Apple, Samsung, and The Value of Software Patents

Ben Bajarin / May 2nd, 2014

I tweeted shortly after the Apple vs Samsung verdict today that I didn’t believe this case was ever about money. It was about making a point. I concluded by saying the debate will now shift to whether that point was made or not. What is relevant is whether the trial, legal fees, and damages are worth it for another company to take the risk to willfully copy the patents of another company. Specifically in this case, software patents which we will come back to in a moment.

Apple has stood its ground and made their position clear — they will defend their patents vigorously. They did in this case and while the damages were relatively minimal, the point remains only a few companies in the world would and could even attempt to take the risk and willfully copy intellectual protocol.

For Samsung, it has paid off. I have no doubt in my mind the battle and damages (assuming they hold) were worth it for Samsung to leverage the copied IP to gain the market leadership position they attained. They took a risk. They also knew they had the bank account to survive any consequences. Not all companies can do this. This is why many take the route to pay a royalty fee to license technology they wish to use to the IP rights holder. As it stands now, Samsung is basically paying $6.40 per unit for the patents in which they infringed.

Benedict Evans made an interesting point in a tweet where he said:

This is a key observation and true to the extent that, by copying Nokia, Samsung gained their position as a market global market leader in feature phones. The difference with Apple was Samsung used the same tactics they did with Nokia against Apple to become a global market leader in smartphones. Seems there is a pattern.

What is interesting to me is the question of how valuable software patents are in the long run. If a precedent has been set around software patents, then we could see this situation happen more often. This was the argument for many who tried to make the point this trial was about money. If the damages were enough then, perhaps, that would be a detractor for companies who may be tempted to steal software innovations in the future. When I look at where we are still going from a big picture industry viewpoint, I believe we still have a great deal of innovation in software ahead of us. While some software patents are awarded much too easily, we should hope we have enough truly innovative software advancements ahead of us that can truly advance computing in meaningful ways. I’m curious what impact, if any, this will have on software patents and unique software innovations.

Ultimately, the point remains. While it is obvious this strategy worked for Samsung, it may not work or be worth the risk for many others. Apple has made it clear it will defend its original technology and many others will likely do the same. This was the point I believe this trial was about from Apple’s perspective. While it may not seem like it, I sense the point has been made.

What we can hope is Samsung’s pattern is unique to them. Hopefully other hardware OEMs –and future ones who don’t exist yet– will carve out their own path to become global market leaders by innovating in original ways.

Ben Bajarin

Ben Bajarin is a Principal Analyst and the head of primary research at Creative Strategies, Inc - An industry analysis, market intelligence and research firm located in Silicon Valley. His primary focus is consumer technology and market trend research and he is responsible for studying over 30 countries. Full Bio
  • klahanas

    I’m not an attorney. Not even close. By osmosis, I have formed the following opinions.

    It used to be that software was protected by copyright. One could also protect trade dress. We should return to that for several reasons.

    -All software relies on algorithms, which are ultimately a set of mathematical functions. Mathematical functions are not patentable. Neither is their combination, because the combination is also a mathematical function.

    -Even if you accept software patents, the prior art from the physical world should count. A bouncing ball for instance…

    -The patent system is pathetically broken. An overwhelmed system is relegating their responsibilities to the courts. “Grant it, let the courts figure it out!”.

    -Just because Herman Melville wrote Moby Dick, does not preclude others from writing a story about a whale!

    -Too many patents don’t pass the obviousness test for the hypothetical person who is “skilled in the art”. This is a common criterion in all patent work.

    You correctly point out that one needs massive funds to play the patent game. This is not the romantic notion that patents are there to protect the “lonely inventor”. Not anymore anyway. Even if you own a bona fide patent, and are flagrantly infringed, you need millions to protect yourself. If you don’t patent, because that requires disclosure, and you are reverse engineered, you lose protection as well.

    Today Apple was awarded $120M, Samsung $158,400. This is chump change to either one, especially in light of what these platforms have become. You’re right, it’s about principle, and they deserve each other.

  • DrewBear2

    A transformational product like the iPhone is rare. It will be decades before Apple comes up with something as big. If the patent & legal system stays the same, Samsung will probably “fast follow” Apple again. But for less impactful (and profitable) products like a wearable or set top box, they may be less inclined to follow as closely. We’ll know soon.

    I think Apple has already started to move beyond reliance on software patents to assure product differentiation. They now know there’s little protection in such a broken system. We’ll see if they are more successful protecting things like Touch ID and manufacturing processes. The “secret sauce” of their camera image processing seems to be difficult to copy, so more of that type of technology will be necessary.

  • Will

    Men, if you said this BEFORE the verdict… I would have believed you…

  • stefnagel

    What if Apple knows what it’s doing? Imagine that.

    What if it seespatents as useless but necessary fights? What choice does it have? The moment it quits aggressively defending and acquiring IP, thousands of little IP insects will begin sucking blood bits out of it in court

    What if massive legal costs are precisely what Apple uses to ward off death by mosquito bites? If so, the more maniacal Apple looks, the more like a bloody nutcase (think Cheney) willing to go thermonuclear on costs, the better. And what are the net legal costs, after taxes?

    Outside court, Apple clearly focuses on significant tech that it can own materially, not just on IP paper that’s not worth a damn: touch ID, sapphire, A7, M7. Yesterday Apple bought a display tech company. Apple spent more on acquiring tech companies than Google last year. And a hellava lot more on acqs relevant to its core business.

