor; correct?

23 A That's true. But some of the products also use

24 a Exynos process from Samsung.

25 Q What you're saying is Samsung has its own

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1 captive semiconductor line; right?

2 A That's right.

3 Q So for some of its products, it uses its own

4 baseband processor; correct?

5 A For its own products, it will use either a

6 Qualcomm or Exynos in the same product depending on the

7 time frame or geography. It varies. They vary it.

8 Q But the one thing we can agree on is when it

9 comes to all of the products on RDX-28.4, to the extent any

10 of them include a merchant market premium baseband

11 processor, it's either Qualcomm or Intel; correct?

12 A As that term is being used by Apple, that's

13 correct.

14 Q Now, Ms. Mulhern, you testified a little while

15 ago that you've been in a lot of these ITC cases; right?

16 A That's right.

17 Q I have too. It's sort of been my bailiwick, to

18 the extent I have one. So you and I understand how

19 important the ITC is; fair?

20 A I think that's fair.

21 Q And we know how powerful the ITC's remedies are;

22 correct?

23 A That's right.

24 Q And we know that a party can't just come

25 marching in here and ask for the extraordinary remedies of

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1 the ITC without proving their case; right?

2 A My understanding is they have to establish a

3 violation, that's right.

4 Q And weak cases need not apply, fair?

5 A I guess they will get decided.

6 Q Statute requires that a party -- the Complainant

7 prove patent infringement; right?

8 A Yes.

9 Q And they have got to prove the existence of a

10 domestic industry; right?

11 A That's right.

12 Q They have got to clear the public interest

13 hurdle; right?

14 A That's right.

15 Q Now, this case is a little bit unique because

16 the real target of the case is not the named iPhone

17 product; right?

18 A So as I understand it, the accused products are

19 iPhone products, that's right.

20 Q Well, that may be. Can I have RDX-31, page 10.

21 You read the complaint in this case; right?

22 A I did.

23 Q And you've read Qualcomm's public interest

24 statement; correct?

25 A Yes.

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1 Q So what I've done is I have put them together

2 here, and the complaint tells us that if you import an

3 iPhone that has a Qualcomm product in it, it can come right

4 in the country; right?

5 A I'm sorry, could you -- I just didn't hear your

6 question. I was reading.

7 Q Sure. The complaint and public interest

8 statement tell us together if you want to make a iPhone

9 with Qualcomm product in it, it can come right into the

10 country; right?

11 A That's right.

12 Q But if you put an Intel processor in that phone

13 and suddenly it's an infringing product that needs to be

14 barred at the border; right?

15 A That's right.

16 Q Do you remember back a few years ago, maybe a

17 decade or so ago, when we used to litigate downstream

18 products cases?

19 A I do.

20 Q And the notion there is you would exclude the

21 iPhone because it included an infringing part in it; right?

22 A That's right.

23 Q This one is kind of turned on its head. This is

24 an upstream products indicates; right?

25 A That's an interesting way to look at it.

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1 Q Because what they are seeking to exclude is not

2 the iPhone product but it's really the Intel baseband

3 processor; correct?

4 A So I don't disagree that the remedy would have

5 an impact on the baseband processor.

6 Q Well, more than that. I mean, the focus of the

7 case is on the Intel baseband processor; right?

8 A I mean, it seems reasonable to me that Qualcomm

9 would not issue an order that implicated its own business.

10 So the carve-out or exemption seems reasonable to me.

11 Q But it's odd because you look at the '936

12 patent. Are you familiar with the patents in this case?

13 A Just broadly.

14 Q You know the '936 patent is on some graphics

15 streaming processor with conversion instructions. Does

16 that sound familiar?

17 A Sounds vaguely familiar. I see that here.

18 Q But the one thing we can agree on is that

19 graphics processor with conversion instruction has nothing

20 to do with the baseband processor; right?

21 A It sounds like it's getting outside my area of

22 expertise.

23 Q But we know that, you know, no matter what the

24 patents say, no matter what part of the system is affected,

25 that Qualcomm says only stop the Intel parts at the border;

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1 right?

2 A The exclusion order only would cover phones with

3 Intel chips in them, that's my understanding.

4 Q Now, we've had a lot of discussion over the last

5 few days about why doesn't Intel just take a license from

6 Qualcomm. Did you hear that?

7 A I think the Judge suggested that.

8 Q And I think Mr. Marriott suggested -- asked

9 Dr. Eisenach, why didn't Intel just take a license; is that

10 right?

11 A I don't recall that.

12 Q And I believe there was some discussion with

13 Ms. Evans to that effect as well. Did you see that?

14 A I don't recall seeing that specifically.

15 Q But the reality is that Qualcomm simply refuses

16 to license Intel; correct?

17 A I don't have an opinion on that.

18 Q So do you know who Evan Chesler is?

19 A No.

20 Q He signed the complaint in this case. He is

21 actually Mr. Marriott's senior partner at Cravath. You

22 have no familiarity with Mr. Chesler?

23 A I have not met him.

24 Q Can I have the complaint, the last page? Show

25 the signature block.

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1 See Mr. Chesler is over on the top of the heap

2 over at Cravath?

3 A I see that.

4 Q Some people call him the Bill Lee at Cravath

5 firm.

6 THE WITNESS: Big shoes to fill.

7 MR. LEE: I'm sure Bill Lee doesn't.

8 BY MR. CORDELL:

9 Q I'm sure both will give me a hard time about

10 that. But he is lead counsel for the entire Apple Qualcomm

11 debate. Are you aware of that?

12 A No, I wasn't.

13 Q So I had a hearing with Mr. Chesler last August,

14 and the judge, Judge Curiel out in San Diego, very bright

15 and inquisitive judge, asks Mr. Chesler the same questions

16 that his Honor asked here. Are you aware of that?

17 A No.

18 Q So if I could have -- can I have it looks like

19 this is RDX-31-11. There you go.

20 So Judge Curiel said I've seen it a number of

21 places, the assertion that Qualcomm denies other chip

22 manufacturers an opportunity to obtain a license. Can you

23 tell me a little bit about how that works.

24 Mr. Chesler says "Yes. We do not license other

25 chip manufacturers. We do not. We license the people who

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1 make the devices." These plaintiffs --

2 "Judge Curiel, Intel is a chip manufacturer,

3 aren't they, or do they make devices as well?

4 "Mr. Chesler: Intel is a chip manufacturer.

5 "The Court: But Intel has a license with

6 Qualcomm?

7 "Mr. Chesler: No. No for the chips, not as a

8 chip manufacturer."

9 He made it quite clear that Qualcomm will not

10 license a competitor; correct?

11 A I hadn't seen this before.

12 JUDGE PENDER: Let's make sure she has no

13 knowledge of this first.

14 BY MR. CORDELL:

15 Q Well, do you have any knowledge of what

16 Qualcomm's policies are with respect to licensing other

17 chip manufacturers?

18 A I had heard some reference to the no license, no

19 chips policies.

20 Q Well, it's more than no license, no chips. This

21 is a little bit different. This is no license, no license;

22 right? Qualcomm simply does not license chip manufacturers

23 full stop; correct?

24 A This was suggested, that's right.

25 MR. LASHER: Objection, your Honor. Ms. Mulhern

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1 hasn't provided any testimony on Qualcomm's licensing

2 activities and she's already stated that she doesn't

3 know --

4 JUDGE PENDER: Right. I get that. But what --

5 I can -- approach and I'll explain why I'm going to allow

6 the testimony, both of you.

7 (Discussion off the record.)

8 JUDGE PENDER: For now, Mr. Cordell will be

9 allowed to continue his examination, but he's assured

10 everyone it's near the end on this particular area.

11 BY MR. CORDELL:

12 Q One last follow-up, Ms. Mulhern. You're not

13 aware of a single chip manufacturer that Qualcomm has

14 licensed; correct?

15 A That's right.

16 Q And you know that Qualcomm owns thousands and

17 thousands of standards essential patents; correct?

18 A That's right.

19 Q And one of the requirements when you have a

20 standards essential patent is that you agree to license it

21 on fair, reasonable and nondiscriminatory terms; correct?

22 A That's right.

23 Q And yet Qualcomm has not licensed a single chip

24 manufacturer under those standards essential patents;

25 correct?

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1 A I'm not aware of any such licenses.

2 Q Let me follow up on one thing at the very end of

3 this, referenced the defendants, contract manufacturers, do

4 have a license. Are you familiar with the contract

5 manufacturers in this entire great Shakespearean tragedy

6 that we have before us?

7 A Yes, I am.

8 Q Now, it turns out that not only did the chip

9 makers did not have a license, but Apple did not have a

10 license from Qualcomm; correct?

11 A My understanding is the license is with the

12 contract manufacturers.

13 Q Apple has never had a license with Qualcomm;

14 correct?

15 A Not to my knowledge.

16 Q Instead, what Qualcomm does is it licenses

17 several Chinese contract manufacturers; correct?

18 A That's my understanding.

19 Q And as long as Apple uses those contract

20 manufacturers, there is a -- I'm told, your Honor, that we

21 may be on the confidential record here.

22 JUDGE PENDER: Okay. We'll go on the

23 confidential record.

24 MR. CORDELL: This would be Apple Intel

25 confidential.

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1 (Confidential session follows.)

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

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1 C O N T E N T S

2 VOIR

3 WITNESSES: DIRECT CROSS REDIRECT RECROSS DIRE

4 JERRY EISENACH

5 by Ms. Comfort 1261

6 by Mr. Cordell 1264

7 FIONA SCOTT MORTON

8 by Mr. Mueller 1272 1327

9 by Mr. Marriott 1279 1339

10 by Ms. Murray 1317 1340

11 ARTHUR KELLY

12 by Mr. Erwine 1346 1356

13 by Mr. Lee 1349 1362

14 by Ms. Comfort 1361

15 MURALI ANNAVARAM

16 by Mr. Hamstra 1368 1379

17 by Mr. Massa 1370

18 by Ms. Murray 1376

19 RUSSEL JACOB BAKER

20 by Mr. Pak 1383 1403

21 by Ms. Tallon 1384 1413

22 by Ms. Comfort 1399

23

24

25 -- continued --

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1 C O N T E N T S (Continued)

2 VOIR

3 WITNESSES: DIRECT CROSS REDIRECT RECROSS DIRE

4 CARLA S. MULHERN

5 by Mr. Lasher 1418 1496

6 by Mr. Cordell 1428 1498

7 by Ms. Comfort 1487

10

11 CONFIDENTIAL SESSIONS: Pages 1261-1273, 1294-1304,

12 1322-1341, 1349-1367,

13 1438-1453, 1468-1504

14

15

16

17 E X H I B I T S

18 EXHIBITS: IDENTIFIED RECEIVED

19 RX-11C 1278

20 RX-1611C 1279

21 SX-11 1322

22 SX-14 1322

23 SX-16 1322

24 SX-18 1322

25 -- continued --

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1 E X H I B I T S (Continued)

2 EXHIBITS: IDENTIFIED RECEIVED

3 RDX-32C 1341

4 RX-7C 1343

5 RX-1607C 1344

6 CX-20C 1348

7 CX-18C 1369

8 CX-19C 1384

9 CX-15C 1424

10 CX-21 1425

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

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1508

CERTIFICATE OF REPORTER
TITLE: In The Matter Of: Certain Mobile Electronic Devices
and Radio Frequency and Processing
Components Thereof

INVESTIGATION NOS: 337-TA-1065


HEARING DATE: 06-25-18
LOCATION: Washington, DC
NATURE OF HEARING: Hearing

I hereby certify that the foregoing/attached


transcript is a true, correct and complete record
of the above-referenced proceeding(s) of the U.S.
International Trade Commission.
DATE: 06-25-2018

SIGNED: Mark A. Jagan


Signature of the Contractor or the
Authorized Contractor's Representative

I hereby certify that I am not the Court Reporter


and that I have proofread the above-referenced
transcript of the proceedings of the U.S.
International Trade Commission, against the
aforementioned Court Reporter's notes and
recordings, for accuracy in transcription in the
spelling, hyphenation, punctuation and speaker
identification and did not make any changes
of a substantive nature. The
foregoing/attached transcript is a true,
correct and complete transcription of the
proceedings.
SIGNED: Christopher Weiskircher
Signature of Proofreader

I hereby certify that I reported the


above-referenced proceedings of the U.S.
International Trade Commission and caused
to be prepared from my tapes and notes of
the proceedings a true, correct and
complete verbatim recording of the
proceedings.
SIGNED: Carmen Smith
Signature of Court Reporter

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Exhibit 

5('$&7('9(56,212)'2&80(17 6 
628*+772%(6($/('
Case 5:17-md-02773-LHK Document 620-9 Filed 07/19/18 Page 1 of 3

Exhibit 
Apple Pushes Monopoly Concerns In Qualcomm ITC Fight - Law360 https://www.law360.com/articles/1055440/print?section=competition
Case 5:17-md-02773-LHK Document 620-9 Filed 07/19/18 Page 2 of 3

Portfolio Media. Inc. | 111 West 19th Street, 5th floor | New York, NY 10011 | www.law360.com
Phone: +1 646 783 7100 | Fax: +1 646 783 7161 | customerservice@law360.com

By Chuck Stanley

Law360 (June 19, 2018, 9:31 PM EDT) -- Apple attorneys questioned an expert witness for
Qualcomm on the potential competition effects of the chipmaker’s bid to ban Intel-equipped
iPhones from the U.S. during a hearing Tuesday at the International Trade Commission, pressing
a claim that a ban on imports of the phone could hand Qualcomm monopoly power and push Intel
out of 5G development.

Apple Inc., in an effort to fight off patent infringement claims related to Intel Corp.-made chips
used in some iPhones, has argued that banning phones with the Intel chips would leave
Qualcomm Inc. with an effective monopoly on the market for modem chips used in premium
smartphones.

Apple has further suggested Intel would likely drop its efforts to develop next-generation wireless
technology known as 5G if its chips were effectively locked out of the U.S. market, diminishing the
influence of U.S. companies on standards for the new technology, an issue that has been flagged
by U.S. policymakers as a national security concern.

The expert witness, Gregory Sidak of consulting firm Criterion Economics, said he thought it was
unlikely Intel would abandon the entire 5G space over a setback to its business making chips for
handsets.

“I don’t think it’s credible,” said Sidak, Criterion's founding chairman. “[Intel] would be passing up
too great an opportunity aside from the smartphone business.”

Apple has said that a decision pushing Intel out of the 5G development game would undercut U.S.
investment in the emerging technology and cede leadership in the vital space to China.

Sidak also hit back at Apple’s claim that a ban on imports of Intel’s chips would allow Qualcomm
to raise prices for the chips and the costs would be passed on to consumers.

Sidak said Apple’s buying power would offset any putative monopoly power handed to Qualcomm,
and that a jump in prices for the chips would drive the tech giant to seek other sources for
advanced chips, incentivize makers of lower-performance chips to develop top-tier modem chips
and increase consumer demand for phones that use less-expensive modem chip designs.

According to an economic analysis Sidak performed for Qualcomm, every top-echelon smartphone
that could potentially serve as a consumer substitute for iPhones blocked from the U.S. uses
Qualcomm's modem chip, with the exception of some Samsung phones that use chips built in-
house.

The Intel-equipped iPhone, Sidak said, is the only top-tier phone that currently uses a competing
company's chip.

Sidak, in response to questioning from Apple attorneys, conceded that it is “generally true” that

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competition between two companies is better than a monopoly for consumer pricing, quality and,
in this case, national security issues.

However, he said that respect for Qualcomm’s intellectual property rights in the instant case
weighs against the general preference for competition.

“You’re trading the competitive benefits on one hand, and the protection of the company holding
the infringed patent on the other,” he said.

The ITC can issue a decision effectively banning the import of goods that violate U.S. patents, but
it has to find that such a decision is in the public interest.

The case is part of a larger dispute between the two companies over roughly 70 patents, playing
out in multiple jurisdictions around the world, including two patent infringement suits in
California federal court.

The instant case, which turns on three patents that cover chip design features that improve
energy efficiency, is the first to get a hearing at the ITC. An ITC administrative law judge is
scheduled to hear another case on a second group of patents in September.

Qualcomm launched the suit after Apple stopped reimbursing contracting manufacturers of
iPhones for royalty payments made by the individual companies to Qualcomm under individual
licensing agreements that allow them to produce the chips.

At Apple’s direction, Qualcomm claims, the contracting manufacturers stopped making the royalty
payments for iPhones, stripping Qualcomm of a major revenue source, even as they continued to
make the payments for phones they made for other device makers using the same Qualcomm
technology.

Apple’s vice president of procurement, Tony Blevins, said at the hearing that Qualcomm’s request
for a licensing agreement with Apple was one reason the company went with another chipmaker
when it produced the first version of the iPhone.

Blevins disputed Qualcomm’s claim that Apple directed manufacturers to withhold royalty
payments.

Rather, he said, Apple made “three very specific statements” to the contracting manufacturers.

Apple, according to Blevins, told the manufacturers it would only reimburse them for tech
royalties they were “required” to pay; that the contracting manufacturers were not required to
pay any royalties to Qualcomm for the modem chips; and that the contracting manufacturers
should do “whatever they want” with regard to the royalty payments.

Arguments in the case are expected to go through June 26, with an initial ruling expected in
September and a final determination in early 2019.

Qualcomm is represented by Quinn Emanuel Urquhart & Sullivan LLP.

Apple is represented by Fish & Richardson PC.

The case is In the Matter of Certain Mobile Electronic Devices and Radio Frequency and Processing
Components Thereof, case number 337-TA-1065, in the U.S. International Trade Commission.

--Additional reporting by Dave Simpson. Editing by Aaron Pelc.

All Content © 2003-2018, Portfolio Media, Inc.

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Exhibit 
Samsung pushes out Qualcomm for Galaxy S6 on AT&T's network - The... http://www.sandiegouniontribune.com/business/technology/sdut-Samsu...
Case 5:17-md-02773-LHK Document 620-10 Filed 07/19/18 Page 2 of 4

Ad Place your ad here. Click triangle to begin. ?

Qualcomm is the market leader in 4G LTE modems that link mobile phones to cellular networks. (/ U-T File Photo)

By Mike Freeman

APRIL 6, 2015, 4:16 PM

arlier this year, Samsung dropped Qualcomm’s application processor from its new flagship Galaxy S6
smartphone in favor of its own silicon, which stung the San Diego wireless technology firm.

Now Samsung appears to be using its own cellular radio chips in at least some versions of the Galaxy S6 as
well.

Cellular radios – also known as modems or basebands – are Qualcomm’s strength. Its leadership in 4G LTE
technology has given the company dominant modem market share for the past couple of years.

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But AT&T said on its website recently that Galaxy S6 smartphones sold on its network will have Samsung’s
Exynos apps processor and a Samsung Shannon 333 cellular modem.

Previous Galaxy S5 and Note 4 models on AT&T’s network were powered by Qualcomm’s Snapdragon
platform – which includes an integrated apps processor and cellular modem.

Christopher Rolland, an analyst with FBR Capital Markets, cut his rating on Qualcomm’s stock to “market
perform” from “buy” on Monday because of the AT&T move, calling it a “big blow” to Qualcomm.

“While we still expect the Verizon and Sprint Galaxy S6 versions to sport Qualcomm modems – both build on
legacy CDMA networks – we believe this change signals Samsung’s clear intent to utilize propriety baseband
whenever and wherever possible,” said Rolland in a research note.

Last week, Chipworks, an industry research firm, took apart a version of Samsung Galaxy S6 and found that
it also used a Samsung’s own cellular modem. The discovery surprised some analysts, who had expected
Qualcomm to retain the bulk of Samsung’s baseband business because of its 4G LTE leadership.

Rolland believes the model analyzed by Chipworks likely was earmarked for sale in India, Australia,
Singapore or Latin America. He said Intel supplied modems for previous Samsung Galaxy phones sold in
these regions, not Qualcomm.

Qualcomm declined to comment. In January, the company lowered its revenue outlook and earnings forecast
for its full fiscal year because of a large unnamed customer dropped Qualcomm’s most-advanced apps
processor from an upcoming flagship phone.

Qualcomm is still expected to supply cellular modems to a meaningful number of Galaxy S6 smartphones
worldwide, according to industry sources, but perhaps to fewer versions than analysts expected.

Samsung struggled last year in its smartphone business – hurt by competition from Apple and low-cost
Android phone makers in China.

By using its own chips, Samsung can improve its profit margins, said Jim McGregor, principal analyst with
Tirias Research.

“Samsung has been under a lot of pressure the past couple of quarters,” he said. “There has been a huge push
at Samsung to use their own silicon to improve their margins. So I think it’s more of a strategic decision. “

Qualcomm’s shares ended Monday down 21 cents at $67.76. Its stock price has slipped about 8 percent so far
this calendar year.

Copyright © 2018, The San Diego Union-Tribune

This article is related to: AT&T, Samsung Galaxy

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Case 5:17-md-02773-LHK Document 620-11 Filed 07/19/18 Page 3 of 86
1097

1 UNITED STATES OF AMERICA

2 BEFORE THE

3 INTERNATIONAL TRADE COMMISSION

5 - - - - - - - - - - - - - - - - - X

6 IN THE MATTER OF: : Investigation Number

7 CERTAIN MOBILE ELECTRONIC DEVICES : 337-TA-1065

8 AND RADIO FREQUENCY AND PROCESS :

9 COMPONENTS THEREOF :

10 - - - - - - - - - - - - - - - - - X

11

12 HEARING

13

14 Friday, June 22, 2018

15 Courtroom B

16 U.S. International Trade

17 Commission

18 500 E Street, SW

19 Washington, DC

20

21

22 The Hearing commenced, pursuant to notice of the

23 Judge, at 8:45 a.m., before the Honorable Thomas B. Pender,

24 Administrative Law Judge for the United States

25 International Trade Commission.

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1098

1 APPEARANCES:

3 DAVID A. NELSON, ESQ.

4 NATHAN HAMSTRA, ESQ.

5 Quinn, Emanuel, Urquhart & Sullivan LLP

6 500 West Madison Street, Suite 2450

7 Chicago, Illinois 60661

8 312.705.7400

9 On Behalf of Complainant Qualcomm, Incorporated

10

11 SEAN PAK, ESQ.

12 Quinn, Emanuel, Urquhart & Sullivan LLP

13 50 California Street, 22nd Floor

14 San Francisco, California 94111

15 415.875.6600

16 On Behalf of Complainant Qualcomm, Incorporated

17

18 RICHARD W. ERWINE, ESQ.

19 KEVIN JANG, ESQ.

20 Quinn, Emanuel, Urquhart & Sullivan LLP

21 51 Madison Avenue, 22nd Floor

22 New York, New York 10010

23 212.849.7000

24 On Behalf of Complainant Qualcomm, Incorporated

25 - continued -

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1099

1 APPEARANCES (CONTINUED):

3 PATRICK T. SCHMIDT, ESQ.

4 Quinn, Emanuel, Urquhart & Sullivan LLP

5 865 South Figueroa Street, 10th Floor

6 Los Angeles, California 90017

7 213.443.3000

8 On Behalf of Complainant Qualcomm, Incorporated

10 S. ALEX LASHER, ESQ.

11 Quinn, Emanuel, Urquhart & Sullivan LLP

12 1300 I Street, NW, Suite 900

13 Washington, DC 20005

14 202.538-8000

15 On Behalf of Complainant Qualcomm, Incorporated

16

17 BRETT N. WATKINS, ESQ.

18 Quinn, Emanuel, Urquhart & Sullivan LLP

19 711 Louisiana Street, Suite 500

20 Houston, Texas 77002

21 713.221.7000

22 On Behalf of Complainant Qualcomm, Incorporated

23

24

25 - continued -

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1100

1 APPEARANCES (CONTINUED):

3 JAMES T. BAILEY, ESQ.

4 Law Office of James T. Bailey

5 504 West 136th Street, #1B

6 New York, New York 10031-7976

7 917.626.1356

8 On Behalf of Complainant Qualcomm, Incorporated

10 DAVID R. MARRIOTT, ESQ.

11 ANDREI HARASYMIAK, ESQ.

12 Cravath, Swaine & Moore LLP

13 Worldwide Plaza, 825 Eighth Avenue

14 New York, New York 10019-7475

15 212.474.1430

16 On Behalf of Complainant Qualcomm, Incorporated

17

18 TOM M. SCHAUMBERG, ESQ.

19 DEANNA TANNER OKUN, ESQ.

20 Adduci, Mastriani & Schaumberg LLP

21 1133 Connecticut Avenue, NW

22 Washington, DC 20036

23 202.467.6300

24 On Behalf of Complainant Qualcomm, Incorporated

25 - continued -

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1101

1 APPEARANCES (CONTINUED):

2 WILLIAM F. LEE, ESQ.

3 JOSEPH J. MUELLER, ESQ.

4 LOUIS W. TOMPROS, ESQ.

5 DOMINIC E. MASSA, ESQ.

6 RICHARD W. O'NEILL, ESQ.

7 Wilmer, Cutler, Pickering, Hale and Dorr LLP

8 60 State Street

9 Boston, Massachusetts 02109

10 617.526.6556

11 On Behalf of Respondent Apple Inc.

12

13 NINA S. TALLON, ESQ.

14 Wilmer, Cutler, Pickering, Hale and Dorr LLP

15 1875 Pennsylvania Avenue, NW

16 Washington, DC 20006

17 202.663.6365

18 On Behalf of Respondent Apple Inc.

19

20 JAMES M. DOWD, ESQ.

21 Wilmer, Cutler, Pickering, Hale and Dorr LLP

22 350 South Grand Avenue, Suite 2100

23 Los Angeles, California 90071

24 213.443.5309

25 On Behalf of Respondent Apple Inc. - continued -

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1102

1 APPEARANCES (CONTINUED):

3 RUFFIN B. CORDELL, ESQ.

4 Fish & Richardson P.C.

5 1000 Maine Avenue, SW

6 Washington, DC 20024

7 202.783.5070

8 On Behalf of Respondent Apple Inc.

10 LISA M. MURRAY, ESQ.

11 CLAIRE COMFORT, ESQ.

12 ANNE GOALWIN, ESQ.

13 Office of Unfair Trade Investigations

14 United States International Trade Commission

15 500 E Street, SW

16 Washington, DC 20436

17 202.205.2158

18 On Behalf of Commission Investigative Staff

19

20

21

22

23

24

25

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1 P R O C E E D I N G S

2 JUDGE PENDER: Ms. Evans was testifying?

3 MR. MUELLER: That's right, your Honor.

4 May I proceed, your Honor?

5 JUDGE PENDER: Please.

6 Whereupon,

7 AICHA EVANS

8 was recalled as a witness and, having previously been duly

9 sworn, was examined and testified further as follows:

10 REDIRECT EXAMINATION

11 BY MR. MUELLER:

12 Q Good morning, Ms. Evans.

13 A Good morning.

14 Q Ms. Evans, Mr. Marriott asked you some

15 questions --

16 MR. MARRIOTT: Excuse me, your Honor, I just

17 want to clarify, if we are on the confidential record or

18 nonconfidential.

19 MR. MUELLER: Public record for right now, your

20 Honor, we can switch back.

21 JUDGE PENDER: Off the record for a second.

22 (Laughter.)

23 JUDGE PENDER: Back on the record. Let's go.

24 MR. MUELLER: Thank you, your Honor.

25 BY MR. MUELLER:

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1 Q Mr. Marriott asked you some questions yesterday

2 about Intel's overall business including all of the units

3 within that business.

4 Do you recall those questions?

5 A Yes, I do.

6 Q Now, does Intel judge each business unit

7 individually on its own merits?

8 A Yes, we do.

9 Q Why?

10 A Because each of the businesses is competing in a

11 different environment and in a different market and has its

12 own targets and goals. And we don't subsidize one business

13 for the other.

14 Q Now, Ms. Murray focused you on the premium

15 baseband chip market.

16 Do you recall that?

17 A Yes, I do.

18 Q And I want to stay right where Ms. Murray was,

19 on that premium baseband chipset market, okay?

20 A Yes, sir.

21 Q Now, with that in mind, I want to talk a bit

22 about 4G and 5G. Do you have that subject in mind?

23 A Yes, I do.

24 MR. MUELLER: Your Honor, may I approach the

25 placard?

