On Saturday, in an extremely rare move, the Obama administration used the President’s power to stop the implementation of a sales ban on older Apple products. The sales ban had been issued by the USITC through proper legal procedure, adversarial litigation and consideration by the full panel of the ITC.
The letter sent to the ITC Chairman from Ambassador Michael B.G. Froman observed that the “veto” on the ban was a policy decision and “is not an endorsement or a criticism of the Commission’s decision or analysis.”
Froman observed in the letter to ITC that though the Commission had issued a cease and desist order preventing Apple from selling some of its products that violated Section 337 of the Tariff Act of 1930, as they were infringing on a U.S. patent owned by Samsung – “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.”
He explained to the ITC Chairman, “The President may disapprove an order on policy grounds, approve and order, or take no action and allow the order to come into force” upon end of the review period.
The Ambassador reminded the commission that the considerations relevant to the policy review in the instant case included (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 effect, for any of the mentioned reasons the President may choose to veto any order of the ITC where cease and desist or exclusion orders may affect the business of a company.
Froman stated after raising FRAND terms and issues that, “After extensive consultations with the agencies of the Trade Policy Staff Committee and the Trade Policy Review Group, as well as other interested agencies and persons, I have decided to disapprove the USITC’s determination to issue an exclusion order and cease and desist order in this investigation.”
He further pointed out that he had based his decision keeping in mind voluntary FRAND commitments by businesses and as such commitments “relate to the effect on competitive conditions in the U.S. economy and the effect on U.S. consumers.”
He also advised the Commission in no uncertain words that in any future cases involving “SEPS that are subject to voluntary FRAND commitments, the Commission should be certain to (1) examine thoroughly and carefully on its own initiate the public interest issues presented both at the outset of its proceeding and when determining whether a particular remedy is in the public interest and (2) seek proactively to have the parties develop a comprehensive factual record related to these issues in the proceedings before the Administrative Law Judge and during the formal remedy phase of the investigation before the Commission, including information on the standards-essential nature of the patent at issue if contested by the patent holder and the presence or absence of patent hold-up or reverse hold-up.”
Froman warned, “the Commission should make explicit finding on these issues to the maximum extent possible. I will look for these elements in any future decisions involving FRAND-encumbered SEPs that are presented for policy review.”
Despite vetoing the sales ban on Apple, Froman ended his letter to the commission with the parting advice, “My decision to disapprove this determination does not mean that the patent owner in this case is not entitled to a remedy. On the contrary, the patent owner may continue to pursue its rights through the courts.”