Samsung Electronics Co. (005930) can’t import some smartphones and tablet computers into the U.S. after President Barack Obama decided not to veto a ban won by Apple Inc. (AAPL) in a patent-infringement dispute.
“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 import ban, Obama’s designee, U.S. Trade Representative Michael Froman, said in a statement today.
The Korean company asked Obama to overturn the ban ordered by the U.S. International Trade Commission on public policy grounds -- the same relief the president gave Apple in August from an order barring imports of the iPhone 4S. Samsung can now seek a delay from a U.S. appeals court.
The companies are the largest in the $279.9 billion global smartphone market, with Samsung holding the title of world’s biggest. Patent litigation on four continents, which has cost the companies hundreds of millions of dollars in legal fees, has left no clear winner, with each seeking the biggest prize of limiting the other’s sales in the U.S.
Forcing Samsung to change its designs is a victory for Apple. The iPhone maker says it keeps and entices new customers by contrasting the look and ease of its devices with other manufacturers, like Samsung or HTC Corp. (2498) In appeals-court arguments, Apple accused Samsung of putting a new name on some handsets without making any changes.
Design Features
The Samsung victory against Apple that Obama overturned involved a basic function of mobile phones that was part of an industrywide standard, rather than features. The administration, in overturning the iPhone ban, cited its position that companies should be limited in their ability to use ownership of standard-essential patents to block competition.
While Cupertino, California-based Apple typically has just four iPhone models on the market at any time, Samsung has dozens of handsets, led by its flagship Galaxy S4, which wasn’t part of the case. Apple could argue that newer models still use the technology.
The import ban is on a limited number of products. The ITC said newer models by Suwon, South Korea-based Samsung had worked around two Apple patents, which covered a multitouch feature and one for a sensor for headphone jacks.
“The order expressly states that these devices and any other Samsung electronic media devices incorporating the approved design-around technologies are not covered,” Froman said in the statement. “Thus, I do not believe that concerns with regard to enforcement related to the scope of the order, in this case, provide a policy basis for disapproving it.”
Different Situations
Samsung said it was disappointed in the decision.
“It will serve only to reduce competition and limit choice for the American consumer,” Adam Yates, a spokesman for the company, said in an e-mail. Kristin Huguet, an Apple spokeswoman, said the company had no comment.
The administration’s decision was expected, since the Apple veto was the first since 1987 and involved a policy issue under debate in Congress and the courts, said Jim Altman, a lawyer with Foster, Murphy, Altman & Nickel in Washington who represents companies at the ITC.
“They felt they needed to say something that would distinguish the two situations,” Altman said of the rare statement issued by the trade representative. “The Samsung order is what we would have expected given it doesn’t have a big impact and there aren’t any true underlying policy issues.”
‘Political Pressure’
The decision could be seen as siding with an American company over a Korean one, which could have trade implications, said Edward Black, president of the Computer & Communications Industry Association, a Washington trade group whose members include Samsung and Google Inc., whose Android operating system runs Samsung phones.
The veto of the Apple import ban “was based on political pressure and favoritism,” Black said. “It was not in keeping with the way the decisions are made.”
Samsung raised the issue in its filing with administration, while Froman’s office said each case had different facts.
“Both Samsung and Apple are important contributors to the U.S. economy and help advance innovation and technological progress,” the trade representative said as part of its statement.
The nationality of the two companies “played no role in the review process,” according to the statement.
Record Profits
Samsung’s mobile unit is the company’s biggest. The company is expected to report third-quarter sales of the mobile unit rose 25 percent, according to the median estimate of six analysts surveyed by Bloomberg News.
Samsung reported operating profits rose to about 10.1 trillion won ($9.4 billion) in the three months ended September, citing demand in China, India and the Middle East for low-cost Galaxy smartphones. The company, which also makes washing machines, computer chips and televisions, didn’t provide net income or a breakdown of division earnings.
The Apple case against Samsung is In the Matter of Electronic Digital Media Devices, 337-796, and Samsung’s case is In the Matter of Electronic Devices, Including Wireless Communication Devices, Portable Music and Data Processing Devices, and Tablet Computers, 337-794, both U.S. International Trade Commission (Washington).
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