Investors greeted the White House veto of a proposed trade ban by driving… (Justin Sullivan, Getty…)
A surprise veto over the weekend by the White House of a proposed trade ban is escalating the stakes in an already epic global patent war between technology giants Apple Inc. and Samsung Electronics Co.
Analysts say the decision will probably make the thicket of litigation between the two smartphone rivals even more tangled. At the same time, intellectual property attorneys are trying to understand what the rare presidential intervention may mean to existing patent rules and lawsuits.
And just to spice things up, the move seems to have provoked the ire of the South Korean government, which issued a statement calling on the U.S. government to make "fair and reasonable decisions" in patent and trade cases involving Samsung, which has its headquarters in Seoul.
"We express concerns about the negative impact that such a decision would have on the protection of patent rights," the South Korean Ministry of Trade, Industry & Energy said in a statement.
So far the legal jostling has had no bearing on what consumers can or can't buy. But investors, who often greet big patent news with gigantic yawns, sent the stocks of both companies racing in opposite directions.
Samsung lost $1 billion in market value after the announcement Monday. Apple's stock, which has been on a strong run over the last month, rose $6.91 a share, or 1.5%, to $469.45. That's the stock's highest close since February.
On Saturday, U.S. Trade Representative Michael Froman, an Obama appointee, announced that he had overturned a previous decision by the U.S. International Trade Commission to ban some older Apple products.
In June, the ITC ruled that Apple had violated a Samsung patent. The ITC handed down a ban that would have applied to the iPhone 4 and iPad 2 3G models that run on networks operated by AT&T Inc. and T-Mobile US Inc., as well as two regional carriers in Texas and Alaska.
No president had overturned an proposed ITC trade ban since 1987. But in recent months, Obama has been speaking out about the effect of patent litigation on the economy and innovation.
In this case, the decision by Froman affects a fairly narrow subset of patents known as "standards-essential patents," which cover technologies that have become widely adopted in an industry. The patent holder is supposed to license an SEP for "fair, reasonable, and non-discriminatory terms."
Companies seeking to pursue patent claims have been increasingly turning to the ITC, hoping that a ban will increase their negotiating leverage. But in this case, Froman said the ITC had gone too far in tipping the scales in favor of Samsung.
The veto could cause some companies to rethink the strategy of using the ITC, said Peter Toren, an intellectual property attorney with Weisbrod Matteis & Copley in Washington. And in the short term, the decision will cost Samsung some leverage in negotiations with Apple over licensing the patent in question.
But Toren also noted that by getting the ITC to rule that Apple had violated the patent, Samsung can still claim some public relations victory as the two companies vie for the mantle of innovator while tagging the other as a copycat.
"Samsung was able to establish that Apple did infringe one of its patents," Toren said. "That suggests that Apple was not as pure as the driven snow, as Steve Jobs liked to portray the company when he was alive."
Nearly a year ago, a federal court jury ruled that Samsung had violated a number of Apple mobile patents and awarded Apple $1 billion. A judge later cut that verdict in half but declined to grant Apple an injunction that would have banned the import of a number of older Samsung products.
On Friday, the ITC is set to rule on a claim by Apple that Samsung violated its patents. The South Korean trade ministry said in its statement that it would be watching the outcome closely for any hints of favoritism.
Susan Kohn Ross, a trade lawyer with Mitchell Silberberg & Knupp in Los Angeles, said that despite the dramatic veto, she expects the patent battles between the two technology giants to rage for years.
"You have two very large and well-respected companies that view this as a way to try and gain leverage over each other," she said. "They're each spending a lot of money to try and tie up a major competitor."