Obama administration had denied a similar ban on Apple products for Samsung

According to the U.S. International Trade Commission (ITC), the highest trade-specific court in the U.S., both Apple, Inc. (AAPL) and Samsung Electronics Comp., Ltd. (KSC:005930) are guilty of violating patent law with their smartphones.  

I. Apple Scores with the International Trade Commission

Apple was found to have refused to pay even a small fee to license Samsung standards patents, which Samsung openly offered.  Samsung was found to have violated non-standards patents that Apple had no obligation to license.  To the ITC, both Samsung and Apple appeared to be guilty, and hence it ordered preliminary injunctions banning some products from both companies.

After Steven P. Jobs, late Apple cofounder and CEO, served personally as the digital campaign manager for Obama in early 2011, the Obama administration had no trouble giving Apple its blessing to ban multiple products from Samsung, just weeks after it committed to the rare decision to overturn a similar ban on older Apple devices.

Obama pointin
Obama's trade appointee shot down a ban on iPhones and iPads, despite a preliminary finding of patent infringement by the ITC. [Image Source: Sodahead]

In September Samsung wrote to the President asking him to treat it like he treated Apple, writing [PDF]:

The world is watching how Samsung is treated by the United States in this ‘smartphone war’ and the administration has a significant interest in avoiding the perception of favoritism and protectionism toward U.S. companies.

But the plea for equal treatment fell on deaf ears.  Late Tuesday, U.S. Trade Ambassador/Representative Michael B. G. Froman, appointed by President Barack Obama to monitor trade court decisions and other matters, announced the decision to allow Apple's ban of Samsung.  He wrote:

The nationality of the companies involved played no role in the review process.
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 Commission's determination in Certain Electronic Digital Media Devices and Components Thereof, Investigation No. 337-TA-796, to become final.

II. What's Banned?

And with that, the following devices are now banned from shipment into the U.S., enforced by the U.S. Customs and Border Patrol (CBP):
  • Samsung smartphones (6)
    • Galaxy S 4G
      Galaxy S II, Galaxy Tab 10.1
    • Fascinate
    • Transform
    • Captivate
    • Intercept
    • Infuse 4G
  • Samsung tablets (2)
    • the original Galaxy Tab
Nexus 7
  • the new Galaxy Tab 10.1

This is the second major ban of Android devices by Apple to be ordered by the ITC and enforced by the CBP; the first was of HTC Corp.'s (TPE:2498) smartphones in 2012.  That ban helped to cripple HTC, sending it into a sales and financial free-fall.

The ITC ban on Samsung devices comes based on the violation of two patents -- one of which covers a headphone jack, and another which details capacitive multi-touch.  The latter patent is U.S. Patent No. 7,912,501 "Audio I/O headset plug and plug detection circuitry" (often referred to as the '501 patent in shorthand), while the second is the "Steve Jobs' multi-touch" patent -- U.S. Patent No. 7,479,949 "Touch screen device, method, and graphical user interface for determining commands by applying heuristics" (the '949 patent) -- which has some claims which are currently in the process of being invalidated.

The final ruling comes from a three judge ITC panel that reviewed a previous decision from Administrative Law Judge (ALJ) Thomas Pender.

III. Is Apple Above the Law?

In many ways the Obama administration's decision not to overrule the legal experts at the ITC in the case of the ban on Samsung devices is not at all atypical.  Rather it is the decision to overrule the ban on Apple devices that is extraordinarily atypical.

The pro-Apple decision marked the first time since 1987 that a U.S. trade representative had overruled an ITC preliminary injunction.  And many argue that the decision sets a dangerous precedent as the ITC had found that Apple engaged in a rare and rather audacious kind of corporate misbehavior.

In the technology industry companies cooperate to develop standards, which are then patented by those who worked on them.  Those patents are governed under so called fair, reasonable and non-discriminatory (FRAND) terms, which require companies to offer licensing at a low rate to anyone who wants them, a policy that is supposed to prevent a barrier to market entry.

In practice FRAND licensing rates in today's hyper-litigious atmosphere are exceptionally low -- as little as 1/10,000th of a non-FRAND patent.  The overarching message set by today's intellectual property system is that it's better not to cooperate, as you're wasting your time on essentially worthless intellectual property.

Apple money
Apple could have paid fractions of a penny per device to license Samsung's patents, but it chose to instead give itself a five fingered discount.  [Image Source: SomanyMP3s]

What is quite extraordinary is that Apple had a virtually sure-fire ban on Samsung's devices as its patents were vague, broad, and most importantly had no FRAND commitments.  It could have made the win entirely one-sided if it simply offered to license Samsung's FRAND patents, which Samsung willingly offered to spur licensing talks.

But rather than pay fractions of a penny per iPhone and iPad to avoid a potential ban like virtually every other company has, Apple refused to license Samsung's IP.  Hence the ITC ruled that Apple had committed the very unusual offense of reverse holdup, allowing Samsung to ban older iPhones and iPads with FRAND IP.

Computer 1987
The last time the President's appointees overturned an ITC ban (1987) computers looked like this. [Image Source: Bowie Songs]

The Obama administration's ruling seemingly greenlights the abuse of FRAND IP via refusal to pay licensing fees, as it willfully ignored the ITC's findings of reverse holdup.  

Samsung is now left to shuffle its product lineup.  A representative said that her company was "disappointed", adding, "It will serve only to reduce competition and limit choice for the American consumer."

That may be true, but it is reasonably clear that Samsung violated the law, as arbitrary and unfair as that law may be.  What is much more troubling and extraordinary is that the Obama administration committed to a "veto" of a court decision the likes of which had not been done in over 25 years, and in doing so effectively ruled that Apple was above the law.

Sources: Fly on the Wall, Samsung [PDF]

"Folks that want porn can buy an Android phone." -- Steve Jobs

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