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ITC sales ban on old iPhones, iPads predicted to have minimum financial impact on Apple

post #1 of 36
Thread Starter 
Though Apple lost an International Trade Commission ruling this week to Samsung and sales of the iPad 2 and iPhone 4 must be suspended in the U.S., those legacy products are already on the way out, suggesting to market watchers that the financial impact will be minimal.

iPhone 4


Maynard Um of Wells Fargo Securities said while the headline news is negative for Apple, he believes there will not be much of a hit to the company's bottom line. In particular, he expects Apple to introduce a new iPhone in September and in the process phase out the iPhone 4, which means the ITC ban would only affect six weeks of shipments.

If the ban were to prevent Apple from selling 1.5 million iPhone 4 units, it would only affect the company's September quarter earnings per share by 24 cents, or 3 percent of Um's current $7.46 estimate.

Separately, analyst Gene Munster of Piper Jaffray said Wednesday he sees the ITC ban affecting Apple's June and September revenue by up to 1 percent, or $680 million. The injunction has not swayed him to drop his "overweight" rating for AAPL stock.Gene Munster of Piper Jaffray noted that some customers who may have bought an iPhone 4 could instead opt for Apple's more recent iPhone 4S or iPhone 5 models.

Munster also expects that the iPhone 4 will be discontinued in September, when he anticipated Apple will release its next-generation "iPhone 5S." Apple has historically offered the last two generations of iPhones at a discount in addition to its latest flagship handset.

"The actual impact will likely be less than 1 percent given AT&T customers that would not have a chance to purchase an iPhone 4 could buy an iPhone 4S or 5 instead," Munster said. "Given the iPhone 4 will likely be retired at the end of September, there should not be an impact after the September quarter."

The ITC ban, announced on Tuesday, only applies to AT&T variants of the iPhone 4, iPhone 3GS, and 3G_capable versions of the first-generation iPad and iPad 2. Among those, the iPhone 4 is the only product with measurable sales, accounting for about 8 percent of total Apple revenue in the March 2013 quarter.

Those devices were found by the ITC to have infringed on Samsung's U.S. Patent No. 7,706,348, named "Apparatus and method for encoding/decoding transport format combination indicator in CDMA mobile communication system," which is a deemed standard essential UMTS wireless technology.

Apple has already vowed to appeal the ITC decision in an effort to overturn it. But by the time that process carries out, the iPhone 4 and iPad 2 ??the only two barred devices that Apple continues to sell ? may already be pulled off the market in favor of newer models.
post #2 of 36
I just wrote to the President and asked the ITC import ban be denied. The ITC ruled HTC violated Apple's patent, but didn't issue an import ban. Further, Apple won against Samsung in federal court, but was not awarded an import ban. Despite any recent contributions Google may have made to the Smartphone arena, Apple undeniable influenced all of the early Smartphones right after the iPhone's release.
post #3 of 36
Cook said that it will be difficult to convince young people that have never worn a watch to put something on their wrist. That was a red herring: people used to have pocket watches and very quickly adopted wrist watches. Heck, people put bracelets that have no function whatsoever on their wrists. Just the fact that he made such a clearly wrong statement, indicates to me they are working on something.
post #4 of 36
Quote:
Originally Posted by TBell View Post

I just wrote to the President and asked the ITC import ban be denied. The ITC ruled HTC violated Apple's patent, but didn't issue an import ban.

Huh? They did order an injunction on certain HTC devices infringing on Apple's IP. I'm surprised you don't remember that.
http://www.pcmag.com/article2/0,2817,2397832,00.asp

The ITC also issued an injunction order on Motorola devices deemed to infringe on a Microsoft patent.
http://www.fosspatents.com/2012/05/itc-orders-import-ban-against-motorola.html

The ITC has no other cure option in the event they find for patent infringement.
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post #5 of 36
Apple executives were not born yesterday. Certainly they knew there was a chance of an import ban on these products before the ruling. Given this information, I'd be blown away if they didn't fill their USA sales channels with enough product to last until product refresh time.

