A New Business Strategy in the Technology Industry

Photo Courtesy of Honou

Apple and Samsung have been locked in an intense patent battle for months. Following drawn out litigation, the Federal Court of Australia awarded an interlocutory injunction to Apple, keeping the Samsung Galaxy Tab 10.1 off the Australian market until a full patent trial takes place. This ruling came just before Judge Koh of the U.S. District Court for Northern California ruled that Samsung’s device does indeed violate American patents held by Apple. These rulings come on top of other major losses suffered by the company in the Netherlands and Germany, where the Galaxy Tab 10.1 has been barred from sale.

Despite these enormous setbacks, Samsung is not backing down. On October 17, just days after its debut, Samsung put Apple’s iPhone 4S squarely in its sites. The company filed an injunction request in Australia and a similar suit in Japan arguing that Apple’s iPhone 4S violates wireless and user interface patents that the company holds in those countries.

However, these are not the only technology giants who have made patent litigation a core element of their business. In August, Google spent $12.5 billion to acquire smartphone manufacturer Motorola Mobility. Google CEO and co-founder Larry Page was not shy in revealing the company’s main purpose for shelling out such a large amount of cash for a company that is already a Google customer. Page stated that the move would “strenthe[n] the company’s portfolio” and better enable the company “to protect Android from anti-competitive threats from Microsoft, Apple, and other companies.” Moves like this that have led some experts to declare the existence of an “arms race” in the technology sector with companies competing to stockpile patents as insurance against potentially costly litigation.

Over the coming decade, we will have to pay attention to see if this hostility in the industry continues to cause an increase in patent litigation or, instead, results in something more cooperative. Some have suggested that the result of the current state will be cross-licensing deals between tech companies. With more patents in their portfolios, companies will be well positioned to negotiate agreements with other companies to not sue each other in a specific field. Such deals will allow companies on both sides of the deal to concentrate more time and money on continued innovation. However, if this is not the case, there is a strong possibility that companies could bring their business overseas to avoid the particularly litigious nature of the American patent system.

Dan Ravicher, executive director of the Public Patent Foundation, rather ominously summarized the current state of affairs when he said, “With arms races, we can only have peace through a lot of fear.”