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  • So Has Apple Given Up the Nuclear Option?

    November 13th, 2012

    When Steve Jobs said he would go "thermonuclear" against Google and all those Android licenses, because he felt they stole Apple's designs, just how liberally should he have been taken? Sure, it's quite obvious Apple has invested hundreds of millions of dollars pursuing patent lawsuits against the likes of Samsung, Motorola, HTC and other companies. At the same time, other companies have sued Apple with similar complaints.

    Don't forget that Apple can't always win, having agreed to pay a reportedly large but undisclosed sum to Nokia to license patents, which materially enhanced that company's bottom line. So I would expect it was hundreds of millions of dollars, which is chump change for Apple. Sure, it didn't help Nokia that much, since the company is still hemorrhaging market share. But Apple resolved the patent disputes, just as they did this past weekend in an unexpected settlement with HTC.

    According to published reports, HTC will be paying Apple up to $8 for every single handset to secure rights to certain patents. One estimate had it that Apple could be getting up to $280 million dollars each year as a result, but HTC's sales aren't going so well these days. At least it'll help cover some of Apple's legal fees.

    Some columnists have begun to suggest that this settlement is likely to form the blueprint for others, possibly with the main "culprit" in the current legal actions, which is Samsung, and also with Motorola and perhaps Google. In each case, there would be a multiyear pact and cross-licensing of certain disputed patents. Where industry standard patents are involved, it's possible Apple will end up paying something, though it's possible there will be an exchange of cash, or it'll be a wash. In HTC's case, the company had a far smaller number of patents to license than the others.

    So far as the industry is concerned, settlements of that sort would be a good thing. Everyone can concentrate on competing fairly in the marketplace, and not concerning themselves over whether this widget, or that rectangle, or some OS feature somehow violates someone else's intellectual property.

    I do, however, find problems with pundits who complain that Apple has become the tech industry's bully in pursing these actions so aggressively. Think about those patent trolls who buy up loads of intellectual property, but instead of actually creating a product or service, they push paper. Patents are licensed, and alleged violators are sued. How does that help advance any industry? Aren't these the real bullies? They depend on most companies settling rather than fight it out in the courts, and, if that happens, the lawsuits will be handled in certain parts of Texas where patent trolls somehow manage to routinely prosper.

    Apple got caught by Microsoft in the 1980s, as many of you know. And maybe the entire existence of Windows in its traditional form was the result of tricking Apple into licensing portions of the Mac OS. Apple won't make that mistake again, and patenting key inventions (or any invention) is simply today's way of doing business. Apple is doing nothing different from any company that wants to protect intellectual property.

    Lest we forget, a number of handset makers building Android gear pay license fees to Microsoft that have been estimated at roughly $5 per handset. Does that somehow make Microsoft the bully, or just another company protecting their intellectual property?

    Why should Apple be any different? Besides, there are loads of companies suing Apple for the very same reasons. Sometimes Apple even loses, such as the lawsuits from Nokia and, some years back, Creative Labs over iPod-related patents. Were they bullies too?

    So is Apple suddenly becoming more amenable to friendly settlements as opposed to legal filings against companies who may have violated their patents? Is Tim Cook being less arrogant about such matters than Jobs?

    In my humble point of view, Jobs simply had the more abrasive personality, more apt to exaggerate and threaten when angered. Certainly spending hundreds of millions of dollars in legal actions amounts to going thermonuclear in a sense. Jobs was still the rational businessperson who knew how and when to make deals, just as he did with Microsoft in the 1990s. Don't forget the Creative Labs and Nokia settlements, not to mention deals with a number of other companies, also occurred during his watch.

    The agreement with HTC is just par for the course. It's not as if Apple expected to HTC to just close up shop and go away, any more than Apple expects Samsung to stop making Galaxy mobile gear, or Google to give up Android.

    Apple clearly wants its pound of flesh, and to, in turn, set a precedent for companies to be more careful about hardware and software design. Besides, Apple's filings against Samsung haven't stopped Galaxy sales, nor do I expect that Motorola will sell any fewer handsets. But with the limits established, the industry will be freer to release new products without the fear of confronting eager lawyers who are ready to pounce.

    Of course, redefining patent laws in a more sensible fashion so patents are awarded for real innovations rather than minor variations on a theme wouldn't hurt.



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    One Response to “So Has Apple Given Up the Nuclear Option?”

    1. Richard says:

      We would do well to remember all of what Steve had to say on the subject...he would spend every last cent of the company's money to kill Google. That's simply not business. It's an emotional vendetta.

      On the brighter side, perhaps Apple will resort to spending their time, efforts, and money on creating products people want to buy. It has been reported that, even with the recent infusion of cash into R&D, Apple have been spending more money on Patents and Patent Litigation than on R&D. Interestingly, the amount spent on R&D, apparently as a percentage of revenue, is less than typical in the industry which certainly makes one wonder.

      One should also not forget that Apple have been guilty of lifting others' ideas and IP as well. The company most recently settled for $21 Million for their appropriation of the Swiss Rail Clock design.

      I think it a good thing for the company to get on with the business of business. Aside from the cost of Patent litigation, many of the patents involved in the litigation are, in my view, either obvious or non-patentable because of prior art. Some of the courts are waking up to this reality and are invalidating these patents when presented with the appropriate opportunity. Apple also needs to wake up and quit misbehaving in court the way they have in the U.K. It does the company no good at all. One observer likened Apple's behavior in that case to that of a petulant child.

      I certainly agree that patent law is overdue for review by the legislative bodies of the world to avoid the plain and simple waste that the present law has encouraged. There should also be an easier, and lengthier period of time, to challenge the providence of the award of a patent.

      Yes, Steve was quite a salesman, but one has to wonder what he could have accomplished without all the bombast.

      Good article, Gene.

      Cheers

      For a small portion of the money involved, Apple could also begin listening to their customers about what hardware they want to be able to purchase. There is a lot of pent up demand for products that the company should be making, if, yes it's a big word, the company would only listen.

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