White House Vetoes iPhone 4 Ban Citing Standards-Essential Nature of Samsung Patent

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The Obama administration has vetoed a sales and import ban on some models of Apple's iPhone 4 and iPad 2 that had been scheduled to go into effect on Sunday, August 4th. On Saturday, White House Trade Representative Michael Froman overturned the U.S. International Trade Commission's ban citing concerns that the patent in question was a standards-essential patent (SEP).

This is the first such veto from the White House since Ronald Reagan's administration overturned a veto ban in 1987. That ban involved Samsung memory chips.

Presidential Seal

The U.S. Presidential Seal

In a letter explaining his decision, which was published by The Wall Street Journal, , Mr. Froman said that he "strongly shared" the "substantial concerns" laid out in a U.S. Department of Justice (DOJ) and U.S. Patent and Trademark Office Policy Statement over the practice of using SEPs to gain import bans.

We'll break down his argument in an easily digestible format:

  1. SEP holders commit to licensing those SEPs on a fair, reasonable, and non-discriminatory basis (FRAND).
  2. FRAND terms are not defined, regulated, or codified.
  3. Once accepted into a technology standard, SEP holders can use import bans to get higher licensing terms—terms that are essentially not FRAND—than they would have been able to get otherwise.
  4. There have been increasing occurrences of this happening, and it needs to stop.
  5. Samsung is welcome to continue pursuing its claims against Apple in the U.S. court system.

Unstated in that last bullet point is that Samsung has had no more luck there trying to assert its SEPs against Apple than it has anywhere else in the world.

Mr. Froman also said that he consulted with all of the interested parties in the case, including the DOJ and Federal Trade Commission.

Commenting on the case to The WSJ, former FTC Chairman Jon Leibowitz said, "When a company agrees to license what is known as a standard-essential patent at fair and reasonable terms, it shouldn't be able to ban importation of a product into the United States simply because it wants a better deal."

Samsung issued a statement condemning the decisions, saying, "We are disappointed that the U.S. Trade Representative has decided to set aside the exclusion order issued by the U.S. International Trade Commission (ITC). The ITC’s decision correctly recognized that Samsung has been negotiating in good faith and that Apple remains unwilling to take a license."

Image courtesy of Shutterstock.

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Comments

Lee Dronick

Well this is an interesting turn in the saga.

daemon

While I would prefer Apple had not stolen another company’s property, I support our President’s decision to veto the sales import ban.

Clearly President Obama made the decision in favor for the best interests of the US people and did not bow to political pressure from Al Gore and company.

Although if Obama did bow to political pressure from Al Gore it’s good to know Al Gore finally did something for Apple after all these years of collecting millions of dollars in pay checks for doing essentially nothing.

skipaq

I didn’t expect this move and am happily surprised.

TitanTiger

“While I would prefer Apple had not stolen another company’s property…”

—————————

They didn’t.  They used intellectual property and were willing to pay for it on FRAND terms…the same terms Samsung gave to Microsoft for the exact same technology.  Samsung tried to extort more money out of Apple.  What Apple refused to do was not pay for another’s property, but rather they refused to be ripped off for it.

Samsung knew the rules of this game when they submitted this tech to be a Standards Essential Patent.  And they are about to find out the courts aren’t going to give them their extortion rates.  Just ask Motorola.  They tried the same stunt with Apple and the courts gave them an adjustment in perspective as well.

daemon

@TitanTiger:

You know when you pick up a shirt off the rack at a store, go into the changing room, put it on, then walk out of the store without paying for it is called stealing, even when you claim you would love to pay for it after the fact.

If Apple wanted to pay the FRAND terms they could have done that at any time before they brought the phone to market.

Terrin

daemon:

Samsung voluntarily entered into a contract with the standard’s body where it voluntarily gave its patents to the standards body. Samsung’s voluntary actions require it to allow anybody to use its patents. Samsung may not exclude anybody from using the patents.

So Apple does not need permission to use the patents, so your store analogy is off base. All Apple is required to do is pay Samsung the rate Samsung agreed to accept when it gave its patents to the standards body: namely a fair, reasonable, and non-discriminatory licensing fee.

The problem is that Samsung knows it is infringing Apple’s non-standard patents, which Apple has no obligation to license. Samsung wanted to use the ITC as a gun to force Apple to license patents Apple is not required to license or to punish Apple by requiring Apple to pay an absurd rate for its standard essential patents.

