Smartphone biggies get into patent wars

Smartphone biggies get into patent wars

Smartphone biggies get into patent wars

The smartphone in your hand is a marvel of innovation, packing sophisticated computing and communications technologies into a sleek digital device.Now, it is also a litigation magnet.

In the last few years, the companies in the smartphone industry have spent billions of dollars buying patents and hundreds of millions suing one another. Last Friday, that battle reached a peak with the decision by a federal jury in San Jose, California to award Apple $1.05 billion in damages from Samsung for infringing on just six patents.

The case underscores how dysfunctional the patent system has become. Patent litigation has followed every industrial innovation, whether it is steam engines, cars, or now, phones.

And it is the courts, rather than the patent office, that are being used to push companies toward a truce.

In the end, consumers may be the losers. The substantial legal fees may be passed on in higher prices, analysts say, and litigation can deter entrepreneurs from entering the industry, so there is less competition.

“It is hard not to see all the patent buying and patent lawsuits as a distortion of the role of patents,” said Josh Lerner, an economist and patent expert at Harvard Business School. “They are supposed to be an incentive for innovation.”

By one estimate, as many as 250,000 patents can be used to claim ownership of some technical or design element in a smartphone. Each patent is potentially a licence to sue.
Samsung says it will challenge the jury’s decision, which covered design basics like the shape of the iPhone itself and its array of small on-screen icons. So the courtroom conflict could continue for years, and even then, the case is but one of dozens of lawsuits and countersuits in 10 countries between Apple and Samsung, the world’s two leading smartphone makers.

But Apple has more than Samsung in its sights in its litigation campaign. Samsung, the Korean electronics giant, is the leader among companies using Google’s Android mobile operating system. So while Apple may be suing Samsung in courtrooms in Germany and Australia, the real enemy is up the road from Apple’s headquarters in Cupertino, Calif., at the Googleplex in Mountain View.

Ultimately, the Apple-Samsung roadshow is just the main attraction in the global smartphone patent wars. The roster of litigants includes Microsoft, Nokia, HTC, Google’s Motorola Mobility subsidiary and others.

In a recent case between Apple and Motorola, Judge Richard A Posner, a prominent federal appeals court judge in Chicago, said in court that the use of patents in the smartphone industry showed a system in ‘chaos.’ In June, Posner dismissed the case, chastising both sides. He heaped scorn on Apple’s broad claims for its user-experience patents and on Motorola’s claim that Apple should pay a rich royalty on its basic communications patents. Both companies have appealed.

The disputes are fuelled, legal experts say, by companies rushing to apply for patents as both defensive and offensive weapons, and by overburdened government examiners granting patents too easily.

Trivial patents

“The smartphone patent battles are enabled by lots of trivial patents that never should have been granted in the first place,” said James E Bessen, a patent expert and lecturer at the Boston University School of Law. “That’s where Judge Posner was coming from in his ruling.” To the winners of the patent wars, the rewards will be rich.

Mobile computing, or smartphones and tablets, is the most lucrative and fastest-growing market in business. It has made Apple the most valuable company in the world. As Samsung passed Apple in the last year to become the largest smartphone maker, its profits surged along with its sales.

Despite the hostilities, experts say the smartphone patent wars will eventually end in an industrial armistice. The California court decision, if it holds up on appeal, could have that effect. “This ruling sends a message to all the handset makers that you have to make truly differentiated products that look different,” said Colleen V Chien, an assistant professor at the Santa Clara University School of Law. “And that’s the message Apple wanted to send with its litigation.”

Legal experts thought Apple would have the most trouble winning infringement judgments on its design patents, which are generally considered weaker than engineering patents for hardware or software, known as utility patents.
But the jury found that Samsung infringed on three of the four design patents in the case. The fourth was a patent for the shape of a tablet computer—a rectangle with rounded corners. “This could open up a whole new front in the patent wars, as companies race to file applications for design patents,” said Kevin G Rivette, a Silicon Valley consultant and former vice president for intellectual property strategy for IBM.

Yet Rivette is convinced that the smartphone patent wars will subside and an accommodation will be reached. The sheer number of smartphone patents and the speed of innovation in product development undermine the power of the patents. The situation is very different than the role patents play in an industry like pharmaceuticals, where a blockbuster drug may be covered by a single patent or a few. In chemistry, the molecule is the patentable idea.

In the smartphone industry, an infringement ruling can slow down a rival for a few months, but not block it. Samsung engineers, for example, have already devised an alternative to one of the patents found to have been infringed on: the so-called bounce feature. Pull a finger from the top of the iPhone’s touch screen to the bottom and the page bounces. On the newest Samsung smartphones, the same downward finger stroke brings a blue glow at the bottom of the screen, not a bounce.

“In this industry, patents are not a clean weapon to stop others,” Rivette said. “The technology, like water, will find its way around impediments.”