[A2k] FT editorial: Apple’s modest win in the patent wars

Thiru Balasubramaniam thiru at keionline.org
Wed Aug 7 14:35:04 PDT 2013

August 5, 2013 7:18 pm

Apple’s modest win in the patent wars

Obama veto in ITC case justified but reform is necessary

Intelligent observers of the epic battles being fought by technology
companies in US courtrooms concluded long ago that the country’s patent
system is no longer fit for its constitutionally-enshrined purpose of
promoting “the progress of science and useful arts”.

President Barack Obama, who has wielded his veto to lift a ban on importing
some Apple products<http://www.ft.com/cms/s/0/7321bf0a-fc6b-11e2-95fc-00144feabdc0.html>into
the US, appears to have some sympathy for the critics, even if such
extrajudicial action is unlikely to have been their preferred fix. The
intervention, which reverses the only significant legal defeat that Apple
had suffered in the US to its arch-rival
inevitably aroused suspicions about the president’s motives. The terse
rationale offered by Michael Froman, US trade representative, did little to
allay those concerns.

This is not the first time that the objectivity of the US patent system has
been called into doubt. In a patent trial against
Samsung<http://www.ft.com/intl/topics/organisations/Samsung>last year,
the sympathies of a Californian jury were widely felt to have
handed Apple <http://www.ft.com/intl/topics/organisations/Apple_Inc> an
advantage. The impression that the US uses its patent system as an
instrument of trade protection threatens to undermine international efforts
to enforce intellectual property rights – something the US economy, which
earns its jam by developing technology at home and exploiting it overseas,
can ill-afford.

Nonetheless, Mr Obama has vetoed a decision that deserved to be reversed.
It concerned a so-called “standard-essential patent” – in this case, for
technology that is necessary to make a mobile phone work on a 3G network.

Most of the value in this technology lies not in its inherent advantages
but in the fact of its adoption, which prevents the use of incompatible
alternatives that are otherwise just as good. Industry conventions dictate
– and, increasingly, antitrust regulators are insisting – that holders of
such patents should licence them to all-comers on reasonable,
non-discriminatory terms.

The details are contested, but Apple declined Samsung’s proposed terms for
licensing the technology, which is used in early models of the iPhone and
iPad (some of which are still on sale). Samsung filed suit; if its claims
are upheld, the amount that Apple must pay will be decided in federal
court. That litigation, which should ensure that Samsung gets a fair price
for its technology, is not affected by Mr Obama’s veto.

But Samsung also took its case to the US International Trade Commission,
which exercised its power to ban imports of the offending Apple products.
Had Mr Obama not vetoed this decision, it would have dramatically
strengthened Samsung’s hand, enabling it to extract far more than the fair
price of the industry-standard transmission technology that is directly at
issue. Others would have followed suit: there are hundreds of patents
covering the industry standards that a typical gadget must conform to.
Their owners could have demanded pay-offs from manufacturers wishing to
sell in the US. That would have sapped the life from one of America’s most
inventive industries.

That this outcome was avoided only by presidential diktat is nonetheless
embarrassing, and damages America’s reputation as a nation of laws. Having
prevented legal malfunction on this occasion, Mr Obama should turn his hand
to fixing the design. He could begin by stripping the ITC of its remit to
enforce patents, which duplicates that of the federal courts and has been
exercised unwisely. The bar for patent applications must be raised to block
“inventions” that are of questionable novelty or value. Once issued,
patents should be easier to challenge, and courts should no longer defer to
the overworked examiners who first granted them. Mr Obama cannot afford to
give the impression that he will act only on patents when large US
corporations are on the losing side.

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