My guess is the only hit Apple will take from all this is not lost sales, but the added cost of needing more inventory space for all the additional pallets of iPhone 4 devices they imported to the USA before yesterday.
post #6 of 36
i reckon that the ban will Increase Apples Revenue.

Customer : iPhone 4 contract for $49 please
Sales Rep: Sorry, we dont have any and will not be getting any more in, but I can give you a 4S for $79
Customer : OK, go on.

More revenue for Apple.
post #7 of 36
The fact that the ITC eventually issued a ban with no economic harm to the infringer (since it took two years to decide) isn't nearly as newsworthy as the fact the ITC has chosen to allow injunctions based on SEP claims to continue. THAT'S the big news.
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post #8 of 36

They're assuming that the ban will start in exactly 60 days. Apple has already said they will appeal so I think the chance the ban actually comes into effect is slim. Should be easy to drag this out a couple more months and turn that "minimal" impact in "zero" impact.

 

Or Apple could turn this around. Have a fire sale and sell off old models at steep discounts to clear inventory. Makes their minimal loss even smaller and gives them some good will with customers (and AT&T).

post #9 of 36
Quote:
Originally Posted by manicakes View Post

Apple executives were not born yesterday. Certainly they knew there was a chance of an import ban on these products before the ruling. Given this information, I'd be blown away if they didn't fill their USA sales channels with enough product to last until product refresh time.

My guess is the only hit Apple will take from all this is not lost sales, but the added cost of needing more inventory space for all the additional pallets of iPhone 4 devices they imported to the USA before yesterday.

Additional pallets of infringing iPhone 4's would be seized too if the ban is allowed to stand. the ITC also ruled for a Cease-and-Desist order meaning even existing domestic stock could not be sold.
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post #10 of 36

The answer I would like to know is WHO has to pay the essencial patents rights? Qualcomm or Apple? The need to clarify this.

 

and Obama specificly said the US would stop banning sales of products on essencial patents dispute. and then they do it anyway...


Edited by herbapou - 6/5/13 at 7:23am
post #11 of 36
Quote:
Originally Posted by Gatorguy View Post


Additional pallets of infringing iPhone 4's would be seized too if the ban is allowed to stand. the ITC also ruled for a Cease-and-Desist order meaning even existing domestic stock could not be sold.

 

Could you provide a source for this? Everything I have read asserts that this was an import ban, not a sales ban.

post #12 of 36
Quote:
Originally Posted by Gatorguy View Post


Huh? They did order an injunction on certain HTC devices infringing on Apple's IP. I'm surprised you don't remember that.
http://www.pcmag.com/article2/0,2817,2397832,00.asp

The ITC also issued an injunction order on Motorola devices deemed to infringe on a Microsoft patent.
http://www.fosspatents.com/2012/05/itc-orders-import-ban-against-motorola.html

The ITC has no other cure option in the event they find for patent infringement.

 

See below Mr Disingenuous, "cease and desist".

 

Quote:
Originally Posted by manicakes View Post

Apple executives were not born yesterday. Certainly they knew there was a chance of an import ban on these products before the ruling. Given this information, I'd be blown away if they didn't fill their USA sales channels with enough product to last until product refresh time.

My guess is the only hit Apple will take from all this is not lost sales, but the added cost of needing more inventory space for all the additional pallets of iPhone 4 devices they imported to the USA before yesterday.

 

The ITC took the further step of issuing a cease and desist order, meaning if the order is enforced Apple will not be able to sell existing stock.

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post #13 of 36
Quote:
Originally Posted by manicakes View Post

Could you provide a source for this? Everything I have read asserts that this was an import ban, not a sales ban.

