As the mega case between Apple and Samsung kicks off in the courts, the rest of the electronics industry continues to struggle with the growing threat of patent infringement lawsuits. Unfortunately, this situation is nothing new.
The current cases involving the handset makers is reminiscent of the epic battles between many semiconductor vendors, such as AMD vs. Intel, Broadcom vs. Qualcomm, and the list goes on.
The current situation is heightened by the vast dollar value associated with the multi-billion annual unit shipments of mobile devices, but the outcome is just as predictable. The two sides will eventually settle with some form of license agreement and a licensing fee.
Most often, the result is a cross-licensing agreement because of patent infringement counter claims. As with the battles of the past, the outcome of this battle will have little impact on the choices of consumers or the resulting direction of the market. The battle will, however, likely delay innovation and potentially raise prices to consumers ultimately pay for devices over the next few years.
The underlying issue that arises from these battles is a broken patent system. The current US patent system allows for the protection of almost any concept or idea. While it is intended to protect the intellectual property of engineers and designers, it also places more constraints on the industry and a greater burden on the court system.
There should be a reasonable test for patents, such as determining if the concept is truly unique or something that is inherently obvious for a particular application, usage model, or device. The problem arises when making such determinations requires not only an understanding of the broader implementations, but also some foresight for a fast moving industry. Another issue is the ability to patent very basic ideas and menial tasks.
Occasionally, patents get struck down following legal fights from competitors, but like all other battles with patents, this is often a multi-year and multi-billion fight through the courts.
The patent system also allows for unused patents to be acquired by patent trolls, which are typically a group of lawyers that have acquired unused patents and use them to sue companies for royalty fees. These too can be challenged, but it is often less expensive for companies to strike a deal with the trolls rather than face another legal battle.
Short of fixing the inadequacies with the patent system, the industry continues to attempt to use it to a competitive advantage and work around it. The outcome is that the company with the early and most patents is awarded with an additional revenue stream, such as Texas Instruments and Qualcomm, which have previously wielded their patents on the rest of the industry.
As the industry evolves to new standards and technologies, these revenue streams eventually dry up and most of the leading companies in a particular technical segment ultimately sign broad cross-licensing agreements because it becomes almost impossible to avoid infringing on a patent of competitor.
As many have pointed out, the current legal battle is much broader than between just Apple and Samsung, it involves Google and all of the handset vendors using the Android operating system, many of which are claiming patent infringements against Apple.
The current and continuing legal battles will have no impact on consumers or the market overall. Consumers can and will continue to spend with the solutions that provide them the best balance between value and usage experience; the handset companies will be forced into broader licensing agreements; the lawyers will continue to be the greatest beneficiaries of the fight; and the industry will continue to find workarounds for an imperfect patent system.
While it is easy to argue for revisions to the patent system, it is difficult to determine the standards that should be used. Rightfully, Innovators should be compensated for their time and investment, especially when it drives a major inflection point in an industry. However, there should be some standard for testing that level of innovation and the bar for future patents should be higher as the industry matures. As for the current battles in mobile devices, look for at least two to three more years of legal wrangling before an armistice.
Jim McGregor TIRIAS Research Founder/Principal Analyst
Maybe there is a bigger story that we might call the 2nd Apple Effect. I'll condense and paraphrase the 1st Apple Effect as, "It's about computing, not computers". When Apple launched their iPhone many years ago, pundits colectively said, "Ho hum, who needs another phone maker". The "blocks of technology" were mature; touch screens, MEMS accelerometers, etc. Yet the clever, but simple design, grabbed the consumer market and turned it upside down. Apple did it with rather old technology, but with extraordinary design innovation. The 2nd Apple Effect? A litter of copycats, big and small, who have mostly forsaken creativity. But innovation is not dead, it's on hold, and that's a sad thing. So who is responsible for attenuated creativity and true innovation? And don't blame Apple.
Who was that quoted Picos' saying, "Good Artists copy, Great Artists Steal." And we (Apple) have never been ashamed of our stealing other people's ideas" It was Steve Jobs himself. What a hypocrite! I hope that famous video of Jobs saying that comes up in the trial.
Apple better hope they lose. If they win, I can see many countries just waiting to hit them with charges of creating a monopoly. It happened to IBM and Microsoft and Apple is finally big enough to draw attention. Plus having all of their devices built in China is sure to be an issue. They should have curbed their greed!