    I don’t see where Apple has in any way given up creative invention for legal reaction. When’s the last time Apple put its head in the noose, relying on IP advantage alone?

    And it did once. Let’s not forget, as Daniel Eran Dilger says, this has all happened before. Apple lost big time relying on court battles in the nineties. Is it likely to rely on lawyers today? Really? I don’t think so. Burned twice, shame on Apple.

    It knows better.

    • klahanas

      Oh, they most certainly know what they’re doing. And you’re right, it’s often used to prevent death by mosquito bites. All industries, since the ’80’s have gotten ever more patent happy. Mostly as a defense mechanism, “you stole from me, I steal from you, we sign cross licensing agreement”. Who gets the shaft? The little guy who stole from nobody. Patent Ofice get ever more exponentially swamped. Lather-Rinse-Repeat!

      In this case though, you must agree, Apple is the aggressor. That’s one big ‘skeeter!

  • Mark Jones

    Almost everyone agrees that Apple drastically changed the smartphone back in 2007 – we went from Blackberry/Nokia/Windows Phone to iPhone. Most of that change is centered on the user interface – multitouch, gestures, virtual keyboard. Apple patented the many methods that they used.

    Because broad patents are usually found invalid, Apple’s patents must and do cover various specific, smaller, things (like slide-to-unlock, data detectors, etc). But the courts refuse to allow many patents (or even claims in patents) to be litigated at once. So Apple can never really show in court that the sum of its changes had a paradigm-changing impact on usability and desirability, and thus really did matter in purchase decisions. In this case, the jury gave Apple a reasonable royalty rate (small dollars per unit) but didn’t give Apple anything for sales lost to Samsung’s copies. (In the first case, because design patents were infringed by Samsung, the jury was instructed to and did give Samsung profits to Apple.)

    The market (i.e., sales) has shown that Apple’s changes truly matter to the consumer – Nokia’s Symbian, Blackberry, and Windows Phone are dead or dying because they didn’t copy the changes. Google copied, Samsung went even further and copied things that Google didn’t (both heavily contributed to the death process for the old guard). But the legal system has basically condoned Google’s and Samsung’s behavior.

    So what has been made clear?
    1. Software patents that cover user interface innovations provide protection only against small or cash-strapped companies. For all others, copying of user interfaces that are implemented in software is the best path to take.
    2. Differentiation must be focused on hardware – chips, sensors, materials – and manufacturing processes for that hardware.

    Apple’s investment behavior shows it already fully understands this lesson. I don’t expect Apple to ever again release new UI paradigms unless it is very tightly coupled to hardware-based innovations. Apple’s future AppleTV or wearables will rely on chips, sensors and other hardware for their advantages.

    • DrewBear2

      “…the courts refuse to allow many patents (or even claims in patents) to be litigated at once. So Apple can never really show in court that the sum of its changes had a paradigm-changing impact on usability and desirability, and thus really did matter in purchase decisions.”

      Well said and worth highlighting. Many of the various pieces (concepts & actual technologies) did exist, but no one had unified them into a real product that actually worked well enough for people to desire. Synthesis of such disparate parts requires creativity of the highest order. Apple deserves more credit and better protection for that most difficult of “birthings”.

      • klahanas

        The burden of proof lies upon the patent applicant that one “skilled in the art”, cannot envision unifying them. That’s how the obviousness question gets settled.

        You can take an existing pencil, stick on an existing eraser, and seek a patent. It does not mean that you will get one. You might, but it could also be invalidated.

  • obarthelemy

    There wasn’t a point made, there were 5: 3 that Samsung infringed Apple, 2 that Apple infringed Samsung. Pretty level, especially with the imbalance of claims at the beginning.
    There’s a general point about patents: let’s look at the patents involved:
    1- making links clickable outside a browser. Word, Acrobat… have been doing that for decades
    2- slide to unlock: My grandmother was sliding thingies to unlock stuff before I was born.
    3- autocomplete. see 1-
    4- photo and video organization. Sorry, I don’t understand details of that one. I very much doubt it has much merit.
    5- video transmission. ditto
    Frankly, all of them seem pretty obvious and/or with prior art to me, unless locking sliders on doors don’t obviously translate into locking sliders on phones, and clickable URLs in .doc to clickable URLs anywhere else – am I a genius ?

    • Mark Jones

      Let’s get the facts straight – only 1 that Apple infringed Samsung.

      Koh allowed each side s5 claims for the trial. Samsung dropped its 3 other claims before the trial began.

      Everything looks obvious in hindsight. And it’s not ideas that are patented; its methods, means, functions, etc.

  • Anders CT

    The only patent that Samsung was found to infringe on in a major way was a patent on linking into apps, a ridiculously trivial and unimportant patent that dates back to the nineties, LONG before the rise of the smartphone. The Samsung patent Apple was found to infringe on was equally ridiculous. The narrative that Samsung has build its marketshare as a slavish copier of Apples original innovations is a complete fairytale and unsupported by evidence.

    The only thing this verdict confirms, is that Apple is a whiny bully who will not hesitate to sue its competitors no matter how comically weak Apples so-called IP is. Apple and Samsung would be better off using their worthless patents as toiletpaper, as it would save both companies and their customers lots and lots of money.

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