PUBLIC VERSION

UNITED STATES INTERNATIONAL TRADE COMMISSION Washington, DC

In the Matter of

CERTAIN ELECTRONIC DEVICES, INCLUDING WIRELESS Investigation No. 337-TA-794 COMMUNICATION DEVICES, PORTABLE MUSIC AND DATA PROCESSING DEVICES, AND TABLET COMPUTERS

RESPONSE OF THE OFFICE OF UNFAIR IMPORT INVESTIGATIONS TO THE COMMISSION’S MARCH 13, 2013 NOTICE REQUESTING ADDITIONAL WRITTEN SUBMISSIONS ON REMEDY AND THE PUBLIC INTEREST

Anne Goalwin, Acting Director David O. Lloyd, Supervisory Attorney Lisa A. Murray, Investigative Attorney OFFICE OF UNFAIR IMPORT INVESTIGATIONS U.S. International Trade Commission 500 E Street SW, Suite 401 Washington, DC 20436 202-205-2734 202-205-2158 (facsimile)

April 3, 2013

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Table of Contents

I. Introduction ...... 1 II. Responses to Questions...... 1 1. How would remedial orders barring the entry and further distribution of the Apple articles alleged to infringe the asserted claims of the ’348 patent affect the public interest, as identified in 19 U.S.C. §§ 1337(d)(1) and (f)(1)? The Commission is particularly interested in the effect on the public interest with respect to (a) the percentage of the total number of imported mobile telephone handsets that would be affected by such orders, (b) the percentage of the total number of imported cellular-network- enabled tablets that would be affected by such orders, and (c) the qualitative impact of exclusion of such handsets and tablets. The Commission is also interested in any other relevant market information bearing on the four statutory public interest factors. In addressing these issues, the Commission requests that submitters avoid discussing issues related to standards-setting organizations, as the record concerning those issues has been well developed...... 1 (a) The percentage of the total number of imported mobile telephone handsets that would be affected by such orders: ...... 2 (b) The percentage of the total number of imported cellular-network- enabled tablets that would be affected by such orders, ...... 4 (c) The qualitative impact of exclusion of such handsets and tablets...... 5 2. What third, fourth, and later generation products (if any) are currently available in the U.S. market that are authorized by Samsung to utilize the technology covered by the asserted claims of the ’348 patent? Are these products acceptable substitutes for the accused iPhones and iPads and are they widely viewed to be acceptable substitutes for the accused iPhones and iPads? ...... 7 3. In what ways, if any, should a remedy with respect to infringement of the ’348 patent be specifically tailored to avoid harm to the public interest, as identified in 19 U.S.C. §§ 1337(d)(1) and (f)(1)? In addressing this issue, the Commission requests that submitters avoid discussing issues related to standards-setting organizations, as the record concerning those issues has been well developed...... 10 4. With respect to the ’348 patent, Samsung’s infringement case before the Commission relied upon accused third and fourth generation Apple products that operate on the AT&T wireless network. If the Commission were to issue remedial orders covering articles covered by the asserted claims of the ’348 patent, would such an order cover (a) Apple products that operate on other wireless networks in the United States, and (b) later generation Apple products (e.g., iPhone 5, later iPad versions)? ...... 11 - iii -

5. Please summarize the history to date of negotiations between Samsung and Apple concerning any potential license to the ’348 patent, either alone or in conjunction with other patents. Please provide copies of all written offers and counteroffers concerning a license that would cover the ’348 patent, whether made by Samsung or Apple...... 14 6. Please summarize all licenses to the ’348 patent granted by Samsung to any entity. Please provide copies of, or cite to their location in the record of this investigation, all agreements wherein Samsung grants any entity a license to the ’348 patent...... 16 7. Samsung and Apple are each requested to submit specific licensing terms for the ’348 patent that each believes are fair, reasonable, and non- discriminatory. Would Samsung’s terms change if the Commission were to enter remedial orders against Apple’s products accused in this investigation? If so, please explain whether such an offer would be fair, reasonable, and non-discriminatory...... 19 8. Which factors in Georgia-Pacific Corp. v. United States Plywood Corp., 318 F. Supp. 1116 (S.D.N.Y. 1970) are most relevant to determining whether Samsung has offered to license the ’348 patent to Apple on fair, reasonable, and non-discriminatory terms? ...... 19 Please apply any relevant Georgia-Pacific factors to Samsung’s offer(s) to license the ’348 patent to Apple. This analysis should include a comparison of Samsung’s licensing offers to a hypothetical negotiation between the parties prior to adoption of the ’348 patent into the standard at issue here. What other factors, if any, are relevant in determining whether Samsung has made a fair, reasonable, and non-discriminatory offer? ...... 22 - iv -

Table of Authorities

Cases

Georgia-Pacific Corp. v. United States Plywood Corp., 318 F. Supp. 1116 (S.D.N.Y. 1970) ...... 19, 21, 22, 23

Statutes

19 U.S.C. § 1337(d) ...... 1

19 U.S.C. § 1337(f) ...... 1

Regulations

19 C.F.R. § 210.50(b)(1) (2012) ...... 2

Administrative Determinations

Certain Abrasive Products Made Using a Process for Powder Preforms, and Products Containing Same, Inv. No. 337-TA-449, USITC Pub. No. 3530, Comm’n Op. (Aug. 2002) ...... 1

Certain Automated Mechanical Transmission Sys. for Medium-Duty & Heavy Duty Trucks & Components Thereof, Inv. No. 337-TA-503, USITC Pub. No. 3934, Comm’n Op. (Aug. 2007) ...... 11

Certain Automatic Crankpin Grinders, Inv. No. 337-TA-60, USITC Pub. No. 1022, Comm’n Det. & Order (1979) ...... 2

Certain Ceramic Capacitors and Products Containing the Same, Inv. No. 337-TA-692, Order No. 37 (June 24, 2010) ...... 13

Certain Electronic Digital Media Devices and Components Thereof, Inv. No. 337-TA- 796, Initial Det. (Oct. 29, 2012) ...... 13

Certain Flash Memory Circuits and Products Containing Same, Inv. No. 337-TA-382, USITC Pub. No. 3046, Comm’n Op. (Jul. 1997) ...... 13

Certain Fluidized Supporting Apparatus, Inv. No. 337-TA-182/188, USITC Pub. No. 1667, Comm’n Op. (1984) ...... 2, 6

Certain Ground Fault Interrupters and Products Containing Same, Inv. No. 337-TA-615, USITC Pub. No. 4146, Comm’n Op. (Oct. 2011) ...... 12

Certain Inclined Field Acceleration Tubes, Inv. No. 337-TA-67, USITC Pub. No. 1119, Comm’n Op. (1980) ...... 2

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Certain MEMs Devices and Products Containing the Same, Inv. No. 337-TA-700, Order No. 8 (Jul. 12, 2010) ...... 13

Certain MEMs Devices and Products Containing the Same, Inv. No. 337-TA-700, USITC Pub. 4294, Comm’n Op. (Nov. 2011) ...... 13

Certain NOR & NAND Flash Memory Devices & Products Containing Same, Inv. No. 337-TA-560, Order No. 14 (Jul. 6, 2006) ...... 11

Certain Personal Data and Mobile Communications Devices and Related Software, Inv. No. 337-TA-710, USITC Pub. No. 4331, Comm’n Op. (June 2012) ...... 5, 11

Certain Self-Cleaning Litter Boxes and Components Thereof, Inv. No. 337-TA-625, USITC Pub. No. 4259, Comm’n Op. (Oct. 2011) ...... 13

Certain Two-Handle Centerset Faucets and Escutcheons, and Components Thereof, Inv. No. 337-TA-422, USITC Pub. No. 3332, Comm’n Op. (Jul. 2000)...... 5

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Table of Exhibits

Exhibit 1 http://www.comscore.com/Insights/Press_Releases/2013/3/comScore_ Reports_January_2013_U.S._Smartphone_Subscriber_Market_Share (Mar. 6, 2013) (accessed Mar. 15, 2013)

Exhibit 2 http://www.forbes.com/sites/chuckjones/2013/02/25/android-regains- us-smartphone-market-share-lead/ (Feb. 25, 2013) (accessed Mar. 13, 2013)

Exhibit 3 comScore, Mobile Future in Focus 2013 at 22 (Feb. 2013)

Exhibit 4 http://www.macworld.com/article/1165992/analyst_only_one_in_ten_t ablets_sold_has_a_cellular_connection.html (Mar. 2012) (accessed Mar. 25, 2013)

Exhibit 5 http://www.localytics.com/blog/2012/only-6-of-ipad-app-sessions-on- cellular-connection/ (Mar. 22, 2012) (accessed Mar. 25, 2013)

Exhibit 6 http://www.samsung.com/us/mobile/at-t; http://www.samsung.com/us/ mobile/at-t-tabs; and http://www.att.com/global-search/search.jsp? App_ID=HOME&autosuggest=FALSE&tabPressed=FALSE&q=sams ung#!/Shop/Wireless/Wireless phones & devices/ (accessed Mar. 28, 2013)

Exhibit 7 http://www.motorola.com/us/consumers/Mobile-Phones/mobile- phones,en_US,sc.html#?prefn1=carrier&prefv1=att; and http://www. att.com/global-search/search.jsp?App_ID=HOME&GS_Form_Src= true&autoSuggest=TRUE&q=motorola#!/Shop/Wireless/Wireless phones & devices/ (accessed Mar. 28, 2013)

Exhibit 8 http://www.nokia.com/us-en/phones/att/; and http://www.att.com/ global-search/search.jsp?App_ID=HOME&GS_Form_Src=true& autoSuggest=FALSE&q=nokia&x=0&y=0#!/Shop/Wireless/Wireless phones & devices/ (accessed Mar. 28, 2013)

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I. INTRODUCTION

The Office of Unfair Import Investigations (“OUII”) respectfully submits this Response to the Commission’s March 13, 2013 Notice Requesting Additional Written Submissions on

Remedy and the Public Interest. See 78 Fed. Reg. 16,865 (Mar. 19, 2013). In this investigation,

Complainants Samsung Electronics Co., Ltd. and Samsung Telecommunications America, LLC

(collectively “Samsung”) have alleged that certain products of Respondent Apple, Inc. (“Apple”) infringe the asserted claims of United States Patent Nos. 7,706,348 (“the ’348 Patent”),

7,486,644 (“the ’644 Patent”), 6,771,980 (“the ’980 Patent”), and 7,450,114 (“the ’114 Patent”), in violation of Section 337 of the Tariff Act of 1930, as amended.

II. RESPONSES TO QUESTIONS

1. How would remedial orders barring the entry and further distribution of the Apple articles alleged to infringe the asserted claims of the ’348 patent affect the public interest, as identified in 19 U.S.C. §§ 1337(d)(1) and (f)(1)? The Commission is particularly interested in the effect on the public interest with respect to (a) the percentage of the total number of imported mobile telephone handsets that would be affected by such orders, (b) the percentage of the total number of imported cellular-network-enabled tablets that would be affected by such orders, and (c) the qualitative impact of exclusion of such handsets and tablets. The Commission is also interested in any other relevant market information bearing on the four statutory public interest factors. In addressing these issues, the Commission requests that submitters avoid discussing issues related to standards-setting organizations, as the record concerning those issues has been well developed.

If the Commission determines that a violation of Section 337 exists, it must also determine the effects of any proposed remedy upon the public interest. 19 U.S.C. §§ 1337

(d)(1), (f)(1). Public interest considerations include the effect of the remedy on (1) the public health and welfare, (2) competitive conditions in the U.S. economy, (3) the U.S. production of like or directly competitive articles, and (4) U.S. consumers. Id. § 1337(d)(1); see also Certain

Abrasive Products Made Using a Process for Powder Preforms, and Products Containing Same,

Inv. No. 337-TA-449, USITC Pub. No. 3530, Comm’n Op. at 8 (Aug. 2002). While the

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Commission has at times delegated the authority to take evidence and make findings and

recommendations relating to public interest considerations to the Administrative Law Judge, see

19 C.F.R. § 210.50(b)(1) (2012), it did not do so in this investigation.1

There have been few instances when public interest considerations have prevented the

Commission from issuing a remedy. See, e.g., Certain Automatic Crankpin Grinders, Inv. No.

337-TA-60, USITC Pub. No. 1022, Comm’n Det. & Order at 2 (1979) (overriding national policy in increasing supply of fuel-efficient automobiles; domestic industry unable to supply

U.S. demand); Certain Inclined Field Acceleration Tubes, Inv. No. 337-TA-67, USITC Pub. No.

1119, Comm’n Op. at 21-31 (1980) (overriding public interest in continuing basic atomic research with imported acceleration tubes deemed to be of higher quality than domestic product);

Certain Fluidized Supporting Apparatus, Inv. No. 337-TA-182/188, USITC Pub. No. 1667,

Comm’n Op. at 23-25 (Oct. 1984) (relief denied where no comparable substitutes available; domestic producer could not meet demand for hospital beds for burn patients). For the reasons provided below, OUII is of the view that the public interest considerations identified in

Section 337(d) do not bar an exclusion order covering Respondent’s accused products.

(a) The percentage of the total number of imported mobile telephone handsets that would be affected by such orders:

The mobile telephone handsets that likely would be affected by remedial orders barring the entry and further distribution of the products accused of infringing the asserted claims of the

’348 patent appear to represent approximately one-fifth of the U.S. smartphone market, calculated as follows. First, according to Samsung, “Apple’s smartphones represent only one- third of the total domestic smartphone market.” Samsung Statement on the Public Interest at 5

1 While Apple now argues that a remedy would not be in the public interest, it did not request that public interest issues be delegated to the Administrative Law Judge at the beginning of the investigation.