Look at the Motorola versus Microsoft case where Motorola was trying to do the same thing to Microsoft. It claimed Microsoft owed 4 Billion in back licensing fees. The judge after reviewing the matter to determine the going rate claimed Microsoft owed less than two million in back licensing fees. That is a huge difference.

Apple is claiming Samsung is doing the same thing by trying to charge Apple way over the FRAND rate it is committed to charge. Moreover, it has refused to provide documents showing what it collects, if anything,  from others. One of Apple’s key arguments, which it prevailed in its lawsuit regarding other standard essential patents, is that the license fee is already covered through a Qualcomm license.

The problem is that federal trial courts take much longer to decide these matters than the ITC.

Robbo

Seeing as how none of really know all the facts, it’s difficult to say who is at fault here. From what I read, these SEP patents were tied up in a Qualcom chip and therefore exhausted (Apple’s argument), but Samsung (and Motorola in a similar case) had a different take, they contended that the patents were not exhausted and Apple had to pay….again?
I think if I bought a shirt and the assistant said that in my case I’d have to buy the buttons as extras, even though the buttons were included in the price for all other customers, I think I would have a problem with that.
So I don’t know if Apple just said eff-off right from the beginning or whether they attempted to negotiate on FRAND terms.
Why didn’t Samsung take the court route? Maybe because it’s slow and maybe because this type of SEP abuse is frowned upon by judges.

TitanTiger

@TitanTiger:

You know when you pick up a shirt off the rack at a store, go into the changing room, put it on, then walk out of the store without paying for it is called stealing, even when you claim you would love to pay for it after the fact.

If Apple wanted to pay the FRAND terms they could have done that at any time before they brought the phone to market.
———————————————

Samsung never offered FRAND terms.  They just tried to extort money at rates far beyond what anyone else was paying for a SEP.  And I believe at the time Apple thought Infineon (who made the baseband chip that infringed) was already covered by a license.  You don’t get to license the tech to the parts maker then turn and try to stick it anyone that uses the part as well.

Regardless, FRAND terms don’t change because you discover infringement after the fact. 

So now, Samsung will discover what Motorola discovered when they tried to rip Apple off by demanding discriminatory terms on SEP patents…the courts don’t like it.  They’ll get paid on terms they agreed to be paid when they submitted the tech to be a standard.

TitanTiger

I see Terrin did a much better job of smacking down the argument than I did.

gnasher729

One thing to remember in this story: In the EU, Samsung also tried to ban Apple’s iPhones over the same standard essential patents. The result: They were threatened with major fines (potentially billions of Euros) for anti-competitive behaviour, unless they stopped. Result: Major backpedaling by Samsung, claiming that they really had no intention to ban Apple from importing phones into the EU.

So we have almost the same situation. In the USA, Samsung got the ITC to rule for it and a higher instance rejected that decision, in Europe Samsung tried to get a similar decision and a higher instance told them to STOP IT. For exactly the same reason: Using standard essential patents this way is anti-competitve.

BurmaYank

daemon said: ”“... I would prefer Apple had not stolen another company’s property…”

“You know when you pick up a shirt off the rack at a store, go into the changing room, put it on, then walk out of the store without paying for it is called stealing, even when you claim you would love to pay for it after the fact.

If Apple wanted to pay the FRAND terms they could have done that at any time before they brought the phone to market.”“

Terrin was right about two mistakes in your statement:

1. You were completely mistaken in stating that, “If Apple wanted to pay the FRAND terms they could have done that at any time…”, On the contrary, at no point yet has Samsung ever offered Apple permission to pay for the licensing at FRAND terms, but has instead always demanded exorbitantly higher-than-FRAND fees, which, legally, no one is required to pay.  In the meantime Apple is legally free, according to the terms of SEP contracts, to go ahead and use any SEP patent without paying, until the patent-holder is willing to accept Apple’s FRAND-compatible payments.

2. You are also probably mistake) when you assume that Apple has not already paid that license fee once before (through a Qualcomm device license to Apple, which had already covered licensing that Samsung patent), and Apple should therefore not have to pay for it again, now, as the court seems likely to rule in that case.

daemon

Samsung voluntarily entered into a contract with the standard’s body where it voluntarily gave its patents to the standards body.

Terrin, your woeful ignorance of how standards bodies work is an extreme example of the failure of our current Education System.

With a simple google search you would have known that a standards essential patent is not given assigned over to a standards body.

Quite simply, you still have to pay for a license to use that patent to the patent holder.

So Apple does not need permission to use the patents, so your store analogy is off base.

