Dean Pinkert

How the ITC forced a veto in the Samsung-Apple patent case

August 5, 2013: 6:13 AM ET

Did the International Trade Commission blow it by ignoring Dean Pinkert's dissent?

Commissioner Pinkert

ITC Commissioner Pinkert

FORTUNE -- His dissent was heavily redacted and buried in a long official filing. But everything you need to know about how the U.S. International Trade Commission punted when it granted Samsung's request for an import ban on five Apple's (AAPL) devices -- forcing the first Presidential veto of one of its decisions in a quarter century -- is contained in the opinion filed by Dean Pinkert, one of the ITC's six commissioners.

Pinkert, a George W. Bush appointee (and a Democrat), laid out in careful detail why his fellow commissioners were wrong to order Apple to cease and desist selling those five products -- including a version of the iPhone 4 that is still one of the company's most popular -- on the strength of Samsung's complaint.

Among the reasons he cites:

  • The patent in question was part -- and only a tiny part -- of an international standard, and as such Samsung had agreed to make it available for licensing under terms that are fair, reasonable and nondiscriminatory (FRAND).
  • Samsung had made no effort to demonstrate that the licensing terms it offered Apple "satisfied an objective standard of reasonableness."
  • That the only time Samsung made such an offer -- in oral discussions in December 2012 -- it came with strings attached to which Apple could not agree.
  • What those strings were are blacked out in the document, but Pinkert adds in the next sentence: "it is neither fair nor non-discriminatory for the holder of the FRAND-encumbered patent to require licenses to non-FRAND-encumberd patents as a condition for licensing its patent" (emphasis his).

Reading between the lines, it sounds like Samsung had refused to license its standard-essential patents (SEPs) unless Apple offered its non-essential iPhone patents -- the company's crown jewels -- in return.

As usual, FOSS Patent's Florian Mueller was on top of the case. In early July he obtained a copy of Pinkert's dissent, painstakingly transcribed it into HTML, and published it in a post that began:

"I'm outraged. The underlying rationale of the ITC ruling is a serious threat to innovation and competition. Among other things, it represents a radical departure from well-established antitrust principles concerning the illegal practice of tying (in this case, a Samsung proposal that required Apple to license its non-standard-essential patents to Samsung in order to get an SEP license). This totally runs counter to the ITC's mission to protect the domestic industry."

The Obama Administration agreed. On Saturday it threw out the ITC's verdict and told Samsung that if it wanted to pursue the case, it could take Apple to court.

UPDATE: Reader Jim Neal points out that the other five members of the ITC are no dummies. He suggests that they may have secretly supported Pinkert's dissent, and that they deliberately kicked the case upstairs to the President, hoping that the import ban they reluctantly ordered would get vetoed.

"The Obama administration has made it clear in recent weeks," Neal writes, "that the system is in dire need of revision, that companies are unfairly using SEP to extort money, to obtain unfair patent licensing agreements from other companies, even to flat out kill competition.  Changes to the ITC mandate might well be in the offing, but for now the ITC majority did exactly what the administration wanted -- made the only decision that would allow a higher authority to send a stronger message than they ever could."

Below the fold: Pinkert's dissent, as transcribed by Mueller.

More

Current Issue
  • Give the gift of Fortune
  • Get the Fortune app
  • Subscribe
Powered by WordPress.com VIP.