1 FRAND defense in Japan through Tokyo District Court’s decision of February 28, 2013, and IP High Court’s invitation of “Amicus Brief” of January 23, 2014 AIPLA MWI IP Practice in Japan Committee Pre-Meeting Wednesday, January 29, 2014 Kei IIDA Attorney at Law & Patent Attorney Nakamura & Partners

2 Parties Plaintiff Apple Japan Gōdō Gaisha, a subsidiary in Japan of Apple Inc. in the US, importing, selling, etc. personal computers, hardware and software of computer related apparatus, instruments attached to computers, etc. manufactured by Apple Inc. Defendant SAMSUNG ELECTRONICS CO., LTD., manufacturing, selling, etc. electronics and electric equipment and apparatus, communication equipment and apparatus, and related instruments, and parts thereof.

3 Subject Patent SAMSUNG’s JP patent No corresponding to US (B2), EP (B1), KR (B1), etc. Method and apparatus for transmitting and receiving packet data by using pre-established length indicator in a mobile communication system Claim 1: method for data transmission Claim 8: data transmission apparatus

4 Subject Products iPhone 3GS by Nvog86 iPhone 4 by Saibo iPad Wi-Fi ＋ 3G model by Evan-Amos iPad 2 Wi-Fi ＋ 3G model by William Hook

5 Court’s Decision Confirmed in a declaratory judgment action that defendant SAMSUNG is not entitled to claim damages against plaintiff Apple Japan under Subject Patent for manufacture, assignment, lease, import, and offer for assignment and lease by plaintiff Apple Japan of Subject Products. In a separate provisional injunction procedure, also on February 28, 2013, Tokyo District Court dismissed claimant SAMSUNG’s claim for a provisional injunction against opponent Apple Japan’s import, assignment, etc. of iPhone 4 and iPad 2 Wi-Fi ＋ 3G model under Subject Patent.

6 Issues ① ① Whether Subject Products fall under the technical scope of claim 8 ? ② ② Whether Apple Japan’s import, assignment, etc. of Subject Products constitute an indirect infringement of claim 1 ? ③ ③ Whether claims 1 and 8 have invalidation grounds for lack of novelty or an inventive step ? ④ ④ Whether a patent right under claims 1 and 8 is exhausted or impliedly licensed for Subject Products because of SAMSUNG’s license to Intel for baseband chips therein ? ⑤ ⑤ Whether a FRAND defense is available for Apple Japan based on a contract through SAMSUNG’s FRAND declaration, etc. ? ⑥ ⑥ Whether a FRAND defense is available for Apple Japan through SAMSUNG’s FRAND declaration, etc. according to Article 1(3) of the Civil Code ?

7 Court’s Holdings on Issues ① & ② iPhone 3GS and iPad Wi-Fi ＋ 3G model among Subject Products do not fall under the technical scope of claim 8, since baseband chips therein are not based upon UMTS Standard “3GPP TS V6.4.0” and therefore do not perform the subject function according to “substitutive E bit construction” adopted thereinafter. Method for data transmission in iPhone 3GS and iPad Wi-Fi ＋ 3G model among Subject Products do not fall under the technical scope of claim 1, too.

8 Court’s Holdings on Issues ① & ② (cont’d) iPhone 4 and iPad 2 Wi-Fi ＋ 3G model among Subject Products fall under the technical scope of claim 8, since baseband chips therein are based upon UMTS Standard “3GPP TS V6.4.0” and therefore perform the subject function according to “substitutive E bit construction” adopted thereinafter, and then claim 8 claims an invention realizing “substitutive E bit construction”. Method for data transmission in iPhone 4 and iPad 2 Wi-Fi ＋ 3G model among Subject Products fall under the technical scope of claim 1, too.

9 Court’s Holdings on Issue ⑥ The governing law of issue ⑥ is the laws of Japan. According to the good faith principle under the Civil Code, SAMSUNG owes the duties to disclose important information to and to negotiate in good faith with Apple Inc. for a license with FRAND terms for UMTS Standard “3GPP TS V6.4.0” under Subject Patent, since (i) according to ETSI’s IPR Policy and Guideline, on August 7, 2007, SAMSUNG notified to ETSI that IPR for Subject Patent is probably essential for UMTS Standards, and declared to ETSI that SAMSUNG is ready to grant a license with FRAND terms, (ii) ETSI’s IPR Guideline provides that ETSI’s member shall grant a license with FRAND terms for ETSI’s standard under its essential IPR, and (iii) Apple Inc. specifically requested the license to SAMSUNG.

