UNITED STATES INTERNATIONAL TRADE COMMISSION

WASHINGTON, D.C.

In the Matter of

CERTAIN MOBILE ELECTRONIC Investigation No. 337-TA-1065

DEVICES AND RADIO FREQUENCY
AND PROCESSING COMPONENTS
THEREOF

COMPLAINANT’S STATEMENT ON THE PUBLIC INTEREST

 Pursuant to 19 C.F.R. § 210.50(a)(4), Complainant Qualcomm Incorporated

(“Qualcomm”) respectfully submits this Statement on the Public Interest concerning the remedial

orders that Qualcomm seeks against Respondent Apple Inc. (“Apple”). The ALJ properly found

a violation of Section 337 but made an unprecedented recommendation against any relief. The

Commission should review and reject the ALJ’s recommendation and issue the requested orders.

I. THE PUBLIC INTEREST FAVORS ENTRY OF THE REQUESTED ORDERS

Qualcomm seeks to enforce patents that are not essential to any cellular standard but

nonetheless concern important technical innovations. Specifically, Qualcomm seeks a limited

exclusion order and a cease and desist order (the “Requested Orders”) to protect and preserve

domestic intellectual property (“IP”) rights resulting from risky and intensive investment in

research and development (“R&D”). The accused Apple products include the iPhone 7, 7 Plus, 8,

8 Plus, and X containing non-Qualcomm baseband chipsets. The Commission has long recognized

a strong public interest in protecting the IP rights of innovative domestic companies such as

Qualcomm. Indeed, Section 337 was designed to protect companies like Qualcomm from the

unauthorized use of their patented technology and to prevent infringement through unfairly traded

imports.

The Requested Orders raise no public interest concerns because there are numerous

reasonable substitutes for the accused devices, and none of the public interest factors counsels

against entry of the Orders: (1) the accused devices do not serve any essential public health or

welfare objective; (2) the Orders would not harm mobile device competition in the United States;

(3) the accused devices are not manufactured in the United States; and (4) the Orders would not

harm U.S. consumers. Accordingly, this investigation does not present any unique circumstances

that would require the Commission to deviate from its practice of issuing remedial orders covering

infringing mobile electronic devices. See, e.g., Certain Electronic Digital Media Devices and
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 Components Thereof, Inv. No. 337-TA-796, Comm’n Op. (Sept. 6, 2013). In fact, the public

interest favors entry of the Orders because vindicating Qualcomm’s IP rights would promote

competition and innovation in the cellular technology field.

II. IN CREDITING APPLE’S ARGUMENTS, THE ALJ MISCONSTRUED THE LAW,

MISUNDERSTOOD THE FACTS AND ENDORSED BAD POLICY

In recommending against a remedy, the ALJ accepted arguments advanced by Apple and

Intel (working hand-in-glove) that the Requested Orders would cause Apple to cease using Intel

chipsets, cause Intel to exit the baseband chipset industry, create a “Qualcomm monopoly”, and

lead to a parade of horribles, including adverse effects on U.S. 5G leadership and national security.

In so doing, the ALJ misconstrued the law, mischaracterized the facts and endorsed bad policy, as

briefly described below.

To begin, the ALJ disregarded the fact that none of the asserted patents is a standard-

essential patent. Apple could remove or design around the accused features and avoid causing

every harm it alleges would occur—yet the ALJ concluded that Intel would abandon its investment

and leave the cellular industry without Apple even investigating the possibility of a design around.

While Qualcomm believes the patents concern important technology, Apple has taken the position

that they are of no real consequence and either already have been or could easily be designed

around. In recommending against a remedy, the ALJ contradicted Commission precedent by

elevating Apple’s preferences and convenience above Qualcomm’s valid and infringed patent

rights. See Certain Erasable Programmable Read Only Memories (“EPROMs”), Inv. No. 337-

TA-276, Comm’n Op. at 137 (April 28, 1989).

