Smartphone rivals Apple Inc. AAPL +0.57%and Samsung Electronics Co. 005930.SE -1.53%have dueled over patents in courts around the globe. Now they are sparring in front of the Obama administration, which faces a looming decision on whether to veto a trade body's order blocking the U.S. sale of some Apple devices.
At issue is a June ruling from the U.S. International Trade Commission, an increasingly hot venue for patent fights, that said Apple infringed on a Samsung patent and ordered a ban on some older-model Apple iPhones and iPads. The trade body has jurisdiction over certain unfair trade practices and can block the import and sale of products, a powerful patent weapon companies can use against their competitors.
The case raises vigorously debated legal questions that have divided technology companies vying for billions of dollars in sales of cutting-edge products. Companies from AT&T Inc. T +0.39%to software makers are trying to sway the administration's deliberations.
Antitrust officials from the Justice Department and the Federal Trade Commission are also weighing in on the ruling, according to people familiar with the matter. The two agencies have been vocal over the past year with concerns that companies may be unfairly harming competition when they assert essential technology patents in lawsuits to block rivals' products from the marketplace.
U.S. Trade Representative Michael Froman has the authority to make the final decision on whether to allow the ITC ban. It is rare for a presidential administration to veto an ITC order, the most recent instance occurring in 1987. If Mr. Froman doesn't intervene, the ban would take effect on Aug. 4.
The trade representative "is conducting a careful and balanced review process of the ITC decision as established by law and with equal opportunity to consider all perspectives related to the case," an agency spokeswoman said.
The main point of contention centers on the legal weapons available to companies that hold patents incorporated into industrywide technology standards: Should they be able to use those patents to block rival products, or is monetary compensation enough?
When companies allow their patented technologies to be used in industry standards, such as standards for mobile devices, they generally must license those patents to rivals on reasonable terms. Without the licensing requirement, companies could wield power over rivals.
Apple, based in Cupertino, Calif., says that Samsung shouldn't be able to obtain an ITC order blocking iPhone and iPad sales because it made a commitment to license its "standard essential" patents reasonably. In a submission to the trade representative, Apple said the ITC's ruling would allow companies to demand excessive patent royalties from rivals, under a product-ban threat if they don't pay up.
The stakes "are at least as high" as past cases in which presidents vetoed ITC orders, Apple said.
The ITC ordered a ban on the sale or import of some older-model Apple products still on store shelves, including a version of the iPhone 4 that runs on the airwaves of AT&T and T-Mobile USA. Separate from the presidential review process, Apple is also appealing in federal court.
Seoul-based Samsung said it had little choice but to seek a ban against Apple devices because its rival provoked the legal tussle. Apple used its patents to sue Samsung first, then engaged in a "deliberate strategy" to avoid paying for licenses on Samsung's patents, the South Korean company said in a filing with the trade representative.
"Samsung has never offensively used its patents, essential or not, to keep competitors out of the market," it said.
The ITC ruled that Apple didn't prove that Samsung's licensing terms were unreasonable and said Apple's position could make it easier for companies to use a rival's patents without paying for a license. It also rejected Apple's argument that the ITC generally shouldn't issue product bans in cases involving standard-essential patents.
One ITC commissioner appeared to invite White House review of the case, saying Apple's policy arguments were better directed to the president. Another commissioner dissented from the product ban, saying it would harm competition and deny entry-level smartphones to some consumers.
The case has prompted several leading technology companies to press their positions with the ITC, Congress and the Obama administration.
"In Washington, there is a lot happening behind the scenes," said Qualcomm Inc. QCOM +1.88%Vice President and counsel Sean Murphy. The chip maker, which will testify at a Senate hearing this week, holds many standard-essential patents and is a member of the Innovation Alliance, a group of technology companies that urged the trade representative to leave the product ban against Apple in place. The group said a veto would upset decades of settled expectations and undermine the enforceability of valuable patents.
Apple's legal papers in the case approvingly quote comments made by AT&T to the trade representative. AT&T said the ITC ruling would eliminate a popular low-cost iPhone for AT&T customers and was "inconsistent with the president's goal of ubiquitous broadband deployment."?
An AT&T spokesman declined to comment or make the company's submission available. Not all documents related to the proceedings are made public, leaving the maneuvering partially out of public view.
BSA, a trade group representing software makers including Microsoft Corp. MSFT +0.73%and Oracle Corp. ORCL +0.53%and chip maker Intel Corp., INTC +0.87%said the use of essential industry patents to ban products shouldn't be allowed except under unusual circumstances.
Intel is scheduled to testify at the Senate hearingand previously filed its concerns with the ITC. Verizon Communication Inc.'s VZ +0.61%top lawyer, Randal Milch, voiced similar arguments in an opinion article published last week by The Wall Street Journal.
Though presidents rarely veto an ITC ruling, the case is being watched closely in part because U.S. officials have signaled they are focusing on issues related to patents and competition. The Justice Department and the U.S. Patent and Trademark Office said jointly in January that the ITC should take a cautious approach to issuing product bans involving essential patents.
The department also has been investigating how Samsung has used its essential wireless patents in litigation, a probe cited by Apple in recent legal documents and previously reported by The Wall Street Journal.
The FTC, meanwhile, reached a settlement with Google Inc. GOOG -0.26%in January after alleging the company acted improperly by pressing certain legal claims premised on essential wireless patents it obtained when it acquired handset maker Motorola Mobility. Google agreed it wouldn't use the patents to try to exclude competing products from companies willing to pay a reasonable amount for a patent license.
A Justice Department spokeswoman and FTC spokesman declined to comment.
The White House itself has advocated for Congress to change ITC legal standards to make it tougher for patent holders to obtain product-exclusion orders. The administration made the recommendations the same day the ITC issued its ruling against Apple.
—Don Clark contributed to this article.