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1 JUDGE PENDER: Yes.

2 BY MR. MUELLER:

3 Q So, Ms. Evans, we have here a graphic depicting

4 different cellular standard generations going from 2G to

5 5G.

6 Do you see that?

7 A Yes, I do.

8 Q And what is the relationship between 4G and 5G?

9 A 4G is a subset of 5G, in terms of the

10 frequencies and the requirements in terms of throughput

11 power.

12 Q And today 4G products are the most advanced

13 products in the market?

14 A Today they are, though we continue -- we

15 think -- well, we don't think. We know it will continue to

16 evolve.

17 Q And at some point, the 5G products will begin to

18 be offered; is that right?

19 A That is correct.

20 Q Could Intel exit the market for 4G products and

21 later reemerge for 5G?

22 A No.

23 Q Why not?

24 A Because we will fall behind. 4G will continue

25 to evolve. Second of all, we will not have the market

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1 presence because it's basically the operators, the

2 customers, and we just will not be able to develop the

3 technology in an efficient and competitive way.

4 And in the history of our industry, we have not

5 seen somebody exit at N minus 1 technology and show back up

6 at N.

7 Q Now, do you see here there's a phone at the

8 bottom of this placard?

9 A I do.

10 Q I'll represent to you this is meant to be a

11 baseband chip within that phone. Do you have that in mind?

12 A I do.

13 Q Can you explain to us, what is the relationship

14 between phones and other types of 4G and 5G technologies?

15 A The phone is really -- you always -- in our

16 industry, you always have what we call a base device or

17 gateway device that is the leading vehicle for developing a

18 technology. And so today and for the last -- frankly,

19 since the inception of wireless technology in the cellular

20 space, the phone has been the base innovation engine for

21 scale, for the features, and we expect that to continue for

22 a while.

23 Q Now, you mentioned yesterday infrastructure.

24 What do you mean by infrastructure?

25 A Infrastructure is -- so if I may digress a

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1 little bit, the way, like in a simple way, the way things

2 work is you have a device in your hand, for example a

3 phone. All of -- everybody right now has one, I assume.

4 There is bits and information that are flying over the air.

5 Those bits actually go to a base station. So there is a

6 tower somewhere around here.

7 Then from that tower, it goes actually through

8 the ground through the cloud and a server somewhere.

9 So that base station talks to the phone of yeah,

10 what we call the physical layer. And therefore, it has a

11 chip that basically takes what the phone sends in terms of

12 the bits, packages it, translates it, does what it needs to

13 do and then sends it to the ground, meaning through a

14 cable, to the cloud.

15 Q Okay. So the infrastructure you are referring

16 to is cell towers, base stations and related equipment?

17 A Yes.

18 Q And then over here we have the phones?

19 A Yes.

20 Q Now, if we stay on the phone side, could Intel

21 exit the market for phones and still make premium baseband

22 chipsets?

23 A No.

24 Q Why not?

25 A We just would -- I mean, we would fall behind.

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1 We would have stuff that works in the lab, but that you

2 cannot commercialize. And we will lose also the seat at

3 the table with standards, operators and TEMs.

4 Q Now, his Honor asked you a few questions at the

5 end of the day whether Intel could reach a license

6 agreement with Qualcomm. Do you recall those questions?

7 A I do.

8 Q Now, you are not involved in license

9 negotiations yourself, are you?

10 A No, I'm not.

11 Q But you do understand that Qualcomm has a policy

12 of not licensing other chipset suppliers?

13 A I do.

14 MR. MUELLER: At this point, your Honor, I'd

15 like to go on the confidential record, if I could.

16 JUDGE PENDER: Sure.

17 (Confidential session follows.)

18

19

20

21

22

23

24

25

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1 OPEN SESSION CONTINUED

2 JUDGE PENDER: Sometimes I expect you attorneys

3 go long on the paper market, you know?

4 MR. CORDELL: We've got to sell more trees, your

5 Honor.

6 Whereupon,

7 STEVEN BOWERS

8 was called as a witness and, having first been duly sworn,

9 was examined and testified as follows:

10 JUDGE PENDER: Thank you. Please be seated,

11 sir.

12 DIRECT EXAMINATION

13 BY MR. CORDELL:

14 Q Good morning, Mr. Bowers.

15 A Good morning.

16 Q So you just gave us your name. But can you tell

17 his Honor a little bit about what it is that you do.

18 A Yes. My position title presently is assistant

19 director to an organization that Intel Corporation called

20 Intel Product Assurance and Security. It's a newly formed

21 business group that examines Intel products from a privacy

22 and security perspective, including those associated with

23 wireless communication products.

24 Q And how long have you been with Intel?

25 A Not quite four years.

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1 Q Now, before that, I understand you were with an

2 esteemed intellectual property law firm of some kind; is

3 that right?

4 A That's right, Fish & Richardson.

5 Q Ah, excellent. And it turns out this is not the

6 first time you've appeared before his Honor, although in a

7 different capacity?

8 A That's correct.

9 Q And which case was that?

10 A As I recall, it was the 808 investigation. I

11 believe it was HTC v. Apple.

12 JUDGE PENDER: Right. And that settled.

13 MR. CORDELL: It did.

14 JUDGE PENDER: Because I remember we got a call

15 at the last moment. The ID was ready.

16 MR. CORDELL: We've always wondered.

17 JUDGE PENDER: Yes. I'm not going to say who

18 was going to win, but I do remember.

19 THE WITNESS: So in that instance, your Honor,

20 you may recall that I presented the technology tutorial in

21 that investigation because Apple's technical expert was

22 unavailable.

23 BY MR. CORDELL:

24 Q Well, but before that -- well, tell us about

25 your educational background.

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1 A From 1988 to 1992 I attended Cornell University

2 in Ithaca, New York. In 1992 I graduated with a

3 mechanical -- excuse me, a bachelor's of science degree in

4 mechanical engineering.

5 Q And I take it you went on to law school?

6 A Well, before then, I went to graduate school at

7 the California Institute of Technology, also known as Cal

8 Tech. In 1993, I earned my masters of science degree in

9 aeronautics.

10 Q Now, your witness statement says something very

11 curious, which is you were pulled out of Cornell as a

12 sophomore by the Central Intelligence Agency?

13 A Yes. During my sophomore year at Cornell, I was

14 recruited by the Central Intelligence Agency to become an

15 analyst before I graduated from Cornell University. So I

16 spent the entire calendar year of 1991 working at the CIA

17 here in Virginia.

18 I continued my employment with the CIA for the

19 next approximately 10 years, so, for example, when I went

20 back to Cal Tech, I went on a leave without pay status.

21 Q So help me understand that, Mr. Bowers. You are

22 in your dorm room at Cornell and these guys show up with --

23 A It was just one guy, yeah. With a very thick

24 application.

25 (Laughter.)

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1 Q And I understand that you spent some time in the

2 CIA being detailed overseas; is that right?

3 A Right. So the first third of my time with the

4 CIA I initially was a missile expert essentially. I

5 worked -- my work entailed essentially reverse-engineering

6 foreign missile weapons systems and collaborating with

7 other members of the intelligence community and the U.S.

8 military, the U.S. Air Force comes to mind, collaborating

9 closely with other military and intelligence community

10 entities to reverse-engineer the capabilities of foreign

11 missile weapons systems.

12 Eventually I transitioned into more of a nuclear

13 weapons nonproliferation field. That led to not quite a

14 four-year deployment to Vienna, Austria, where I was a

15 science attache at the U.S. mission to the International

16 Atomic Energy.

17 That gave me the bright idea to come back to

18 Washington, D.C., and attend law school starting in 1999 at

19 night while I continued my employment with the CIA.

20 Q And during your law school experience, I

21 understand you were sent back overseas; is that right?

22 A Right. Rather unexpectedly, I received orders,

23 gosh I think that was in 2001-2002, to deploy to Bosnia, to

24 Tuzla, Bosnia, to provide support to the NATO force

25 implementing the Dayton Accords, that was known as S4, the

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1 stabilization force, so I spent a good month or so

2 supporting the U.S. Army Third Infantry out there and their

3 mission to keep the peace out there.

4 Q Was your work recognized in any fashion?

5 A In fact, it was. I did receive the NATO service

6 medal for the Balkans for my time out there.

7 Q And with Intel, has your work received any

8 recognition?

9 A Yes. So before I encumbered my present position

10 with this IPAS organization, that's the Intel Product

11 Assurance and Security organization, I spent the first

12 3-1/2 years or so supporting Intel's communication and

13 devices group.

14 And while supporting that group, this is the

15 group that designs, innovates, researches and develops

16 cellular wireless products, among other things, and it was

17 while supporting that group that the business unit, ICDG

18 I'll refer to it, awarded me what's known as a division

19 recognition award.

20 Q And for what kind of work did you receive the

21 award?

22 A I don't recall the exact citation quote, but it

23 was along the lines of for my contributions to enabling or

24 establishing Intel leadership position in 5G.

25 Q Thank you. Now, Mr. Bowers, in front of you is

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1 a binder, and if you open it, I believe you will find

2 RX-9C. Do you have that?

3 A Yes, I see it.

4 Q Is this your witness statement?

5 A Yes, it is.

6 Q Does it contain questions from counsel and your

7 answers thereto?

8 A Yes, it does.

9 Q Is it true and correct to the best of your

10 knowledge and belief?

11 A Yes, it is.

12 Q And does it set forth your sworn testimony in

13 this case?

14 A Yes, it does.

15 MR. CORDELL: Your Honor, I move the admission

16 of RX-9C and the exhibits cited therein.

17 MR. MARRIOTT: No objection here, your Honor.

18 MS. COMFORT: No objection, your Honor.

19 JUDGE PENDER: There being no objection, Exhibit

20 RX-9C for identification and the exhibits referenced

21 therein are accepted into the record as evidence, a copy of

22 the exhibits or a list of the exhibits, anyway, therein

23 will be provided or has been provided to the court

24 reporter.

25 (Exhibit RX-9C and accompanying exhibits received.)

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1 MR. CORDELL: And with respect to the exhibits

2 cited therein, your Honor, there is one that's a little bit

3 unique. And I wonder if I could have the witness identify.

4 JUDGE PENDER: I was interested so I read the

5 testimony. Do you want to start with that?

6 MR. CORDELL: If we could.

7 JUDGE PENDER: Right. Because they're relevant

8 all over the place in this case.

9 MR. CORDELL: May I approach, your Honor?

10 JUDGE PENDER: Yes.

11 BY MR. CORDELL:

12 Q Now, Mr. Bowers, what is this VCR I am holding

13 that's called RPX-4?

14 A Right. And don't hurt yourself, I know it's

15 quite heavy. It's an Intel device that we call the mobile

16 trial platform, MTP, mobile trial platform. It's a -- it's

17 a device we're quite proud of at Intel. In fact, for many

18 people here in the courtroom, it very well may be the first

19 5G-compliant piece of hardware people have laid eyes on.

20 It's a client-side device that can execute the

21 most current or most recent 5G specifications and is used

22 in a trial setting to gain engineering learnings, debug

23 designs and so forth in a 5G-compliant network.

24 Q So let me just take that apart a little bit.

25 You said it's a client-side device. What does that mean?

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1 A In wireless technology circles, we refer to the

2 client to distinguish, for example, a portable device or a

3 subscriber device, it doesn't necessarily have to be

4 portable, it could be nonmobile, as this device obviously

5 is.

6 The client side is as opposed to the base

7 station side, the network side. That's how we distinguish

8 the two.

9 The client side would be a smartphone, a laptop.

10 It could be an autonomous vehicle, for example. That would

11 be considered client side. Whereas the base station side

12 would be associated with the wireless network operator.

13 Unfortunately, this industry is full of

14 acronyms, but one may have come across an acronym known as

15 eNodeB, and that's an acronym that represents a base

16 station on the network side.

17 So network side, client side, the two -- the two

18 receiving and transmitting sides in a network.

19 Q So the eNodeB would communicate with RPX-4?

20 A Correct.

21 Q Okay. And can you just describe generally how

22 it has been used by Intel as part of your work.

23 A Originally, the MTP was designed for Intel's

24 internal use only. We thought originally we would design

25 and build maybe a dozen or 20 or so of these units for our

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1 own internal testing purposes to help refine our 5G modem

2 chipset design.

3 In February 2016, Intel decided to demonstrate

4 and display this MTP, not this particular one, but an MTP

5 in Barcelona, Spain, at the Mobile World Congress.

6 The impact and the splash that that MTP made at

7 the Mobile World Congress was immediate and tangible and

8 almost overnight we received a number of inquiries from

9 third parties around the world, including in the United

10 States, about how wireless network operators and telecom

11 equipment manufacturers, we call them TEMs, telecom

12 equipment manufacturers, could possibly get their hands on

13 one to help develop and innovate their own 5G network

14 capabilities.

15 So rather -- almost overnight, we went from

16 viewing this as an internal program, to on not quite a

17 commercial scale, but on a far larger scale, manufacturing

18 these. We actually employed an engineering company in

19 Colorado to construct hundreds of these. And this became

20 the basis of what we called FUTs, friendly user trials.

21 It was a program that I was personally involved

22 in.

23 Q I'm sorry, you said frankly user trials?

24 A Friendly, friendly.

25 Q Friendly, okay.

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1 A A program I was personally involved in, where we

2 would collaborate with U.S. network operators, Verizon and

3 AT&T come to mind, and base station designers like Ericsson

4 and Nokia, to install these boxes in friendly users'

5 premises, like their homes or their businesses, to gain

6 real world understanding about the capabilities and

7 potential use cases about 5G.

8 MR. CORDELL: Thank you, your Honor. At this

9 time I'll pass the witness.

10 MR. MARRIOTT: May I proceed, your Honor?

11 JUDGE PENDER: Go ahead.

12 CROSS-EXAMINATION

13 BY MR. MARRIOTT:

14 Q Good morning, Mr. Bowers. My name is David

15 Marriott. I'm at Cravath, Swain & Moore and I represent

16 Qualcomm. We've not met, but good morning.

17 A Good morning.

18 Q You said that you have appeared in the ITC

19 before; correct?

20 A Correct. Not as a witness but as an attorney.

21 Q As counsel, right. So you know something about

22 exclusion orders; correct?

23 A Correct.

24 Q And, in fact, in your direct testimony, you

25 speak about your view of the impact of an exclusion order

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1 in this investigation; correct?

2 A Yes.

3 Q Now, you understand, do you not, that an

4 exclusion order here would only apply to infringing

5 products; correct?

6 A Correct, apply to products that infringe a valid

7 claim.

8 Q And an exclusion order would not prevent Apple

9 or Intel from removing the accused features from the

10 iPhone; correct?

11 A Can you repeat the question?

12 Q Sure. An exclusion order would not prevent

13 Apple or Intel from removing the accused features from the

14 accused iPhones; correct?

15 A In and of itself, correct. There might be

16 technical challenges.

17 Q And if, in fact, the accused features were

18 removed from the accused iPhones, an exclusion order would

19 not cause Intel to exit the baseband business; correct?

20 A I believe that's the case. I don't know much

21 about the patents or the features involved in the case, so

22 it's hard for me to say categorically correct or not.

23 Q And if the accused features were removed from

24 the accused iPhones, an exclusion order would not cause

25 Intel to abandon all of its investments in 5G; correct?

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1 A I'm sorry, could you repeat the question?

2 Q Sure. If the accused features were removed from

3 the accused iPhones, then an exclusion order would have no

4 effect on Intel's ability to continue to participate in the

5 development of 5G technologies; correct?

6 A Again, I don't have any knowledge of what the

7 accused features are, so it's hard for me to state

8 categorically whether that's correct or not.

9 Q This pretty impressive device you have here,

10 Intel has, is it fair to say, made 5G one of the top

11 priorities of the company over the next few years?

12 A That is correct.

13 Q And, in fact, Intel believes that 5G will

14 fundamentally have a profound transition on the industry;

15 correct?

16 A Yes.

17 MR. MARRIOTT: That's all I have, your Honor.

18 JUDGE PENDER: Thank you.

19 Ms. Murray -- Ms. Comfort, excuse me.

20 CROSS-EXAMINATION

21 BY MS. COMFORT:

22 Q Good morning, Mr. Bowers.

23 A Good morning.

24 Q You work for Intel Corporation; right?

25 A That is correct.

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1 Q And Intel -- so you don't work -- do you work

2 specifically for Intel communication and devices group

3 within Intel Corporation or for the broader Intel

4 Corporation?

5 A Up until January of 2018, I worked as an

6 attorney providing counsel to the Intel communications and

7 devices group, which is a business unit within Intel

8 Corporation.

9 Q Okay. And so in your work with the

10 standard-setting organizations, are you representing Intel

11 Corporation or Intel communication and devices group within

12 Intel Corporation?

13 A Right. So just to be clear, I personally did

14 not participate in the standard-setting activities of

15 Intel. I certainly supported that from a legal and perhaps

16 business advice perspective.

17 But when an individual, an employee from Intel,

18 attends a standard-setting organization proceeding, we can

19 take, for example, 3G PP, that stands for third generation

20 partnership project, they would be going in their capacity

21 as an Intel Corporation employee.

22 Q Because -- Intel Corporation, the overall

23 company, is heavily involved in 5G efforts; right?

24 A That's exactly right.

25 Q Intel Corporation makes billions of dollars in

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1 profits each year?

2 A Yes.

3 Q Intel Corporation's core historic business has

4 been PC computers?

5 A Historically that's the case, although the

6 company has pivoted to a very deliberate strategy of

7 diversifying its product portfolio, including in the

8 wireless space.

9 Q Intel Corporation is the market leader in

10 application chip processors for personal computers?

11 A I think that's fair to say.

12 Q They have recently made a push into data -- data

13 applications?

14 A Well, I think it would depend on what you mean

15 by that. But Intel has a very strong presence in what we

16 know as the data center market. We design, innovate and

17 manufacture processors for data center servers.

18 Q So I've been hearing 5G used in conjunction with

19 words such as interconnectivity. What does

20 interconnectivity in the context of 5G mean?

21 A I'm afraid it's not going to be a short answer.

22 Q That's okay.

23 A The idea behind 5G is that for the first time in

24 the continuum of telecommunications development, you are

25 bringing not just telecommunications technologies into the

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1 picture, you are now bringing compute power into the

2 paradigm.

3 And the reason is because of this. The idea of

4 interconnecting not just your personal devices like your

5 phone or your PC, but also things like autonomous vehicles,

6 appliances, smart cities, factories, drones and so forth,

7 are going to generate massive, massive amounts of data.

8 That data has to be stored, it has to be routed,

9 there have to be associated analytics associated with that

10 data. It's a massive computing job.

11 So for the first time, we need to bring compute

12 into the pick, because without the power of compute, it's

13 extremely difficult to execute on 5G.

14 When I think about 5G, I don't think of it as a

15 monolithic technology. And quite frankly, it's a bit of a

16 misconception that it is a monolithic technology. Sure,

17 there is a 5G associated standard.

18 But when I think about 5G, I think about a set

19 of performance characteristics that have been defined by

20 the International Telecommunications Union. It's a very --

21 a document known as IMT2020. And it sets forth some

22 aspirational performance goals.

23 We want faster speeds, gigabit-per-second

24 speeds, we want lower latency, that's the time between when

25 you request data and receive data. We don't want that to

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1 be less than -- more than 1 millisecond.

2 We want greater connectivity densities, that is

3 greater number of connections per unit of geography. And

4 to accomplish that, we don't have a single silver bullet to

5 make that happen.

6 And so I think of 5G as a quiver of arrows. We

7 have a number of technologies, including improved

8 standards, but other technologies like access to other

9 parts of the radio frequency spectrum, what we call the

10 millimeter wave.

11 We can use techniques like unlicensed spectrum

12 offloading. We can bring into the picture some rather

13 exotic antenna technologies and transmission technologies

14 called, like, MIMO or beamforming.

15 And it's this aggregate of techniques,

16 technologies and solutions brought together that will

17 enable the magic of 5G, and it will unlock use cases that

18 we're just beginning to identify now, like autonomous

19 vehicles. But I think it will actually unlock a host of

20 use cases that we haven't quite conceived of yet, including

21 those that might be used for health purposes, public

22 welfare purposes, national security purposes and so forth.

23 Q So is it fair to say that all of Intel's core

24 businesses dealing with communications systems will be

25 impacted by 5G?

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1 A Profoundly so.

2 Q Intel missed out on being a leader in 4G

3 technology; right?

4 A I -- I think the way I would characterize it is

5 that Intel had to invest a lot of money and personnel to

6 play catch-up on 4G, to establish itself as a premium LTE

7 chipset provider.

8 Q And is Intel hoping to leverage its mobile

9 business and its current position in 4G into the market in

10 5G?

11 A I would characterize it as more than a hope.

12 It's -- it's an imperative.

13 The 4G business at Intel and the prospects of 5G

14 business are inextricably linked, both from a business

15 perspective and from a technology perspective.

16 Let me take the latter instance first. When you

17 look at 4G and you compare it to 5G, to be clear, when the

18 standard-setting organization, 3G PP, finished with 4G,

19 they didn't simply close the book and high five each other

20 and say okay, let's start 5G with a clean sheet of paper.

21 Point of fact, the 5G related standard at 3G PP

22 is an evolution, a refinement, improvement of the standards

23 that were drafted in 4G.

24 So you have to bear in mind what you do in 4G in

25 many respects will be replicated and refined and reused, if

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1 you will, in 5G. So that's the technical perspective.

2 From a business perspective, Intel's commercial

3 viability in 4G is vital and essential to Intel's future

4 innovation and commercial viability in 5G.

5 I can think of at least four reasons why that's

6 the case.

7 Reason number one is that for the foreseeable

8 future, that's, say, the next three years or so, the

9 revenue that the wireless group gets to justify its

10 continued innovation in 5G will drive exclusively from 4G

11 sales.

12 It has always been a strategy, a long-term

13 strategy, that notwithstanding the losses upfront from

14 investments in personnel that would be incurred, say, the

15 first five or six years to catch up in 4G, there would have

16 to be a path or trajectory to profitability. We are now at

17 the very beginning of that path. And our future 5G

18 strategy is contingent on remaining on that trajectory,

19 that path of revenues from 4G.

20 So to remove that 4G from the picture, from a

21 revenue standpoint, would be devastating from a financial

22 perspective to justify from a business perspective future

23 innovation in 5G. That's the business angle.

24 There's an ecosystem angle as well, and that is

25 that if -- if Intel were not a player in 4G -- let me

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1 restate it this way.

2 Intel has spent the last seven or eight years

3 cultivating and nurturing relationships, especially in the

4 United States, with other wireless ecosystem players, like

5 Verizon, like AT&T, like Ericsson, incorporated in the

6 United States and so forth.

7 And those relationships, hard fought

8 relationships, were premised mainly on the fact that Intel

9 now is a player in 4G, it actually is selling in volume a

10 premium LTE chipset. You take that LTE chipset off the

11 table, the rationale for those other parties to collaborate

12 with Intel simply goes away. They simply will not -- they

13 will lose interest in collaborating with Intel.

14 A third reason I can think of is that now that

15 Intel is a large volume supplier to Apple of premium LTE

16 chipsets, from Apple's perspective, Apple, you can imagine,

17 places a premium on maintaining a trustworthy source of

18 supply for its premium chipsets, for any of its components.

19 It needs to have confidence and faith that its

20 suppliers will be predictable and can deliver on time and

21 consistently.

22 If Intel is not playing in 4G all of a sudden,

23 that trust, that hard-won trust that Intel took virtually a

24 decade to establish as supplier of LTE chipsets, goes away,

25 even if it's for reasons beyond Intel's internal

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1 decision-making process. That trust is not easily

2 reestablished, and it would be almost irreversibly harmed,

3 irreversibly harmed if all of a sudden it was shown that it

4 could not be a trustworthy or reliable supplier of

5 chipsets.

6 The final reason I can think of is that if Intel

7 is not playing, if you will, in the 4G space, well, that

8 has engineering implications.

9 Products are designed around things like modem

10 chipsets. The actual internal circuit board, what we call

11 the PCB, is designed around components like chipsets. And

12 chipsets from different companies have different

13 geometries, profiles. They take up a certain amount of

14 real estate. They are shaped differently, for example.

15 And so once you're able to get that what we call

16 the socket in a downstream product, that board is designed

17 around that particular -- so now that Intel's chipset is in

18 the Apple iPhone, that board is now designed around that

19 Intel component.

20 If you remove the Intel component from that

21 board, you would need to redesign the circuit board around

22 it to accommodate the next other third-party product.

23 So my point is once you are removed from the

24 socket, it's extremely difficult to get back in the socket,

25 even if it's just a few years down the line, if only

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1 because it causes the OEM to have to essentially redesign

2 their PCB board or at least make some very significant

3 changes to accommodate the new third-party product.

4 Q Intel's long-term goal is to be a leading

5 innovator in 5G technology; right?

6 A Absolutely.

7 Q And it needs its 4G mobile business to do that?

8 A It's axiomatic that the two are inextricably

9 linked. It's vital. I -- you cannot have one without the

10 other, in my view.

11 Q So what happens if in any given year, Apple

12 chooses not to use Intel for its iPhone products? Does

13 Intel exit the market?

14 A Yes.

15 Q Intel would abandon all of its 5G investments

16 with all of their relevance to all of its core business

17 based on losing a single year of modems for an iPhone

18 product?

19 A Yes. And, again, it would be for the reasons I

20 just discussed. That trajectory that I described of -- of

21 making the business profitable would essentially go away.

22 The revenues that the board looks to and our shareholders

23 look to to justify the continued existence of the cellular

24 program in general goes away.

25 You lose the relationships that I just described

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1 in the ecosystem. You lose -- it's a halo effect that

2 the -- that the ecosystem views you as no longer a player

3 because you are no longer in a premium smartphone.

4 This has ripple effects not just in the United

5 States but around the world because you're no longer viewed

6 as a player in the United States.

7 You lose the socket on the actual design of the

8 board.

9 The revenues that we need from 4G are going to

10 sustain or at least justify the continued commitment to 5G

11 for the foreseeable future.

12 Bear in mind that the first 5G modems that will

13 be commercially available we probably will not see for at

14 least two, possibly three years. And even once those are

15 available commercially for sale, they will be available or

16 at least sold in fairly small volumes, at least relative to

17 the volumes in the 4G LTE chipset market.

18 So even once 5G modem chipsets are available,

19 those volumes will be relatively small, and certainly won't

20 compensate for the loss of the 4G market that we would

21 experience.

22 (Confidential session follows.)

23

24

25

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1 OPEN SESSION CONTINUED

2 MR. CORDELL: Thank you, your Honor. At this

3 time Apple calls Dr. Jeffrey Eisenach.

4 JUDGE PENDER: Give me one second, sir. I'll be

5 right with you.

6 Whereupon,

7 JEFFREY EISENACH

8 was called as a witness and, having first been duly sworn,

9 was examined and testified as follows:

10 JUDGE PENDER: Thank you. Please be seated and

11 identify yourself to the court reporter.

12 THE WITNESS: Jeffrey A. Eisenach.

13 JUDGE PENDER: Mr. Cordell.

14 MR. CORDELL: Thank you, your Honor.

15 DIRECT EXAMINATION

16 BY MR. CORDELL:

17 Q Good morning, Mr. Eisenach.

18 A Good morning, Mr. Cordell.

19 Q You just gave us your name. Tell Judge Pender a

20 little bit about yourself.

21 A Well, I'm a managing director at NERA Economic

22 Consulting, a large global economic consulting firm with

23 about 500 economists around the world. I'm also a visiting

24 scholar at the American Enterprise Institute, where I have

25 led the institute's work on communications and information

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1 technology, including a report on America's strategy for

2 cyberspace in the 21st century.

3 I'm also an adjunct scholar -- excuse me,

4 adjunct professor at Scalia Law School at George Mason

5 University, where I teach the course on regulated

6 industries.

7 My professional career for the past 25 years or

8 so has been focused on studying the information -- the

9 Internet and communications information technology sector.

10 Q Can you summarize your education for us.

11 A I received a bachelor's in economics from

12 Claremont McKenna College in 1979 and a PhD in economics

13 from the University of Virginia in 1985.