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(Oct. 22, 2012).2 Recent statistical analyses seem to support this claim. During the three months

ending in January 2013, 129.4 million people in the United States owned smartphones, representing a 55-percent mobile market penetration.3 Of these U.S. smartphone subscribers, on

average 37.8 percent were Apple users:

Average Share (%) of U.S. Smartphone Subscribers Age 13+4

Manufacturer Oct-12 Jan-13 Point Change Apple 34.3% 37.8% 3.5 All Google/Android models 53.6% 52.3% -1.3 - Samsung 19.5% 21.4% 1.9 - Other Manufacturers 34.1% 30.9% -3.2 Other OS models 11.6% 9.5% -2.1 Method: 3-month average ending Jan. 2013 vs. 3-month average ending Oct. 2012 Source: comScore MobiLens

However, not all imports of imported Apple telephone handsets are likely to be affected if an exclusion order is based solely on the ’348 patent. Only Apple products operating on the

AT&T wireless network have been accused of infringing this patent. E.g., Hearing Tr.

at 484:8-15 (Min). Smartphones operating on the AT&T network represent an apparently declining share of the U.S. smartphone market, currently 28.2 percent:

2 Samsung cites the following press release: http://www.comscore.com/Insights/Press_Releases/ 2012/10/comScore_Reports_August_2012_U.S._Mobile_Subscriber_Market_Share (Aug. 2012).

3 Exhibit 1 (http://www.comscore.com/Insights/Press_Releases/2013/3/comScore_Reports_ January_2013_U.S._Smartphone_Subscriber_Market_Share (Mar. 6, 2013) (accessed Mar. 15, 2013)).

4 Id.

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U.S. Smartphone Market Share by Wireless Network5

Wireless Network Jan-12 Oct-12 Nov-12 Dec-12 Jan-13 AT&T 36.4% 34.7% 35.4% 33.3% 28.2% Verizon 33.0% 27.5% 31.9% 32.0% 35.2% Sprint Nextel 13.4% 19.9% 14.5% 14.8% 14.2% T-Mobile 7.0% 8.4% 7.1% 8.2% 9.1% Other 10.3% 9.5% 11.0% 11.7% 13.3% Source: Kantar Worldpanel

Of the smartphones operating on the AT&T network in the United States, 69.9 percent are

reported to be Apple products:

Market Share Within the AT&T Network by Operating System6

Operating System Jan-12 Oct-12 Nov-12 Dec-12 Jan-13 iOS 69.5% 66.4% 71.8% 74.7% 69.9% Android 23.1% 25.9% 22.1% 19.6% 24.5% Other 7.4% 7.8% 6.2% 5.7% 5.6% Source: Kantar Worldpanel

This suggests that as of January 2013, Apple smartphones operating on the AT&T wireless

network should account for approximately 20 percent of the total U.S. smartphone market

(0.282 * 0.699 = 0.197).

(b) The percentage of the total number of imported cellular-network-enabled tablets that would be affected by such orders,

Apple iPads appear to account for approximately 42.9 percent of the tablet market in the

United States.7 This figure includes WiFi-only iPads as well as those with telecommunications

capabilities. In 2012, however, only one in ten iPads sold used a cellular connection, on either

5 Exhibit 2 (http://www.forbes.com/sites/chuckjones/2013/02/25/android-regains-us-smartphone- market-share-lead/ (Feb. 25, 2013) (accessed Mar. 13, 2013)).

6 Id.

7 Exhibit 3 at 22 (comScore, Mobile Future in Focus 2013 (Feb. 2013)).

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the AT&T or the Verizon network.8 Even assuming that the proportion of cellular-network-

enabled iPads using AT&T is as high as the proportion of iPhones using AT&T, 69.9 percent,

this suggests that only three percent of the tablet market in the United States likely would be

affected by an exclusion order based on the ’348 patent (0.429 * 0.1 * 0.699 = 0.029).

(c) The qualitative impact of exclusion of such handsets and tablets.

In OUII’s view, the qualitative impact of excluding the products accused of infringing the

asserted claims of the ’348 patent would not rise to the level of harm threatened in past

investigations where the Commission determined that an exclusion order would not be in the

public interest. First, with regard to the public health and welfare, OUII notes that the public

interest favors the protection of U.S. intellectual property rights by excluding infringing imports.

See, e.g., Certain Two-Handle Centerset Faucets and Escutcheons, and Components Thereof,

Inv. No. 337-TA-422, USITC Pub. No. 3332, Comm’n Op. at 9 (Jul. 2000). Moreover, OUII is

unaware of any health concerns that would arise if the accused products were excluded from the

United States. See, e.g., Certain Personal Data and Mobile Communications Devices and

Related Software, Inv. No. 337-TA-710, USITC Pub. No. 4331, Comm’n Op. at 74 (June 2012)

(“That ‘mobile phones’ may play a critical role in public health and safety does not mean that

[one manufacturer’s] smartphones play a critical role in public health and safety that other

smartphones cannot.”)

Second, OUII submits that a significant adverse effect on competitive conditions in the

U.S. economy would be unlikely, as there would still be considerable competition among

8 Exhibit 4 (http://www.macworld.com/article/1165992/analyst_only_one_in_ten_ tablets_sold_has_a_cellular_connection.html (Mar. 2012) (accessed Mar. 25, 2013)); Exhibit 5 (http://www.localytics.com/blog/2012/only-6-of-ipad-app-sessions-on-cellular-connection/ (Mar. 22, 2012) (accessed Mar. 25, 2013)) (10.3% of iPads and 6% of iPad app sessions use cellular connection).

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smartphone and tablet suppliers. Two-thirds of the U.S. market already consists of non-Apple

products, which compete with one another on price and product features. In the smartphone

market, for example, Samsung holds only a 21.4 percent market share, with competitors such as

Motorola, Ericsson, Nokia, HTC, LG Electronics, and Research in Motion accounting for

another 40.4 percent of the current U.S. market (non-Samsung Android models: 30.9%; other

OS models 9.5%).9 Competition among these manufacturers will continue unabated regardless of whether an exclusion order is imposed on a subset of Apple devices.

Third, there are multiple sources of “articles that are like or directly competitive with those that are the subject of the investigation[,]” although there is no evidence that any smartphones or tablets (including Apple’s) are manufactured in the United States. In the few instances in which public interest concerns have led to the denial of relief after a violation of section 337 has been found, a key consideration has been the complainant’s inability to meet consumer demand if the respondent’s products were excluded. See, e.g., Certain Fluidized

Supporting Apparatus, Inv. No. 337-TA-182/188, USITC Pub. No. 1667, Comm’n Op. at 23-25

(any increase in domestic production would not match rising demand). Here, there is no evidence that U.S. demand for the accused products cannot be met by other suppliers of directly competitive devices, including Samsung and its licensees. See response to Question 2 below.

Finally, the effect of an exclusion order on U.S. consumers need not be severe, especially if the Commission determines to delay the effective date of the exclusion order to allow AT&T and its vendors to accumulate a sufficient inventory of substitute products, such as Android smartphones and tablets. A delayed effective date could also allow Apple or other manufacturers

9 Exhibit 1 (http://www.comscore.com/Insights/Press_Releases/2013/3/comScore_Reports_ January_2013_U.S._Smartphone_Subscriber_Market_Share); Samsung Statement on the Public Interest at 5 (Oct. 22, 2012).

-7- time to develop comparable noninfringing products before the exclusion order takes effect. See response to Question 3 below. Accordingly, in OUII’s view there is no compelling public interest factor suggesting that the Commission should not provide relief if a violation of

Section 337 is found.

2. What third, fourth, and later generation products (if any) are currently available in the U.S. market that are authorized by Samsung to utilize the technology covered by the asserted claims of the ’348 patent? Are these products acceptable substitutes for the accused iPhones and iPads and are they widely viewed to be acceptable substitutes for the accused iPhones and iPads?

Third, fourth, and later generation products currently available in the U.S. market and authorized to use the technology covered by the asserted claims of the ’348 patent include at least Samsung’s own 3G and/or 4G/LTE products that operate on the AT&T wireless network in the United States. These products include at least the Galaxy Exhilarate, Galaxy Focus S,

Galaxy Focus II, Galaxy Focus Flash, Galaxy S II, Galaxy S III, Galaxy S4; Galaxy Express,

Galaxy Rugby Pro, Rugby II, Rugby III, Nexus S, Captivate Glide, Galaxy Appeal GoPhone,

Galaxy Note, and Galaxy Note II smartphones, as well as the ATIV Smart PC, Galaxy Tab, and

Galaxy Tab 2 tablets.10

In addition, Samsung has reported that [

]. Compl. Conf. Exh. 62 (rev. Jul. 15, 2011) (EDIS Doc. No.

454591); see response to Question 6 below. [

10 See Exhibit 6 (http://www.samsung.com/us/mobile/at-t; http://www.samsung.com/us/mobile/ at-t-tabs; and http://www.att.com/global-search/search.jsp?App_ID=HOME&autoSuggest= FALSE&tabPressed=FALSE&q=samsung#!/Shop/Wireless/Wireless phones & devices/ (accessed Mar. 28, 2013)). OUII takes no position as to whether each of these products actually practices the technology covered by the asserted claims of the ’348 patent.

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]11

Moreover, it is possible that noninfringing alternative products are available from other,

[ ] suppliers, as the record shows that it is possible to practice the relevant industry standards without also practicing the asserted claims of the ’348 patent. Specifically, [

], Final ID at 547, even though it is undisputed that they comply with all relevant industry standards. [ ] are UMTS devices that are compliant with

3GPP TS 25.212 rel. 99 or later, and all are capable of operating on a CDMA-based telecommunications network. See, e.g., Hearing Tr. at 602:18-603:15 (Min). It is possible that smartphones produced by other manufacturers similarly comply with 3GPP TS 25.212 rel. 99 or later without infringing any of the asserted claims of the ’348 patent.

Finally, OUII notes that in the smartphone and tablet markets, “platform loyalty” is a significant factor. Owners of Apple devices tend to stick with Apple products, while Android users tend to remain loyal to the Android operating system.12 Even so, in OUII’s view, the

11 [

]

12 See, e.g., Exhibit 3 at 30 (comScore, Mobile Future in Focus 2013) (“Although tablets and smartphones are different devices with varying functions, there is evidence of platform loyalty among consumers. Most mobile consumers may not resemble the stereotypical Apple ‘fanboy,’ but their propensity to favor one platform over another is apparent.”).

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Source: comScore MobiLens and TabLens, U.S., 3-month average ending Dec-2012

Exhibit 3 at 33 (comScore, Mobile Future in Focus 2013). In most cases, consumers use “apps” to perform these functions. Id. at 37 (“4 out of every 5 mobile media minutes occur via apps, while mobile web usage drives the remainder.”). OUII submits that in addition to providing mobile web access, both the iOS operating system used in the iPhones and iPads and the Android system used in the comparable substitutes offered by Samsung and others feature apps that perform each of the functions listed above:

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Source: comScore Mobile Metrix, U.S., Dec-2012

Id. at 37. For example, comScore reports that consumers frequently use Facebook on both platforms for accessing social networking, Google Maps for accessing maps, and YouTube for watching video. Id. Where an app is only available on one platform, such as Apple iTunes, a comparable substitute is available on the other platform, such as Google Play. Id. Since consumers can, and do, perform the same activities on the same AT&T wireless network using either the accused products or an Android equivalent, OUII submits that authorized Android smartphones and tablets are acceptable, directly competitive substitutes for the accused products.

3. In what ways, if any, should a remedy with respect to infringement of the ’348 patent be specifically tailored to avoid harm to the public interest, as identified in 19 U.S.C. §§ 1337(d)(1) and (f)(1)? In addressing this issue, the Commission requests that submitters avoid discussing issues related to standards-setting organizations, as the record concerning those issues has been well developed.

OUII submits that any harm that an exclusion order might cause to U.S. consumers or competitive conditions in the U.S. economy could be mitigated by delaying the effective date of the exclusion order by four to six months, thus allowing AT&T vendors time to switch to

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comparable substitute products before the exclusion order takes effect. See, e.g., Certain

Personal Data and Mobile Communications Devices and Related Software, Inv. No. 337-TA-

710, USITC Pub. No. 4331, Comm’n Op. at 83 (June 2012) (delaying exclusion of articles

subject to order by four months to minimize impact on third parties). In Investigation 337-TA-

710, the Commission also narrowed the effect of the exclusion order by permitting continued

imports of respondent’s refurbished products to be provided to consumers as replacements under

warranty or an insurance contract. Personal Data and Mobile Communications Devices, USITC

Pub. No. 4331, Comm’n Op. at 83-84; see also Certain Automated Mechanical Transmission

Sys. for Medium-Duty & Heavy Duty Trucks & Components Thereof, Inv. No. 337-TA-503,

USITC Pub. No. 3934, Comm’n Op. at 4-5, 7 (Aug. 2007) (exempting replacement parts necessary to service respondent’s infringing systems). In OUII’s view, either or both of these modifications would result in a narrower exclusion that would still afford meaningful relief to

Samsung, while minimizing the effect of the exclusion order on third parties.

4. With respect to the ’348 patent, Samsung’s infringement case before the Commission relied upon accused third and fourth generation Apple products that operate on the AT&T wireless network. If the Commission were to issue remedial orders covering articles covered by the asserted claims of the ’348 patent, would such an order cover (a) Apple products that operate on other wireless networks in the United States, and (b) later generation Apple products (e.g., iPhone 5, later iPad versions)?

