One of the many remedies available to patent holders when a company is found to be infringing on a patent is to restrict trade by the infringer. The idea is that you shouldn’t allow a company to sell products illegally.
Samsung has been found to hold a number of valid patents covering communications technology used for products that use GSM and HSPA. When Apple didn’t buy licenses for those technologies, Samsung asked for, and got, a ban on Apple’s import of those products into the United States.
Apple contracts with manufacturers in China to produce most of its products. Those products are then imported to the United States for sale. In June the International Trade Commission found that Apple had infringed on Samsung’s patents and ordered that these Apple products be excluded by the U.S. It also issued a cease and desist order banning sales in the United States. The affected products included the iPad 2 and older iPhones that are still being sold in the United States.
Then on Saturday, Aug. 3, the U.S. Trade Representative sent a letter to the chairman of the International Trade Commission, which had ordered the ban, informing him that President Obama’s administration had rejected the ban. U.S. Trade Representative, Ambassador Michael Froman, said the administration’s disapproval is rooted in standards-essential patents, which are for technologies essential for an entire class of products to function. If this sounds familiar, it’s because this same issue was already determined by the European Union in 2012.
Then Samsung tried to get Apple banned from Europe for infringing on the same standards-essential patents. The EU said that Samsung was abusing its patents and engaging in anti-competitive behavior. The EU also refused to ban Apple from Europe under a situation that’s very similar to the decision by the USTR.
The USTR, meanwhile, simply overturned the import ban. He didn’t say that Samsung’s claims were invalid, but rather that the banning of imports was not the right remedy while the case was still working its way through the legal system. In his letter to the ITC, Froman said that public interest considerations outweigh the necessity of an exclusionary order. In the case of standards-essential patents such an exclusionary action could have a significant impact not only on the company, but on the public that uses the products, the USTR contends.
The issue here is in the nature of standards-essential patents. When a patent is considered to be standards-essential, that means it was incorporated into a standard that’s used to define how a technology works.
Apple Import Ban Denial Makes Sense to Let Courts Review Patent Case
Companies that hold standard-essential patents must agree to license their patents to all comers on a fair, reasonable and non-discriminatory (FRAND) basis. By doing so the patent holders get a certain amount of protection and recognition for their invention.
The Samsung patent was for 3G communications adopted as a global standard. Had Samsung not agreed to the FRAND basis of its standards-essential patent, then another type of 3G communications could have been chosen and Samsung would have lost out.
The real problem here is that Apple and Samsung couldn’t come to terms for a license on the Samsung patents. Samsung’s response was to basically go nuclear and blow up Apple’s ability to sell its products. Apple, of course, would like to avoid paying any licensing fees at all. It would seem that a middle ground to resolving this patent dispute is what makes sense. Samsung has every right to pursue its assertions of patent ownership in the courts.
But as you might expect, something with as many twists and turns as patent litigation can only mean one thing; there’s little if any agreement on what’s the best approach. This is part of the current level of patent chaos that exists in the United States and elsewhere these days. The fact that the USTR had to takes sides is the surest sign of all that things are spiraling out of control. There’s also little agreement that the USTR’s approach is the right one.
“The Administration’s unprecedented decision to veto an ITC ‘Section 337’ import ban against Apple for infringing Samsung’s intellectual property is a disruptive and potentially dangerous development that calls into question the fairness of our trading regime,” said Ed Black, president and CEO of the Computer and Communications Industry Association.
But the U.S. Patent and Trademark Office and the Department of Justice have had a policy in place since the beginning of the year that tries to limit what those departments call “undue leverage” in asserting standards-essential patents. That policy attempts to discourage price gouging by patent holders, especially if it’s discriminatory.
What this action reveals isn’t that the USTR is taking sides, but rather that assertion of a standards-essential patent shouldn’t result in a ban on a company’s business when other avenues are available. Right now, Samsung has other avenues, which that company is pursuing with great vigor. Banning Apple is at the very least premature. Letting the process continue through the courts only makes sense.