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Has the Smartphone Patent War Turned Political or Is It Business As Usual? Photo: blakespot

Has the Smartphone Patent War Turned Political or Is It Business As Usual?

Has the smartphone patent war turned political after a recent US veto of an ITC decision against Apple, or is it just business as usual?

A few weeks ago, the smartphone patent war between Apple and Samsung took an interesting turn. After a lengthy dispute over patent infringement at the US International Trade Commission (a quasi judicial body tasked with ruling on disputes over US imports), a decision issued on 4 June which would have excluded the iPhone 4 and some versions of the Apple iPod from the US market. But instead of letting the exclusion order stand, the Obama administration exercised a rarely used power to veto the order.

In the words of the US trade representative Michael Froman, who officially disapproved the ITC decision on 3 August, such an order would negatively impact ‘the competitive conditions in the US economy…and US consumers’.

Although this policy discretion is formally built into the operation of the ITC, the action nevertheless sparked some concern that the patent warfare between the two smartphone giants had turned political.

Now all eyes are drawn to the even more recent (August 9) ITC decision to ban some Samsung products from the US market due to infringement of Apple patents. The following questions arise: will the US trade representative also intervene to strike down the exclusion order, this time on Samsung’s behalf? If not, are we looking at a new era of economic protectionism where technology-producing countries big-up their national champions at the expense of foreign rivals?

This blog will briefly explain why the answer is ‘No’ to all the above.

The first ITC exclusion order and the US veto

Not all patents are created equal, and the patent that was the subject of the ITC exclusion order against Apple was what is referred to as a Standards-Essential Patent (‘SEP’). A ‘standard’ is a unified way of achieving a technological outcome, such as exchanging data between mobiles, which is facilitated by the 3G/UMTS standard. Because of their essentiality to standards, the great majority of SEPs is subject to licensing commitments mandating Fair, Reasonable and Non-Discriminatory (‘FRAND’) conditions.

In the first ITC decision, the Samsung infringement action concerned just such an SEP (in this case, to the 3G/UMTS standard). In addition, Samsung had committed to give Apple a FRAND licence. The case ended up at the ITC because the parties couldn’t agree on the terms of that licence. The key question was whether Apple should be excluded from the US market due to not having acquired licence rights to the Samsung SEP.

Interestingly, the EU Commission was recently faced with a similar question in the EU battleground of the patent war. There, the Commission decided, on competition principles alone, that the holder of a FRAND-committed SEP should generally not be entitled to injunctive relief.

The EU approach, which was embraced in the strong dissent of ITC Commissioner Pinkert, as well as in a previously published US policy document, was rejected by the ITC board majority, who instead decided to ban the infringing Apple products from the US market.

By refusing to approve this exclusion order, the Obama Administration was arguably just applying good law and policy in line with international practice.

The second ITC decision and possible US intervention?

Unlike the first ITC decision banning some Apple products from the US market due to infringement of Samsung’s SEP, the second ITC decision concerned non-SEP patents only. These Apple patents - mainly multi-touch technology and phone-jack detection - are known as ‘differentiation patents’, meaning they are specific to one company, namely Apple, and do not form part of any standard.

Unlike Samsung’s SEPs, Apple had not undertaken contractual commitments to license them on FRAND terms. This means Apple had no obligation to license these patents whatsoever.

And here is the nub of the issue. The two ITC cases differ in important ways. In the first case, Apple had infringed a Samsung FRAND-committed SEP, which Samsung had an obligation to license. In the second case, Samsung infringed non-SEPs owned by Apple, where Apple had no obligation to license.

Unlike the first case, Samsung’s infringement of Apple’s non-SEP differentiation patents is just business as usual for patent law. Infringement of an exclusive right (without any additional licensing commitments or SEP status) demands injunctive relief. It is difficult to see on what legal grounds the Obama Administration might intervene to veto this decision.

Conclusion

For the above reasons, it seems fairly clear that rather than representing the genesis of a new era of economic protectionism, the US decision to veto the exclusion order of the ITC with respect to Apple products was in line with good law, policy, and international practice. Furthermore, not intervening in the ITC decision to ban Samsung products from the market is just business as usual.

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