Under § 1337 of
the Tariff Act, the ITC may issue an exclusion order (injunctive type relief)
against an entity that imports a patent infringing product. In deciding whether
to grant the exclusion order, the ITC must consider the effects of the order on
US trade and commerce. If the ITC believes that the public interest would not be
best served by the issuance of the exclusion order, it has the discretion to
refuse it.
Samsung’s patent is what is known as a “standard-essential
patent” (SEP). These patents cover inventions that must be incorporated into a
given device if they are to meet some applicable technical standard. SEPs have
the potential to give vertically integrated patent holders an advantage over
their competitors whom, for all intents and purposes must license the
technology from them.
To combat anti-competitive behavior while still allowing the
best technology to form industry standards, standards-developing organization
(SDOs) encourage patentees to establish “fair, reasonable, and
non-discriminatory” (FRAND) licenses. FRAND licenses allow any player in a
given market, incumbents and new entrants, to obtain a license to use the SEP
technology on a fair and reasonable license thereby stimulating a more robust
and competitive marketplace and eliminating a phenomenon known as “patent
hold-up” whereby the holder of an SEP asserts its patent with the goal of
frustrating a competitor’s entry into the market.
Far from trying to hold-up the process, Samsung alleges that
it sought to negotiate a license in good faith with Apple over the
technology. Samsung further claims that
it was Apple who refused to negotiate a FRAND license in good faith resulting
in a “reverse hold-up” situation: where the patentee is faced with a
recalcitrant would be licensee.
The Office of the President of the United States has a 60-day
window in which it may exercise veto power over an ITC decision. This power was
assigned
by the President to the USTR in
2005. In deciding whether to honor the ITC’s initial decision, the USTR will
consider the following factors:
1.
Public health and welfare;
2.
Competitive conditions in the U.S. economy;
3.
Production of competitive articles in the United
States;
4.
U.S. consumers; and
5.
U.S. foreign relations, economic and political.
In the present case, the USTR’s rejection of the ITC’s
decision was bolstered in part by a policy document
(http://www.justice.gov/atr/public/guidelines/290994.pdf) released jointly by
the Department of Justice (DOJ) and the United States Patent and Trademark
Office (USPTO). The document warns against the issuance of injunctions and
exclusion orders in instances when the American economy would not be best
served by the measure.
In the very same policy document, however, the DOJ and USPTO
note that exclusion orders are still sometimes appropriate, even when the
patent at issue is an SEP. One instance identified as appropriate is when “the
putative licensee is unable or refuses to take a F/RAND license and is acting
outside the scope of the patent holder’s commitment to license on F/RAND
terms”. If Samsung’s statements about Apple’s reticence to negotiate are to be
taken as true, it would seem that the present case was expressly contemplated
by the DOJ and USPTO as an instance in which the imposition of an exclusion
order is justified.
The USTR’s disapproval letter was clear that its ruling
applied only to the present case and should not be taken as a blanket statement
that exclusion orders should never be issued when the infringed patent is an
SEP. The ITC (and the USTR on review) will examine the facts of each case in
light of the policy considerations outlined above. It would seem that in this
case, despite the undisputed violation of Samsung’s patent rights, the USTR
found that in this case Apple was too big to fail; or perhaps more accurately,
too big to enjoin.
LL.L, J.D.
Summer Student with MBM