14 Q What issues have you focused on in your work as

15 an economist?

16 A Well, I'm an industrial organization economist,

17 and that means that I focus on the way that markets work in

18 general.

19 As I said, for the past 25 years or so, my focus

20 has been on dynamic markets, information technology

21 markets, like the markets for communications, mobile

22 wireless, the mobile wireless sector, the Internet,

23 communications and media generally.

24 Q Well, I'll try to pause a little bit. You and I

25 have a bad habit of both speaking quickly, I don't want to

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1 get in trouble.

2 Have you had occasion to study the mobile

3 telecommunications industry?

4 A I have studied the mobile telecommunications

5 industry extensively. I have published articles on the

6 mobile communications industry in peer-reviewed journals

7 like the Review of Network Economics, Communications and

8 Strategies, Telecommunications Policy.

9 I've served as an expert in a number of mobile

10 wireless cases. Most recently I filed a declaration on

11 behalf of T-Mobile in its current merger with Sprint,

12 focusing on the impact of 5G technologies on economic

13 growth and America's public -- and public interest in the

14 United States.

15 Q Mentioning the public interest, have you done

16 any work on the impact of telecommunications on the U.S.

17 public interest?

18 A I've done -- never in the context of the

19 International Trade Commission. This is my first time

20 before the ITC. But I've studied the public interest

21 impacts of mobile communications networks and technologies

22 in a wide variety of contexts in the United States, outside

23 the United States and again as an academic.

24 Q Have you served as part of bodies that study the

25 national interest?

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1 A I have. So as I mentioned, in 2016, '15

2 and '16, I led a project at the American Enterprise

3 Institute, which was designed to devise an American

4 strategy for cyberspace. That project had an advisory

5 board, which included General Michael Hayden, the general

6 counsel of Verizon Communications, the CEO of BlackBerry,

7 for example. I worked actively with all of them. That's

8 the most recent example of a long -- in a series of

9 activities in that general arena.

10 In 2000, for example, I served as the member of

11 commission on America's national interests organized by the

12 Belfer Center at the Kennedy School of Government where I

13 was on the faculty.

14 And there I was a member of a 23-member

15 commission, including Senator John McCain, Condoleeza Rice,

16 Brent Scowcroft, where we looked at the broad issue of

17 America's national interests in the 21st century. I was

18 the primary author of the chapter on information technology

19 and cybersecurity.

20 Q Have you published papers on telecommunications?

21 A Yes, as I mentioned I have published in

22 peer-reviewed journals. I've published over the last 25

23 years, I would guess, four or five dozen papers altogether,

24 maybe including a lot of expert declarations in a variety

25 of cases.

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1 MR. CORDELL: Your Honor, we would tender

2 Dr. Eisenach as an expert in the economics of mobile

3 telecommunications.

4 MR. MARRIOTT: No objection, your Honor.

5 JUDGE PENDER: Ms. Comfort?

6 MS. COMFORT: No objection, your Honor.

7 JUDGE PENDER: I'm going to find him to be an

8 expert on industrial organization economist; right?

9 THE WITNESS: Yes, sir.

10 JUDGE PENDER: And also on -- I don't have any

11 problem qualifying him on global communications, based on

12 what he's testified to. But I think it's more interesting

13 that he is an industrial organization economist, with

14 what's going on here in this courtroom, okay?

15 MR. CORDELL: Excellent.

16 JUDGE PENDER: Proceed.

17 BY MR. CORDELL:

18 Q Dr. Eisenach, there should be a binder in front

19 of you. Could you open it up to RX-10C.

20 A I've got one that says witness statement and one

21 that says rebuttal witness statement.

22 Q So I'm betting it's the one called the witness

23 statement.

24 A Okay. There we go.

25 Q Is this, in fact, your direct witness statement?

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1 A Yes, it is.

2 Q And does it contain the questions from counsel

3 and your answers thereto?

4 A Yes, it does.

5 Q Is it true and correct to the best of your

6 knowledge and belief?

7 A Yes, it is.

8 Q And does it set forth your sworn testimony for

9 the purposes of at least your direct testimony in this

10 case?

11 A Yes, it does.

12 Q And is that your signature on page 33?

13 A That is my signature.

14 MR. CORDELL: Your Honor, we move admission of

15 RX-10C and -- RX-10C and its associated exhibits.

16 MR. MARRIOTT: No objection, your Honor.

17 MS. COMFORT: No objection, your Honor.

18 JUDGE PENDER: There being no objection, Exhibit

19 RX-10C for identification along with its accompanying

20 documents are admitted into the record as evidence, with

21 the understanding that a list of the documents is to be

22 provided to the court reporter.

23 (Exhibit RX-10C and accompanying exhibits

24 received.)

25 MR. CORDELL: Thank you, your Honor.

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1 BY MR. CORDELL:

2 Q Dr. Eisenach, is there also a binder with your

3 rebuttal witness statement, RX-1612?

4 A Yes, there is.

5 Q Is this, in fact, your rebuttal witness

6 statement in this case?

7 A Yes, it is.

8 Q Does it contain your answers to questions from

9 counsel?

10 A It does.

11 Q Is it true and correct to the best of your

12 knowledge and belief?

13 A Yes, it is.

14 Q And does it represent your sworn testimony in

15 this case?

16 A Yes, sir.

17 Q Is that your signature on the last page?

18 A That is my signature.

19 MR. CORDELL: With that, your Honor, I move

20 admission of RX-1612 and its associated exhibits.

21 MR. MARRIOTT: No objection.

22 MS. COMFORT: No objection, your Honor.

23 JUDGE PENDER: There being no objection, Exhibit

24 RX-1612C for identification, along with its accompanying

25 documents, is admitted to the record as evidence and it is

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1 also understood that a copy of -- a list of those documents

2 be provided to the court reporter.

3 MR. CORDELL: Yes, your Honor.

4 (Exhibit RX-1612C and accompanying exhibits

5 received.)

6 MR. CORDELL: With that, I would pass the

7 witness. And we should have been on the public record for

8 that, I apologize.

9 JUDGE PENDER: Can we stay on the public record

10 for him?

11 MR. MARRIOTT: We can certainly for now, your

12 Honor. There comes a point when there's Apple confidential

13 information, but not at the beginning.

14 JUDGE PENDER: Thank you, Mr. Marriott.

15 So start from the time he was sworn in on the

16 public record, Carmen, please.

17 MR. MARRIOTT: Your Honor, two housekeeping

18 matters if I may. We would like to pass out some binders

19 for cross. And if I may take that down so we can see the

20 screen when the opportunity comes.

21 JUDGE PENDER: Right, that's perfect.

22 MR. MARRIOTT: May I proceed, your Honor?

23 JUDGE PENDER: Yes.

24 CROSS-EXAMINATION

25 BY MR. MARRIOTT:

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1 Q All right. Good morning, Dr. Eisenach.

2 A Good morning, Mr. Marriott.

3 Q My name is David Marriott. We haven't met, but

4 thank you for coming this morning.

5 Am I right, sir, virtually 100 percent of your

6 annual compensation is attributable to your work as an

7 expert witness?

8 A That's approximately right.

9 Q And I think you said you've never been a witness

10 in the ITC before; is that correct?

11 A That's true.

12 Q And you've also never served as an expert

13 witness or provided testimony concerning public interest --

14 the public interest test as set forth in the ITC statute;

15 correct?

16 A That's correct.

17 Q Is it also correct that you've never given

18 testimony concerning mobile devices in contested litigation

19 or contested proceedings such as this one?

20 A I think it would depend on your definition of

21 contested. I've given, for example, testimony before the

22 CRTC, the communications regulator in Canada, which I think

23 everyone would agree was hotly contested. It was not

24 litigation per se.

25 Q Fair enough. You've never given testimony

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1 concerning baseband chips at any point, correct, other than

2 this proceeding?

3 A That's correct.

4 Q You have never given testimony concerning other

5 mobile devices or components; correct?

6 A Yeah, I think that's correct, yes.

7 Q And how about 5G? Is it also true you haven't

8 given testimony concerning 5G in any contested judicial

9 proceeding?

10 A Yes.

11 Q And you're not an engineer or a technologist

12 when it comes to mobile device technology; correct?

13 A That's correct.

14 Q And you're not an engineer or technologist when

15 it comes to baseband chips or baseband chip technology;

16 correct?

17 A That's correct.

18 Q And is it also correct that you're not an

19 engineer or technologist when it comes to cellular wireless

20 standards such as LTE?

21 A That's correct.

22 Q Now, you understand that Qualcomm's experts in

23 this investigation include Mr. Greg Sidak and Ms. Carla

24 Mulhern; is that right?

25 A I do.

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1 Q And you are familiar with both of them; correct?

2 A I've never met Ms. Mulhern. I've known

3 Mr. Sidak for a long time. I know them by reputation.

4 Q And you agree that each of them has good

5 professional reputations; correct?

6 A As far as I know, yes.

7 Q And you agree they are qualified to offer

8 opinions, in your view at least, in this investigation;

9 correct?

10 A Yes.

11 Q Now, let me ask you a little bit about the

12 mobile device industry generally and R&D specifically. You

13 would agree, would you not, that the mobile device industry

14 is one of the most research and development-intensive

15 industries in the United States; correct?

16 A Yes.

17 Q And you would further agree that maximizing

18 investments in baseband communications technologies is in

19 the public interest; correct?

20 A Yes.

21 Q The potential to earn a higher rate of return,

22 Dr. Eisenach, can be an important factor in incentivizing

23 future investments in innovation; correct?

24 A Yes.

25 Q And, in fact, strong patent protections allow

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1 innovation-intensive industries to earn returns on huge R&D

2 investments needed to create better technologies; correct?

3 A That's generally true, yes.

4 Q And patent infringement can reduce patent

5 holders' incentives to invest in research and development;

6 correct?

7 A I think that's generally true, yes.

8 Q Now, you have some general familiarity with

9 Qualcomm as a business; correct?

10 A Generally, yes.

11 Q And you understand that Qualcomm has brought

12 substantial innovation to the wireless and mobile

13 industries; true?

14 A I think that's true, yes.

15 Q And it's also true, is it not, that Qualcomm

16 invests very large sums of money in research and

17 development, including research and development for LTE

18 chips?

19 A Yes.

20 Q And Qualcomm has developed, so far as you

21 understand, important LTE innovations; right?

22 A I believe that's true.

23 Q So let's talk a little bit about, if we may,

24 mobile devices. You understand that the public interest

25 inquiry focuses on whether there are reasonable substitutes

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1 for the accused products; correct?

2 A I do.

3 Q And after an exclusion order, iPhones with

4 Qualcomm baseband chipsets will be available for import and

5 sale in the United States; correct?

6 A The current models, yes.

7 Q And we can refer to those, can we, during this

8 conversation as the nonaccused devices? Is that agreeable?

9 A That's fine.

10 Q And for each of the current models of the

11 accused iPhones, Dr. Eisenach, there is a corresponding

12 nonaccused iPhone; correct?

13 A That's, as I understand it, correct, yes.

14 Q And so, for example, for an iPhone 8, there is

15 also an iPhone in which an Intel chip and -- I'm sorry.

16 For an iPhone 8, there is an iPhone with an

17 Intel chip and an iPhone 8 with a Qualcomm chip; correct?

18 A That's correct.

19 Q And the same holds true for other of the accused

20 iPhones; correct?

21 A That's correct.

22 Q Now, is it your opinion, sir, that for the vast

23 majority of consumers, there are, in fact, no reasonable

24 substitutes for the 2018 generation of iPhones?

25 A Yes.

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1 Q There is no way that anyone could know what

2 particular features and performance and attributes,

3 et cetera, for the 2018 iPhones would be forgone if people

4 instead had to buy the current generation of iPhones;

5 correct?

6 A Not the specific attributes, that's correct.

7 And I'd like to, if I can amend my -- I want to amend my

8 prior statement.

9 When I said the vast majority, it's the vast

10 majority of current iPhone owners are seeking to purchase

11 iPhones as replacements. So that's -- whether that's the

12 vast majority of all phone purchasers, it might be a

13 little -- depends on the definition of vast.

14 But the vast majority of current iPhone owners

15 are very reluctant to leave and would be harmed by having

16 to leave the Apple ecosystem.

17 Q Do you recall giving a deposition in this

18 investigation?

19 A Yes, sir.

20 Q Why don't I have you -- it should be in the

21 binder in front of you, Dr. Eisenach. And I can also have

22 it brought it up on the screen, that may be easier. It's

23 on your 4/10/18 deposition, page 61, lines 9 through 13.

24 Maybe we could just have those brought up, please.

25 Do you have that there on the screen,

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1 Dr. Eisenach?

2 A Yes, this is what I was referencing.

3 Q So you were asked this question and you gave

4 this answer; correct? "So it is your opinion that for the

5 vast majority of consumers, there are no reasonable

6 substitutes, whatsoever, for the 2018 generation of

7 iPhones?

8 "Answer: Yes."

9 Did you give that answer to that question?

10 A Yes, sir.

11 MR. CORDELL: Your Honor, I'm going to invoke

12 the rule of optional completeness, one of my favorites, and

13 have the deposition continue with the next question and

14 answer, question at line 14. "When you say vast majority

15 of consumers in percentage terms, what do you mean?

16 "Answer: The evidence I rely on is a 2000 -- is

17 an Apple survey from 2017 primary evidence, which reports

18 that 87 percent of iPhone purchasers for the iPhone 7 were

19 replacing prior models of iPhones, so I think that's a very

20 good proxy for the proportion of people who consider

21 themselves -- who consider the iPhone to be a preferred

22 device. There's" --

23 JUDGE PENDER: Your objection is noted. It's

24 sustained.

25 Mr. Marriott, when you try to impeach a witness,

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1 you need to be careful not to cherry-pick. If you get

2 caught cherry-picking, judges draw unwanted conclusions

3 from that cherry-picking.

4 And you may want to discuss that with people who

5 have appeared before me before on how I react to that.

6 So I suggest that you cease and desist from this

7 kind of -- the only word, I'm sorry it's going to be

8 hurtful for me to say it, nonsense, okay? So let's not do

9 this.

10 MR. MARRIOTT: Understood, your Honor.

11 BY MR. MARRIOTT:

12 Q Dr. Eisenach, is it your opinion that there are,

13 in fact, substitutes for the iPhone?

14 A I think for a new to the market consumer, that

15 consumer who has not in any way been locked in to the Apple

16 ecosystem is going to be looking at both Android phones,

17 particularly Samsungs, and Apple phones.

18 I think once you are within the Apple ecosystem,

19 the evidence is pretty clear that you want to stay within

20 the Apple ecosystem and you would be harmed by -- if you

21 were forced to switch.

22 Q Is it your opinion, Dr. Eisenach, that if

23 consumers can't get the most recent iPhone, then they are

24 harmed?

25 A I think that's generally true, yes.

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1 Q So assume with me that there are two iPhones

2 that are identical in every respect except that one has a

3 larger screen, offers facial recognition and sells for $150

4 more. Do you have that assumption in mind?

5 A Yes, I do.

6 Q If your -- is it your contention that a consumer

7 who wanted to buy the more expensive iPhone would be harmed

8 if that iPhone were not available?

9 A First of all, I accept your assumption. I don't

10 think that's -- quite comports with the real world

11 precisely. But accepting your assumption, the fact that

12 consumers are willing to pay $150 more for the first phone

13 is an indication that for whatever reason, consumers value

14 that phone more highly.

15 Now as an economist, I follow the principle of

16 consumer sovereignty. Consumers get to choose what's of

17 value to them. It's not up to me or to Dr. Sidak or

18 Ms. Mulhern -- Mr. Sidak or Ms. Mulhern to look at a list

19 of features and say here is what consumers should want.

20 As an economist, you look at what consumers do,

21 how they behave, their revealed preferences. And in the

22 example you just gave, the revealed preferences --

23 preference is that consumers prefer to spend $150 more for

24 the first iPhone.

25 Q And you don't offer any opinion here that an

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1 exclusion order would harm competitive conditions in the

2 U.S. mobile device industry; correct?

3 A I have not offered that opinion.

4 Q And you don't offer any opinion that an

5 exclusion order would harm competitive conditions in the

6 premium smartphone industry; correct?

7 A That's correct.

8 Q At least some non-Apple smartphones are properly

9 categorized as premium smartphones; correct?

10 A Yes, that's correct.

11 Q And you would agree that there are non-Apple

12 premium smartphones; correct?

13 A Yes.

14 Q So Samsung and LG and Google and Motorola each

15 make premium smartphones; correct?

16 A I think that's broadly true, yes.

17 Q So in your direct testimony, Mr. -- or

18 Dr. Eisenach, you contend that there is a market for what

19 you call the premium LTE baseband chipsets; is that right?

20 A That's correct.

21 Q And in defining the proposed premium chipset

22 market, you didn't perform a hypothetical monopolist test;

23 correct?

24 A Well, in this case I didn't feel a hypothetical

25 monopolist test was necessary. So no, I did not.

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1 Q And you didn't calculate cross priced elasticity

2 of demand regarding LTE premium chipsets; correct?

3 A I did not.

4 Q And you didn't calculate owned price elasticity

5 of demand regarding LTE chipsets; correct?

6 A That's correct.

7 Q Let's talk a little bit about your proposed

8 market. A chipset can be in the proposed premium chipset

9 market when it's first introduced but then fall outside of

10 that market at some point in subsequent years, as you

11 define it; correct?

12 A Yes.

13 Q And there is no way to tell what exactly -- when

14 exactly a chipset ceases to be part of the proposed market;

15 correct?

16 A Looking through the rearview mirror, that's

17 right, it's not clear when it disappears, if you will.

18 Q And you haven't identified all of the chipsets

19 that you believe have been in the proposed premium chipset

20 market over time; correct?

21 A That's correct.

22 Q Now, nobody is making smartphones in the United

23 States. Is that fair to say?

24 A That's correct.

25 Q No one is making premium smartphones in the

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1 United States either; is that correct?

2 A That's correct.

3 Q Baseband chipsets are not assembled into premium

4 smartphones in the United States; correct?

5 A Just to make sure I understand, are you asking

6 whether premium baseband chipsets are made in the United

7 States or are you asking whether they are incorporated into

8 a smartphone in the United States?

9 Q Let me reframe the question. That was not a

10 great question.

11 Baseband chipsets are not assembled into premium

12 smartphones in the United States; correct?

13 A Just to clarify my understanding, they're not

14 incorporated. I believe there are baseband chipsets made

15 in the United States. They are not incorporated into the

16 phones in the United States. The phones are produced

17 outside the United States and imported to the U.S.

18 Q Exactly, thank you. And OEMs take delivery of

19 baseband chipsets in Asia and then they put them into

20 devices in Asia; correct?

21 A That's my understanding, yes.

22 Q And then those devices are shipped to various

23 countries, including the United States; correct?

24 A That's correct.

25 Q So a chip supplier like Qualcomm or Intel can't

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1 say for sure whether a particular chipset would end up in

2 the United States; correct?

3 A That's correct.

4 Q The proposed premium chipset market which you

5 discuss in your direct testimony, that is a global market

6 in your view; correct?

7 A Yes.

8 Q And there is no separate market for baseband

9 chips in the United States; correct?

10 A Well, not as an economic matter. As a legal

11 matter, if there were an exclusion order in this case, it

12 effectively bifurcates the world market. Some baseband

13 chipsets would be permitted, some would not be permitted.

14 So you would have in effect a government order bifurcating

15 the market. Currently it's a global market.

16 Q And the premium LTE baseband chipset market,

17 that includes SOCs; correct?

18 A Yes, there are two flavors, if you will, thin

19 modems and SOCs.

20 Q And premium -- premium LTE chipsets can be used

21 in devices other than mobile devices; correct?

22 A Yes.

23 Q They can be used in PCs, for example?

24 A Yes.

25 Q They can be used in automobiles; right?

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1 A Yes.

2 Q And Qualcomm had what you would call a first

3 mover advantage in LTE baseband chipsets; correct?

4 A Yes.

5 Q A number of new LTE chipset suppliers entered

6 the market after the LTE standard was adopted; correct?

7 A There were new manufacturers of LTE baseband --

8 there were manufacturers who began manufacturing LTE

9 baseband chipsets after Qualcomm began making LTE baseband

10 chipsets, yes.

11 Q And those new suppliers included MediaTek and

12 Huawei and Samsung and Spreadtrum; correct?

13 A Yes.

14 Q And Qualcomm shared the LTE chipset space has

15 fallen since 2012; correct?

16 A Yes.

17 Q And the price of LTE chipsets declined

18 significantly from 2012 to the present; correct?

19 A Yes.

20 Q And the production of LTE chips has generally

21 increased from 2012 to the present; correct?

22 A Of course, yes.

23 MR. MARRIOTT: Your Honor, I think we're now

24 about to begin a section with Intel confidential

25 information.

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1 JUDGE PENDER: All right then. We'll go on the

2 confidential record.

3 (Confidential session follows.)

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

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1 OPEN SESSION CONTINUED

2 MR. MARRIOTT: May I proceed, your Honor?

3 BY MR. MARRIOTT:

4 Q Intel presently sells thin modems for use in

5 nonmobile devices; correct?

6 A I think that's true, yes.

7 Q And sales of thin modems for nonmobile devices

8 could continue following an exclusion order; right?

9 A I think that's true, yes.

10 Q An exclusion order wouldn't prevent Intel from

11 selling baseband chips for use in nonmobile devices such as

12 automobiles and personal computers and the Internet of

13 things; correct?

14 A Did you just call them nonmobile? I'm not sure

15 I would call an automobile nonmobile, but it could sell in

16 those use cases, yes.

17 Q And you haven't attempted to determine the

18 present value of future sales of Intel premium modems for

19 use in nonmobile applications; correct?

20 A That's correct.

21 Q Now, the asserted --

22 JUDGE PENDER: Off the record for a minute.

23 (Discussion off the record.)

24 JUDGE PENDER: Back on the record. We have

25 people coming in and out, that's why I stopped it too,

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1 Mr. Marriott.

2 MR. MARRIOTT: Thank you, your Honor.

3 BY MR. MARRIOTT:

4 Q So the asserted -- the asserted claims, the

5 specific claims of the patents here don't have any bearing

6 on your opinions in this case; correct?

7 A That's correct. Specific claims, right.

8 Q You're not an engineer or a technologist when it

9 comes to baseband chips or baseband chip technology;

10 correct?

11 A That is correct.

12 Q And so you don't know of any reason why Apple

13 couldn't remove the accused features from the accused

14 phones; correct?

15 A That's true.

16 Q And you don't know of any reason why Intel

17 couldn't remove the accused features from the accused

18 phones; correct?

19 A That's correct.

20 Q And if Apple or Intel removed the accused

21 features, then an exclusion order wouldn't cause Intel to

22 leave the baseband chipset business; correct?

23 A I don't think that's necessarily true, no.

24 Q Okay. And it wouldn't cause Intel to

25 necessarily abandon 5G development, would it, sir?

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1 A I don't think that's necessarily true, no.

2 Q And an exclusion order wouldn't prevent Intel

3 from selling chips to Apple for use in noninfringing

4 products; correct?

5 A That's true.

6 Q Now, you say that an exclusion order would deny

7 Intel the opportunity to participate in what you call the

8 U.S. innovative ecosystem; right?

9 A That's correct.

10 Q And the participants in that ecosystem are OEMs

11 like Apple; correct?

12 A Correct.

13 Q And they're network carriers like AT&T and

14 Verizon; right?

15 A And T-Mobile, yes.

16 Q And they're telecom equipment manufacturers like

17 Ericsson and Nokia; correct?

18 A That's correct.

19 Q And input suppliers like Intel; right?

20 A That's correct.

21 Q And you've not seen any evidence that Intel has

22 advised any network carrier or telecom equipment

23 manufacturer that it will exit the baseband chipset

24 industry; correct?

25 A That's correct.

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1 Q Let's talk about OEMs for a minute here,

2 Dr. Eisenach. Intel would not lose the benefit of

3 collaborating with Apple at least with respect to foreign

4 iPhones in the event of an exclusion order; correct?

5 A I don't think that is correct, no.

6 Q Well, Intel had a relationship with OEMs other

7 than Apple; correct?

8 A Yes.

9 Q And an exclusion order would not prevent Intel

10 from selling baseband chipsets to OEMs other than Apple;

11 correct?

12 A That's correct.

13 Q And Intel could develop relationships with OEMs

14 other than Apple; correct?

15 A In theory, I suppose, yes.

16 Q So the major U.S. carriers, they also operate

17 various wireless networks in countries other than the

18 United States; right?

19 A Some do, yes.

20 Q So T-Mobile, for example, is a subsidiary of

21 Deutsche Telecom which operates in Germany and elsewhere in

22 Europe?

23 A That's correct.

24 Q And Sprint SoftBank has numerous international

25 subsidiaries; correct?

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1 A That's correct.

2 Q And you have no evidence that any foreign

3 network carrier or subsidiary of a U.S. network carrier

4 would refuse to collaborate with Intel in the event of an

5 exclusion order; correct?

6 A I have no evidence to that effect, that's

7 correct.

8 Q And you have no evidence that any telecom

9 equipment manufacturer would refuse to collaborate with

10 Intel in the event of an exclusion order; correct?

11 A I think -- I think the record evidence goes to

12 the U.S. market, and I think the record evidence suggests

13 that the ability to participate in the collaborative U.S.

14 ecosystem would be diminished. So I don't have specific

15 evidence of a particular equipment manufacturer, for

16 example, stating that, no.

17 Q So telecom equipment manufacturers like Ericsson

18 and Nokia do not operate only in the United States;

19 correct?

20 A That's correct.

21 Q They are based outside the United States, they

22 operate globally; correct?

23 A Yes, that's correct.

24 Q And the exclusion order and ex- -- an exclusion

25 order would not prevent Intel from collaborating with

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1 telecom equipment manufacturers outside the United States;

2 correct?

3 A That's correct.

4 Q If Intel would not exit or curtail 4G research

5 and development activities after an exclusion order, that

6 would not be a factor in affecting Intel's ability to

7 transition to 5G; correct?

8 A I am sorry, there were too many notes in that

9 sentence.

10 Q If Intel -- let me try it one more time.

11 A Sorry, I'll try to get it.

12 Q If Intel would not exit or curtail 4G research

13 and development activities after an exclusion order, that

14 would not be a factor affecting Intel's ability to

15 transition to 5G; correct?

16 A I have to restate that, because I'm not -- so

17 the -- your premise is that following an exclusion order,

18 Intel would not reduce its 4G innovation activities?

19 That's part 1?

20 Q Correct.

21 A And assuming that Intel did not reduce its 4G

22 innovation activities, that would not harm its 5G

23 innovation activities? Is that the --

24 Q That's close enough.

25 A Is that close enough?

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1 I think the question answers itself. I think if

2 Intel did not reduce -- I don't know that there's a clear

3 line in the sand between what's a 4G innovation activity

4 and what is a 5G innovation activity, is the way that I

5 would think about the question.

6 But if there were no reduction in Intel's

7 innovation activities in mobile wireless, then obviously

8 there would be no effect on its participation in 5G. I

9 hope that -- that's the best I can do.

10 Q You don't know when Apple's first 5G product

11 will be; correct?

12 A I think Ms. Evans testified this morning that

13 she's not entirely sure.

14 Q So no, you don't know?

15 A That's no, I don't know.

16 MR. MARRIOTT: Now, your Honor, I have Intel

17 confidential information next up.

18 JUDGE PENDER: Okay. We'll go on the

19 confidential record.

20 (Confidential session follows.)

21

22

23

24

25

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1 OPEN SESSION CONTINUED

2 BY MR. MARRIOTT:

3 Q Intel's -- Intel's financial reports and public

4 statements emphasize the importance of 5G to Intel's

5 business; correct?

6 A I think that's a fair assessment, yes.

7 Q And an exclusion order wouldn't prohibit Intel

8 from conducting 5G research; correct?

9 A I think it would hinder its ability to do so but

10 it wouldn't legally prohibit it.

11 Q And an exclusion order wouldn't prevent Intel

12 from participating in standard-setting organizations in

13 which it currently participates; correct?

14 A Same answer, not legally, no.

15 Q And an exclusion order wouldn't prohibit Intel

16 from developing 5G products including 5G baseband chips;

17 correct?

