In the aftermath of the jury’s verdict in favor of Apple on almost all counts in the epic
trial over intellectual property, analysts and journalists have been quick to
ferret out the possible implications of the decision to the likely consequences
for the market. One of them is that Apple could rapidly turn into a monopoly.
Most watchers have assessed correctly that it’s really Google in
Apple’s crosshairs rather than Samsung. Apple’s vehemence in this
case, its unwillingness to license its intellectual property to Samsung on
reasonable terms, is really aimed at Google. Apple’s crucifixion of
Samsung is just a head piked on a stake at the edge of Google’s territory.
Google has been the most extraordinarily silent partner, the most
absent un-indicted co-conspirator ever not to be in a trial. Its cryptic statement on Monday
did little to change that status. As Microsoft has pointed out time and again, Google has
failed to indemnify its customers and properly license intellectual property it
uses in its software, which it gives away to its customers and on which it
collects no royalties.
Rather, Google has perfected a
business model in which it gives away things of value in return for eyeballs on
the back end. Money enters Google’s system via advertisers. Hard for any
rival — or any public authority, for that matter — to connect the software
Google makes and gives away with how it makes money. It’s a model Google
has used to threaten the more traditional business models of companies like
Microsoft, which sells software, and Apple, which sells hardware.
In this matter, Microsoft and Apple
are allies, more alike than either is similar to Google.
In all of history, there has
probably never been a situation in which one company (Microsoft) collects
nearly half a billion dollars in annual royalties from another company’s
(Google’s) customers. Microsoft collects Android license fees from Samsung
based on holdings in its own mobile patent portfolio.
But Apple doesn’t want money from
Samsung. Of course Apple is happy to add the jury-verdict winnings (to be
appealed) to its already staggering hoard, but this matter is not primarily
about money. It’s about wanting Google dead, at least in the
high-mobility-platform business, and, really, entirely, just for being cheeky.
So, now Google stands facing the
cobra of Apple’s wrath with only the shred of Motorola’s patent portfolio to
shield it.
Unfortunately for Google, its
Motorola purchase has not been enough to gain it a seat at the main table with
Apple, Microsoft, and a handful of others with big portfolios of intellectual
property. This group horse-trades among its members. Whatever disputes
they have in other areas, Apple and Microsoft have a gentleman’s agreement not
to sue each other. All quiet on the Apple-Microsoft front.
When the Nortel patents came up for
sale, a group that included Apple and Microsoft made sure Google didn’t get
them. They were keystone patents that could have blocked others in mobile
communications, enabling Google to get in on the horse trading. And
Moto’s patents? Not so potent.
So, one message here goes out to the
absent, silent, non-indemnifying Google: You need to grow up and become a
real business.
Just because you make some software
and give it away doesn’t mean you don’t have to clear the intellectual property
rights. Microsoft has chosen to play a license-fee game, but Apple wants
only blood.
Steve Jobs harbored a well-known vendetta against Google based on
his belief that Eric Schmidt, while sitting on Apple’s board, had leaked the
iPhone’s critical characteristics to his own design teams, who then copied
it. Jobs swore he would spend as much of Apple’s considerable wealth as
necessary to stop Google cold, and he wasn’t interested in licensing to
Google’s partners. The offer that Apple made to Samsung, which came out
during the trial, would have absorbed all of Samsung’s profit. In other
words, the terms were unreasonable, and Samsung rejected the offer. But
Apple wasn’t serious, or else it would have done something more like what
Microsoft has done: license on reasonable terms.
Apple seems to want to drive all
viable competitors from the high-mobility game (in which the pieces are
smartphones, tablets, Ultrabooks, and basically any device you can carry around
and operate all day without plugging into a wall socket). If Apple
succeeds, then it will have no viable competitors and might draw attention from
public authorities around the world.
Microsoft may gain a better position in high mobility over the
next few years with Windows Phone 8 and Windows 8 on tablets. And the
aforementioned gentleman’s agreement between Apple and Microsoft will allow the
latter at least the opportunity to give it a go. But Microsoft has no position
in this market today. Only Google does, by way of Samsung,HTC, and
others.
There are questions about whether
Jobs was alone in his passionate Google-hate and whether Tim Cook is prepared to
carry on the battle in Jobs’s name. Some people think that Cook is less
emotional and might seek an accommodation, but so far there’s no evidence of
that. It’s likely that Jobs wasn’t the only one who felt the way he did and
that some of his team still want the heart of Google’s city burnt to the
ground.
It would be a bad thing for the
market if Apple were to become the only supplier of high mobility products,
software, and related services. And yet, that’s where we’re heading.
Samsung has said it will request
that the judge set aside the verdict and otherwise will appeal to a higher
court. A higher court might be more sympathetic to Google’s proxy if it
sees Apple starting to look more like a monopoly. The Supreme Court would
likely weigh heavily the potential harm to consumers of there being no viable
competitor to Apple.
Intel has made good use of Advanced
Micro Devices as a straw competitor and has thus avoided some of the problems
that, for example, Microsoft faced. And that Apple could face.
A proper settlement of this case
would be for Apple to license on a reasonable basis to Samsung and other
Android customers. Microsoft already does. A lot of consumers like
Android.
Google can argue that Apple’s
patents are overly broad and should be invalidated. It can say, Apple,
with its filings on “ways of doing things” is trying to patent the blue of the
sky and the warmth of the sun. And that’s not right. Apple can’t
claim to have invented “roundness” or “black.”
Over the years, whatever the final
disposition of the case, the outcome will affect the shape of the high-mobility
market — and our lives — dramatically.