The White House has vetoed the trade ban that was proposed by the US International Trade Commission after the ITC found that some of Apple’s products infringe on a patent owned by Samsung Electronics Co. The ITC’s June order had found that Apple’s iPhone 4 and iPad 2 3G models had infringed on U.S. Patent No. 7,706,348. This patent relates to a “transport format combination indicator (TFCI)” that is used in CDMA communications. Had the trade ban been enforced, Apple would no longer be allowed to import these iPhone and iPad models. While the White House is given the power to veto trade bans ordered by the ITC for policy reasons, this was the first White House veto of an ITC action in twenty-five years.
In the day after the veto was announced, Apple’s stock price rose 1.5% to its highest close since February. In contrast, Samsung lost over $1 billion in market value after the announcement (See LA Times Article).
While Presidential vetoes of ITC actions are rare, the White House has vetoed importation bans that it felt would cause undue hardship to an important U.S. industry. In this case, it appears that the Presidential veto is based on the fact that the Samsung’s patent was a “standard-essential” patent and that Samsung has made a voluntary commitment to license this patent to third parties on fair, reasonable, and non-discriminatory (“FRAND”) terms. In this case, the U.S. Trade Representative (to whom the President has delegated the authority to veto ITC actions) determined that enforcing the ITC ban for this “FRAND encumbered” standards-essential patent was against the public interest.
Samsung had argued that, although it had agreed to license the 7,706,348 patent to competitors on fair, reasonable, and non-discriminatory terms, it was not obligated to license the patent to competitors that do not, in turn, license their patents back to Samsung. Apple is currently alleging that Samsung’s phone and tablet computer devices infringe on Apple’s own patents. Apple has refused to license those patents to Samsung, thereby causing Samsung to sue Apple on the patents that it owns which covers CDMA cell-phone technology.
Florian Mueller has argued that Samsung is effectively trying to tie the granting of a license to its FRAND-encumbered standard-essential patent to the receipt of a license to Apple’s non-standards-based patents that cover Apple’s iPhone and iPad products. Mr. Mueller reviewed the dissent to the original ITC decision by Dean Pinkert, which notice that the patent in question covered only a very small part of an international standard, and that Samsung had made no effort to demonstrate that the licensing terms it offered to Apple satisfied an object standard of reasonableness. Specifically, Nr, Pinkert found that “it is neither fair nor non-discriminatory for the holder of the FRAND-encumbered patent to require licenses to non-FRAND-encumbered patents as a condition for licensing its patent.”