Apple and Patents: King of the World?

June 24th, 2011

You just know that Apple’s lawyers and executives must be slapping themselves on their backs and smiling broadly after being awarded yet another U.S. patent for mobile technology. The latest and greatest covers a number of features of their amazing touchsreens. While I’m not an attorney — and don’t play one on television — you can just bet that competing mobile device makers must be shaking in their boots.

If those patents are as all-encompassing as they seem to laymen, it could mean that Apple would have the power to force virtually every maker of a competing touchscreen-based  smartphone or tablet to stop selling those gadgets, pay Apple large sums of money, or a combination of both. It’s not a pretty picture for companies who hope to build iPhone and iPad killers.

Now intellectual property is not necessarily a cut and dried affair. The courts might regard the new touchscreen patents as overly broad, and toss them out. Or they might suggest or direct Apple to license some of those technologies to other companies at fair prices. Regardless, even if Apple requests preliminary injunctions to halt the sale of infringing gear, it may take years to resolve. In the meantime, there will be a cloud on each and every touch-based smartphone and tablet built by those other companies. Are they so sure of victory that they could afford to invest in products, market them, and not have everything come back to bite them down the road?

Of course, this doesn’t mean there’s no way around those patents. Perhaps the design engineers at Google and other companies are even now examining the patent filings, and seeing if they can devise workarounds that do not infringe on Apple’s property rights. This is what Dish Network attempted to do when they lost a key court case from TiVO that was designed to stop them from building DVRs that could record one show and play back another at the same time.

After several years of legal skirmishing, and losing just about every critical decision, the folks at Echostar, a sister company, realized they had no choice but to pay up before millions of set top boxes had to be disabled. If anything, licensing fees are what probably keep TiVO alive, since they sure can’t earn profits from the sale of hardware and services.

Now I do not know whether a workaround to sidestep Apple’s patents is even possible. I suppose there are many schemes to accomplish onscreen touch capability. But that’s for the engineers — with watchful eyes from company lawyers — to figure out. What’s more, even if they invent methods that do not infringe on Apple’s intellectual property, can it all be done in software, or will hardware have to be altered as well?

Even worse, would Apple file complaints anyway, just to make sure that all bases are covered?

I do not want to wear the shoes of the people charged with getting their employers out of this possible mess. More than likely, they might consider a double-pronged approach. As the engineers do their thing, lawyers will be ready to defend these companies from the almost inevitable cease and desist letters from Apple. It’s not going to be a pretty picture.

Unless such actions are filed right away, or the warning letters sent, there may be no more news about this situation until Apple holds the quarterly conference call financial analysts in July to talk about the June quarter. If no questions are asked then, I’d have serious concerns about those analysts and their ability to ask a company about such significant matters.

Now this doesn’t mean Apple doesn’t have to pay other companies for patent rights. That situation occurs all the time, and one-time fees or ongoing payments will be negotiated, as they were with Nokia. As you know, Apple has a curious habit of naming new products, and attempting to obtain the rights to use those names later. So, for example, Apple called their smartphone, logically of course, an iPhone even before they acquired the rights to do so from Cisco. There’s even now a pending court case about Apple’s right to use the trademark iCloud, even though they allegedly acquired those rights from another company. All so confusing.

But names are names. Technology is something else again, and Apple has been caught flat-footed there a few times too. Some years back, they had to pay millions to Creative Labs to get the rights to use certain features on the iPod. To Apple, all that cash is a drop in the bucket, but you can be assured that lawyers spent many hours negotiating the contracts.

If you check Apple’s SEC filings, you’ll even see that, at any point in time, the company is engaged in a number of legal actions over one matter or another. Not that Apple is necessarily more litigious than other multinational corporations. They live and die by the value of their trade secrets and intellectual property, and they have a perfect right to defend themselves whenever it’s necessary. Doing nothing is out of the question. The act of not defending intellectual property in a timely fashion may be enough to allow the alleged infringement to continue unabated.

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