Obama administration vetoes a ban that would have blocked sales of older Apple iPhones; Samsung stock loses $1 billion in value and Korean government expresses concern.
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The on-going legal drama between smartphone superstars Apple and Samsung took an interesting turn over the weekend. U.S. Trade Representative Michael Froman and the Obama administration vetoed a ban set in place by the U.S. International Trade Commission that would have prevented Apple from selling its older iPhone in the U.S. The decision has already led to significant reactions from the financial markets and from Korea's leaders in Seoul.
In June, the ITC found Apple guilty of infringing on a patent owned by Samsung. The patent pertains to how mobile devices communicate with wireless networks. The patent is considered standard essential, meaning it has to be used by other companies in order for their gear to function properly. Such patents must be licensed at "fair, reasonable, and non-discriminatory" -- or FRAND -- terms. Samsung wanted a licensing fee of about $18 for every iPhone Apple sold. Apple didn't think that was reasonable.
No matter Apple's opinion on the matter, the ITC ordered that all the infringing products, which includes the AT&T variants of the iPhone 4 and iPad 2, be banned in the U.S. Apple would no longer be able to import them into the country, and would have to cease selling them online and in its own stores. The ban was to go into effect Monday, Aug. 5, but the president interceded.
Froman said the Obama administration feared the ban would give "undue leverage" to Samsung and others when hammering out licensing deals for standard essential patents. The move is a win for Apple, but a big loss for Samsung.
Samsung lost $1 billion in value, as its shares sunk 0.9% after the veto was announced. The veto, which marks the first time a president has interfered with an ITC action since 1987, caused concern among government officials in Seoul. Later this week, the ITC is set to make a decision about Samsung's products and whether or not they infringe on Apple's patents. The Korean Ministry of Trade, Industry & Energy said, "We hope to see a fair and reasonable decision on the matter."
If Samsung's products are banned by the ITC on Friday, Samsung will likely follow the path set by Apple and seek for a presidential veto.
Others see the veto as cause for greater concern. "If the presidential veto appears to be used to give advantage to Apple over Samsung, this would be a dangerous precedent that could upset the current good trade relations between the U.S. and South Korea," said Mark Newman, an analyst with Sanford C. Bernstein, in a statement provided toThe Wall Street Journal.
Apple and Samsung have been attacking one another in courts around the world, not just in the U.S. So far, the U.S. courts' decisions have provided the biggest headlines. Samsung was already found guilty of infringing on a handful of Apple patents and socked with a $600 million fine. That fine could go up later this year. A second big patent trial between the two companies is set to get underway in 2014 that could wreak further financial havoc on either Apple or Samsung.
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