In a Section 337 investigation, “the scope of the remedy is dependent upon the scope of the investigation, which is determined by the notice of investigation.” Automated Mechanical

Transmission Sys., Inv. No. 337-TA-503, Comm’n Op. at 4; see also Certain NOR & NAND

Flash Memory Devices & Products Containing Same, Inv. No. 337-TA-560, Order No. 14

(Jul. 6, 2006) (notice of investigation determines scope of investigation). In a patent-based investigation, the Commission’s remedial order encompasses all articles within the scope of the notice of investigation that infringe the asserted claims of the patent or patents identified in the

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order, regardless of whether the particular model numbers were specifically discussed in the

Commission’s infringement analysis. See, e.g., Certain Ground Fault Interrupters and Products

Containing Same, Inv. No. 337-TA-615, USITC Pub. No. 4146, Comm’n Op. at 27 (Oct. 2011)

(rejecting request to “deviate from the long-standing Commission practice of declining to limit exclusion orders to specific model numbers”). Thus, a limited exclusion order based on the ’348

patent would cover later generation Apple products if those products continued to use the same

infringing functionality. Products that did not contain that functionality, such as products that

were not part of a “CDMA mobile communication system” or did not use a “transport format

combination indicator,” would not infringe the ’348 patent and therefore would not be covered

by the exclusion order. See JXM-1 (’348 patent). OUII has recommended that the Commission

follow this standard approach in this investigation if a violation of Section 337 is found. OUII

Comm’n Br. at 40-41; OUII Proposed Limited Exclusion Order.

In this investigation, Samsung contends that the following UMTS-capable Apple

products infringe claims 75-76 and 82-84 of the ’348 patent: all AT&T models of [

]. Hearing Tr. at 484:8-15 (Min).

Products designed to work with other carriers are specifically not accused. Id. at 1260:15-22.

As a result, there is no evidence in the record as to whether “Apple products that operate on other

wireless networks in the United States” would infringe the asserted claims of the ’348 patent.

The same is true with regard to “later generation Apple products,” such as the iPhone 5 or the

iPad 3. Accordingly, the question of whether such products would be within the scope of a

remedial order based on the ’348 patent would have to be determined in the future on a case-by-

case basis, either by the U.S. Bureau of Customs and Border Protection through a certification

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process or scope ruling, or by the Commission in an advisory or enforcement proceeding.13 See,

e.g., Certain Self-Cleaning Litter Boxes and Components Thereof, Inv. No. 337-TA-625, USITC

Pub. No. 4259, Comm’n Op. at 59-60 (Oct. 2011) (refusing to carve out “new products” from an

exclusion order because “the Commission has regulatory safeguards in place to prevent

enforcement of an exclusion order against products that do not violate section 337”). To address

the question in the abstract at this time would be tantamount to issuing a pre-exclusion order

“advisory opinion,” for which the Commission Rules do not provide.14 See Certain MEMs

Devices and Products Containing the Same, Inv. No. 337-TA-700, Order No. 8 at 6-7 (Jul. 12,

2010) (denying motion for summary determination of noninfringement by unaccused products);

Certain MEMs Devices and Products Containing the Same, Inv. No. 337-TA-700, USITC Pub.

4294, Comm’n Op. at 27-28 (Nov. 2011) (express carve-out unwarranted where complainant has not moved to exclude products from scope of investigation and respondent’s motion for summary judgment was denied); Certain Ceramic Capacitors and Products Containing the

Same, Inv. No. 337-TA-692, Order No. 37 (June 24, 2010).

13 OUII has agreed with Apple that any exclusion order issued in this investigation should include a certification provision to assist in enforcing the order. OUII Reply Br. on Issues Under Review & on Remedy, Public Interest, & Bonding at 25 (Dec. 10, 2012).

14 Alternatively, Apple could have presented evidence at the hearing concerning unaccused products in an effort to demonstrate that they do not infringe. See Certain Electronic Digital Media Devices and Components Thereof, Inv. No. 337-TA-796, Initial Det. at 8-11 (Oct. 29, 2012) (under review); Certain Flash Memory Circuits and Products Containing Same, Inv. No. 337-TA-382, USITC Pub. No. 3046, Comm’n Op. at 12-16 (Jul. 1997).

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5. Please summarize the history to date of negotiations between Samsung and Apple concerning any potential license to the ’348 patent, either alone or in conjunction with other patents. Please provide copies of all written offers and counteroffers concerning a license that would cover the ’348 patent, whether made by Samsung or Apple.

Based on the record evidence, OUII understands that Samsung and Apple [

-15-

]

-16-

OUII has not been privy to any further negotiations between Samsung and Apple concerning any potential license to the ’348 patent or to a patent portfolio containing the ’348 patent. Accordingly, OUII refers the Commission to the responses of the private parties for any additional information in response to this question.

6. Please summarize all licenses to the ’348 patent granted by Samsung to any entity. Please provide copies of, or cite to their location in the record of this investigation, all agreements wherein Samsung grants any entity a license to the ’348 patent.

The Complaint states that Samsung Electronics Co., Ltd. “has current license agreements under Asserted Patents and has current agreements containing a covenant-not-to-sue or non- assertion clause with respect to Asserted Patents with the entities identified in Confidential

Exhibit 62.” In a revised version of Confidential Exhibit 62 dated July 15, 2011, Samsung reported the following:

Entities with Current License Agreements Under the Asserted Patents

[

]

Entities with Current Agreements Containing a Covenant-Not-To-Sue or Non-Assertion Clause with Respect to the Asserted Patents

[

]

Compl. Conf. Exh. 62 (rev. Jul. 15, 2011) (EDIS Doc. No. 454591).15

15 A further revised list was originally submitted to the Administrative Law Judge as proposed trial exhibit CX-1602C, but the exhibit was withdrawn and is not included in the record.

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Apple claims that [ ] is also currently licensed to the ’348 and ’644 patents by virtue of a portfolio cross-license. Apple Posth. Br. at 30-3, 140-41. Specifically,

[

] Apple Posth. Br. at 141.

In addition, record documents indicate that Samsung [

]:16

Trial Exh. # Effective Date [ ] Summary of Key Terms [

16 [

]

-18-

Trial Exh. # Effective Date [ ] Summary of Key Terms

-19-

Trial Exh. # Effective Date [ ] Summary of Key Terms

]

Cf. CX-373C, CX-422C through CX-432C, CX-446C [

].

7. Samsung and Apple are each requested to submit specific licensing terms for the ’348 patent that each believes are fair, reasonable, and non-discriminatory. Would Samsung’s terms change if the Commission were to enter remedial orders against Apple’s products accused in this investigation? If so, please explain whether such an offer would be fair, reasonable, and non-discriminatory.

OUII is not privy to Samsung’s or Apple’s current negotiating positions with regard to specific licensing terms for the ’348 patent. Accordingly, OUII refers the Commission to the responses of the private parties for information in response to this question.

8. Which factors in Georgia-Pacific Corp. v. United States Plywood Corp., 318 F. Supp. 1116 (S.D.N.Y. 1970) are most relevant to determining whether Samsung has offered to license the ’348 patent to Apple on fair, reasonable, and non- discriminatory terms?

In Georgia-Pacific, the court set forth “[a] comprehensive list of evidentiary facts relevant, in general, to the determination of the amount of a reasonable royalty for a patent license[.]” Georgia-Pacific Corp. v. United States Plywood Corp., 318 F. Supp. 1116, 1120

(S.D.N.Y. 1970). In district court this amount typically is used to calculate money damages, which are not available in Section 337 investigations. See, e.g., id. at 1143. OUII understands the Commission’s question to assume that this calculated amount can also be compared with a royalty rate proposed in a licensing offer for the purpose of determining whether the offered rate is objectively “reasonable.” If used for this purpose in a Section 337 investigation involving a

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FRAND affirmative defense,17 some of the Georgia-Pacific factors would be more germane than others.

In OUII’s view, the following Georgia-Pacific factors would be particularly relevant to determining whether a licensing offer contains FRAND terms in the context of a Section 337 investigation:

1. The royalties received by the patentee for the licensing of the patent in suit, proving or tending to prove an established royalty.

2. The rates paid by the licensee for the use of other patents comparable to the patent in suit.

. . .

12. The portion of the profit or of the selling price that may be customary in the particular business or in comparable businesses to allow for the use of the invention or analogous inventions.

13. The portion of the realizable profit that should be credited to the invention as distinguished from non-patented elements, the manufacturing process, business risks, or significant features or improvements added by the infringer.

. . .

15. The amount that a licensor (such as the patentee) and a licensee (such as the infringer) would have agreed upon (at the time the infringement began) if both had been reasonably and voluntarily trying to reach an agreement; that is, the amount which a prudent licensee – who desired, as a business proposition, to obtain a license to manufacture and sell a particular article embodying the patented invention – would have been willing to pay as a royalty and yet be able to make a reasonable profit and which amount would have been acceptable by a prudent patentee who was willing to grant a license.

17 OUII is of the view that this investigation does not involve a true FRAND situation because, as the Final ID found, it is possible to practice the relevant industry standard without infringing the asserted ’348 patent. Final ID at 547. Accordingly, the ’348 patent cannot be a “standard- essential” patent. Specifically, [ ]. See OUII Br. on Issues Under Review & on Remedy, Public Interest, & Bonding at 10-12 (Dec. 3, 2012) (“OUII Comm’n Br.”).

-21-

Georgia-Pacific Corp., 318 F. Supp. at 1120. Determining the portion of the customary realizable profit that would be consumed by the proposed royalty allows the Commission to assess whether complainant’s proposal is “fair” and “reasonable.” By comparing the complainant’s licensing offer with royalties received by licensees of the same or similar patents, the Commission can determine whether an offer is “non-discriminatory.”

The following factors, while less relevant to setting a FRAND royalty rate, may still be important and should be considered:

6. The effect of selling the patented specialty in promoting sales of other products of the licensee; that existing value of the invention to the licensor as a generator of sales of his non-patented items; and the extent of such derivative or convoyed sales.

7. The duration of the patent and the term of the license.

8. The established profitability of the product made under the patent; its commercial success; and its current popularity.

. . .

14. The opinion testimony of qualified experts.

Id. Considering these factors would assist the Commission in determining whether the amount of a proposed royalty is reasonable within the context of the industry as a whole.

OUII submits that the following factors may not be relevant to determining a FRAND royalty rate because in a FRAND setting the licensor is required to license the patented technology to all comers and no longer has the option of preserving a patent monopoly or restricting the number or type of licensees:

3. The nature and scope of the license, as exclusive or non-exclusive; or as restricted or non-restricted in terms of territory or with respect to whom the manufactured product may be sold.

4. The licensor’s established policy and marketing program to maintain his patent monopoly by not licensing others to use the invention or by granting licenses under special conditions designed to preserve that monopoly.

-22-

5. The commercial relationship between the licensor and licensee, such as, whether they are competitors in the same territory in the same line of business; or whether they are inventor and promoter.

Id.

Finally, OUII submits that the following factors would not be relevant to determining a royalty rate for a standards-essential patent because, by definition, the patented technology must be adopted by all who practice the technological standard:

9. The utility and advantages of the patent property over the old modes or devices, if any, that had been used for working out similar results.

10. The nature of the patented invention; the character of the commercial embodiment of it as owned and produced by the licensor; and the benefits to those who have used the invention.

11. The extent to which the infringer has made use of the invention; and any evidence probative of the value of that use.

Id.

Please apply any relevant Georgia-Pacific factors to Samsung’s offer(s) to license the ’348 patent to Apple. This analysis should include a comparison of Samsung’s licensing offers to a hypothetical negotiation between the parties prior to adoption of the ’348 patent into the standard at issue here. What other factors, if any, are relevant in determining whether Samsung has made a fair, reasonable, and non- discriminatory offer?

OUII submits that the evidence of record is not sufficient to determine a FRAND royalty rate for the ’348 patent with regard to Apple.18 This fact, however, should not delay the ultimate resolution of this investigation at this time, for the following reasons:

First, OUII submits that Apple has not met its burden of proof concerning FRAND- related issues, including the application of the Georgia-Pacific factors and the determination of a reasonable royalty. As discussed in OUII’s original brief to the Commission, Apple has the

18 OUII recognizes that the private parties may provide additional evidence in connection with their submissions.

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burden to show that the ’348 patent is a standard-essential patent, that Samsung had FRAND

obligations with regard to that patent, and that Samsung has not met those obligations. OUII

Comm’n Br. at 6-7, 17-18. Here, however, the ’348 patent is not actually standard-essential,

since it is possible to meet the relevant standard without practicing the patent. Specifically,

[

], Final ID at 547, even though it is undisputed that the products successfully

operate and are compliant with 3GPP TS 25.212 rel. 99 or later, Hearing Tr. at 602:18-603:15

(Min). Furthermore, in OUII’s view the fact that Samsung [

], a fact that Apple emphasizes, says little about whether Samsung’s overall conduct satisfies any FRAND obligations arising from the ’348 patent. See CX-1589C

(Samsung licensing offer to Apple (Jul. 25, 2011)). Unless a particular standard-setting organization requires otherwise, FRAND obligations can be satisfied over a course of dealings, as long as the patent-holder conducts negotiations in a fair, reasonable, and nondiscriminatory manner. In OUII’s view, Apple has not established that Samsung’s overall course of conduct demonstrates a failure to offer to license the ’348 patent for a reasonable royalty of the type contemplated in Georgia-Pacific.

