Google just became another Qualcomm. You may not have noticed, but by buying the Motorola mobile phone portfolio, Google can now integrate its Android operating system with Motorola's underlying mobile phone technology. This hardware plus software change means there is going to be a stronger licensing relationship with companies like HTC and Samsung. Which means Google will be able to collect more of their dollars in licensing fees.
Blackberry is still the greatest email mobile device but email is passé. Social media sites like Facebook rely on browsers or apps. Perhaps, worse for Blackberry is that enterprise applications like Chatter accomplish more efficiently what was previously reserved for email.
Eric Schmidt, the executive chairman of Google, refers to Google, Apple, Facebook and Amazon as the "gang of four." Each player will vie for consumer dollars, and with the exception of Facebook, each will control hardware technology that may inevitably infringe on each other.
For Google's strategy to work, they must follow Qualcomm's model and aggressively protect their patent portfolio (i.e., patent litigation). Litigation is usually a peculiarly US-centric practice, but not these days. Apple sued Samsung for patent infringement in Germany and Amazon has regulators investigating Apple and major book publishers for price fixing in the UK. Apple has HTC tied in knots in the US as the International Trade Commission (ITC) issued a ruling that HTC's Android devices infringe on two of ten Apple patents.
Scott Stern, professor at the Sloan School of Management, MIT, was quoted in the New York Times saying:
The trouble is that in this industry so often a patent is not a clearly defined property right, but a lottery ticket of uncertain value.
The validity of this statement was borne out recently when a German court reversed an earlier ruling to ban the sale of the Samsung tablet in Europe. A ruling on the ban in Germany is due for a hearing next week.
Stern's comment should be changed to "neither a clearly defined nor easily enforceable property right." The fact is that patent litigation is a game for the big guys. Anyone who has dealt with small companies with good patent portfolios knows that any large corporation can come along and rip you off with a high probability of impunity. Your only safeguard is know-how (intellectual capital).
Patents are written to obfuscate their true meaning (e.g., in the style of an insurance policy or relying on the use of double negative and the French pluperfect subjunctive). Patent examiners are overworked and unloved. Unlike in the US, EU challenges come early in a patent's life. The statistics speak to the weakness of the system. In the EU, 25% of patents survive this process without change, 36% are amended, and 39% are revoked.
As the data demonstrates, it is easy to miss existing patents (i.e., prior art) that can be ignored by an applicant and overlooked by the patent office. This is precisely the sweet spot of companies like M-CAM, the brainchild of founder David Martin. M-CAM identifies prior art through an electronic search process and a great deal of proprietary software. They also value intellectual property. Hedge funds and some corporations love M-CAM. Patent attorneys do not. A patent attorney who files patent applications (i.e., patent prosecution) is obligated to acknowledge all known prior art. A company like M-CAM often knows too much about prior art.
As the gang of four continues to flex its muscle through litigation, there are going to be more purchases of companies. Some will be small companies unfamiliar to most; regardless of size, all in an effort to shore up each company's patent estate.
Yet, all this litigation is really about achieving a freedom to operate. It seems unlikely that any of these companies will ever have a monopoly on the sole path to a consumer's wallet. Once the air clears, the path to success will remain innovation, not patent litigation.
Google's Marissa Mayer, vice president of search products and user experience, is quoted in The Innovator's DNA saying:
Creativity, in fact, thrives best when constrained.
Creativity will thrive under the latest round of technology acquisitions. Engineers will need to create workarounds to accomplish functionality that does not violate competitor patents.
Yet, as the battles over patents proceed, there is only one certainty: Everyone wants an Apple. They may weaken and get some other device because of price or their employer, but the standard is Apple. Ever since the first Mac, with and without Steve Jobs, Apple has never deviated from a closed system. The hardware and operating system belong to Apple. The acquisitions represent catch-up, not innovation. Innovations will come when Apple releases the next Apple idea and when engineers find new ways to achieve what Apple creates.
So, as they say in wrestling: Let's get ready to RUMBLE!
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