Patent decision’s effect on Apple? Not too much

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Patent decision’s effect on Apple? Not too much

Samsung Electronics’ first U.S. patent victory over Apple may prove fleeting if the iPhone maker rolls out new products before the government’s ban on older devices takes effect.

Apple has several avenues to string out, if not eliminate, damage from an import ban ordered by a U.S. trade panel yesterday on devices including the iPhone 4 and iPad 2 3G. It can appeal to President Barack Obama and an appeals court, and lobby Customs officials charged with enforcing import bans.

AT&T, T-Mobile and two regional carriers selling the offending devices have been offering the iPhone 5, which isn’t covered by the import ban, since last year and a new model is expected out later this year. When Samsung filed its complaint in June 2011, it targeted the iPhone 3G, iPhone 3GS and iPad 3G - none of which is sold anymore. Apple usually discontinues older models when it introduces a new one.

“In the high-tech space, product development rolls out so fast that legal losses aren’t necessarily devastating,” said Paul Berghoff, a founding partner at McDonnell Boehnen Hulbert & Berghoff in Chicago who’s been watching the cases.

The iPhone 4 and iPad 2 3G, offered as entry-level products to lure people that Apple hopes to convert into long-term customers, were found by the U.S. International Trade Commission to infringe a Samsung patent for a way data is transmitted over networks.

T-Mobile said Wednesday it “doesn’t anticipate any impact onof current and future supply of Apple devices.” AT&T said it expects “minimal, if any, impact for customers wanting an iPhone 4 or iPad 2.”

The Cupertino, California-based Apple has indicated it won’t give up without a fight, even if only a few of the models it currently sells are blocked.

Apple’s first stop will be the White House, where Obama, who was given an iPad by Apple’s late co-founder Steve Jobs, has the power to overturn any import ban on public policy grounds. Historically, presidents haven’t stepped in and instead have allowed them to take effect after the 60-day review period ends.

“If you can get the president to act, the rest would be unnecessary,” said Susan Kohn Ross, a trade lawyer with Mitchell Silberberg & Knupp in Los Angeles. “The question is, why would he get involved?”

Apple’s CEO Tim Cook, sat next to the first lady, Michelle Obama, at the president’s State of the Union address in February and contributed $2,300 to Obama’s 2008 presidential campaign.

On the other side, Samsung is the pride of a nation forging closer economic ties with the United States, including a free trade agreement signed in March 2012 and a pledge to stand together against threats from North Korea.

Apple said it will appeal the ITC ruling to the U.S. Court of Appeals for the Federal Circuit in Washington. The court, which handles all patent appeals, is already considering one issue central to yesterday’s ruling - whether products can be blocked for infringing patents tied to industry standards they must follow - in a dispute involving Apple and Google’s Motorola Mobility.

“They’ve got some fairly significant arguments they can make about irreparable harm,” Ross said.

The court may let the ban take effect since there are no public health or safety concerns, Berghoff said. “These are smartphones,” he said. “They are essential to our lives in one respect, but if the older models are cut off from the market, I don’t know that that would affect the greater good.”

Even if the import ban goes into effect, enforcing it could be difficult.

Patent and trade lawyers who’ve handled similar cases describe a process in which officials at U.S. Customs and Border Protection trained to keep out terrorists and undocumented immigrants must parse technical details of patents covering complex electronics.

The ban also doesn’t cover Apple’s most recent and most popular products - the iPhone 5, iPad mini and fourth-generation iPad.

“Customs is going to have its hands full looking at documents and looking at cargo,” Ross said. “It is not terribly good in distinguishing different types of technology.”

The ITC is gathering comments on the effectiveness of its orders, and Obama on June 4 also called for a review of the process. It was part of a broader policy statement on efforts to curb abusive patent litigation.

Any delay gives Apple a chance to try to get the ruling overturned as it tries to work out a deal with its rival and prepares to start selling its next models.

The ruling adds to challenges Cook has faced since succeeding Jobs as head of the world’s largest technology company. The iPhone maker has faced criticism about its tax and China labor practices. Apple stock has fallen more than 35 percent since a September high.

“What inevitably happens is the two players are like sumo wrestlers,” Berghoff said. “They just beat eat other until they both collapse and fall to the ground and work out a settlement.” Bloomberg
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