The Obama administration on Saturday vetoed a U.S. trade body's ban on the import and sale of some Apple Inc.
AAPL +1.28%
iPhones and iPads, a rare move that upends a legal victory for smartphone rival Samsung Electronics Co.
005930.SE -0.86%
U.S. Trade Representative Michael Froman made the decision to
veto the ban on the Apple devices, citing concerns about patent holders
gaining "undue leverage" as well as potential harm to consumers and
competitive conditions in the U.S. economy.
He said Samsung could continue to pursue its patent rights through the courts.
The action marked the first time since 1987 that a presidential
administration had vetoed an import ban ordered by the U.S.
International Trade Commission.
The ITC in June had ordered the import ban and an accompanying
cease-and-desist order affecting some older-model Apple iPhones and
iPads after finding the products infringed a Samsung patent.
The ban raised concerns among U.S. antitrust enforcers and touched
off intense lobbying of the Obama administration by technology companies
with opposing positions on the issue.
Critics of the ITC order questioned whether companies should be able
to block rival products in cases involving patents that have been deemed
to be essential to creating products based on key technologies overseen
by industry standard-setting groups.
Apple and some other technology companies argued to the trade
representative that the ban was inappropriate because Samsung had
committed to fairly license such "standard essential" patents associated
with technology for wireless devices.
Samsung insisted it had offered to license its patents to Apple, but
the Silicon Valley company had sought to avoid paying for licenses of
Samsung's patents.
The South Korean electronics giant and some U.S. technology companies
disputed that their commitments to standard-setting bodies mean that
patent holders can't seek import bans or court injunctions in enforcing
their intellectual property. They argued that a veto of the ITC order
would upset decades of settled expectations, weaken the value of patents
and discourage innovation.
"We applaud the Administration for standing up for innovation in this
landmark case," an Apple spokeswoman said in a statement. "Samsung was
wrong to abuse the patent system in this way."
A Samsung spokesman said the company was disappointed by the veto.
"The ITC's decision correctly recognized that Samsung has been
negotiating in good faith and that Apple remains unwilling to take a
license," he said.
The veto concludes one of the most dramatic ITC cases in years.
Apple's loss in the case and the subsequent ban was seen as a blow to
the company's continued efforts to press cases against competitors it
says have copied technology it developed for the iPhone and iPad.
Samsung, meanwhile, is scheduled to face a ruling by the ITC this
Friday on whether some of its products infringe Apple patents and should
be barred from import as a result. One person familiar with ITC
proceedings said it might choose to delay that decision in the wake of
the Obama administration's move Saturday.
The ITC cases represent one set of fronts in a global patent war
between Apple and Samsung, longtime technology partners that became
bitter rivals after Apple introduced the iPhone in 2007 and Samsung
later introduced products that contain similar features.
Apple launched a series of patent suits against Samsung, which responded by leveling infringement charges of its own.
The ITC order would have barred the U.S. sale or import of some Apple
products still on store shelves, including a version of the iPad 2 made
to work on AT&T Inc.'s
T +0.14%
network, and the iPhone4, which runs on AT&T and T-Mobile USA's airwaves.
Mr.
Froman, in a letter explaining the veto, said he came to his decision
after extensive consultations with government trade bodies "as well as
other interested agencies and persons."
He said he also "strongly shares" concerns raised in a policy
statement issued in January by the Justice Department and the U.S.
Patent and Trademark Office, which said ITC product bans should rarely
be allowed in cases involving standard-essential patents. Among other
issues, the agencies discussed the possibility that holders of such
patents could use them in ways that would unduly increase royalty rates
they might receive for licenses.
DOJ officials were included during the trade representative's review
of the Apple ban. A Justice spokeswoman declined to comment.
The Federal Trade Commission, which shares antitrust authority with
the Justice Department, has made similar arguments. The FTC in January
reached a settlement with Google Inc.
GOOG +0.26%
after alleging the company was misusing standard-essential patents it acquired from handset maker Motorola Mobility.
An FTC spokesman didn't immediately respond to a request for comment.
Former FTC Chairman Jon Leibowitz, who led the agency during the
Google case, said Saturday's veto would benefit consumers and promote
innovation.
"When a company agrees to license what is known as a
standard-essential patent at fair and reasonable terms, it shouldn't be
able to ban importation of a product into the United States simply
because it wants a better deal," he said.
Susan Kohn Ross, a partner at the law firm Mitchell
Silberberg & Knupp, said she was surprised the Obama administration
stepped in on the case. Usually, such reviews turn on whether a patent
in a case was really infringed, rather than concerns about the kinds of
issues laid out in government policy statements.
Either way, this blow to Samsung likely won't have much impact in the
bargaining room with Apple, she said. ITC decisions typically don't
have as much of an impact in setting legal precedents as rulings in
federal courts.
Samsung cannot appeal the veto, but it can continue to press its own
court cases against Apple. "Does it in any way end the dispute? No," Ms.
Ross said.