18 A Same answer.

19 Q And an exclusion order wouldn't prevent Intel

20 from developing 5G premium baseband chips; correct?

21 A Again, not legally, no.

22 Q Intel has already invested substantially in 5G

23 development; right?

24 A I think that's right.

25 Q And, in fact, it's announced a 5G baseband

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1 processor modem; correct?

2 A Yes.

3 Q And it's completed substantial development work

4 on 5G chip technology; correct?

5 A You're using the word "substantial." I think

6 that's more granular than my understanding. I know it has

7 done work in that area.

8 Q And when Intel introduces a commercially viable

9 5G baseband premium chip, it may begin to earn revenues on

10 that chip; correct?

11 A Yes.

12 Q And that revenue would be able to support

13 further 5G research and development; correct?

14 A Yes.

15 Q Would you also agree, Dr. Eisenach, that the

16 development of 5G would not cease without Intel's

17 involvement?

18 A Yes.

19 Q And companies like Qualcomm and Ericsson and

20 Huawei and many others have also made substantial

21 investments and contributions to 5G technology; correct?

22 A Yes.

23 Q Is it -- is it also correct that you're not

24 qualified to reach a conclusion on the value of Intel's

25 contributions for 5G technology from a technical

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1 perspective?

2 A You put a technical perspective qualifier on

3 that, then yes, I think that's true.

4 Q I'm sorry, I just missed the answer.

5 A I apologize. No, I'm not a technical expert,

6 and I don't -- I'm not here making technical opinions.

7 Q I'm sorry I interrupted you. You think it's too

8 strong to say that other companies couldn't duplicate or

9 contribute similar 5G innovations to the ones that Intel is

10 contributing; correct?

11 A I apologize, I missed the negative at the

12 beginning or the lack of one. Just read it again if you

13 don't mind.

14 Q In your view, it's too strong to say that other

15 companies couldn't duplicate or contribute similar 5G

16 innovations to the ones that Intel is contributing;

17 correct?

18 A I think -- I think that if Intel were not

19 innovating in part of the 5G innovation ecosystem, that

20 innovation would be harmed, there would be less innovation.

21 So that's the way I'd answer that question.

22 Q If what Intel is bringing to the 5G innovation

23 exercise is not unique, then you would also agree that the

24 harm to innovation from an exclusion order and to consumers

25 would also be less or nonexistent; correct?

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1 A But I don't accept the premise of your question.

2 Q Accepting the premise, you then would agree,

3 would you not, sir?

4 A If I accept the premise which I don't agree

5 with, then I think that would be correct.

6 Q The most important 5G standards, those have

7 already been completed; isn't that right?

8 A I don't know that.

9 Q Well, do you know that the 3G PP announced a

10 finished non-standalone 5G new radio standard in December

11 of 2017?

12 A I am aware of that, yes.

13 Q Are you aware that 3G PP has announced a

14 finished standalone 5G radio standard earlier this month?

15 A Yes.

16 Q In fact, Intel is developing 5G technologies all

17 around the world, not just in the United States; correct?

18 A I know that they are -- some of their work on 5G

19 occurs outside the United States, yes.

20 Q And you are familiar with their partnerships

21 with Nokia and Ericsson and Huawei and China Mobile;

22 correct?

23 A Yes.

24 Q And with Spreadtrum and with Lenovo; right?

25 A Yes. Broadly. I don't have detailed knowledge

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1 of those but --

2 Q In addition to whatever Intel may be doing,

3 there are a lot of companies involved in 5G development;

4 correct?

5 A Yes.

6 Q And a lot of those companies are U.S.-based

7 companies; correct?

8 A There are smaller companies engaged in 5G, U.S.

9 companies engaged in 5G, yes.

10 Q Well, AT&T is involved in 5G; correct?

11 A Yes.

12 Q In fact, it plans to deliver mobile 5G to

13 customers in dozens of cities by late 2018; right?

14 A That's correct.

15 Q And T-Mobile is involved in 5G; right?

16 A Very much so.

17 Q And they will launch 5G in 30 cities in 2018;

18 correct?

19 A That's correct.

20 Q And Verizon is involved; right?

21 A That's correct.

22 Q And Verizon plans to roll out 5G fixed wireless

23 in five cities in 2018; right?

24 A That's correct.

25 Q Ford is involved; correct?

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1 A Yes.

2 Q Ford Motor Company. They are exploring the

3 development of 5G technologies in platforms for vehicles;

4 right?

5 A That's correct.

6 Q And Cisco is involved?

7 A That probably is correct.

8 Q Microsoft, Dell, they are involved; correct?

9 A Yes, I think everyone in the information

10 technology ecosystem is one way or another looking at 5G.

11 Q In arriving at your conclusions in this case,

12 you spoke with Ms. Evans, Mr. Constantine and Mr. Bowers

13 from Intel; correct?

14 A Yes.

15 Q And you asked for and you reviewed thousands of

16 pages of Intel internal documents; correct?

17 A I didn't count, but it was a lot.

18 Q Lots of pages; right?

19 A Lots of pages.

20 Q And you never saw any written exit plan

21 described Intel leaving, saying that Intel would leave in

22 the event of an exclusion order; correct?

23 A That is correct.

24 Q And you never saw any financial analysis showing

25 that it would make sense for Intel to leave in the event of

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1 an exclusion order; correct?

2 A I've heard testimony to that effect but I've

3 never seen a spreadsheet if that's what you're asking.

4 Q Never saw any board minutes or presentations

5 discussing that Intel will have no choice but to leave the

6 baseband chipset business in the event of an exclusion

7 order; correct?

8 A That's correct.

9 Q In your direct testimony, Dr. Eisenach, you

10 claimed that Qualcomm's conduct during the period when it

11 was Apple's sole source of baseband chipsets was consistent

12 with what you called a possession of monopoly power.

13 Do you recall that?

14 A Yes.

15 Q And that's because you say Qualcomm supposedly

16 charged high prices and provided poor service quality;

17 correct?

18 A That's correct.

19 Q The only evidence you cite in support of that is

20 three Apple documents; correct?

21 A I don't think that's correct, no.

22 Q Well, take a look, if you would, at your -- let

23 me put it this way. The only evidence you cite is

24 reflected in your witness statement; correct?

25 A The only evidence cited in my witness statement

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1 is the evidence cited in my witness statement.

2 Q And you've not -- the only evidence you relied

3 upon is the evidence cited in your witness statement;

4 correct?

5 A Yes.

6 Q And you've not quoted any documents concerning

7 Qualcomm's views of its relationship with Apple; correct?

8 A That's I think correct.

9 Q But you understand that Qualcomm itself

10 expressed unhappiness with Apple's conduct during the

11 relevant period you discuss; correct?

12 A I think that's been presented to me at some

13 point.

14 Q And you understand that Qualcomm was required to

15 agree to demands from Apple that it preferred not to agree

16 to; correct?

17 A I don't have any specific knowledge of that.

18 Q Is it fair to say that you have no way of

19 objectively assessing whether Apple's technical or

20 engineering demands of Qualcomm were reasonable?

21 A From a technical perspective, I'm not offering

22 technical opinions, that's correct.

23 Q And you have no way of objectively assessing

24 whether Qualcomm, in fact, provided good chipset value or

25 service; correct?

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1 A From a technical perspective, that's correct.

2 Q And you said in your direct testimony that the

3 relief Qualcomm is seeking is consistent with

4 anticompetitive conduct and exclusionary behavior.

5 Do you recall that?

6 A Yes.

7 Q Let's just say that Qualcomm were seeking an

8 exclusion order against all of Apple's iPhones in the

9 United States, meaning devices with both Qualcomm chips and

10 Intel chips.

11 Do you have that assumption in mind?

12 A I do.

13 Q So under that situation, the loss of chipset

14 business to Intel would be exactly the same as it is under

15 an order in which only Intel-based iPhones were excluded;

16 correct?

17 A That's not something I've specifically

18 considered. I'm not sure what the second order effects of

19 that might be. I'd want to give that some thought.

20 Q You would -- I'm sorry?

21 A I would want to give that some thought.

22 Q You would agree that if Qualcomm had asked for

23 an exclusion order that affected all iPhones, it would lose

24 the chipset business for those iPhones; correct?

25 A If Qualcomm had asked for an order including all

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1 iPhones, it would have lost the business for the Qualcomm

2 iPhones, yes, I understand that.

3 Q In your direct testimony, you mentioned pending

4 litigation between Qualcomm and decisions of foreign

5 competition authorities concerning Qualcomm.

6 Do you recall that?

7 A Yes, I do.

8 Q But you're not presenting any economic analysis

9 that Qualcomm violated the antitrust statutes in any of

10 those cases because you haven't been asked to do that;

11 right?

12 A That's correct.

13 Q It's possible, is it not, that foreign

14 competition authority actions against U.S. companies such

15 as Qualcomm might be motivated by things unrelated to

16 competition but instead by protectionism or hostility to

17 U.S. companies; correct?

18 A Generically possible. I'm aware of no evidence

19 of that here.

20 Q You don't know one way or another whether any of

21 the foreign competition authority actions against Qualcomm

22 have been motivated by things other than ensuring

23 competition; correct?

24 A I can't speak to their motivations.

25 Q You agree, do you not, that Apple has market

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1 power in the space for premium smartphones?

2 A As long as we understand market power in the

3 context, I won't give a long dissertation. But as long as

4 we understand market power in the context of dynamic

5 markets, then I'm happy to agree to that, yes.

6 Q You've done a lot of writing on antitrust and

7 competition issues; correct?

8 A That's correct.

9 Q And you believe that the consensus among

10 economists is that market concentration alone is not a good

11 indicator of market power, as it fails to capture the

12 dynamic character of competition; correct?

13 A Yes.

14 Q And within the market for mobile devices, Apple

15 is the overwhelmingly largest buyer of premium thin modems;

16 correct?

17 A That's correct.

18 Q And you didn't do as part of this matter any

19 investigation into whether Apple may have abused its power

20 in that position; correct?

21 A That's not correct.

22 Q I'm sorry?

23 A That is not correct.

24 Q You did do an investigation?

25 A Yes.

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1 Q And Apple has been accused of anticompetitive

2 conduct in various jurisdictions; isn't that right?

3 A I haven't -- I haven't examined anticompetitive

4 conduct accusations against Apple.

5 MR. MARRIOTT: It looks like I'm now -- I

6 apologize, your Honor, but I do have one brief passage here

7 which is Intel confidential.

8 JUDGE PENDER: Okay. Go on the confidential

9 business record for that.

10 (Confidential session follows.)

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

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1 OPEN SESSION CONTINUED

2 BY MR. MARRIOTT:

3 Q Now, you understand, Dr. Eisenach, that Qualcomm

4 seeks a limited exclusion order and cease-and-desist order

5 against the accused iPhones; correct?

6 A Yes.

7 Q And not issuing an order based on public

8 interest considerations is rare in your understanding;

9 right?

10 A That's happened three or four times in the past,

11 I believe.

12 Q And an exclusion order would not affect the

13 operation of accused devices that are already in the United

14 States; correct?

15 A That's my understanding.

16 Q And an exclusion order -- after an exclusion

17 order, iPhones with Qualcomm baseband chips will still be

18 available for import and sale into the United States;

19 correct?

20 A With Qualcomm chips? Yes.

21 Q And an exclusion order wouldn't affect iPhones

22 sold outside the United States?

23 A That's correct.

24 Q An exclusion order wouldn't prevent Intel from

25 selling baseband chips to Apple for those devices; correct?

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1 JUDGE PENDER: Excuse me, Counsel. What are you

2 asking these questions for? You know, I'm going to tell

3 you, they are irrelevant, what this witness knows or

4 doesn't know about that. That's all law stuff.

5 MR. MARRIOTT: Well, then with that, your Honor,

6 I have no further questions.

7 JUDGE PENDER: Good.

8 Ms. Comfort?

9 MS. COMFORT: Do you want me to start?

10 JUDGE PENDER: Yeah, if you can. I'll give you

11 15 minutes. If you get it done, you'll get it done. If

12 you don't --

13 MS. COMFORT: We might spend 20, 25 minutes

14 with --

15 JUDGE PENDER: I don't want to go beyond that.

16 I have other issues that I have to deal with, okay?

17 So what's your preference, then?

18 MS. COMFORT: I'm happy to go either way. We

19 could start and see where we get or would you rather wrap

20 for the day?

21 JUDGE PENDER: Let's see what happens, all

22 right? We'll stop at noon.

23 CROSS-EXAMINATION

24 BY MS. COMFORT:

25 Q Dr. Eisenach, would you agree that patent rights

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1 play a role in promoting innovation?

2 A Yes.

3 Q Would you agree that one way that patent rights

4 do so is by encouraging competitors to design around and do

5 things differently?

6 A Broadly speaking, yes.

7 Q You stated that competition drives innovation.

8 A And -- yes, broadly speaking, that's true.

9 Q That's in differentiated product markets; right?

10 A Yes, particularly in differentiated product

11 markets.

12 Q If you had a nondifferentiated product market,

13 there wouldn't be any innovation; right?

14 A That's a great question. So I've always thought

15 of innovation as product differentiation over time, and I

16 think you've captured that perfectly, yes. A commoditized

17 market is one where all products are the same, and if

18 they're all the same in the next period as they are in this

19 period, then that would be a market with no innovation. So

20 that's a good definition.

21 JUDGE PENDER: Market products would be things

22 like grain and commodities.

23 THE WITNESS: Yes, sir.

24 JUDGE PENDER: And so interesting, it is a great

25 question, Ms. Comfort. We're talking about are these

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1 chips, are they commodities or not, is that where you're

2 going?

3 MS. COMFORT: Well, we're on the public record,

4 but we might have to go to the confidential record to get

5 there.

6 JUDGE PENDER: To answer that question, really?

7 MS. COMFORT: Well, not to further explore the

8 question. So I'll continue.

9 JUDGE PENDER: Please do.

10 BY MS. COMFORT:

11 Q In a -- in perfect competition, for example,

12 Dr. Eisenach, all firms would sell an identical product;

13 right?

14 A That's correct.

15 Q And all firms would be price takers; right?

16 A Correct.

17 Q They would compete on price and compete away all

18 profits down to the bottom line?

19 A That's correct.

20 Q You've also heard of a buyer's monopoly; right?

21 A Of a buyer's monopoly? Yes.

22 Q So in a buyer's monopoly, there's only one buyer

23 of a good?

24 A Correct.

25 Q And that situation gives the buyer considerable

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1 power to demand concessions from sellers, since the sellers

2 have no alternative to selling to the buyer?

3 A Yes. It's a -- the kind of market you're

4 talking about we also refer to as an monopsony, and it's

5 essentially a monopoly upside down.

6 Q As with a monopolist, who is a seller, the buyer

7 in a buyer's monopoly is a price maker?

8 A Correct.

9 Q So we agreed the only differentiated product

10 markets promote innovation; right?

11 A I wouldn't put it that way. So in a

12 commoditized market, you still have the opportunity for

13 imagination to come along and invent something better. So

14 quill pens may have been monopolies -- may have been

15 commodities until someone thought of the ballpoint. So I

16 don't think that's exactly right.

17 Q Sure. So if you and I, we were both selling

18 commodities and we're selling exactly the same commodity,

19 there's no innovation; right?

20 A I'm sorry, I -- I don't want to debate -- or I

21 don't think I'm making a fine point. I'm not really sure

22 where you're going so I don't want to belabor the point.

23 But there would be innovation in two ways.

24 So even if the product is a commodity, the

25 producers still have an incentive to innovate on costs. So

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1 we're still looking for ways to make these, we call them

2 widgets in the economics profession, we're still looking

3 for ways to make cheaper widgets, even if there's no way to

4 make a better or a different widget. So there's innovation

5 on that front.

6 And then as I say, somebody is always looking

7 for a way to make somehow a differentiated widget or some

8 other way to -- a better mousetrap, if you will.

9 Q Sure. The innovation comes when one of us has

10 the opportunity and incentives to go out and do things

11 differently; right?

12 A Yes, that's correct.

13 MS. COMFORT: We should go to the confidential

14 record.

15 JUDGE PENDER: All right. We'll go on the

16 confidential record.

17 (Confidential session follows.)

18

19

20

21

22

23

24

25

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1 C O N T E N T S

2 VOIR

3 WITNESSES: DIRECT CROSS REDIRECT RECROSS DIRE

4 AICHA EVANS

5 by Mr. Mueller 1103/1130

6 by Mr. Marriott 1119/1133

7 by Ms. Murray 1126

8 STEVEN BOWERS

9 by Mr. Cordell 1137

10 by Mr. Marriott 1146/1166

11 by Ms. Comfort 1148

12 JERRY EISENACH

13 by Mr. Cordell 1172

14 by Mr. Marriott 1179

15 by Ms. Comfort 1241

16

17 CONFIDENTIAL SESSIONS: Pages 1109-1136, 1159-1171,

18 1195-1215, 1223-1224,

19 1237-1239, 1246-1251

20

21 E X H I B I T S

22 EXHIBITS: IDENTIFIED RECEIVED

23 RX-9C 1142

24 RX-10C 1177

25 RX-1612C 1179

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CERTIFICATE OF REPORTER
TITLE: In The Matter Of: Certain Mobile Electronic Devices
and Radio Frequency and Processing
Components Thereof

INVESTIGATION NOS: 337-TA-1065


HEARING DATE: 06-22-18
LOCATION: Washington, DC
NATURE OF HEARING: Hearing

I hereby certify that the foregoing/attached


transcript is a true, correct and complete record
of the above-referenced proceeding(s) of the U.S.
International Trade Commission.
DATE: 06-22-2018

SIGNED: Mark A. Jagan


Signature of the Contractor or the
Authorized Contractor's Representative

I hereby certify that I am not the Court Reporter


and that I have proofread the above-referenced
transcript of the proceedings of the U.S.
International Trade Commission, against the
aforementioned Court Reporter's notes and
recordings, for accuracy in transcription in the
spelling, hyphenation, punctuation and speaker
identification and did not make any changes
of a substantive nature. The
foregoing/attached transcript is a true,
correct and complete transcription of the
proceedings.
SIGNED: Christopher Weiskircher
Signature of Proofreader

I hereby certify that I reported the


above-referenced proceedings of the U.S.
International Trade Commission and caused
to be prepared from my tapes and notes of
the proceedings a true, correct and
complete verbatim recording of the
proceedings.
SIGNED: Carmen Smith
Signature of Court Reporter

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Case 5:17-md-02773-LHK Document 620-12 Filed 07/19/18 Page 3 of 116
1

1 UNITED STATES OF AMERICA

2 BEFORE THE

3 INTERNATIONAL TRADE COMMISSION

5 - - - - - - - - - - - - - - - - - X

6 IN THE MATTER OF: : Investigation Number

7 CERTAIN MOBILE ELECTRONIC DEVICES : 337-TA-1065

8 AND RADIO FREQUENCY AND PROCESS :

9 COMPONENTS THEREOF :

10 - - - - - - - - - - - - - - - - - X

11

12 PREHEARING

13

14 Friday, June 15, 2018

15 Courtroom B

16 U.S. International Trade

17 Commission

18 500 E Street, SW

19 Washington, DC

20

21

22 The prehearing commenced, pursuant to notice of

23 the Judge, at 8:47 a.m., before the Honorable Thomas B.

24 Pender, Administrative Law Judge for the United States

25 International Trade Commission.

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1 APPEARANCES:

3 DAVID A. NELSON, ESQ.

4 Quinn, Emanuel, Urquhart & Sullivan LLP

5 500 West Madison Street, Suite 2450

6 Chicago, Illinois 60661

7 312.705.7400

8 On Behalf of Complainant Qualcomm, Incorporated

10 SEAN PAK, ESQ.

11 Quinn, Emanuel, Urquhart & Sullivan LLP

12 50 California Street, 22nd Floor

13 San Francisco, California 94111

14 415.875.6600

15 On Behalf of Complainant Qualcomm, Incorporated

16

17 DAVID R. MARRIOTT, ESQ.

18 Cravath, Swaine & Moore LLP

19 Worldwide Plaza

20 825 Eighth Avenue

21 New York, New York 10019-7475

22 212.474.1430

23 On Behalf of Complainant Qualcomm, Incorporated

24

25 - continued -

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1 APPEARANCES (CONTINUED):

3 TOM M. SCHAUMBERG, ESQ.

4 DEANNA TANNER OKUN, ESQ.

5 Adduci, Mastriani & Schaumberg LLP

6 1133 Connecticut Avenue, NW

7 Washington, DC 20036

8 202.467.6300

9 On Behalf of Complainant Qualcomm, Incorporated

10

11 WILLIAM F. LEE, ESQ.

12 JOSEPH J. MUELLER, ESQ.

13 Wilmer, Cutler, Pickering, Hale and Dorr LLP

14 60 State Street

15 Boston, Massachusetts 02109

16 617.526.6556

17 On Behalf of Respondent Apple Inc.

18

19 NINA S. TALLON, ESQ.

20 Wilmer, Cutler, Pickering, Hale and Dorr LLP

21 1875 Pennsylvania Avenue, NW

22 Washington, DC 20006

23 202.663.6365

24 On Behalf of Respondent Apple Inc.

25 - continued -

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1 APPEARANCES (CONTINUED):

3 JAMES M. DOWD, ESQ.

4 Wilmer, Cutler, Pickering, Hale and Dorr LLP

5 350 South Grand Avenue, Suite 2100

6 Los Angeles, California 90071

7 213.443.5309

8 On Behalf of Respondent Apple Inc.

10 RUFFIN B. CORDELL, ESQ.

11 Fish & Richardson P.C.

12 1000 Maine Avenue, SW

13 Washington, DC 20024

14 202.783.5070

15 On Behalf of Respondent Apple Inc.

16

17 LISA M. MURRAY, ESQ.

18 CLAIRE COMFORT, ESQ.

19 JEFFREY HSU, ESQ.

20 Office of Unfair Trade Investigations

21 United States International Trade Commission

22 500 E Street, SW

23 Washington, DC 20436

24 202.205.2158

25 On Behalf of Commission Investigative Staff

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1 P R O C E E D I N G S

2 JUDGE PENDER: Good morning, everyone. This is

3 Investigation 337-TA-1065, Certain Mobile Electronic

4 Devices and Radio Frequency and Process Components Thereof.

5 This is our prehearing conference. Today is Friday, June

6 15, 2018. Our normal hearing rules will be that the

7 hearing hours will be from 8:45 to 4:30 p.m. and may go a

8 few minutes later if it makes sense to do so.

9 Normally lunch will be from 11:45 to 1:00.

10 We'll take breaks in the morning and afternoon around 10:00

11 or so and around 2:30 in the afternoon when we're taking

12 evidentiary testimony.

13 The hearing will not go past Tuesday, June 26.

14 Fridays, including today and next week, will be half days

15 ending before noon.

16 I mentioned something else. I've heard that the

17 weather is going to be truly gruesome next week on Monday

18 and Tuesday. And I'm going to ask that the air

19 conditioning be left on in this place over the weekend.

20 Otherwise we'll expire in here or we'll have to throw the

21 people out and just keep maybe 15 or 20 people in here,

22 whatever.

23 Okay. I'll allow beverages in the courtroom

24 provided they are in an indestructible container or bottle

25 with a tight-fitting lid or cap. This means no Styrofoam

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1 cups or Starbucks-like cups. Of course water bottles are

2 okay. I don't really care what you have in there, as long

3 as it doesn't spill.

4 With regard to food, the official rule is no

5 food in this courtroom, so don't let me hear it, smell it,

6 and of course those who have heard me give this speech

7 before know that I truly dislike gum.

8 Also, you all are the first to sit in the

9 comfortable chairs for attorneys. I have been agitating

10 for these since I've came here and finally something

11 happened. I think that most of you know who Angie Jones

12 is. She was Judge Luckern's assistant for all these years

13 and now she is Judge Bullock's assistant. She was in here

14 all week working to get all this stuff set up, so if you

15 see her, say thank you.

16 I'm going to mention, there are some

17 installation issues with the new carpet near the front of

18 the attorney area, including a roll across the width of the

19 courtroom. If you walk up and you're not looking for it,

20 you're going to take a gainer. So let's not -- let's be

21 careful anyway.

22 Before we go any further, please take this

23 opportunity to turn off or set to silent your cell phones

24 and pagers so they will not interrupt these proceedings.

25 I remember to do that for myself. My handy

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1 dandy Apple phone, so I don't want to hear too much from

2 Apple about that. And I still have my iMac, and Costco put

3 iMac Pros on sale, the ones with the 256 GB on it, so I

4 bought one of those. And I like it more than I like my

5 iMac, by the way. So for the Apple people, they probably

6 have done surveys, they probably know that. It's a

7 terrific device.

8 All right. Appearances. For Complainant,

9 Qualcomm. May we please enter appearances.

10 MR. NELSON: Good morning, your Honor. Dave

11 Nelson on behalf of Qualcomm and I'll just -- should I just

12 go ahead and introduce some of the folks?

13 JUDGE PENDER: Go ahead, please.

14 MR. NELSON: Mr. Sean Pak, Dave Marriott. We're

15 going to be, for the opening statement, your Honor, just

16 while I'm on it, we are planning on splitting some of the

17 issues. I was going to handle the patent issues and

18 Mr. Marriott was going to handle some of the public

19 interest issues, if that's all right with your Honor.

20 JUDGE PENDER: Right. I'm looking for the --

21 Carmen usually gives me a -- all right, great. And she

22 did, of course.

23 We're very fortunate to have what I consider to

24 be the best court reporter there is, and especially for

25 this case. I think they know better than to give me

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1 someone else. But anyway, be that as it may.

2 And introduce other counsel as we move along.

3 MR. NELSON: Yeah, I can. The one question I

4 did have for your Honor --

5 JUDGE PENDER: Sure.

6 MR. NELSON: -- on this was you had mentioned a

7 couple of times, and I've been in front of you before and

8 you've mentioned this, that you like to see some young

9 attorneys do things at hearings, to get some --

10 JUDGE PENDER: You can open it up for them,

11 sure.

12 MR. NELSON: I mean, if that's still something

13 your Honor would like to see, I will try to make that

14 happen with certain of the witnesses.

15 JUDGE PENDER: I won't penalize mistakes or

16 anything else, and I would ask counsel on the other side to

17 take a deep breath before they object or anything like

18 that, you know. There's no substitute for actually doing

19 it.

20 MR. NELSON: Okay. Thank you, your Honor. I

21 just wanted to do that. And so the rest of the folks --

22 you will see them as they come up. But thank you very

23 much, I appreciate it.

24 JUDGE PENDER: Thank you, Mr. Nelson.

25 Good morning, Mr. Lee.

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1 MR. LEE: Good morning, your Honor. I'll

2 introduce just the folks at the front table, and then as

3 Mr. Nelson suggested, we will introduce other folks as they

4 come up to do examinations.

5 I am Bill Lee from Wilmer Hale, and with me at

6 counsel table are Ruffin Cordell, Nina Tallon and Joe

7 Mueller. With us in the courtroom from Apple are Noreen

8 Krall and Ryan Moran, and with us from Intel are Ben

9 Ostapuck and Kim Schmidt.

10 Thank you, your Honor.

11 JUDGE PENDER: Thank you. And I know most of

12 the other counsel there, and I know Ms. Tallon has been

13 signing all the stuff.

14 You know, I will say overall, the quality of the

15 paper has been decent. I'll let you know after I hear the

16 opening, where I didn't think the quality of the paper will

17 match your aspirations. But facts are what the facts are.

18 For the Staff?

19 MS. MURRAY: Good morning, your Honor, Lisa

20 Murray on behalf of the Commission Investigative Staff.

21 Also appearing today is Claire Comfort, and with us is

22 Jeffrey Hsu.

23 JUDGE PENDER: The order of the hearing of

24 course is set forth in Ground Rule 14.6. We will begin

25 with opening statements and proceed to eventually the

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1 Complainants' case-in-chief on Monday. And we will hope

2 that the air conditioning is working. Respondents'

3 case-in-chief, Respondents' rebuttal case and Complainants

4 rebuttal case. No need for closing arguments, of course,

5 that being the purpose of the brief.