The ALJ also explicitly based his recommendation on Apple’s contention that Qualcomm

can obtain money damages in federal district court and accepted Apple’s invitation to focus his

public-interest inquiry on a single component of the accused articles—a type of cellular

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baseband chipset known as a thin modem that is customized for Apple’s use. In doing so, the

ALJ ignored the fact that Commission remedies are “in addition to any other provision of law”,

19 U.S.C. § 1337(a)(1), and effectively imposed a compulsory licensing scheme. Moreover, the

statute does not contemplate an analysis focused on a single component of an infringing product,

19 U.S.C. § 1337 (focusing on accused articles, not components thereof); if it did, analysis would

be required of all of the hundreds of components of the iPhone, which is neither practical nor

consistent with Commission precedent. See, e.g., Certain Personal Data and Mobile Commc’ns

Devices and Related Software, Inv. No. 337-TA-710, Comm’n Op. at 67–76 (Dec. 29, 2011).

In addition, the ALJ: (1) relied on unsubstantiated and self-interested speculation about

yet-to-be-developed, future products; (2) effectively shifted the burden to Qualcomm to disprove

a series of alleged third-order, future effects relating to subjects such as 5G development and

national security; and (3) based his recommendation on the wrong market and a legally-flawed

conception of “monopoly power”.

1) Reliance on Unsubstantiated, Self-Interested Speculation. Intel will be supplying

Apple with 100 percent of the baseband chipsets for 2018 model iPhones. Because the
majority of Apple’s iPhone sales occur outside the United States and thus would not be
subject to the Requested Orders, those Orders would leave Intel with more of Apple’s
business than it needs. Yet, the ALJ dismissed those sales altogether based on
conclusory speculation that Apple would not be able to use Intel as a supplier for future
iPhones sold outside the U.S. unless it were also able to use Intel chipsets in iPhones
sold in the United States. Whether the Requested Orders would affect 2018 and future
model iPhones is entirely speculative, but even if such devices were covered by the
Orders, Apple could continue to sell iPhones with Intel chipsets, including the 2018
iPhones which have already been designed and are being sold, outside the United
States. The Commission previously has rejected such speculative public interest
arguments, and should do so again here. See, e.g., Certain Magnetic Data Storage
Tapes and Cartridges Containing the Same (“Data Storage Tapes”), Inv. No. 337- TA-
1012, Comm’n Op. at 139–40 (Apr. 2, 2018); EPROMs, Comm’n Op. at 140.
Moreover, in accepting Apple’s argument that sales of chipsets into iPhones sold in the
United States is critical to proving the chipsets and succeeding in the marketplace, the
ALJ ignored the fact that other companies, including Intel in 2016, have done just that.

2) Reliance on Speculative Third-Order Effects on 5G and National Security. Although

the ALJ accepted Apple’s argument that the Requested Orders would likely result in
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 Intel abandoning certain aspects of 5G development and could therefore compromise
national security, he did so solely based on conclusory and unsubstantiated testimony
from a few self-interested witnesses. Neither Apple nor Intel presented a single
document showing that Intel has decided to abandon any 5G efforts in the event of an
exclusion order or that Intel’s exit would have any effect on 5G or compromise national
security. In fact, neither company produced any corroborating documentary evidence
showing any internal discussion or analysis of the effect of an exclusion order on Intel’s
chipset business, 5G development or national security. To the contrary, the only
credible evidence shows that denying remedies to patent holders could threaten both
5G development and national security. In any case, “[n]ational security interests are
not specifically identified in the statute as a public interest factor for the Commission’s
consideration” and “more appropriate for the President’s consideration during the
review period.” EPROMs, Comm’n Op. at 135–36, 143 n.187.

