OLD Media Moves

Will consumers benefit from patent veto?

August 5, 2013

Posted by Liz Hester

The news that the U.S. vetoed a ban that would have stopped Apple from selling some products next week was a rare one for the White House. But what does it actually mean?

Here are some of the details from the New York Times, which had a clear lead explaining what the news meant:

The Obama administration has vetoed a federal commission’s ban that would have forced Apple to stop selling some iPhones and iPads in the United States next week, a rare intervention by the White House and a victory for Apple in its heated patent war with Samsung Electronics.

The United States International Trade Commission in June ordered a ban of older-model Apple products that worked with AT&T’s network, including the iPhone 4 and 3GS, after determining that Apple had violated a patent that Samsung owned related to transmission of data over cellular networks. The administration had until Monday to weigh in.

It was the first time that an administration has vetoed an International Trade Commission ban since 1987, according to Susan Kohn Ross, an international trade lawyer for Mitchell Silberberg & Knupp.

The Wall Street Journal added this context:

Such orders, and the role of the ITC, have split the technology industry, raising questions about how best to promote innovation. Companies including Intel Corp. and Microsoft Corp. fear that injunctions stemming from patents on tiny features of their products could restrict their ability to bring improved devices to consumers. They and some other tech companies argued against ITC sales bans in such cases.

Other companies that make money from licensing patents, including Qualcomm Inc., take the opposite position. They argue that courts and trade bodies need to be able to impose sales or import bans or the value of patented inventions will be diminished.

“Once you get a patent, how do you know what it’s worth because your expectations are changing on a daily basis because of what the courts say, what the ITC says and now what the White House says?” said Christal Sheppard, a former ITC attorney who is now an assistant professor at the University of Nebraska College of Law.

One of the industry’s starkest divides has been over the type of patent at issue in the ITC case, one of many covering basic kinds of functions that many companies’ products have to perform—in this case, connecting to a wireless network.

Such patents are deemed to be essential to creating products based on technical standards set by industry groups. Companies are expected to license these “standard essential” patents on fair, reasonable and nondiscriminatory terms.

The Financial Times reported that some critics are concerned about the message the veto sends to other companies:

But critics of the Obama administration’s approach to intellectual property in trade negotiations say the White House’s case has grown weaker and lacks consistency.

“If open technology standards benefiting the public interest are the rule for smart phones, why not for life-saving pharmaceuticals? Why not for other innovations that would improve the lives of billions of people around the world?,” asks Adam Hersh, an economist at the left-leaning Center for American Progress.

“The decision shows the untenability of stringent IPRs to which so many US trading partners have objected on social welfare grounds. The onus is now on [Mr] Froman to explain why this is good for American consumers, but not for the rest of the world,” Mr Hersh added.

Meanwhile, some in Washington were concerned about the message the Apple decision sent on foreign investment.

“US and international patent laws play a critical role in global competition. However, it is crucial to ensure that the president’s prerogative is used when the merits of the case warrant, and not to simply advantage a US company over a foreign competitor,” said Nancy McLernon, president of the Organization for International Investment, which represents US subsidiaries of foreign companies, including Samsung.

What isn’t clear is what this means for consumers. Some argued that companies may be less innovative since they won’t know if their ideas will be protected. I like the point that the FT story brings up about how this could be applied to other industries. I happen to agree that making standards more open to save lives is definitely more important than smartphones.

While the issues are complex and will likely continue to be debated, it does send a mixed message if the U.S. is relaxing standards and pushing for higher ones at other times.


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