Trade Case Puts Apple In Washington's Sights
Apple has been notoriously disinterested in Washington politics. But two decisions coming from the Obama administration in the past few days indicate that Washington is increasingly interested in Apple.
Apple got some good news this weekend when U.S. Trade Representative Michael Froman stepped in and overturned a ban on the import of the iPhone 4 and the iPad 2. The ban was put in place by the U.S. International Trade Commission, which ruled that those Apple products violated standard industry patents held by Samsung.
The U.S. Trade Representative hasn't overturned an ITC decision since 1987. But a presidential administration can throw out a decision if it determines that it's in the best interests of the U.S. economy and American consumers.
At first glance, Froman's decision doesn't seem that significant. According to Carolina Milanesi, an analyst at Gartner, the ban only applied to iPhone 4s and iPad 2s using a particular technology largely available on AT&T and T-Mobile. The iPhone 4 still sells because it's cheaper than getting the latest version, but sales of AT&T iPhone 4s are only a bit over 1 million units a year. Milanesi says the iPad 2 hardly sells at all.
The U.S. Trade Representative may have been looking at the way Samsung was using its patents as a negotiating tactic with Apple. Last year, Samsung lost a big patent case to Apple. Unless it wins on appeal, Samsung is going to pay out hundreds of millions of dollars in damages. However, Samsung has some patents that are necessary for a lot of mobile communication devices like the iPhone 4 and iPad 2. It was those patents that were at issue in the ITC ruling.
In his letter overturning the ITC, Froman said Samsung was engaged in a "patent hold-up." Basically, Samsung was trying to get a very high price on patents that are essential to Apple and others who make wireless devices. To Froman it may have seemed that Samsung was trying to get revenge from Apple over its earlier loss.
In a statement, Apple applauded Froman for "standing up for innovation." But if the company was having a fuzzy moment toward the Obama administration, it didn't last long.
On Friday, the Justice Department handed down some pretty harsh punishment to Apple for its role in price-fixing e-books. Last month, Apple was found guilty by a federal judge of conspiring with publishers to raise the price of e-books. Under the Justice Department's proposed remedy, Apple will now face extra scrutiny when entering into agreements with suppliers of music, movies, TV shows and other content that might raise prices for consumers: Every time Apple signs a new contract, it will have to demonstrate to a DOJ auditor that its action won't raise prices.
Google and Microsoft used to ignore lawmakers in D.C. But both ended up being scrutinized for their business practices by antitrust regulators. Now, these companies no longer sit around waiting on Washington to act.
Last year, Politico reported that Google and Microsoft spent $7 million lobbying Congress. Meanwhile, Apple spent about $500,000 — and that's less than the year before. Over the weekend, the long arm of the Obama administration reached out into the offices in Cupertino. And you have to wonder if Apple isn't thinking it better start reaching back.
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