Apple's Monopoly Survives
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The tech industry's second great monopoly court battle has concluded. And this time the ruling favored the dominant company, Apple (NASDAQ: AAPL). For its part, Samsung had argued that Apple was using patent laws to protect an unfair monopoly and lock competitors out of the smartphone and tablet markets.
We've seen this movie before but with a much different ending. It first ran as a late 90's thriller called United States v. Microsoft.
At the height of its market power in 1999, Microsoft (NASDAQ: MSFT) lost the battle to protect its own monopoly when the government found it in violation of antitrust laws. As part of the "browser wars," Mr. Softee was declared a monopolist in its bundling of the company's Internet Explorer browser into the Windows operating system while crushing competitors' attempts to participate in the market.
It was a bitter fight between MSFT and the government, punctuated by a federal judge labeling Microsoft "a company with an institutional disdain for both the truth and for rules of law." In the end, Microsoft's browser dominance took a major hit. The company had to make big changes to the way it developed and sold its flagship products so that competitors' positions were strengthened.
Fast forward a dozen years and patents are the latest tech battleground. Companies are fighting over these legally granted monopolies in what's been dubbed the "patent wars." Key to Samsung's defense this round was the argument that Apple couldn't enforce exclusive patent rights on basic features found in both Apple's iOS and in many of Samsung's devices that make use of Google's (NASDAQ: GOOG) Android system.
These features included navigation aspects like the pinch gestures and "bounce back" effects that are popular on devices with touch screen displays. Apple couldn't manipulate patent law to keep Samsung's products out of the market, the company argued. Samsung also ridiculed the idea that Apple could possibly own the exclusive design rights to a geometric shape: the rectangle with rounded corners.
In a big blow to both Samsung and the Android franchise, the jury disagreed with Samsung on nearly all counts. That means Apple's dominating hold on mobile device design and on touch screen user interfaces not only survives, but has been strengthened by this fight. Unlike in the 90's version of this show, with the dominant company having to make amends, it's the competitors who have been sent scrambling this time. Much of Apple's mobile device competition now has to return to the drawing board, directed to stay out of Apple's domain which is now protected by a court-approved moat of fully enforceable patents.
And ironically, Microsoft looks to be the other big winner from this ruling. The company's Windows 8 operating system is different enough from Apple's iOS that it won't have the same patent problems set to hobble many Android devices. So, thanks in part to federal regulators, niche player Microsoft now has the inside track against the Apple juggernaut. That's a plot twist that no one would have bought back when Microsoft dominated the tech kingdom. But these days, its all just part of the show.
SigmaSwan owns shares of Apple. The Motley Fool owns shares of Apple, Google, and Microsoft. Motley Fool newsletter services recommend Apple and Google. 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.If you have questions about this post or the Fool’s blog network, click here for information.