Moreover, OUII submits that even if Samsung has incurred FRAND obligations with respect to the ’348 patent, the unusual circumstances of this investigation are not readily amenable to a Georgia-Pacific-type analysis. First, Georgia-Pacific asks what amount the two parties would have agreed upon as a reasonable royalty rate “if both had been reasonably and voluntarily trying to reach an agreement” at the time the infringement began. Georgia-Pacific

Corp., 318 F. Supp. at 1120. In a FRAND context, however, the question is: What would have been a reasonable rate as of the time that the licensor declared the patent essential to a standard

-24-

and committed to license the technology on fair, reasonable, and nondiscriminatory terms? The parties are no longer “voluntarily trying to reach an agreement” – the patent-holder must offer a license, and the licensee must either agree to licensing terms or forego practicing the industry standard. Second, Georgia-Pacific presupposes that that it is possible to construct a hypothetical neutral situation in which both parties have as their main goal the successful negotiation of a license agreement, but have not yet litigated the issues of infringement or validity. In a true

FRAND context, unlike in normal litigation, the patent at issue is presumably “essential” (or at least far superior to available alternatives), and is thus necessarily infringed, inevitably affecting the bargaining positions of both parties. Finally, the current situation is unique in that the two largest competitors in the industry, Samsung and Apple, are engaged in worldwide, multi-forum litigation, including reciprocal attempts by Apple to bar Samsung products from the United

States. This, too, must inevitably affect their bargaining positions. For these reasons, OUII submits that the Georgia-Pacific factors are of limited use in this investigation or in the

Section 337 context generally.

Respectfully submitted,

/s/ Lisa A. Murray Anne Goalwin, Acting Director David O. Lloyd, Supervisory Attorney Lisa A. Murray, Investigative Attorney OFFICE OF UNFAIR IMPORT INVESTIGATIONS U.S. International Trade Commission 500 E Street SW, Suite 401 Washington, DC 20436 202-205-2734 202-205-2158 (facsimile) April 3, 2013

EXHIBIT 1 http://www.comscorexom/Insights/Press_Releases/2013/3/comScore_Reports_January_2013_U. S._Smartphone_Su...

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GET OUR MOBILE APP comScore Reports January 2013 U.S. Smartphone Subscriber Market Share Related Products MobiLens Big Jump in January Smartphone Adoption Driven Largely by Apple comScore MobiLens® provides an RESTON, VA, March 6, 2013 - comScore, Inc. (NASDAQ: SCOR), a leader in measuring the digital world, today released data unparalleled view ofthe U.S., European, from the comScore MobiLens service, reporting key trends in the U.S. smartphone industry during the three month average Japanese and Canadian mobile media period ending January 2013. Apple ranked as the top smartphone manufacturer with 37.8 percent OEM market share, while landscapes, connecting data on mobile Google Android led as the #1 smartphone platform with 52.3 percent platform market share. consumer demographics and,.. Learn More Smartphone OEM Market Share

129.4 million people in the U.S. owned smartphones (55 percent mobile market penetration) during the three months ending in January, up 7 percent since October. Apple ranked as the top OEM with 37.8 percent of U.S. smartphone subscribers (up 3.5 percentage points from October). Samsung ranked second with 21.4 percent market share (up 1.9 percentage points), followed by HTC with 9.7 percent share, Motorola with 8.6 percent and LG with 7 percent (up 0.3 percentage points).

Top Smartphone OEMs 3 Month Avg. Ending Jan. 2013 vs. 3 Month Avg. Ending Oct. 2012 Total U.S. Smartphone Subscribers Age 13+ Source: comScore MobiLens

Share (%) of Smartphone Subscribers

Oct-12 Jan-13 Point Change

Total Mobile Subscribers 100.0% 100.0% N/A

Apple 34.3% 37.8% 3.5

Samsung 19.5% 21.4% 1.9

HTC 11.4% 9.7% -1.7

Motorola 10.0% 8.6% -1.4

LG 6.7% 7.0% 0.3

Smartphone Platform Market Share

Google Android ranked as the top smartphone platform with 52.3 percent market share, while Apple's share increased 3.5 percentage points to 37.8 percent. BlackBerry ranked third with 5.9 percent share, followed by Microsoft (3.1 percent) and Symbian (0.5 percent).

Top Smartphone Platforms 3 Month Avg. Ending Jan. 2013 vs. 3 Month Avg. Ending Oct. 2012 Total U.S. Smartphone Subscribers Age 13+ Source: comScore MobiLens

Share (%) of Smartphone Subscribers

Oct-12 Jan-13 Point Change

Total Smartphone Subscribers 100.0% 100.0% N/A

Google 53.6% 52.3% -1.3

Apple 34.3% 37.8% 3.5

BlackBerry 7.8% 5.9% -1.9

Microsoft 3.2% 3.1% -0.1

Rvjnhian 0 6% 0 5% -0 1

3/15/2013 5:27:39 PM http://www.comscore.com/m^

About MobiLens MobiLens data is derived from an intelligent online survey of a nationally representative sample of mobile subscribers age 13 and older. Data on mobile phone usage refers to a respondent's primary mobile phone and does not include data related to a respondent's secondary device.

About comScore comScore, Inc. (NASDAQ: SCOR) is a global leader in digital measurement and analytics, delivering insights on web, mobile and TV consumer behavior that enable clients to maximize the value of their digital investments. For more information, please visit www.comscore.com/companyinfo.

Tags: Android, Apple, BlackBerry, Google, HTC, iPhone, LG, Microsoft, Mobile, Rankings, RIM, Samsung, Smartphone, Symbian

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3/15/2013 5:27:39 PM EXHIBIT 2 http://www.forbesxom/sites/chuckjones/2013/02/25/android-regains-us-smartphone-market-share-lead/

Chuck Jones, Contributor I cover technology companies, worldwide economies and the stock market Followed)

TECH | 2/25/2013 @ 7:58PM | 3,826 views Android Regains US Smartphone Market Share Lead

I . HPI iii 1F1 5 comments, 4 called-out j Comment Now Follow Comments

According to Kantar's latest survey Android became the US 19 smartphone market share leader at 40.4% forth e three months ending in January since losing it last October to iOS. iOS came in second with 45.9% with Microsoft a distant third at 3.2%. 114 Not too surprisingly product cycles have Tweet ilobt* Subititotrm faChln i n ol J*nusry,»)l a large effect on market shares. Before the iPhone 4S was launched in October 2011 Apple had a 26.8% market share in the August 2011 timeframe. iOS's market share increased to 44.9% in December 2011 but subsequently moved down to 35.2% prior to the iPhone 5 China Carriers launch. It got above 50% for the first Smartphone 3G time in the November 2012 timeframe Penetration Only (53-3%) after the iPhone 5 was on the at 22% market but has slid to 45.9% in January l.'Ffl] Chuck Jones iS,1 Contributor 2013.

us Aug. 7. 'liNov. 27. 'iiDec. 25. 'iiAug. 5, '12N0V. 25, 'i2Jan. '13

IOS 26.8% 35.8% 44.9% 35.2% 53.3% 45.9%

Android 60.4% 52.8% 44.8% 55-9% 41.9% 494%

RIM 6.5% 7.0% 6.1% 1.5% 1.4% 0.9%

Symbian 0.6% 0.4% 0.2% 0.0% 0.2% 0.1%

Windows 3.4% 2.1% 2.2% 3.3% 2.7% 3.2%

Bada 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Others 2.4% 1.8% 1.7% 4.2% Q.6% Q.R%

3/18/2013 10:05:23 AM http://www.forbesxom/sites/chuckjones/2013/02/25/android Total 100.1% 99.9% 99.9% 100.1% 100.1% 100.0%

Source: Kantar Worldpanel. Due to rounding may not add to 100.0%.

Verizon has taken the lead in US smartphone market share at 35.2% for the past three months overtaking AT&T with 28.2%. Sprint Nextel is a sold but distant third at 14.2%.

Jan. '12 Oct. 28. '12N0V. 25, 'l2Dec. 23 '12 Jan. '13

AT&T 36.4% 34.7% 35.4% 33.3% 28.2%

Verizon 33-0% 27.5% 31-9% 32.0% 35-2%

Sprint Nextel 13.4% 19.9% 14.5% 14.8% 14.2%

T-Mobile 7.0% 8.4% 7.1% 8.2% 9.1%

Other IQ.3% Q.5% ll.Q% 11.7% 13.3%

Total 100.1% 100.0% 99.9% 100.0% 100.0%

Source: Kantar Worldpanel. Due to rounding may not add to 100.0%. iOS has the greatest market share at Verizon with 56.5% with Android at 39.6%. Windows seems to be gaining some traction with its share increasing from 0.6% in October 2012 to 2.5% in January.

Verizon Jan. '12 Oct. 28. '12N0V. 25. 'l2Dec. 23 '12 Jan. '13 ios 57.2% 47.9% 55.0% 58.8% 56.5%

Android 41.5% 50.5% 43-1% 38.5% 39-6%

RIM 0.6% 0.7% 1.0% 1.2% 0.9%

Windows 0.2% 0.6% 0.4% 1.0% 2.5%

Symbian 0.0% 0.0% 0.0% 0.0% 0.0%

Others Q.6% Q.3% O.R% 0.6% 0.4%

Total 100.1% 100.0% 100.0% 100.1% 99.9%

Source: Kantar Worldpanel. Due to rounding may not add to 100.0%.

3/18/2013 10:05:23 AM http://www.forbesxom/sites/chuckjones/2013/02/25/android-regains-us-smartphone-market-share-lead/ iOS is the dominant platform for AT&T smartphones at almost 70% with Android at 24.5%. Windows has not had the same share gain at AT&T that it has enjoyed at Verizon but has a slightly higher share at 4.3%.

AT&T Jan. '12 Oct. 28. 'i2Nov. 25. 'i2Dec. 23 '12 Jan. '13

ios 69.5% 66.4% 71.8% 74.7% 69.9%

Android 23.1% 25.9% 22.1% 19.6% 24.5%

RIM 4.9% 3.2% 1.8% 1.6% 1.2%

Windows 2.4% 3.9% 3.7% 3.6% 4.3%

Symbian 0.0% 0.2% 0.2% 0.0% 0.0%

Others Q.1% Q.fj% 0.5% 0.5% Q.1%

Total 100.0% 100.1% 100.1% 100.0% 100.0%

Source: Kantar Worldpanel. Due to rounding may not add to 100.0%.

Disclosure: My family and I own Apple shares

3/18/2013 10:05:23 AM EXHIBIT 3

February 2013 SHARE THIS REPORT INTRODUCTION

For each of the past several years, many tech industry pundits have proudly proclaimed that the upcoming year will be “the year of mobile.” And while it may be true that mobile is continually becoming more important to the digital landscape, the industry is only now undergoing its most significant changes.

This report examines the mobile and connected device landscape with a focus on the U.S. market but includes highlights from several other markets: the UK, France, Germany, Spain, Italy, Canada and Japan.

DATA NOTE

This report is based on a combination of sources in the comScore Mobile suite of products, including comScore MobiLens®, comScore TabLens®, comScore Mobile Metrix® and comScore Device Essentials™. The report also includes data from comScore Media Metrix® Multi-Platform (Beta). Smartphones are defined throughout the report as mobile phones that use the Google Android, Apple iOS, BlackBerry, Windows Phone and other similar platforms.

FOR FURTHER INFORMATION, PLEASE CONTACT:

Andrew Lipsman comScore, Inc. +1 312 775 6510 [email protected]

Carmela Aquino comScore, Inc. +1 703 438 2024 [email protected]

3

TABLE OF CONTENTS

7 Executive Summary

11 Mobile and Connected Device Landscape

16 Mobile Network Dynamics

21 Mobile OEM Dynamics

27 Mobile Platform Dynamics

33 Mobile Media Consumption

39 International: Mobile Landscape Across EU5, Japan and Canada

43 Conclusion

47 About comScore

51 Methodology and Definitions

5 With smartphones surpassing 125 million U.S. consumers and tablets now owned by more than 50 million, we have crossed into the Brave New Digital World. EXECUTIVE SUMMARY

2012 was another milestone year in the life of mobile as continued innovation in hardware, software and device functionality lays the groundwork for the future of the industry. Smartphones and tablets are ushering in a new era of multi-platform media, with consumers becoming increasingly agnostic about how, when and where they engage with content. This report will examine how these rapidly changing market dynamics have shaped the current U.S. and international mobile marketplaces and what these changes mean for the coming year as comScore helps bring the mobile future into focus.

MULTI-PLATFORM DYNAMICS SHAPING THE ‘BRAVE NEW DIGITAL WORLD’

With smartphones surpassing 125 million U.S. consumers and tablets now owned by more than 50 million, we have crossed into the Brave New Digital World – a new paradigm of digital media fragmentation in which consumers are always connected. This constant flow of information is not only changing how, when and where consumers engage with media, but is also disrupting established revenue streams, making it paramount for businesses to adapt or risk being left behind. Despite this uncomfortable change, media companies have new opportunities to monetize incremental consumption activity while marketers have the ability to optimize campaigns for maximum effectiveness across multiple channels. Now is the time for businesses to get smarter about how their audiences are behaving in this multi-platform world.

SMARTPHONES SURPASS 50 PERCENT PENETRATION AND BREAK INTO ‘LATE MAJORITY’ OF ADOPTERS

Five years after the launch of the original iPhone, the smartphone market has come of age in the past year with a majority of U.S. mobile consumers now owning these devices featuring advanced capabilities and multimedia access. The most rapid part of the technology adoption curve may now be in the industry’s rear view mirror as smartphones begin to penetrate the “late majority” of consumers. Because these consumers tend to be somewhat resistant to new technology and more price-sensitive than the average consumer, gaining adoption in this segment requires the industry to evolve its product mix and marketing strategies.

7 ANDROID AND iOS CONTROL U.S. SMARTPHONE MARKET

Google’s Android OS, which has been adopted by multiple OEMs, and Apple’s iOS, which is carried exclusively on iPhones, have come to dominate the U.S. smartphone landscape with nearly 90 percent of the market today. Both platforms have continued to grow their respective market shares at the expense of BlackBerry, Windows and HP. This market share dominance is being reinforced by the two platforms’ well-developed app ecosystems, making it even more difficult for the competing platforms to narrow the gap.

