The linked article claims Apple is willing to settle in exchange for license income on some of its patents. For those of you not familiar with the patent war: that´s unheard of until now. Steve Job´s Apple has always refused to offer licenses blocking all possible deals. Instead of quoting the article lets see if it makes sense for Apple to change its long time stance.
The major cause for the flood of court cases, injunctions, temporary sales blocks, disabling of services etc. is not the patent system in itself. Patents, how silly some may be, exist for a long time, but normal business practice is to strike a deal with the owner of the patents.
The, – by now already old – PC industry has more patents than the mobile sector, but you never hear about court cases, orders to change software, blocks on the sale in some countries or disabled functionality in other parts of the world. There is no need for this high stake theater play as the parties involved are mature, the industry is mature and most of all: they all realize the need to license their patents.
Sometimes a payment per device is agreed, like Apple now pays to Nokia for essential patents, sometimes a cross-licensing deal is made like the major deal between AMD and Intel a long time ago. The details are usually secret but in the case of Apple paying Nokia its rumored that Cupertino settled out of court by paying 750 million dollar AND a fixed amount per sold iPhone.
Steve Jobs has always refused to license Apple technology to others. He was convinced that the patent system would protect not only the technology, but also the designs. I have often wondered how he managed to convince investors and his board of the wisdom of this policy as the so called software patents and design protection don´t have a proven track record.
It´s easy to get a patent on a swipe, a tap, a rectangle with a glass surface, but defending that patent is an entirely different matter. The patent system is designed to allow for many patents while trusting the market and the judges on the actual value. Some of the key patents never survive a test in court as prior art surfaces or the judge finds the patent trivial and you end up with empty hands.
Steve Jobs reality distortion field was so large that nobody even doubted his wisdom to put all Apple´s money on the patent system. Worse, even his threat to go ´thermonuclear´ on competitors like Android was taken serious. Tim Cooke is a very different man. He understands manufacturing like nobody else and he knows that the deep pockets of Apple can be put to good use by buying production capacity.
What every company wants is having a monopoly on products as only then you can get the extreme profit margins Apple has on its iPhones. Jobs gambled on the patent protection, Cooke knows that just buying all capacity to produce essential components is just as effective. The difference: Apple knows how much money it can pump into a supplier demanding exclusivity for a year while the outcome of court cases is not under control of Apple.
The recent setbacks in courts and the new leadership by Cooke brought the change which Apple really needed . By licensing its technology the company ascertains itself of a price advantage over competitors. They may not need the money, but making sure your rival can´t out compete you is very effective.
The crucial factor for the new stance on licensing will be the ´one device per year´ policy of Apple. This reduces development costs, marketing costs and makes it possible to strike extremely good deals with suppliers as you can guarantee and pay for 20 million new super duper technology screens without any worries. The competition has five models a year, uses the traditional production run system and will always have a disadvantage that way.
However there is one catch of the ´one device per year´ policy. If a court case against your recently introduced model is successful you´re out of business. Your competitor, let´s just call them Samsung or Google Motorola, will survive a similar setback.
When the 10.1 tablet of Samsung was kept off the German market the Korean giant just introduced a 10.1N revision. Would that have failed, there were three other models already in the pipeline. And for Apple the question is not if they can keep Samsung out off their profit margins, but if they can keep all Android devices locked up by courts.
Tim Cooke is a smart man. He doesn´t like to gamble on court cases if he can get his guaranteed monopoly by buying exclusive technology. It´s remarkable that Steve Jobs, the man who trusted nobody, put the future of his company in the hands of lawyers and judges from all over the world. His successor will proof to be wiser by avoiding the risks and maximize the real advantages of Apple: their deep pockets.
The thermonuclear war of Steve Jobs will probably go into the history books as the largest mistake ever made. Licensing Apple technology will be the key to the future of Apple.
Tim Cooke doesn´t have the charisma, but he has common sense and that will pay off in the end. Sometimes it helps to face the reality without any distortion.
now go read the link and prepare for more Apple news today 🙂 #patents
NASDAQ News: Apple Offered Licensing Deals To Some Patent Foes -Sources
Truly hope that it will truly stops…
Good for Apple, MS and Google/Android I suppose, but I fear that cross-licensing is just a way to keep all the power of patents as a tool for rich corporations.