Yes sir.
http://www.iclarified.com/30778/itc-finds-apple-infringed-on-samsung-patent-issues-cease-and-desist-order-on-older-iphones-ipads
"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 respondent Apple Inc. of Cupertino, California (“Apple”), from importing wireless communication devices, portable music and data processing devices, and tablet computers that infringe claims 75-76 and 82-84 of U.S. Patent No. 7,706,348 (“the ’348 patent”). The Commission has also issued a cease and desist order against Apple prohibiting the sale and distribution within the United States of articles that infringe claims 75-76 and 82-84 of the ’348 patent. The Commission has found no violation based on U.S. Patent Nos. 7,486,644 (“the ’644 patent”), 7,450,114 (“the ’114 patent”), and 6,771,980 (“the ’980 patent”). The Commission’s determination is final, and the investigation is terminated.
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post #14 of 36
Quote:
Originally Posted by manicakes View Post

 

Could you provide a source for this? Everything I have read asserts that this was an import ban, not a sales ban.

 

"The Commission has determined that the appropriate remedy is a limited exclusion order and a cease and desist order prohibiting Apple from importing into the United States or selling or distributing within the United States wireless communication devices, portable music and data processing devices, and tablet computers that infringe claims 75-76 and 82-84 of the ’348 patent. The Commission has determined that the public interest factors enumerated in section 337(d)(1) and (f)(1) do not preclude issuance of the limited exclusion order and cease and desist order."

 

Source (pdf)

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post #15 of 36
Quote:
Originally Posted by Gatorguy View Post


Huh? They did order an injunction on certain HTC devices infringing on Apple's IP. I'm surprised you don't remember that.
http://www.pcmag.com/article2/0,2817,2397832,00.asp

The ITC also issued an injunction order on Motorola devices deemed to infringe on a Microsoft patent.
http://www.fosspatents.com/2012/05/itc-orders-import-ban-against-motorola.html

The ITC has no other cure option in the event they find for patent infringement.

 

 

My initial post was poorly written.I know an HTC import ban was issued.  The ITC can both recommend an import ban and issue a cease and desist order (preventing a found infringer from selling already imported devices in its inventory). In HTC's case, the ITC issued the import ban, but did not issue a cease and desist order. So, HTC could sell product that was already in the Country. HTC did not have a FRAND defense. 

 

So, the ITC does have options if it finds infringement. Regardless, it should have not found infringement based on the FRAND defense. Samsung, like Motorola, is asking for 2.5 percent of the retail cost of a product. That is way higher then the industry standard, as determined by the judge setting the FRAND rate for Microsoft. Motorola was asking for 4 billion a year from Microsoft. The judge award 1.8 million a year. Huge difference.  

post #16 of 36
Quote:
Originally Posted by TBell View Post


My initial post was poorly written.I know an HTC import ban was issued.  The ITC can both recommend an import ban and issue a cease and desist order (preventing a found infringer from selling already imported devices in its inventory). In HTC's case, the ITC issued the import ban, but did not issue a cease and desist order. So, HTC could sellproduct that was already in the Country. HTC did not have a FRAND defense. 


So, the ITC does have options if it finds infringement. Regardless, it should have not found infringement based on the FRAND defense. Samsung, like Motorola, is asking for 2.5 percent of the retail cost of a product. That is way higher then the industry standard, as determined by the judge setting the FRAND rate for Microsoft. Motorola was asking for 4 billion a year from Microsoft. The judge award 1.8 million a year. Huge difference.  

That's not at all what the Motorola case judge determined. Go back and read the rationale behind his finding for yourself. He did not find that a 2%+ royalty demand was in and of itself "higher than the industry standard" nor unfair.for that matter. He applied his reasoning to one particular standard and specific to a certain number and set of patents under that standard which is why it won't establish any new legal precedent on an appropriate royalty percentage or basis for FRAND-pledged IP. At least that's what I find when researching the decision for myself.

As for your claim the ITC has a choice of punishments, a cease and desist is simply another form of injunction but applying to the sale of existing domestic inventory. So where's the choice besides an injunction on imports and/or an injunction on domestic sales?


