It's Time to Start Worrying and Hate the Patent Bomb
It has been a very interesting week for mobile industry lawsuits—and it's only Thursday. First Nokia and Apple came to a settlement that ended their patent battle, probably costing Cupertino hundreds of millions of dollars in the short term.And now Google, which is being sued by Oracle over its use of Java in the Android operating system, has filed a fierce series of objections to that case.
In particular, Google suggests that the testimony and evidence of Oracle's expert witness, Boston University economics professor Dr.Iain Cockburn, should be disregarded. Why? Because it is based on "unreliable and results-oriented opinions," says Google.
ZDNet's Larry Dignan has outlined the objections contained in the 48-page document—but the bottom line seems to be simply that Google's lawyers boggled at the suggested damages put forward by Oracle.And no surprise: Free-software activist Florian Mueller has estimated that the claim could run into billions of dollars.
Web of Disputes
The details are fascinating, but the truth is that blow-by-blow accounts of these cases often get lost because there are just so many active lawsuits in the mobile industry right now. Indeed, over the past two years, the amount of litigation between companies interested in mobile has cranked up to the point where it seems as if almost every company is suing almost everyone else. Everyone from Apple, Nokia, and Google to Motorola, HTC, Microsoft, Samsung, Research In Motion, LG, and more are all embroiled in a complex web of patent disputes [http://bits.blogs.nytimes.com/2010/03/04/an-explosion-of-mobile-patent-lawsuits/] going back over the past couple of years. It's like some huge run of dominoes that just keep on toppling.
You may shrug. Nothing really different here, since technology companies have a long and rich history of squabbling with each other through their lawyers—who can forget Netscape and Microsoft waging war? But this is something different. It's at least an order of magnitude further up the scale than the arguments and antitrust cases and mergers and acquisitions and disputes we've seen in the past. Why? Because ultimately, it doesn't matter whether the cases are related to hardware (as in the Nokia/Apple dispute) or software (such as Oracle vs. Google). They all go to reinforce one thing: the policy of mutually assured destruction that has emerged in the world's most important technology business.
Just as the Cold War's nuclear standoff was led by superpowers armed enough to cause the other critical damage in the blink of an eye, what we are witnessing now is almost the culmination of an intellectual property arms race between some of the world's most powerful companies. The mobile phone is, arguably, the most important and transformative communications technology we have seen. It piggybacks on everything else, whether it's voice, personal computing, or the rise of the Web, to create something more ubiquitous and life-changing than we probably realize. Around 5 billion mobile handsets are now in use worldwide, more than double the number of Internet users. In such areas as Sub-Sahara Africa, mobiles outnumber PCs by 14 to one.
Arsenal of Patents
But almost every aspect of every mobile handset is already owned, patented, licensed, and monetized. From time to time, that system comes under threat—when Apple launched the iPhone, for example. But that's when negotiations happen—and the price to get to the negotiating table is to have your own arsenal of patents. It is, essentially, a policy of mutually assured destruction: You won't sue us because we can sue you, so let's negotiate.
This approach has been a given in technology circles for a long time, but recently Google General Counsel Kent Walker laid it out bare:
"As things stand today, one of a company's best defenses against this kind of litigation is (ironically) to have a formidable patent portfolio, as this helps maintain your freedom to develop new products and services. Google is a relatively young company, and although we have a growing number of patents, many of our competitors have larger portfolios given their longer histories."
That's why Google is looking to spend $900 million buying out 6,000 patents owned by Canadian telecom company Nortel. That's why Apple and Research In Motion are sniffing around the same deal. And that's why Microsoft, AT&T, HP, Nokia, and Verizon have all objected to Google's interest.
The trouble will all this is that we, the users, wind up paying in the end. Maybe it will be increased prices caused by licensing arrangements. Maybe it will be decreased choice as one patent owner exerts undue influence over the rest of the market. More damaging, however—and certainly harder to define—will be the opportunities lost because real innovations are smothered at birth.
All these lawsuits simply prove how difficult it is now to disrupt mobile. The stakes are simply too high. This cold war is designed to lock out disruption, as one commenter pointed out on the Nokia-Apple story. Yes, Apple and Google upset the order of things—but they are two of the largest companies on the planet, hardly newcomers or ingénues. They used their power and success in one field to push into another, and even then they have found themselves scrabbling to bolster their power.
In the end, the real impact of these lawsuits—this agreed policy of mutually assured destruction—is that it locks out disruptors and favors the incumbents. Anyone who doesn't have a war chest stuffed with patents or can't afford billions of dollars is at a crippling, perhaps fatal, disadvantage. In hindsight, we could be watching the world's most exciting industry being smothered just as it looked like it was ready to change everything.
Also from GigaOM:
A Global Mobile Handset Forecast: 2011-15 (subscription required)