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Update: Obama Turns Down an Apple Product Ban at the Last Minute

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The ITC had ruled that the iPhone 4 and other iDevices infringed on a Samsung patent and were banned from import. At the last minute, Obama stepped in and overturned the ban.

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Editor's Note: This is an update of a story published on Friday: Expert: Apple and Samsung's Battle Is a 'Pointless Tit for Tat.'

Stepping in on Saturday, US Trade Representative Michael Froman, working on President Obama's authority, vetoed a decision to ban the import of certain Apple (NASDAQ:AAPL) iPhones and iPads. This was the last day of a 60-day window in which the White House or Froman had the chance to turn down the ruling.

On June 4, 2013, the International Trade Commission ruled in favor of Samsung (OTCMKTS:SSNLF) in a case against Apple and its use of an apparatus for encoding and decoding information in a CDMA mobile communication system. The affected devices were the iPhone 4, iPhone 3GS, iPad 3G, and iPad 2 3G, chipsets for which were supplied by Infineon (OTCMKTS:IFNNY), and not Qualcomm (NASDAQ:QCOM). Most were AT&T (NYSE:T) models.

Of those devices, only the iPhone 4 and the iPad 2G are still sold, and even they are likely to be phased out later this year with the debut of new Apple products that are two generations ahead of them, the iPhone 5S and the iPad 5.

The case was important for the potential setting of precedent, as the patent in question is what is known as a standard essential patent (SEP).

Tech companies are required to offer competitors FRAND (fair, reasonable, and non-discriminatory) licensing at reasonable rates. Apple and its strong lineup of supporters feared that the ITC ruling would allow companies like Samsung, which holds SEPs, to take advantage of their competitors by increasing licensing fees. Standards-making bodies, such as the European Telecommunications Standards Institute (ETSI), which happens to be the one involved in this case, must ensure that different devices from different companies are able to work together. Major tech companies propose engineering solutions and ETSI chooses the best one, though often the approaches are equally well-designed, and so the decision is arbitrary. Samsung's patent in question is an SEP patent, which means it's not very different from Apple's own technology -- yet Apple would have had to pay a licensing fee and use Samsung's technology, or face having its devices banned. Obviously, the company chose to not honor the SEP with its iPhone 4.


AT&T has said that the ITC ruling would have completely eliminated a popular entry-level phone from its stock, and that it is "inconsistent with the president's goal of ubiquitous broadband deployment."

Of the ban, Apple said in a plea to the ITC that it would "sweep away an entire segment of Apple's product offerings." Moreover, major tech companies like Microsoft (NASDAQ:MSFT), Oracle (NASDAQ:ORCL), and Intel (NASDAQ:INTC) came to the support of Apple and AT&T, urging the US government to overturn the ITC's ban.

On Friday, I quoted Richard Windsor, a former global technology analyst at Nomura Securities and the founder of the mobile handset and software commentary blog Radio Free Mobile, as saying Obama was unlikely to overturn the ruling because President Bush before him hadn't acted in similar case involving BlackBerry (NASDAQ:BBRY) and because the impact on sales would not be that great.

Obviously, Obama and Froman decided that the ruling would have set a dangerous patent for standard essential patents.

As Froman wrote in his letter to the ITC, "My decision does not mean that the patent owner in this case is not entitled to a remedy. On the contrary, the patent owner may continue to pursue its rights in the courts." Rulings by the ITC can be appealed to the US Court of Appeals for the Federal Circuit. From there, cases can reach the Supreme Court.

Froman also wrote that the decision was made for policy reasons, for its "effect on competitive conditions in the US economy and the effect on US consumers."

Apple is, of course, thrilled about the last minute turnaround: "We applaud the Administration for standing up for innovation in this landmark case. Samsung was wrong to abuse the patent system in this way," said Apple spokeswoman Kristin Huguet.

Said Adam Yates, the spokesperson for Samsung, the company is "disappointed that the US Trade Representative has decided to set aside the exclusion order issued by the ITC."

Ironically, using the seldom-invoked power of overturning an ITC order, Obama and Froman became the first to do so since 1987, when President Reagan overturned a ban on certain Samsung products.

Disclosure: Minyanville Studios, a division of Minyanville Media, has a business relationship with BlackBerry.

Follow me on Twitter: @JoshWolonick and @Minyanville
No positions in stocks mentioned.
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