InterDigital, Inc.

InterDigital | 200 Bellevue Parkway, Suite 300 | Wilmington, DE 19809 | USA | T: +1 302.281.3600 | F: +1 302.281.3763 September 12, 2022 VIA EMAIL ONLY Directorate-General for Taxation and Customs Union European Commission 1049 Bruxelles/Brussel Belgium Re: Feedback on Reform of the Union Customs Legislation Dear Director-General: InterDigital, Inc. ("InterDigital") is grateful for the opportunity to provide feedback on the operation of the Union customs legislation and the challenges facing our sector in the context of the EU Customs Union. In support of our response to the questionnaire entitled 'Reform of the Union customs legislation', we set out below supplementary submissions. BACKGROUND ON OPERATIONS OF INTERDIGITAL InterDigital is one of the world’s leading for‐profit research and development companies.

ON OPERATIONS OF INTERDIGITAL InterDigital is one of the world’s leading for‐profit research and development companies. Primary research areas include next-generation cellular wireless, IoT technology, media technologies, and visual technologies. We are focused on developing the mobile and video technologies that are at the core of global telecommunications networks and supporting services. Our solutions create, among other things, more efficient broadband networks, better video delivery, and richer multimedia experiences. With multiple research and innovation laboratories in key wireless and video research centres around the world, as well as corporate offices in the United States and Europe, InterDigital’s footprint is aligned with the world’s best talent in these disciplines. InterDigital operates six R&D facilities in four countries: France, United Kingdom, United States, and Canada.

InterDigital operates six R&D facilities in four countries: France, United Kingdom, United States, and Canada. We are also active participants and leaders in many standards development organisations (SDOs), including 3GPP, where we contribute our research and expertise to the further development of digital standards for cellular communications, wireless, broadband and video. Our licensing programme provides lawful access to our extensive portfolio of patents, which protect our fundamental inventions created through our research and development work. Licensing these patents is our principal source of income. The revenue InterDigital generates through its licensing activities enables us to continue our industry-leading technology development, which we often contribute to the industry generally through our noted participation in global SDOs.

…development, which we often contribute to the industry generally through our noted participation in global SDOs. Although the development of the digital technologies sector is key to the European Commission's policy agenda, research and development activities within the EU remains below that in other major economies such as the US, China, Japan and South Korea.1 It is therefore vital for innovators active within the EU, such as InterDigital, for the EU Customs Union to operate in such a manner that supports innovators and ensures that the results of their creativity and investments are sufficiently protected. In March 2022, a Report and Recommendations were issued by the Wise Men Group on the Reform of the EU Customs. The Report notes: “[T]he expectations on Customs’ role have dramatically evolved to include many additional dimensions.

The Report notes: “[T]he expectations on Customs’ role have dramatically evolved to include many additional dimensions. There are growing additional expectations regarding security (bombs, weapons, explosives, ammunitions, dual use goods, drugs and drug precursors, etc.), regarding the safety of 1 DG Research, Science, Research and Innovation Performance of the EU, 2022, chapter 5.3. DocuSign Envelope ID: 5CCDB40C-A849-405B-BD43-FAE73D562415 Ref.

Innovation Performance of the EU, 2022, chapter 5.3. DocuSign Envelope ID: 5CCDB40C-A849-405B-BD43-FAE73D562415 Ref. Ares(2022)6321895 - 13/09/2022 European Customs Union September 12, 2022 Page 2 goods (compliance with food, feed and phytosanitary and medicinal standards, with product compliance and safety obligations, etc.), regarding the fight against cigarette smuggling and illicit cash flows, regarding illicit trade in cultural goods or regarding the protection of intellectual property rights.” (emphasis added) 2 As intellectual property rights ("IPRs") and standard essential patents ("SEPs") have become geo-strategic assets (as evidenced by the latest European Commission actions at the WTO3), the EU Customs Union should play a significant role in ensuring a level playing field as between those implementers who negotiate licences with IPR holders and pay due royalties, and those…

