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USTR Declines to Overturn USITC's Section 337 Samsung Exclusion Order

October 8, 2013. Michael Froman, the U.S. Trade Representative, announced his decision to deny Samsung's request to overturn a Section 337 exclusion order of the U.S. International Trade Commission (USITC) that affects certain Samsung mobile devices that infringe Apple patents.

Denial of such a request would be standard, but for the USTR's granting of a similar request in August to Samsung's US rival, Apple, which the USITC found had infringed Samsung patents.

The USITC performs a judicial function in Section 337 proceedings. Parties may, and often do, seek judicial review by the U.S. Court of Appeals (FedCir) pursuant to 5 U.S.C. § 706. In addition, the President may overturn these exclusion orders within 60 days, pursuant to 19 U.S.C. § 1337(j). These requests are typically denied.

The Office of the U.S. Trade Representative (OUSTR) is a part of the Executive Office of the President (EOP). Froman acted on behalf of the President.

Section 337, which is codified at 19 U.S.C. § 1337, provides, in part, that "The importation into the United States, the sale for importation, or the sale within the United States after importation by the owner, importer, or consignee, of articles that ... infringe a valid and enforceable United States patent or a valid and enforceable United States copyright registered under title 17". Moreover, this section empowers the USITC to issue exclusion orders.

Apple Exclusion Order. In June the USITC issued an exclusion order banning importation of certain Apple devices that infringed certain Samsung patents. See, story titled "USITC Enjoins Importation of Certain Older iPhones and iPads" in TLJ Daily E-Mail Alert No. 2,570, June 4, 2013.

The Apple exclusion order was issued on June 4, 2013 in USITC Investigation No. 337-TA-794.

Froman overturned that order in August. See, story titled "USTR Froman Disapproves USITC Exclusion Order in Samsung Apple Proceeding" in TLJ Daily E-Mail Alert No. 2,587, August 6, 2013.

Had that order gone into effect, it would have benefited Apple's competitors, and especially Samsung.

Samsung Exclusion Order. The USITC then issued an exclusion order directed at Samsung for infringing certain Apple patents. This order benefits Apple. This order was issued in USITC Investigation No. 337-TA-796.

Samsung sent a letter to the OUSTR asking that this order be similarly overturned. It wrote that "The world is watching how Samsung is treated by the United States in this ``smartphone war´´ and the Administration has a significant interest in avoiding the perception of favoritism and protectionism toward U.S. companies. Samsung requests nothing more than equal and fair treatment in this, and future investigations."

The just announced decision denies this request.

Protectionism. President Obama and his administration have a checkered record on free trade.

For example, the Bush administration completed negotiations on a free trade agreement (FTA) with Korea in 2007. The Obama administration, and Democrats in the Congress, then delayed implementation of that agreement for years.

Moreover, the Obama administration has not concluded any bilateral FTAs.

In addition, the Obama administration has had great success in blocking telecommunications equipment manufacturers based in the People's Republic of China (PRC), Huawei and ZTE, from competing in US markets, including for low end consumer devices. The administration, and allies its in Congress, have leveled accusations that these foreign companies and the PRC government would diminish telecommunications and cyber security. Recent revelations, based upon documents provided by Edward Snowden, and admissions by the National Institute of Standards and Technology (NIST), disclose that the US government has already engaged in security diminishing activities.

Apple, a US company, and Samsung, a Korean company, compete in the sale of smart phones. The USITC issued two exclusion orders based upon patent infringement -- one directed at Apple, and one directed a Samsung. Froman overturned the Apple order, but not the Samsung order. This set of actions, in the least, creates the appearance of favoritism and protectionism.

Apologists for Froman have advanced the argument that the Apple order excluded the importation devices that infringed standards essential patents (SEPs) subject to fair, reasonable and non-discriminatory (FRAND) commitments, while the Samsung order involved findings of infringement of non-SEPs.

Froman did raise the subject of SEPs subject to FRAND commitments in his August ruling. Also, he referenced the Department of Justice's (DOJ) and U.S. Patent and Trademark Office's (USPTO) joint policy statement [10 pages in PDF] dated January 8, 2013 on the subject. See also, story titled "DOJ and USPTO Issue Statement on Injunctive Relief for Infringement of SEPs Subject to FRAND Commitments" in TLJ Daily E-Mail Alert No. 2,506, January 9, 2013.

That DOJ/USPTO statement argued that an exclusion order or injunction for a FRAND encumbered SEP may be inconsistent with the public interest. However, there are exceptions. For example, an exclusion order or injunction may be appropriate where the putative licensee has refused to take a FRAND license.

However, Froman's August letter made no attempt to apply the principles of that DOJ/USPTO statement to the facts of the Apple proceeding. Moreover, he recited no factual findings of USITC, and made no new or de novo factual findings of his own. He did not even cite any portion of the June 4 USITC determination for the proposition that Samsung refused to license SEPs on FRAND terms, or make any such finding himself.

That is, apologists for Froman seek to distinguish his August letter on the basis of things that are not in the August letter.

(Published in TLJ Daily E-Mail Alert No. 2,611, October 9, 2013.)