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  • Innovation by Lawsuit

    March 2nd, 2010

    This week, there’s a report that Apple is suing a mobile phone handset maker, HTC, over supposed various and sundry patent infringement issues. Now in passing I should point out that HTC is also the company that builds Google’s Nexus One smartphone and a number of other devices that support the Android OS.

    And, yes, I’m aware that it’s possible HTC is serving as Google’s proxy to some degree in this lawsuit.

    But Apple doesn’t innovate by filing legal actions against the competition, although a quick look at their SEC filings will show a number of ongoing lawsuits. Some involve companies suing Apple, some involve Apple suing others.

    In the end, the lawyers will get paid handsomely regardless of the outcome of these various filings. However, the real issue is what does a company have to gain from seeking relief from the courts? It’s not as if there will be a sudden conclusion, one way or the other. Between multiple hearings, decisions and possible appeals, an initial filing may be little more than the onset of years of legal skirmishes before a decision is reached, which can be stressful whether you’re following the case as you’re studying for your masters degree in law, or you’re one of the companies involved. When it’s big boys like Apple, Google and HMC involved in filing, things can get even more tricky.

    Indeed, it’s not unusual for two companies to reach an out-of-court settlement to end the process. Innocent or guilty of the claims, it’s often cheaper just to write a check and be done with it. In cases such as this, the actual details of the settlement will often be sealed, except what’s required by law. So you never really know what actually happened behind the scenes.

    Now Apple isn’t new to the intellectual property lawsuit game. They’ve been doing it for years. In the early days, Microsoft was the victim, as Apple went after them claiming that Windows contained elements allegedly stolen from the Mac OS. It’s also true that Apple licensed some portions of the Mac OS to Microsoft at one time, back in the 1980s. In any case, all that ended in 1997 when Microsoft made that notorious $150 million investment in Apple, thus closing the books on the endless legal battles.

    I have to wonder, though, whether a company is just plain stupid when they do things that bring on intellectual property lawsuits, or perhaps some patents are so vague it’s not easy to know if you’re infringing on something. Unless the issue is clear-cut, there may be a large gray area where the lawyers can argue forever, but the truth will never be found.

    It’s also quite possible for intellectual property rights to be abused. There are some companies, for example, that don’t actually produce a product or service. Instead, they own patent portfolios of one sort or another, and they collect royalties from companies that license the technologies they control. More often than not, if legal action is needed they’ll file them in certain portions of East Texas that appear to have become “patent mills,” because it’s easy to get favorable rulings.

    As far as companies that actually build things are concerned, it’s a sure thing that they’re engaged in defensive patent filings. The slightest change in an existing technology, or anything potentially innovative, will both be detailed and patents sought. Few companies can do otherwise, because there’s no telling whether another company might come up with something similar enough to actually infringe on that intellectual property. But without a patent, how are the rights enforced?

    There’s also the broad gray area about whether a patent should be granted in the first place, and revisions have been considered in the U.S. laws as the result. All these ongoing legal challenges should be sufficient to make companies take notice that something is very wrong when so many lawsuits must be filed.

    I do not pretend to know the real issues regarding those 20 or so patents that Apple alleges HTC violated. By the same token, those actions involving Apple, Nokia and other companies that were filed with the U.S. International Trade Commission are also quite murky. Does anyone have a valid case here, and what of the consequences?

    If Apple beats Nokia, does that mean that the latter can no longer make gear that violates those patents, or do they simply write Apple a check to cover the alleged losses? By the same token, do you really believe there’s a chance that Apple would somehow be forced by the ITC to stop selling iPhones because some of the features are in conflict with Nokia’s inventions?

    None of that sounds credible to me. It may all be a power-grabbing skirmish on the part of these companies to gain competitive advantages, or somehow extort payments or other forms of settlement. I don’t pretend to have the answer, but I am troubled when supposedly responsible manufacturers claim to have cause to file complaints against respected competitors for stealing their stuff.

    Of course, all of this may just be posturing, a complicated marketing scheme to make a company seem more innovative, and thus garner customer sympathy. But does that make any sense? I doubt it.



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    10 Responses to “Innovation by Lawsuit”

    1. James Katt says:

      It is ABSURD to file a patent to protect your idea or invention if you are NOT willing to sue someone that is copying that idea or invention. PERIOD.

      If you are not willing to sue the person who is infringing on your patent, then that patent is null and void. It is worthless. It is invalid.

      • @James Katt, An important issue here is whether patents are granted appropriately in many cases. Does a very fine variation of an existing invention constitute reason to issue a new patent? It’s a question the lawyers and the authorities are wrestling with.

