The United States Trade Representative (USTR), to whom the White House has delegated the authority to veto ITC rulings, has just announced the decision to veto an early-June ITC ruling, which would otherwise have taken effect on Monday, to ban the importation of older iPhones and iPads into the United States market over a Samsung declared-essential patent. Here's the letter (this post continues below the document):
This is a victory for consumers and fair competition, and it also shows that Commissioner Dean Pinkert, one of the six leaders of the ITC, appropriately dissented from the majority decision, which was a total outlier with respect to injunctive relief over standard-essential patents (SEPs).
The reason for the veto is the Administration's concern over the implications of exclusion orders over SEPs except "in some circumstances, such as where the putative licensee is unable or refuses to take a FRAND license and is acting outside the scope of the patent holder's commitment to license on FRAND terms" or "if a putative licensee is not subject to the jurisdiction of a court that could award damages" (these quotes are from a joint policy paper of the Department of Justice and United States Patent and Trademark Office on SEPs and injunctive relief).
This is the first veto of an ITC ruling in decades, and I believe the ITC's majority opinion was so out of step with basic antitrust rules (such as tying) and its effects would have been so very anticompetitive and anti-innovative that this veto was unfortunately necessary. The issue here is not primarily what would have happened to those older iPhones and iPads -- I'm sure Apple could have handled the situation somehow. The problem is that this would have made the ITC the forum of choice for SEP abusers (strategic abusers who want to get away with infringement of non-SEPs as well as overly aggressive monetizers).
In recent days and weeks there had been more and more support for Apple's request for this veto. Most notably, a bipartisan group of United States Senators expressed concerns over the ban in a letter to the USTR. Last month it became known that AT&T had asked the USTR, Ambassador Michael Froman, to make this decision. Verizon's general counsel, Randal Milch, took the same position in a Wall Street Journal op-ed. The WSJ also reported on support from BSA | The Software Alliance. Roger Parloff, senior editor of Fortune (part of the CNN Money network), also advocated a veto in an opinion piece, as did Orrick Herrington Sutcliffe partner Jay Jurata, a leading Washington, DC antitrust lawyer.
I'm sure that it wasn't an easy decision to veto the only significant win Samsung had scored against Apple in the earth-spanning patent dispute between the two companies, considering the special relationship between the U.S. and South Korea, but the USTR's letter makes very clear that this is not about taking sides with or against any particular company -- it's all about protecting the industry standard-setting system against the abusive pursuit of injunctive relief by certain players. At the very end, the letter makes clear that Samsung "may continue to pursue its rights through the courts", seeking monetary copensation.
Ambassador Froman's letter instructs the ITC, which I believe has acted in connection with this investigation like a government agency that is out of control, to proceed more cautiously in other cases involving FRAND-pledged SEPs. In those cases, "the Commission should be certain to (1) to [sic] examine thoroughly and carefully on its own initiative the public interest issues presented both at the outset of its proceeding and when determining whether a particular remedy is in the public interest and (2) seek proactively to have the parties develop a comprehensive factual record relates to these issues in the proceedings before the Administrative Law Judge and during the formal remedy phase of the investigation before the Commission, including information on the standards-essential nature of the patent at issue if contested by the patent holder and the presence or absence of patent hold-up or reverse hold-up". The U.S. trade agency should also "make explicit findings on these issues to the maximum extent possible". If the Commission does not do its job and exercise its discretion with respect to public interest considerations, then it's quite clear that more vetoes will follow.
Apart from future policy reviews of ITC decisions, the United States government is also working on measures relating to the standard applied by the ITC to decisions on import bans as well as on certain shortcomings of the enforcement process following ITC exclusion orders.
[Update] According to a tweet citing CNBC, Apple "applaud[s] the Administration for standing up for innovation in this landmark case" and Samsung was "wrong to abuse [the] patent system this way". [/Update]
[Update 2] I'd like to add one more thing. While Samsung certainly considers the dispute with Apple its most important ongoing patent spat, it will also benefit from the Administration's defense of FRAND in cases in which the shoe is on the other foot. At the moment, Samsung is defending itself at the ITC against a SEP-based InterDigital complaint, and it's embroiled in a two-way dispute with Ericsson involving, in no small part, SEPs as well. [/Update]
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