The U.S. decision to overturn an import ban on Apple’s older iPhones and iPads may help short-term sales and hobble Samsung Electronics in any settlement talks in the companies’ patent fight.
President Obama’s administration, in issuing the reprieve to Apple on Saturday, lets the company continue selling the iPhone 4, which is priced lower than newer models, said Brian Marshall, an analyst at ISI Group. Less-expensive smartphones are selling more quickly than higher-priced models, he said.
“The Obama administration’s decision is a net positive for Apple in the short term,” Marshall said.
The ruling is a setback for Samsung, which had won the import ban against Apple from the U.S. International Trade Commission in June based on a patent widely used in the mobile-device industry for transmitting data.
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The U.S. drew a line between blocking the sale of products infringing patents that are part of industry standards versus those for unique features.
The decision will probably handicap Samsung’s ability to obtain higher technology licensing fees from Apple in any negotiations, said Susan Kohn Ross, a trade lawyer with Mitchell Silberberg & Knupp in Los Angeles.
“If Samsung had been successful in getting the exclusion order, it would put more pressure on Apple,” she said.
More broadly, the decision by U.S. Trade Representative Michael Froman, designated by Obama to review the case, could limit the ability of large patent-holding companies like Qualcomm, InterDigital and Dolby Laboratories to rely on royalty revenue from standards patents used in smartphone chips or sound transmission.
Apple, based in Cupertino, Calif., said disputes over licensing terms shouldn’t result in product import bans.
“We applaud the administration for standing up for innovation in this landmark case,” said an Apple spokeswoman, Kristin Huguet. “Samsung was wrong to abuse the patent system in this way.”
Apple sued South Korea-based Samsung first, in April 2011, over patents covering the look and unique features of the iPhone.
Samsung, which has made mobile phones for decades, retaliated with infringement claims over the fundamental ways a phone works, in the type of one-upmanship that’s typical of patent dispute.
In all, there have been more than three dozen cases across four continents.
Technology companies have split over how courts and regulators should deal with patents that relate to fundamental technology used in every mobile device.
Samsung and Google contend they should be able to block use of such standard technology if a company won’t pay what they consider a reasonable royalty.
“It’s the product-based companies versus the patent-based companies,” said Jorge Contreras, an associate professor at American University.
“The product companies don’t want to be bothered with the threats of having their products stopped because they can’t come to an agreement,” he said.
Groups of companies establish standards so products can work together, like a charger that fits in most electronic devices.
Companies whose inventions are included in the standard pledge to license any relevant patents on fair, reasonable and nondiscriminatory terms.
South Korea’s Ministry of Trade, Industry and Energy said it’s “concerned” about the overturning of the Apple ban.
The decision may hurt Samsung’s patent protection and the government will watch the ITC ruling on Aug. 9, it said in an emailed statement.
While Samsung couldn’t get an import ban, it’s entitled to seek cash compensation in federal court, Froman said in his Saturday notice.
In his letter, Froman didn’t provide any specifics as to why he rejected the import ban on some versions of the iPhone 4 and iPad 2 3G.
Instead, he outlined the Obama administration’s concern that some patent owners could engage in “hold up,” meaning they would demand high rates from a competitor under threat of withholding use of industry standard technology.
There are some instances when an import ban is appropriate, such as when the user of a standard technology refuses to negotiate a license or is outside the jurisdiction of U.S. courts, Froman said.
Froman’s decision was the first time the executive branch has overturned an import ban ordered by the ITC since 1987, when President Reagan did so in a case involving Samsung computer-memory chips.
Samsung said its patent related to a widely used way that data is transmitted, though the commission said the record wasn’t clear as to whether it was essential to the standard, said David Long, a patent lawyer with Dow Lohnes.
The commission did find, however, that Samsung had not acted inappropriately in licensing negotiations with Apple.