Monday, 18 June 2012

The smartphone and tablet patent wars

David Larish

During the Cold War, the US and the Soviet engaged in a form of military-industrial battle, the so-called Arms Race. As the stockpile of nuclear weaponry on both sides increased, the world – paradoxically – became a safer place. This occurred, most historians agree, as a result of a concept that came to be known as Mutually Assured Destruction (MAD). Each superpower was deterred from hitting the other with a nuclear attack because they realised that this would inevitably lead to the opponent unleashing a nuclear attack on a similar scale. An attack on the other was, in effect, an attack on oneself.

A few decades on, the world’s leading smartphone/tablet manufacturers have been engaging in a race of their own. The weapon of choice is the patent. Manufacturers have been stockpiling them for offensive and defensive reasons. That is nothing new. However, until April 2011, a force resembling MAD seemed to be preventing worldwide mass smartphone/tablet patent infringement lawsuits. Then Apple launched its first strike on Samsung’s Galaxy Tab and Samsung retaliated on Apple’s iPhone and iPad, resulting in numerous and as yet unresolved global skirmishes between the telecommunications behemoths.

The rationale for the patent system is based on promoting innovation; you are less likely to throw time, resources and dollars at innovating if others can piggy-back on whatever you create with impunity. Leaving aside the debate about the merits of the patent system in general, it is clear that, when it comes to the smartphone/tablet wars, the patent system is struggling to cope.

In conventional patent litigation, the party asserting infringement generally confronts the alleged infringer with one (or a few) patent(s), albeit often asserting infringement of multiple claims within each patent. The distinction with tablet/smartphone patent litigation is that the manufacturers have literally hundreds of patents in their stockpiles: method of unlocking the device, method of scrolling within the device etc. When contemplating litigation, these companies have vast possibilities from which to choose and are therefore able to assert patent infringement in respect of numerous independent patents. It only takes a finding of infringement in respect of one of these patents for a rival smartphone/tablet to be removed (in all likelihood) from the market. Based on sheer weight of numbers and probability alone, the odds are stacked in favour of the company asserting infringement. Throw enough mud at the wall and some of it will stick.

Let’s use Game Theory to examine the relationship between Companies A and B, two successful competitors in the smartphone/tablet market. Company A may face two different scenarios: (1) Company B has sued Company A for infringement of its patents; or (2) Company B has not sued. In either case (leaving aside transaction/legal costs), Company A is in a better position by opting to sue Company B for infringement of Company A’s patents than by opting not to. Under (1), bringing an infringement action against Company B is necessary as a defensive mechanism – the return of fire to Company B gives Company A some clout at the negotiating table (ie MAD). Under (2), offensive action restricting Company B’s smartphone/tablet from operating on the market would, if successful, harm a competitor and increase Company A’s market share.

The best position overall for Companies A and B involves neither suing the other. This is because there is no threat of the products’ release into the marketplace being restrained and the time, inconvenience and expense of litigation are avoided. The concern, however, is that given:

• the fiercely competitive nature of the smartphone/tablet market;

• the diversity of the patent stockpile at the disposal of the smartphone/tablet manufacturers; and

• the possibility that, since April 2011, MAD is no longer effective in operating as a deterrent to litigation;

tablet/smartphone patent litigation will, in future, become the norm rather than the exception.

This would be disastrous for retailers and consumers. The tablet/smartphone market would suffer from less competition, greater uncertainty and the absence of products which consumers wanted. Most worryingly, the outcome by which the patent system is justified and by which the disadvantages associated with it are tolerated – the incentive to innovate – would actually be counteracted. Yes, in the final outcome, genuine smartphone/tablet innovations should not fall foul of the patent system. However, in a practical sense, when enough mud is thrown there is a strong chance that they will, at least at some point in the litigation process. And, even if they do not, the shifting of resources away from product development and towards courtroom battles, the delays in the release of products and the helplessness of small stockpile tablet/smartphone manufacturers when faced with legal threats against their products from large stockpile tablet/smartphone manufacturers would all be considerable impediments to innovation.

Watch this space. The situation needs to be closely monitored.

2 comments:

  1. An elegant and sensible approach to the spectre of escalating patent infringement litigation, and very welcome to hear from a sound legal source.

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  2. Well, I guess many people still use smartphone than tablets because it is convenient to use at any place or wherever you are.

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