PLANK SEPTEMBER 20, 2012
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Things look good for Apple right now. Last month, it won its big lawsuit, collecting $1 billion in damages from Samsung for infringing various patents. The iPhone 5 is selling well. And today, it heads to federal court to begin the process of gaining an actual ban on the importation and sale of Samsung’s “contraband” phones.
Meanwhile, matters look darker for Samsung, Google (which makes the software that powers the Samsung phones), and the 400 million owners of Android devices. But if history is any guide, these appearances may be deceiving: the strategy Apple has adopted runs huge long-term risks.
Apple’s iPhone, while it sometimes seems to be everywhere, has actually been losing market share to Android for the last five years. And contrary to much reporting, the patent victories are unlikely to reverse that trend on their own.
“Over the long run, [Apple’s victories] probably mean nothing” says Harold Edgar, a patent specialist at Columbia Law School. Google says it has already programmed around Apple’s design patents. The firm made it clear to me that there was no “stop the presses” moment in response to the decision. Microsoft, whose Windows Phone 8 also powers some Samsung phones, “won't have to change [anything] in any meaningful way” according Horatio Gutierrez, head of Microsoft’s Worldwide Intellectual Property group. Gutierrez says these “design patents are famously easy to design around.”
There are, meanwhile, long-term dangers in Apple’s grand patent campaign, both for the company itself and the industry at large. Since the 1970s, winning and losing in tech has been generally, if not always, a matter of merit. Each of Apple’s great victories, from the Macintosh to the iPhone, came by building great products.
Apple’s resort to patent law is a completely different way of doing business. It’s an appeal to the federal government for protection against competition. It can be effective, but relying on public help is an addictive habit, and unhealthy over the long term.
While supposedly affecting how its competitors make products, Apple’s patents may do more to change its own products. That’s because they create an incentive to build things that are safely protected behind its proven “patent shield.” As Edgar puts it, with patent protection in place, “the innovation required to make a new product seem desirable will increase exponentially.” This may be one of the reasons the iPhone 5 looks and works so much like its predecessors.
But the more serious effects are in the long term, where history suggests that tech firms reliant on governmental protection, instead of innovation, tend to decline, because they don’t actually have to be better to stay ahead of their competitors. A lesson can be learned from the American car industry, a world leader through the 1970s. When it began to lose ground to its Japanese competitors, General Motors, Ford and Chrysler should have started making better cars. Instead, the Big Three invested heavily in lobbying for trade protection against Honda, Datsun and Toyota. That strategy did slow down the Japanese, for a while at least. But in the long run, it did nothing to fix the problems of decline.
This isn’t to say that Apple has accomplished nothing. Instead, the experts suggest it has built itself a shield against knock-offs--literal copies of the style of its phones and iPad that might make you mistake for the authentic items. Call it “Louis Vuitton” protection–good against counterfeiters, but not control of the whole handbag market.
And to be fair, Apple, of course, is hardly a stagnant firm, but rather, one that’s in its prime, making some of the best products in its history. Still, its strategy is risky. To the degree the tech industry has collective interests, they lie in a continuation of more than three decades of steady growth and innovation. Some of that has depended on an implicit, mutual agreement not to spend their time and money gaining advantage using patent. Windows beat the Mac in the 1990s without patents, and when Google rose to the top, it did so without relying on the law. Apple has broken that agreement.
6 comments
I don't follow this. There's no reason why a company can't develop great products while at the same time seeking aggressive patent enforcement. Wu refers to "time and money" spent on the latter, but the time is mostly lawyers', and the money is easily recouped if successful. The iPhone 5 is not like its predecessors because of the patent case. The iPhone 5 was designed before the verdict. Apple doesn't reinvent the wheel with each new iteration of the product. It reinvents the wheel when it reinvents the wheel -- that is, when it comes up with a truly new product. It will not be discouraged from doing that by patent protection of its greatest hits. Whether it's able to keep the hits coming is a separate question -- one that depends on the ability of its executives to see around the corner as Steve Jobs was so famously capable of doing. I don't say any of this as an Apple fanboy. I don't have an iPhone, and don't give a shit about them, and I think Steve Jobs was a prick. Still, I'm not seeing in this lawsuit a sign of the General Motorization of Apple, and that's for the simple reason that seeking legal protection and making good whatevers are not mutually exclusive. Indeed, the patent thing is but a continuation of the dear leader's agenda, insofar as Jobs thought that he invented everything and that everyone else ripped him off, which is sort of true.
- JakeH
September 20, 2012 at 1:43am
Every company in the tech industry is following the same patent strategy, more or less. I don't see Apple doing anything out of the ordinary for the industry. And Apple certainly is not Research in Motion -- how's the market share for Blackberries doing these days? In fact, Apple is where it is now because it has been extremely innovative with products like the iPod and iPhone, and aggressively re-designed and re-made them on a frequent basis. A much more interesting article would have delved into whether they will be able to keep that up.
- JEFF FREY
September 20, 2012 at 11:43am
I think the bigger risk for Apple is that their big patent win will change public perceptions of them--as a stodgy, defensive company in the mold of Microsoft. Indeed, Apple's iPhone is going to continue to look stodgy over time, as other manufacturers bring out more colorful, customizable, and larger options. And Apple is currently losing the content war. Amazon is kicking its but in that dimension. Apple will have to use some of its vast cash to dramatically improve and cheapen its media offerings.
- polcereal
September 20, 2012 at 12:05pm
The commentator betrays fundamental misundertandings about the philosophical justification and economic function of patents when he characterizes using patents to protect innovation as inconsistent with succeeding on merit. The function of patents is to incentivize innovation: If anyone can copy anyone else's invention, then the incentive to innovate is greatly reduced. The justification is to protect the property rights of those who create new things. Does the commentator feel that authors who copywrite their works are relying on the government instead of succeeding on their own merits?
- NateG
September 20, 2012 at 12:12pm
It is true that the patent system is in some ways disfunctional. It is not very good at identifying which ideas are truly new. Moreover, the system is even worse at judging the technical inventiveness and economic value of patented ideas. The courts have to get better at distinguishing between "incremental" and "fundamental" advances, and at scaling legal leverage and financial rewards in accordance with this distinction. But addressing these issues requires a more informed analysis than simply characterizing the use of patents as resorting to help from the government instead of succeeding on merit.
- NateG
September 20, 2012 at 12:25pm
Complementary article on the Apple Samsung issue by Clyde Prestowitz entitled "Advantage, Samsung." Interesting take--Prestowitz approaches the topic in the context of global strategic competition and cooperation between Apple and Samsung. (Samsung is Apple's biggest supplier, accounting for 30% of the content value of Apple products.) http://prestowitz.foreignpolicy.com/posts/2012/09/04/advantage_samsung
- ccarrick@vzavenue.net-old
September 20, 2012 at 10:29pm