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iPhone Sales Ban Overturned, Samsung Takes Hit

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.

[ While Apple battles over old phones, it seems to have some new tricks waiting in the wings. Read Apple iOS 7 Ready For Fingerprint Scanner. ]

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 to The 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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User Rank: Ninja
8/7/2013 | 12:58:19 AM
re: iPhone Sales Ban Overturned, Samsung Takes Hit
Given what a mess patent law is, it might have been better for the Administration to allow the ban to go forward. If the consequences of bad laws are painful enough (for large corporations as well as small businesses), Congress might actually be motivated enough to change the law.

Selective enforcement is always a bad deal.
Thomas Claburn
Thomas Claburn,
User Rank: Author
8/6/2013 | 5:16:54 PM
re: iPhone Sales Ban Overturned, Samsung Takes Hit
It will be interesting to see whether the South Korean government intervenes on Samsung's behalf when the opportunity arises.
User Rank: Apprentice
8/6/2013 | 2:51:38 PM
re: iPhone Sales Ban Overturned, Samsung Takes Hit
I didn't realize "Apple fanboi" was something I could add to my list of reasons to dislike President Obama.
User Rank: Apprentice
8/6/2013 | 9:46:26 AM
re: iPhone Sales Ban Overturned, Samsung Takes Hit
It would be interesting to know wether Apple has been paying Samsung something for the intended 18$ per iPhone and how much, or if they're not paying at all and if so, are they going to have to pay something and who's going to set the price...
User Rank: Apprentice
8/5/2013 | 11:19:13 PM
re: iPhone Sales Ban Overturned, Samsung Takes Hit
The long slide...
Back to the days of govt protected industries and limited product availability based
on national borders.
Given the harsh penalities for other companies which were not vetoed by US govt
I can only see this becoming a tit for tat with govts around the world and ignoring court rulings because it lines their pockets with tax $
If I had to devise a strategy to alienate apple from the rest of the world
this is how I would start.
User Rank: Apprentice
8/5/2013 | 11:01:10 PM
re: iPhone Sales Ban Overturned, Samsung Takes Hit
I like Obama but how can a man be President with no brains and no balls. So we give Apple, a shill for Communist China (who supports "axis of evil" nations like Iran and North Korea) while dissing Samsung from our long time ally South Korea. Apple has long been a patent troll, thinking back to the 80's when they sued Xerox PARC for presciently stealing the Mac concept years before Apple "invented" it.
User Rank: Ninja
8/5/2013 | 5:39:27 PM
re: iPhone Sales Ban Overturned, Samsung Takes Hit
WTF of epic proportion.
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