Patent Laws Aren't Preventing Copycat Firms like Apple and Samsung

Phillip is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Large technology firms often spend billions of dollars each year on research and development in attempts to release the next best thing. The cost of the effort that goes into putting out innovative gadgets is staggering, but companies know that in order to be the leader, they have to release groundbreaking technology. That's what made Apple (NASDAQ: AAPL) into the giant it is, and it is what could lead TiVo (NASDAQ: TIVO) down the same path.

But in the rush to release the best possible device on the market, many will be enticed to take a shortcut. Peaking over a competitor's shoulder is nothing new for these companies, and it usually results in far more profits than if each company follows patent rules.

Investing in cheaters

Investing in cheaters could be a new market strategy. After all, Steve Jobs's groundbreaking smartphone technology wasn't sold to Samsung (NASDAQOTH: SSNLF); the firm copied it, and the South Korean company was ordered to pay Apple $1 billion last summer over illegal use of the technology. While $1 billion is a lot to most companies, it doesn't phase Samsung, especially considering the billions it has secured by being a major player in the smartphone industry -- thanks largely to stolen technology.

Samsung retaliated and on June 5, the company received a positive ruling that Apple violated a wireless technology patent that Samsung held. The patent was over the 3G wireless technology that Apple was using for years with its iPhone and iPad lines. In the years leading up to the lawsuit, Apple raked in billions. The ruling means that importing these devices into the United States is illegal, but it doesn't affect those who already own one of the gadgets, and it doesn't take away any of Apple's profits from the use of the stolen technology.

Lawsuits aren't new for Apple. The company was sued, along with BlackBerry, by Eastman Kodak for incorporating patented digital camera technology into smartphones.

TiVo rulings

More recently, TiVo had its own string of legal disputes. The company filed a suit against Motorola, (which Google now owns) that was settled on June 6, and two days later the company announced settlements with Cisco and Time Warner Cable. Those lawsuits add up to $490 million. But, again, the penalty doesn't make a big enough impact to deter the companies from copying each other and then taking their battles to court. 

Suing over patent infringements is now responsible for major profits at TiVo. While the lawsuit was clearly a smart decision, one that nearly doubled the company's cash and equivalents, patent suing is not a long-term solution. However, patent stealing clearly is. In order for TiVo to rake in profits, it might want to take notes from those it sued, just like Apple did with Samsung. Of course, I mention this in tongue-in-cheek.

Public could become upset with high court costs

These billion dollar companies are certainly taking up a lot of court time. Taxpayers are not only funding the legal battles -- by paying judges' salaries and other administrative costs -- but court time focused on big ticket patent infringements feeds backlogs and diverts attention from other cases. If this type of behavior continues, people could catch on and spend their money with companies who aren't involved in costly legal battles. But for now, the billion dollar cheaters have shown they are safe places to put your money.

It's incredible to think just how much of our digital and technological lives are almost entirely shaped and molded by just a handful of companies. Find out "Who Will Win the War Between the 5 Biggest Tech Stocks?" in The Motley Fool's latest free report, which details the knock-down, drag-out battle being waged by the five kings of tech. Click here to keep reading.


Phillip Woolgar has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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