The smartphone patent wars between Apple and Samsung have been going on for years now, with the latest rounds taking place at the International Trade Commission, a relatively obscure quasi-judicial federal agency responsible for monitoring the impact of imports on the U.S. economy. In this capacity, the ITC provides a special forum for trade disputes and is charged with protecting domestic industry from unfair foreign competition, which includes patent infringement. For example, if Company A is importing goods into the U.S. that infringe Company B's patent, Company B can seek help at the ITC. If Company B proves its case, the ITC would exclude the Company A's goods from being imported into the U.S.
But as patent lawsuits have increased, the ITC has become increasingly more popular. This increased popularity is at least partly attributable to a recent Supreme Court decision that raised the district court standard for getting an injunction in patent infringement cases. The Court has made it more difficult for plaintiffs to get injunctions to block competitors' products from the market, particularly when the patents in question constitute only a small piece of the value of the overall product. At the ITC, however, there is only one remedy: an exclusion order that blocks importation. Because the Supreme Court precedent does not directly apply to the ITC, the ITC's use of exclusion orders has, controversially, not been reined in in a similar fashion.
Recently, the ITC issued an exclusion order against Apple after finding that some of its products infringed Samsung's patents. For the first time in the last quarter century, the Administration stepped in and vetoed the ITC order, leaving Samsung with no remedy. The White House apparently based its decision on the fact that Samsung's patents were essential to implementing certain international standards, and a district court would be very unlikely to issue an injunction in the same circumstance.
After that decision, the ITC issued an exclusion order against Samsung based on infringing Apple's patents. Soon, the Administration will have to decide whether to disapprove this order as well.
Given the logic of its first veto of Samsung's exclusion order on Apple's products (i.e. consistent legal interpretation across different judicial forums), the White House should also overturn the injunction order against Samsung. This is because the patents at issue in this latest decision are for features so small that Samsung has already designed around them. For such minor features, a district court would be unlikely to issue an injunction. In fact, Judge Koh of the U.S. District Court for the Northern District of California refused to issue an injunction against Samsung for exactly that reason.
It would be inconsistent to have one standard at the ITC and a completely different one in federal court. That's why President Obama is seeking to change the standard for exclusion orders at the ITC to be the same one that federal courts use for injunctions.
Furthermore, the U.S. took a hit to its international image and credibility when the Administration took the rare step of disapproving the exclusion order against Apple. To our trading partners, including South Korea in particular, the veto smacked of favoritism. If Samsung, the largest South Korean company, is not afforded similar treatment from the Administration, our trade representative's legitimacy and fairness will be called into question. This could have cascading consequences for the United States Trade Representative, which is in the process of negotiating three major international trade agreements. Furthermore, it is difficult for the U.S. to credibly ask other nations to protect U.S. intellectual property (such as movies and music) against domestic companies when the U.S. didn't protect Samsung's patents.
The Administration has an important opportunity here: by disapproving the ITC's exclusion order, it can show that the U.S. is even-handed and fair. It can also begin implementing its very own reform proposal to change the way that the ITC issues exclusion orders -- rather than waiting for legislation. Showing the world that the U.S. does not play favorites and reining in the ITC's nearly automatic issuing of exclusion orders for any violation are both good for U.S. industry and international trade.
We hope that the Administration will take advantage of this chance to do the right thing.