EDIT:
BTW, it surprised me too that the ITC chose to enforce an injunction based on SEP's considering the pressure they were under not to.
Edited by Gatorguy - 6/5/13 at 8:28am
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post #17 of 36
Quote:
Originally Posted by seanie248 View Post

i reckon that the ban will Increase Apples Revenue.

Customer : iPhone 4 contract for $49 please
Sales Rep: Sorry, we dont have any and will not be getting any more in, but I can give you a 4S for $79
Customer : OK, go on.

More revenue for Apple.

That's the subsidized price you're quoting but in all you are not wrong.
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post #18 of 36

Ah, GG, still posting limited portions of decisions to try and skew the "spirit" of what happened.

 

Motorola got a serious smackdown and ended up with a fraction of what they were asking, no matter whose "method" you use to calculate. Another quote from the decision by the judge:

 

"only constitutes a sliver of the overall technology incorporated"

 

Which shoots down Motorola's "one bullet can kill" theory. It's asinine for Motorola to think their small number of patents should get them more money than other patent pools with many times the number of SEP's related to the standard.

 

And it's not over for Motorola in this case. There's still a case coming up in August to see if Motorola failed to meet its "contractual obligations" when it made its offer to MS. Considering the abslutley HUGE difference between what Motorola asked and what they ended up with, I think this case will go badly for Motorola.

post #19 of 36
It's time for Obama to get his big boy pants on and start punishing agencies who selectively comply with the law. Biased judges don't help either. Everyone wants to blame Obama for everything but in this case it's 4 judges who disagreed with the original judge. How many trials do we have to go through? Enough for Samsung to win? Seems like that's the answer.
post #20 of 36
Quote:
Originally Posted by EricTheHalfBee View Post

Ah, GG, still posting limited portions of decisions to try and skew the "spirit" of what happened.

The inference by TBell was that the court's judgment in the Motorola case established the amount of a fair or "standard" royalty rate for FRAND-pledged IP, and that it would extend to other SEP holders as well. It did not do either of those things.

So how did my reply skew that? Oh, right. . . it didn't.1rolleyes.gif

EDIT: I guess I'm back off your ignore list then. That's good or you wouldn't know to challenge me on things I've posted.
Edited by Gatorguy - 6/5/13 at 8:56am
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post #21 of 36
Quote:
Originally Posted by EricTheHalfBee View Post

They're assuming that the ban will start in exactly 60 days. Apple has already said they will appeal so I think the chance the ban actually comes into effect is slim. Should be easy to drag this out a couple more months and turn that "minimal" impact in "zero" impact.

 

Or Apple could turn this around. Have a fire sale and sell off old models at steep discounts to clear inventory. Makes their minimal loss even smaller and gives them some good will with customers (and AT&T).

That's the route I expect, which timetable runs in range (or beyond) of the new iPhone announcement and release which is likely to eliminate the 4 from the lineup in any case.

post #22 of 36
Apple is probably working on a rejiggered iPhone 4 as the new low cost iPhone.
post #23 of 36

Am I missing something or is another route possible. Couldn't Apple just pay Samsung the licensing fees and be done with it?

post #24 of 36
Samsung: "I've done far worse than kill you: I've hurt you. And I wish to go on...hurting you. I shall leave you as you left her. Marooned for all eternity at the center of a dead planet... buried alive... buried alive...."

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post #25 of 36

Perhaps the financial impact of sales ban is minimal. But do we know for sure the overall financial impact will be "minimal" when they still have to negotiate a settlement for units already sold (assuming Apple's appeal does not succeed)?

