Apple and the Specter of Decline

by Tim Wu | September 20, 2012

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.

Source URL: http://www.newrepublic.com//article/107514/apple-and-specter-decline