Post 9: Imperial War: Litigation or Licensing?

As the worldwide smartphone demand increases, more and more companies involve this kind of ‘battle without gunpowder’ and it will probably become more sever as time goes on. How to be the final winner of the imperial war? Let’s see how Apple and Microsoft’s different approaches to smartphone patent.

Apple: Once Apple innovates, it will shake all over the world, such as the shock we got by the first iPhone. However, once Apple’s innovation pace slows down, what would happen? When Apple’s CEO began to take over Apple’s “day-to-day operations”, Apple’s Board of Directors decided to use patent attack to replace Steve Jobs’ innovateon staff. By then, Apple’s patent war debut. It filed the patent lawsuit against its number one target, Google, smoothly under HTC and Samsung in the sight, perhaps, there are more enemies. So far, Apple has sued HTC, Nokia, Samsung. Nokia has sued LG, Toshiba, Hitachi, sharp, and etc. At the same time, HTC, Nokia, Samsung, Qualcomm responded spontaneously when facing their own plaintiffs. We can’t deny how great Apple used to be; however, we can also see the gradually reducing of innovation element in the generation interchange of the iPad and iPhone family. The new products bring less and less surprise to Apple fans.

Microsoft: Unlike Apple, Microsoft chose a different approach to enter the smartphone market. It chose to pursue de facto licensing arrangements in lieu of litigation. Instead of suing all other companies, Microsoft chose to cooperate with them as long as they pay royalties to Microsoft.

By comparing these two companies’ business behavior, we can’t judge whether it’s right or wrong. But if you let me select, I would prefer Microsoft’s way to do business. Reasons are simple, like professor Lavian mentioned in the PowerPoint, suing for patent infringement is costly and no way to make friend. Plus, the smartphone market is so large; it is impossible for one company to monopolize it. Yet, facing the market, you can fight with others or cooperate with them. It’s all your choices. I think if Apple wants to get back its leading position in the smartphone market, it’s not too late for them to think about their market strategy. Perhaps, Microsoft is the best model for them to learn.

Post 8: Operating System of Smartphone

         What is the operating system for wireless mobile devices? It is what a mobile is built on with more advanced capability connectivity than a feature phone. How important is it? Based on my understanding, it is mostly like the brain to the body. the body cannot function without the brain. Or it is like the foundation to the house.  The apps are like the variety of the houses. Without a good operating system, all fancy apps are useless. Now you can see how important it is!

The current mobile operating systems for smartphone are Google’s Android, Apple’s iOS, Nokia’s Symbian, RIM’s BlackBerry OS and Microsoft’s Windows Phone shown as in the lecture PowerPoint (the data in 2011).

         Surprisingly, Android’s users are larger than iOS user. Android system was founded in October 2003, while the first multi-touch interface mobile phone, iPhone, was released in 2007. As the demand for smartphone increases in the recent years, the rate of lawsuits based on patents for smartphones increases greatly in 2010 as more and more companies engaged in patent wars.

When we take a look at the global smartphone operating system market share in Quarter 4, 2012.

         We can see that both Android and iOS competed in a promptly growing. According to BetaNews, the demand of Android and iOS heavily rely on Apple and Samsung. I think it might be one of the most essential reason why Apple consider Samsung as its biggest enemy in the smartphone market and file a lot of patent lawsuits against Samsung. The question is whether Apple can take back the market share if it can beat Samsung. I doubt it since the chance for Apple to win is tiny, plus, other Android smartphone are still there trying to gain share against Apple and Samsung. As professor Lavian questioned in the PowerPoint :” Who is Number 3 Operating System?” I guess it’s really hard to say. Success comes with risks. Although Android share continue increase and iOS share decreases, it’s hard to predict the share after the smartphone market saturates. Not to mention the improvement of the comparability of other operating systems. Thus, I am more interested to see who is No. 1 in a few year. Android again? Maybe. iOS? Maybe. Or something else? You name it!

Post 7: Patent Trolls -- What's after it?

What’s a patent troll? According to Electronic Frontier Foundation, a patent troll uses patents as legal weapons, instead of actually creating any new products or coming us with new ideas. In some cases, the companies buy the patents from unlucky companies and send out threatening letters to those they argue “infringe” their patents to pay a licensing fee, which ranges from thousands of dollars. Surprisingly, many who receive infringement letters choose to pay the licensing fee although they believe their products do not infringe. Why don’t they fight back?

I found the answer from Mercury News, “’Patent trolls’ filing majority of U.S patent lawsuits”. A data found from Patexia shows a sharp increase in patent lawsuits at the end of last year.