6 Following Ground Rule 14.7, examination of

7 witness will be presented with direct examination by a

8 witness statement followed by cross, redirect and recross,

9 if necessary.

10 All right. Complainant and Respondent should

11 use equal time over the course of the hearing, but I'm not

12 going to be enforcing this down to the minute. Parties

13 should keep track of their own time. I'm sure you have

14 somebody who does that, like the person who manages the

15 screen.

16 As for stipulations, as I understand from the

17 parties' prehearing statements, on December 15, 2017, the

18 parties filed a joint stipulation regarding collection and

19 production of documents and electronically stored

20 information. On April 25, 2018, the parties filed a joint

21 cross-use stipulation concerning discovery in this

22 investigation.

23 On February 6, 2018, Qualcomm filed a

24 stipulation regarding the scope of remedy. Qualcomm has

25 stipulated it will not seek a remedy against products

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1 containing a Qualcomm brand baseband processor modem.

2 Apple and the Staff do not oppose this stipulation.

3 I'll make a comment on that. That was a good

4 move, I would think.

5 On March 5, 2018, Qualcomm and Apple filed a

6 stipulation regarding importation and inventory. Apple

7 stipulated to the importation of the accused products and

8 has stipulated to domestic inventories of the accused

9 products, which makes sense since we all know they are

10 there; right?

11 Okay. Next is evidence without a sponsoring

12 witness. I understand all parties have submitted requests

13 for the receipt of evidence without sponsoring witnesses.

14 There is a joint request from Qualcomm, Apple and the

15 Staff, a separate request from Apple and a separate request

16 from the Staff.

17 To my knowledge, no one is opposing these

18 requests; is that correct? Mr. Nelson?

19 MR. NELSON: That is correct, your Honor.

20 MR. LEE: That's correct, your Honor.

21 JUDGE PENDER: Okay. Then that's okay. Then

22 these exhibits will be admitted when the hearing record is

23 opened. I don't want to do that before because one of the

24 reasons I do this half day thing is so I don't open the

25 record until you guys have had a chance to think about

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1 things over the weekend.

2 All right. Posthearing briefing. The due dates

3 are in the procedural schedule. I'll discuss page limits

4 at the end of the hearing. And be thinking about it, you

5 know. Open the discussions with one another, all right?

6 Let's see. I'm going to forgo my comments until

7 after I've heard the opening statements. I'll let you guys

8 get a full head of steam at that point. But what I did was

9 slightly different this year with this case.

10 I had the Staff's brief right here, which was

11 thankfully shorter than the other two, and it was the only

12 hard copy, and I had two screens behind me on my desk

13 there. And I would have Complainants' brief open on one

14 screen and then the other brief open on the other. And I

15 had a really nice 1 terabyte hard drive somebody had given

16 me with the exhibits on it plus another thing.

17 So I was opening exhibits as I went and I was

18 looking, not all the time, I just didn't have the time to

19 do that. But occasionally I would read the exhibits.

20 So I have a pretty reasonable familiarity with

21 what's going on, and it's caused me to form some opinions.

22 And I'm not going to telegraph them until I've heard the

23 opening statements. Although I may -- I'll probably

24 telegraph them during the Staff's opening statement because

25 I'll ask questions of the Staff. And of course I may do

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1 that to you, Mr. Nelson and Mr. Lee, okay?

2 Mr. Nelson, you may proceed.

3 MR. NELSON: I have some copies of the slides.

4 JUDGE PENDER: That would be great.

5 MR. PAK: May I approach?

6 MR. NELSON: May I proceed, your Honor?

7 JUDGE PENDER: Please.

8 MR. NELSON: Oh, actually, Mr. Pak is still

9 passing things out, I jumped the gun a little bit. Sorry

10 about that.

11 Your Honor, also Mr. John Scott from Qualcomm is

12 here today and I wanted to introduce him as well.

13 So I did forget my glasses, your Honor, so I

14 can't read very well, I apologize. But up here on the

15 screen, I can see. So if I'm facing this way a little bit,

16 that's the reason why.

17 So let me -- as I said, Mr. Marriott and I are

18 going to split up the opening statement, if that's all

19 right with your Honor. I want to address the patent issues

20 and get right into the substance of those.

21 I think you're fairly familiar with the

22 background of the parties and who these parties are from

23 some of the prior proceedings, so I won't belabor that.

24 JUDGE PENDER: Yeah, I'll hit you both on that.

25 You don't need to tell us who you guys are, you know. How

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1 many hearings have I had with Apple and Qualcomm? You guys

2 were always the 800-pound gorilla at the other side of the

3 tracks. This is the first time I believe I've ever had you

4 as a party, you know.

5 MR. NELSON: Right. Understood, your Honor.

6 There's not any point in me spending time telling you what

7 you already know.

8 JUDGE PENDER: Right.

9 MR. NELSON: At this point in this

10 investigation, we've taken into account your Honor's

11 requests that we narrow the issues for the purposes of the

12 hearing, and we've done that. You know, we've taken the

13 input of the Staff, we've taken the input from your Honor

14 through the Markman process and some of your comments at

15 the Markman proceeding, and here's where we've landed for

16 purposes of this hearing.

17 We have the '558 patent, we have the '490 patent

18 and we have the '936 patent. And let me take those -- I'm

19 going to take them in numerical order, just because that's

20 easier for me to do, by the last three numbers.

21 So I want to start with the '490 patent, talk a

22 little bit about the background, some of the infringement

23 issues as well as some of the invalidity issues that have

24 been raised by Apple.

25 JUDGE PENDER: Tease you a little bit,

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1 Mr. Nelson. It's good to start with your strongest case,

2 so what you're doing makes sense from a practical

3 standpoint as well.

4 MR. NELSON: Yeah, that's -- my father taught me

5 at a young age, start with a strength. And I'll let them

6 adjust things here. Okay. So we're there on the screen

7 now, your Honor.

8 I want to talk a little bit about what things

9 were like before the '490 patent and what they were dealing

10 with. This is described in the background of the patent,

11 so I'll kind of work from that.

12 So you have a situation, and this isn't

13 necessarily always the architecture, but certainly can be,

14 and in the accused offerings, it is the architecture, where

15 you have an applications processor that's, you know,

16 responsible for handling that type of processing for the

17 applications, the rendering on the screen, those types of

18 things. And you have a modem processor that's responsible

19 for doing the processing of sending the information,

20 receiving the information over the what I'll call the radio

21 link, the air link.

22 And these two processors, there's obviously a

23 lot of data going back and forth between these two

24 processors, and they need to communicate. And they need to

25 communicate, particularly at today's rates that the

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1 consumers demand and that the networks provide, pretty

2 quickly.

3 And when you do that, you know, you have to have

4 this what we'll call a wide bus between there, something

5 that can move a lot of data back and forth, a wide highway,

6 if we want to use an example, an analogy. Takes power,

7 takes a fair amount of power.

8 And so in these mobile devices, unlike, you

9 know, a laptop computer that's plugged into the wall where

10 power is much less of a concern, power consumption, it's a

11 big deal, right, in these mobile devices.

12 So what you need to do in all these areas where

13 you can is try to minimize that power consumption as much

14 as you can. You obviously can't eliminate it, but you can

15 minimize these things.

16 In the prior art approach, or at least the state

17 of the art prior to the '490 patent, we have a situation,

18 and just to get this terminology, the downlink data will be

19 the data that's coming from the base station down to the

20 device. That's just the terminology we use. That's the

21 downlink direction. And uplink will be what's wanted to be

22 communicated, its application processor data, to send up to

23 the network.

24 And so you'll see that in these prior art

25 approaches, what you had is a situation where these two

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1 things were not coordinated, the transmission of downlink

2 data and uplink data, even though they are both using this

3 bus, because it's a bus between the applications processor

4 and the baseband, the modem processor, which is called for

5 purposes of the '490 patent.

6 So the data, whether it be uplink data or

7 downlink data, travels over this bus. But it was

8 uncoordinated; right? What happens when you do that? We

9 have a lot of transitions, and you will see those

10 transitions are kind of depicted in the figures of the

11 patent as that slope, you know, on the -- so it's not a

12 rectangular wave. There is a slope there.

13 And the problem with that is you're not really

14 doing any work during that, until it gets all the way

15 powered up, you can't send data across there.

16 So the power that's consumed during that

17 transition time is really wasted, in terms of the work

18 that's being done.

19 Same on the downlink side. So when you have all

20 of these uncoordinated transitions, you have a situation

21 where you're consuming power unnecessarily. Also, when

22 they're not -- in these prior art approaches, they were

23 what we call half duplex buses, meaning I can only send

24 data one direction at a time. Even though it's a

25 unidirectional bus, I can't send both directions at a time.

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1 And what that does is kind of maximizes the up time,

2 because I can't overlap.

3 JUDGE PENDER: You said a unidirectional bus.

4 Uni, doesn't that mean only one direction?

5 MR. NELSON: Half duplex, I said. They're

6 bidirectional, so they go both ways, but I can only send

7 one direction at any given time. And that's just what the

8 term "half duplex" means. I think it actually comes from

9 the old telephone communications systems, that term.

10 So that was kind of the state of the world at

11 that time.

12 And so here we have a situation now where the

13 buses have advanced, and now we have some examples in the

14 patent are this USB 3.0 and the PCIe bus, PCI express bus

15 that's used as the communication between these processors.

16 It's much higher bandwidth, the data can move

17 faster to keep up with the data rates that are necessary.

18 And it's also full duplex, meaning I can send data in both

19 directions simultaneously or concurrently, right.

20 And the trade-off for that is it's higher power,

21 right, consumes more power so it's even more important that

22 I come up with a situation where I minimize the power

23 consumed by that particular bus, and that's what the '490

24 patent is about, your Honor.

25 So we see that here. I have an excerpt from the

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1 patent at column 1 that talks about exactly what I just

2 mentioned.

3 And let me just show a particular example from

4 the '490 that's talking about -- we're focused on claim 31

5 here, your Honor, in this patent. So I want to talk about

6 an embodiment from the patent of claim 31.

7 So here in this we have a situation where, as I

8 run this animation, I'm showing the uplink data, meaning

9 the data from the processor to go up over the air link,

10 being held on the processor side, right. It's -- when I

11 say "held," I mean it's on that side of the bus. It's not

12 being transferred over the bus. It's being held by the

13 processor.

14 The downlink data, on the other hand, is the

15 same, right. It's being held by the modem. It's coming

16 down, but I'm not transferring over the bus. So that bus

17 is sleeping right now and consuming minimal power in that

18 situation.

19 Now I've accumulated that data on both sides in

20 this example, and I have a timer on the modem side, I

21 believe it's called a modem timer in the context of the

22 patent. And that timer is what on the modem side is going

23 to trigger the event of starting -- beginning the transfer

24 of that data.

25 And so what happens if I proceed forward here is

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1 I have a push of data from the modem side. The modem

2 processor is the -- you know, the brains of this outfit,

3 this transfer in the context of claim 3 is, so to speak.

4 So what the modem processor does, you know, in

5 claim 31, we kind of recognize that statistically, your

6 Honor, you're going to have more data coming down from the

7 network, in other words, these devices are going to want

8 more data than they send up. That's the idea. So there

9 will be more to transfer from the downlink side, meaning it

10 takes longer to transfer that.

11 So what you do in the context of claim 31, once

12 that timer expires, the modem processor takes the data it's

13 accumulated, that bus wakes up, and it pushes that data

14 down to the applications processor.

15 Now, also at that time, once it begins the push

16 of the data, the modem processor gets the information from

17 the applications processor about where it should begin to

18 pull data from, right, where is your data that I need to

19 pull that we're calling uplink data to send up the network.

20 And so then once it gets that information, it

21 will begin to pull that data as well from the applications

22 processor, because that bus is awake and so it's taking

23 advantage of the fact that it can transfer that information

24 with minimal transitions, you know, asleep to awake

25 transitions, as well as minimal time awake, right. Because

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1 I've now overlapped these or at least I can overlap these

2 transmissions.

3 So that's -- we have figure 5 of the patent, and

4 that's what's depicted here. You can see, you know,

5 contrary to that figure I started with, I've minimized the

6 number of transitions, and I've also minimized in this

7 sense the up time, right, the awake time of the bus. So

8 I've in this sense minimized the amount of power consumed

9 by that bus, which is a good thing because I don't have to

10 charge my device quite as often to do this.

11 Now, the accused products and the domestic

12 industry products work very, very similarly in this regard.

13 And without getting into any specifics, I think you will

14 see some evidence, your Honor, that that really isn't

15 merely a coincidence. And you know, we'll leave it at that

16 for now, but that's kind of where things stand.

17 So let me talk a little bit about some of

18 Apple's arguments that your Honor saw in the briefing, and

19 I just want to introduce you to those things. Well,

20 introduce you is probably the wrong word, because you've

21 read the briefing, but just talk about them from my

22 perspective so that you can get an idea of where we're

23 going with the evidence at the hearing, give it a little

24 context.

25 So Apple has this idea, one of their arguments

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1 is you have to send all of the downlink data from the modem

2 processor before you pull any data up, right, the uplink

3 data from the application processor.

4 In other words, they can't be overlapped.

5 That's one of their main noninfringement arguments. That's

6 just wrong; right? That inserts the idea of all in the

7 claim, a word that isn't there. It doesn't make sense,

8 it's inconsistent with the purpose of the invention and the

9 description of the invention. And it also, when we had

10 this discussion at Markman, that type of construction of

11 the claims, which is what this issue really is, your Honor,

12 because I don't think there's any dispute, factual dispute,

13 about the operation, would exclude the figure 10

14 embodiment, which is a description of an embodiment of

15 claim 31 of the patent.

16 And we'll show you other excerpts in the patent

17 that talk about this that would also be excluded from that,

18 which is a little bit of a strange way to read the claims,

19 as we all know.

20 Another issue that Apple has with the '490

21 patent in terms of its noninfringement defenses, your

22 Honor, is they redefine what hold means. And this is kind

23 of an interrelated argument that they have with this what

24 I'll call the processor argument, defining what the

25 processor is.

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1 You know, basically saying that the processor is

2 only the very specific die, you know, the semiconductor

3 die, that holds the processing logic and not the associated

4 memory of the processor, saying, well, if the processor

5 accumulates its data, right, on its side of the bus so it's

6 not sending uplink data over the bus until it's pulled from

7 the modem, if it accumulates that in a memory that's

8 associated but not physically on the die of the processor,

9 that that's not being held by the processor. That's their

10 argument. Inconsistent with the discussion in the patent

11 and inconsistent with frankly how these devices -- one of

12 ordinary skill in the art would understand how these

13 devices are implemented.

14 So here, I mean, we'll see evidence, your Honor.

15 These are from public teardowns, so there's no issue with

16 confidential information, that, you know, the processors in

17 the Apple phones, what they stamp as being A10 and A11,

18 which are the processors that are at issue in the accused

19 devices here, they include, it's one package that include

20 that die, you know, the processing logic die that I talked

21 about, as well as its associated memory. And that's what's

22 stamped with the A10. That's what Apple itself calls the

23 processor here.

24 So, you know, we just don't -- that's not an

25 argument that carries a lot of weight. It really is a --

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1 well, it's inconsistent with the patent, a bit of a Doug

2 Flutie pass.

3 So you can see here hold, you know, simply means

4 accumulate in the data, right. Doesn't say exactly where

5 you accumulate the data, where you decide to store that, as

6 long as it's on -- you don't have to push it over the bus

7 in order to do it.

8 And similarly, processor. You know, the patent

9 talks about a processor, that it may be a combination of

10 computing devices or any such other configuration. It has

11 a very general, you know, definition. It's not a specific

12 definition of processor that would be -- you know, Apple

13 would need to have in order to succeed on its --

14 JUDGE PENDER: I think I remember the Staff

15 saying that definition by Apple is overly narrow on that

16 point; is that correct? Is that what I got on that?

17 MR. NELSON: That's my understanding from

18 reading the briefs, your Honor. But of course I'll let --

19 JUDGE PENDER: Let the Staff hang on.

20 MR. NELSON: Yes, let Ms. Comfort speak -- I

21 believe she's going to speak on that issue.

22 So let me talk about some of the validity, just

23 to highlight. I'm not going to go into everything, I

24 certainly don't have time.

25 JUDGE PENDER: I'll be up front with you. I

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1 didn't see the validity arguments on this patent as being

2 more than perfunctory.

3 MR. NELSON: Okay. Well, then you know what,

4 I'll take that and --

5 JUDGE PENDER: You don't need to say anything

6 else.

7 MR. NELSON: Okay. I will take that direction

8 and move now to the '558 patent, your Honor. Unless there

9 are any questions on the '490.

10 JUDGE PENDER: No. Well, just give me a second.

11 MR. NELSON: Okay.

12 JUDGE PENDER: I mean, there were only two

13 serious arguments, the Centrino notebook computers and the

14 Heinrich in combination with something I'm not even going

15 to try and pronounce.

16 MR. NELSON: Yes.

17 JUDGE PENDER: And you easily dispose of them.

18 Is there anything that you want to point out to me, though?

19 I shouldn't have -- I didn't mean to cut you off

20 necessarily.

21 MR. NELSON: You know, I don't think so from the

22 briefing. I think this was made pretty clear. It's -- it

23 really is the situation, and I think perfunctory is a good

24 way to describe it, your Honor. First of all, they are

25 talking about Wi-Fi, and what they're trying to identify as

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1 a modem timer is really the backoff timer for Wi-Fi.

2 And I'm sure from your other investigations,

3 your Honor is familiar with Wi-Fi and how that works, with

4 a shared medium, with all the devices trying to get

5 information to the access point, right.

6 And so you may have a situation where the -- a

7 device senses the carrier, says oh, the medium is free, I'm

8 going to send a test packet and see if I get an

9 acknowledgment back, right.

10 You do that, and if there's a collision, meaning

11 some other device did that same thing at the same time,

12 such that the access point can't read it --

13 JUDGE PENDER: Then back off.

14 MR. NELSON: Then there's a backoff timer. And

15 it's a pseudorandom timer, which of course makes sense,

16 right, because nobody is really controlling this. It would

17 be a bit like a bunch of lawyers in a room --

18 JUDGE PENDER: When I first heard that argument

19 almost seven years ago by your partner Charlie Verhoeven,

20 and I heard about backup timers and all the rest of that

21 stuff.

22 MR. NELSON: Yes. So I mean, you know, your

23 Honor. And that -- that isn't -- that has nothing to do

24 with this particular patent. That is really trying to, you

25 know, put a -- it isn't even a square peg in a round hole.

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1 It's like some kind of rhomboidal peg in a round hole.

2 So I think your Honor -- and the other thing

3 about it is this is Intel prior art, and you will see. And

4 Intel, although not a party, has been, you know, largely

5 injected and represented by the same counsel during the

6 course of this investigation, yet you're going to see on

7 this particular issue, there is a wealth of information

8 that is within Intel's possession about how this Centrino

9 card actually worked, how it was programmed, the

10 documentation. None of it produced, your Honor. None of

11 it.

12 That not only says something, but it's also --

13 you know, this is going to be a theme that you will see

14 here, particularly with respect to the '936 patent, that

15 the standards being applied are backwards, right.

16 Meaning we know on infringement it's a

17 preponderance of the evidence standard. That's invalidity,

18 clear and convincing. Yet what we have is a situation

19 where on infringement, Apple is trying to hold us,

20 Qualcomm, to a standard that says you haven't definitively

21 proved X, right. You have all this information that X

22 is -- that is more likely than not true, but you haven't

23 definitively shown me X.

24 Yet on invalidity, it's a, where they have a

25 clear and convincing burden, just like it is here, it's,

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1 oh, well, you know, X -- even though I don't have the

2 evidence, trust me, X is there.

3 And so we're going to see that throughout. And

4 that's particularly true here on the Centrino cards.

5 JUDGE PENDER: That's an interesting point to

6 make. I'm sensitive to burdens of proof, maybe more so

7 than other judges are. And if you feel that's an issue,

8 you need to brief that with real care and -- but for the

9 other two patents, for the '558 and the '936.

10 But don't give up the fact that even though I

11 may feel the '490 is your strongest patent, for instance,

12 for proven violation, be super careful not to drop the ball

13 on anything on it, okay?

14 MR. NELSON: Understood, your Honor.

15 Absolutely.

16 So that's the '490 patent.

17 JUDGE PENDER: Let me tell you how I started out

18 with this one. When I first read your brief I thought, oh,

19 not bad. And then I read what the Staff had to say. And

20 then I read what Qualcomm had to say. And it introduced

21 doubts in my mind, in fact maybe might go a little bit more

22 than doubts. So I really want to hear what you have to say

23 here.

24 MR. NELSON: On '558?

25 JUDGE PENDER: Yes.

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1 MR. NELSON: Okay. And that's -- so '558, we

2 talked a fair amount during the Markman hearing.

3 JUDGE PENDER: Yes.

4 MR. NELSON: You will recall Mr. Pak gave the

5 technology tutorial on this, and I think your Honor said it

6 was one of the most helpful ones he had ever received.

7 JUDGE PENDER: It was.

8 MR. NELSON: I'm not going to belabor that, I'm

9 just going to kind of remind back to that, that what this

10 really is is a very similar situation to what I talked

11 about before, which is trying to deal with a very real

12 problem of getting performance out of mobile devices, the

13 necessary performance to get the data rates that we want

14 these days, and trying to do it in a way that doesn't drain

15 your battery in just a few minutes, right.

16 And again, these things are all taken in

17 conglomeration or, you know, there are so many things going

18 on in any one of these smartphones, and you've got to look

19 at all these issues. And that's what Qualcomm has been, as

20 we talked about before, it is a mobile systems company. So

21 for years and years and years, that's the technology they

22 have been developing, looking at each one of those issues,

23 and not only get the performance but do it in a way that's

24 power-efficient in a mobile system.

25 And so that's what the '558 patent is about.

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1 And you'll remember that we're talking about the

2 envelope signal here of the data, right. What this is is

3 if you look at what's actually transmitted out, if you

4 could just see that on an oscilloscope for example, your

5 Honor, kind of a snapshot in time, actually it would not be

6 a snapshot, it would be a video in time of what's coming

7 out, this is kind of what you'd see.

8 Because you have your carrier waveforms, but

9 you're modulating those with the information that you're

10 trying to send. And that's the way you communicate from

11 point A to point B, just like we've done in radio and

12 things going way, way back to Mr. Marconi and such, right.

13 Different modulation scheme, but nonetheless, that's

14 exactly what you're trying to do.

15 And so you have this power amplifier that's

16 involved, and we'll show that here. The power amplifier is

17 shown in blue down there, and this is from figure 5 of the

18 patent.

19 You know, that's power-hungry. And when you're

20 powering it with more power than you need, that's all

21 wasted, and it's a fair amount of wasted power. So that's

22 where this invention comes into play.

23 So we show here on the left an envelope signal,

24 meaning what is that, you know -- what does it kind of look

25 like. If I looked at it in time, how are the peaks and

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1 valleys going of the transmitted signal.

2 I put that in and input into the linear

3 amplifier. And the linear amplifier, I know your Honor has

4 talked about having some experience, a fair amount of

5 experience with audio in the past. And so, you know, this

6 would be similar to that.

7 This is something -- a linear amplifier is very

8 good at frequency response, right. It will -- it will

9 track that signal, and it will reproduce it, amplified of

10 course, with very good what we call fidelity, right,

11 true -- it's true to its source.

12 And that's great, except for it's power-hungry.

13 It's not terribly efficient. It will respond to all those

14 high frequency changes, it will do it real well, but it

15 will consume a lot of power to do it, right. And I'll

16 explain in a minute why that's the case.

17 But we also have these things called switching

18 amplifiers, right, where we have a storage element, in this

19 case an inductor that stores the energy. And I will

20 basically transfer buckets of energy, you know, over time

21 to that inductor. And that inductor can also be used to

22 supply power to the power amplifier.

23 Much, much more efficient because it's only on

24 when you need it to be on. But it can't -- it can't

25 reproduce a high frequency signal with the same fidelity.

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1 It's just not as frequency responsive because it's on and

2 off, on and off, on and off, on and off, right.

3 So what the '558 is trying to do is come up with

4 a way in these mobile devices, in mobile phones, to

5 efficiently work those two things together, your Honor,

6 combine those two things together.

7 And the way -- a couple of the main ways,

8 focusing on the linear amplifier side, you see that boost

9 converter on there. And just let me explain for just a

10 moment the role in that.

11 So if I look at that envelope signal, it has

12 peaks and valleys, right. And those peaks, let's just say,

13 you know, some of them are 3 volts and the valleys may be a

14 volt, right, just an example.

15 Well, a battery, the way a battery works in one

16 of these mobile devices is it might start out at a voltage,

17 you know, 5 volts when it's fully charged, but as it starts

18 to discharge, at some point in time, that voltage starts to

19 drop down, right. It's just -- it's the way battery

20 technology works.

21 Well, you wouldn't want a situation where you

22 can no longer transfer information when your battery drops

23 down say, you know, a third or 25 percent, whenever that

24 voltage, depends on the battery, depends on your phone

25 design of when it does that. Because you would effectively

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1 then, for what people want to use the phone for, make it so

2 now they have to go recharge, it's not good anymore, right.

3 So you want to get that out of there.

4 Well, one of the ways you do that, since you

5 need to reproduce that signal with fidelity, is you can

6 have a booster, something that boosts the voltage up when

7 it needs to be boosted up, right.

8 So in other words, when the peaks necessary for

9 that envelope signal are above what the battery voltage

10 would be, then you boost the supply to that linear

11 amplifier so that it can track those peaks with fidelity.

12 But you only boost it when you need to. Because if

13 boosting itself consumes power, it's not 100 percent

14 efficient, and also you only need -- see, the whole idea of

15 this is you only want to supply as much voltage to that

16 power amplifier as necessary to reproduce the signal.

17 So if you -- if your battery voltage in my

18 example was down to 2-1/2 volts or 3 volts, let's say, but

19 the peak of your signal was only a volt or a volt and a

20 half, you wouldn't need to boost.

21 So in the '558 you don't, right. And that's

22 something that's very, very different you will see from the

23 prior art, that recognition that finds its way in the

24 claims, and particularly in claim 7 of the patent.

25 So conversely on the switcher side, your Honor,

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1 and that's -- I've shown that, what I just talked about

2 here in slide 22 and the quote from the patent about

3 boosting only when needed.

4 But on the switcher side, again, this is the one

5 that's a little bit slower. See, the balance that you're

6 trying to do here, your Honor, we would love the switcher

7 to do all the work if it could, right, provide all the

8 power, because it's much more efficient. But we can't

9 because that envelope signal is going to have high

10 frequency components, right. It's going to be changing

11 quicker than the switcher can respond. So we're going to

12 need some power out of that linear amplifier.

13 But if we can come up with a way to provide more

14 from the switcher and less from the linear amplifier,

15 that's better, the overall efficiency of the system is

16 going to be improved.

17 So that's part of what this offset is trying to

18 do that is talked about in the patent.

19 And what you will do is provide a signal to that

20 switcher, the control aspect of that switcher that's

21 driving the buckets, how frequently and how long those

22 buckets -- basically, how big the buckets of energy are

23 that are transferred to that inductor.

24 You do that, you have an offset that's going to

25 make that more than it otherwise would be. And we'll see

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1 that in figure 4B and 4C of the patent, where without the

2 offset, you might have an average current that is supplied

3 by the switcher of about .2 amps that's shown here. And

4 with the offset, the average may be right around .4 that

5 you see.

6 So that's really what's going on, is make that

7 switcher do more work than it otherwise would so I get less

8 from the power amplifier, so overall more efficiency, but

9 do it in a way where the linear amplifier can still track

10 those peaks, so I still reproduce the signal with fidelity.

11 Here, your Honor, I'm going to have to talk

12 about things that have been designated as confidential for

13 a little while for the infringe. This is primarily Qorvo

14 confidential information so I'm going to need to be on the

15 confidential record, your Honor.

16 JUDGE PENDER: We'll be on the confidential

17 record.

18 (Confidential session follows.)

19

20

21

22

23

24

25

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1 OPEN SESSION CONTINUED

2 JUDGE PENDER: Ms. Comfort, you are taking

3 notes? No? You got it all -- you're remembering what he's

4 saying? He's taking your name.

