Thermonuclear Patent Wars
Phil is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
In the high-stakes world of mobile technology, scarcely a week goes by without a new patent lawsuit being filed by one of the combatants on either side of the mobile divide. Whether the lawsuits are based on real infringement of intellectual property (IP) or just a fishing expedition, they are a key indicator of the current state of mobile technology, and it isn’t good for consumers.
Patented Rip Off
As told in Walter Isaacson's biography of the late Steve Jobs, co-founder and former CEO of Apple (NASDAQ: AAPL), when Jobs saw that Google's Android mobile operating system had "ripped off" the iPhone he was furious. Steve Jobs declared thermonuclear war on Google (NASDAQ: GOOG), vowing to spend his last dying breath and every last penny in Apple's coffers to destroy Android. Many media headlines have captured the famous quote.
More recently, Jobs' declaration of thermonuclear war on Android has become a topic in the courtrooms as Samsung and Motorola have sought to include the famous Jobs quote in their defense. In one case the judge allowed the defendant to use it, in the other it was ruled inadmissible.
$12.5 Billion Battle Axe
In May this year Google paid $12.5 billion to acquire Motorola Mobility for just one very important reason -- competitive advantage for the Android operating system. Few can argue that many Android user interface features bear striking resemblance to the Apple iOS, and not by mere coincidence. Google knew the risk it was taking by mimicking Apple iOS features and almost certainly anticipated Steve Jobs’ reaction. Acquiring Motorola's 17,000 patents was crucial to build a defense against Apple. But there was more to it than that.
Motorola was in a position to use its deep patent portfolio to lay waste to several of its competitors, many of whom also produce Android-based devices. By acquiring Motorola and its patents Google can now ensure safe passage for its Android-friendly partners. At the same time the patents are good insurance to defend Android, and also give Google powerful offensive ammunition against competitors Apple and Microsoft (NASDAQ: MSFT). The battleground has been staked.
Google’s insurance policy paid off in spades last month when Judge Posner dismissed Apple's lawsuit against Motorola with prejudice. What would have been the first major courtroom showdown between the two titans never even reached a jury, and turned into a monumental disappointment for team Apple. But this is just the beginning.
Litigation between Apple and Android hardware manufacturers, including Koreans HTC and Samsung, is coming to a courtroom near you. There are currently about 50 active lawsuits between Apple, HTC and Samsung in multiple countries. The U.S. trial between Apple and Samsung is scheduled to begin on July 30 and will determine if Samsung will be permitted to continue selling the Galaxy Nexus smart phones and the Galaxy Tab in the U.S.
HTC recently lost a case where it tried to sue Apple based on Google-owned patents. The International Trade Commission ruled HTC cannot sue for patents it does not legally own. HTC is trying again with new patents it acquired from Hewlett-Packard last December. Earlier this month a British judge ruled Samsung's Galaxy tablets did not infringe Apple's designs for the iPad because they were "not as cool." The judge ordered Apple to publish a notice on its U.K. website and in British newspapers informing consumers the Samsung Galaxy Tab's design is not a copy of the iPad. Apple has filed for an appeal.
Last week Apple was awarded 25 new patents, several of which cover a variety of iPhone-specific user interface features, including visual cues and graphic behaviors in reaction to touch inputs. Some believe these new patents provide Apple lethal material to defend its IP.
Innovation vs. Profit
The Apple iPhone, introduced in 2007, revolutionized the smart phone market with its touch screen user interface using finger gestures. Ever since then it has been increasingly mimicked by Android-based phones. Similarly, after Apple released the first iPad, multiple Android-based competitors shortly appeared. For the past five years, Apple has led the innovation race, being first to market with several new technologies, features and user interface paradigms, only to see nearly identical implementations on Android-based devices a short time later.
The fact Apple’s iOS is often mimicked by Android is testimony that Apple is the world’s leading innovator in mobile, while everyone else is profiting on Apple’s ideas. Unfortunately, that is bad for consumers because other developers and manufacturers are not investing in their own innovation. Instead of trying to make a better iPhone, chasing profits, the Android community and manufacturers should be trying to create something new and better. Something that will move technology forward.
The ongoing battle prompted this remark from Apple’s CEO – Tim Cook: "From our point of view, it's important that Apple not be the developer for the world. We can't take all of our energy and all of our care and finish the painting, then have someone else put their name on it."
It could be years before these patent disputes are tested and resolved in a court of law, but one thing appears certain -- the war is far from over.
Invest wisely, my friends.
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