Obama gives low-cost iPhones a reprieve from ITC ban

Overrules trade agency on Samsung patent case ruling. Photo: Apple

WASHINGTON, August 3, 2013 – President Obama ordered U.S. Trade Representative Michael Froman on Saturday to overrule a June U.S. International Trade Commission (ITC) decision to ban imports of certain older, low cost iPhones and iPads running on AT&T’s (T) wireless networks.

The ITC’s ban on sales of imported Apple iPhone 4s and specific versions of the company’s iPad2 was based on its decision that the Chinese-manufactured models infringed on a Samsung patent. The ban was to take effect this month.

PR photo of an Apple iPhone 4, one of the models involved in Saturday’s veto of an ITC ruling. (Apple)

President Obama has come out against import bans on the basis of the type of patent at issue in the Samsung case. The White House has recommended that Congress limit the ITC’s ability to impose import bans in these cases.

The overturned ban marked the first time such an ITC action has been overturned since a 1987 ITC ruling was reversed—ironically, in another case involving Samsung. The unusual Saturday announcement, a non-trading day for Wall Street, may have been deliberate in order to avoid roiling last week’s market while giving investors time to digest the decision.

According to a letter issued by Mr. Froman, the President’s decision to reverse the ruling was due to a key concept in patent litigation. The Samsung patent in question is regarded as “standards-essential,” which essentially means, in this case, that the patent involves a standard that must be adhered to by all manufacturers of wireless telephone and touchpad devices.

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Companies like Samsung that hold such standards-essential patents are generally required to license them to manufacturers on more favorable or evenhanded terms than is usually the case with other patents held on intellectual property. Apple had vigorously contested the ITC ban on this basis and the administration has now weighed in in favor of the American company.

If it had gone into effect as scheduled, the Apple ban could have seriously damaged the computer and consumer giant’s bottom line in upcoming quarters. Even though the iPhone and iPad models in question no longer represent either Apple’s or the industries latest technological breakthroughs and feature sets, current deep discounts on these devices still make them big sellers in an consumer market that increasingly favors cheaper wireless devices and lower-cost Internet access.

The President’s effective ITC veto appeared to catch industry pundits, experts on international trade law and enforcement and some investors off-guard as it had not been widely anticipated.

But the often cynical but frequently insightful financial web site ZeroHedge.com cites the adjacent chart—obtained from OpenSecrets.org—as providing at least a hint as to why the White House might have made its move.

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Bar chart indicating Apple’s lopsided campaign contributions to the Obama campaign and the Democrats in recent electoral contests. (OpenSecrets.org via ZeroHedge.com)

The larger Silicon Valley high tech community—including Apple—has, in recent years, provided lopsided campaign support for the President. It is likely that Apple’s stalwart support for the Administration, along with the key patent precedent cited by Mr. Froman, helped bring about Saturday’s ruling.

Mr. Froman’s letter also noted his continuing concern over the possibility that patent holders could gain too much leverage over licensees of its patents in coming years with a resulting negative effect “on competitive conditions in the U.S. economy and their effect on U.S. consumers.”

Apple issued a statement endorsing the Administration’s stance, applauding “the administration for standing up for innovation in this landmark case. Samsung was wrong to abuse the patent system in this way.”

The now mostly metaphorical but still very much alive K St. lobbying machine continues to exert major political influence in Washington, DC. For better or worse.

But Mr. Froman’s letter notably did not preclude Samsung from pursuing damages in the court system, noting that the current decision in favor of Apple “does not mean that the patent owner in this case is not entitled to a remedy.”

  —AP contributed to this report.


Read more of Terry’s news and reviews at Curtain Up! in the Entertain Us neighborhood of the Washington Times Communities. For Terry’s investing and political insights, visit his Communities columns, The Prudent Man and Morning Market Maven, in Business.

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Terry Ponick

Now writing on investing, politics, music, movies and theater for the Washington Times Communities, Terry was formerly the longtime music and culture critic for the Washington Times print edition (1994-2009) before moving online with Communities in 2010.  



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