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  Today's News:
A Minute With...
from the UNIVERSITY OF ILLINOIS AT URBANA-CHAMPAIGN

8/14/13

SMARTPHONE PATENT WAR: A MINUTE WITH U. OF I. EXPERT DEEPAK SOMAYA

Editor’s note: The ongoing patent war between two technology behemoths took an unusual turn when the Obama administration overruled a U.S. International Trade Commission decision that would have banned older models of the iPhone and iPad because of the infringement of certain smartphone- and tablet-related patents owned by Samsung, its chief rival in the smartphone business.

Deepak Somaya is a U. of I. business professor who studies patent and intellectual property strategies in high-technology businesses. In an interview with News Bureau business and law editor Phil Ciciora, Somaya discusses the implications of the Obama administration’s headline-grabbing decision.

This was the first such veto of a U.S. International Trade Commission (ITC) ruling in more than 25 years. Just how unusual was this decision?

The so-called section 337 venue created in the ITC under the Smoot-Hawley Tariff Act is a highly specialized venue for intellectual property enforcement, and has a great deal of expertise in this area. The facts related to the licensing of Samsung’s patent that were cited as the reason for overruling the ITC decision, such as the company’s commitments to license patents that are part of a wireless interface standard, would already have been heard by the ITC section 337 judges, who are experts in the patent field. Thus, it was a highly unusual decision by the Obama administration to intervene, and will unfortunately reinforce perceptions of unfairness experienced by foreign firms in ITC section 337 proceedings.

Over the last several years, the ITC section 337 venue had shed much of its erstwhile reputation of being biased against foreign firms. This came about through a combination of new legal regulations – for example, by opening up the “domestic industry” requirement for bringing suit to include foreign firms – and restraint exercised by various administrations by not overruling the ITC judges’ decisions. I can imagine that this decision against Samsung will be thrown back at U.S. trade negotiators for many years to come when they complain about intellectual property unfairness in foreign countries.

In the explanation for the decision, U.S. Trade Representative Michael Froman said the ruling did not preclude Samsung from taking Apple to court to enforce its patent protections. Is that fair?

Unfortunately, the Office of the United States Trade Representative’s comment can be viewed as creating two sets of rules – one for domestic companies, and another for foreign firms like Samsung. The ITC is supposed to be accessible to any complainant that is a “domestic industry,” so why not to Samsung?

In my research, I have shown that the ITC is preferred over district courts for enforcing patents that involve high strategic stakes, and there is no patent battle right now that has higher strategic stakes than the one over smartphone patents. Effectively, the administration is asking Samsung to fight its high stakes patent war against Apple with one hand tied behind its back, whereas Apple apparently has no such handicap.

In its most recent decision, the ITC has upheld Apple’s request for an exclusion order against Samsung. Would we expect this decision to also be overruled? I don’t think so.

It’s no secret that President Obama is a fan of Apple products. Does this decision create the appearance of favoritism?

He also was once inseparable from his BlackBerry. I don’t think the president’s personal product preferences are the issue here. It is a case of political overruling of a judicial decision by a federal agency, which is allowed under the law but creates a perception of favoritism toward domestic firms, especially given the history of the ITC and who is exercising this privilege on the president’s behalf – in this case, the Office of the United States Trade Representative, which is also in the forefront of trade negotiations.

Is this outcome an outlier or a harbinger as the patent wars between technology companies continue to brew?

Actually, both. The smartphone patent wars are already in uncharted territory along multiple dimensions when compared with past patent battles. However, they are emblematic of a larger trend toward multi-invention products that incorporate very large numbers of patented inventions, which are in turn owned by multiple entities.

In my research, I have noted the significant challenges that need to be overcome by companies operating in such contexts, particularly with regard to their patent strategy. It is almost impossible for firms to ensure they have access to all the patents needed to commercialize in these contexts, so competitive battles in high-stakes multi-invention product markets like smartphones are likely to increasingly spill over into the courts. And, the more cases that end up in the courts, the more opportunities there will be to set new precedents.

Editor’s note: To contact Deepak Somaya, call 217-333-6873; email dsomaya@illinois.edu.



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