White House Takes Small Step To Patent Reform By Vetoing iPhone Ban

The White House has decided that it wants to have a say in the in the ongoing patent wars that have waged between smartphone manufacturers over the past several years. 

This weekend, the Obama administration vetoed a ruling from the International Trade Commission that called for an import ban on older Apple mobile products, including the iPhone 3GS, iPhone 4, iPad 3G and iPad 2 3G after the ITC found those products infringed on a patent from Samsung. 

The ITC veto is the first of its kind in nearly 25 years, The Wall Street Journal reports. Samsung had won the ruling to ban long-tail Apple products from the ITC in June based on patents surrounding cellular connectivity and wireless standards.

U.S. Trade Representative Michael Froman of the Obama administration explained that the White House is vetoing the ITC’s ruling based on the fact that Samsung’s patents are what are known as “standard essential patents.” These standard patents usually concern technologies that are pivotal for every device to perform basic operations, such as using cellular connectivity.

In January this year, the U.S. Department of Justice and the U.S. Patent and Trademark Office issued a new policy on standard essential patents stating that those type of patents need to be licensed by their holders on “fair, reasonable and non-discriminatory” terms and as such should not be used in cases of patent litigation between two companies. The January policy stemmed from a ruling by the Federal Trade Commission on a Google antitrust case and the use of the patents it acquired when it bought Motorola in August 2011.

Froman explained the veto in a letter to Irving A. Williamson, chairman of the ITC:

The Policy Statement expresses substantial concerns, which I strongly share, about the potential harms that can result from owners of standards-essential patents (“SEPs”) who have made a voluntary commitment to offer license SEPs on terms that are fair, reasonable and non-discriminatory (“FRAND”), gaining undue leverage and engaging in “patent hold-up”, i.e., asserting the patent to exclude an implementer of the standard from a market to obtain a higher price for use of the patent than would have been possible before the standard was set, when alternative technologies could have been chosen.

The Effect On Patent Lawsuits

According to The Wall Street Journal, Samsung was disappointed in the ruling, feeling that it has tried to license these patents to Apple in the correct legal manner and that Apple has been unwilling to accept the license. For its part, Apple lauded the Obama administration for “standing up for innovation” and that Samsung was wrong to abuse the patent system.

The belief among many essential patent holders is that the administration's decision was a bad one, upsetting a status quo that has developed over decades in how essential patents are licensed. The ITC injunction against the importation of Apple products that had not licensed the patent in question from Samsung was a bit of a surprise given that usually standard essential patents lawsuits do not end up in import bans and the parties are usually forced into a FRAND licensing agreement. 

On the other hand, many people will ask that if the situations had been reversed and it was Apple that had an import ban on Samsung based on essential patents, would the White House would have vetoed the ITC ruling? Apple is a darling in the U.S. tech industry and a favorite among many government officials. Was the White House playing favorites for one of the country’s biggest tech companies?

The ITC obviously won't like the veto, just on the basis that the White House undercut its decision making in a fairly important case. Froman was careful in his letter to Williamson to say that the veto was, “not an endorsement or a criticism of the Commission’s decision or analysis.” He said that Samsung may still pursue its case through the court system.

The ITC has become a central figure in patent battles in the U.S., as companies go to the agency to get quick results on patent fights rather than duking it out in Federal courts in cases that can often take months or years before going to trial. If the ITC has its authority diminished by the threat of presidential veto, companies with patent issues may choose to keep their battles in the courts, spending more time and effort on legal maneuverings. Consumers may get something good out of this, though: they will likely see less bans on smartphones and tablets including both new models and long-tail units, such as the older iPhones and iPads at issue in this case.

The iPhone 4 and iPad 2 are both still available to consumers in the U.S. but perhaps not for long. Apple traditionally sunsets discounted older products when it comes out with newer models. The new iPhone is expected to be announced by Apple near the end of September while newer iPads are expected by the end of the year. So, while the effect to consumers in the short term from this ruling is likely minimal, the overall precedent set by the White House in this case could have effects on future patent battles between tech giants.