Apple Inc. v. Samsung Electronics Co. Ltd. et al

Filing 991

Administrative Motion to File Under Seal Documents Re Apples Opposition To Samsungs Motion To Exclude Opinions Of Certain Of Apple Experts filed by Apple Inc.. (Attachments: #1 Declaration Of Cyndi Wheeler In Support Of Apples Administrative Motion To File Under Seal Documents Re Apples Opposition to Exclude Apple Experts Opinions, #2 [Proposed] Order Granting Apples Administrative Motion To File Under Seal, #3 Apples Opposition To Samsungs Motion To Exclude Opinions Of Certain Of Apples Experts, #4 Declaration Of Mia Mazza In Support Of Apples Opposition To Samsungs Motion To Exclude Opinions Of Certain Of Apples Experts, #5 Exhibit Mazza Decl. Ex. D, #6 Exhibit Mazza Decl. Ex. F, #7 Exhibit Mazza Decl. Ex. G, #8 Exhibit Mazza Decl. Ex. J, #9 Exhibit Mazza Decl. Ex. K, #10 Exhibit Mazza Decl. Ex. L, #11 Exhibit Mazza Decl. Ex. R, #12 Exhibit Mazza Decl. Ex. S, #13 Exhibit Mazza Decl. Ex. T, #14 Exhibit Mazza Decl. Ex. U, #15 Exhibit Mazza Decl. Ex. V, #16 Exhibit Hauser Decl. Ex. B, #17 Exhibit Hauser Decl. Ex. C, #18 Exhibit Hauser Decl. Ex. D, #19 Exhibit Hauser Decl. Ex. E, #20 Exhibit Musika Decl. Ex. S, #21 Exhibit Musika Decl. Ex. T, #22 Exhibit Musika Decl. Ex. U, #23 [Proposed] Order Denying Samsungs Motion To Exclude Opinions Of Apples Experts)(Jacobs, Michael) (Filed on 5/31/2012) Modified on 6/3/2012 attachment #1 Sealed pursuant to General Order No. 62 (dhm, COURT STAFF).

Exhibit J

1 QUINN EMANUEL URQUHART & SULLIVAN, LLP
Charles K. Verhoeven (Bar No. 170151)
2
[e-mail]
50 California Street, 22nd Floor
3 San Francisco, California 94111
Telephone: [phone]
4 Facsimile: [phone]
5

Kevin P.B. Johnson (Bar No. 177129
[e-mail]
6
Victoria F. Maroulis (Bar No. 202603)
[e-mail]
7 555 Twin Dolphin Drive, 5th Floor
Redwood Shores, California 94065-2139
8 Telephone:
[phone]
Facsimile:
[phone]
9
Michael T. Zeller (Bar No. 196417)
10
[e-mail]
865 S. Figueroa St., 10th Floor
11 Los Angeles, California 90017
Telephone: [phone]
12 Facsimile: [phone]
13 Attorneys for SAMSUNG ELECTRONICS CO.,
LTD., SAMSUNG ELECTRONICS AMERICA,
14 INC. and SAMSUNG
TELECOMMUNICATIONS AMERICA, LLC
15
UNITED STATES DISTRICT COURT
16
NORTHERN DISTRICT OF CALIFORNIA, SAN JOSE DIVISION
17
APPLE INC., a California corporation,
CASE NO. 11-cv-01846-LHK
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Plaintiff,
19
EXPERT REPORT OF ERIC STASIK
vs.
REGARDING ETSI AND STANDARDS20
SETTING MATTERS
SAMSUNG ELECTRONICS CO., LTD., a
21 Korean business entity; SAMSUNG
ELECTRONICS AMERICA, INC., a New
22 York corporation; SAMSUNG
TELECOMMUNICATIONS AMERICA,
23 LLC, a Delaware limited liability company,
24

Defendant.

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EXPERT REPORT OF ERIC STASIK REGARDING ETSI AND STANDARDS-SETTING MATTERS

1 support Apple’s contention that the value of handsets derives from features other than the cellular
2 interface. It may not have been clear at that time that technologies related to wireless
3 communication would retain their importance as numerous smart phone features are dependent on
4 transmission of substantial amounts of data. Moreover, the addition of 3G wireless connectivity
5 adds value to all the features of a smart phone. In any event, in my experience, the royalty rates
6 offered for patent portfolios relating to wireless standards have not declined, even as a variety of
7 new features are now available on handsets.
8 VI.

SAMSUNG’S LICENSE WITH INTEL

9

A.

Does Samsung’s patent cross license with Intel create “pass through” rights to
Sasmsung’s Patents?

71.

Donaldson’s opines that licensing professionals in the telecommunications industry

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12 would expect a licensing agreement to provide for “pass through rights.” I disagree.
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72.

“Pass through rights” from chipset manufacturers to handset manufacturers has

14 been a matter of intense interest and scrutiny for as long as I have worked in the industry. It is a
15 well-known fact in the mobile industry, both inside and outside the licensing profession, that
16 GSM/UMTS chipset manufacturers generally do not receive licenses that provide for “pass
17 through rights” to handset manufacturers.3 For example, in 2007, Qualcomm issued a press
18 release explaining:
In a ruling in prior litigation between Qualcomm and Texas Instruments, the
Delaware Supreme Court wrote: “To protect its stream of royalties from the hand
set manufacturers, Qualcomm's licenses with integrated circuit manufacturers
deny the licensees any so called 'pass through rights' that would otherwise relieve
the hand set manufacturers of their obligation to pay CDMA royalties to
Qualcomm.”

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(Qualcomm Press Release March 20, 2007, Exhibit 25 (emphasis added).)
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73.

