There have been many high profile court cases of patent infringement in the past year, culminating in a headline-topping $1 billion award for Apple against Samsung. Even with massive awards like this, at the end of the day, has the patent system produced a net benefit for Apple and the smartphone industry as a whole?
Much has been written about the patent system worldwide, and in particular the issues with software patents. In 2012, the New York Times reported that patent litigation and purchases in the smartphone industry grew to $20 billion dollars over the previous 2 years. The Times also reported that Apple and Google had spent more in 2011 in this regard than on research and development. One would think these massive investments by technology companies would only be made if there was an associated return. A Wall Street Journal report found, however that all of this investment by smartphone companies has yielded little reward in terms of monetary compensation or worthwhile injunctions. Even the highly-publicized $1 billion dollar Apple victory has been reduced by 40%, and is currently under appeal. (See past IPilogue coverage on the initial award, and the subsequent appeal.) Similarly, an injunction won by Apple against a Samsung tablet and phone was eventually overturned. While these developments would not indicate a positive return on these large involvements, the true net benefit of patent litigation must be considered in light of the entire patent system, and in doing so, account for the perspectives of all the players involved.
What Else Did Apple Gain?
While return on investment is typically measured financially, there are many benefits beyond monetary that can be argued to have been gained by Apple. By vigilantly defending its patents, Apple has shown a willingness to take others to court when it believes its intellectual property has been infringed on. Apple's willingness to defend its patents likely increases the deterrence factor and encourages other parties to invest in proper research and development to ensure that they do not infringe any of Apple's intellectual property. Apple also gains affirmation in those patents which have been upheld, likely strengthening and streamlining future legal actions where those patents are involved. Neither of these benefits are necessarily reflected by monetary awards or injunctions being granted, but benefit Apple nonetheless.
What Else Did Samsung Lose?
Samsung could be seen as having two main losses beyond the real financial costs of the award and legal defence. By being found guilty of infringement, Samsung has to address its internal product development process which lead to the construction of infringing devices. This will require increased investment and work to produce future products that do not infringe patents owned by Apple or other constituents. This will also introduce uncertainty into Samsung's product development, as current product roadmaps will need to be modified to avoid similar infringement claims in the future.
Finally, this award against Samsung sends a message to the market that they inadequately protected themselves from this legal risk. This could lead to concerns by investors that Samsung may be exposing themselves to other legal liabilities. At a minimum, this massive award against Samsung at least implicitly undermines the company's reputation in the public eye for originality and innovation.
What About Third Parties?
Interested third parties can, for the most part, be divided into "other smartphone manufacturers", and "consumers". In the future other smartphone manufacturers will have to increase investments in patent acquisition and due diligence to avoid similar infringement suits. This will affect their ability to invest and plan future products, potentially shifting resources from new product development to managing intellectual property.
Consumers have the most to lose and least to gain in the ongoing smartphone legal battles. As manufacturers inevitably internalize the cost of patent acquisitions, litigation, and payment of settlements, smartphone prices paid by consumers must rise to cover these costs. If Apple's patents are upheld and Samsung is found to infringe on them, consumers may further lose from a reduction of competition in the market spurred by an extension of Apple's monopoly over patented technology. Consumers may also benefit, however, from stronger intellectual property protection which would encourage further investments in research and development. As a result, new innovative products would likely be developed with the assurance that effective legal protection will be given to these new inventions. This was the original "trade-off" of the patent system; public disclosure of an invention in exchange for a time -limited monopoly ensuring that investments in research and development can be profitably commercialized.
The View Forward
While ongoing for many years, many patent suits have yet to be definitively decided by the courts. Many parties are interested in seeing how the various suits pan out, as positive results may have a cascading effect and encourage more enforcement actions. It will have to be seen whether this will stifle innovation by expanding monopolies, or encourage more investment with the promise of effective protection.
Alex Buonassisi is an IPilogue Editor and a JD Candidate at Thompson Rivers University.