Yesterday I marveled at the fact that intellectual property issues were already dominating industry news and that it was only Monday. Who knew that the Microsoft sale of most of its recently acquired patents from AOL to Facebook and Apple’s getting nailed with a patent infringement suit from little-know FlatWorld on things relating to touch screen technology, would barely last the 24 hour news cycle. Alas, even the lively proceedings of the Oracle-Google trial (lively if you like the jury is falling asleep over questions of whether APIs can be copyrighted), have been forced to play second news fiddle as the International Trade Commission (ITC) today got crabby with Apple.
Hot off the wires was the revelation today that ITC Judge Thomas Pender had ruled Apple violated one of four Motorola Mobility patent rights. While the patent relates to Wi-Fi and not to the core (pardon the pun) of what “makes and iPhone and iPhone,” it is nonetheless important. The major reason is that the six-member commission after reviewing the judge’s ruling has the authority to block imports that infringe U.S. patents. And, as we all know, iPhones and iPads are not born in the USA.
A deeper dive
Because patent litigation and regulatory complaints now span the world and involve virtually every major mobility device and software makers suing everyone else, a little context on this decision is in order, especially since the ITC alone has over a dozen cases on the subject on its platter. Here is a quick primer:
· Motorola Mobility, in the process of being acquired by Google, filed the ITC complaint Oct. 1, 2010, (In the Matter of Wireless Communication Devices, Portable Music and Data Processing Devices, Computers and Components Thereof, 337-745). It was done partially in reaction to Apple’s public anger that Android phones were copies of the iPhone.
· Apple actually soon thereafter lost its own ITC case, filed Oct. 29, 2010, to block the importation of Motorola Mobility’s Android phones (also not made in the USA), based on infringement of its patents. The case is currently under appeal.
· Apple just for good measure also has an ITC complaint against Android manufacturer HTC to block importation of their phones as well.
· In Motorola’s case against Apple, two of the four patents actually relate to Wi-Fi. The other two are for a way the server tracks applications, and a sensor to determine the proximity of a person’s head to the phone so it doesn’t initiate unwanted actions like hanging up or dialing.
Blocking and tackling
It is difficult to keep track of which company has been barred in which jurisdiction by which court or regulator from importing what products at this moment in time. For the moment, despite various rulings such as today’s everything, everywhere is under appeal.
As everyone who comments on these matters likes to point out there is a staggering amount at stake both short and long term. In fact, writer Peter Svensson has a fascinating piece, some might say disturbing, on how Apple’s market dominance casts an incredibly long and dark shadow on service providers and competitors alike around the world. What he did not say is that in the fast moving smartphone and tablet markets, every minute counts. Thus, sticking a thumb in the eye of a competitor is important as market shares, until now with the exception of Apple’s which keep going up, can swing violently and profitability can go from black to deep red in an commercial blink of an eye. Think back of what has happened to the fortunes of former high fliers Motorola and Nokia, the departure from the scene of Siemens, how Microsoft maybe too late to the party, and now how quickly Samsung has emerged as the major challenger to Apple from the Android crowd when not long ago HTC had all the buzz. Presence in key markets really matters. And, other than India and China, the U.S. market with the 4G LTE deployment arms race in full force, while not the biggest market continues to be a bell weather.
Stop the madness
There is a certain Alice in Wonderland aspect to all of this. Google which is defending its use of Oracle (by way of its Sun Microsystems acquisition) Java technology as not infringing on Oracle’s IP, for the moment is the beneficiary of an infringement finding on behalf of its soon to be acquired Motorola assets. In a way this is validation of Google having paid $12.5B for the Motorola treasure chest of 17,000 patents. In part, along with cementing end-to-end control of its mobility-centric ecosystem which portends interesting sledding ahead, Google has said building ups its IP portfolio was the best defense against potential litigation. Really?
Many years ago I interviewed a corporate executive about a joint-venture that his company had taken a pass on. He said the philosophy of his company was in line with the Chinese axiom that a joint business venture represented, “same bed different dreams.” Today, ecosystems are more closely akin to what used to be joint ventures than in many aspects modern joint ventures themselves.
As the Svensson article points out, how Apple ultimately manages the health and welfare of its ecosystem partners, i.e., shares the wealth, will be critical. With 80 percent of the mobile device industry profits and carriers chaffing at their perception of not getting a fair share, the Apple squeeze may have some short-term impacts on investor views of Apple’s profit outlooks but in the long run it appears some rebalancing is in order. On the Android front, Google is going to have to figure out how to allow other Android manufacturers to flourish; it needs those app revenues, while also being mindful of reasons other than IP that it bought Motorola Holdings.
It is this calibration of ecosystems, driven by customer fancy and increasing disloyalty that makes the IP wars so important. Indeed, for those who like to bet on long-shots, while Apple and the Android crew battle, Microsoft and Nokia may have just the window (again pardon the pun) they need to get back in the game. Things like new form factors, integrations with TV and PCs, online gaming, and the mobile wallet all present opportunities for Microsoft and Nokia (still the world’s largest device supplier) to gain share and do so quickly.
The lesson here is that no matter what the subject of an IP patent win is, it will be importation restrictions (who gets blocked) and licensing fees (who gets tackled and how hard) that matter. It may only have been about Wi-Fi and Apple could prevail during the ITC review, but this was no trivial matter.
As I remarked in my previous article, it was only Monday and look at all of the madness that had been unleashed. It is Tuesday and we have already doubled down. This is shaping up as a possible week to bookmark. Unfortunately, there seems to be no end to the madness.
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