Apple Scores a Win in the Smartphone Wars

8/12/2019 Apple Scores a Win in the Smartphone Wars

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4 | Research-Technology Management NovemberDecember 2012

Apple Scores a Win inthe Smartphone WarsAfter several failed attempts, Appleslatest salvo in the smartphone patentwars seems to have hit home. OnAugust 24, after less than 24 hours ofdeliberation, a California jury decidedthat Samsung had, in fact, infringed onsix Apple patents, to the tune of justover $1 billion in damagesone of thelargest patent infringement awards ever.

Once the initial excitement subsided,however, the real meaning and likelyeffect of the verdict became murky. Firstcame hints that the jury hadnt been

thorough in its consideration of the is-sues leading to the verdict. The decisioncame much too fast, some said, giventhe length (109 pages) and complexityof the jury instructions. Worse, the orig-inal verdict sheet bore some clear math-ematical and logical errors that forcedthe court to issue a corrected sheet. Andinterviews with jurors have revealedthat their deliberations veered intoextralegal territory, for instance suggest-ing that the amount of the award wasintended to punish Samsung when es-

tablished law (and the jury instructions)clearly indicates that damages should becalibrated to restore the losses of theplaintiff, not to punish the defendant.

And, in the same week, similarlawsuits in Japan and South Koreaconcluded with very different results.A Tokyo judge ruled against Apple,

deciding that Samsung hadnt infringedon Apple patents, and a South Korean

judge offered a decision that was, es-sentially, a draw, acknowledging thatSamsung products did closely resembleApples designs but not nding a clearcase for infringement.

Post-decision statements from thetwo companies were predictably ex-treme: Apple applauded the verdict as avalidation of values, characterizing it asa loud and clear message that stealingisnt right; Samsung asserted that thedecision should not be viewed as a winfor Apple, but as a loss for the Americanconsumer. But analysts found little

to agree about, either. Indeed, varioussources concurred on only one essentialtruth: that Samsung is absolutely cor-rect that this is not the nal wordin this case or in the raging patentwar. It remains to be seen how manySamsung products will be pulled fromU.S. shelves, and there will certainly

be appeals of the decision and of theassociated damages, which many see asextreme. The case is unlikely to see anal decision for months, if not years.

Some observers see the Samsung suit,

and the suit against HTC that Apple lostlast year, as proxy wars against GooglesAndroid operating system, which SteveJobs saw as a blatant knockoff of ApplesiOS. Jobs told his bio grapher, WalterIsaacson, shortly before his death in 2011,Im going to destroy Android, becauseits a stolen product. Im willing to gothermonuclear war on this. Indeed,the Samsung decision may representa signicant challenge for hardware

manufacturers as they create the nextgeneration of Android phones. WithApples right to key elements of thesmartphone experience backed up by asuccessful, and costly, lawsuit, manufac-turers of Android handsets will have tond new ways to accomplish key tasksand then convince consumers to adoptthem.

But Apple would be advised to remem- ber that no one truly wins a thermonu-clear war. The decision may give thecompany a temporary advantage, lock-ing competitors out of key technologiesand user interface features, but given thespeed of change in the industry, its un-

clear how long that advantage may last.And the decision may also kick off a newround of innovation that could eventuallyknock Apple off its pedestal. Even be-fore the Samsung decision, UBS industryanalyst Steve Milunovich suggested thata win in the case might actually be badfor Apple over the long term. In a widelyquoted research report, Milunovich ar-gued that a win could hurt Apple be-cause the real threat is not a competitor

beating Apple at its own game but in-stead changing the game. The likelihood

of Apple being leapfrogged or a rival cre-ating a new category is greater if theyhave to think out of the box. In otherwords, forcing competitors to avoid itspatents could backre on Apple, if themove motivates the competition to out-innovate the company. Given Apples ownreputation as a game-changing innovator,such an outcome would be ironic indeed.