3) Reliance on Legally-Flawed Monopoly Arguments. The ALJ accepted Apple’s

argument that the Requested Orders would make Qualcomm a monopolist in a so-
called “U.S. merchant market for premium LTE baseband chipsets”. However, all
experts agree that there is no separate U.S. market and that any relevant market is
global. Competitive conditions in the United States are determined by competition to
sell chipsets for mobile devices that are all made in Asia and then sold around the world.
Further, instead of recognizing that any improvement in Qualcomm’s marketplace
position that resulted from the Requested Order would be a natural and beneficial
consequence of its valid and enforceable IP rights, the ALJ asserted that “monopolies
are bad” without any finding of unlawful conduct by Qualcomm. ID at 195. In fact,
the very purpose of a valid patent is to incentivize innovation by conferring lawful
rights of exclusivity. Not enforcing Qualcomm’s IP would actually enlarge the power
and influence of two of the most powerful companies in the world and diminish
incentives to invest in R&D and to innovate. It is not the role of the ITC to prop up a
competitor rather than allow market forces to work, see Certain Table Saws
Incorporating Active Injury Mitigation Technology and Components Thereof, Inv. No.
337-TA-965, Comm’n Op. at 10 (Feb. 1, 2017), and it certainly is not the ITC’s role to
concentrate power in Apple, the world’s first trillion-dollar company and a
monopsonist in the purchase of thin modems for iPhones, and in Intel, the world’s
largest semiconductor company.

Finally, the ALJ adopted arguments that effectively permit Apple to build a business on

infringement and immunize Apple from any relief in the ITC from any complaint brought by any

patent owner. If the exclusion of iPhones with Intel chipsets is sufficient to create a public interest

basis for disregarding Qualcomm’s patents, then the Commission cannot enforce any patent

against any iPhone with an Intel chipset. Such a policy would rob Qualcomm and other innovators

of the fruits of their R&D investments and give Apple (and Intel) an unfair advantage over their

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 competitors. Apple would be free to use any IP that reads on the iPhone without risk of an

exclusion order, whereas Samsung and Apple’s other OEM competitors could not, which plainly

is not in the public interest. See, e.g., EPROMs, Comm’n Op. at 138.

There has not been a case since the 1980s in which the Commission has found a violation

of Section 337 without issuing an exclusion order, and in each case, there were no available

substitutes for the excluded products. See Certain Automatic Crankpin Grinders, Inv. 337-TA-60

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

67 (Dec. 1980); Certain Fluidized Supporting Apparatus & Components Thereof, Inv. No. 337-

TA-182/188. That is not the case here, and the ALJ erred in breaking with precedent. In fact,

since the Commission began delegating public interest fact-finding to ALJs in 2011, no ALJ prior

to this Investigation had found a violation and not recommended issuing an exclusion order.

III. IF DEEMED NECESSARY BY THE COMMISSION, THE RELIEF COULD BE

TAILORED

As described above, there is no foundation for the alleged parade of horribles upon which

the ALJ based his recommendation of no remedy. The alleged harm is entirely speculative and

without documentary corroboration. If, however, the Commission were to find such harm, it could

be remedied by tailoring any exclusion order. For example, as proposed by Staff, Apple’s alleged

concern that it could not develop non-Qualcomm-based iPhones in the United States for sale

abroad “can be easily avoided by permitting a carve-out that allows the continued importation of

mobile electronic devices (iPhones, etc.) with non-Qualcomm baseband processor chips for the

purpose of testing and development at Apple.” ID at 188 (citing SPost at 74). Similarly,

Qualcomm has no objection to Staff’s proposed certification procedure as applied to that carve-

out. See id. at 74–75. The Commission has made similar carve-outs before, and could do so again

here. See Data Storage Tapes, Comm’n Op. at 132.

