Is Apple launching a Patent War?
March 4, 2010
No doubt, when Apple announced Tuesday that it was suing HTC for allegedly infringing on its patents, only one company may have been named, but Jobs & Co. were issuing a legal warning to nearly every company that's released an iPhone-like device.
But how far will this fight go? That's the unanswered question.
The HTC lawsuit could be the first of many as the company stakes its territory in the smartphone market. Larger manufacturers, such as Motorola, Samsung, or Sony Ericsson, may find themselves in the crosshairs later. And even though this particular suit may start with HTC, Apple could end up battling much larger companies Google and Microsoft if it aggressively advances its patent war.
"If Apple just wants to push one competitor out of the way, then it may not implicate Google or Microsoft at all," said Jason Schultz, director of the Samuelson Law, Technology & Public Policy Clinic at the UC Berkeley School of Law. "But if they are staking out their turf and letting everyone know that they own the whole touchscreen smartphone market, then there will be a showdown."
Apple sends clear message
It's still early in the case. Apple has named the patents in question, but it hasn't yet defined how its sees HTC violating these patents. Schultz said when Apple begins filing more detailed arguments it will be much easier to see the company's strategy.
Regardless of how far it goes, Apple's actions are sending a clear signal that the company wants to put the kibosh on iPhone look-alikes. Even as far back as when the iPhone was launched three years ago, it's clear that CEO Steve Jobs wanted to ensure that the iPhone would secure a unique niche in the market. During that first presentation unveiling the iPhone, he made a point of noting the more than 200 patents that Apple had filed regarding iPhone technology.
Since then, Apple's executives have repeatedly stated they will defend those patents. Last year, when Palm wasmaking a big marketing splash with the Pre, Apple Chief Operations Officer Tim Cook said when asked about competitors that his company would be ready and willing to take on anyone who violated its patents.
"We like competition as long as they don't rip off our IP," he said. "And if they do, we will go after anyone who does."
Many technology companies, such as Nokia, Qualcomm, or Texas Instruments, launch patent fights to extract revenue from companies that will license their technology. In fact, that is why Nokia filed a lawsuit against Apple late last year. Nokia's patents, which it accuses Apple of infringing, largely deal with cellular and Wi-Fi technology. This is technology that Nokia licenses to many other companies, and it generates a nice revenue stream from these patents.
But Apple is not interested in generating cash through licensing technology. In fact, Cook made that very clear during the company's recent shareholder meeting. When asked if the company would consider licensing technologies that Apple develops but doesn't actually sell, he said that the company is "not in the business of licensing ideas."
"In many other patent cases, it's about money," Schultz said. "But that's not likely the case with Apple. You generally only get Apple developed technology on Apple products."
Apple certainly doesn't need the money. And it has plenty of cash to pick up the tab for a long legal battle. At the end of December, the company had about $25 billion in cash and short-term investments. When questioned about the company's large war chest, Jobs said during the company's shareholder meeting that Apple is holding onto the money to take "big, bold" risks. Stoking an expensive patent war to maintain the iPhone's unique position in the market, could certainly be considered a "big, bold" risk.
Why HTC?
Apple likely chose HTC as its target for several reasons. For one, HTC is a relatively small and young company when compared with some of its handset rivals, which means it has less money for a long legal battle. And it likely has fewer patents that can be used to countersue Apple. And if Apple is able to strong-arm HTC into changing its designs or even wins the legal war, that will provide leverage that Apple can use against other phone manufacturers, such as Motorola, Samsung, and Sony Ericsson.
These manufacturers may back off on using similar iPhone technology on their own, or Apple could use a victory to bolster its position in future patent fights.
"I would guess Apple wants to take on a fight that they think they can win," Schultz said. "The smart thing to do in these cases is to pick on someone with fewer resources and fewer of its own patents. It makes it much easier to go after subsequent companies with a win under your belt."