No Terrin, Apple does still need a license. That’s why the ITC imposed the ban on the import and sale of Apple products that infringed those standards essential patents.

daemon

On the contrary, at no point yet has Samsung ever offered Apple permission to pay for the licensing at FRAND terms,

I’m sorry BurmaYank, are you one of Apple’s lawyers with direct knowledge of all the negotiations Apple has entered into with Apple? And are you talking on behalf of Apple here?

daemon

*Apple has entered into with Samsung*

I liked it when you could edit posts….

RonMacGuy

Terrin, your woeful ignorance of how standards bodies work is an extreme example of the failure of our current Education System.

daemon, let’s stop with the personal insults, shall we?  TMO has been a much happier place since you-know-who has stopped posting, and most of us don’t want to deteriorate back to the way it was.

How you can derive that our current education system has failed when people don’t understand how ‘standards bodies work’ is fascinating to me.

 

Terrin

daemon:

It is true the education is adequate in the United States. Perhaps you are even correct that I may be a victim of the system. For what is is worth, my pre-college days occurred before all the recent cut backs and layoffs. I consider myself extremely lucky. I also am fortunate enough to have been able to obtain a law degree with a concentration in IP related classes.  This was after I worked for several years in the Fashion Design industry in New York. I often times find myself comparing the robust fashion industry that is always growing despite not having any copyright protections with other stagnant industries entrenched in copyright litigation.

With that said, a degree in law is unnecessary to give a valid opinion on what is going on in this matter. One can do like I did, just read the materials to gain perspective.

As I see it, the flaw with your view is you make it seem like all Apple had to do was take a license. Well, that is all fine and dandy in a perfect world. In the real world, things work differently.

While fully embracing Samsung’s position, you entirely discount Apple’s position. Apple claims 1) it already has a licence by virtue of buying Infineon’s chip whereby Infineon is alleged to have paid the license fee on behalf of its customers, and 2) Apple claims despite believing Samsung’s patent claim is exhausted by its license with Infineon Apple was willing to pay Samsung to end litigation. Samsung, however, was demanding approximately $18 per iDevice, which Apple thinks is absurd.

Regardless of who is correct. At the end of the day, the ITC is not the right forum to determine these issues when standard essential patents are involved. All Samsung is entitled to, if anything, is money. It cannot stop Apple from using the patents. Unlike the ITC, a federal Court can determine what Apple should be paying if anything.

It is worth noting, the 867 patent in question was found by Judge Koh to not be infringed by Apple. Regarding other patents, the jury in the Samsung case where it was found to infringe Apple’s IP found Samsung’s SEP claims were exhausted.  Further, the technology in question represents 1/40 of the technology found in the broadband chip in question. Image if every patent holder could charge $18 per iDevice. That comes out to $720 just for the IP claims in one chip.

skipaq

@Terrin, excellent points. I had just finished reading a lengthy article that deals with this matter. In it many of the points you make are included:

http://appleinsider.com/articles/13/08/05/samsungs-vetoed-push-for-an-itc-ban-against-apple-inc-in-pictures

Terrin

@skipaq:

Thank you, and I will check out the link.

BurmaYank

Thank you, skipaq, for your link’s  thoroughly elucidating & quite definitive history of this question

daemon, too, will be significantly better educated after he studies it carefully.

daemon

As I see it, the flaw with your view is you make it seem like all Apple had to do was take a license.

Pay for a license, not “take a license.” And that is all they had to do before they shipped the iPhone and started selling it. Pay for the licenses!

In regards to the Patent 7,362,867: Judge Koh ruled on two of the thirty-six claims. Why did she only address two of the claims? Cause she forced each side to pare down their claims against the other. The ITC wasn’t just looking at two claims like Judge Koh did.

 

Bryan Chaffin

daemon, do you think Samsung offered FRAND terms? If Samsung did, you are right: Apple needs to pay.

If Samsung didn’t honor its FRAND commitments, Apple should not pay up until the courts force Samsung and Apple to agree to terms, terms that will almost certainly be what Apple’s competitors pay.

Every number we’ve seen show that Samsung didn’t honor those commitments. The company has asked for many times more from Apple than competitors pay, and it has frequently sought licensing terms for patents already covered by Exhaustion.

Is it logical that Apple would refuse FRAND terms? We’re talking about a company that voluntarily licensed Amazon’s One-Click patent, the poster child for the anti-software patent argument.

In addition, at any time Apple could choose to pay for a license in order to make Samsung’s counter claims to Apple’s design and utility patents simply go away. We also know that Samsung didn’t try to assert these patents until Apple sued over those software and utility patents.

