Apple

The U.S. Bans iPhone Imports: Big Deal or No?


Apple's iPhone 4

Photograph by Chris Goodney/Bloomberg

Apple's iPhone 4

The International Trade Commission ruled on Tuesday afternoon (PDF) that certain models of Apple’s (AAPL) iPads and iPhones violate patents held by Samsung, which could lead to Apple facing restrictions importing the devices into the U.S. The two companies dominate the smartphone market worldwide, but have been spending a lot of time competing in courts of law in addition to the marketplace. Tuesday’s ruling is the first against Apple that could impact product sales in the U.S.

The ruling, which comes in response to a complaint filed by Samsung in 2011, found that Apple violated Samsung’s patents related to the way devices transmit data. It also found that Apple did not violate several other Samsung patents. The ruling overturns a judge’s opinion issued last year.

How big a deal is this? Any time a company is forbidden from importing its products into the country, it matters. And the patent in question regards the way data are transmitted over a cellular network, which is a pretty basic function when you’re talking about a cell phone, so it’s probably not something easily fixable.

What’s more, Apple has been up against a wave of bad publicity. There have been unhappy investors, questions about its clever tax policies, and a federal trial accusing it of conspiring to raise the price of electronic books. Having its products declared by a court to be rip-offs of a competitor, and banned, is a big blow symbolically.

Financially speaking, though, the impact will be limited because the decision only applies to older devices. The two newest iPhone models are in the clear; only the iPhone 3, iPhone 3GS, and iPhone 4 are affected, as well as the AT&T (T) versions of the iPad 3G and iPad 2 3G. Considering how quickly new mobile products become obsolete, such an import ban may not matter much.

The Obama administration has a chance to stop this ruling before it takes effect. The executive branch can overrule import bans issued by the ITC within 60 days, and Apple will be allowed to bring its devices into the U.S. while the president mulls this one over. It’s probably worth noting that on Tuesday the administration said that the ITC’s permissive approach to patent lawsuits was something lawmakers should look to change as they reform the overall patent system. And even if the administration sides with the ITC, Apple will still be able to keep the ban from taking effect until the company has appealed the ruling.

Apple and Samsung have been fighting each other over patent violations for some time now. And my, what a tangled web they weave. A federal ruling in California granted Apple $1 billion in damages due to Samsung’s infringement of its patents, while a Korean court said that each company violated the other’s patents. Apple has its own case pending against Samsung at the ITC, with a final decision scheduled for August. Maybe now each company has put enough notches on its belt to declare the contest a draw, shake hands, and go back to sucking up almost all the profits to be made in the mobile device industry.

Brustein is a writer for Businessweek.com in New York.

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