White House Hobbles Samsung, ITC in Apple Patent Fight

, The Litigation Daily

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The Obama Administration's decision on Saturday to veto a looming import ban on some iPhones and iPads was a huge relief for Apple Inc., and a big setback for its arch IP rival, Samsung Electronics Co. It could also weaken the lure of the U.S. International Trade Commission as a venue for picking patent battles, especially in cases involving industrywide technical standards.

Samsung's lawyers at Quinn Emanuel Urquhart & Sullivan persuaded an ITC panel to rule in June that that certain older iPhones and iPads infringed a Samsung patent. The ITC was scheduled to issue an exclusion order banning importation of the products on Sunday, but U.S. Trade Representative Michael Forman announced Saturday that his agency was reversing the ruling. It was the first time in more than 25 years the White House overruled an ITC import ban.

"This is a victory for Apple, but the decision goes beyond Apple and Samsung," said Jay Jurata, a partner at Orrick, Herrington & Sutcliffe who specializes in antitrust and intellectual property law but who was not involved in this case.

Wilmer Cutler Pickering Hale and Dorr's William Lee, who represents Apple in the ITC case, said he couldn't comment on the decision. Samsung counsel Paul Brinkman and Charles Verhoeven of Quinn Emanuel weren't immediately available.

Samsung's ITC case against Apple concerned a so-called standards essential patent—a patent covering an industry technical standard that allows devices to operate seamlessly with each other. To prevent SEP holders from refusing to license or from charging exorbitant fees, standards-setting organizations require participants to license their patents on "fair, reasonable, and non-discriminatory" (FRAND) terms. Samsung, which had demanded 2.4 percent of Apple's iPhone and iPad revenues—estimated to be $18 per device—said it went to the ITC because Apple had refused to negotiate licensing terms. Apple, meanwhile, said Samsung's terms were unreasonable.  

The ITC became a magnet for patent litigation over the past few years, in large part because the agency has the power to ban importation of infringing devices. Over the past year, the ITC also became the only venue where patent holders could bring infringement claims related to FRAND patents and succeed in winning a ban.

"The ITC was an outlier," Jurata said. "It became a magnet for SEP abuse and developed a reputation as the forum to be in because it would ignore the FRAND promise."

The Federal Trade Commission has said that using SEPs to exclude products harms consumers, and it has also entered into consent decrees prohibiting Google and Motorola from doing so. The Department of Justice and the Patent and Trademark Office have also weighed in, issuing a joint policy statement that exclusion orders distort competition and undermine the public interest.  

The federal courts have also ordered companies to stop seeking injunctive relief for SEPs. Judge Richard Posner of the U.S. Court of Appeals for the Seventh Circuit, sitting by designation in a district court patent case that Motorola brought against Apple ruled last year that injunctive relief is unavailable to SEP holders who voluntarily commit to license those patents. The ITC's decision in the Apple case also ran counter to rulings by the European Commission, Japan, and the Netherlands.

The White House's veto may result in fewer SEP cases being brought before the ITC, lawyers said. And it's likely to have an immediate impact on other SEP cases pending before the agency, including one brought by InterDigital against Nokia, Huawei, ZTE and Samsung, and another brought by Ericcson against Samsung. As a defendant in the InterDigital case, Samsung could actually benefit from the administration's decision.

The veto doesn't mean Samsung and others have no remedy if they can show infringement of their standards essential patents. They may not be entitled to a ban, but they can still seek monetary damages. Forman's letter explicitly states that "the patent owner may continue to pursue its rights through the courts." Samsung already has a parallel case pending against Apple in U.S. district court in Delaware.

Saturday's decision, which can't be appealed, also asserts that the ITC needs to consider the public interest in future cases, but it doesn't entirely rule out the possibility of import bans involving standards essential patents.

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