Apple throws sand in competitors' gears, but they won't slow down

Apple's court victory has awakened Samsung and other competitors, who will now be more motivated to out-innovate and out-patent their rival.

Apple is sending out legal teams around the world to slow down competitors and protect its brand. Kimball Sand Company, Inc.

Apple had its day in a U.S. court with a jury awarding the company more than $1 billion in an overwhelming patent infringement victory over Samsung. After the presiding judge, Lucy Koh, finishes her assessment of damages, the ultimate payout might actually climb higher. Some Samsung phones might even be prohibited from sale in this country (we'll find out the answer at a scheduled September 20 court hearing).

It all sounds rosy for Apple, which was in an understandably celebratory mood after the jury returned its verdict. Indeed, CEO Tim Cook told his employees that Apple values "originality and innovation and pour our lives into making the best products on earth. And we do this to delight our customers, not for competitors to flagrantly copy."

But while the headlines tell one story, there's another scenario that could unfold, one in which Apple's court win ends up as a Pyrrhic victory. As if they needed a reminder, the lopsided court victory sends a wake up call to rivals, including Samsung, Motorola (Google), HTC, Nokia, RIM, and Microsoft. All have quivers full of patents and plenty of cash to go to court to protect their interests.

Over time, most phones and tablets will have similar designs and behaviors, just like PCs and laptops, or TVs, cars, and newspapers. Rounded or rectangular corners and square icons aren't key points of differentiation, despite Cook's charge of flagrant copying by competitors.

Samsung took the shortest route to competing with the iPhone when it was first introduced by copying some of its features. That expedient business decision factored heavily in the jury's guilty verdict, and it could cost the South Korean company some cash. Samsung would probably make the same decision if it had a do-over so that it didn't fall too far behind Apple, as RIM and Nokia did, and now will file an appeal to the verdict and continue to dominate the smartphone market along with Apple.

Complete coverage: Apple v. Samsung, a battle over billions

According to IDC statistics for the second quarter of 2012, Samsung had 32.6 percent share of the worldwide market for smartphones, compared with 17 percent in the same quarter a year earlier. Apple had 16.9 percent share, down from 18.8 during that same period.

Google's Android -- which is free to partners like Samsung -- not Apple's iOS, dominates the overall smartphone market. According IDC, Android had 68.1 percent share of the worldwide smartphone market in the second quarter of 2012, up from 46.9 percent a year earlier, compared with Apple's 16.9 percent share. However, Apple is extracting enormous profits compared with Samsung and others with its less than 20 percent share of market.

The iPad is a different story. Apple has a more substantial lead, with more than double the share of competing Android tablets, according to Gartner. Apple could directly attack Google over patent infringements in Android, but that could take years to play out; in the meantime, Google can trot out patents that it gained from purchasing Motorola Mobility for a counterattack. In the end, it's more likely that all legal entanglements will lead to more cross-licensing agreements than to massive payouts -- though there's no guarantee that scenario will prevail.

Apple's greatest fear is that competitors will create a much better smartphone or tablet, or that it will deliver a new mobile device to the market that grossly fails to meet user expectations. Despite its incredible success over the last few years -- Apple is the most valuable public firm on Wall Street as measured by market capitalization -- the company still conducts business as if it was competing for its life. It's part of the Steve Jobs legacy, from the days when it was Apple against a world dominated by Microsoft.

Patent suits are a way to sow fear, uncertainty, and doubt among competitors, and to tout the uniqueness of the Apple products. The Apple v. Samsung verdict should force competitors to pivot and act on the notion that the best way to throw sand in Apple's gears is to out-innovate, rather than imitate, the company.

Samsung's more recent Galaxy S3and HTC's One X, for example, leapfrog Apple's iPhone in some areas. Google's Android mobile platform may not be as polished and innovative as Apple's iOS, but Google has a lot of creative engineering resources that it could apply to competing more effectively with Apple, and not tread on its patents. Microsoft's Windows 8 could take a bite out of Apple in the next few years.

Apple has every right to be paranoid, and the company will continue to throw as much sand as possible into the face of any rival that might threaten its future.

 

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