During the Cold War, the US and the Soviet Union built enormous stockpiles of nuclear weapons that could have wiped out each other — along with everyone — else on the globe many times over. The policy was called ‘mutually assured destruction’, or MAD. Smartphone makers are following the same strategy, only with patents, not bombs. But only one phone maker is in a position to win no matter who tosses the first bomb.
Apple Inc. (NASDAQ: AAPL) leads all smartphone makers in profitability, and its iPad tablet essentially has no competition at all. The Android operating system from Google Inc. (NASDAQ: GOOG) powers smartphones from Samsung Electronics (OTC: SSNLF) and HTC Corp. (OTC: HTCKF), among others, and Apple has been very aggressive in pushing its claims that Samsung and the other Android-based phone makers are infringing on Apple’s patents on product design, interface design, and even packaging. Apple is also suing Amazon.com (NASDAQ: AMZN) for using the term ‘App Store’ claiming an infringement on an Apple Trademark.
Apple’s strategy has been to seek injunctive relief as well as damages and the latest victory for the Cupertino company is the announcement from Samsung that it will delay the Australian release of its Galaxy Tab 10.1 tablet until after an expected court ruling is delivered in late September. A ruling in Apple’s favor could prohibit Samsung from introducing the tablet until all the patent claims are sorted out, which will take years.
Whether Apple wins or loses the suits is almost irrelevant. What matters is how quickly or slowly this all happens and how much it costs.
The traditional counter-action in technology patent fights is for each company to amass as many patents as possible and counter-sue. Mutually assured damage, if not destruction.
So Samsung has retaliated by suing Apple for infringing patents Samsung holds on certain wireless technology. HTC has also counter-sued Apple. Nokia Corp. (NYSE: NOK) and Apple are also suing each other for infringing patents. Google’s recently announced acquisition of Motorola Mobility Holdings Co. (NYSE: MMI) adds significantly to Google’s arsenal of patents.
Apple is winning in the marketplace and it is winning at least temporary relief in the courts. In addition to the ruling due in Australia, Apple has won delays in the Galaxy tablet’s introduction in the Netherlands and Germany. Of course Samsung will counter-sue in both places, hoping that its patent portfolio will force Apple to settle. Not likely to work out the way Samsung hopes.
But Apple has no reason to give in easily, whether to Samsung or Google or any other company. And even if a negotiated settlement is reached, Apple will no doubt exact a stiff price.
Perhaps that’s as it should be. After all Apple’s iPhone changed the market and its iPad created a new market. If the various courts appear to be favoring Apple’s position, settlements will follow quickly. It’s more important for competitors to get into the market than to risk a long legal battle. Either way Apple wins.