SAMSUNG MAKES SPLASH IN SMARTPHONE OEM MARKET

Apple continues to gain ground as the leading smartphone Original Equipment Manufacturer (OEM), but Samsung has seen the most explosive growth in this market over the past couple of years with a year-over-year increase of more than 100 percent and a two-year increase of more than 400 percent. While Apple maintains a healthy lead over #2 Samsung, the gap has been steadily narrowing during a year in which the rivalry heated up between the two smartphone OEM leaders.

APP USAGE, LED BY FACEBOOK AND GOOGLE, DOMINATES MOBILE WEB Consumers have demonstrated a clear preference for engaging with content on smartphones via apps, which account for 4 out of every 5 mobile minutes, rather than the mobile web. As a result, the dynamics of mobile media consumption are proving different from the traditional web. Because of the scarcity of app real estate on the smartphone home-screen, consumers are spending more time concentrated on the apps of major media brands rather than with the long tail of brands. Facebook finished the year as the top U.S. smartphone app, followed by five different Google apps, as major media brands dominated the top of the rankings.

‘SHOWROOMING’ STIRS MAJOR DISRUPTION IN RETAIL AS MOBILE ENTERS BRICK-AND-MORTAR

Many U.S. consumers have come to rely on their smartphones to assist with their in-store shopping, arming them with information in the palm of their hands to ensure they are getting the right product at the best available price. This behavior, known as “showrooming,” is putting significant price pressure on brick-and-mortar retailers as they are forced to compete with e-commerce retailers within the confines of their own stores. With the pricing power so clearly in the hands of the consumer today, the retail industry is rapidly being disrupted as e-commerce grows at 4x the rate of traditional retail while accounting for 1 out of every 10 retail dollars. Brick-and-mortar retailers are being faced with the need to quickly adjust with aggressive defense strategies to protect their businesses and ensure long-term survival.

8 HIGH-SPEED MOBILE CONNECTIVITY HAS UNLEASHED MOBILE CONTENT CONSUMPTION

The improved availability of high-speed Internet access has significantly enhanced the average user’s media consumption experience, contributing to a rapid uptick in mobile media consumption. Default Wi-Fi accessibility for smartphones and tablets has not only off-loaded bandwidth from networks, but has also contributed to a better on-premise (e.g. in-home) browsing experience for users. While Wi-Fi usage has become more prevalent, networks speeds have also improved with 4G and LTE technology as an increasing number of phones on the market are enabled for these speeds. The net result for mobile Internet users is a faster, more seamless browsing experience that has resulted in mobile channels now accounting for 1 out of every 3 digital media consumption minutes.

9 Multi-platform consumption is today’s new reality. 1 in 3 minutes spent online is now spent beyond the PC. MOBILE AND CONNECTED DEVICE LANDSCAPE

RAPID ADOPTION OF SMARTPHONES AND TABLETS USHERS IN ‘BRAVE NEW DIGITAL WORLD’

The past year saw mobile media consumption grow exponentially as smartphone adoption surged nearly 30 percent to more than 120 million owners, while tablets emerged as one of the fastest selling devices in history to reach nearly 50 million owners. Tablets have already achieved a level of adoption in three years that it took smartphones nearly a decade to reach from when they were originally introduced.

140 Smartphone and 120 Tablet Ownership (MM) 100 Source: comScore 80 MobiLens & TabLens, U.S., 2003-2012 60

40

20

0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Smartphone Owners Tablet Owners

Smartphones and tablets are completely reshaping the way consumers connect with content and experience media, with audiences fragmenting even further as attention gets shared across platforms. In this Brave New Digital World, the fundamental economics of digital media are at stake if shifting between platforms means trading dollars for dimes. At the same time, an overall increase in media engagement also means more monetization opportunities for media companies and a greater ability for marketers to optimize campaigns across platforms. Digital businesses still have a chance to effectively navigate this transition and maximize their opportunities while mitigating their risks. Doing so will require a firm grasp of the multi-platform landscape and an understanding of how consumer usage patterns are shifting. Those who fail to devise an effective multi- platform strategy will likely be left behind.

11 MULTI-PLATFORM CONSUMPTION IS TODAY’S NEW REALITY

The digital media landscape is already well into this transition, and smartphone and tablet usage can no longer be considered a mere rounding error in digital consumer behavior. comScore Media Metrix® Multi-Platform (Beta), which provides an unduplicated view of digital media audiences and consumption across desktop computers, smartphones and tablets, reveals that more than 1 in 3 minutes (37 percent) is now spent beyond the PC.

Share of Digital Media Time Spent: Desktop Computer vs. Mobile (Smartphone + Tablet) Source: comScore Media 63% Metrix Multi-Platform (Beta), U.S., Dec-2012 Desktop 37% Mobile

As digital consumers become more reliant on their smartphones and tablets for everyday content consumption, we can expect this share to rise over time and perhaps take over majority share during the course of the next year. Envisioning this reality places a premium not only on getting the mobile channels right, but also on proving their value in short order.

MORE PLATFORMS MEANS EXTENDED REACH FOR MEDIA COMPANIES

While desktop-based Internet usage has not seen notable declines for the majority of content categories and leading digital properties, usage does appear to be leveling off as incremental usage shifts to smartphones and tablets. By accounting for these incremental audiences, media companies are able to demonstrate significantly wider scale to advertisers, along with the ability to provide unique marketing experiences according to the medium.

The average Top 25 digital media property extended its reach via mobile channels by 29 percent. Certain mobile-oriented properties such as Pandora (+155 percent reach), ESPN (+59 percent) and Twitter (+46 percent) are extending their reach by an even greater percentage. Even those with a relatively modest incremental reach in the teens are recognizing that mobile channels represent more than a mere rounding error.

12 TOTAL DIGITAL % INCREMENTAL Top 25 Digital TOP 25 DIGITAL MOBILE POPULATION PC (000) AUDIENCE VIA Properties by Digital PROPERTIES (000) (000) MOBILE Population (000) 1 Google Sites 223,445 193,757 113,650 15% Source: comScore Media Metrix Multi-Platform 2 Yahoo! Sites 206,830 185,847 92,218 11% (Beta), U.S., Dec-2012 3 Facebook.com 185,335 150,294 97,739 23% 4 Microsoft Sites 178,737 170,947 55,190 5% 5 Amazon Sites 159,630 128,227 80,476 24% 6 AOL, Inc. 140,252 117,628 62,360 19% 7 Glam Media 128,317 110,555 50,428 16% 8 Ask Network 121,833 104,148 47,972 17% 9 Apple Inc. 108,580 83,722 51,548 30% 10 Turner Digital 104,897 85,666 44,675 22% 11 CBS Interactive 104,415 87,121 42,135 20% 12 Wikimedia Foundation 103,644 85,883 41,700 21% Sites 13 eBay 95,498 77,725 39,489 23% 14 Demand Media 89,208 74,924 33,406 19% 15 Comcast 88,586 71,091 37,300 25% NBCUniversal 16 Viacom Digital 80,614 71,695 22,312 12% 17 Federated Media 78,680 64,639 30,105 22% Publishing 18 The Weather Channel 69,749 48,928 34,877 43% 19 Wal-Mart 66,208 52,203 26,734 27% 20 Pandora.com 65,838 25,863 52,595 155% 21 Answers.com Sites 64,931 49,171 28,006 32% 22 Gannett Sites 63,573 48,228 27,523 32% 23 ESPN 61,505 38,660 34,616 59% 24 VEVO 59,790 56,793 5,504 5% 25 Twitter.com 59,323 40,659 29,629 46%

The future revenue streams of these media companies depend on effectively delivering content and commerce to their consumers through these channels and demonstrating why they are an important part of the marketing mix. Failure to meet consumer expectations and aggressively prove the value of these additional channels in 2013 could spell a very rocky economic transition by the time 2014 comes around.

13 The average Top 25 digital media property extended its reach via mobile channels by 29 percent. FRAGMENTED MEDIA LANDSCAPE ALSO DRIVES DIFFERENT USAGE PATTERNS

With so many consumers becoming “digital omnivores” accessing media content at different points in the day across varying devices, there has also been an evolution in behavioral patterns around when people tend to consume content using each respective platform. More content availability means the emergence of new consumption occasions and a greater amount of overall engagement with digital media for the average consumer. Mobile platforms, in particular, are creating occasions for consumption when people are either on-the-go or in a more relaxed, lean-back setting. While desktop computer usage tends to peak during the workday and in the early evening, smartphones see peaks during the rush-hours (when people are in transit). Tablet consumption is highest during the late evening hours when people are curled up on the couch or winding down for the night in bed.

Share of Browser-Based 10% Page Traffic by Hour for 9% Computer, Smartphone 8% and Tablet Platforms 7% Source: comScore Device 6% Essentials, U.S., Monday, 5% Jan. 21, 2013 4% 3% 2% Share of Daily Device Traffic Share of Daily Device Traffic 1% 0% 12:00 AM 4:00 AM 8:00 AM 12:00 PM 4:00 PM 8:00 PM

Tablet Smartphone Computer

Importantly, these new occasions mean new opportunities. Media companies have the ability to monetize additional media channels or reinforce the value of primary channels, while marketers have the ability to optimize their campaigns according to day-part to reach consumers when they may be most receptive to particular messaging.

15 The number of 4G users has exploded in the past year to 33.1 million, up 273 percent. MOBILE NETWORK DYNAMICS

VERIZON MAINTAINS LEAD OVER AT&T IN OPERATOR SHARE

Across the total mobile market, the top 4 network operators – Verizon, AT&T, Sprint and T-Mobile – comprised more than three-quarters of all subscribers. Verizon maintained its leading position, garnering 31.2 percent of the market, followed closely by AT&T at 27.3 percent. Sprint (10.3 percent) and T-Mobile (8.4 percent) rounded out the top four. Other network operators combined to account for more than 20 percent of the market, led by Tracfone, slightly behind T-Mobile at 7.6 percent, Sprint Prepaid (5.4 percent) and MetroPCS (3.2 percent).

Network Operator Share of Total Mobile Market 3% 2% 2% Source: comScore 3% Verizon MobiLens, U.S., 3 Month 6% AT&T Avg. Ending Dec-2012 31% Sprint 8% T-Mobile Tracfone 8% Sprint Prepaid MetroPCS Other 10% US Cellular 27% Cricket

4G SMARTPHONE USAGE EXPLODES IN 2012

Another important driver of mobile media use apart from smartphone adoption is the adoption of 3G or 4G-enabled devices. In recent years, mobile carriers have made it a priority to build out increasingly faster networks while handset manufacturers prioritized the development of smartphones that could fully take advantage of these networks. In 2012, Apple made waves with the announcement that its next iPhone would support LTE – a sign that major industry players saw the future of mobile in these faster networks.

By the end of 2012, 97.7 percent of U.S. smartphone owners used 3G or 4G enabled devices. While 3G users still represent the wide majority of the smartphone market, the number of 4G users has exploded in the past year to 33.1 million, up 273 percent from a year ago. Android has led the way with 4G adoption but the introduction of the 4G-enabled iPhone 5 in September 2012 spurred an acceleration in adoption during the final months of the year.

17 4G Adoption Among 35,000 iOS and Android Smartphone 30,000 Subscribers (000) Source: comScore 25,000 MobiLens, U.S., 3 Month Avg. Ending Dec-2011 to 20,000 Dec-2012 15,000

10,000

5,000 Smartphone Subscribers (000) 0 Dec-2011 Feb-2012 Apr-2012 Jun-2012 Aug-2012 Oct-2012 Dec-2012

Android iOS Other

IPHONES CONTINUE TO SHOW GREATEST WI-FI ACTIVITY

An analysis of mobile Internet and Wi-Fi usage across smartphones and tablets shows that a significant share of browsing activity happens via Wi-Fi. For tablets, which do not require a wireless data plan to function, 93.6 percent of all time spent online is via Wi-Fi connection, with both Android tablets and iPads showing similar percentages. For smartphones, Android phones and iPhones show an interesting disparity. While two-thirds of online activity on Android phones is conducted via a mobile connection, more than half of all time spent online on iPhones happens via Wi-Fi. The higher level of Wi-Fi activity on iPhone could be attributable to their heavier use as entertainment devices, inducing more video and music streaming activity, and that network settings default to off-load activity to accessible Wi-Fi networks.

Mobile and Wi-Fi Smartphone 58% 42% Connection Activity Across Smartphones Source: comScore Device Android 66% 34% Essentials, U.S., Dec- 2012 iOS 45% 55%

Mobile Connection Wi-Fi Connection

Mobile and Wi-Fi Connection Activity Tablet 6% 94% Across Tablets Source: comScore Device Android 7% 93% Essentials, U.S., Dec- 2012 iOS 6% 94%

Mobile Connection Wi-Fi Connection

18 NETWORK AND OS RANK HIGHER THAN COST FOR SMARTPHONE PURCHASE CONSIDERATION

Purchase consideration factors continue to be very important for the mobile industry given the high rate of customer churn and new device acquisition. Among both the total mobile phone and smartphone populations, network quality still ranks as the most important purchase consideration factor, validating the efforts of carriers rolling out faster and higher-capability 4G networks.

For smartphone users, operating system ranks as the second-most important consideration factor. In contrast, the total mobile audience put the overall cost of monthly service and the cost of the data plan specifically higher on the list. Interestingly, the selection of apps available only ranked fifth as a consideration factor for smartphone users this time around, compared to last year when it ranked third, perhaps suggesting that consumers perceive greater parity in app ecosystems among the leading operating systems.