Now independent developers won't be able to create a 'for loop', use an icon of any shape or size, or move an image on a screen without paying Apple, Google, or MS for the 'right' to use what once were public domain designs, concepts and ideas.
I'd much rather see patent/copyright reform (real reform that takes into account people and not just corporations) than a 'license agreement cartel' solution.
But meanwhile +David Landry I wanted to have this rant 😉
I'd much rather see patent/copyright reform […] than a 'license agreement cartel' solution.
Agreed. A more reasonable patent system is a long time coming though. At least this will serve as an intermediary between the two and this licensing cost should hypothetically be less of a cost to the consumer than a drawn out legal battle.
Enjoyed your post +Max Huijgen.
Thanks +Andrew Eva It was bubbling inside me for a long time so I wrote it in 30 minutes flat after spotting the article.
All I can hope for now is that it gets read before the iPad/iTV launch bursts….
Read it and enjoyed it. I also think that patents alone are like putting all your money on a bet and the more competition you're facing the less your odds of always winning are. If Apple was to buy a producer of flash chips, for example, they would have a steady revenue coming from their competitors who can't do without the chips. Or some new storage technology comes along faster than estimated – which also wouldn't be a bad thing.
+Lucas Appelmann they did buy some crucial technology companies. Some processor design companies, SIRI, memory technology etc.
+Max Huijgen I know they did – but I think that if they want to make the most of their investments they can't just sit there being their only client. Technology on this scale is about sharing or someone else will come along and surpass you in a surprise move. My opinion, of course 😉
Sure +Lucas Appelmann sitting on top of crucial technology is fine, but at the moment the margins on an iPhone are so high that it´s hard to imagine a way in which any licensing can contribute to Apple´s total profit. Hence my opinion that they will license for the strategic reasons outlined in the post.
+Max Huijgen point taken 😉 I would never have believed that this licencing deal would have altruistic reasons…
I don't think there will be any deals. Samsung just launched another lawsuit against Apple today in Korea. Personally I think this is right…its a reality check. But the reality is that the Google Motorola purchase may have put Google in the drivers seat as Apple is infringing on Moto patents with services like iCloud and they are going to have to pay Google for the FRAND patents that they didn't license.
In addition when Apple started going after companies on the swipe to unlock patent some pointed to a company called Neonode that had a device out that used swipe to unlock as prior art. Well it turns out that company applied for the patent on that and it was just issued to them. They've said they are approaching Apple about the license fees they are owed. So not only will Apple have to pay up but they will have to drop their cases against the Android OEMs.
And finally its now coming to light that Google has been applying for patents of its own including the drop down notification system which would cover Apple's message center. These Google patent applications are being discovered left and right now and who knows what else they may have up their sleeve that paints Apple into a corner.
So I'd dare say this settlement offer might be the beginning of Apple trying to save itself from the fire it started. Buying up all the technology won't save them if others hold the patents on what they are trying to do and take the same stance as Apple on licensing. Imagine Apple having to remove Message Center from the iPhone and iPad. Imagine if they have to shut down iCloud everywhere. Imagine if Neonode doesn't like the terms Apple offers or worse yet if Google was able to buy the company. Its true they can't win this game but I think its for different reasons.
+Phillip Hagger great contribution and I was not aware of NeoNode so thanks for it, but I beg to differ on the crucial point: in view of the imminent losses in court cases Apple will start licensing and trying to make some license swaps.
I'll believe it when I see it. IP protectionism is part of Apple's DNA, going back to the Look and Feel lawsuits in the 90s.
Jobs' philosophy appears to have changed over the years, judging from this interview in '94:
Steve Jobs: Good artists copy great artists steal
So, it is ok to take something from somebody else and improve on it, unless you are taking it from Apple.
Fundamentally, I think our IP protections are broken — all of human advancement is based on the work of others, with incremental improvements. Even revolutionary things wouldn't be possible at all without the work that was done before.
