Apple asks Obama to take a stand on injunctions and essential patents

July 25, 2013

If there were any doubt that the tech world remains transfixed by the question of whether courts should order injunctions based on standard-essential patents, check out the Federal Trade Commission’s newly released response to commenters on the Google antitrust settlement it proposed in January. Many of the 25 letters that the FTC received focused on settlement provisions barring Google from seeking an injunction based on infringement of an essential patent until a fair licensing rate is determined by a court or arbitrator. The FTC said that its final settlement with Google, which was disclosed Wednesday, holds Google accountable for its commitment to license essential technology on fair and reasonable terms. Potential licensees, the agency said, must be protected from “opportunistic behavior” and permitted “to negotiate licensing terms without facing the threat of an injunction.”

It’s no secret that the executive and judicial branches of the U.S. government have recently frowned upon the grant of injunctions to holders of standard-essential patents. In January, as you may recall, the Justice Department and U.S. Patent and Trademark Office issued a joint policy statement recommending “caution in granting injunctions or exclusion orders based on infringement of … patents essential to a standard.” Judge Richard Posner of the 7th Circuit Court of Appeals said flat-out in a case involving cross-allegations by Apple and Motorola that injunctions should not be issued on the basis of essential technology. And when Motorola appealed the ruling to the Federal Circuit, the FTC weighed in with an amicus brief that described the threat of injunction in licensing talks as “the essence of hold-up.”

The White House itself is now confronted with an Aug. 4 deadline on the issue, in the form of a request by Apple to disapprove an exclusion order against certain Apple iPhones and iPads that was entered by the U.S. International Trade Commission on June 4. Apple contends that the ITC order, which was based on the commission’s finding that Apple infringed a Samsung patent covering essential technology for telecom communications, puts the ITC (and, by extension, the United States) at odds with the anti-injunction predisposition of other parts of the U.S. government and the rest of the world. Samsung, meanwhile, contends that “there are no policy reasons” to overrule the commission in this particular case, nor should the administration establish “a bright-line rule prohibiting exclusion orders for SEP infringement” because such a bar would encourage potential licensees to refuse to negotiate reasonable terms. (Hat tip to Florian Mueller of Foss Patents, who was first to write about the Apple and Samsung submissions.)

The ITC itself, in its June 4 order in the Samsung case, invited the president to specify the White House’s policy. In discussing the appropriate remedy for Apple’s infringement, the commission said it had considered and rejected Apple’s argument that Samsung breached its obligation to license standard-essential IP on fair and reasonable terms. Apple hadn’t established in the trial phase of the case that the infringed patent is actually standard-essential, the ITC said, or that Samsung had specific obligations to license it on fair and reasonable terms. As a result, the order said, anti-injunction policy arguments by Apple and other commenters didn’t apply. “Whatever the merits of such arguments, they are inapt to the facts of this investigation,” the order said. “The Commission is not a policy-making body and is not empowered to make that decision. The parties are free to raise these arguments to the president during the 60-day review period. The president may, should he so choose, weigh the relative risks of (patent) hold-up and reverse hold-up in deciding whether to disapprove the remedy the commission is issuing today.”

That’s exactly what Apple’s lawyers at Wilmer Cutler Pickering Hale and Dorr are urging the president to do in Apple’s submission to the U.S. Trade Representative, who is empowered to review ITC rulings. The submission asserts that the exclusion order barring import of Apple products is not only contrary to the ITC’s mission of protecting American companies but is at odds with international acknowledgement that holders of standard-essential patents have an obligation to license their technology without using the threat of injunctions. Apple contends that before Samsung’s case, the ITC never issued an exclusion order based on infringement of an essential patent, and its decision to do so “upsets the international consensus against FRAND abuse, making the ITC an outlier among agencies and tribunals around the world,” the submission said. “For example, the European Commission issued a preliminary determination that Samsung had violated European competition law by pursuing injunctions on FRAND patents against Apple, and Samsung has withdrawn all such injunction requests in Europe. Yet here in the United States, Samsung has continued to pursue injunctions and exclusion orders, and the ITC has now rewarded that conduct.”

Samsung, which is represented in the Apple case at the ITC by Quinn Emanuel Urquhart & Sullivan, is in an awkward position on injunctions and standard-essential patents because, as its submission to the U.S. Trade Representative notes, it is a defendant in other ITC cases involving essential technology. (A case brought by Ericsson, for instance, is well under way.) Samsung’s submission doesn’t argue for or against a broad policy on injunctions and standard-essential patents, but says that this case represents one of the rare instances when an injunction is justified because of Apple’s refusal to negotiate a licensing fee. (Samsung also asserted, rather less persuasively, that the exclusion order only applies to out-of-date and relatively low-cost Apple products, so it’s not a big deal.)

It’s incredibly rare for the president to make use of the power to overturn the ITC. The last time the veto was exercised was in 1987, when former President Reagan disapproved an exclusion order against (of all companies) Samsung products containing dynamic random-access memory systems. But according to Apple, the Obama administration’s June 4 legislative proposals on patent trolls can’t be reconciled with an ITC injunction based on standard-essential patents. We’ll find out soon if the White House agrees.

Apple counsel William Lee of Wilmer declined to comment. Samsung counsel Charles Verhoeven of Quinn didn’t return my call.

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