The most important question in connection with the ITC ruling on Friday, ordering a limited exclusion order (vendor-specific U.S. import ban) against Samsung's Android-based devices infringing two Apple patents, is not whether Samsung will continue to be present on the U.S. market (no doubt about that) but the commercial impact, such as on the attractiveness of its products to consumers, its obligation to comply with the order will have. Against Apple's objections on procedural grounds, Samsung had persuaded the Administrative Law Judge to adjudicate certain "designaround products" it presented during the course of the investigation. Some unknown quantities of those were actually imported into the United States market. Judge Pender cleared those designarounds, and the Commission, the trade agency's highest-level decision-making body, supported the related findings. But even if a designaround is legally above board, it may very well -- and often does -- come with some degradations of functionality, performance, ease-of-use, stability, or security, to name but a few examples of adverse impact.
The ITC investigation had been going on for more than two years. The designarounds were presented a long time ago. If Samsung can work around those two Apple patents without any negative effects on its competitiveness, how come it has, according to Apple, continued importing infringing devices throughout the entire duration of the investigation? And how come it has just posted surety bonds with the ITC to ensure its continued right to import and/or sell such infringing devices during the 60-day Presidential review period?
The amount of those bonds is not known because only a redacted version of a letter from the ITC to Samsung's counsel, confirming receipt of those bonds (the sufficiency of which will be evaluated now), has become available so far (this post continues below the document):
13-08-13 Letter From ITC Secretary Barton to Samsung Counsel Re. Receipt of Bond
In its Friday ruling, the Commission "determined that excluded [emphasis mine] mobile phones, media players, and tablet computers may be imported and sold in the United States during the period of Presidential review (19 U.S.C. § 1337(j)) with the posting of a bond in the amount of 1.25 percent of the entered value". The word "sold" appears in that sentence because the Commission ordered not only an import ban but also a cease-and-desist order against the sale of already-imported devices. The purpose of the bond is to ensure that Apple may recover damages against this bond regardless of any future changes to Samsung's liquidity (a non-issue for the foreseeable future, but formally a bond is nevertheless required). Note that the bond applies only to excluded -- i.e., infringing -- products, not to non-infringing "designaround products", which were explicitly not excluded.
Absent a Presidential veto, for which there is no reason here because no standard-essential patents are involved, the exclusion order will enter into force in less than two months, and at that stage any shipments of infringing goods would be seized and the cease-and-desist order would have to be respected as far as already-imported goods are concerned. The bonding requirement is only for the period during which there might still be a veto (though, again, I don't think it will happen here).
In a Monday morning post, in which I discussed the overall state of the dispute between Apple and Samsung, I already said that the ITC has "banned all Samsung 'electronic digital media devices and components thereof' that infringe in the same way as certain exemplary investigated products do, regardless of their name or release date". There's been too much inaccurate, incompetent reporting (including commentary by financial analysts who failed to do their homework). I saw plenty of headlines on Twitter that said the ITC banned only older Samsung products. The ruling is not about old versus new. It's about infringing vs. non-infringing. If Samsung modifies a product that was investigated and found infringing so as to steer clear of infringement now (for example, new firmware could be designed to longer infringe the "Steve Jobs patent"), then the ban doesn't apply. But if a new product, such as the S4, infringed in the same way as an exemplary infringing product accused by Apple in this investigation, then the ban would apply unless Samsung could argue that the new product is licensed (so far, Apple has not extented a non-SEP license to Samsung) or no longer imported (but assembled in the United States, as Google submits with respect to the Moto X) or that it falls without the scope of the investigation, which is however defined (very broadly) by its title, "Certain Electronic Digital Media Devices and Components Thereof", and not by a few names of obsolete products.
There's another document that makes it easy for everyone to see the actual scope of the ban (this post continues below the document):
13-08-09 ITC Letter to Chief Steuart Re. Samsung Import Ban
That letter instructs U.S. Customs to hold shipments of infringing goods. The first sentence clearly refers to any "electronic digital media devices" that infringe any of the patent claims-in-suit:
"On August 9, 2013, the United States International Trade commission issued a limited exclusion order prohibiting Samsung [...] from importing into the United States electronic digital media devices that infringe one or more of [the patent claims-in-suit that the ITC deemed valid and infringed and that satisfied the domestic industry requirement]."
For now I can't rule out that Samsung's bonds don't amount to much. Maybe they just relate to a few products of which it isn't selling a lot of units now, but it didn't want to make any changes to those products toward the end of their lifecycle. Still, Samsung has known for well over two years that a U.S. import ban over the asserted Apple patents could issue, and the fact that it still hasn't ceased to import and/or sell products that infringe on those patents is at least a potential indication that Samsung would rather not have to work around the patents Apple successfully asserted. It's not clear yet whether Samsung's products imported into and sold in the U.S. will be equally attractive after the end of the Presidential review period as the ones it's been selling so far. Let's wait and see.
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