By Simon Heimowitz – Edited by Kathleen McGuinness
On August 3, the Obama administration issued a veto on an International Trade Commission (“ITC”) exclusion order that had effectively banned the importation of some older models of the iPhone and iPad. Letter from Michael B. G. Froman, U.S. Trade Representative, to Irving A. Williamson, Chairman, ITC (Aug. 3, 2013). The ITC had ordered the ban on older Apple devices — the iPhone 3GS, iPhone 4, iPad 3G and iPad 2 3G distributed with cellular service by AT&T — after agreeing with Samsung that Apple had infringed one of Samsung’s standard-essential patents (“SEPs”). The ban would have gone into effect on August 5. Ambassador Froman expressed the administration’s decision to veto the exclusion order as the result of “extensive consultations with the agencies of the Trade Policy Staff Committee and the Trade Policy Review Group, as well as other interested agencies and persons,” after which he “decided to disapprove the USITC’s determination to issue an exclusion order and cease and desist order in this investigation.” Letter at 3. As reported by Forbes.com, Froman noted the administration’s decision was made after taking into account the “effect on competitive conditions in the U.S. economy and the effect on U.S. consumers.” Id.
According to Fortune.com, ITC commissioner Dean Pinkert cited a number of errors in his fellow commissioners’ decision to order the exclusion of the Apple products. Pinkert contended that, “the patent in question was part — and only a tiny part — of an international standard, and as such Samsung had agreed to make it available for licensing under terms that are fair, reasonable and nondiscriminatory (FRAND).” Secondly, Pinkert argued that Samsung’s proposal, which would have required Apple to license its non-standard-essential patents to Samsung in exchange for its SEPs, was “neither fair nor non-discriminatory.”
The Wall Street Journal reports that, in response to the presidential veto, Apple released a statement stating, “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 recent Apple-Samsung battles highlight the role of the ITC in patent jurisprudence and stimulate debate on how best to promote innovation. Some technology companies argue against ITC exclusion orders in cases where the patent to be enjoined concerns small features, contending that such injunctions would hamper the companies’ ability to provide their customers with updated devices. On the other hand, patent licensing companies argue that banning the sale or importation of infringing products must remain a viable remedy for patent holders. As reported in the Wall Street Journal, decreasing the availability of exclusion orders may diminish patent-stimulated innovation because of the instability and uncertainty in the value of a patent. As one advocate of exclusion orders put it, “[o]nce you get a patent, how do you know what it’s worth because your expectations are changing on a daily basis because of what the courts say, what the ITC says and now what the White House says?”