8.4 Top Purchase Network quality of mobile service provider 8.2 Consideration Factors for Smartphone 8.2 Phone operating system Purchasers vs. Total 7.7 Mobile (1-10 Scale, 8.0 Overall cost of the monthly service 10=Most Important) 8.0 Source: comScore 7.9 MobiLens, U.S., 3 Month Cost of the data plan specifically 7.8 Avg. Ending Dec-2012

Selection of apps available for my phone 7.8 model 7.3

Price of the phone (after any rebates and other 7.7 incentives) 7.7 7.5 Brand name of the mobile service provider 7.3 7.5 Brand name of the phone 7.1 7.4 Music and video capabilities 6.9 7.0 Social networking features 6.6 6.6 Recommended by family/friend 6.4 5.8 Recommended by retail sales person 5.7

Smartphone Total Mobile

19 The race among handset manufacturers heats up as smartphones take center stage. MOBILE OEM DYNAMICS

APPLE AND SAMSUNG COMPETE FOR SUPREMACY IN MOBILE OEM MARKET The race among handset manufacturers heated up in 2012 as smartphones took center stage in the mobile market. Across the total mobile population, Samsung maintained its position as the lead Original Equipment Manufacturer (OEM), increasing its share to slightly more than a quarter of all mobile devices in use in the U.S. Apple rose two spots, overtaking LG and Motorola, to claim the #2 position accounting for nearly 20 percent of the total mobile market. Across the smartphone population, however, Apple takes the largest share of the OEM market, having increased its lead by a significant 6-percentage points to 36.3 percent, buoyed by the continued popularity and increasing affordability of the iPhone. Samsung edged out RIM and HTC to claim the #2 spot among smartphone manufacturers, with the release of the well-received Samsung Galaxy S III, accounting for 21 percent of all smartphones in use. Noticeably absent from the OEM leaderboard was BlackBerry, which took the #2 spot the year prior.

TOTAL MOBILE SMARTPHONE Top OEMs by Share of Samsung 27.1% Apple 36.3% Total Mobile Market and Apple 19.5% Samsung 21.0% Smartphone Market LG 17.3% HTC 10.2% Source: comScore Motorola 10.0% Motorola 9.1% MobiLens, U.S., 3 Month HTC 5.6% LG 7.1% Avg. Ending Dec-2012

A look at the share of OEMs among the Android smartphone market in particular shows Samsung exhibiting remarkable growth within the market in the previous year. In December 2011, Samsung accounted for just 1 in 4 Android smartphones in use. By the end of 2012, that percentage shot up 13 percentage points, gaining share directly from Motorola and HTC to account for nearly 2 in 5 Android smartphones. While the market still remains fiercely competitive among OEMs in the Android ecosystem, Samsung is exhibiting remarkable leadership with the recent smartphone models it has introduced to the market, such as the Samsung Galaxy S III. As a result, no other OEM has captured the attention of consumers and smartphone enthusiasts in the past year as much as Samsung.

21 OEM Share for Android 100% Smartphones 12% Source: comScore 90% 15% MobiLens, U.S., 3 Month Avg. Ending Dec-2012 vs. 80% 14% 13% Dec-2011 Other 70% LG 18% 60% 26% HTC

50% Motorola 17% 40% Samsung 23% 30%

20% 38%

10% 25%

0% Dec-2011 Dec-2012

APPLE AND AMAZON LEAD AMONG TABLET OEMS

In the household tablet market (excluding tablets for business use), Apple sees an even greater lead over other device manufacturers, with iPads accounting for 42.9 percent of the tablet market. Amazon followed with the #2 spot as Kindle Fire tablets comprise nearly a quarter of all tablets in use. Barnes & Noble accounted for the third-largest share among OEMs with 7.8 percent of all tablets, largely due to the Barnes & Noble NOOK Tablet. Samsung and Acer rounded out the top five tablet OEMs, with 5.6 percent and 3.6 percent share of the market, respectively, due to the popularity of the Samsung Galaxy Tab and the Acer Iconia Tab devices.

OEM Share of the Tablet Market 1% Source: comScore 4% TabLens, U.S., 3 Month 5% Avg. Ending Dec-2012 8% Apple Amazon

43% Other

15% Barnes & Noble Samsung

Acer

HP

24%

22 APPLE TOPS LIST OF MOST ACQUIRED MOBILE PHONES AND TABLETS

Smartphones dominated the list of top acquired mobile phones in the U.S., led by various versions of the Apple iPhone, which claimed four of the top five spots, ousting BlackBerry and HTC devices from the year prior. The Samsung Galaxy S III proved to be highly popular as well, finding its way into the top five. Apple’s popularity among consumers making new mobile device purchases likely comes from a combination of strategic marketing moves. As older models of iPhones are marked down with the release of newer models, an increasing number of consumers gain access to them, which accounts for the popularity of a model such as the Apple iPhone 3GS – originally released in 2009.

TOP ACQUIRED PHONES Top Acquired Individual Phone Models in the U.S. Apple iPhone 4S Source: comScore Apple iPhone 4 MobiLens, U.S., 3 Month Avg. Ending Jan-2012 to Apple iPhone 3GS Dec-2012 Apple iPhone 5 Samsung Galaxy S III

A look at the tablet landscape shows Apple ruling this market as well, with iPads ranking as the top acquired tablet family in the past year, outpacing other tablet families by a significant margin. As a platform, however, Android also fared well with each of the next four most acquired tablet families. Amazon put on a good showing with the Kindle Fire family of tablets ranking #2, followed by the Acer Iconia and Iconia Tab, Samsung Galaxy Tab and Note, and Barnes & Noble NOOK tablets.

TOP ACQUIRED TABLET FAMILIES Top Acquired Tablet Families in the U.S. Apple iPads Source: comScore Amazon Kindle 2/Fire/HD TabLens, U.S., Apr-2012 to Dec-2012 Acer Iconia/Iconia Tab Samsung Galaxy Note/Tab Barnes & Noble NOOK Color/Tablet/HD

TABLET OWNERS OLDER AND LESS AFFLUENT THAN SMARTPHONE OWNERS

A demographic comparison of tablet owners and smartphone owners showed that while both groups had fairly similar gender splits, tablets saw higher percentages of older and less affluent members of their audience. More than 28 percent of tablet owners were age 55 and older vs. 20 percent of smartphone owners, while 25 percent came from households earning at least $100,000 annually vs. 36 percent among smartphone owners. One hypothesis might be that because

23 While Apple leads among tablet manufacturers in share, Android devices also fared well, with 4 of the top 5 most acquired tablet families. tablets are very intuitive, older generations are starting to use these devices in place of computers, which can be more complicated to set up and maintain. In addition, tablets are increasingly providing a less expensive alternative to computers and can be more affordable than smartphones in the long run, as they don’t require a data plan for use.

Age Breakdown of Smartphone and Tablet 7% 13% 17% 17% 18% 15% 14% Tablet Owners Source: comScore TabLens and MobiLens, U.S., 3 Month Avg. Ending Smartphone 7% 12% 22% 21% 18% 12% 8% Dec-2012

13-17 18-24 25-34 35-44 45-54 55-64 65+

Household Income Breakdown Tablet 17% 22% 21% 14% 25% of Smartphone and Tablet Owners Source: comScore Smartphone 9% 17% 20% 17% 36% TabLens and MobiLens, U.S., 3 Month Avg. Ending Dec-2012

<$25k $25k to <$50k $50k to <$75k $75k to <$100k $100k+

25 Smartphones hit the mobile majority in 2012, up 29 percent from a year ago. MOBILE PLATFORM DYNAMICS

SMARTPHONE PENETRATION SURPASSES 50 PERCENT IN 2012

2012 was a milestone year for the U.S. smartphone market as it finally surpassed 50 percent market penetration. The more than 125 million smartphone subscribers represents a 29-percent increase from a year ago, and a 99-percent increase from two years ago. Not only does the market’s current ownership profile reflect a smartphone majority, but 72 percent of all newly-acquired devices are now smartphones. Mobile Phone Market Android iOS BlackBerry Share Trend by Platform Windows Other Smartphone Non-Smartphone Source: comScore MobiLens, U.S., 3 Month 100% Avg. Ending Dec-2010 to 90% Dec-2012 80% 70% 60% 50% 40% 30% 20% 10% 0% Dec-2010 Mar-2011 Jun-2011 Sep-2011 Dec-2011 Mar-2012 Jun-2012 Sep-2012 Dec-2012

SMARTPHONES ENTER ‘LATE MAJORITY’ IN TECHNOLOGY LIFECYCLE

With smartphone penetration surging past 50 percent during the latter half of 2012, the market is now entering the “late majority” stage of the technology adoption curve. The characteristics and motivations of consumers in the late majority are substantially different than the early majority, and almost the complete opposite of the innovators and early adopters. These fundamentally different market dynamics

2.5% Innovators 13.5% 34% 34% 16% Early Adopters Early Majority Late Majority Laggards

27 mean that new marketing strategies are required to capture this segment of the population representing approximately 80 million U.S. consumers.

Individuals in the late majority tend to be of below average means, may be somewhat skeptical of technology and are opinion takers rather than opinion makers. These characteristics will necessarily drive the marketing strategies needed to win over new adopters during this next phase of the smartphone market. Price sensitivity dictates that many in this segment will simply not consider premium models and are willing to sacrifice certain features for more basic functionality. Many may not even grasp what advanced features mean or why they deliver a superior experience. The availability of a diverse app ecosystem is likely to be an important driver of utility for these consumers, which favors Android and iOS.

Another impediment to adoption is that it’s not just the price of the phone but the additional recurring cost of a data plan. While handset prices are already heavily subsidized by the operators, the introduction of a new tier of pricing plans to capture this segment of consumers may be required to spur further device adoption. But even if an acceptable threshold is met, the average sales price for device models will need to remain sufficiently low. Recognition of this reality may be one reason that Apple is heavily rumored to be developing a low-cost iPhone. Without being able to meet the price expectations of these consumers, a premium device such as the iPhone would likely begin to lose market share.

ANDROID OWNS MAJORITY SHARE OF U.S. SMARTPHONE USERS

The U.S. smartphone market has seen two platforms, Android and iOS, come to dominate the market over the past few years and now combine for nearly 90 percent of the market. Android captured a majority of the market for the first time in February

1% Smartphone Market 3% Share by Platform 6% Source: comScore MobiLens, U.S., 3 Month Avg. Ending Dec-2012 Android iOS 53% 36% BlackBerry Windows Other Smartphone

2012 and continued to extend its leadership to 53.4 percent by the end of the year. Apple grew its market share nearly 7 percentage points to 36.3 percent in the past year. All other platforms experienced share declines.

28 This upcoming year in the smartphone market could be make-or-break for non-iOS and Android platforms. If they concede much more of their remaining market shares, it could be very difficult to encourage developers to build for their platforms, putting them even further behind the market leaders.

LONG TERM VIEW OF SMARTPHONE MARKET REMINDS HOW QUICKLY FORTUNES CAN CHANGE

But while Android and iOS might appear poised to lock up the smartphone market for good, it is worth looking at the history of the smartphone market to understand just how quickly fortunes can change. In 2005, the market was dominated by Palm, Symbian and BlackBerry. However, by the following year all three had ceded control to Microsoft as the new market share leader. 2008-2010 saw BlackBerry stage a comeback to assume the #1 position before eventually giving way to the upstart Android platform in 2011. The only key player in the current smartphone market never to have owned the market share lead, interestingly enough, is iOS.

100% Long Term Smartphone 90% Platform Market 80% Share Trend Source: comScore 70% MobiLens, U.S., Dec- 60% 2005 to Dec-2012 50% 40% 30% 20% 10% 0% Dec-2005 Dec-2006 Dec-2007 Dec-2008 Dec-2009 Dec-2010 Dec-2011 Dec-2012

Android iOS BlackBerry Windows Symbian HP

This view reminds us that the smartphone market has historically been one of constant disruption, and with most consumers trading out their phones for new ones every couple of years, there is more opportunity to bring a compelling product to market and quickly win market share. Conversely, one could also argue that the emergence of well-developed platform ecosystems creates a higher degree of customer lock-in that did not exist in the earlier days of the market, suggesting that iOS and Android may have a better chance of maintaining their stranglehold on the market for the foreseeable future. But the possibility of emergent platforms (Amazon and Facebook) and resurgent platforms (Windows and BlackBerry) suggests an uncertain future where new leaders certainly have the potential to break through.

29 ANDROID’S OEM INTEROPERABILITY HELPS IT ESTABLISH TABLET MARKET SHARE LEADERSHIP

Although Apple effectively invented the tablet market with its 2010 introduction of the iPad, several fast-followers delivering more affordable models have helped drive the tablet market as it’s evolved in the past few years. Android models are now the most-owned tablets in the U.S. household tablet market – largely buoyed by the Amazon Kindle Fire – just slightly ahead of the iPad. Other tablet platforms maintain just a fractional percentage of the market. Unique Tablets (000) by Platform 70,000 Source: comScore 60,000 TabLens, U.S., 3 Month Avg. Ending Dec-2012 50,000 BlackBerry 40,000 Windows 30,000 HP

20,000 Android Unique Tablets (000) Unique Tablets

10,000 iOS

0

Jul-2012 Apr-2012 May-2012 Jun-2012 Aug-2012 Sep-2012 Oct-2012 Nov-2012 Dec-2012

Although Apple has conceded its initial leadership position to Android in the tablet market, it is fighting to win back market share with its October 2012 introduction of the 7.9-inch iPad Mini. The smaller and lighter model is proving popular with consumers who favor portability over screen size. With other tablet makers likely to follow suit, the market appears pointed towards increased adoption of smaller tablets. This product differentiation can not only help capture a segment of new tablet consumers who valued portability, but it also may increase second-tablet ownership for households that might have different occasions to favor a particular device type.

