Has patent fight run its course?
Following U.S. President Barack Obama’s unusual overruling of the International Trade Commission’s decision on Aug. 3 to ban imports of some Apple mobile devices for infringing on Samsung patents, the trade agency six days later partially pushed forward with its preliminary ruling to curb entry into the United States of a few outdated Samsung products violating Apple intellectual property patents.
The ITC left open the possibility for Samsung to continue to import and sell its devices - Galaxy S, Galaxy S2 and Galaxy Tab 10.1 - if it posted a surety bond of 1.25 percent. Patent expert Florian Mueller wrote after the ruling on his blog FOSS Patents that Samsung has posted that bond, which will forestall bans on imports of infringing products until completion of a 60-day presidential review period.
With a little over a month left to the Oct. 8 deadline, questions and predictions are swirling over whether Obama will allow the Samsung device import ban, an action that would again favor the American tech giant, and possible implications of the decision.
Would Obama’s approval signal that the United States intends to step up protections of its own companies - as many Korean media outlets and patent experts predict? Or did Samsung simply happen to be an owner of so-called standard-essential patents (SEPs) at a time when the U.S. administration is cracking down on such companies that force others to pay up?
Specter of protectionism
The U.S. government’s Aug. 3 veto of its trade body’s ban on imports of Chinese-made Apple products was the first since 1987. The ITC, a quasi-judicial agency, in a preliminary ruling 60 days earlier, said sales of some older iPhones and iPads should be banned because Apple infringed on a Samsung patent.
The majority of patent attorneys and analysts in Korea, however, doubt the Obama administration will veto the trade agency’s ruling that bans imports of Samsung products in October.
“Given that the U.S. administration intervened in a legal wrangling between two companies [with different nationalities] and sided with an American one, the veto can be interpreted as trade protectionism,” said Lee Chang-hoon, a patent attorney with Aju Kim Chang and Lee Patent and Law Firm in Seoul, at a seminar last week.
Underlying his view is what Michael Froman, the U.S. trade representative to whom the White House has delegated the authority to veto ITC rulings, wrote 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 letter says.
“Any country can choose the level of protecting or opening its trade, depending on the pending interest. Free trade is not necessarily an absolute virtue,” says Jeon Jong-hag, a patent attorney and president of Kyongeun Patent and Law Office in Seoul.
However, it may be a little too early to conclude that the U.S. president’s decision was made simply to protect the American tech king, he says, given that the country still has more to lose than gain from overruling the ITC.
Kang went so far as to say Obama was “being penny-wise and pound foolish. His veto put a scratch on the integrity of the tremendous patent royalty fees that U.S. companies reap around the world.”
SEPs versus non-SEPs
The patents in question in the Samsung case are considered to be “fair, reasonable and nondiscriminatory (FRAND)” SEPs, which the Obama administration said deserve “special consideration.”
SEPs cover basic technologies that their holders have to support in their products to comply with industry standards. In Samsung’s case, it is a core 3G technology that all smartphones rely on to communicate over wireless networks and the affected Apple devices are 3G-running (pre-iPhone 4S) iPhones and iPads that don’t use Qualcomm chips. For Apple, on the other hand, the patents the ITC ruled it copied were related to design and technologies with no FRAND implications.
The U.S. administration’s decision over SEPs has split the technology industry inside the country. Companies that make money from licensing patents, including chipmaker Qualcomm, claim that courts and trade bodies should be allowed to impose sales or import bans, otherwise the value of patented inventions will be diminished. Companies such as Intel and Microsoft, on the other hand, have expressed fears that any injunction stemming from patents on features of their products could restrict their ability to come up with improved devices.
Even if Obama gives the green light to the ITC’s blocking entry of some outdated Samsung Galaxy smartphones and tablet PCs following an investigation that began in August 2011, there won’t be a visible impact, experts say.
“No tangible damage - in terms of sales, in particular - is foreseen from the ITC import ban for Samsung because the products are mostly old or already off market shelves,” said Nho Geun-chang, an analyst with HMC Securities in Seoul. “Also, people are already getting sick of repeated trials and disputes over the same issues surrounding Samsung and Apple. Brokerages have also grown very insensitive to them.”