Taking too punitive a line with Sam-sung and other companies could have

PERSPECTIVES

News and Analysis of the Global Innovation SceneMaryAnne M. Gobble , Editor

DOI: 10.5437/08956308X5506001


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Perspectives NovemberDecember 2012 | 5

Samsungs Galaxy S III, right, and Apples iPhone 4S on display at a mobile phone shop in Seoul,South Korea, August 24. (AP Photo/Ahn Young-joon)

other repercussions for Apple as well. Al-though Apple, and some analysts,

believe that the win in court brings withit an advantage in the court of publicopinion, IAM Magazine editor Joff Wildsuggests that too much focus on blow-ing [competitors] out of the water couldirreparably damage Apples brand. This isan argument worth considering, espe-

cially given the way in which Apple hastraded on the emotional appeal of itsproducts to build customer loyalty. Hav-ing its brand associated with a heavy-handed vindictiveness could taint thatexperience, breaking the emotional

bond that keeps many consumers re-turning to Apple. Steve Jobs once de-clared, Good artists copy, great artistssteal. And we have always been shame-less about stealing great ideas. In thiscontext, the companys declaration ofthermonuclear war may seem hypo-

critical, and Apple itself has trained itscustomers to be attuned to suchcon siderations.

Instead, many suggest, Apple shouldconsider offering Samsung and otherAndroid handset manufacturers a setof cross-licensing agreements, whichwould also defuse impending infringe-ment suits against Apple led by Mo-torola and others. It may also help tomend fences with Samsung, a major

supplier of components for the iPhone.At the same time, it would give Apple astake in every Android smartphonesold and moderate competition byforcing Android makers to account forthose licensing fees in their pricing.(Smartphone manufacturers alreadypay licensing fees to Microsoft for someelements of the Android OS. As Roger

Chen, writing for CNET, put it,Googles free operating system isnt asfree as it used to be.)

The wider impact of the decisionremains to be seen. A number of parties,including Google general counsel KurtWalker, have expressed concern that thepatent wars may stie innovation in theindustry and shut out newcomers whodont have the resources to protectthemselves. This decision may acceleratethe patent arms race, building the barri-ers to entry even higher. It may also in-

ate the value of patent portfolios evenfurther, which could be good news forRIM, Kodak, and others contemplatingpatent sales. Whether consumers willsee a rush of new designs as companiesseek ways to work around Apples pat-ents, or less choice and higher prices, willdepend on a whole array of factors yet to

be determined. Apple has won this battle, but the war, it seems, is still upfor grabs.

MaryAnne M. Gobble , Managing Editor

Raleigh, North [email protected]

Americas New BrainDrain: The Loss of theSea TurtlesThe Chinese call them sea turtlessci-entists and engineers who obtain doctor-ates, postgraduate experience, and even

jobs in the West and then return to theirhomeland to take up key roles in thetechnology economy. While China is notalone in persuading qualied citizens toreturn homeIndians are increasinglyfollowing the sea turtles exampletheMiddle Kingdom has approached the is-sue most aggressively. A governmenttalent development program started in2010 offers bonuses of up to $150,000 toreturnees qualied in science, technol-ogy, engineering, and mathematics(STEM) elds.

Chinas gain is the Wests loss; thedrain has been particularly felt in theUnited States. Over the decades, theUnited States has beneted hugelyfrom overseas science students choos-ing to stay in U.S. universities or corpo-rations once they complete their

training. International students ac-count for about two-thirds of engineer-ing PhDs awarded by Americanuniversities and a high proportion ofdoctorates in the sciences. So the in-creasing ow of sea turtles threatens toproduce a signicant gap in Americaninnovation.

A recent report by the Partnershipfor a New American Economy and thePartnership for New York City, NotComing to America: Why the U.S. is Fall-ing Behind in the Global Race for Talent ,

spells out the problem. In recentyears, it states, U.S. immigrationlaws have failed to keep pace with thecountrys changing economic needs.Articially low limits on the numberof visas and serious bureaucratic ob-stacles prevent employers from hiringthe people they needand drive en-trepreneurs to other countries, whoare quick to welcome them. In fact,other nations have witnessed the


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Apple Scores a Win in the Smartphone Wars