Saturday, 28 February 2009

Apple and the IPhone: Can We Expect a Patent War?

Back in the saddle after several weeks away from the office and largely off-line, I have been reviewing various news items collected during my absence. One item immediately caught my attention--"Apple May Use 'Nuclear Arsenal' to Delay Palm's IPhone Rival," by Connie Guglielmo and Susan Decker, which appeared on February 2nd on Bloomberg.com.

Quite by chance, around the time that this item was published, I had posted my most recent MBA exam question, which focused on the various stages of the cellular/smartphone industry. From the IP vantage, the students were asked to address software copyright and trademark-branding issues, while the patent aspect was less highlighted in the question. The Bloomberg report has caused me to reconsider the potential role of patents in this industry, and especially the burgeoning smartphone business.

The article reported that Apple, and in particular Tim Cook, who has taken over the reigns of the company during the absence of Steve Jobs, has intimated that it would consider using its patent portfolio to challenge iPhone competitors, most notably Palm, which is scheduled to come out with its Pre smartphone within several months. Most recently (on January 20, 2009), Apple was awarded a patent for its so-called multitouch technology, which reportedly allows

"people [to] work the iPhone by touching the screen with two fingers and making swiping motions."
The next day, Cook was quoted as saying that "[w]e'll use whatever weapons we have at our disposal" to protect the company's IP.

Does the Apple Patent Arsenal Give iPhone Competitors a Sporting Chance?

A number of US patent practitioners offered their views about what how Apple can be expected to use its iPhone-related patent portfolio. Morgan Chu, a well-known IP litigator for Irell & Manella in LA, suggested that the move may be a form of "nuclear deterrent," whereby the very credibility of the threat forces competitors to redesign certain of their functional and technology features. As Chu noted, [t]he best deterrent of a nuclear arsenal is not to use it."

Robert Yoches, an attorney at IP giant Finnegan and Henderson in D.C, observed that Apple has historically been more successful in taking on competitors in the marketplace than in the courtroom. Yoches did not, however, explicitly state that Apple might break with custom in the current situation.

This is especially if the Pre phone is viewed as a "bet the company"-type of product for Palm, and litigation by Apple could have materially delay the launch of the Pre as well as force Palm to expend substantial sums in defense. Of course, if Apple would prevail in such an action, the injunction (if granted under the more stringent standard for awarding a permanent injunction in a patent infringment action following the U.S. Supreme Court decision in the eBay case in 2006), the affect on Palm could be far worse.

As for the patented technology itself, while Jobs described it as "phenomenol" and "magic", the article suggests that it might be less path-breaking than alleged. It notes that iPhone competitors have challenged the claim, and other companies--Nokia Oyi, Samsung Electronics Co, and Research in Motion--are reported to own patents related to the technology and to incorporate touch screens into its product. While these observations might temper Apple's ardor for pursuing a legal action, it certaintly does not of itself suggest that Apple might completely forego a sabre-rattling strategy against Palm or others.

Apple and Palm Smartphones: Another View

I do not know quite what to make of all this. On the one hand, as a colleague of mine from New York observed over lunch last week, clients seem less willing than in past recessions to embark on potentially expensive patent litigation proceedings. Sure a law suit might cost Palm, but it will cost Apple as well. On the other hand, credible threats and well-executed brinkmanship on the part of Apple could well achieve the desired efect (unless, of course, Palm reaches the conclusion tht has nothing to gain by settlement, nor matter how skilled the brinkmanship).

1 comment:

John Richard Troll said...

One thing to make of it. When IP is used as a club to scare off technological development then we need to examine carefully our rationale for giving that club to one company. When companies are anxious to fight battles in the courtroom instead of the marketplace what does it say about their real willingness to let consumers choose the best product?
When a company builds an identity as cool, hip and postmodern, how much to they sabotage that identify by resorting to threats worthy of the most plebeian commodity chemical company?