5 MS. COMFORT: I think mostly it was accurate.

6 MR. NELSON: May I proceed, your Honor?

7 JUDGE PENDER: Yes.

8 MR. NELSON: With respect to the GPU, the '936

9 patent, what we have here just briefly, we talked about a

10 little bit at Markman, we have a situation where there's

11 certain aspects of graphics rendering, what you see on the

12 screen, that requires high precision, full precision is

13 what it's called. And that would be 32 bit in this

14 instant.

15 But -- and that, although very, very important

16 because it basically, you can see as we go through vertex

17 processing, primitive processing and rasterization, which

18 it kind of outlines the -- you know, basically like the

19 plan for your house, you know, the framing for your house,

20 if you're building that. That's obviously very important

21 to how your house is going to look at the end, and getting

22 that all right at 32 bit precision is an important thing,

23 but it happens to be only 3 percent of the instructions

24 that are used to actually render the scene.

25 97 percent are the fragment processing, in other

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1 words filling everything in, painting everything, getting

2 the right color on the pixels, and that is a very

3 repetitive graphics processing exercise. And it turns out

4 you don't need to do that at a high precision, you can do

5 that at half precision, 16 bits, okay.

6 Fundamental thing, and that's what's shown here,

7 you can see that last step on the right would be that

8 fragment processing, which is 97 percent of the

9 calculation, but in order to render that particular scene,

10 it's pretty important that I do those first three steps,

11 and I do those at high precision.

12 So the conventional approach, what you can do is

13 just do everything at the highest precision, right, the

14 highest precision you need. It's kind of the inverse of a

15 least common denominator theory.

16 And so the problem with that, though, is it

17 consumes more power, you know. When you use 32 bits,

18 you're flipping more transistors, and that consumes more

19 power. And in these devices, it's important.

20 So what you have here in the '936 patent is a

21 mixed high and low. So I have certain of the processing

22 pipelines that are 16 bit, others that are 32 bits, and I

23 have the ability through a compiler instruction to convert

24 data from 32 bits, where I needed that to process the data

25 in the first part, you know, the first three percent, to 16

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1 bits for further processing down the road, right. That's

2 essentially what we're talking about with the '936 patent,

3 at a very high level.

4 Accused products being the -- in the A11, we're

5 focusing on the iPhone 8 and the iPhone X, not iPhone 7

6 with respect to this patent, as you saw from the briefing,

7 your Honor.

8 (Confidential session follows.)

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

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1 OPEN SESSION CONTINUED

2 MR. MARRIOTT: Your Honor, with your permission,

3 and mindful of what the Court just said, let me, if I may,

4 scrap the 20-minute presentation that I had for the Court,

5 and just say briefly this, your Honor. There are, in our

6 view, three buckets of evidence that relate to the public

7 interest issues.

8 The first of those buckets concerns what the

9 evidence would show about the effect, if any, of an

10 exclusion order on smartphones. And you won't be surprised

11 to know, your Honor, we concur with the Court's at least

12 preliminary assessment of that in your comments moments

13 ago, and we concur with that when the Staff has to say with

14 the effect if any of an exclusion order on smartphones.

15 That's the first bucket of evidence, your Honor, and

16 respectfully we think that the really overwhelming evidence

17 supports the Qualcomm position in that regard.

18 The second bucket of evidence concerns so-called

19 baseband chip sets, your Honor. What Apple has done in

20 furtherance of its public interest arguments is to define

21 for your Honor a, we think, artificial and flawed market

22 definition. A market of so-called -- a so-called merchant

23 market of premium baseband LTE chip sets.

24 We respectfully believe the record won't support

25 that focus for purposes of the public interest analysis,

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1 but that in any event, the evidence will support the entry

2 of an exclusion order as if you took that focus, which

3 again we think is an incorrect focus.

4 The principal focus of the Apple position in

5 that regard, your Honor, is the proposition that somehow an

6 exclusion order would cause Intel to pick up its marbles

7 and go home, to no longer participate in the baseband

8 business altogether. And I echo, your Honor, and I believe

9 the evidence will support, your Honor's comments that

10 that's simply not a credible proposition.

11 No more credible, your Honor, is the suggestion

12 that Intel will altogether forgo participation in the 5G

13 effort. 5G is by their own account a multibillion-dollar

14 enterprise that will involve 50-billion-plus devices

15 worldwide. So that's the second category of evidence, your

16 Honor, and we just don't think the credible evidence will

17 support the position taken by Apple and Intel in that

18 regard.

19 The final bucket of evidence, your Honor,

20 concerns antitrust allegations. And we think that is

21 really not the appropriate focus of the public interest

22 analysis here.

23 JUDGE PENDER: Well, I don't -- they're not one

24 of the statutory factors that I'm aware of. And the whole

25 point of what goes on here is -- you know, I'm a

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1 literalist, and what I mean by that is you can tell me a

2 joke, and if it requires any shading or anything like that,

3 I don't get it, okay.

4 To me we are here on a patent issue. The whole

5 point of the patent system is exclusivity. I don't even

6 understand why the FTC is involved. I haven't understood

7 the FTC's involvement from the beginning. Ted Essex and I

8 agree 100 percent on that, for that matter. So I just

9 don't see a role for the FTC here. But that's me, okay.

10 And the Commission may feel differently, of course. That's

11 their right. But I thought that was the point of the

12 patent. Is that your point?

13 MR. MARRIOTT: I think that is the point of the

14 patent, your Honor. What I don't think is that the proper

15 focus here ought to be on antitrust allegations. And in

16 any event, even if it were, we respectfully submit that the

17 evidence doesn't support the tale that Apple seeks to tell.

18 JUDGE PENDER: If we were going to follow that

19 to its logical conclusion, if you had an invention that

20 allowed you to corner the market, your invention would be

21 worthless. Is that not the end run of the argument?

22 MR. MARRIOTT: I believe it is, your Honor.

23 JUDGE PENDER: Well, then I don't know why we're

24 here. If that's true, what's the point of a patent? I'm

25 asking a rhetorical question.

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1 So I don't find that to -- that befuddles me.

2 MR. MARRIOTT: That's all I have, your Honor.

3 Thank you.

4 JUDGE PENDER: Mr. Marriott, that was perfect,

5 thank you.

6 MR. MARRIOTT: Thank you.

7 JUDGE PENDER: Good morning, Mr. Lee.

8 MR. LEE: Good morning, your Honor. I will try

9 in an hour or so to address both the patent issues, but I'm

10 also going to address the public interest issues, your

11 Honor.

12 JUDGE PENDER: Right. Your strengths are the

13 '558 and the '936.

14 MR. LEE: And, your Honor, if your Honor will

15 indulge me, I do want to address some of the issues on

16 which we may disagree on the public interest, the

17 importance of the antitrust issues. Just so your Honor can

18 hear what our position is, so as the evidence comes in, you

19 have a sense of why we are offering you the evidence that

20 we do.

21 JUDGE PENDER: That's your call, sir.

22 MR. LEE: Your Honor, as I said, my name is Bill

23 Lee, and together with Ruffin Cordell and a number of other

24 colleagues, we represent Apple.

25 MR. PAK: I apologize, Mr. Lee, are we on the

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1 public record?

2 MR. LEE: We are on the public record.

3 JUDGE PENDER: We should be on the public

4 record, then. We'll start from when we got back in.

5 MR. LEE: Your Honor, I provided you a set of

6 slides, and I think I can keep us on the public record the

7 entire time. There are three or four slides which I will

8 refer your Honor to which are confidential. The Staff will

9 have them, Qualcomm will have them, but we will blank the

10 screen.

11 JUDGE PENDER: That's fine.

12 MR. LEE: And I won't refer to the text.

13 Your Honor, in many ways, this investigation is

14 similar to other Section 337 investigations your Honor has

15 addressed. It began with the assertion of six patents and

16 92 claims. We're now down to three patents, as your Honor

17 knows, and 13 claims.

18 And Apple and the Staff on the infringement

19 issues agree that for two of the patents and 12 of the

20 claims, there is no infringement and therefore no basis for

21 a Section 337 violation. We disagree with the Staff, we

22 depart with the Staff on the issue of infringement only on

23 claim 31 of the '490 patent.

24 And recognizing what your Honor has said to us

25 repeatedly about the importance of the Staff and the

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1 quality of what they have done --

2 JUDGE PENDER: You know, Mr. Lee, I don't know

3 how much you read your brief. You are leading this band

4 here. It's very hard. But I have read hundreds of briefs

5 in the last several years, and I can always tell I feel

6 when somebody is serious and when somebody is not serious.

7 I didn't feel that your brief was serious on

8 that patent. It just -- it just didn't come across to me

9 as being an effort much beyond perfunctory. I'm being --

10 I'm really being blunt. It's not persuasive.

11 MR. LEE: Your Honor, I'm going to get to the

12 '490 patent and I'll move to it quickly if you would like.

13 I would like to provide some introduction to the

14 investigation. But I think, your Honor, one of the issues

15 on the '490 patent is your Honor didn't have a tutorial, it

16 didn't have a Markman.

17 And during Mr. Nelson's presentation today, you

18 will notice that the claim wasn't put up on the screen, and

19 there was no discussion of the words in the claim.

20 We haven't had a chance to discuss those words

21 with your Honor now, but the words in the claim, such as

22 after or processor, when read in light of what the

23 specification says, I think, your Honor, I hope, we will be

24 able to convince your Honor by some time during the hearing

25 that there are serious arguments, because this was a very

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1 narrow invention, in a very crowded field of art, and the

2 words that Qualcomm put into the claims, after, location,

3 processor, actually have a meaning.

4 And, your Honor, this is the one claim. Your

5 Honor will recall that in that patent, there were a host of

6 claims originally asserted. We're down to claim 31. There

7 are some claims that have been dropped that actually make

8 the point that we're trying to make.

9 So I'll take your Honor through that. I have

10 that as part of the presentation. I'd like to go to the

11 parts where we're typical and atypical if I could

12 because --

13 JUDGE PENDER: Right. On claim 31 you mean?

14 MR. LEE: I will get to that one, your Honor. I

15 can do it now, but I would like to basically set the stage

16 for the entire investigation.

17 JUDGE PENDER: This is your show. Do it the way

18 you want to do it, sir.

19 MR. LEE: So, your Honor, at the heart of the

20 patent case, our defenses, as Mr. Nelson has suggested,

21 that are typical, we agree with the Staff that for the

22 remaining patents, 12 of the claims are not infringed.

23 These issues about not practicing embodiments,

24 burdens of proof. The evidence that the Staff and we have

25 on those claims are the same, and they have concluded what

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1 we have urged, which is they're not infringed.

2 JUDGE PENDER: Well, what I found interesting

3 was the Staff's arguments and your arguments on the '558

4 and the '36 patents dovetailed.

5 MR. LEE: Yes, I agree.

6 JUDGE PENDER: And so I said to myself, okay,

7 how can I best understand what the Staff is talking about,

8 so I read your brief on those two. And I had no problem at

9 all. The logic was there, okay.

10 MR. LEE: Your Honor, on those two patents, on

11 the question of the compilers, the conversion instructions,

12 on the question of cascoded transistors, we and the Staff

13 not only agree upon what the facts are but what the legal

14 conclusions are. We also agree on the question that your

15 Honor raised on prosecution history estoppel and the

16 consequence of the amendments.

17 JUDGE PENDER: The big thing to me was the lack

18 of technical prong. You see, Mr. Lee, you are the pro's

19 pro in this business, everybody knows that. So all right,

20 infringement is where it should all start.

21 And technical prong, there's just so many ways

22 you can fail at an ITC investigation, right. And -- but if

23 you don't got the technical prong, that's -- that's the big

24 step, isn't it?

25 MR. LEE: It is, your Honor. And actually, let

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1 me make this point on the patents, because I think it's an

2 important point.

3 For each of the three remaining patents -- and

4 recognizing that the Staff and we disagree about claim 31

5 of the '490 patent, but our position for each of the three

6 remaining patents is this. Each of them was in a crowded

7 field of art, each of them required several amendments in

8 order to get them allowed. Each of those amendments and

9 each of the words that were used were important.

10 JUDGE PENDER: They narrowed the claims.

11 MR. LEE: They narrowed the claims. And what

12 has happened for each of the three, your Honor, is the

13 claims were narrowed enough that nobody uses it. We don't

14 use it, Qualcomm doesn't use it.

15 And, in fact, for all three, Qualcomm and we,

16 Apple, or Apple/Intel, actually do it the same way. And

17 the question is why. It's because technology has moved on.

18 There are better, faster, more sophisticated ways to do it.

19 And as a consequence, as a consequence, these

20 narrow claims in narrow fields of prior art, which are the

21 basis for just the remaining patents that your Honor has

22 before you, are not things that are being used, not by us,

23 not by them.

24 And to put -- to go slightly out of what I had

25 planned to do, your Honor, to put a point of emphasis on

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1 it, the '558 patent claims a very specific configuration of

2 components, all of which were known in the prior art, with

3 a very specific set of interconnections.

4 JUDGE PENDER: What they are trying to do is

5 shoehorn something different into that definition. I read

6 that from the Staff and then I read it in yours. Now, that

7 was really good, okay. That was clear.

8 MR. LEE: And, your Honor, nobody does it that

9 way, not Qualcomm, not Apple. Why? Because things like

10 the cascoded transistors have real benefits, they have

11 benefits in terms of speed, they have benefits in terms of

12 robustness.

13 The same is true for the '936 graphic patent.

14 It has -- first, as your Honor knows, it has nothing to do

15 with the baseband chips, Intel's, but it's a very specific

16 conversion instruction and a very specific compiler.

17 And again, no one actually does it.

18 And for the '490 -- and I recognize that I have

19 an uphill battle and I'm going to try to start moving up

20 the mountain in a few minutes. But for the '490 patent,

21 when I take your Honor through the specifics of what the

22 prior art is as disclosed in the patent, the words that

23 they use to distinguish that prior art and the meaning they

24 have in light of the specification, things we haven't had a

25 chance to discuss with your Honor, I think you will find

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1 out that, with all due respect to Mr. Nelson, it's Qualcomm

2 that's actually trying to reinterpret the claims in a way

3 that's inconsistent with the specification.

4 And if you actually credit what the

5 specification says and you credit what the claims say, the

6 claim is not infringed.

7 And I will focus on that, and I think, your

8 Honor, what I would like to do, given what your Honor has

9 said is, I think what I'll do is provide you the

10 introductory remarks in part because I know we may have a

11 little bit of an uphill climb on public interest, and I

12 just want your Honor to have our position. I'll go to the

13 '490 patent slightly out of order to ensure that I've got

14 plenty of time to address it. And then I'll come back to

15 the other two. I want to make sure that I leave a half

16 hour for the Staff, which I think is sufficient.

17 JUDGE PENDER: I agree with you. I'm going to

18 sow something in your mind a little bit, and that is --

19 both parties here. I think what you're both missing is

20 it's in both your interests to have Qualcomm and Intel make

21 these chips. And I will give you a perfect example.

22 Years ago I did litigation, it was called the

23 great fighter engine competition, and it was between

24 Pratt & Whitney and General Electric, who made the fighter

25 engines for the F16s and the F15s. And before Pratt &

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1 Whitney had been the only person making the fighter

2 engines.

3 So the Air Force had a problem, they had hangar

4 queens, hundreds of them, in other words jets with no

5 engines.

6 So my point is simple. What did the Air Force

7 end up getting? They got better quality engines, they got

8 them cheaper, and they had no hangar queens.

9 So the problem -- the point here is it seems to

10 me that you want both parties making these things. Maybe

11 somebody takes a little less of a hit, but in the long run,

12 I heard a number thrown up there, 50 billion units,

13 Mr. Marriott said, I believe, of these 5G phones. It would

14 seem to me that you would want -- your client would want

15 the best manufacturer of chips in the world, it's a tie

16 between Intel and Qualcomm obviously, making them, those

17 two companies making them, because if something goes wrong,

18 you have a backup.

19 So I sow that in your mind that you're fighting

20 the wrong fight. But continue.

21 MR. LEE: Your Honor, actually, I don't think we

22 are, given what your Honor just said. We couldn't agree

23 more. We actually think that the marketplace benefits from

24 two robust competitors. We think that the marketplace

25 benefits from two robust United States competitors, because

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1 as your Honor knows, as we move into 5G, the things that

2 are going to be interconnected are not just your phone and

3 your wife's phone. It's going to be the electrical grid.

4 It's going to be defense. It's national security interests

5 which are in play.

6 And your Honor has witness statements that makes

7 that point.

8 As we move into that area, it is a benefit, it's

9 an obvious economic benefit, to have two competitors. I

10 think it's also clear that when you have two competitors,

11 there's more innovation, because they are competing to

12 innovate. And there are benefits for the competitors to be

13 the U.S.-based -- two prominent U.S.-based companies,

14 Qualcomm and Intel.

15 JUDGE PENDER: The two best.

16 MR. LEE: And, your Honor, I think part of what

17 we want to do is not to have an exclusion order that

18 takes -- and I'm going to come -- because I understand your

19 Honor has expressed skepticism, and I want to get to that

20 immediately.

21 We want to have two, two of the best, and we

22 want them to remain two of the best.

23 I understand your Honor has expressed some

24 skepticism about whether Intel would depart the market.

25 And this, your Honor, is where, you know, I hope we'll put

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1 on evidence that will demonstrate to you historically what

2 has occurred in this marketplace.

3 Because Intel expended billions of dollars to

4 acquire Infineon. It was unsuccessful. It has now

5 invested billions of dollars over years to get into this

6 marketplace, and it has. And it has really one customer in

7 this premium baseband chipset market.

8 Now, Mr. Marriott says that this is a creation

9 of ours. It's not. This is a marketplace the Staff agrees

10 exists, Apple agrees exists, Intel agrees exists. And it

11 would be beneficial for there to be these two competitors.

12 Most critically, your Honor, is this. To go to

13 the point you expressed skepticism on. If Intel is barred

14 from selling to Apple in the United States market, there is

15 a real chance they will exit. They will exit that market.

16 Now, will we participate in 5G in other ways?

17 We will try to. But the mere fact that it's a

18 billion-dollar opportunity won't be enough.

19 And the reason is Apple will tell you that if

20 they have to stop accepting supply for the U.S. market from

21 one customer, Intel, they probably can't deal with Intel

22 even globally.

23 Intel will tell your Honor that given all the

24 other things that are on the table today, basically, taking

25 a two-year hiatus before they could enter the market is not

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1 something that they are likely to do.

2 And I think, your Honor, here is going to be the

3 key, and this is the place -- I understand from the very

4 first time we were before you that the interplay between

5 the antitrust issues and the patent issues was one that

6 your Honor was concerned with and recognized that it was

7 different.

8 Here is the reason that it's important here. We

9 now know, because of what's going on in San Jose before

10 Judge Koh, we now know that the reason Intel couldn't get

11 into the market wasn't because technologically they

12 couldn't. We know that there was a series of

13 anticompetitive monopolistic steps that were intended to

14 exclude Apple from the marketplace. And we know, your

15 Honor, that those steps basically have resulted in Broadcom

16 exiting the market, MediaTek exiting the market and a whole

17 host of other people exiting the market.

18 So this is the place, your Honor, where the

19 relief asked of your Honor is unique and unprecedented. It

20 is not to exclude the iPhones that would infringe these

21 three patents. It's not to exclude the iPhones that would

22 infringe claim 31 of the '490 patent.

23 It is to exclude only iPhones that have the

24 chips of Intel -- of Qualcomm's primary competitor.

25 It is fundamental, it's a unique remedy. I

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1 would suggest it's not a remedy intended to remedy patent

2 infringement. To go to your Honor's comment about the

3 exclusivity of the patent, it is a remedy designed to

4 eliminate Qualcomm's only competitor in a market that the

5 Staff says exists, after looking at this very carefully,

6 that we say exists, that Intel says exists, that has been

7 exited, exited, your Honor, by a host of other companies

8 globally and within the United States because of Qualcomm's

9 conduct.

10 And that's why the issues converge. We're not

11 asking your Honor to adjudicate the antitrust issues. We

12 agree with you, that's for someone else to adjudicate.

13 But the facts overlap in a substantial way. And

14 the facts overlap because of this unprecedented remedy,

15 which is to exclude only products that have the Intel chip,

16 even in the case of a patent where the baseband processor

17 chip has nothing to do, nothing to do with the claim.

18 This is a remedy, your Honor, that is intended

19 to restore the monopoly that Qualcomm had an earlier point

20 in time. It is a monopoly that Apple, without knowing what

21 Qualcomm was doing, literally invests billions of dollars

22 in in order to break into the market. They have, and

23 Qualcomm is now trying to use the ITC tactically to take us

24 out of the marketplace.

25 And there's one issue of timing I'd like to

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1 mention to your Honor, because I think it will help bring

2 things together. I know your Honor has told us and your

3 Honor looks at things very practically.

4 There were a host, as your Honor knows, of

5 regulatory investigations of Qualcomm, the European

6 commission, Japan, Korea, Taiwan, a number of others.

7 There's been close to $4 billion in fines.

8 The important one is this. There was a case

9 commenced by the FTC, and this, your Honor, is my answer to

10 your question of why are these things related, why are they

11 here.

12 And it's not to allow them to interfere with

13 your adjudication, it's not to ask you to adjudicate

14 theirs. But the FTC filed a case at the beginning of 2017

15 in California. Judge Koh scheduled a trial for next

16 January, January of 2019. She then decided a motion to

17 dismiss and rendered what we think is a very thoughtful,

18 thorough opinion that details many of these anticompetitive

19 monopolistic practices. Many of them in black and white.

20 Two weeks after that opinion came down, after

21 the trial was scheduled, this investigation was commenced.

22 And the timing works, your Honor, so that the target date

23 comes right after her trial.

24 As your Honor knows --

25 JUDGE PENDER: I read IP law 390 every morning.

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1 MR. LEE: As your Honor knows better than

2 anybody, it takes some time to write these memorandum

3 opinions, even with wonderful help.

4 JUDGE PENDER: Right, right.

5 MR. LEE: And this is a circumstance where if

6 Intel were excluded from the market before Judge Koh had a

7 chance to rule, her remedy could be meaningless.

8 This timing is not coincidental, the timing is

9 important.

10 And so, your Honor, I think -- and I'm going to

11 go directly to the '490 patent so I can address your

12 Honor's concern.

13 JUDGE PENDER: Right. One interruption. I've

14 listened to a lot of what you said, it's interesting. I

15 don't know that I buy unprecedented remedy, okay. For the

16 simple reason that every time we exclude something, we

17 exclude something, you know. I mean, a perfect example

18 would be in a case that Quinn had where we had the Turks,

19 Turkish chemical company stealing trade secrets. Not

20 allowed to sell -- they can't sell those polymers in the

21 United States, for darned good reason. Or when Bosch

22 decided to copy the SawStop saw, one of the attorneys who

23 tried that case is in the courtroom as well. And I could

24 go on.

25 It's always about the exclusion of something to

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1 someone else's benefit. So I don't understand the

2 argument. You may be able to make that point for me in the

3 brief, but I don't understand it right now. So please

4 proceed.

5 MR. LEE: So let me take one more shot at it

6 now, and then we'll try to be articulate and eloquent in

7 the brief.

8 Here's the difference. In the ITC proceedings

9 I've been involved in, 30 or 35 of them, and the many your

10 Honor has been involved in, you exclude a product if it

11 infringes, right. We don't know of any, any ITC case,

12 rendering an exclusion order that excluded some products

13 because they had a component made by a nonparty, and

14 allowed others to be imported because they had a chip made

15 by another party.

16 JUDGE PENDER: Couldn't the reason be because

17 one group is licensed and the other group is not?

18 MR. LEE: Your Honor, that's not the basis here,

19 because in some of the cases, the baseband processor has

20 nothing to do with the patent claims.

21 JUDGE PENDER: Okay. I'll pay attention to your

22 argument, in any event.

23 MR. LEE: And, your Honor, I think -- we

24 understand that this is new, but I think I can represent to

25 you that the idea that you would have an exclusion order

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1 that's based not solely on infringement but based upon the

2 identity of a component supplier who is not a party to the

3 case, and at least for one of the patents where the

4 baseband processor being supplied by that component

5 supplier Intel has literally nothing to do with the case,

6 that's unprecedented.

7 And I know your Honor views these things very

8 practically. One thing to do, one thing that we should all

9 collectively do, is step back and say, why is that? Why is

10 that?

11 If the real complaint is that Apple is

12 infringing the '936 patent and it has nothing to do with

13 the Qualcomm baseband chip, it has nothing to do with the

14 Intel chip, then in the normal course, everything would be

15 excluded.

16 Here the answer is no. It's only those for the

17 chip of the competitor that has broken into the marketplace

18 recently. And that's what becomes critical.

19 JUDGE PENDER: Mr. Lee, what I will promise is

20 what the Staff says on that, I'm not going to say it's

21 going to be decisive, but it's going to be important to me.

22 MR. LEE: And, your Honor, I think we agree that

23 it should be. And Ms. Murray will say whether I'm getting

24 this right. But the Staff, at least as we read it, agrees

25 that there is a premium baseband chipset market. I think

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1 the Staff has said the question of whether Intel will exit

2 if there is an exclusion order is one that it has not yet

3 taken a position on but it wants to not only hear the

4 evidence but I believe wants to elicit some of the evidence

5 that your Honor will hear.

6 So I think this is recognized that your Honor

7 expressed some skepticism. I would just ask your Honor to

8 listen to the testimony, to listen to the testimony the

9 Staff elicits.

10 Because I think when you have the entire history

11 of what it took to break into the market for Intel, the

12 nonparty, the number of people who have departed the market

13 to leave just two today, and the chronological consequences

14 of what will occur in 2019, in 2020, if there is an

15 exclusion order, are important.

16 And, your Honor, I understand that some of these

17 things are -- when we say they're different, it will take

18 some time to convince you that we're correct or not. But

19 again, on the '936 patent, if you just step back, the

20 patent claim, as Mr. Nelson described, it's got nothing to

21 do with the baseband processor.

22 If that's true, how can the relief have

23 something to do with who makes the baseband processor,

24 unless the goal is to exclude Intel.

25 And while Qualcomm and Apple have their

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1 disputes, and while Qualcomm and Apple are litigating a

2 number of different disputes all over the world, one of the

3 things that I hope will be clear with your Honor is an

4 exclusion order will punish Apple. It will be -- it will

5 really punish the nonparty.

6 And that, I think, makes it different. Without

7 a doubt, your Honor, any exclusion order has an

8 exclusionary effect. That's the reason that the ITC has

9 that power.

10 The ITC is a special forum with special rules

11 with a special and powerful remedy. And the question is,

12 setting aside the patent issues for a second, right, should

13 that remedy, can that remedy, when you consider the public

14 interest factors, can that remedy be one that is imposed.

15 Is it in the best interests of consumers? Is it in the

16 best interest of the economy? Is it in the best interest

17 of the country? Is it in our national security?

18 I think, your Honor, your statement that we

19 should have two is right. The statement that we should

20 have two from the United States, we believe for sure is

21 right. And we believe that the historical record will show

22 you that when Intel came into the market, what happened?

23 Prices went down. Prices went down.

24 What else happened? Innovation went up, because

25 Qualcomm and Apple were competing to innovate. Product

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1 quality went up. More American companies were involved in

2 4G and 5G.

3 So, your Honor, the place that we're hoping that

4 we'll be able to demonstrate to you that this is different

5 is this. And again, to be slightly redundant, we're not

6 asking your Honor to litigate the antitrust issues. We're

7 not asking your Honor to weigh into the details of all

8 these regulatory bodies.

9 What we do say is the conduct that they are

10 examining has two important implications. The first

11 implication is this. It explains why it was so hard for

12 Intel to get in the marketplace. It explains,

13 notwithstanding Intel's size and robustness, just how

14 tenuous the position is.

15 It explains why being taken out of that market

16 on 4G products for 24 months is potentially catastrophic.

17 And the second set of important considerations

18 is it explains why the public interest would be negatively

19 affected if there were a monopoly restored in the premium

20 baseband chip market.

21 So with that as the background, let me go to the

22 '490 patent.

