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Apple faces U.S. import ban on some devices including iPhone 4 on Samsung win

By Susan Decker, Published: June 5

June 4 (Bloomberg) -- Apple Inc. faces a ban on imports of some older devices including the iPhone 4 after a U.S. trade agency said they infringe a patent owned by Samsung Electronics Co., its biggest competitor in the global market for smartphones.

It’s the first patent ruling against Apple in the U.S. that affects product sales, covering models of the iPhone 4, iPhone 3GS, iPhone 3, iPad 3G and iPad 2 3G made for AT&T Inc. The U.S. International Trade Commission announced its decision in a notice posted on its website.

The import ban is subject to review by President Barack Obama, who can overturn the decision on public-policy grounds, and Apple will be able to import the devices without having to post a bond during the 60-day presidential review period.

The patent litigation, which spans four continents, is just one front of a battle for greater share of the $293.9 billion market for smartphones. Together, the companies make more than half of the smartphones sold worldwide, with Samsung holding the title of biggest smartphone maker and Apple dominating in the U.S.

Samsung, based in Suwon, South Korea, contended Apple infringes four patents, including two that relate to how phones transmit data. U.S. trade Judge James Gildea sided with Apple in September, saying Apple didn’t infringe any of the patents and that one, for a way to detect movement on a touch screen, was invalid. The fourth patent in the case is for a way to detect phone numbers in e-mails so they can be dialed or stored in the phone’s contact list.

One Patent

The infringement was found on one of the two patents for data transmission, which relate to standard technology used across the industry. Apple, based in Cupertino, California, argued that, since Samsung helped establish the industry standard and agreed to license the patents on fair terms, it shouldn’t be allowed to use those patents to thwart competition.

An issue in the case was whether Samsung complied with its pledge to license its standard-essential patents on fair terms.

Apple contends that Samsung never made a fair offer and demanded that Apple pay 2.4 percent of the average sales price of every iPhone and cellular-enabled iPad, according to filings with the agency. The iPhone generated $78.7 billion in sales for the fiscal year ended Sept. 29, or about 50 percent of Apple’s revenue, according to data compiled by Bloomberg. Its iPad brought in $30.9 billion, and the iPod generated $5.6 billion.

In its filings, Samsung said it’s been offering Apple a license since November 2010 and “Apple has never been willing to take a license on any terms.”

AT&T’s Products

Steve Dowling, a spokesman for Apple, didn’t immediately respond to requests for comment.

Apple has for two years claimed Samsung “slavishly copied” the iPhone, while Samsung contends that Apple entered the mobile-phone market without paying royalties to the companies that built the industry.

Neither has been able to get a significant victory against the other outside the U.S. Apple was forced to apologize in the U.K. for accusing Samsung of copying the patented design of the iPad; the judge who ordered the apology has since left the bench and been hired by Samsung in its unrelated patent fight with Ericsson AB, according to an ITC notice posted in that case.

Apple Victory

Apple’s biggest victory over Samsung was a $1 billion infringement verdict by a California jury in August, the fifth biggest in U.S. history. U.S. District Judge Lucy Koh in San Jose, California, on March 1 ordered a new trial on damages for a portion of the award, while upholding $598.9 million of the verdict.

Koh earlier rejected Samsung’s request for a new trial on liability as well as Apple’s bid for an order to block sales of the Samsung products that were part of the trial.

Samsung, with 140,000 patents worldwide on items including light-emitting diodes and televisions, has been the second- biggest recipient of U.S. patents since 2006 and now tops the list of applicants in Europe.

It filed its trade complaint in June 2011 as a counterstrike against Apple’s accusations that handsets running on Google Inc.’s Android operating system copied the look and feel of the iPhone.

Apple has its own case against Samsung at the trade agency. A final decision in that dispute is scheduled to be released Aug. 1.

Samsung’s case against Apple is In the Matter of Electronic Devices, Including Wireless Communication Devices, 337-794, and Apple’s case against Samsung is In the Matter of Electronic Digital Media Devices, 337-796, both U.S. International Trade Commission (Washington).