On the final day of a 60-day review period under Section 337 of the Tariff Act of 1930, the Obama Administration notified the U.S. International Trade Commission of its disapproval of an import and sales ban handed down in June of Apple’s iPhone 4 (among other devices) scheduled to take effect on August 5, 2013.  The ITC ban prevented Apple from importing five China assembled products, including the iPhone 4 running on AT&T’s network - one of Apple’s biggest 2013 hits.  The ITC held that Apple infringed a single Samsung patent relating to 3G wireless technology and the ability to transmit multiple services simultaneously and correctly.  Samsung’s original complaint asserted four patents, but the ITC held that three of them were not infringed.  It was the first time in 25 years that an administration had vetoed an ITC decision.

Patents at Issue

The patents at issue in the ITC dispute are known as Standards Essential Patents (“SEP”) - patents covering technology that must be used to comply with a technical standard and recently courts and regulators have been grappling over the proper way to deal with patent infringement disputes involving SEPs, including whether FRAND licenses or “fair, reasonable and nondiscriminatory” patent licenses should be required in this context.  Expectations that SEP owners should be willing to enter into FRAND licenses are increasing in the United States and quickly becoming policy.

Policy Behind the Ruling

The ruling was delivered in a letter by Michael Froman, the U.S. Trade Representative and the president’s adviser on international trade issues.  In the letter, Mr. Froman explained that Samsung may still pursue its case through the courts.  According to Froman his decision was at least in part based on the ITC ban’s potential “effect on competitive conditions in the U.S. economy and the effect on U.S. consumers.”  The ruling also reflects concerns that companies like Samsung are “gaining undue leverage” over their competitors through such bans and is consistent with the administration’s position on “licensing SEPs on FRAND terms” which is “an important element of the administration's policy of promoting innovation and economic progress.”  Froman also stated that he agrees with the Department of Justice and the USPTO that ITC bans should rarely be allowed in cases involving SEPs. 

Considerations for Corporations

As a patent attorney, I’m concerned about the waste produced by this decision.  ITC cases tend to be fast paced, intensive, and expensive.  This recent decision promotes a feeling of uncertainty, both in the business community and the legal profession.  Needless to say, this ruling likely will put a chill (at least temporarily) on ITC case filings involving standard essential patents, but will that be the only impact?  The administration’s decision might cause all prospective parties to think twice about filing an action in this forum.  Going forward, it might be wise to gage the political environment and examine whether the current administration has taken a strong position on the matters at issue in the case prior to filing.