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Note: This post was co-written with Rashmi Rangnath, Director of Global Knowledge Initiative, and Staff Attorney
The Administration overturned a decision to ban imports of technology products that infringe patents. This reaffirms the principle that an automatic ban on product importation is not in the public interest.
The public interest has to be a central concern in decisions about technology policy. The Obama Administration, through the United States Trade Representative (USTR), reaffirmed this principle this past Saturday when it overruled a recent International Trade Commission (ITC) decision to ban imports of certain Apple products including the iPhone 4.
The ITC is a specialized court that decides patent infringement cases. If the ITC finds that a product infringes a patent in certain circumstances, then the ITC will, as a matter of course, ban importation of that product. This is exactly what happened as part of the Apple /Samsung litigation: the ITC ordered a ban of the iPhone 4 and other Apple products on the ground that they violated patents owned by Samsung and relating to CDMA encoding and decoding (CDMA is a cell phone network technology used mostly by Verizon and Sprint in the US.)
The problem, as recognized by the USTR, is that the ITC imposes these bans without consideration of the public interest. In the case of the iPhone4, the injunction would have cut consumers off from access to phones that are significantly cheaper than the latest models of iPhones, effectively raising the prices for a significant market share of smartphones. A ban on their import would have been particularly unjust given that Samsung’s patented technology made up only a small part of the many technologies in the iPhone 4.
We applaud the USTR for directing the ITC to consider the public interest in the Apple/Samsung litigation, as it recognizes the direct impact that patents have on consumer access to technology. Significantly, the USTR also urged the ITC to apply this standard to future cases noting that:
“in any future cases involving SEPs [standards-essential patents], the Commission should be certain to 1) examine thoroughly and carefully on its own initiative 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 ….”
Standards-essential nature of patents should not be the sole factor in determining impact on public interest.
But a lingering question remains relating to the nature of Samsung’s patents as “standards-essential patents.” One of the factors that influenced the USTR’s decision was that the patent Samsung claimed was a standards-essential patent. In this context, a “standard” is a technology that many product makers across different companies agree to use in order to make interoperable products. For example, USB ports follow a particular standard so that the same plugs fit all sorts of different devices. The advantage is that products can interoperate and consumers would not have to buy a whole range of accessories when they buy one new device. Thus, standards facilitate interoperability and facilitate greater consumer choice.
Often technologies that become part of standards are patented. In the development process, patent owners of these standards promise to license their technology to anyone who wants to employ that standard on Fair, Reasonable, and Non-Discriminatory terms (FRAND terms).
Standards-essential patents, like those covering WiFi or USB, have a particularly prominent impact on the consumer interest. Those patents affect whole classes of technologies, and assertion of those patents can obstruct interoperability and market competition. The USTR considered the adverse impact of such behavior to be especially grave.
But whether a patent is standards-essential or not should not be the only thing, or even the most important thing that determines what is in the public interest. The ultimate determinative factor must be the public’s interest in access to valuable and beneficial technologies whether or not those technologies are approved by a standards board. Indeed, consider the following factors that could militate against an importation ban of the iPhone 4 or other products, none of which have anything to do with technology standards:
- Whether the iPhone 4 has far more features than the scope of the patent, so an importation ban would exclude those additional features with no justification
- Whether the alternative products made by Samsung are an adequate alternative to the products being banned
- Whether Samsung is actually making any products available, rather than just engaging in a “domestic industry of licensing”
As is apparent, the public interest is much more expansive than the question of whether a patent is standards-essential or not. Accordingly, where the ITC’s duty, according to the USTR, is to consider importation bans in view of the public interest, the ITC’s inquiry must be much more expansive as well.
Original image by Flickr user sidduz.