U.S. overturns decision to ban Apple imports

The Obama administration on Saturday unexpectedly overruled its trade agency’s June decision to block imports of some made-in-China Apple mobile gadgets that violated Samsung Electronics patents, dealing a blow to the world’s top smartphone maker that is engaged in a number of court battles with its American counterpart over intellectual property rights.

If the administration had endorsed the decision by its U.S. International Trade Commission (ITC), older smartphones and tablets - iPhone 4, iPhone 3, iPhone 3GS, iPad 3G and iPad 2 3G, all assembled in China - would have been banned from entering the United States starting this week.

“After extensive consultations with the agencies of the Trade Policy Staff Committee and the Trade Policy Review Group, as well as other interested agencies and persons, I have decided to disapprove the ITC’s determination to issue an exclusion order and cease and desist order in this investigation,” wrote Michael Froman, the U.S. trade representative to whom the White House has delegated the authority to veto ITC rulings, in a four-page letter. “This decision is based on my review of the various policy considerations discussed above as they relate to the effect on competitive conditions in the U.S. economy and the effect on U.S. consumers.”

The ITC ruled in early June on Samsung’s complaint against Apple that the American tech giant infringed on a patent related to the iPhones and iPads, all released prior to the iPhone 4S and some of which Apple has retired.

The ruling was subject to a 60-day presidential review period when U.S. President Barack Obama could overturn the order on policy grounds, approve the order, or take no action and allow the order to take effect at the end of the 60 days, according to ITC regulations.

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

Samsung said in a statement it was “disappointed” that the U.S. trade representative has decided to set aside the exclusion order. “The ITC’s decision correctly recognized that Samsung has been negotiating a license in good faith and that Apple remains unwilling to accept a license,” it said.

Apple spokeswoman Kristin Huguet said the company “applauds” the administration for “standing up for innovation,” adding that Samsung was “wrong to abuse the patent system in this way.”

The patent in dispute is about a core 3G technology belonging to Samsung, which the ITC ruled Apple products violated. But Apple unsuccessfully argued that Samsung has a fair, reasonable and non-discriminatory obligation to license the patent to cellphone producers because 3G technology is an industry-essential patent. U.S. courts have ruled that such patents cannot be the basis for import bans, whereas the ITC applied different standards. The Obama administration’s decision Saturday signals it wants to adhere to the principles of the courts.

The ruling is “not primarily about what would have happened to those older iPhones and iPad,” says Florian Mueller, a German intellectual property expert who writes the FOSSPatents blog. “The problem is that this would have made the ITC the forum of choice for standard-essential patents abusers,” he wrote on the blog.

“I’m sure that it wasn’t an easy decision to veto the only significant win Samsung had scored against Apple … it’s all about protecting the industry standard-setting system against the abusive pursuit of injunctive relief by certain players.”

Froman, the trade representative, also wrote in the letter that he had concerns about “patent holders getting too much leverage over competitors that use their technology under licenses.”

The Obama administration’s decision has placed the ITC in a tricky position, given that it is set to make a separate final import ban ruling Friday on some outdated Samsung smartphones and a tablet PC - the Galaxy S, Galaxy S2, Galaxy Nexus, and Galaxy Tab 10.1. The ITC originally scheduled the decision Aug. 1, but delayed it to Aug. 9.

The ITC said in a preliminary ruling in October that Samsung deliberately infringed on patented design and technologies from the iPhone after a complaint from Apple. The violations include a touchscreen heuristics patent, translucent images patent, plug detection patent and a smartphone design patent.

If the trade agency makes the same ruling it did 10 months earlier and the Obama administration endorses the decision to curb those Korean products’ entry into the United States, questions of fairness and the world’s largest economy protecting its own companies are likely to arise - even though the patents in question are different in nature for the two separate import restriction cases.

In addition, Samsung and Apple are engaged in a number of trials over other patents across the globe. A San Jose federal court jury ruled last year that Samsung should pay Apple $1 billion in damages for infringing on Apple patents. But Judge Lucy Koh refused to impose an import ban on Samsung smartphones and later reduced the judgment by $450 million, saying the jurors miscalculated. The case goes to the U.S. Court of Appeals on Friday.

By Seo Ji-eun [spring@joongang.co.kr]