Obama allows Samsung import ban

People check out Galaxy Note 3s and Galaxy Gear watches during a promotion in Times Square, New York, in September. Older Samsung devices will be banned from being imported into the United States. [BLOOMBERG]

The Korean government expressed displeasure over the Barack Obama administration’s failure to block an import ban on some older Samsung mobile devices.

The Ministry of Trade, Industry and Energy said in a statement yesterday, “We express regret over the decision of the U.S. trade representative not to veto the U.S. International Trade Commission’s exclusion order against Samsung.”

The ITC said on Aug. 9 that some smartphone and tablet models made by Samsung infringed on two Apple patents - the 949 patent, which deals with commands on touch-screen devices, and the 501 patent, which is related to input and output detection for microphone and headphone jacks - and banned their import or sale. Unlike standard-essential patents, these are categorized as design and technology patents that the U.S. administration thinks can be worked around, especially Samsung’s 3G technology patent, which the ITC ruled Apple infringed upon.

U.S. Trade Representative Michael Froman said in a statement yesterday, “After carefully weighing policy considerations, including the impact on consumers and competition, advice from agencies and information from interested parties, I have decided to allow the import ban.”

Samsung also released an official statement yesterday right after Froman’s announcement.

“We are disappointed by the U.S. trade representative’s decision to allow the exclusion order issued by the International Trade Commission,” the company said. “It will serve only to reduce competition and limit choice for the American consumer.”

A Samsung spokesman said, “We are considering every possible measure, including making an appeal, at the moment.”

The Korean company asked Obama to overturn the ban ordered by the U.S. ITC on public policy grounds - the same relief the president gave Apple in August from an order barring imports of the iPhone 4S. Samsung can now seek a delay from a U.S. appeals court.

The companies are the largest in the $279.9 billion global smartphone market, with Samsung holding the title of the world’s biggest.

Patent litigation on four continents, which has cost the companies hundreds of millions of dollars in legal fees, has left no clear winner, with each company seeking the big prize of limiting the other’s sales in the United States.

Forcing Samsung to change its designs is a victory for Apple. The iPhone maker says it keeps and entices new customers by contrasting the look and ease of its devices with other manufacturers, like Samsung or HTC. In appeals court arguments, Apple accused Samsung of putting a new name on some handsets without making any changes.

The Samsung victory against Apple that Obama overturned involved a basic function of mobile phones that was part of an industry-wide standard rather than features. The administration, in overturning the iPhone ban, cited its position that companies should be limited in their ability to use ownership of standard-essential patents to block competition.

The Obama administration on Aug. 3 overruled its trade agency’s June decision to block imports of some made-in-China Apple mobile gadgets - the iPhone 4, iPhone 3, iPhone 3GS, iPad 3G and iPad 2 3G - that violated Samsung patents, saying that the ban could affect competitive conditions in the U.S. economy and U.S. consumers.

It was the first time an ITC import ban has been overturned by a U.S. administration since a 1987 case that also involved Samsung.

While the Cupertino, California-based Apple typically has just four iPhone models on the market at any time, Samsung has dozens of handsets, led by its flagship Galaxy S4, which wasn’t part of the case. Apple could argue that newer models still use the technology.

The import ban is on a limited number of products. The ITC said newer models by Suwon-based Samsung had worked around two Apple patents, which covered a multi-touch feature and one for a sensor for headphone jacks.

“The order expressly states that these devices and any other Samsung electronic media devices incorporating the approved design-around technologies are not covered,” Froman said in a statement. “Thus, I do not believe that concerns with regard to enforcement related to the scope of the order, in this case, provide a policy basis for disapproving it.”

The administration’s decision was expected and involved a policy issue under debate in Congress and the courts, said Jim Altman, a lawyer with Foster, Murphy, Altman & Nickel in Washington, D.C., who represents companies at the ITC.

“They felt they needed to say something that would distinguish the two situations,” Altman said of the rare statement issued by the trade representative. “The Samsung order is what we would have expected given it doesn’t have a big impact and there aren’t any true underlying policy issues.”

The decision could be seen as siding with an American company over a Korean one, which could have trade implications, said Edward Black, president of the Computer & Communications Industry Association, a Washington, D.C. trade group whose members include Samsung and Google, whose Android operating system is run on Samsung phones.

The veto of the Apple import ban “was based on political pressure and favoritism,” Black said. “It was not in keeping with the way the decisions are made.”

Samsung raised the issue in its filing with the administration, while Froman’s office said each case had different facts.

“Both Samsung and Apple are important contributors to the U.S. economy and help advance innovation and technological progress,” the trade representative said as part of his statement.

The nationality of the two companies “played no role in the review process,” according to the statement.

Samsung’s mobile unit is the company’s biggest. The company is expected to report third-quarter sales of the mobile unit rising 25 percent, according to the median estimate of six analysts surveyed by Bloomberg News.

Although the ITC didn’t mention specific models to be banned, the final determination on the exclusion order is expected to include some older models like Galaxy S, Galaxy S2, Galaxy Nexus and Galaxy Tab. Market experts believe the ban won’t affect the company’s sales or stock prices.

BY Song Su-hyun, bloomberg [ssh@joongang.co.kr]