© The Financial Times Ltd 2015 FT and 'Financial Times' are trademarks of The Financial Times Ltd.
August 3, 2013 8:51 pm
President Obama has overturned a looming US import ban against some older models of the iPhone and iPad, adding a significant political twist to the legal wars that have been raging between smartphone giants Apple and Samsung.
The ban, which had been set to take effect this week, was ordered by the US International Trade Commission in June, after the agency found that Apple had infringed on a key Samsung technology patent.
An ITC import ban has not been overturned by the White House since Ronald Reagan intervened in another case involving Samsung in 1987, and the chances of action on behalf of Apple had been discounted by many trade experts.
If the ban had gone ahead it would have stopped American consumers from buying some versions of the iPhone 4 and iPad 2, discounted devices that are still big sellers as Apple reaches a larger, more price-conscious market.
“It could be viewed as the US favouring US companies,” said Susan Kohn Ross, a partner at Los Angeles law firm Mitchell Silberberg & Knupp, about the political impact of the decision. “Frankly, every other country does it, so why shouldn’t the US?”
The presidential veto was announced on Saturday by Michael Froman, the US Trade Representative, who was formally responsible for reviewing the case. The decision was overturned because of “the effect on competitive conditions in the US economy and their effect on US consumers,” he said in a letter announcing the decision.
Washington’s intervention on behalf of Apple marks the second key victory the US company has scored on its home turf against Samsung, after more than two years of legal wrangling over rights to technology in the booming smartphone and tablet markets. A year ago a US court sided with Apple in a separate case and ordered Samsung to pay $1bn in damages, though the amount was later reduced on appeal.
Apple said in a statement after the veto was announced: “We applaud the administration for standing up for innovation in this landmark case. Samsung was wrong to abuse the patent system in this way.”
The ITC case turned on a Samsung patent covering a technology which is included in standards followed by all makers of phones and tablets. Companies with so-called standards-essential patents are required to license them on less onerous terms than other intellectual property, a stipulation that Apple claimed Samsung had failed to follow.
Samsung said that it was disappointed that the US Trade Representative had decided to set aside the exclusion order. “The ITC’s decision correctly recognised that Samsung has been negotiating in good faith and that Apple remains unwilling to take a licence.”
Ms Ross said the decision would “take from Samsung what might have been a very strong bargaining chip and change whatever settlement discussions are under way between the two companies”.
In his letter announcing the decision, Mr Froman quoted from a policy statement about standards-essential patents earlier this year. There the Department of Justice and US Patent and Trademark office expressed concerns about how companies owning these patents might be able to use them to block competitors from entering their markets, hurting competition.
Mr Froman said he “strongly share[d]” that position, and that there was risk of holders of these patents “gaining undue leverage and engaging in ‘patent hold-up’ ” Standards “have come to play an increasingly important role in the US economy”, he added.
The likelihood of an import ban against a company widely seen as the most innovative US technology concern of the past decade had already started to raise political concerns in Washington, with several senators last week writing to express their concern.
However, patent experts had also warned about the risk of intervening to overturn a patent right that had been upheld at the ITC – particularly since the US has made respect for intellectual property rights a cornerstone of its trade policy.
“The administration is committed to promoting innovation and economic progress, including through providing adequate and effective protection and enforcement of intellectual property rights,” Mr Froman said.
“My decision in this case does not mean that the patent owner in this case is not entitled to a remedy,” he said. “On the contrary, the patent owner may continue to pursue its rights through the courts.”
Please don't cut articles from FT.com and redistribute by email or post to the web.
Sign up for email briefings to stay up to date on topics you are interested in