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Dated: October 31, 2018 Respectfully submitted,

/s/ S. Alex Lasher

S. Alex Lasher
QUINN EMANUEL URQUHART & SULLIVAN, LLP
1300 I Street NW, Suite 900
Washington, DC 20005
Tel.: (202) 538-8000
Fax: (202) 538-8100

David A. Nelson
Stephen Swedlow
QUINN EMANUEL URQUHART & SULLIVAN, LLP
191 N. Wacker, Suite 2700
Chicago, Illinois 60606
Tel.: (312) 705-7400
Fax: (312) 705-7401

Richard W. Erwine
Alexander Rudis
QUINN EMANUEL URQUHART & SULLIVAN, LLP
51 Madison Avenue, 22nd Floor
New York, NY 10010
Tel.: (212) 849-7000
Fax: (212) 849-7100

Sean S. Pak
QUINN EMANUEL URQUHART & SULLIVAN, LLP
50 California Street, 22nd Floor
San Francisco, CA 94111
Tel.: (415) 875-6600
Fax: (415) 875-6700

Brett N. Watkins
QUINN EMANUEL URQUHART & SULLIVAN, LLP
711 Louisiana Street, Suite 500
Houston, TX 77002
Tel.: (713) 221-7000
Fax: (713) 221-7100

Tom M. Schaumberg
Deanna Tanner Okun
Evan Langdon
Michael R. Doman, Jr.
ADDUCI, MASTRIANI & SCHAUMBERG, L.L.P.
1133 Connecticut Avenue, N.W., 12th Floor
Washington, DC 20036
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Tel.: (202) 467-6300
Fax: (202) 466-2006

David R. Marriott
Andrei Harasymiak
CRAVATH, SWAINE & MOORE LLP
Worldwide Plaza, 825 Eighth Avenue
New York, NY 10019
Tel.: (212) 474-1000
Fax: (212) 474-3700

Counsel for Complainant Qualcomm Incorporated

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 Inv. No. 337-TA-1065

CERTIFICATE OF SERVICE

I, Stephanie Sandoval, hereby certify that on October 31, 2018, copies of the foregoing
documents were served upon the following parties as indicated:

The Honorable Lisa R. Barton

Via First Class Mail
Secretary
Via Hand Delivery (8 copies)
U.S. International Trade Commission
Via Electronic Mail
500 E Street, SW
Via EDIS
Washington, D.C. 20436
The Honorable Thomas B. Pender
Administrative Law Judge
Via First Class Mail
U. S. International Trade Commission
Via Hand Delivery (2 copies)
500 E Street, SW
Via Electronic Mail
Washington, DC 20436
Via Express Mail
Email: patricia.chow@usitc.gov
Lisa Murray, Esq.
Claire Comfort, Esq.
Office of Unfair Import Investigations
Via First Class Mail
U.S. International Trade Commission
Via Hand Delivery
500 E Street, SW
Via Electronic Mail
Washington, D.C. 20436
Via Express Mail
Email: Lisa.Murray@usitc.gov
Email: Claire.Comfort@usitc.gov
Lauren A. Degnan
FISH & RICHARDSON P.C.
901 15th Street, NW
Via First Class Mail
7th Floor
Via Hand Delivery
Washington, D.C. 20005
Via Electronic Mail
Via Express Mail
Email: FRService-Apple1065@fr.com

Counsel for Respondent Apple Inc.

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William G. McElwain
WILMER CUTLER PICKERING HALE AND DORR LLP
1875 Pennsylvania Ave., NW
Via First Class Mail
Washington, DC 20006
Via Hand Delivery
Via Electronic Mail
Email: WHQualcomm-
Via Express Mail
Apple1065servicelist@wilmerhale.com

Counsel for Respondent Apple Inc.

William A. Isaacson
BOIES SCHILLER FLEXNER LLP
1401 New York Avenue, N.W. Via First Class Mail
Washington, DC 20005 Via Hand Delivery
Via Electronic Mail
Email: Apple_Qualcomm_Service@BSFLLP.com Via Express Mail

Counsel for Respondent Apple Inc.

/s/ Stephanie Sandoval

Stephanie Sandoval