Htc Corporation and Htc America, Inc., As Amici Curiae in Support of Petitioner ______

No. 15-1189 In the Supreme Court of the United States __________ IMPRESSION PRODUCTS, INC., PETITIONER v. LEXMARK INTERNATIONAL, INC., RESPONDENT __________ ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FEDERAL CIRCUIT __________ BRIEF FOR HTC CORPORATION AND HTC AMERICA, INC., AS AMICI CURIAE IN SUPPORT OF PETITIONER __________ OWAIS SIDDIQUI STEVEN M. ANZALONE HTC AMERICA, INC. Counsel of Record 13920 SE Eastgate Way JOHN ALISON #200 Winston & Strawn LLP BELLEVUE, WA 98005 1700 K Street, N.W. (425) 679-5318 Washington, DC 20006 (202) 282-5000 GINO CHENG [email protected] Winston & Strawn LLP 355 South Grand Avenue Los Angeles, CA 90071 (213) 615-1700 Counsel for Amici Curiae QUESTION PRESENTED The “patent exhaustion doctrine”—also known as the “first sale doctrine”—holds that “the initial authorized sale of a patented item terminates all patent rights to that item.” Quanta Computer, Inc. v. LG Electronics, Inc., 553 U.S. 617, 625 (2008). This case presents two questions of great practical significance regarding the scope of this doctrine on which the en banc Federal Circuit divided below: 1. Whether a “conditional sale” that transfers title to the patented item while specifying post-sale restrictions on the article’s use or resale avoids applica- tion of the patent exhaustion doctrine and therefore permits the enforcement of such post-sale restrictions through the patent law’s infringement remedy. 2. Whether, in light of this Court’s holding in Kirtsaeng v. John Wiley & Sons, Inc., 133 S. Ct. 1351, 1363 (2013), that the common law doctrine barring re- straints on alienation that is the basis of the exhaustion doctrine “makes no geographical distinctions,” a sale of a patented article—authorized by the U.S. pa- tentee—that takes place outside of the United States exhausts the U.S. patent rights in that article. ii TABLE OF CONTENTS Page QUESTION PRESENTED ........................................... i TABLE OF AUTHORITIES ....................................... iv INTRODUCTION AND INTEREST OF AMICI CURIAE ....................................................................... 1 A. HTC Corporation and HTC America, Inc. (collectively “HTC”) Create Innovative Smartphones Used by Consumers Worldwide .................................... 1 B. HTC Smartphones Contain Integrated Circuits and Components Made Worldwide, Sold to HTC by Vendors Worldwide, and for Use in Smartphones Purchased by Consumers Worldwide ............ 2 C. HTC Relies on Fully Authorized Sales from Licensed Component Suppliers Worldwide ....................................................... 4 D. Patent Exhaustion Principles Protect Smartphone Manufacturers Like HTC and Consumers Worldwide ............................. 6 E. The Lower Court Jurisprudence Rescuing Patent Rights from International Exhaustion Leads to Mischief and Real-World Harms to Downstream Customers ................................. 8 STATEMENT ............................................................. 11 SUMMARY OF ARGUMENT ................................... 12 ARGUMENT .............................................................. 14 iii I. Foreign “First Sales” Terminate Patent Rights in Sales to Subsequent Purchasers. ........ 14 CONCLUSION .......................................................... 18 iv TABLE OF AUTHORITIES Page(s) CASES Adams v. Burke, 84 U.S. 453 (1873) ................................................ 16 Bobbs-Merrill Co. v. Straus, 210 U.S. 339 (1908) .............................................. 14 Boesch v. Graff, 133 U.S. 697 (1890) .............................................. 14 Fuji Photo Film Co. Ltd v. Jazz Photo Corp., 394 F.3d 1368 (Fed. Cir. 2005) ............................. 10 Fujifilm Corp v. Benun, 605 F.3d 1366 (Fed. Cir. 2010) ............................. 10 Jazz Photo Corp. v. International Trade Comm’n, 264 F.3d 1094 (Fed. Cir. 2001) ......................... 8, 11 John D. Park & Sons Co. v. Hartman, 153 F. 24 (6th Cir. 1907) ...................................... 17 Keeler v. Standard Folding Bed Co., 157 U.S. 659 (1895) .............................................. 14 Kirtsaeng v. John Wiley & Sons, Inc., 133 S. Ct. 1351 (2013) .................................. Passim Lexmark Int’l, Inc. v. Impression Prod., Inc., 816 F.3d 721 (Fed. Cir. 2016) ......................... 11, 13 v Mallinckrodt, Inc. v. Medipart, Inc., 976 F.2d 700 (Fed. Cir. 1992) ............................... 11 Quanta/ Computer Inc. v. LG Electronics Inc., 553 U.S. 617 (2008) ...................................... Passim Sony Corp. of Am. v. Universal City Studios, Inc., 464 U.S. 417 (1984) ........................................ 13, 16 OTHER AUTHORITIES 1 E. Coke, Institutes of the Laws of England § 360 (1628) ........................................................... 