Oh snap! Apple ITC Ban Vetoed by the Obama Administration

South Korea to the US regarding the veto – “I find your lack of faith disturbing…”

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The ITC announced that it would ban imports of the iPhone 4 as well as the iPad 2 due to patent infringements that the ITC found Apple had committed.  While Apple insists that it did nothing wrong and that the patents in question were SEP (standard essential patents) needed in order to conduct business, Samsung praised the ban.

Then the only thing that could disrupt Samsung’s brief, mental party happened – The Obama administration vetoed the ITC ban – the first such veto in over 25 years.

The US has the ability to overturn an ITC ban when it feels said ban conflicts with US Policy and is against the public interest.

The ban did a couple things outside of allowing Apple to continue selling the iPhone 4 and iPad 2 in the US. Briefly, it

  • Weakened the ITC
    If the US can so easily, so casually veto the ITC’s decision to ban these products, it may discourage other companies to seek relief via the ITC. Historically, it’s been easier to gain these types of injunctive relief through the ITC, as it didn’t require the burden of proof that other legal avenues did.
  • Caused a $1B Market Cap Loss for Samsung
    The market responded negatively and Samsung lost a great deal of operating capital and value as a result.
  • Strained Relations between the US and South Korea
    The South Korean government issued a statement expressing worries about the ITC ban veto. The Ministry of Trade, Industry & Energy says that the decision could harm Samsung’s patent rights.  The Ministry said it will be paying close attention on Friday, when the ITC is expected to rule on a possible ban of some of Samsung’s Galaxy devices; and that [they hoped] “to see a fair and reasonable decision on the matter.”

It’s clear from the South Korean statement that they aren’t happy with the US government’s decision to back Apple. If it were any other country on any other volatile peninsula, it might strain relations between the two countries. However, South Korea is dependent on US support against an aggressive North Korea, so the rhetoric from the South may just end up being that – rhetoric.

The banned items are likely to be discontinued in a few months as Apple introduces the anticipated iPhone 5S, iPhone 5C (the budget iPhone) and the iPhone 5, sometime this Fall.  As I understood the ban, it was an import, not a sales ban.  So Apple, AT&T and other resellers would have been able to continue to sell what stock they had of each device.

In the end, I’m not certain how effective the ban would have been, had the US not vetoed it. I actually think the veto sent a louder message than the ban would have.

According to the published dissenting opinion by ITC commissioner Dean Pinkert, the ban has a few major flaws. Among them are:

  • The patent in question was only a small part of an international standard.  As such Samsung had agreed to make it available for licensing under terms that are fair, reasonable and nondiscriminatory (FRAND) terms.
  • Samsung had made no effort to demonstrate that the licensing terms it offered to Apple were reasonable
  • That the only time Samsung made such an offer was during an oral discussions in December 2012; and it came with strings attached that Apple simply could not agree to
  • What those strings were have been redacted (blacked out) in the document, but Pinkert adds in the next sentence: “it is neither fair nor non-discriminatory for the holder of the FRAND-encumbered patent to require licenses to non-FRAND-encumbered patents as a condition for licensing its patent.”

It may be that the ban was implemented due to politics. There seems to be some evidence that suggests the commissioners kicked this one upstairs hoping the President would veto it. Now that that’s happened, and issues like these have gotten executive attention, perhaps some serious patent law changes can be implemented.

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