Obama Administration’s Letter on Veto of iPhone, iPad Ban

U.S. Trade Representative Michael Froman issued the following letter to Irving A. Williamson, chairman of the United States International Trade Commission,on the decision to veto a ban on the sale of some
Apple AAPL +1.28% iPhone sand iPads:
On June 4, 2013, the United States International Trade Commission (“Commission”) determined that Apple Inc. (“Apple”) had violated Section 337 of the Tariff Act of 1930, as amended, in the importation of certain devices,e.g., certain smartphones and tablet computers that infringe a U.S. patent owned by Samsung Electronics Co. 005930.SE +0.47% , Ltd. and Samsung Telecommunications America Inc. (“Samsung”). Following this determination, theCommission issued an exclusion order prohibitingthe unlicensedimportation of infringing devices, manufactured foror on behalf of Apple. The Commission also issued a cease and desist order that prevents Apple from engaging in certain activities,such as sale of these products inthe United States.
Under section 337, the President is required to engage in a policy evaluation of the Commission’s determinations to issue exclusion and cease and desist orders. The President may disapprove an order on policy grounds, approve an order, or take no action and allow the order to come into force upon the expiration of the60-day review period. This authority has been assigned to the United States Trade Representative. The legislative history of section 337 lists the followingconsiderationsrelevant to the policy review of the impact of theCommission’s determination to issue an exclusion order: “(1) publichealth and welfare; (2) competitive conditions inthe U.S. economy; (3) production of competitive articles inthe United States; (4) U.S. consumers; and (5) U.S. foreignrelations, economic and political.”
In addition,on January 8, 2013, theDepartment of Justice and United States Patent and Trademark Office issued an important Policy Statement entitled“Policy Statement on Remedies forStandard-Essential Patents Subject to Voluntary FRAND Commitments” (“Policy Statement”). The Policy Statementmakes clear that standards, and particularly voluntary consensus standards set by standards developing organizations (“SDO”), have incorporated important technical advances that are fundamentalto theinteroperability of man of theproducts on which consumershave come to rely, including thetypes of devices that are the subject of theCommission’s determination. The Policy Statementexpresses substantial concerns, which I strongly share, about thepotential harms that can result from owners of standards-essential patents (“SEPs”) who have made a voluntary commitment to offer license SEPs on terms that are fair, reasonable, and non-discriminatory (“FRAND”), gainingundue leverage and engaging in“patent hold-up”, i.e., asserting thepatent to exclude an implementerof the standard from a market to obtain a higher pricefor useof the patent thanwould have been possible before thestandard was set, when alternative technologiescould have been chosen. At the same time, technology implementers also can cause potential harm by, for example, engaging in“reverse hold-up” (“hold-out”), e.g., by constructive refusal to negotiate a FRAND license with the SEP owner or refusal to pay what has been determined to be a FRAND royalty.