The U.S. International Trade Commission’s recent ruling that some of Apple’s (NASDAQ:AAPL) devices are infringing on Samsung’s (SSNLF.PK) patented technology has put President Obama in an awkward position. According to the ITC rules, Mr. Obama can overturn the ruling during the 60-day Presidential Review period.
This leaves the president with the dilemma of having to choose between supporting an iconic American company by vetoing the ITC’s decision, or following years of precedence by letting the ITC’s decision stand. Although it would seem natural for the president to overturn the ruling in favor of Apple, the issue is not that simple.
Vetoing the ITC’s ruling simply to support a U.S.-based company over a foreign company would create an unsavory appearance of blatant bias and could offend the Korea-based Samsung. According to Business Insider, presidents generally don’t meddle with the ITC’s rulings and the presidential ITC veto power has only been used five times since the commission was founded in 1916.
The ITC’s ruling bans the importation and sale of the AT&T (NYSE:T) versions of the iPhone 3G, iPhone 3GS, and iPhone 4. It also bans the cellular versions of the original iPad and iPad 2. Although the iPhone 5, iPhone 4S, and certain models of the iPhone 4 are unaffected by this ruling, it may still have a financial impact on Apple since the company typically sells the last two generations of its flagship smartphone.
On the other hand, Obama’s veto decision will not be the last word in this case. Apple can also appeal the ITC’s ruling to the Federal Circuit. While the case is being appealed, Apple may be able to obtain a stay on the ITC injunction for up to 12 months.
This potential delay could render Samsung’s victory moot since Apple is widely expected to debut the iPhone 5S or some other next-generation iPhone by this fall. This would push the iPhone 4 out of commercial circulation anyways since consumers would then have the iPhone 4S and iPhone 5 as older-generation options.
Although Obama may feel pressure to side with Apple in this case, his best option may be to follow precedence and let the two tech giants resolve their disputes through the courts. Apple may actually have a good chance of winning this case on appeal since the technology that it infringed on is a “standard essential patent.” This means that Samsung is required to license this technology under its FRAND (fair, reasonable, and non-discriminatory) licensing obligations.
Apple has argued that Samsung never made a fair offer to license its patented technology and has instead worked against the interests of consumers by demanding exorbitant licensing fees for industry standard patents. According to filings with the ITC, Samsung was seeking a licensing fee of 2.4 percent on the average price of the affected iPhones and iPads.
Apple closed up 0.76 percent, or $3.35, at $441.81 today. Here’s how Apple has traded over this past week.
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