 

This may be a precursor of the future. Product cycles outpace court proceedings. So sales bans will almost never be imposed early enough. All that's left to do is determination of damages. The companies would have served themselves better to have negotiated and settled amongst themselves in the first place.

post #26 of 36
Quote:
Originally Posted by stelligent View Post

Perhaps the financial impact of sales ban is minimal. But do we know for sure the overall financial impact will be "minimal" when they still have to negotiate a settlement for units already sold (assuming Apple's appeal does not succeed)?

This may be a precursor of the future. Product cycles outpace court proceedings. So sales bans will almost never be imposed early enough. All that's left to do is determination of damages. The companies would have served themselves better to have negotiated and settled amongst themselves in the first place.

The ITC doesn't involve itself with past infringement or any related monetary compensation for it.
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post #27 of 36
Quote:
Originally Posted by Gatorguy View Post

The ITC doesn't involve itself with past infringement or any related monetary compensation for it.

So we can expect another Sammy lawsuit? Joy!
post #28 of 36
Quote:
Originally Posted by jungmark View Post

So we can expect another Sammy lawsuit? Joy!

IMHO it's not about money for either company.
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post #29 of 36
Quote:
Originally Posted by Gatorguy View Post


The ITC doesn't involve itself with past infringement or any related monetary compensation for it.

There is more to development of these cases than just ITC rulings. But you already knew that. So what's your point?

post #30 of 36

Samsung especially and Apple are keeping ITC employees in a job, you never hear of cut backs in that government organisation

post #31 of 36

This is bad for Apple in terms of PR, whether the effect on sales will be measurable or not. The general public doesn't recognize a distinction between FRAND patents and the rest. I'd wager that the ITC didn't fully take into account FRAND licensing practices, but the ITC just gave some number of people reason to believe Samsung has at least as legitimate (or illegitimate) a business as Apple.

post #32 of 36
Quote:
Originally Posted by souliisoul View Post

Samsung especially and Apple are keeping ITC employees in a job, you never hear of cut backs in that government organisation

Off-topic: Outside of the military, when have you ever heard of the federal government cutting employees other than through attrition?

post #33 of 36
Quote:
Originally Posted by Suddenly Newton View Post

Samsung: "I've done far worse than kill you: I've hurt you. And I wish to go on...hurting you. I shall leave you as you left her. Marooned for all eternity at the center of a dead planet... buried alive... buried alive...."

 

You sir have won this thread.

 

Of course, Steve Jobs basically said: "He tasks me, he tasks me!" so I'm really confused on who's who. 

post #34 of 36
Quote:
Originally Posted by lkrupp View Post

Am I missing something or is another route possible. Couldn't Apple just pay Samsung the licensing fees and be done with it?

I believe the answer to that is yes.
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post #35 of 36
Quote:
Originally Posted by stelligent View Post

There is more to development of these cases than just ITC rulings. But you already knew that. So what's your point?

No idea what you're referring to. Are you saying that Samsung has also filed a civil suit to collect back-royalties based on those same patent claims? That Samsung's intent was just to collect money? That's seemed to me the question the OP had. If so it obviously wasn't going to be via the ITC which he perhaps didn't realize..

If that's not what you're getting at then just what's YOUR point? I've never been good at riddles and suck at charades.
Edited by Gatorguy - 6/5/13 at 3:07pm
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post #36 of 36
Quote:
Originally Posted by Gatorguy View Post

The fact that the ITC eventually issued a ban with no economic harm to the infringer (since it took two years to decide) isn't nearly as newsworthy as the fact the ITC has chosen to allow injunctions based on SEP claims to continue. THAT'S the big news.

This is what I find interesting.

The import ban along with the cease and desist ( which HTC didn't get ) over FRAND SEPs is one of the most extreme decisions yet by the ITC in the mobile wars.

Considering this goes against the FTC/Google agreement, congress calls for reform, and Obama's new opinions.

I can't figure out if this is:

1. The ITC sticking a flag in the ground to maintain their power and relavance ~ politics

2. The ITC deciding to take an extreme stance in order to force Congress to legislate and clean up the rules so that they use.

Hmmmm
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