23 JUDGE PENDER: Let me say one thing, though.

24 You need to focus on the statutory factors. You know, you

25 can end up with a pyrrhic victory if you convince

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1 commissioners that, you know, based on things that are

2 other than the statutory factors and you end up at the

3 circuit Court and the circuit Court pounds the

4 commissioners on that. I think that's even money here.

5 So I don't think that's what you -- I think that

6 is what you're essentially arguing for. See, I don't

7 accept your base argument, sir, and you may be able to

8 convince me of it, that what's being offered here or sought

9 here is unique. I don't see it as unique. I see it as the

10 purpose of what this place exists for.

11 So go ahead and talk about the '490, please.

12 MR. LEE: Your Honor, let me just add one thing

13 to that and then go directly to '490.

14 I think when your Honor looks at the witness

15 statements in detail, and particularly those from the

16 experts, they are tied to the four statutory factors. And

17 we have tried to take everything that I've just described

18 to you and tie them to each of the four statutory factors

19 so that we can make the argument to you under the statute

20 that governs your Honor, that there are critical public

21 interest implications that makes this unique.

22 And while those facts overlap with competing

23 regulatory investigations elsewhere, they happen to

24 overlap. And those facts help to explain what's happened

25 here, but they also, we think, educate and illuminate those

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1 four statutory factors.

2 And I think your Honor will see that everything

3 we've done is tied to those factors, because we recognize

4 that's what governs your Honor's decisions.

5 So let me go to the '490 patent, your Honor, and

6 I will be sure to leave the Staff the half hour. What I

7 will do is go through the '490 patent in a little bit more

8 detail, because we haven't had a Markman hearing, we

9 haven't had a tutorial, and because your Honor has

10 expressed some skepticism with our position.

11 I think what I will do is quickly hit on a few

12 issues on the '558 and the '936. And I'll just say this as

13 I start.

14 I'm not going to deal with issues of validity,

15 even on those places where the Staff and we agree that

16 certain claims are invalid. We also heard your Honor's

17 skepticism, and I'm sure you know that given the way the

18 law is developing, it's important for us to put these

19 positions before you, to have your Honor address them. We

20 might convince you on them, we might not. We might

21 convince someone else down the road, we might not.

22 So let me go to slide 39 in your package, your

23 Honor. This is the '490 patent. And as I said, unlike the

24 other patents, there was no technology tutorial, and there

25 were -- there was no Markman hearing.

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1 We didn't think that there were claim terms to

2 construe, because we believe that terms like "after" which

3 are in the claim term had a plain and ordinary meaning.

4 We believe that terms like "processor" had a

5 plain and ordinary meaning.

6 It's now pretty clear that the parties don't

7 agree. So, your Honor, let me take you through some of the

8 background if I could, because in terms of what the patent

9 claims and the narrowness of what the patent claims, I

10 think it's important that I do a little bit of the

11 background. It's a little bit redundant of what Mr. Nelson

12 covered, but with your Honor's indulgence, I'd like to do

13 it.

14 So if we went to slide 40, the '490 patent is

15 directed to mobile devices with the basic hardware

16 configuration we have on slide 40. On the left, this is

17 similar to Mr. Nelson's slide, is an application processor

18 that runs software applications on the device.

19 On the right is the modem processor that manages

20 communications between the mobile device and the network,

21 such as a cellular network or Wi-Fi network.

22 Between the processors is a communication link,

23 a bus or a link. It's the path over which the processors

24 can transfer data back and forth between each other. All

25 old, all in the prior art, no one disagrees.

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1 Slide 41. Two types of data are relevant to the

2 '490 patent. And this becomes important when we look at

3 the meaning of the claim terms. Data that an application

4 processor sends across the bus to the modem processor for

5 transmission up to the network is called, as your Honor

6 knows from other investigations, uplink data.

7 If I go to slide 42, downlink data is the data

8 the cellular network sends down to the mobile device, which

9 is then sent from the modem processor to the application

10 processor.

11 The two ends of the bus are -- the two ends of

12 the bus are connected to circuitry in the application and

13 the modem processors. When the circuitry connected to the

14 bus is powered on, data can flow across the bus. That's

15 the active state, according to the patent.

16 But keeping -- Mr. Nelson said this, and we

17 agree. Keeping the bus in an active state wastes power.

18 And for that reason, modern buses usually have one or more

19 low-power states in which circuitry connected to the bus is

20 powered down. That saves power and the data cannot flow

21 across the bus in low-power states.

22 If I turn to slide 43, what happens when a

23 processor has data intended for the other processor but the

24 bus is in a low-power state? If you activate the bus each

25 time there's an uplink or downlink data to send, then

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1 deactivate it, you're going to waste power, you're going to

2 consume power.

3 My father taught me a long time ago that

4 sometimes it's better to keep the light switch on than to

5 keep switching it on and off, on and off, on and off.

6 Another option is to store the data while the

7 bus is in a low power state and then send all the stored

8 data together when the bus is active. By aggregating the

9 data and waiting for the higher power state, you can save

10 power.

11 One final background point. There are two ways

12 to transfer data across the bus. You can push it or you

13 can pull it.

14 You will hear evidence during the course of the

15 hearing that push means the processor sends the data

16 across, pull means it asks for the data and it pulls it

17 across the bus.

18 So, your Honor, with that background, let's turn

19 to the '490 patent and talk about what's new and what's

20 old.

21 The patent doesn't claim a new type of

22 processor. It doesn't claim a new type of bus. It doesn't

23 claim a new way to push, it doesn't claim a new way to

24 pull.

25 In addition, the patent doesn't claim and

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1 couldn't claim to have invented the idea of holding data in

2 memory when the bus is in a low-power state and then

3 sending data when the bus is active.

4 Everyone agrees, your Honor, everyone, that all

5 of this is old. And, in fact, figure 3, which I'm putting

6 on the screen now, which is figure 3 of the patent, slide

7 number 44, shows just this.

8 On the left the bus is in a low power state.

9 The modem processor is holding downlink data, and the

10 application processor is holding uplink data.

11 When the bus switches to the active state at 60,

12 your Honor, on the left of figure 3, all the held downlink

13 data is sent and then the bus goes back into the low power

14 state.

15 Later at step 62, sort of towards the middle of

16 figure 3, your Honor, the bus transitions to an active

17 state. All the held uplink data, and I'm -- these are not

18 my words, these are the words of the patentees -- is

19 transmitted, and then the link transitions back to the low

20 power state.

21 Again, your Honor, this is the patent's

22 articulation and description of what's in the prior art,

23 and no one disputes that, in fact, it was.

24 If that's true, then the question becomes so

25 what does the '490 patent claim to invent, and where do we

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1 find it in claim 31, the only claim that is left in the

2 case?

3 And what your Honor will see is that the sole

4 inventive contribution, the sole inventive contribution on

5 the one claim that we disagree with the Staff on is when

6 the link becomes active, you exchange the downlink data

7 followed by the uplink data during a single active bus

8 state.

9 Now, your Honor may ask how do you know that,

10 and the answer is figure 5. And figure 5 is the patentee's

11 description of how the invention differs from the prior

12 art. And what your Honor will see is, again, these are

13 their words. When on the left-hand side at 104, when the

14 bus becomes active, downlink is followed by uplink data in

15 the transmission. So both are transmitted, but the way the

16 specification describes it is the downlink is followed by

17 the uplink data.

18 Now, claim 31, as I said, is the only claim

19 that's left in the case for the '490 patent. And the

20 question then becomes so where in claim 31 -- can we go

21 back one slide? Where in claim 31 do we find, if I may

22 approach the screen, your Honor?

23 Where do we find in claim 31 what they contend

24 is the distinction between figure 3 and 5, which is

25 downlink followed by uplink data.

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1 JUDGE PENDER: Let me ask you rhetorically, do

2 they have to? They can claim something different than is

3 shown on figure 5.

4 MR. LEE: Actually, your Honor, theoretically I

5 think they could. But I think what I can show you is two

6 things.

7 The specification -- and I don't think there's a

8 lot of disagreement about this. Everybody agrees that

9 figure 5 distinguishes -- distinguishes the claimed

10 invention from figure 3, right.

11 Everyone agrees that figure 5 is an embodiment

12 of claim 31. The question is, what do the terms of claim

13 31 mean? And this is where I think there are two critical

14 points, your Honor.

15 As always happens, Qualcomm had the power of the

16 pen, so the words that they put into the claim, right, are

17 the words they chose.

18 But then the question becomes this. If you look

19 at the words in the claim and you go back to figure 5 and

20 the words of the specification, what do they tell us? And

21 I think, your Honor, that's the exercise we're going

22 through.

23 Because this patent tells you pretty clearly

24 what the plain meaning of the word "after" is. It's very

25 consistent with what you and I would understand it to be.

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1 This patent tells you that certain data can be

2 stored at the processor. And the patent actually, your

3 Honor, tells you that there are two different places it

4 could be stored. The patent actually has claims that are

5 agnostic as to which place it could be stored.

6 But claim 31 is not.

7 So if I go to slide 47, your Honor, this is the

8 claim. And this is where the words count.

9 I think there was a suggestion that we're

10 wordsmithing or we're just -- we're at a sort of

11 compulsively granular level on the words. But the words

12 count. That's the only thing we know to distinguish the

13 prior art.

14 So E says "the application processor configured

15 to hold application processor to modem data until the modem

16 processor pulls data from the application processor after

17 transmission of the modem processor to the application

18 processor data.

19 So what does it say? Application processor

20 configured to hold application processor to modem processor

21 data. That's not what the Apple products do.

22 If I could have slide 48 and I don't think

23 there's any real disagreement about this. There's a

24 disagreement about the consequences of it, to be sure.

25 In the Apple products, the uplink data is held

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1 in an external memory that is not part of the application

2 processor. It's off chip. And as your Honor will hear

3 from the evidence, there are some advantages to it being

4 off chip, as your Honor knows. There are some

5 disadvantages to it being off chip.

6 It is a decision made when you consider the

7 competing functionality and the competing benefits.

8 The question for this claim is, does it tell us

9 where it has to be? And the answer is, it does in the

10 processor. And how do we know?

11 If I go to slide 49, your Honor, the

12 specification itself, and I think -- I hope this may answer

13 your prior question, if I haven't answered it expressly.

14 The patent actually says you can have two

15 different storage locations. One is a storage medium

16 coupled to the processor. Then it says, "in the

17 alternative, the storage medium may be integral to the

18 processor. The processor and the storage medium may reside

19 in an ASIC." This is at column 17, lines 15 to 20.

20 To the same effect, your Honor, if I take you to

21 figure 2 of the specification, you will see that figure 2,

22 which is describing an embodiment invention describes an

23 application processor plus separate memory.

24 If you read the portion of the specification

25 that is dealing with this figure, it would make no sense if

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1 the data was stored at the separate memory. It's the

2 application's processor where the data is stored.

3 And, in fact, the patent repeatedly describes

4 the external memory here as separate from the application

5 processor, but then repeatedly states that the data is

6 stored at the application processor.

7 JUDGE PENDER: Right. But I see conditional

8 language, so I'm not too much put off by that.

9 MR. LEE: Well, your Honor, I don't think the

10 language in the claim is conditional and --

11 JUDGE PENDER: No, the language in the

12 specification certainly is, though.

13 MR. LEE: Actually, your Honor, it's

14 conditional. It's in the alternative and that becomes --

15 you're right, it's critically important, because for this

16 claim 31, it says at the processor. Claim 16, which was

17 asserted previously, and if I could bring up claim 16.

18 So on the right I have claim 31. On the left I

19 have claim 16.

20 When you look at -- claim 16 was originally

21 asserted but has been withdrawn. In claim 16, either -- I

22 think -- I called it alternative, your Honor called it

23 conditional. Either of the two locations, either on the

24 processor or external memory, would satisfy claim 16. But

25 claim 31 is worded differently. And it leads to a

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1 different consequence.

2 So this is not, your Honor, word games played by

3 lawyers. This is the prior art being undisputed. This is

4 figure 5 describing the very small thing that's different,

5 which is the uplink and downlink data going back and forth,

6 one followed by the other. And then you have a claim that

7 was drafted to avoid the very close prior art.

8 When it's drafted, it says "the application

9 processor configured to hold application processor to modem

10 processor data," and in contrast you have a separate claim,

11 claim 16, that isn't specific as to where the data is held.

12 So claim 16 can cover both the conditional, as

13 your Honor described, or alternative, as I described it.

14 Claim 31 cannot.

15 And the difference between the two claims, now

16 that only one is asserted, demonstrates that the drafters

17 of the patent could say where they wanted the location to

18 be when they wanted to say where the location is.

19 And this comparison, if you take claim 16 and

20 claim 31, if you take the portion of the specification that

21 I read to you and you then look at it against the figures,

22 the noninfringement argument we've made, which is given

23 that in the Apple products, the data is not held on the

24 processor, in fact, your Honor, it's held on a DRAM that's

25 made by a third party, different chip, different memory,

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1 doesn't infringe.

2 Now, there's been a suggestion that the doctrine

3 of equivalents would address these issues. I think when

4 the claims are this precise, that's a problem.

5 But more importantly, Qualcomm and the named

6 inventors, Qualcomm's expert and the named inventors, have

7 both testified that there are really important differences

8 between data stored on an external memory and data stored

9 on the processor, and there can be benefits both ways.

10 As I go to slide 53, your Honor, this point I've

11 made about the location isn't made just once. It's made

12 twice in claim 31.

13 So limitation B, "a modem processor, the modem

14 processor configured to hold modem processor to application

15 processor data until expiration of the modem timer," that's

16 the same issue.

17 The language tells us that it's going to be held

18 at the modem processor. It's not. It's the same set of

19 arguments.

20 But there's a third argument that again is

21 basically predicated upon and founded in the words that

22 Qualcomm chose for this patent.

23 If I could have slide 54. Now, this I'm going

24 to have to take your Honor through the claim because

25 there's a word in limitation E, and it says "the

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1 application processor figured to hold application processor

2 to modem data until the modem processor pulls data from the

3 application processor after transmission of the modem

4 processor to application processor data."

5 So after is Qualcomm's word. If you think about

6 after in light of figure 5, where it has the transmission

7 of one set of data followed by, to use their words, after

8 gets its plain and ordinary meaning.

9 But there's a second part of this that makes it

10 even more important, and that's this phrase, your Honor.

11 "The modem processor to application processor data."

12 And as your Honor knows from your other cases,

13 when you have something that says "the," there has to be an

14 antecedent basis for the reference to the data.

15 So in this case, it's the modem processor to

16 application processor data, and it's "the." So where is

17 the antecedent basis?

18 If I go to slide 55, the antecedent basis, your

19 Honor, is in the second limitation of the claim. "The

20 modem processor configured to hold modem processor to

21 application processor data."

22 So it's modem processor to application processor

23 data. It's then referred to as "the."

24 What does the claim tell us? It tells us that

25 that has to be transmitted, the transmission -- the other

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1 transmission has to occur after that data has been

2 transmitted. It is completely consistent with figure 5.

3 If I could have slide 57.

4 This is a portion of figure 5, your Honor. And

5 it refers to the uplink data follows the downlink data. It

6 is one after the other.

7 Now, your Honor may ask, you know, why are these

8 things important, and it's a good question. It's important

9 because this is the way that they drafted the claims to

10 distinguish this very, very, very close prior art.

11 More importantly, no one does it this way today.

12 Technology has moved on. The chips are more robust. The

13 devices are more robust. Everybody now does it

14 simultaneously, and no one waits for one to follow the

15 other.

16 So what you have is a claim, a claim that's very

17 specific.

18 JUDGE PENDER: That's your better argument. If

19 you're saying the science has moved on, you have to say,

20 all right, somebody can look at the coding or whatever for

21 the chip and they can tell me it doesn't infringe. If

22 that's what you say is true, then a priori, that's the best

23 argument, if that's true.

24 MR. LEE: Your Honor, that's precisely what the

25 expert has said. It's said that this claim requires A to

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1 follow B. And the place the technology has moved to is

2 that the data can be transmitted simultaneously when the

3 link is active. And, in fact --

4 JUDGE PENDER: I accept the technology may have

5 moved there for the sake of argument, but does it do that

6 in the chip? That's the key.

7 MR. LEE: Yeah. And, your Honor, I think

8 that -- I would say two things. I think that the evidence

9 will demonstrate that in our chips, the data is

10 communicated simultaneously, not one after the other.

11 I think the second thing, and I'm not going to

12 go into confidential information here because I don't want

13 to have to clear the courtroom, there are a set of slides

14 before your Honor that are testimony from --

15 JUDGE PENDER: Which numbers, Counsel?

16 MR. LEE: Let me get them for you. Slide 60 to

17 63, your Honor. And we won't put them on the screen.

18 JUDGE PENDER: Slide 60?

19 MR. LEE: 60 to 63, your Honor.

20 JUDGE PENDER: Okay, yeah.

21 MR. LEE: And you will see it's the testimony of

22 Qualcomm witness that's been designated confidential.

23 JUDGE PENDER: Right. But those are

24 confidential.

25 MR. LEE: Yes, your Honor. And so I -- the

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1 Staff has them, Qualcomm has them, and what this

2 demonstrates is that the product, the domestic industry

3 product, operates simultaneously, just like the Apple

4 product does.

5 And, your Honor, I think the thing that I would

6 say to your Honor when you hear this testimony --

7 JUDGE PENDER: I'll make a comment about slide

8 60. I'm not going to give much credibility to that slide.

9 You know why? Mr. Lee, you are a pro. What's wrong with

10 the questions in slide 60?

11 MR. LEE: I'm trying to get to slide 60. Right.

12 The ones that are highlighted, your Honor, I'm not sure.

13 JUDGE PENDER: If counsel objected to them from

14 the other side, I'd strike them. I would sustain the

15 objection, they are leading questions.

16 MR. LEE: Well, and your Honor, first we're

17 cross-examining their witness, and this is their corporate

18 designee, so I think we can ask leading questions.

19 JUDGE PENDER: Right. I'm saying, of course,

20 that I'm unaware. But I'm still uncomfortable about that.

21 MR. LEE: Well, your Honor, if you look at the

22 four slides, you will see no one objected to the questions.

23 JUDGE PENDER: Right, so I won't say anything.

24 I don't like it.

25 MR. LEE: No one objects to the questions. The

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1 answer, first time was simultaneous, the second time was

2 simultaneous, the third time was simultaneous.

3 JUDGE PENDER: Right, right, I see that.

4 MR. LEE: And, your Honor, that becomes

5 important. That's why, as we say, every word counts, and

6 a -- every word counts, particularly in this crowded field

7 of art.

8 Let me -- what I would like to do, your Honor,

9 in the 10 minutes or so that I have remaining is make a few

10 points on the '558 and '936 and then come back and address

11 some of the things that Mr. Marriott said on public

12 interest. But I will do it briefly as well, if that's all

13 right with your Honor.

14 So if I go to the '558, here is the most

15 important point that I would like to make.

16 For both claim 6 and claim 7, the question of

17 whether the cascoded transistors satisfy the limitations of

18 the claim and have the right inputs is something that we

19 and the Staff agree upon. They were -- cascoded

20 transistors were known. They are not mentioned in the

21 patent, they are not mentioned in the file history. And

22 because they are cascoded transistors that have benefits,

23 the inputs at the gain, gate, source and drain are

24 different. And for that reason, there's no infringement of

25 those two claims.

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1 Your Honor said today in response to --

2 JUDGE PENDER: That's a creative argument. I

3 caught that. I remember buying it.

4 MR. LEE: There was an argument made today, I

5 think, that somehow our argument makes figure 5 a disclosed

6 embodiment not covered by the claims. And your Honor,

7 remember you said you didn't remember that argument.

8 There's a reason your Honor didn't remember it. It wasn't

9 made. It wasn't made in the expert report, wasn't made in

10 the witness statement. And I think we'll be able to

11 demonstrate that it's not correct.

12 On the infringement issues for each of the

13 claims, and on the invalidity issues for three of the

14 broader claims, we agree with the Staff and I'll move on

15 from those.

16 For the '936, let me make two points. Again,

17 your Honor, the field was very crowded. Programmable

18 streaming processors, multiple execution units, compilers,

19 conversion instructions as your Honor knows from the

20 Markman hearing were very well known.

21 So the question then becomes what -- in a patent

22 where there were multiple narrowing amendment over a period

23 of six years, what did they say were different?

24 And it was the conversion instructions and it

25 was the specific compiler configuration.

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1 And we and the Staff agree that if you look at

2 what the Apple products do, there is no evidence of actual

3 use that would satisfy those limitations.

4 And to go to the question that you asked

5 Ms. Murray, I'll give my version of the answer, which is,

6 you know, if you don't infringe 90 percent of the time and

7 you infringe 10 percent of the time, you might have -- you

8 would have an issue. But to quote Ms. Murray, if it's

9 zero, which is what the proof here is, it's zero.

10 JUDGE PENDER: Zero is zero.

11 MR. LEE: Even for lawyers, zero is zero.

12 JUDGE PENDER: Yes. Oh, well, I don't know.

13 (Laughter.)

14 JUDGE PENDER: You haven't heard arguments to

15 the contrary?

16 MR. LEE: You know, I've been around a long

17 time. I guess what I would say is for most lawyers, zero

18 is zero.

19 So let me in just a few minutes I have left make

20 some points on the public interest. I apologize if this is

21 redundant a little bit to where we started, but I think

22 it's important because we all have collectively recognized,

23 as your Honor says, if you read the press, the press has

24 recognized, that there are portions of this investigation

25 or aspects that are a little bit different.

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1 The focus of the public interest case that we

2 have brought to your Honor focuses not just on the phone

3 market, which is what your Honor talked about and what

4 Mr. Marriott called his first bucket, but on the premium

5 baseband chipset market. It is a market. Apple says so,

6 Intel says so, the Staff agreed, and your Honor, if I take

7 you to slide 68, in Qualcomm's 10-K, they talk about the

8 premium-tier integrated circuit product markets.

9 There really is no disagreement. There's also

10 no real disagreement that today -- now, I say, I'm not

11 asking your Honor to accept this, I say as a result of

12 anticompetitive monopolistic practices over 15 years, I say

13 there are two people left, Qualcomm, Intel.

14 And there are a host of people, including people

15 like Broadcom that I represented here at one point in time,

16 that tried. They tried valiantly. They came to this forum

17 to try to get into the marketplace, and then they invested.

18 And they're gone.

19 Now, why is that important? It's important

20 because if you take the four statutory factors that your

21 Honor will consider, the national economic interests and

22 the national -- the noneconomic interests are critically

23 important for 4G, but as we move to 5G connectivity, it's

24 more important.

25 And to basically take a quote, if I could go to

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1 slide number 71, out of a letter from CFIUS, when the

2 federal -- the executive branch basically prohibited

3 Broadcom from acquiring Qualcomm, it's a letter that --

4 JUDGE PENDER: You're asking me to take notice

5 of that I would obviously; right?

6 MR. LEE: And, your Honor, in particular --

7 JUDGE PENDER: I mean, I remember reading that.

8 MR. LEE: Yeah. Qualcomm has brought it to your

9 attention, we did do at the earlier hearing. We both

10 brought it to your attention.

11 The sentence that's on slide 71 is a sentence

12 that I would like to bring your Honor's attention to.

13 "Given well known U.S. national security

14 concerns about Huawei and the other Chinese

15 telecommunications companies, a shift to Chinese dominance

16 in 5G would have substantial negative national security

17 consequences for the country."

18 JUDGE PENDER: I also take notice of the fact

19 that the president imposed tariffs was it today or

20 yesterday, because the Chinese don't do anything to enforce

21 intellectual property rights over there.

22 MR. LEE: You know, actually, your Honor, I

23 think it goes to the same point, and it goes to this point,

24 which is I think the critical public interest point.

25 Our economic interest and our national security

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1 interest benefits from two robust competitors in the

2 baseband chip market. We benefit because prices go down.

3 I'm not going to refer to the confidential

4 information you have, but when Intel finally broke in, when

5 it finally broke in after the investment of billions of

6 dollars and, quite honestly, butting its head against the

7 wall which it didn't understand quite why it was closed,

8 prices went down. That's good for everybody.

9 Innovation went up because you had two

10 technology companies competing to be better than the other,

11 and that's good.

12 We have two people at the table, maybe more than

13 two people, but we have two substantial players at the

14 table as 4G evolves and 5G develops. And that's good.

15 And if we take Qualcomm, the executive branch,

16 Intel and others at their word, it would be critically

17 important to have those robust competitors at the 5G table.

18 Now, what we have before us now at the end of

19 the day is one claim which we disagree with the Staff on,

20 it's a claim that is in a very narrow field of prior art

21 that talks about how information goes back and forth on a

22 bus, what goes first, what goes second. That's it. That's

23 it.

24 And Qualcomm is saying to your Honor, on that

25 basis, take Intel-based products out of the marketplace.

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1 That is not in the public interest. It's not for each of

2 the four statutory factors, it's not in the public

3 interest.

4 And, your Honor, to close on a point that your

5 Honor expressed skepticism on but which I would ask your

6 Honor to listen to the testimony as it comes in, Intel

7 literally butted its head against a brick wall trying to

8 get into this market. It literally spent billions of

9 dollars trying to get in. It literally bought a company to

10 try to get in.

11 We now know why they couldn't get in. Qualcomm

12 paid people to keep them out. Qualcomm paid people to

13 lobby against the standards that Intel favored.

14 Intel knew none of this, not one iota, until the

15 FTC filed its complaint. But we got in. And Intel got in

16 because it had a product that was technologically

17 comparable. Qualcomm sometimes says it's not; we sometimes

18 say better. But Apple has decided that it's

19 technologically comparable. And we've all benefited.

20 And the question at the end of the day will be

21 for these three patents, where I think we can demonstrate

22 to your Honor today that no one uses, not Apple, not

23 Qualcomm, should the Commission take the extraordinary step

24 of taking a competitor that took more than a decade to get

25 into the market, who survived where everyone else failed,

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1 and take it out of the market so that we restore what was

2 fundamentally a monopoly for some extended period of time?

3 We suggest no. Thank you, your Honor.

4 JUDGE PENDER: Mr. Lee, to keep it so simple, if

5 there is no technical prong, if there is no infringement,

6 there's nothing.

7 MR. LEE: True.

8 JUDGE PENDER: Okay.

9 MR. LEE: That's where I tried to start, which

10 is I think this case can be resolved on those bases.

11 JUDGE PENDER: My colleague, Judge Shaw, has

12 been around for a long time. And he says -- around the ITC

13 that is, and he says it used to be investigations were

14 about infringement, and then validity bled into them. And

15 that became the soup du jour, so to speak.

16 This case, the '558 and the '936 -- well, the

17 '558 certainly has terrible infringement problems, as far

18 as I'm concerned -- excuse me, validity problems, as far as

19 I'm concerned. I would probably go along with finding the

20 patent invalid right now, were I writing a decision today.

21 And I'm not saying my mind couldn't be changed, Qualcomm,

22 but that's the way I see it.

23 And probably the same on '936. Again, I was

24 astonished with the congruence between your brief and the

25 brief by the Staff. More than that, I was happy with the

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1 way the arguments were made. They were consistent, they

2 were different arguments in some ways. Okay.

3 If you convince a judge that '490 is not

4 practiced, then the public interest factors don't matter.

5 MR. LEE: True.

6 JUDGE PENDER: But you're going to have a

7 certain amount of pages in the prehearing -- in the

8 posthearing brief, and the way it goes, we do sequential

9 briefing. In other words, you're going to first talk about

10 invalidity, and then while they're talking about, you know,

11 infringement. And then you can come back.

12 All right. My strong feeling is I would be

13 writing the best no infringement brief ever seen. Am I

14 clear?

15 MR. LEE: You are 100 percent clear.

16 JUDGE PENDER: Technical prong. And one thing

17 nobody has talked about, and I'm grateful, if there's not

18 domestic industry in this case, I give up, okay. And I'm

19 not saying you have to agree to it or stipulate to it or

20 anything like that. Just don't waste any time talking

21 about it, you know?

22 MR. LEE: On the economic prong, your Honor, I

23 don't think I have. I haven't addressed it at all.

24 JUDGE PENDER: I know, you're too smart. And

25 it's just we're talking literally billions of dollars.

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1 It's there.

