Samsung Electronics Co. (005930) must stop importing some models of smartphones and tablet computers into the U.S. after President Barack Obama’s administration upheld 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 to proceed, Obama’s designee, U.S. Trade Representative Michael Froman, said in a statement today.
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.
The Korean company argued the ban ordered by the U.S. International Trade Commission should be overturned on public policy grounds, especially since a similar order it won against Apple’s iPhone 4S was thwarted by a presidential veto in August. Samsung can now seek a delay in the ban from a U.S. appeals court that will consider the entire case on legal grounds.
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.
Design Workaround
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.”
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.
Basic Function
Forcing Samsung to change its design is a victory for Apple. The iPhone maker says it keeps and entices new customers by contrasting the look and ease of its devices to other manufacturers, like Samsung or HTC Corp. (2498) In appeals-court arguments, Apple accused Samsung of simply putting a new name on some handsets without making any changes.
In contrast, Samsung’s victory against Apple involved a basic function of the phone, the ability to transmit data that was part of a standard used across platforms. The administration cited its position that advocates limiting the ability to use standard-essential patents to block competition in overturning the import ban.
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).
To contact the reporters on this story: Susan Decker in Washington at sdecker1@bloomberg.net; Brian Wingfield in Washington at bwingfield3@bloomberg.net
To contact the editor responsible for this story: Bernard Kohn at bkohn2@bloomberg.net
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