ITC Sides With Samsung To Ban Certain Apple Products

by King & Spalding
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The U.S. International Trade Commission ("ITC") issued an exclusion order on June 4, 2013 banning importation of Apple Inc.'s older products, including iPhone 3 and 4 and iPad 2 products. The basis for the ITC's exclusion order is Apple's infringement of a Samsung patent that is essential to the 3G cellular telecommunications standard. The patent feud between the two Global 500 companies has been ongoing since well before 2011. After losing several small battles against Apple and then a jury verdict of $600 million in 2012, Samsung's win could allow the company to regain ground. The intellectual property battle at the ITC, in particular, raises pressing questions about the role of intellectual property in high-tech trade. The ITC's exclusion order is the first decision ordering an injunction on a standard essential patent ("SEP"). Samsung, as the owner of an SEP, committed to license such essential patent on terms that are fair, reasonable, and nondiscriminatory.

The exclusion order has not yet entered into force. Exclusion orders issued by the ITC are subject to a 60-day review period by the President. The ruling can be overturned if USTR, to which the president has designated authority to review ITC rulings, decides to veto the decision on public policy grounds. Apple has petitioned USTR to veto the ITC's order, arguing that the ITC exceeded its authority by issuing an injunction based on an SEP, at odds with views expressed by the Department of Justice and the Federal Trade Commission. Samsung has asked USTR to uphold the ITC's determination, stating that Apple refused to engage in fair, reasonable, and nondiscriminatory licensing discussions. Presidential disapproval of an ITC exclusion order has occurred only five times in the agency's history. During the review period, Apple may continue selling all products under bond. The American company vows to appeal the decision, should the President decide to uphold the ITC's order. Apple's appeal would be heard by the U.S. Court of Appeals for the Federal Circuit.

This dispute highlights the ITC's role in protecting "domestic" industry, whether or not the complainant is a U.S. company. Although the ITC historically was an agency protecting U.S. manufacturing companies from unfair trade practices, the growth of foreign companies with U.S.-based manufacturing plants and other significant U.S. operations has led to a surge in foreign companies seeking relief from the agency. As Samsung and other foreign companies expand their U.S.- based manufacturing operations, similar claims may make their way before the ITC.

Afia Kwakwa and Jordan Shepherd

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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