2 MR. LEE: And, your Honor, I would say just as

3 one final thought.

4 JUDGE PENDER: Please do.

5 MR. LEE: Responding to your Honor. Is on the

6 '490, I actually think on the technical prong of domestic

7 industry, setting aside the economic prong, if after means

8 after, if followed by means followed by, and you take those

9 four pages of deposition I gave your Honor, there's no

10 technical prong.

11 JUDGE PENDER: Why don't you spend -- one of the

12 reasons that I end things on Fridays this way, this time

13 I'll make a joke out of it. I got to put dicamba down and

14 a bunch of other things tomorrow, and I have to get ready

15 for it, but is to give a chance for you guys, after you've

16 heard the opening statement, after you've heard what my

17 reaction is to the briefs, to talk about to see if you can

18 end things, you know. And I -- I personally believe there

19 is enough risk on this side for both parties to come to

20 some kind of an accommodation.

21 You know, it always stuns me how we do things

22 that are not in our best interest. For instance, on the

23 F-22, the Air Force only goes with one engine. That's

24 insane. I mean, that's -- it's almost criminal. The

25 cutting edge fighter they don't use, both General Electric

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1 and Pratt & Whitney, they only use Pratt & Whitney.

2 So what I'm saying here is we are quite capable

3 as a nation of doing things that are crazy, but I think

4 most of you all are too smart to do that. And you can

5 avoid that.

6 And now I'm really interested in hearing from

7 the Staff, and Mr. Lee, I appreciate more than I can say

8 your decency in cutting the arguments down and hitting the

9 high points, I really appreciate that, sir.

10 MR. LEE: Thank you, your Honor.

11 JUDGE PENDER: Ms. Murray, I'm going to let you

12 have 15 minutes at the beginning of the day on Monday if

13 you change your mind about something you've heard, you

14 don't have to talk about it today. Because the whole point

15 of the Staff is to be an honest broker, to act in the

16 public interest. And I don't want to handcuff you from

17 doing that. Does that make sense?

18 MS. MURRAY: Yes, your Honor.

19 JUDGE PENDER: And you've earned a spot. Your

20 briefing, I just want to emphasize, it has been one of the

21 delights of this investigation, your Markman briefing,

22 prehearing briefing as well.

23 MS. COMFORT: We're going to start on the public

24 record and then we're going to have to switch to the

25 confidential record about halfway through.

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1 JUDGE PENDER: All right. As long as you call

2 it out.

3 MS. MURRAY: Your Honor, may I approach?

4 JUDGE PENDER: Sure.

5 Please proceed, Ms. Comfort.

6 MS. COMFORT: Okay. We know by now that there's

7 three patents, the '558, the '490 and the '936. There are

8 together four independent claims, and the Staff expects the

9 evidence to show a violation but only with respect to claim

10 31 of the '490.

11 JUDGE PENDER: Right. Now, Ms. Comfort, you've

12 sat in on the depositions of some of these experts?

13 MS. COMFORT: I have.

14 JUDGE PENDER: Am I going to -- is their

15 credibility going to be something that's going to matter to

16 me?

17 MS. COMFORT: Not for the experts. There will

18 be maybe for some certain fact witnesses.

19 JUDGE PENDER: Okay. And I'll need your help,

20 you know. If you see -- if you hear something that causes

21 your ears to prick, you've got to let me know, okay?

22 MS. COMFORT: Okay.

23 JUDGE PENDER: All right. One thing I would

24 deeply appreciate, Mr. Lee, Mr. Nelson, have a discussion

25 with your experts. I don't want to hear combat in the

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1 courtroom. I want them to answer the questions asked. If

2 it deserves a yes, please answer yes. If it deserves a no,

3 please answer no. We'll get this hearing done if they're

4 not in combat with you guys.

5 And you have the perfect right to say, your

6 Honor, I've asked this witness a yes-or-no question, I'm

7 not getting a yes-or-no answer, and I'll need help on that.

8 All of us will need help. We will get a cleaner record, we

9 will get a better record, we will waste less time, we will

10 have a good hearing, you know.

11 And tell them look, they're getting paid anyway,

12 just answer the question asked.

13 Ms. Comfort, I would deeply appreciate you and

14 Ms. Murray weighing in when something -- if you think

15 things are getting out of hand as well, okay?

16 MS. COMFORT: Okay. Will do.

17 JUDGE PENDER: Please proceed.

18 MS. COMFORT: So we put our slides in the order

19 that everybody has agreed to brief and present them, but if

20 you prefer me to go to the '490 instead of the '558, I can

21 do that.

22 JUDGE PENDER: You do whatever you want to do.

23 MS. COMFORT: Okay. The '558 is entitled low

24 voltage power efficient envelope tracker, and it is

25 directed to a specific design for an envelope tracker. We

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1 are going to hear --

2 JUDGE PENDER: That's a very careful choice of

3 words there, a specific design.

4 MS. COMFORT: A particular design.

5 JUDGE PENDER: Particular the same thing?

6 MS. COMFORT: Right. It is not a patent on all

7 possible envelope trackers.

8 JUDGE PENDER: Okay.

9 MS. COMFORT: We're going to hear from Mr. Marra

10 on behalf of the inventors on Monday.

11 We previously at the Markman as well as in the

12 earlier presentations talked about what envelope tracking

13 is, and we construed the word "envelope signal" as a signal

14 indicative of the upper boundary of the output RF signal.

15 Qualcomm did not invent envelope tracking.

16 As we've moved to LTE advanced and 4G

17 technology, there's been reasons to introduce envelope

18 tracking technology in smartphones. It has to do with the

19 waveforms. There's greater variability. There's also the

20 amplitude carries information so you can't use compression

21 techniques. And there's new technology such as carrier

22 aggregation in MIMO where you're adding multiple signals

23 together and you're even going to get even greater

24 variation in the amplitude of the waveforms.

25 So for those reasons, there's been recent

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1 reasons to use envelope tracking in smartphone products and

2 Qualcomm may have been on the forefront of introducing

3 these sorts of devices commercially, but that does not mean

4 that they exclusively patented or invented envelope

5 tracking or envelope trackers.

6 So basically an envelope tracker has an envelope

7 amplifier, a less efficient side paired with a more

8 efficient switched mode power supply.

9 And the use of a less efficient linear amp with

10 a switch in a power supply goes way back in the art, very

11 well-established. Various designs of control systems for

12 switchers are also very well-established. There's a range

13 of them that were known.

14 The particular problem in the '558 patent that

15 the inventors were focused on was a low battery voltage

16 problem. And the patent specification has description

17 about new battery technology that might go down to 2.5

18 volts, that that would be a very low off point for a

19 typical lithium battery. And in designing a device and

20 using envelope tracking that would work to address this

21 particular problem.

22 Consistent with that, there's two key features

23 to the device on the patent, one is the boost converter on

24 the envelope amp, which is being used to boost the low

25 battery voltage up so that it can reach the amplitudes of

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1 the RF signal, and you don't risk clipping the signal

2 because you have too low of battery voltage. And then the

3 use of an offset on the switcher side, and the offset can

4 be keyed either to the battery voltage or to the envelope

5 of the waveform. And that's -- that's to make the switcher

6 more efficient in the particular context of the low battery

7 voltage or the envelope of the waveform.

8 Everybody agrees that figure 5, not that the

9 disclosure is so limited but figure 5 is the primary

10 embodiment, and all of the description is directed at this

11 figure. There's also figure 3, which the only difference

12 is it doesn't have the offset.

13 We had some discussion earlier on the envelope

14 amplifier side. If you look 314 is a depiction of a PMOS

15 transistor and 318 and 320 are also a depiction of a second

16 and a third PMOS transistor, and the description in the

17 patent specification describes them as such, which

18 indicates that when you get to the claims and they claim a

19 PMOS transistor, that they're not referring to a

20 combination of two transistors. There's even other

21 unasserted claims that call for a second and a third PMOS

22 transistor.

23 Also earlier at the claim construction, just to

24 close this door, we construed the term "current sense

25 amplifier" on the switcher side as an amplifier that

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1 produces a voltage from a current. And we talked about the

2 word "based on" in dependent claim 7, and how the patent

3 specification, it's not so limited, but it clearly

4 discloses a device that can selectively operate based on

5 either a boosted supply voltage or a first supply voltage.

6 Which brings us to the claims. So independent

7 claim 6, and this would also apply to dependent claim 7.

8 During prosecution, the examiner indicated that dependent

9 claim limitation was allowable but the broader independent

10 claim was not based on prior art. And the claims were

11 amended with this particular underlined wherein limitation.

12 This creates a presumption of estoppel, where

13 the Complainant is foreclosed of recourse to equivalents

14 outside of the scope of this particular limitation. And

15 this particular limitation calls for a very particular

16 arrangement of a PMOS and an NMOS transistor.

17 JUDGE PENDER: And the point being no doctrine

18 of equivalents?

19 MS. COMFORT: The Complainant would need to

20 rebut it, and to rebut it you would have to show that it

21 was tangential to patentability and not foreseeable within

22 the scope of what you disclaimed.

23 JUDGE PENDER: But you didn't find that to be

24 true?

25 MS. COMFORT: The parties have previously used

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1 the word cascode on the public record, that that was out

2 there in the art and was foreseeable within the scope of

3 what was disclaimed. And the evidence will show that.

4 And this amendment was clearly tied to

5 patentability because it was done over prior art, where the

6 broader claim was canceled because it couldn't be allowed

7 over the prior art.

8 JUDGE PENDER: So this is a strong situation.

9 MS. COMFORT: It's a strong case for estoppel.

10 And it's also a strong case that it's not literally met

11 because a PMOS transistor and NMOS transistor with these

12 particular gate source/drain requirements just simply

13 doesn't read onto a cascode arrangement.

14 I mean, yes in some sense it's a design

15 substitute, but it is just not literally the same thing.

16 It is not this design.

17 So then we move to claims 15 and its dependents,

18 which are in some ways a different set of claims. They're

19 directed to the switcher side of the device. Even though

20 18 and 19 do also add an envelope amplifier. And on the

21 switcher side of the device, there's a similar situation

22 that in prosecution the examiner said a broader claim was

23 not allowable but a dependent claim limitation with very

24 particular limitations for the design of the switcher was

25 allowable over the prior art.

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1 And the applicants amended their claims to claim

2 the claim with the particular design for switcher that's

3 underlined with the wherein limitation.

4 And again, the Staff expects the evidence to

5 show that this particular design of switcher is not used

6 either in the accused products or the domestic industry

7 products.

8 Moving to invalidity, the Staff expects the

9 evidence to show that at least claim --

10 JUDGE PENDER: Excuse me, Ms. Comfort, you

11 remember the testimony obviously of the expert. What

12 they're saying is the technology moved on and nobody does

13 it this way anymore?

14 MS. COMFORT: For envelope trackers? I think it

15 was '490.

16 JUDGE PENDER: '490, sure, sure. What about

17 envelope trackers?

18 MS. COMFORT: For envelope trackers, I think

19 this was a particular design for the low voltage problem,

20 and no, I don't think the low voltage problem is what's

21 really used in the commercial products. They're regular

22 lithium batteries, 3.7 to 4.2 volts. Maybe they can go

23 lower than they used to, but -- and it happens that there

24 are designs that are more efficient and quicker for

25 switching, and there's just different advantages.

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1 JUDGE PENDER: All right, thank you.

2 MS. COMFORT: And those particular designs are

3 not described anywhere in the '558 patent spec, so the

4 evidence will build out, hopefully, some of these

5 differences that aren't even tied to the limitations.

6 On the invalidity side, the Staff expects the

7 evidence to show that claims 6, 15 and 18 are invalid over

8 prior art. Claim 6, it's broader than claim 7. It's not

9 limited to the selective boost situation. It allows for

10 either a selective boost embodiment or just a boosted

11 embodiment.

12 And there is description in the art in Kang, as

13 well as if you combine Chu with Choi, that you would have

14 an envelope amplifier that meets all of the limitations

15 which receives a boosted voltage.

16 Similarly, claims 15 and 18 to the switcher are

17 anticipated by Kwak, which discloses each of the elements

18 in a pulse width modulated control system.

19 So we can move to the '490 unless you have

20 questions.

21 JUDGE PENDER: Please.

22 MS. COMFORT: The '490 patent was filed only in

23 December 2014. It's post America Invents Act.

24 And while it's not so limited, it discloses a

25 mobile terminal with express disclosure that an example

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1 could be a smartphone, such as a Samsung Galaxy or an Apple

2 iPhone.

3 The Complainants previously covered that the

4 uplink/downlink data point, but I will address it briefly.

5 Uplink data is data transferred from device to network,

6 downlink data is data transferred from network to device.

7 And the reason it's important is because when

8 the fact witnesses start talking, they're probably not

9 going to use the words modem processor to application

10 processor data, they're going to use the word downlink data

11 and they're not going to use the words application

12 processor to modem processor data, they're going to use the

13 word uplink data for data coming from the application

14 processor that's ultimately sent out from the device.

15 The particular problem that the '490 inventors

16 were focused on was how -- moving to LTE, moving to newer

17 smartphone devices, there's increased data rates, there's

18 increased demands for increased data rates. And higher

19 data rates require faster internal buses.

20 There's been development of PCIe and USB 3.0.

21 And just as a note that PCIe buses, even as of the time of

22 the patent, were already full duplex, they were already

23 allowed for data to be transferred in both directions.

24 But these buses, they can handle higher data

25 rates, but the problem is that they consume excessive power

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1 and that's a problem for your battery life. And no one

2 wants a smartphone with dwindling battery life.

3 So a particular aspect of this problem that the

4 inventors focused on is sleep mode and how when you're

5 transitioning in and out of sleep mode, that in and of

6 itself consumes lots of power.

7 And so their solution was to minimize the number

8 of transitions that occur by synchronizing the data

9 transfer across the bus. And any, you know, individual

10 transition might not matter, but in the aggregate, these

11 are happening continuously in the device, and so in the

12 aggregate, it's stated to -- stated to preserve battery

13 life.

14 Which brings us to the claim, and the claim

15 language. The dispute between the parties has focused on

16 certain claim language. It's almost at the level of a

17 claim construction dispute. Even though we didn't construe

18 any of the terms in this particular patent back at the

19 Markman.

20 JUDGE PENDER: It happens.

21 MS. COMFORT: And so these are really the issues

22 that we're dealing with, the issues in bold.

23 Pull data is a term of art, the counterpart term

24 is to push data. And to push data would mean the source

25 processor sends the data out, it pushes it. To pull means

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1 the remote processor -- the data is transferred under the

2 control of the remote processor.

3 And actually, just while we're here, the patent

4 does have a large amount of disclosure to a different

5 embodiment, and the other claims are directed to a

6 different embodiment where the application processor pushes

7 its data out, upon being triggered by receipt of the

8 downlink data from the modem processor.

9 And in contrast, here we have -- this is the

10 pulls embodiment.

11 Then turning to the terms "after transmission,"

12 and really, you need to read those words together. It's

13 after transmission of the data. It's not just after. It's

14 after transmission.

15 And after transmission clearly means after

16 sending. There's disclosure for some examples in the

17 patent specification that the data may arrive at the modem

18 processor for transmission, so for sending, that the

19 downlink timer is used as the basis for data transmission,

20 the basis for sending.

21 There's even not strictly in the context of the

22 application processor and the modem processor and the PCIe

23 bus, that there's disclosure in the patent tied to sending

24 out from the device and that says that the data is encoded

25 for transmission, encoded for sending out from the device.

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1 Then we have this other issue of the processor

2 configured to hold and what that means for memory elements.

3 So again, we didn't construe the word

4 "processor" back at the Markman, but the Staff does not

5 believe that it's so limited to only logic circuitry or CPU

6 components as opposed to the entire system or package that

7 does the processing.

8 Here's some disclosure in the back end of the

9 patent, tied to the idea that a person of skill would

10 understand that there are a degree of variation that could

11 be made within the scope of the patent.

12 And the patent itself is really tied, element

13 36, it's focused on the bus and the transition of data

14 across the bus from the modem processor to the application

15 processor. It's not focused on really the structure or

16 scope of the modem processor or application processor

17 itself.

18 Then on invalidity, there is likely to be a

19 sizable amount of testimony both with respect to a prior

20 product and with respect to the accused products that this

21 idea was obvious and that, you know, someone else came up

22 with it earlier.

23 And so the Staff thinks it's really important to

24 look at the documentation, to ask is there documentation

25 that supports those claims and to see what does the

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1 documentation really show.

2 JUDGE PENDER: You've heard me say it,

3 Ms. Comfort, or at least you know that I've said it, that

4 99 percent of the time motivation is not established.

5 MS. COMFORT: Some of this is what -- how prior

6 products worked or whether individuals who work at the

7 Respondent were previously in possession of this idea, and

8 again, does the documentation show that? The Staff expects

9 that the answer is no.

10 Then turning to the two references, Heinrich and

11 Balasubramian, the elements of an application processor or

12 a modem processor and a bus, sure, of course, those were

13 out there in the art, and it's easy to point to them. But

14 is there any motivation in the art to combine them in a way

15 that really gets you to the invention?

16 And again, the Staff expects the answer is no.

17 And we need to be cognizant of the risk of hindsight bias,

18 I mean, sometimes seemingly simple and elegant solutions at

19 this point in time may have at the time of their invention

20 been truly inventive.

21 So now we will transition to the confidential

22 record.

23 JUDGE PENDER: Do you want to do it or is it

24 necessary to do it?

25 MS. COMFORT: I believe it is necessary, at

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1 least -- and also in the interest of time, it's necessary

2 for at least some of the content in the rest of our

3 presentation, and we want to get this wrapped up.

4 JUDGE PENDER: Okay, great.

5 MS. COMFORT: It's both sides.

6 JUDGE PENDER: I'm going to let you go until 10

7 after and also give you 15 minutes on Monday to begin if

8 that's what you want. Take a deep breath if that helps.

9 MS. COMFORT: I am speaking quickly.

10 (Confidential session follows.)

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

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1 OPEN SESSION CONTINUED

2 MS. MURRAY: Shall I proceed, your Honor?

3 JUDGE PENDER: Please.

4 MS. MURRAY: I'd like to turn to the public

5 interest issue. And I believe your Honor has made a

6 similar point earlier today that the public interest

7 analysis is not an equitable defense to patent

8 infringement. There are no equitable defenses remaining in

9 this investigation.

10 And so it's just simply not relevant whether one

11 or both of the parties have been bad actors in the past.

12 Allegations of past anticompetitive activity are

13 simply not relevant. The only thing that's relevant here

14 are the statutory public interest factors.

15 So turning to those, the evidence will show that

16 a remedy in this case would not cause harm to the public

17 health and welfare, that it would not create harm to U.S.

18 production of like or directly competitive articles, and

19 that it would not cause harm to U.S. consumers of

20 smartphones.

21 The remaining consideration is whether there

22 would be harm to competitive conditions in the U.S.

23 economy. And there I'd like to stress that the wording of

24 the statute is "competitive conditions in the U.S.

25 economy," not in the domestic industry. It's necessary to

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1 look more widely than at mobile electronic devices

2 themselves.

3 Particularly in this case, which is captioned

4 "and radio frequency and processing components thereof."

5 And where the requested remedy is specifically designed to

6 affect competition not in the smartphone market but in the

7 baseband processor market.

8 So taking a look at competitive conditions, the

9 question is whether there would be harm to competitive

10 conditions in the U.S. economy, and here we have two

11 different answers.

12 With regard to mobile electronic devices, the

13 Qualcomm-based nonaccused iPhones would be perfect

14 substitutes for the accused products, and therefore, the

15 Staff's position is that the evidence will show there is no

16 harm to competitive conditions in that market.

17 However, competitive conditions in the market

18 for premium baseband processor chips likely would be

19 harmed.

20 Now, here Qualcomm and Intel will disagree as to

21 the effect of an exclusion order beyond its immediate

22 effect on Apple and Intel. You will hear from Intel

23 witnesses who will testify that in some form, Intel would

24 exit the premium LTE baseband processor market.

25 The question is, are they really going to do

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1 that? Well, we know that at the very least, they would

2 exit the premium LTE baseband processor market in the

3 United States, because that's what would be covered by the

4 exclusion order. They would not be able to sell their thin

5 modems to Apple for use in the United States.

6 The question is how much broader would that go.

7 The confidential data in the prehearing briefs indicates

8 the pattern of Intel's success over time in the baseband

9 processor market, its ups and downs and how much it's

10 invested. The Staff on that point would just say that any

11 rational company reaches a point where there's only so much

12 money they can pour down a rat hole.

13 The second key question is what extent would an

14 Intel exit have on the pace of U.S. innovation in 5G

15 technologies. You're going to have testimony from

16 Qualcomm's experts saying that Intel is not going to exit

17 the market, Intel could remain in the market by increasing

18 its sales for overseas markets and that therefore the harm

19 to 5G innovation simply wouldn't -- wouldn't be as damaging

20 as Intel predicts.

21 This is the key question that needs to be

22 determined, and it will depend on the credibility of the

23 Intel and Qualcomm witnesses. And to a lesser extent, the

24 Apple witnesses.

25 Because as you've pointed out, this isn't really

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1 a case about whether Apple would be harmed. Apple will

2 either sell Intel-based iPhones or Qualcomm-based iPhones.

3 The question is what will happen in the baseband processor

4 industry.

5 Now, if Intel is taken out of the 5G race, this

6 would slow the pace of U.S. innovation in 5G technologies

7 and create a risk that the United States would not be a

8 leader in that vital area.

9 You will hear testimony that this would be for

10 three reasons. One, there would be a loss of the benefits

11 of competition of having two U.S. suppliers trying to

12 develop 5G at the same time. Second, there would be a halt

13 to Intel's current aggressive investment in 5G. Are they

14 going to stop entirely? Probably not. Are they going to

15 keep pouring massive amounts of investment in it? We'll

16 find out.

17 Are they going to continue with 5G in the

18 cellular capacity or are they going to abandon mobile

19 electronic devices and focus on the Internet of things?

20 These are all questions that we'll have for Intel's

21 witnesses.

22 If it does turn out, however, that the pace of

23 innovation in 5G in the United States would be affected by

24 an exclusion order, this possibility does raise national

25 security concerns that affect the public interest.

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1 So in that case, the Staff is not suggesting

2 that there shouldn't be any remedy at all, given the strong

3 interest in the protection of intellectual property rights,

4 there should be a remedy if a violation of 337 is found in

5 this investigation.

6 The harm to the public interest, however, could

7 be mitigated by tailoring that remedy to minimize the

8 impact on third parties. And the suggestion that the Staff

9 has raised is that the Commission could carve out an

10 exception for future products that have 5G technology

11 included.

12 This would provide Qualcomm with a remedy in

13 that currently accused products, all of which are 4G LTE

14 models would be excluded from the market, but any future

15 iPhones that had 5G included would not be covered by the

16 order, and this would provide Apple and Intel with a

17 continued incentive to invest in 5G.

18 The Staff's view is that a remedy tailored in

19 this fashion would balance the competing interests in

20 protecting intellectual property rights and protecting

21 third parties from harm and maintaining competitive

22 conditions in the United States.

23 Does your Honor have any further questions on

24 those issues?

25 JUDGE PENDER: No, no. I just -- I don't know

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1 what most of you understand, but when I was chief trial

2 attorney in DOD, I was responsible to Cost Accounting

3 Standards, litigation of all Cost Accounting Standards

4 cases and stuff like that. And that would include direct

5 costs and indirect costs. Indirect costs are typically

6 three, 400 percent of direct costs.

7 And one of the things I learned is that it's

8 present industry that drives future investment. In other

9 words, you can't invest on research and development unless

10 you have something to pay the bills with. So I'm aware of

11 that. I'm keenly aware of that. I think that's pretty

12 obvious to anyone.

13 So that's in my mind. And Ms. Murray, I thank

14 you rather profusely, because now I understand some of the

15 arguments Mr. Lee made better anyway. I read them, but

16 somehow it -- I'm not saying that I buy them, okay. I

17 think the problem here in this litigation is that the risk

18 is too high for either one of you to proceed. I think

19 you're crazy to proceed. That's the truth.

20 And you need to solve it. And going forward

21 with this litigation here and taking the risk of what could

22 happen is bad for both of you, bad for Intel, it's bad for

23 Qualcomm. And I'd be on the phone this afternoon saying

24 this is not going to be a perfect result.

25 Isn't that correct, Ms. Murray?

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1 MS. MURRAY: Yes, your Honor.

2 JUDGE PENDER: I mean, I tend to agree with the

3 Staff a little bit on the tailoring of the remedy, but it's

4 still potentially an ugly result. I think it's very likely

5 that there will be a violation found. Whether or not the

6 public interest will be sufficient to outweigh that, I

7 can't predict.

8 But what I will predict is that this is not a

9 case to litigate. I mean, I spent my whole life litigating

10 cases. And there's sometimes where the gain is not worth

11 the pain, and this is one of them. This is almost horrible

12 to me that I'll have to -- I will do it, you know, I'll

13 listen to the evidence, we'll get a decision out.

14 But this isn't the right place to do it, you

15 know? This room has the best -- some of the best, arguably

16 the best patent lawyer in the United States, litigator in

17 the United States in this room. And Mr. Nelson, you are

18 the leader of Quinn Emanuel's patent litigation group;

19 correct?

20 MR. NELSON: I would say just one, one of the

21 many.

22 JUDGE PENDER: One. But you know, you're up

23 there, and Mr. Pak next to you. People I have great

24 respect for. And Mr. Cordell appears in front of me all of

25 the time, and Mr. Lee, his reputation precedes him.

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1 So the -- I think that the clients need to

2 listen to these litigators. I think they know where the

3 risk is, and that's why I'm making this speech.

4 But I'll be ready and happy to proceed at 8:45

5 Monday morning. We'll see what we can do about the

6 temperature in this place, and if you want to talk a little

7 more, Ms. Murray, I will let you do that at your option.

8 MS. MURRAY: Thank you, your Honor.

9 JUDGE PENDER: And I am very appreciative of

10 everyone's patience this morning. In the last 3-1/2 hours

11 almost, we did pretty good. We were only five or six

12 minutes off the time.

13 So please, use the time this afternoon to talk

14 to one another. I don't see a result here as being perfect

15 for anyone. You could probably fashion a better result

16 amongst yourselves. Thank you.

17 (Whereupon, at 12:08 p.m., the prehearing was

18 concluded, with the hearing to begin at 8:45 a.m., on Monday,

19 June 18, 2018.)

20

21

22

23

24

25

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1 C O N T E N T S

3 VOIR

4 WITNESSES: DIRECT CROSS REDIRECT RECROSS DIRE

5 (NONE)

9 CONFIDENTIAL SESSIONS: Pages 36-49, 53-65, 132-136

10

11

12 E X H I B I T S

13 EXHIBITS: IDENTIFIED RECEIVED

14 (NONE)

15

16

17

18

19

20

21

22

23

24

25

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CERTIFICATE OF REPORTER
TITLE: In The Matter Of: Certain Mobile Electronic Devices
and Radio Frequency and Processing
Components Thereof

INVESTIGATION NOS: 337-TA-1065


HEARING DATE: 06-15-18
LOCATION: Washington, DC
NATURE OF HEARING: Prehearing

I hereby certify that the foregoing/attached


transcript is a true, correct and complete record
of the above-referenced proceeding(s) of the U.S.
International Trade Commission.
DATE: 06-15-2018

SIGNED: Mark A. Jagan


Signature of the Contractor or the
Authorized Contractor's Representative

I hereby certify that I am not the Court Reporter


and that I have proofread the above-referenced
transcript of the proceedings of the U.S.
International Trade Commission, against the
aforementioned Court Reporter's notes and
recordings, for accuracy in transcription in the
spelling, hyphenation, punctuation and speaker
identification and did not make any changes
of a substantive nature. The
foregoing/attached transcript is a true,
correct and complete transcription of the
proceedings.
SIGNED: Christopher Weiskircher
Signature of Proofreader

I hereby certify that I reported the


above-referenced proceedings of the U.S.
International Trade Commission and caused
to be prepared from my tapes and notes of
the proceedings a true, correct and
complete verbatim recording of the
proceedings.
SIGNED: Carmen Smith
Signature of Court Reporter

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