Kim Sung-in, a senior analyst with Kiwoom Securities, also said the U.S. administration’s upcoming decision would put a damper on neither the sales nor the brand image of Samsung.
Apple losing the upper hand
A silver lining for Samsung is the fact that the United States Patent and Trademark Office (USPTO), under the Department of Commerce, earlier last week decided to re-examine the validity of the three design-related Apple patents that the American titan has used in the patent litigation against Samsung. The agency said the move was because of anonymous requests - most likely submitted by Samsung.
“Each of the three references include a rectangular front face having a rectangular screen, a border space around the screen and an oblong-shaped speaker opening above the screen,” the USPTO notice said. The patent office’s decision could influence the American company’s legal prospects against Samsung.
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 $450.5 million, saying jurors had miscalculated, and ordered a fresh trial, scheduled in November.
The USPTO re-examination is in line with the ITC’s final ruling on Aug. 9 to clear charges on four of the six Apple patents that it had found Samsung violated in an October preliminary ruling. The two patents in question are the ’949 patent, which deals with touch commands on touch-screen devices, and the ’501 patent, which is related to input and output detection for microphone and headphone jacks.
“Apple has been prevented from trying to use its overly broad design patents to achieve a monopoly on rectangles and rounded corners,” said Samsung in a statement on the ruling. “The proper focus for the smartphone industry is not a global war in the courts, but fair competition in the marketplace.”
Notable is the ’949 patent, a.k.a. the “Steve Jobs patent” because its key inventor was the late Apple co-founder, has been the subject of inconsistent rulings by different U.S. regulators. In December, the USPTO ruled the patent was invalid - reversing a declaration by an ITC judge in October.
“The Apple vs. Samsung case suggests that the legal system has not quite worked out what to make of the design patent,” writes Haydn Shaughnessy, a tech expert, on the Forbes Web site on Aug. 22.
Some experts complain about discrepancies among different policy organizations in the United States. “Once you get a patent, how do you know what it’s worth because your expectations are changing on a daily basis because of what the courts say, what the ITC says and now what the White House says?” Christal Sheppard, a former ITC attorney who is now an assistant professor at the University of Nebraska, was quoted as saying by the Wall Street Journal.
“Samsung initially garnered this image as an ‘Apple copycat’ mainly because of design factors,” said attorney Kang. “But design as a bargaining chip for Apple in the patent battle against Samsung is increasingly losing power as smartphones with similar shapes no longer serve as an ‘innovation icon’ as it did at the beginning.”
“ITC’s sales and import ban on Samsung may work unfavorably for the company in upcoming trials,” said patent attorney Jeon. “But as Samsung’s Apple design violation charges wane, the trials will center around technologies, a scenario that won’t be so bad for Samsung, which has strong technology fundamentals.”
What’s more, Shaughnessy of Forbes found that Samsung, not Apple, was the leading grantee of design patents by the USPTO last year. The world’s No.1 smartphone producer also topped the list in 2011.
According to the WIPO (World Intellectual Property Organization) 2012 World Intellectual Property Indicators, Samsung was granted 378 design patents in 2012, whereas Apple, the No. 6 patent owner in 2012, acquired 147 in the same year. “If the South Korean giant was caught napping the first time round, it is now building a design patent war chest for the future,” he writes.
Against this backdrop, attorney Kang predicts the longtime business partners that became archrivals after Apple introduced the iPhone in 2007 and Samsung followed suit with its first Galaxy have no choice but to eventually reconcile.
“More than anything else, both Samsung and Apple have gained more than enough brand recognition through the legal wrangling. People talk about no smartphone brands other than the two now and their fight no longer makes such huge headlines as before,” said Kang.
“As trials drag on, related expenditures would continue growing when gains from them won’t be as huge,” said an industry insider who is familiar with the matter. “The two top smartphone producers preparing for an exit plan would be desirable, from a business perspective.”
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