Indeed, in F3Q08 earnings call with investors discussing the settlement ending the

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long-running patent dispute with Nokia, Qualcomm’s Steve Altman confirmed that Qualcomm
25
3

On the other hand, it is also well-known that CDMA chipsets manufactured by Qualcomm
for many years enjoyed pass-through rights under cross-licenses negotiated by Qualcomm. “In
27 addition, many of our license agreements include extremely valuable pass-through rights from
which our customers of our QUALCOMM chipsets can benefit.” (Qualcomm F1Q06 Earnings
28 Conf. Call Transcript, Exhibit 24 at 2.)
26

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EXPERT REPORT OF ERIC STASIK REGARDING ETSI AND STANDARDS-SETTING MATTERS

1 “did not get pass through rights” from Nokia and “companies that buy chips from (Qualcomm)
2 similar to buying chips from other companies . . . would require a (separate) license agreement
3 with [Nokia].” (QUALCOMM Inc. F3Q08 (Qtr End 07/24/08) Earnings Call Transcript, Exhibit
4 26 at 12.)4
5

74.

6

We have entered into such agreements with QCT competitors, including Broadcom,
Fujitsu, Icera, Infineon (Intel recently announced an agreement to acquire
Infineon’s Wireless Solutions business), Mediatek, NEC, Renesas Electronics,
Texas Instruments and VIA Telecom. These agreements generally permit the
manufacture of CDMA-based and/or OFDMA-based integrated circuits and/or
baseband software for use on such integrated circuits. In exchange for these
rights, we receive rights that allow us to use certain intellectual property rights of
these companies for specified purposes. In every case, these agreements do not
allow such integrated circuit suppliers to pass through rights under Qualcomm’s
patents to their customers for use in wireless devices manufactured or sold by
such suppliers’ customers, and such customers’ sales of CDMA-, WCDMA- and
OFDMA- based cellular devices into which such suppliers’ integrated circuits
are incorporated require separate licensing arrangements with us in order to use
our patented technologies.

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10
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12

More recently, in their 2010 Annual Report, Qualcomm assured its investors that:

13
(Qualcomm Form 10-K (Annual Report) (excerpt), Filed 11/03/10 for the Period Ending 09/26/10,
14
Exhibit 27 at 18.)
15
75.

Donaldson appears to conflate pass-through provisions with the legal doctrine of

16
exhaustion. Regardless of whether licensees are aware of the doctrine of exhaustion, licensees
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typically include specific pass-through provisions to ensure that their customers obtain legal
18
protection.
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4

The transcript further states, in pertinent part:
Mark Mckechnie – American Technology: Great, thank you and congrats on the
settlement, it sounds like good deal for both. I wanted to ask a question here for
Steve on pass through rights and specifically does QUALCOMM actually get pass
through rights on some of the Nokia GSM patents for your customers? I'm really
just trying to figure out is would LG or Samsung or an Apple if they use your chips
be free from Nokia IP issues by using the QUALCOMM chips? Thank you.
Steven Altman: We did not get pass through rights, but we did get assignment of
the significant number of patents which we would be able to offer as licenses to our
customers. So companies that buy chips from us similar to buying chips from
other companies would – to the extent they use Nokia IP would negotiate with
Nokia, the terms of a license agreement to those companies.
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EXPERT REPORT OF ERIC STASIK REGARDING ETSI AND STANDARDS-SETTING MATTERS

1

76.

I have been asked by Samsung to determine whether, based upon my experience

2 preparing and negotiating license agreements in the telecommunications industry and the language
3 of the agreement, the parties to the agreement intended to limit Intel’s rights to selling products of
4 its own design. A review of a redacted copy of the agreement leads me to conclude that this was
5 the parties’ intention. First, the preamble of the Intel Agreement demonstrates that the purpose of
6 the agreement was to “increase [the parties’] freedom to design and manufacture their own new
7 products without infringing the rights of the other . . . .” (Exhibit 28, 1993 Agreement at 1
8 (emphasis added).) Second, Section 3.1 of the Intel Agreement provides that Intel is only
9 licensed “to have [products] developed exclusively for INTEL.” (Id., 1993 Agreement § 3.1.)
10 Further, the parties amended Section 3.1(a) to provide that Intel does not have the right to
11 sublicense and to require that any manufacture by a third party was solely for the purpose of
12 supplying Intel. (Id., 2004 Amendment § 3.1(a)(1) (“without the right to sublicense”); id. §
13 3.1(a)(1) (granting a right to have Intel Licensed Products made by “another manufacturer for
14 supply solely to INTEL for use, import sale of disposition by INTEL pursuant to the license
15 granted above in Section 3.1(a)(1)”).) Third, Section 3.2 limits Intel’s foundry rights under the
16 agreement to the manufacture of products designed by Intel and excludes product designs by third
17 parties. (Id., 1993 Agreement § 3.2.) Fourth, Section 7.12 prohibits Intel from creating or
18 acquiring a subsidiary where “a primary purpose of such creation or acquisition is to extend the
19 benefits of this Agreement to a third party.” (Id., 2004 Amendment § 7.2.)
20 VII.

TRIAL EXHIBITS

21

77.

If called as a witness at trial, I may rely on visual aids and demonstrative exhibits

22 that demonstrate the bases of my opinions. Examples of these visual aids and demonstrative
23 exhibits may include, for example, interrogatory responses, deposition testimony and deposition
24 exhibits, as well as charts, or diagrams.
25

78.

Other than as referred to in this report, I have not yet prepared any exhibits for use

26 at trial as a summary or support for the opinions expressed in this report, but I expect to do so in
27 accordance with the Court’s scheduling orders.
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EXPERT REPORT OF ERIC STASIK REGARDING ETSI AND STANDARDS-SETTING MATTERS