Foreign media: Obama's shelter for Apple may disrupt patent litigation

On August 5, according to American media reports, the Obama administration exercised its veto power for the first time in over 25 years, overturning the ITC's ruling against Apple. This decision could disrupt long-standing intellectual property disputes in the smartphone market and force some of the world's largest technology companies to change their strategies for protecting intellectual property.

These companies are increasingly using patents to hinder competitors' development in the mobile device market, which is expected to exceed $400 billion this year. According to consulting firm PricewaterhouseCoopers, patent lawsuits filed in the U.S. increased by nearly 30% year-over-year in 2012 to 5,189 cases. In particular, Apple and Samsung Electronics have been filing patent charges against each other around the world since April 2011.

In the case that was overturned on Saturday, the U.S. International Trade Commission (ITC) ruled in early June that some older models of iPhones and iPads should be banned from sale because Apple infringed on a Samsung patent. Such rulings and the role of the commission have caused divisions within the tech industry, raising questions about how best to promote innovation. Companies such as Intel and Microsoft are concerned that bans due to minor product features may limit their ability to provide consumers with improved devices.

They and other tech companies oppose ITC sales bans in these types of cases. Other companies, like Qualcomm, which profit from licensing patents, take an opposing stance. They believe that courts and trade agencies must have the authority to issue sales or import bans; otherwise, the value of patent inventions will be diminished. Former ITC lawyer and assistant professor at the University of Nebraska College of Law, Christal Sheppard, stated: "If your expectations keep changing based on what the court, ITC, or even the White House says, once you obtain a patent, how do you know its value?"

One of the most prominent divisions in the industry concerns the type of patents involved in ITC cases, including those covering basic functions that many products must use — in this case, connecting to wireless networks. These patents are considered essential for developing products based on industry technical standards. Companies should be able to obtain licenses for 'basic standard' patents under fair, reasonable, and non-discriminatory terms.

In explaining why the veto power was used, U.S. Trade Representative Michael Froman, responsible for reviewing ITC rulings for the president, said that the decision was made after extensive consultation with government trade agencies "and other relevant institutions and individuals." Froman stated that sales bans could harm consumers and the U.S. economy, and the decision was based on this reason. He hinted that Samsung could still enforce its patent rights in court.

He expressed "serious" agreement with concerns raised in January by the U.S. Department of Justice and the U.S. Patent and Trademark Office, stating that ITC product bans should not occur in litigation involving basic standard patents. On other issues, the agency discussed the possibility that holders of such patents might use these rulings to unreasonably increase licensing fees. However, patent experts indicated that the veto might discourage companies from filing patent lawsuits at the ITC, a strategy that had been favored because the agency often decides faster and more favorably than federal courts.

The veto could also reduce the leverage of some patent holders in patent licensing negotiations, lowering the commercial value of their patents. A Samsung spokesperson said the company was very disappointed by the veto, as its patent licensing negotiation behavior with Apple was proper. He stated: "The ITC's ruling correctly recognized that Samsung has negotiated in good faith, but Apple remains unwilling to obtain a license." An Apple spokeswoman said the company agrees with the Obama administration's position supporting innovation, "It's wrong for Samsung to abuse patents in this way."