Even revolutionary things wouldn't be possible at all without the work that was done before.
And that is why patents have an expiration date. Just recently the exclusive patent for lipotor (cholesterol drug) expired, so now generics can be made. The idea is that a company needs to recoup the cost of research.
I'm not convinced that a timeline is the best method for determining the recouping of research costs in all scenarios. Perhaps a loophole allowing for patent expirations to be expired based on challenges? So if you can prove that a company has reasonably recouped the development costs of a patent, the patent can be opened?
That was the original goal, and in some cases the investment required to create the technology is so much higher than that required to use it that a long protection period is justified. However, in most cases that doesn't apply. How much did it take to imagine "slide to unlock", given the countless physical examples? Instead, patents have just become a way to shake down other people rather than encouraging research.
Also, IP protections get extended, particularly copyright where every time Mickey Mouse is about to become public domain they extend the copyright length.
Agreed, +John Tamplin … what are your thoughts on being able to legally challenge a patent for public domain based on "reasonable period to recoup" or something along those lines? Or challenge based on "unreasonable licensing fees"
Those seem like red herrings and likely to just increase litigation.
Personally, I think while there are genuine cases where the patent system helps, those are far outweighed by the losses caused and we would be better off throwing the whole system out.
+John Tamplin are you in any way representative for the whole of Google when it comes to refining or even renewing/removing the current patent system?
Desperate perhaps?? Be interesting to see how it all shakes out.
+Lucas Appelmann No, I am speaking only for myself. Google has made official statements about it though:
http://googlepublicpolicy.blogspot.com/2009/03/patent-reform-needed-more-than-ever.html
http://googleblog.blogspot.com/2011/04/patents-and-innovation.html
http://googleblog.blogspot.com/2011/08/when-patents-attack-android.html
Thanks +John Tamplin, off to read…
Very nice writing +Max Huijgen And you may well be right on the reasons. I also think it is partly because of the perception to some groups that Apple is plane evil. Me being one of them to be honest. I think some Apple products are pretty good but I will never buy one of them because of my perception of how the company does its business. If it really does start to play nice and cross license then who knows, maybe some day I will buy an apple device.
Who knows, with the old dictator gone North Korea was willing to give up nukes — maybe with a dictator gone, Apple is willing to give up lawsuits.
Max, while I agree in terms of business this is absolutely sound, think about the impact it has on the image of Apple.
Now, maybe I'm getting ahead of myself and I don't quite get all this implies, but imagine licensing MacOS X. Many, many Apple product owners identify themselves to the brand as being superior in terms of usability, design, and sophistication. All of a sudden, the Apple becomes tarnished.
I think this is what made Jobs the icon he was: he catered to the customers that thought like him. "Think like me, and everything will be all right." Now, this is a radical change in terms of image. Apple users like to be "different". Now, if licensing is kept only to patents, fine. If it goes further, say Mac OS X, then I think it could be bad.
+Vincent Langlois I´m pretty sure MacOS X won´t be licensed to anyone for two reasons: Apple did this once and lost big time on it as they didn´t make profit on the hardware anymore and b) MacOS X is going the iOS route so it will disappear 🙂
You´re right of course that in general Apple will not license it´s software. They will grant licenses on their patents to avoid battling over them.
Remember: once someone start paying he won´t fight over them anymore. Steve Jobs had about 300 under his own name and how damaging it would be it judges all over the world would call these ´trivial´ Now that would be a PR drama!
+Max Huijgen good analysis. Apple's purchases have all been very strategic, and not a penny was wasted (unlike with a few other of the Big Boys I won't name here… cough…cough…). Only thing they bought we haven't seen yet is the alternative keyboard co. they bought (name escapes me now).
We'll see if they fully go the MSFT shakedown of Android route in time. Also see here -> plus.google.com/112964117318166648677/posts/JK9wp93dVLb
File under #patentlyAbsurd.
I read your post +Alex Schleber but I want to differentiate between Apple wanting to get paid for their licenses and their actual capabilities. It could well become a patent swap with closed wallets.