Wouldn’t it be logical for Apple to do so—if Samsung was offering FRAND terms—knowing that the courts will eventually enforce FRAND terms anyway?

Samsung has a vast patent portfolio, one that is much larger than Apple’s. The strength of that portfolio is outside of Apple’s strength in design and utility patents. But those patents are all Samsung has to counter Apple’s infringement claims.

It seems rather obvious to me that Samsung set up a strawman situation where it demanded outrageous licensing terms for patents so that Apple would refuse and it could then use that refusal to fight Apple’s own infringement claims.

Do you see things differently? I assume so, since we have a different opinion, but how do you see things differently?

daemon

daemon, do you think Samsung offered FRAND terms? If Samsung did, you are right: Apple needs to pay.

Bryan, I think Samsung was never given the opportunity to offer any terms to Apple before the iPhone came to market.

I think Apple went ahead, violated Samsung’s patents and didn’t give it a second thought.

Bryan Chaffin

daemon, I strongly suspect that wasn’t the case, but I don’t have any evidence either way.

Do you?

Terrin

daemon:

You are neglecting Apple’s main argument. Namely, that it has a license by virtue of it’s chip purchase from Infineon, and that Samsung’s FRAND claim is exhausted. Apple’s offer to pay Samsung is not because Apple thinks it owes a FRAND rate, but is according to Apple merely to settle litigation.

Clearly with Apple’s perspective in mind,  Apple would not approach Samsung before shipping the product if it thought it has a license. Moreover, Samsung supplied quite a few parts for the iPhone, and iPad. Why didn’t Samsung make a stink about the license while negotiating over the parts? Moreover, it still supplies parts.  Samsung could just refuse to enter into a new parts contract with Apple. Fat chance of that happening.

Moreover, the dissenting Judge in the ITC opinion clearly felt Samsung did not make any effort to offer Apple FRAND terms or show that the offer it had made was objectively reasonable. Instead, Samsung tied to its offer a cross licensing demand from Apple, which under FRAND is improper. Samsung could easily show its offer was objectively reasonable by showing Apple other parties who held a license under similar terms. The ITC decision as well as other litigation makes clear at no time did Samsung provide such information. I am guessing this is because Samsung knows its offer is not reasonable. I am also guessing Samsung does not collect a licensing fee from anybody else on this patent, which makes its demand discriminatory.

You might be correct that Judge Kohl only ruled on two of thirty six claims, however, on the two claims she elected to rule on she found that Apple did not infringe the patent. The jury also found Samsung’s FRAND related claims for the patent at issue was exhausted by virtue of a third party license. With that in mind, Apple’s argument that it has a license for the disputed patent certainly seems reasonable. More importantly if Apple would have capitulated to Samsung’s demands over those patents and pay a license as you suggest, Apple would be paying for a license a Court eventually found it did not owe.

Terrin

Bryan:

You make good points, especially about how Apple took a license to Amazon’s wacky one click patent (back when the two parties were not competing). I wonder what the terms were. I am completely guessing, but I bet Apple paid nothing because Amazon could use the publicity to help validate the patent.

However, keep in mind Apple does not think it owes fees in relation to a FRAND license. Apple thinks Infineon (and then Qualcomm) paid the fee and Apple is a third party beneficiary. Apple only offered to pay a FRAND rate to end litigation, but at the end of the day, it does not think it owes a fee at all.

daemon

daemon, I strongly suspect that wasn’t the case, but I don’t have any evidence either way.

Do you?

Bryan, surely know that there is no such thing as evidence of something that didn’t happen. You can have evidence of actions, but not absence of action.

What I do have is a history of Apple under Steve Jobs going ahead with questionable business practices.

The naming of the iPhone: Apple did not own the rights to the name of the iPhone when they announced it, they did not own the rights to the name when they started selling the phone months later. Apple forced a settlement out of Cisco for the name.

iPad: Apple once again did not own the rights to the name when they brought the iPad to market. Several lawsuits over the name and I think they’ve almost got it all wrapped up now.

Nokia accused Apple of stealing their intellectual property, to which Apple counter-sued. Course the only thing that got resolved from that was that Microsoft is a white knight with cross licensing deals already in place with Apple and if you want Apple to just go away, commit to using nothing but Microsoft software.

Steve Jobs colluding with Publishers to fix ebook prices for the market.

Apple’s tax havens that allow it to avoid paying taxes on the $130 billion dollars sitting in a Manhattan bank “overseas.”

Apple Maps.

Abandonment of legacy I/O interfaces that Apple used to champion.

Apple does have a track record of going about and doing their own thing regardless of anyone else.

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