The 1999 film “Pirates of Silicon Valley” documents the early story of Apple and Microsoft, where Apple got its start by building on technologies developed by others. The graphical user interface, mouse and tablet computer that Apple commercialized were in different development stages at institutions such as the Stanford Research Institute and Xerox’s Palo Alto Research Center. Steve Jobs built on these innovations. And later, Bill Gates developed the Windows 3 user interface after absorbing the technology through strategic alliance with Steve Jobs.
Their characters in the film vividly state “Good artists copy. But great artists steal,” when they developed the frontier technology based on others’ technology. The era in which the film is set spans the 70s and 80s, back when it was a more relaxed environment. The concept of intellectual property (IP) rights was not strictly enforced. Xerox did not sue Apple and neither did Apple sue MS. These companies were not embroiled in lawsuits and because so, consumers could enjoy the graphical user interface either in IBM-compatibles or Macintosh.
However, these days, we witnessed between Apple and Samsung Electronics a series of more than 50 ongoing patent infringement lawsuits around the globe regarding the design and technologies of smartphones and tablets. Apple’s multinational litigation over technology patents has now become a part of the fierce competition in the global market for consumer mobile communication devices.
The current score in litigation seems to be more or less favorable to Apple. The rulings from several countries are mixed, thus confusing and frustrating to all parties. In its global patent battle, in Korea, Samsung won a home court filing in net. In Japan, Apple’s claims against Samsung were turned down. British court ruled Samsung’s Galaxy tablets were not “cool” enough to be confused with Apple’s iPad. In German court, based on a “clear impression of similarity,” the EU-wide preliminary injunction barring Samsung from selling some device was granted to Apple. Later the EU-wide injunction, however, was reduced to a lesser one applied to the German market, and Apple’s allegation of Samsung’s infringement in “overscroll bounce” patent was denied.
Dutch court ruled for Apple in rejecting Samsung’s infringement arguments in Apple’s using 3G mobile technology as an industry standard. The Dutch appeals court also rejected Apple’s claim that Samsung’s device infringed its design rights. In the US, the verdict from the jury was largely favorable to Apple, stated that Samsung had willfully infringed design patent, and awarded the huge punitive damages.
Patent-related cases basically deal with the ownership of knowledge and the distinction between two companies’ technologies and technical processes may not be easy even to experts to recognize at first sight. A trial by jury may not be the most objective method of deciding patent cases, as the jury verdict may be colored by feelings of patriotism and marred by the lack of expertise in patents.
Handing over the very important role of making such a distinction to the technically-untrained jury may pose even more problems than losing a dispute. For instance, the costs of a global litigation are burdensome. It is even arguable that the monetary benefits that go to litigators may outweigh the benefits to the winning company because in the long-term, the winning company may also find itself on the losing side of IP litigation.
It seems as if these costly litigations have become a type of management strategy and consumers are harmed in the process, as they must bear the burden of litigation costs. Litigation costs can be both observable and non-observable. Observable costs are the monetary costs of litigation that are transferred to consumers in the form of higher-priced goods with innovative technology. But the more deep-set problem of entangled litigation is the hindrance to technological development and the decrease in consumer choice that follows from companies’ reluctance to develop technologies.
If Apple continues to lash out to companies operating on the Android platform, such as Samsung, Motorola Mobility, HTC, etc., the range of choices available to consumers will shrink and the diminished utility in such a situation poses the greater danger of too much litigation. Furthermore, if giants such as Apple continue to pursue these exorbitant legal disputes, smaller firms with fewer funds for litigation may voluntarily forego the chance to develop new technologies and products. The resulting dis-incentive to develop and decrease in consumer choice in products would be the more serious cost of IP disputes.
The current technology patent game is floundering in ‘lose-lose’ game, and the ultimate loser will be consumers. Do not let self-destruction take the place of Schumpeterian destructive innovation. What is needed in the holistic evolution of a winning eco-system is the emergence of an optimal equilibrium between IP rights and innovation spirit. Patents and IP rights are certainly crucial factors by which innovation efforts would be properly compensated. However, there must be a threshold where industry peers begin to avoid cutting-edge innovation because, in excess, they are likely to make vain effort due to the throat-cutting IP litigations. There are too many pitfalls to avoid technology infringements in fast cycle innovation process.
Now it is time for policymakers to reshape patent policies including patent troll problems, for legal community to redefine patent infringements in design and technologies, and most of all, for companies to refocus business strategies according to consumer demand. In this course, we have to remember the fact that growing firms need to innovate and a sustainable eco-system needs to cooperate. It is time to redirect energy into the mutual recognition of other stakeholders and thrive together.
Gyoung-Gyu Choi is a Professor of Strategic Management at Business School of Dongguk University. Professor Choi received her Ph.D. in Business Administration from Stanford University, her Master in Public Policy from Harvard University and BS from Seoul National University. Currently she serves as an advisor to Ministry of Foreign Affairs and Trade and Ministry of Public Administration and Security, and non-executive director of Hana Financial Group and National Information Agency.
