In a much-anticipated decision, the International Trade Commission today sided with Apple (NSDQ: AAPL) and announced that it would impose a limited import ban on certain devices made by Taiwanese rival HTC. [Updated below]
HTC is a major provider of cell phones to the US market, supplying popular devices like the Windows 7 Phone and the Droid Incredible.
The order will not go into effect until April 19 and is subject to Presidential veto. The ITC, citing a concern for competitive conditions, said it was delaying the ban until April to provide a transition period for US carriers.
The trade body also acknowledged consumer concerns, and ruled that “HTC may import refurbished handsets to be provided to consumers as replacements under warranty” until December of 2013.
For its part, HTC didn’t appear too worried about meeting the standard set by the judge. “”We are gratified that the Commission affirmed the judge’s initial determination on the ’721 and ’983 patents, and reversed its decision on the ’263 patent and partially on the ’647 patent. We are very pleased with the determination and we respect it. However, the ’647 patent is a small UI experience and HTC will completely remove it from all of our phones soon,” said Grace Lei, general counsel of HTC, in a statement.
In its ruling, senior ITC officials affirmed an administrative law judge’s ruling that HTC violated tariff laws by importing a product that violates one of Apple’s patents.
The administrative judge had ruled that HTC violated two of four patents that Apple had asserted against it, but the ITC today pared back the finding and said only one of the patents violated Apple’s technology. The patent in question was granted in 1999 and describes (roughly) a method for a computer program to fetch information from another application. The patent can be seen here.
The dispute is part of a global battle for market share in which cell phone giants are increasingly using patents as a tactic to keep drive rivals’ out of their market. Critics says many of these patents were issued at a time of lax standards at the US Patent Office and that they are of questionable value.
Even though it does not have the power to award monetary damages, the ITC has become a popular forum for patent disputes because it has the power to ban imports and because it has a reputation for being quicker than the court system.
Apple is also suing HTC over the same patents in Delaware federal court. Today’s finding by the ITC does not necessarily determine the outcome of that litigation.
The ban will go into place automatically unless President Obama exercises his power to veto it in the next 60 days. A presidential decision to override an ITC import ban is very rare and is reported to have occurred only five times in recent years.
The ruling was a political hot potato for the ITC which twice delayed its decision as consumers and the phone industry watched closely. The final outcome benefits Apple but the ruling appears designed in such a way that HTC will have time to redesign phones that infringe the patent without creating major inconvenience to consumers and carriers, as noted above.
A summary from the ITC’s order and a copy of the order are posted below:
Notice is hereby given that the U.S. International Trade Commission has found a violation of section 337 in this investigation and has issued a limited exclusion order prohibiting importation of infringing personal data and mobile communications devices and related software. The Commission has determined that exclusion of articles subject to this order shall commence on
April 19, 2012.