Apple Inc. (NASDAQ:AAPL) has been at the center of several lawsuits related to patent infringements in the recent past. However, according to a report published by the New York Times, on Apple Inc. (NASDAQ:AAPL)’s role in patent wars, the idevice maker has been at the core of major lawsuits where it has won some, and lost some, dating back to 2006. The report revealed some of the events that describe Apple’s stand on patent related issues, as we know it today. Some think that companies sue their competitors in pursuit of damages for patent infringements, but Apple Inc. (NASDAQ:AAPL) knows better that, there is more to it than just damages.
It all began in 2006, when Mr. Phillips developed voice recognition software to be used in computers and smartphones, most notably, Apple Inc. (NASDAQ:AAPL)’s SIRI. The tech wizard through his company, Vlingo, developed the software only to come across strong headwinds in the form of Nuance, a renown giant in voice recognition devices, at that time. Eventually, Phillips was forced to sell his company to Nuance, following continued threats from the latter’s CEO, Paul Ricci, on patent infringements.
“Mr. Phillips and Vlingo are among the thousands of executives and companies caught in a software patent system that federal judges, economists, policy makers, and technology executives say is so flawed, that it often stymies innovation,” writes Charles Duhigg and Steve Lohr, in the New York Times.
Indeed, according to the report, companies seem to be focusing so much more on patent issues than product development. The same report suggests that Apple Inc. (NASDAQ:AAPL) and Google Inc (NASDAQ:GOOG) spend more money on patent related issues, as compared to, research and development. Additionally, the report notes that, in the last couple of years, companies have spent at least $20 billion in patent infringement lawsuits.
A good example is Apple’s latest victory against Samsung Electronics Co. Ltd, where it received $1 billion worth of damages. Subsequently, the iPhone maker did not stop there, and went on to press for more charges against its main competitor in the industry. The big question is whether Apple Inc. (NASDAQ:AAPL) was doing this in pursuit of more damages, or there was something bigger behind the lawsuit.
My guess is, Apple Inc. (NASDAQ:AAPL) would be happier to see Samsung cease operations in the U.S., than just receive damages. Samsung was served with; an injunction to discontinue selling the patent infringing devices in the U.S., most notably, the Galaxy S2, but the American based smartphone manufacturer wanted more devices banned. The article in the NYT, is titled, the “Patent Used as a Sword”, and I won’t delve on it much, because you can find a link to it at the end of this article.
Apple Inc. (NASDAQ:AAPL) knows very well that eliminating Samsung from the furor will be its biggest achievement against its major competitor. This is probably why the company has been launching lawsuit after lawsuit, against its Korean competitor. Apple has taken the issue of patents so seriously, that it even held corporate meeting during Jobs’ time, to discuss how to patent the iPhone.
This well exhibited in Mac Rumors, as quoted below:
Privately, Mr. Jobs gathered his senior managers. While Apple had long been adept at filing patents, when it came to the new iPhone, “we are going to patent it all,” he declared, according to a former executive who, like other former employees, requested anonymity because of confidentiality agreements.
“His attitude was, that if someone at Apple can dream it up, then we should apply for a patent, because even if we never build it, it’s a defensive tool,” said Nancy R. Heinen, Apple’s general counsel, until 2006.
Therefore, it is quite clear that Apple Inc. (NASDAQ:AAPL) went on to patent products and ideas that they never intended to develop, in order to use it as a defensive tool. I see it as a weapon against competitors, as we have been noticing of late. At some point, the late Steve Jobs, was quoted to have said that Google Inc (NASDAQ:GOOG)’s Android O.S. is stolen property, which makes me wonder whether this was one of those patented products that Apple never went on to develop.
Heinen’s comments exhibit a scenario witnessed back in 2006, between Phillips and Ricci, with the latter ultimately, forcing the former to sell his company to him. However, from a different point of view, the issue of patents can be seen as a powerful Porter force, in the form of barriers to entry. This explains why, it has been so difficult for a third ecosystem to emerge in the smartphones industry. Indeed, the likes of Nokia Corporation (NYSE:NOK), and Research In Motion Limited (NASDAQ:RIMM) (TSE:RIM) are only surviving by virtue of the patents they hold.
Yahoo! Inc. (NASDAQ:YHOO), in a recent patent case with Microsoft, was forced to part with $500 million worth of patents, once again calling on what now appears to be becoming a very precious commodity in the technology industry. Therefore, Apple Inc. (NASDAQ:AAPL) knows that it is not just about the damages, but also about securing the future, and trying as much as possible to have few obstacles along the way.
Up and coming tech companies have been forced into acquisitions by the dominant giants, through use of patents, as is the case e of Vlingo and Nuance. Additionally, tech giants have acquired these companies to enhance their pool of patents, as noted in recent acquisitions. For instance, Facebook Inc (NASDAQ:FB) acquired Face.com; Apple Inc. (NASDAQ:AAPL) acquired AuthenTec, and there have been rumors that, Nokia’s patents could be worth a fortune, were it to close shop.
The New York Times report can be found here.