PLATFORM LOYALTY EXISTS BETWEEN TABLET AND SMARTPHONE OWNERSHIP

Although tablets and smartphones are different devices with varying functions, there is evidence of platform loyalty among consumers. Most mobile consumers may not resemble the stereotypical Apple “fanboy”, but their propensity to favor one platform over another is apparent. For example, iPhone users represent 36 percent of the total smartphone market, but a full 60 percent of smartphone users with an iPad have an iPhone. Similarly, 62 percent of smartphone users with an Android tablet also use Android phones, considerably higher than that of the total smartphone market.

30 Percentage of Tablet 10% 7% 9% Users by Platform 20% Who Use Smartphone Platforms 32% Other Phone Source: comScore 53% Android Phone MobiLens, U.S., 3 Month 62% Avg. Ending Dec-2012 iPhone 57%

60% 36% 29% 23%

Total iPad Android Other

Platform loyalty is important because it increases the likelihood of a consumer being wedded to a particular platform over the long term, especially given mobile’s rapid replacement cycle. With an app ecosystem that transfers seamlessly between devices, consumers may become accustomed to a consistent interface and media experience that makes them more likely to stick with the same platform when it’s time for a device upgrade.

31 Tablet owners show a higher propensity to browse and engage in more involved media behaviors. MOBILE MEDIA CONSUMPTION

SMARTPHONES AND TABLETS DRIVE EXPANDED MOBILE MEDIA USAGE

Analysis of the top mobile media behaviors across smartphone and tablet users shows some interesting similarities and differences for both groups. Both platforms’ users show an inclination toward engaging in activities that lend themselves well to being done on-the-go, such as accessing weather, maps and news updates.

Among smartphone users, sending text messages was still the foremost activity in which users engaged (90.5 percent). Taking photos was the second-ranked activity for smartphone users (83.4 percent), followed by checking e-mail (77.8 percent) and accessing weather updates (67.1 percent). Accessing social networks or blogs also ranked among the top mobile media activities for smartphone users (65.3 percent), as apps have made it easier than ever for smartphone users to engage with social networks at any given minute.

TOP ACTIVITIES TOP ACTIVITIES Top Mobile Media FOR SMARTPHONE AUDIENCE FOR TABLET AUDIENCE Activities by Share Sent text message to 90.5% Accessed search 73.9% of Smartphone and another phone Tablet Users Source: comScore Took photos 83.4% Used email 73.6% MobiLens and TabLens, Used email 77.8% Accessed social 67.5% U.S., 3 Month Avg. Ending networking Dec-2012 Accessed weather 67.1% Played games 66.3% Accessed social 65.3% Accessed weather 64.6% networking Accessed search 58.7% Accessed news 58.8% Played games 52.9% Accessed photo/video 51.5% sharing site Accessed maps 51.2% Read books 51.2% Accessed news 49.2% Watched video 50.9% Listened to music on 48.0% Accessed retail 49.8% mobile phone

For tablet owners, there is a higher propensity to browse and engage in more involved media behaviors. While the most popular activity for tablet owners was accessing search results (73.9 percent), a significant percentage also played games (66.3 percent), accessed photo/video sharing sites (51.5 percent), read books (51.2 percent) and watched video (50.9 percent). As tablets have come

33 to provide a convenient platform for users to read longer-form content, we have seen this platform disrupt the way tech-savvy consumers are consuming news and information. In addition to books, 37.8 percent of tablet owners read magazines on their devices, underscoring the importance of this platform to magazine publishers as consumers continue to shift away from print.

TABLETS DRIVE SOCIAL ENGAGEMENT

Social networking activity continued to be very popular on mobile devices, with approximately 2 out of every 3 smartphone and tablet owners accessing these 67% sites65% from their devices. The most popular social media activity among both groups was reading posts61% or status updates from people known personally. Half of the smartphone audience reported reading status updates from friends, and 3 in 10 smartphone owners53% reported51% doing so on a daily basis. For tablet owners, the 49% percentage is even higher for many social networking47% 46% activities, as tablets lend 44% themselves particularly well to leisurely browsing for prolonged41% periods of time. 39% 37% 37% 34% 35% 34% In addition to using their devices for keeping up to date on friends’ activities, smartphone and tablet owners are engaging with brands on social networks.27% 26% 2 in 5 smartphone subscribers read posts from brands and organizations, while nearly half of the tablet audience reported doing so as well. A slightly lower percentage of smartphone (34.5 percent) and tablet (41.3 percent) owners read posts by celebrities and public figures. Finally, 1 in 4 smartphone owners reported receiving a coupon, offer or deal via mobile social networking. A greater percentage of 67% tablet owners (34 percent) reported the same thing. 65% Accessed 'Read posts !Accessed Posted status VRead posts 3Followed a -Read posts Posted a link !Received a social from people photo/video update or status link to a from public to a website coupon, offer, Selected Social networking61% known sharing site updates from website figures or or deal Networking Activities personally organizations, posted by celebrities companies, someone else Among Smartphone and 53% brands, Tablet Owners 51% events or Smartphone 49% products Tablet Source: comScore 47% 46% MobiLens and TabLens, 44% 41% U.S., 3 Month Avg. Ending 39% Dec-2012 37% 37% 34% 35% 34%

27% 26%

Accessed 'Read posts !Accessed Posted status VRead posts 3Followed a -Read posts Posted a link !Received a social fromRead people Accessedphoto/video Postedupdate Reador status posts Followedlink to a Readfrom public posts to aPosted website coupon,Received offer, networking postsknown from sharingphoto/ site status updatesor status from awebsite link to fromfigures public or a link aor coupon, deal personallypeople video update updatesorganizations, from aposted website by celebritiesfigures or to a offer, or known sharing organizations,companies, someoneposted byelse celebrities website deal personally site companies,brands, someone eventsbrands, or else Smartphone eventsproducts or Tablet products 34 SMARTPHONES DRIVING SHOWROOMING, TABLETS DRIVING PURCHASE

The past few years have seen the rise of a practice known as “showrooming,” which means visiting a retail store to check out a product in person but then completing the actual purchase online. In Q4 2012, 36 percent of consumers indicated they had engaged in showrooming and 74 percent of those individuals said that price was an important driver of that activity. Interestingly, smartphones have emerged as a significant enabler of showrooming activity because people are armed with access to competitive pricing information and product reviews while in a brick-and-mortar store. In fact, 46 percent of smartphone owners have showroomed as compared to just 27 percent of non-smartphone owners.

While smartphones are becoming disruptive to the traditional retail environment, tablets are changing shopping behaviors in somewhat different ways. Because their functionality more closely resembles that of computers, tablets are not influencing the in-store shopping experience as much as they are driving in- home shopping behavior. In fact, tablet users were significantly more likely than smartphone owners to engage in various shopping behaviors, such as researching product features and comparing prices. Perhaps most importantly, tablet users were twice as likely to purchase items on their devices (38 percent) than smartphone owners (19 percent). 67% 65% 61% Share of Smartphone 67% and Tablet Owners 65% 39% Researched product features Performing Mobile 53%61% 51% 23% 49% Retail Activities 47% 46% 44% 39% Source: comScore 53% 51% Compared product prices 49% 41% 24% MobiLens and TabLens, 39%47% 46% 37% 44% 37% U.S., 3 Month Avg. Ending 34% 35% 34% 38% Purchased goods or services online 41% Dec-2012 39% 19% 37% 37% 27% 34% 35% 26%34% 38% Found store location 27% 26% 34% 33% Found coupons or deals 22%

30% Checked product availability 19% Accessed 'Read posts !Accessed Posted status VRead posts 3Followed a -Read posts Posted a link !Received a social from people photo/video update or status link to a from public to a website coupon, offer, networking known sharing site updates from website figures or or deal 21% Made shopping lists Accessed 'Readpersonally posts !Accessed Posted statusorganizations, VRead posts 3Followedposted by a -Readcelebrities posts Posted a link !Received a social from people photo/video update companies,or status someonelink to aelse from public to a website coupon, offer, 21% brands, networking known sharing site updates from website figures or Smartphoneor deal personally organizations,events or posted by celebrities companies,products someone else Tablet brands, events or Smartphone products Tablet

35 FACEBOOK #1 AMONG MOBILE APPS, WHILE GOOGLE OWNS HALF OF TOP 10

Consumers who engage with mobile media may do so via the mobile web or apps. And in this environment – unlike with the traditional fixed web – the majority of consumption is driven by apps, which are optimized for the smaller-screen environment. 4 out of every 5 mobile media minutes occur via apps, while mobile web usage drives the remainder.

Among smartphone apps on the iOS and Android platforms, Facebook finished 2012 strong to capture the #1 position, reaching 3 out of every 4 smartphone users in December 2012. Facebook grabbed the lead from Google Maps, which conceded the top spot following Apple’s decision to replace it with Apple Maps on iOS 6. Despite losing the #1 position, Google still featured prominently among the leading apps with each of the next 5 spots. Google Maps ranked 2nd with a reach of 65.9 percent in the smartphone market, followed by Google Play (54.3 percent), Google Search (53.5 percent), Gmail (47.6 percent) and YouTube (46.4 percent).

Top Mobile Apps by Facebook 76% Reach of Smartphone Audience (Age 18+) Google Maps 66% Source: comScore Mobile Google Play 54% Metrix, U.S., Dec-2012 Google Search 54%

Gmail 48%

YouTube 46%

Pandora Radio 42%

Apple iTunes 41%

Cooliris 38%

Yahoo! Messenger 32%

A breakdown of the top mobile apps specifically for iOS and Android users yields some noticeable differences between the platforms. For iPhone owners, the Apple iTunes app proved to be the #1 app on the list, barely edging out Facebook, while Yahoo! Stocks, Google Maps and Yahoo! Weather rounded out the top five. Meanwhile, Google apps dominated the list of top apps for Android users, with Google Play ranking first, followed by Google Search, Gmail, Facebook and Google Maps. For iPhone users, a number of the top apps on this list are entertainment-focused, such as Pandora Radio, YouTube and Instagram.

36 TOP IOS MOBILE APPS TOP ANDROID MOBILE APPS Top Mobile Apps for iOS and Android Active Apple iTunes Google Play Users (Age 18+) Facebook Google Search Source: comScore Mobile Metrix, U.S., Dec-2012 Yahoo! Stocks Gmail Google Maps Facebook Yahoo! Weather Google Maps Pandora Radio Cooliris Apple Maps Yahoo! Messenger YouTube Voice Search The Weather Channel YouTube Instagram Google News and Weather

MOBILE MEDIA USE CONTRIBUTES TO GROWING PERCENTAGE OF TIME SPENT ONLINE

The rapid growth in mobile media usage has resulted in a greater share of time spent online now happening on mobile devices. comScore Media Metrix Multi- Platform (Beta) indicates that one-third of digital media consumption time happens via smartphones and tablets. However, these time splits by platform can vary considerably by content category. Categories that lend themselves well to mobile use – such as Maps and Weather – will naturally see a higher percentage of time spent online coming from those platforms. Other categories such as Portals, which represent the traditional entry-point for experiencing much of the fixed web, still see a higher percentage of activity being driven by PC access.

Total Internet 63% 37% Share of Total Time Spent Online for Maps 16% 84% Selected Properties Weather 40% 60% Source: comScore Media Metrix Multi-Platform Music 43% 57% (Beta), U.S., Dec-2012 Social Networking 45% 55% Sports 56% 44% Retail 62% 38% Newspapers 62% 38% Online Gaming 66% 34% e-mail 69% 31% Portals 74% 26%

PC Mobile

37 Smartphone adoption hit the mobile majority in EU5 and Canada. MOBILE INSIGHTS AROUND THE WORLD

SMARTPHONE ADOPTION REACHES MOBILE MAJORITY ACROSS EU5 AND CANADA

Smartphone adoption rose rapidly in the past year to assume the mobile majority in 2012 in many international markets, including the EU5 (UK, France, Germany, Spain and Italy) and Canada. Among these markets, Spain had the highest smartphone adoption at 66 percent, followed by the UK (64 percent) and Canada (62 percent). Canada saw significant gains at the end of the year after first reaching 50 percent penetration in Q2 2012. France, Germany and Italy each saw their subscriber bases surpass this mark in the second half of the year and ended the year with at least 51 percent smartphone penetration.

Spain 66% Smartphone Adoption Across Markets UK 64% Source: comScore MobiLens, 3 Month Avg. Dec-2012 Canada 62%

France 53%

Italy 53%

Germany 51%

Japan 30%

ANDROID LEADS SMARTPHONE MARKET SHARE ACROSS COUNTRIES

Android owned the smartphone market share lead in each of the EU5 countries, Canada and Japan. Android had greater than 50 percent market share in Japan, Spain and Germany, and even eclipsed 60 percent in both Japan and Spain. iOS ranked second in 5 out of the 7 markets, while Symbian captured the #2 spots in Spain and Italy. In general, Android, iOS and Windows saw gains in these markets over the past year, while BlackBerry and Symbian saw declines.

39

100% Smartphone Platform Market Share 90% Source: comScore 80% MobiLens, 3 Month Avg. 70% Ending Dec-2012

60%

50%

40%

30%

20%

10%

0% Japan Spain Germany France UK Canada Italy

Android iOS Windows Symbian BlackBerry HP Other Smartphone

Some of these markets outside the U.S. have a heritage with other platforms that may enable their revival. As home to BlackBerry, Canada has a rooting interest in seeing that platform succeed. Nokia’s rich history as one of Europe’s leading companies gives it the potential to reawaken its prospects in the European markets, particularly in Spain and Italy. But regaining traction will depend on improved product and marketing strategies, which may be easier said than done in a competitive market led by the well-entrenched Android and iOS platforms.

