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11th Hour Veto Saves Older iPhones, iPads From ITC Ban

By Erika Morphy MacNewsWorld ECT News Network
Aug 5, 2013 3:43 PM PT

In a surprise move, the Obama administration overturned a decision by the International Trade Commission to ban the import of certain older Apple products after it found that they infringed on certain Samsung patents. The administration made the announcement on Saturday, one day before the ban was set to take effect.

11th Hour Veto Saves Older iPhones, iPads From ITC Ban

U.S. Trade Representative Michael Froman supplied several reasons for vetoing the import ban, including "technical policy considerations" and their "effect on competitive conditions in the U.S. economy and the effect on U.S. consumers."

A Surprise Decision

Although Apple and other tech companies fiercely lobbied for the veto, it still came as a surprise. The last time the president overturned an ITC decision was in 1987. The fact that Apple is an immensely popular company has led to rampant speculation that the Obama administration caved purely for political reasons.

It is easy to see how that conclusion could be reached, said Matthew Woods, an attorney with Robins Kaplan Miller & Ciresi. "These types of decisions don't happen very often, and the fact that the Obama administration is weighing in at this late date in the decision making process is also something to note," he told MacNewsWorld.

It seems likely that the Obama administration wanted to avoid putting a stamp of approval on a decision to ban the iPhone and iPad, even though the products involved were older models, he said.

The Impact on FRAND

There are reasons for concern over what the decision means for standard setting, said Woods.

The ITC issued the ban after finding that Apple had infringed standard-essential patents held by Samsung. The argument made by Apple and its supporters was that Samsung was refusing to allow Apple to license the technology except under onerous royalty fees that had strings attached.

That is not the purpose of FRAND (Fair, Reasonable And Non-Discriminatory) terms, they argued.

The Business Software Alliance recently made this very case when it filed a brief arguing for an overturn of the ban. Companies have a choice whether they submit their patented technologies to become part of internationally recognized standards, it noted, "but if they make the choice to participate in creating such a standard and in the process commit to licensing their technologies on FRAND terms, then they should not be allowed to circumvent their original commitment by using the Commission to obtain an exclusion order which could result in extracting unreasonable royalties."

On the other hand, licensees could also game the system by refusing to pay a fair and reasonable royalty, as Samsung and its supporters maintained Apple did.

While not taking sides in this particular case, Woods did note that patent holders need to have some option or way to up the ante if licensees refuse to cooperate.

Until its ruling was overturned, the ITC provided one such way, he said.

A Move Against Forum Shopping

There is another reason the Obama administration might have struck down the ITC's ruling, Douglas Panzer of the Law Office of Douglas Panzer told MacNewsWorld.

Companies forum shop their patent cases among district courts routinely, he said, and this practice has expanded to the ITC. "People see the ITC as a way of getting products off the market sooner than they could through the courts. Also, the standard is lower because the ITC doesn't have to meet the injunction criteria."

Panzer's guess about some of the thinking that went into the veto: "What the Obama administration wants to do is say to people, 'We will not let you use the ITC as an end run for patent laws, so think twice about patent shopping into the executive branch and out of the judicial branch.'"

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