…who are able to “hold out” from negotiating licences and avoid paying any royalties for use of the IPRs in question. We believe that intervention of the EU Customs Union is needed to improve the mechanisms for the identification and enforcement of IPRs in respect of infringing products at the EU border. CURRENT CHALLENGES FACED BY INNOVATORS Innovators such as InterDigital, which contribute to open standardisation at SDOs, commit to make their SEPs available for licence to manufacturers on fair, reasonable and non-discriminatory ("FRAND") terms. Such innovators rely on the income derived from patent royalties to reinvest in their research and development activities.

…rely on the income derived from patent royalties to reinvest in their research and development activities. In recent years, this cycle of innovation has been threatened by a growing trend towards 'hold out' strategies by certain implementers, namely manufacturers of telecommunications and video products that refuse to enter into licence agreements, on FRAND terms or otherwise, for products that include SEPs. These strategies not only result in extensive infringement of legally protected IPRs, but also deprive innovators of the income necessary for their continued activities and existence, notably continued investment in research and development activities and participation in the development of global standards. Such strategies also reward “bad actors” who effectively steal IPRs from their rightful owners, thereby undercutting legitimate licensees.

…reward “bad actors” who effectively steal IPRs from their rightful owners, thereby undercutting legitimate licensees. Implementers following these strategies are able to export infringing products into the EU without accounting for the value of the patented technologies embedded in the products. It has been our experience that unlicensed products significantly impact the revenues of all legitimate producers, experience that is borne out by research. For example, in 2015 alone infringement of IPRs in the EU smartphone market resulted in direct lost sales of €4.2 billion, or 8.3% of total sales.4 Absent sufficient protection provided by customs operations and legislation, innovators such as InterDigital are forced to engage in litigation as a means of preventing imports of infringing products into the EU.

…as InterDigital are forced to engage in litigation as a means of preventing imports of infringing products into the EU. In contrast to the unified EU Customs Union, such litigation requires enforcement on a patent by patent and a country by country basis. Such requirements force innovators to engage in a costly and lengthy process, in multiple countries, in order to ensure the protection of their IPRs. 2 PUTTING MORE UNION IN THE EUROPEAN CUSTOMS, Ten proposals to make the EU Customs Union fit for a Geopolitical Europe, Report by the Wise Persons Group on the Reform of the EU Customs Union – Brussels March 2022, p. 21. 3 https://www.wto.org/english/news_e/news22_e/ds611rfc_22feb22_e.htm 4 2019 EUIPO Status Report on IPR Infringement, p.23.

…2019 EUIPO Status Report on IPR Infringement, p.23. DocuSign Envelope ID: 5CCDB40C-A849-405B-BD43-FAE73D562415 European Customs Union September 12, 2022 Page 3 ISSUES ARISING UNDER EXISTING EU CUSTOMS LEGISLATION As the Commission is aware, legislation is in place within the EU for the customs enforcement of IPRs under Regulation (EU) No 608/2013 ("Regulation 608/2013"). We believe this framework does not provide adequate protection for innovators, particularly those operating within the digital technologies sector. Pursuant to Regulation 608/2013, IPRs holders are entitled to initiate proceedings with the customs authorities of one or more Member States in order to determine whether IPRs have been infringed.

…with the customs authorities of one or more Member States in order to determine whether IPRs have been infringed. If the customs authorities issue a decision granting an application and identifies goods suspected of infringing such rights, the release of the goods will be suspended, or the goods will be detained. However, except for small consignments of counterfeit goods customs authorities will only destroy goods suspected of infringing IPRs where: a) the rights holder has confirmed that they consider that IPRs have been infringed and that they agree to the destruction of the goods; and b) the declarant or holder of the goods has confirmed their agreement to the destruction of the goods. Regulation 608/2013 does not require customs authorities to ascertain the existence of an infringement of IPRs.

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