41

CONCLUSION 2013: PUTTING THE MOBILE FUTURE INTO FOCUS

ARE THE PLATFORM WARS ENDING OR JUST BEGINNING? With Android and iOS now representing the overwhelming majority of smartphone and tablet users, the market in some ways appears headed towards a two-party system for the foreseeable future. At the same time, BlackBerry and Windows are once again making a renewed push that suggests it is too early to count either one of them out of the smartphone market. At the same time, the possibility of new entrants such as Amazon and Facebook could reignite the platform wars, and history suggests that leadership positions can change instantly and new players can quickly carve out market share with a compelling offering.

MULTI-PLATFORM PARADIGM WILL DRIVE AD AND CONTENT INTEGRATION STRATEGIES With the platform shift in full swing, businesses will be challenged in the coming year to stay ahead of consumers’ usage curve and deliver them with the content they want, when and where they want it. It will also be imperative to maintain revenue streams in the core digital channels while capturing market share and monetizing emerging channels. Doing so will require businesses to get even smarter in how they scale their content to other platforms by developing integration strategies that deliver unique offerings to advertisers. Greater integration between delivery of content and the ability to deliver campaigns in a multi-platform fashion remains a challenge, but the companies who facilitate this form of platform agnostic strategy will enhance value to marketers, simplify campaign management for agencies and foster greater pricing equilibrium between their content channels. Some media companies are completely re-configuring the design of their websites to optimize them across any platform. Others are developing “native ad” units, such as Facebook’s Sponsored Story or Twitter’s Promoted Tweet, which seamlessly integrate into the content stream on any device. Strategies like these that break down the barriers between platforms not only improve the consistency of user experience, but also facilitate the flow of ad dollars.

MOBILE ADVERTISING WILL EVOLVE AS A BRANDING MEDIUM TO ATTRACT MAJOR AD DOLLARS

The coming year will be a critical one for the mobile advertising industry as it looks to bring its share of ad dollars into greater alignment with its share of media consumption time. With people now spending so much time on their phones and tablets, there is a growing need to prove the value of the medium – especially as that time begins to eat into existing content channels like TV and Online. Failure to

43 prove advertising value could mean cannibalization of existing content monetization streams, raising the stake for many publishers and media companies. At the same time, the use of outdated ad metrics such as click-through rates is impeding the development of the medium, as advertisers place little faith in figures clearly inflated by the “fat finger syndrome” on touch-screens. Proving value in 2013 will shift to evaluating campaigns on the basis of reaching target audiences, and the development of innovative research methods to demonstrate the branding value of these campaigns, particularly within the context of a brand’s TV and online campaigns. Finally, another critical component to mobile advertising’s evolution will be providing consumers with clear choices for data privacy. Clear and transparent standards for data privacy must be adopted by the industry as it seeks to grow.

THE LINES BETWEEN DEVICE TYPES WILL CONTINUE TO BLUR The definitions of what constitutes a smartphone, tablet or other connected device will continue to blur in the coming year with so many new devices featuring their own unique dimensions and technological specifications. Is it an e-reader or a tablet? A smartphone or a “phablet?” These questions will become more commonplace in the year ahead as each device maker adapts its offerings to meet one of the many micro-segments of consumers with a specific set of need drivers. Screen size, functionality, portability, keyboard style, content ecosystem, processing power, connection speeds and many other variables have varying importance to consumers, which means that OEMs will continue to innovate and experiment with their offering to find consumer sweet spots.

MOBILE COMMERCE WILL ACCELERATE CHANNEL CANNIBALIZATION Mobile will accelerate its cannibalization of both e-commerce and traditional brick-and-mortar retail over the coming year, driven by the increase in consumers shopping, comparing prices and transacting over their smartphones and tablets. With m-commerce currently accounting for 1 in 10 e-commerce dollars, and e-commerce dollars accounting for 1 in 10 retail dollars, m-commerce still represents only 1 percent of total retail spending. But the introduction of the mobile device into the existing retail marketplace has the potential to be far more disruptive because it is influencing and shaping the path to purchase in so many new ways. And even modest share shifts from one channel to another can be significant in a low-margin industry such as retail, so even a modest acceleration in the current trends could prove exponentially more disruptive. Retailers will be challenged to sharpen their mobile strategies, invest in additional platforms and defend against “showrooming” in order to preserve their existing business. While it is an uncomfortable position for many retailers, this approach may be necessary for long- term survival against the digital commerce tidal wave.

4G CONNECTIVITY TO PAVE WAY FOR ADVANCED COMMUNICATION AND CONTENT CONSUMPTION With leading smartphones on the market boasting 4G networks, consumers will increasingly be enabled with a faster and more robust experience for mobile media consumption. Faster speeds will not only give consumers more incentive to rely on their phones for monetizable activities like searching and news consumption, but it

44 will also facilitate the use of streaming video on services like Netflix and HBO GO. In addition, high-bandwidth activities such as video chat may begin to gain popularity among consumers as data speeds allow. Mobile operators may be challenged to provide sufficient bandwidth for its subscribers as these behaviors expand, and they will need to balance consumers’ increasing demand for data speed with the costs associated.

GLOBAL SMARTPHONE GROWTH WILL DRIVE MOBILE MARKET EXPANSION While the U.S. market still has plenty of room for growth, the business prospects for operators and OEMs in international markets are expansive. Expect to see many key players set their sights on opportunities abroad to take advantage of the burgeoning middle class in developing countries. China will be a specific area of focus in the coming year, as will other parts of Asia and Latin America. While developing markets may not boast the profit potential of the U.S., they represent hundreds of millions if not billions of subscribers that can drive huge revenue and play an important role in global market share dynamics.

45

METHODOLOGY AND DEFINITIONS

This report utilizes data from the comScore suite of products, including comScore MobiLens, comScore TabLens, comScore Device Essentials and comScore Mobile Metrix. The report also includes data from comScore Media Metrix Multi-Platform (Beta).

• comScore MobiLens® comScore MobiLens provides market-wide insight into mobile digital media consumption, brand-level audience metrics and details of device ownership and technology penetration. Using proprietary data collection methods, we survey nationally representative samples of mobile subscribers age13+ in the U.S., UK, France, Germany, Spain, Italy, Canada and Japan. The MobiLens sample is substantial enough to provide projected data for sub-segments as small as 1 percent of mobile subscribers. The MobiLens’ sampling and survey methods undergo extensive analysis and market validation including comparisons to known network operator market shares, leading handset model shares, downloading activity and other usage metrics.

For more information, please visit: www.comscore.com/Products/Audience_Analytics/MobiLens

• comScore TabLens® comScore TabLens is a monthly syndicated service providing insights into U.S. tablet ownership and usage. Based on a 3-month rolling sample of 6,000 U.S. tablet owners, TabLens provides insight into tablet audiences, including demographics, content consumption habits and device ownership, to provide the industry with the most up-to-date look at this expanding tablet market.

For more information, please visit: www.comscore.com/Products/Audience_Analytics/TabLens

• comScore Device Essentials™ comScore Device Essentials provides insight into digital traffic share across all devices worldwide, offering detail into device characteristics, connection type and category consumption. The product is based on the comScore Unified Digital Measurement (UDM) approach, measuring browser-based page views coming from computers, mobile and other connected devices to more than one million domains tagging with comScore. Device Essentials also utilizes the comScore Client Focus Dictionary to segment connected device usage into content categories.

For more information, please visit: www.comscore.com/Products/Audience_Analytics/Device_Essentials

47

• comScore Mobile Metrix® Mobile Metrix provides direct and continuous monitoring of actual U.S. consumer behavior on smartphones across the Android, iOS and RIM platforms for mobile users age 18 and older. Utilizing comScore’s Unified Digital Measurement approach, Mobile Metrix combines panel and census measurement to provide a comprehensive picture of mobile activity across browser and application usage including metrics such as unique visitors, reach, frequency and duration as well as demographic insights in order to best understand today’s smartphone audience.

For more information, please visit: www.comscore.com/Products/Audience_Analytics/Mobile_Metrix

• comScore Media Metrix® Multi-Platform (Beta) The comScore Media Metrix suite of syndicated products sets the standard for digital audience measurement and media planning. Included in this suite, comScore Media Metrix Multi-Platform (Beta) offers comprehensive reporting on more than 300,000 digital media entities, including their un-duplicated audience size, demographic composition, engagement, performance within key user segments and behavioral trends.

For more information, please visit: www.comscore.com/Products/Audience_Analytics/Media_Metrix_Multi-Platform

49

ABOUT COMSCORE, INC. comScore, Inc. (NASDAQ: SCOR) is a global leader in digital measurement and analytics, delivering insights on web, mobile and TV consumer behavior that enable clients to maximize the value of their digital investments.

A preferred source of digital audience measurement, comScore offers a variety of on-demand software and custom services within its four analytics pillars: Audience Analytics, Advertising Analytics, Digital Business Analytics and Mobile Operator Analytics. By leveraging a world-class technology infrastructure, the comScore Census Network™ (CCN) captures trillions of digital interactions a month to power big data analytics on a global scale for its more than 2,000 clients, which include leading companies such as AOL, Baidu, BBC, Best Buy, Carat, Deutsche Bank, ESPN, France Telecom, Financial Times, Fox, LinkedIn, Microsoft, MediaCorp, Nestle, Starcom, Terra Networks, Universal McCann, Verizon, ViaMichelin and Yahoo!.

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51 [email protected] www.comscore.com ©2013 comScore, Inc. EXHIBIT 4 Analyst: Only one in ten tablets sold has a cellular connection | Macworld

iPads Analyst: Only one in ten tablets sold has a cellular connection

It’s clear that people are willing to pay for new tablets, but it’s also clear that they aren’t yet ready to take on the fee for cellular connectivity to it, according to an analyst.

Just one of every ten tablets sold uses a cellular connection, Chetan Sharma of Chetan Sharma Consulting revealed in a report on Tuesday.

Since most tablet owners typically also have a smartphone, they appear to be reluctant to pay for both services. Sharma expects that carriers want to attract those users and will soon make changes so that tablet cellular plans are more attractive. “Operators who start to bundle multiple devices by single data plans and data buckets are going to see a better yield in this category,” Sharma said.

Anecdotally, the LTE version of the new iPad seemed less popular in one East Coast town on the day the new tablets went on sale.

Operators aren’t the only companies trying to keep pace with the changing market for computing products. By 2014 in the U.S., Sharma expects that more than 200 million smartphones and emerging devices will ship, up from under 50 million in 2009. But the computer market will grow at a much slower rate, with shipments up from just over 50 million in 2009 to still under 100 million in 2014.

“More than anything else, the old guard is having a tough time adjusting to the new computing paradigm,” Sharma said. He pointed to Hewlett-Packard and Dell as examples of traditional computer powerhouses which have failed to launch a decent tablet or smartphone.

Sharma expects to see the mobile industry reach an important milestone in early 2013. That’s when he predicts that data revenues will exceed voice revenues in the U.S. market for the first time.

Sharma covered a wide range of additional topics in his quarterly report, including mobile subscriber growth, smartphone sales, and patent awards. Related Stories

This is Tim: Apple CEO talks at investment conference

2012 Tech predictions from IDG editors around the world 9 comments

http://www.macworld.com/article/1165992/analyst_only_one_in_ten_tablets_sold_has_a_cellular_connection.html[3/25/2013 10:55:54 AM] EXHIBIT 5 http://vvww.localytics.com/blog/2012/o^

2012-03-22 Only 6% of iPad App Sessions On Cellular Connection

Apple has reportedly sold over 3 million of the new, 3rd-generation iPads, whose main selling points are updated internals, a Retina display and available 4G LTE connectivity. The first two seem to be driving the quick sales, but the cellular-enabled variants seem to be comparatively unpopular, perhaps because of how quickly they are capable of crushing limited data plans. We looked into all iPad usage of apps with Localytics app analytics since the launch to see how many devices connected via a cellular network, and how often cellular-enabled iPads used 3G or 4G vs. WiFi.

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CERTIFICATE OF SERVICE The undersigned certifies that on April 3, 2013, she caused the foregoing RESPONSE OF THE OFFICE OF UNFAIR IMPORT INVESTIGATIONS TO THE COMMISSION’S MARCH 13, 2013 NOTICE REQUESTING ADDITIONAL WRITTEN SUBMISSIONS ON REMEDY AND THE PUBLIC INTEREST to be served by hand upon Administrative Law Judge E. James Gildea (2 copies), and served upon the parties (1 copy each) in the manner indicated below:

For Complainants Samsung Electronics Co., Ltd., Samsung Electronics America, Inc., and Samsung Telecommunications America, LLC:

S. Alex Lasher, Esq. BY E-MAIL QUINN EMANUEL URQUHART & SULLIVAN, LLP [email protected] 1299 Pennsylvania Ave. NW, Suite 825 Washington, DC 20004 Telephone: 202-538-8104 Facsimile: 202-538-8100

Charles F. Schill, Esq. BY E-MAIL STEPTOE & JOHNSON LLP [email protected] 1330 Connecticut Avenue, NW Washington, DC 20036 Telephone: 202-429-8162 Facsimile: 202-429-8162

For Respondent Apple, Inc.:

Nina S. Tallon, Esq. BY E-MAIL WILMER CUTLER PICKERING HALE & DORR LLP WHAppleSamsungITC- 1875 Pennsylvania Avenue, NW [email protected]; Washington, DC 20006 Telephone: 202-663-6365 Facsimile: 202-663-6363

William F. Lee, Esq. Peter M. Dichiara, Esq. WILMER CUTLER PICKERING HALE & DORR LLP 60 State Street Boston, Massachusetts 02109 Telephone: 617-526-6000 Facsimile: 617-526-5000

/s/ Nicole McPherson Nicole McPherson Program Support Specialist OFFICE OF UNFAIR IMPORT INVESTIGATIONS U.S. International Trade Commission 500 E Street, SW, Suite 401 Washington, DC 20436 (202) 205-2560 (202) 205-2158 (Facsimile)