12 HTC Corp. v. Nokia Corp., High Court of Justice, Chancery Division, Patents Court, Case Nos. HC12A02048 and HC12C02909 (2013) ................. 9 SEC, HTC v. Nokia-Public-UK-Judgment, available at www.scribd.com/document/180191060/13 -10-30-HTC-v-Nokia-Public-UK- Judgment-EP0998024 (last visited January 19, 2017) ................................................... 9 SEC, Qualcomm’s Form 10-K for the Fiscal Year Ended Sept. 28, 2014 (available at https://www.sec.gov/Archives/edgar/data/ 804328/000123445214000320/qcom10- k2014.htm) (last visited January 19, 2017).................................................................... 3, 4 2 William Blackstone, Commentaries ....................... 17 INTRODUCTION AND INTEREST OF AMICI CURIAE∗ For centuries, the common law has protected the ability of consumers to legally resell their legally purchased patented products free from the onerous bur- den of license or royalty fees to the patent owner. De- spite this Court’s guidance in Quanta Computer Inc. v. LG Electronics Inc., 553 U.S. 617, 625 (2008), recog- nizing an authorization-based patent framework, and Kirtsaeng v. John Wiley & Sons, Inc., 133 S. Ct. 1351, 1363 (2013), reaffirming the global role of common law doctrines, the Federal Circuit1 has created a territorial exception to the patent exhaustion and “first sale” doctrines. This unjustified exception threatens the practical realities of the global, interdependent market- place and should be overruled. A. HTC Corporation and HTC America, Inc. (collectively “HTC”) Create In- novative Smartphones Used by Con- sumers Worldwide In 1997, a few determined individuals— including current CEO Cher Wang—founded today’s HTC Cor- poration. Although they had initially targeted OEM sales of conventional notebook computers, HTC’s founders recognized the near-limitless market poten- ∗ The parties consented to the filing of this brief. The let- ters of consent are on file with the Clerk. In accordance with Rule 37.6, amici state that no counsel for any party authored this brief in whole or in part, and that no person or entity, other than the amici, has contributed monetarily to the preparation or submission of this brief. 1 This amicus brief addresses only the second question presented here. 2 tial for hand-held mobile devices and fearlessly com- mitted their resources to creating the world’s first touch and wireless handheld devices. Over the intervening 20 years, HTC has supplied a “parade of firsts” to the worldwide market for smartphone devices, including the world’s first smartphone with keyboard (2004); the world’s first 3G smartphone (2005); the world’s first “touch screen” smartphone (2007); the world’s first Google Android smartphone (2008); and the world’s first 4G Android smartphone (2010). By 2011, Interbrand recognized HTC smartphones in its list of “Global Best 100 Brands.” HTC currently sells worldwide its flagship HTC 10 line of smartphone products and other consumer electronic products. B. HTC Smartphones Contain Inte- grated Circuits and Components Made Worldwide, Sold to HTC by Vendors Worldwide, and for Use in Smartphones Purchased by Consum- ers Worldwide The logistics behind the manufacture and assembly of a smartphone have grown increasingly intricate and international in nature. HTC builds innovative smartphones using integrated circuits (“ICs”) made abroad by (or for) U.S. manufacturers. Such ICs are commonly protected by both U.S. and international patents and are sold, through networks of authorized vendors, for consumer use both in the U.S. and worldwide. For example, over at least the past twelve years, HTC has built most of its smartphones using Qual- comm’s telecommunications chipsets. The Qualcomm 3 model,2 discussed below, provides a useful paradigm illuminating how certain U.S. companies make and sell, in Asia, hardware and software technologies that have been invented and patented in the U.S., for use by consumers in the U.S. and in countries worldwide. Qualcomm relies on independent third-party suppliers to perform the manufacturing and assembly, and most of the testing, of its ICs, based primarily on Qualcomm designs and test programs. See Qual- comm’s 10-K at 6. For instance, Qualcomm’s primary foundry manufacturers include international companies such as Global Foundries Inc. (Germany, Singa- pore, and New York); Samsung Electronics Co., Ltd. (South Korea, Texas); SMIC (Shanghai, Beijing, Tian- jin); TSMC (Taiwan, China, Washington State); and UMC (Taiwan and Singapore). Ibid. Qualcomm also contracts “assembly” and “test” ser- vices from a worldwide network of partners who trans- form Qualcomm’s manufactured silicon wafers into functioning IC processors, including ASE (Japan,

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