        Peace,
        Gene

    2. Joe Anonymous says:

      This is one of the most foolish blogs I’ve ever seen – and that’s saying a lot.

      1. “Apple doesn’t innovate by filing lawsuits”. Obviously. Apple R&D innovates. The role of the law suit is simply to ensure that Apple benefits from their R&D and not the competitors. What’s wrong with that?

      2. “I do not pretend to know the real issues regarding those 20 or so patents that Apple alleges HTC violated.” Why is it that bloggers are so proud to show off their ignorance? What makes you think you have ANY business writing about Apple’s patent position when you haven’t even read the patents?

      3. “It’s also quite possible for intellectual property rights to be abused. There are some companies, for example, that don’t actually produce a product or service. Instead, they own patent portfolios of one sort or another, and they collect royalties from companies that license the technologies they control.” Hint: there’s nothing illegal about this, nor is it fundamentally wrong. The principle if a patent is that when you invent something, you have the right to control (and profit from) its use. There’s nothing in the US patent laws (or anywhere else AFAIK) that says you have to make a product yourself. The whole principle of licensing is that you don’t always want to make everything you invent.

      4. “However, the real issue is what does a company have to gain from seeking relief from the courts?” “If Apple beats Nokia, does that mean that the latter can no longer make gear that violates those patents, or do they simply write Apple a check to cover the alleged losses?” Obviously, what they gain if they win is stopping competitors from stealing their technology. In some cases, they can stop the competitor from making the product at all (read up on the Psystar case if you’ve forgotten). In other cases, they receive licensing fees. Either way, the patent system is a mechanism for inventors to benefit from their patented inventions.

      5. “I have to wonder, though, whether a company is just plain stupid when they do things that bring on intellectual property lawsuits” Well, Apple has an entire team of lawyers and executives who HAVE read the patents and know something about intellectual property (unlike you, apparently), so I guess they don’t really care if you think it’s stupid. Maybe if you bothered to read the patents and learn about IP law, your concerns might have some validity.

      6. “There’s also the broad gray area about whether a patent should be granted in the first place, and revisions have been considered in the U.S. laws as the result.”. True. Irrelevant, but true. All that says is that there’s some risk in filing a lawsuit because you might not win. I’m sure Apple has considered that risk in their decision.

      Look, the patent system is not perfect and no one ever claimed that it was. There are bogus patents and there are patent suits that should never be filed. But for Apple to file a patent suit at this level (it’s been at least 15 years since they’ve sued to protect their patents), they’ve obviously considered the risks and the validity of their patents. Why is it that people with no concept of how IP law works post nonsense like this article?

      • @Joe Anonymous, It clear from your statements and a private email exchange we’ve had that you feel that only people who are intimately familiar with patent law and the programming issues involved are qualified to report or comment on the story. If that’s true, than 99.99% of the reporters covering this story are unqualified.

        More to the point, you’re actually not finding any errors in the article, just making value judgments that I do not necessarily disagree with in terms of those facts.

        Glad we got that out of the way.

        Have a nice day.

        Peace,
        Gene

    3. Joe Anonymous says:

      ” It clear from your statements and a private email exchange we’ve had that you feel that only people who are intimately familiar with patent law and the programming issues involved are qualified to report or comment on the story. If that’s true, than 99.99% of the reporters covering this story are unqualified.”

      That’s exactly the kind of irresponsible writing I’m complaining about. Nice example.

      I never said that only attorneys or programmers should comment. I simply pointed out that you admitted that you had NEVER READ the patents in question – and were therefore unqualified to comment. It seems to me that if you were a responsible journalist, you would at least make an attempt to read the patents before writing an article on the subject.

      I guess journalism is gone. It’s now all about posting inflammatory messages with no fact and no effort to ascertain the facts. You don’t like something Apple’s done and you go on the attack – without even reading the patents in question. And then you defend that position and pretend that I said only lawyers can comment.

      I guess you’re taking the position that only attorneys and programmers know how to read. Strange position for a journalist to take.

      • @Joe Anonymous, Ah, the misquote. What I really said is: “I do not pretend to know the real issues regarding those 20 or so patents that Apple alleges HTC violated.” It doesn’t mean that I didn’t read them or commentaries about them. It’s an admission that I am not qualified to make a judgment call as to their validity, since I am not a programer or patent attorney and do not play those roles on TV.

        There’s nothing inflammatory about the article. It contains factual statements that you have not been able to refute. But maybe you should read it again. I don’t mind disagreements, but I am concerned when I’m misquoted.

        Peace,
        Gene

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