Based on a research done by a Californian law professor, Colleen Chien, the majority of U.S patent lawsuits are brought by “patent trolls”. In 2012, abut 61% of patent lawsuits were brought by patent-assertion, comparing with 45% in 2011 and 23 % five years ago.  Many patent demands were settled before reaching the lawsuit.

I think many companies would like to settle the cases since they can’t afford the huge lawsuit cost or they don’s want to waste their time on lawsuit. It seems like a lot of companies have treated patent lawsuits as a business model rather that build their own technology. I can’t judge if that’s right or wrong. Probability that’s why professor Lavian said the patent lawsuit made some lawyers rich. However, I wonder how long they can go before the U.S. government improves the patent law. It has been several years since the first smartphone patents related lawsuit in 2009. I think it’s quite a long time for the patent office to analyze their leak and fix it. Nevertheless, it might be harder for the technology companies that really need to assert their patents.

All in all, I think it’s the time for the patent office to regulate the market. 

Post 6: Nokia's Patent War

I have a special feeling about Nokia since my first cell phone was Nokia’s. I would say I like it a lot since it is the most durable phone I have ever used. I have dropped it on floor more that five times in two years, but the phone still run well and only some slightly scars appeared on the surface of the phone. I just realized that Nokia’s phones disappear from the market gradually when professor Lavian mentioned in the lecture on Monday. Nokia used to be the world’s largest vendor of mobile phones from 1998 to 2012. However, as the growing use of smartphones, Nokia has suffered a declining market share in the past five years.

Then how can the company survive during these recent years? The answer is Nokia’s patent that not only shows Nokia’s value but also saves the company. One recent lawsuit is against Research In Motion (RIM) for infringing on some of its mobile WLAN patents. At the end, RIM agreed to a one-time sum of ~$65 million plus recur royalty payments of an undisclosed amount. The lawsuit not only proves the potential portfolio of Nokia’s patent, but also shows the growing efforts on Nokia’s part to get back to its smartphone business. Based on my research, Nokia holds about 16,000 issued patents and 4500 pending patent applications in and out of the U.S. With the current royalty run rate, Nokia’s patents are believed to be worth about $4 billion. Although Nokia is losing money on the smartphone business, it earns a steady income from its patents by suing RIM, Apple, HTC these recent years. It seems like Nokia has found a new way of using patents to generate profits, and it also demonstrates the strength of patent.

After reading all these, I do see the real power of patent. At the mean time, I am looking forward to see Nokia’s smartphone. Hopefully, Nokia won’t let me wait too long.

Post 5: Smartphone War -- Apple vs. Samsung

I just read the news that professor Lavian shared to us—“Apple-Samsung judge says she may put second patent case on hold. The first thing I notice in the article is the place the lawsuit is held. San Jose, CA, one of the places professor mentioned in the lecture. I remember the first time I started to pay attention to Apple and Samsung is when I planned to purchase my first smart phone about half a year ago. I hesitated a long time between iphone and galaxy. They are kind of similar at some aspects, but they both have advantages and disadvantages. I did a little bit research on this two products and companies, and realized they have a series of ongoing lawsuit. In fact, Apple and Samsung are the first of a series of ongoing lawsuits with respect to smartphone and tablet computers. Apple first sued Samsung on April 15, 2011 in the United States District Court for the Northern District of California. In the lawsuit, Apple mentioned that a series of Samsung’s Android phones and tablets infringed on Apple’s intellectual property. The attached graph shows the smartphone product timeline for Apple and Samsung.

One of the studies I read stated that Apple’s iPhone 5 and Samsung’s Galaxy SIII now equals in North American web use.  

When we looks at the data driven by Chitika Insight, we can see that iPhone 5 is only a slightly lead over Galaxy S III However, when we looked back to the timeline, we can see that iPhone was first released in Jan 2007, while galaxy was first released in June 2010. Within 3 years, Samsung got to be the #2 mobile company that leaves other competitors behind.

Apple used to offer Samsung $30~$40 per unit license in 201, but Samsung refused. It seems like it is cheaper to go through the lawsuit rather than encumbered long term with a license fee. Plus, at the same time, apple has to pay some attention on the lawsuit, so why not?

My only concern is how long apple can be the leading smartphone company.  Since Apple only has one kind of smartphone, compare to other smartphone companies, Apple smartphone user are so limited. A lot of my friends have switched from iPhone to Galaxy or some Samsung smartphone.  Honestly, I am thinking about switch to Galaxy as well. Nevertheless, if Apple does some surprisingly changes this summer/fall, am I going to switch? That’s a good question!