10 Court’s Holdings on Issue ⑥ (cont’d) Regarding the above (iii), a request must be specific to show requester’s definite intention for a license, and Apple Inc.’s request was found specific in light of the draft agreement providing licensed patents, a certain royalty rate (not unreasonably too low), etc. proposed to SAMSUNG on March 4, Regarding the above (iii), a specific request may still be found, even if a requester reserves the possibility of invalidity of a patent to be licensed.

11 Court’s Holdings on Issue ⑥ (cont’d) SAMSUNG breached the duties through the following courses of negotiation with Apple Inc. On Jul. 25, 2011, when proposing a license with a certain royalty rate under NDA, SAMSUNG did not show grounds to calculate the royalty rate. On Aug. 18, 2011, Apple Inc., with giving its opinion that the royalty rate was too high based on a certain ground, requested SAMSUNG to disclose information on licenses with others under NDA so that Apple Inc. may determine whether the royalty rate follows FRAND terms. On Jan. 31, 2012, SAMSUNG requested Apple Inc. to show a counterproposal for a license without showing grounds to calculate the royalty rate. On Mar. 4, 2012, Apple Inc. showed the draft agreement providing licensed patents, a certain royalty rate (not unreasonably too low), etc. On Apr. 18, 2012, SAMSUNG gave its opinion that the royalty rate was unreasonably too low. On Sep. 1, 2012, Apple Inc. expressed that it was ready for a proposal for a cross license with FRAND terms for the whole 2G, 3G and 4G standards under the whole essential patents. On Sep. 7, 2012, SAMSUNG made a certain reaction to Apple Inc.’s expression. On Sep. 7, 2012, Apple Inc., with explaining a certain ground to calculate the royalty rate, showed the proposal. SAMSUNG did not react to Apple Inc.’ proposal.

12 Court’s Holdings on Issue ⑥ (cont’d) A FRAND defense is available for Apple Japan against SAMSUNG’s claim for damages under Subject Patent according to Article 1(3) (prohibition of abuse of right) of the Civil Code, since (i) SAMSUNG breached the duties through the courses of negotiation with Apple Inc., (ii) SAMSUNG seeks for a provisional injunction against Apple Japan’s import, assignment, etc. of iPhone 4 and iPad 2 Wi-Fi ＋ 3G model under Subject Patent, (iii) SAMSUNG notified to ETSI that IPR for Subject Patent was probably essential for UMTS Standards around 2 years after “substitutive E bit construction” was adopted in UMTS Standard “3GPP TS V6.4.0” according to its own proposal.

13 Comments A FRAND defense under Article 1(3) of the Civil Code is available also against patentee’s claim for injunction. The bar for a FRAND defense under Article 1(3) of the Civil Code is probably lower than the bar for a FRAND defense adopted by Federal Supreme Court of Germany in the “Orange Book Standard” case. In general, requirements or decisive factors for a FRAND defense under Article 1(3) of the Civil Code are not necessarily clear, especially in the point of whether patentee’s breach of the duties to disclose important information and to negotiate in good faith only will suffice the FRAND defense, and whether SAMSUNG’s acts after the Decision by the Court may meet the duties.

14 Comments (cont’d) Regarding issue ⑤, in general, a FRAND defense may be available also based on a contract between a patentee and a standards organization for a person who adopts a standard through patentee’s FRAND declaration to the organization according to an IPR policy and adoption by the person of the standard. Whether a FRAND defense is available even against patentee’s claim just for specific damages of reasonable royalty according to FRAND terms only may be a remaining issue, since in this case the Court especially mentioned in the decision that SAMSUNG did not make its assertion for damages. How to calculate the sum of reasonable royalty according to FRAND terms and whether the courts can appropriately calculate the sum may be an ultimate question.

15 IP High Court’s Invitation of “Amicus Brief” for Appeal Case The case was appealed to the IP High Court (Case No (Ne) 10043). The IP High Court decided to hear the appeal case by the Grand Panel. The IP High Court further announced as of January 23, 2014 that “Amicus Brief” from the public is invited for the issue of a FRAND defense in the appeal case. Anyone may submit “Amicus Brief”. The person who submits “Amicus Brief” shall submit the same written or translated in Japanese to either of the attorneys for the parties by March 24, 2014, and then the attorneys for the parties will submit the same to the Court as evidence. If interested, please see the English translation of the announcement provided to the IP Practice in Japan Committee.

16 Thank you! Kei IIDA Attorney at Law & Patent Attorney Nakamura & Partners Shin-Tokyo Bldg., 6F, 3-1, Marunouchi 3-Chome, Chiyoda-ku, Tokyo Japan Tel: Fax: