Winners and losers in the Apple case

The outcome of the Apple-Samsung trial is likely to have a significant impact on future smartphone and tablet products. In this mega-trial held in San Jose, Apple accused Samsung of copying its iPhone and iPad products, both in physical design and user interface. The jury found that accusation to be true, and awarded Apple more than $1 billion. Because it found Samsung’s actions to be deliberate, the award could be tripled.

I followed the trial with interest, particularly the evidence that described how the Samsung engineers methodically made feature-by-feature comparisons between their Android product and the iPhone. In one document with more than 100 pages of comparative illustrations, unearthed during discovery, dozens of features were compared, and in most cases, the engineers found the iPhone’s implementation to be superior. That included items such as the spacing between the phone keys, locations of buttons, finger gestures and the number of steps to accomplish a task.

Such a thorough comparison by itself is not proof of copying. It showed Samsung did what any other top company would do to better understand its competition. It’s very common for companies to look to their competitors and to adopt some of their features. What is not permitted is to adopt those features that are patented, which is what Samsung did.

Expect Apple to use its victory and go after other companies building phones and tablets using the Android OS, particularly those that have retained the Android interface. Apple will threaten to sue to take those products off the market or require a royalty payment for each device sold, perhaps $20 each, a figure it supposedly offered to Samsung before the trial.

But next to Samsung, the big loser is Google, which developed the Android system. Apple may have assumed it was more convenient to sue Samsung than Google, but Google was the target. Google’s former CEO, Eric Schmidt, was on Apple’s board when the iPhone was developed, and Steve Jobs accused him of flagrantly copying it. And it was one of Jobs' last pronouncements to punish Google’s transgression. This victory for Apple now pits it against Google and could decimate Google’s efforts to grow its Android ecosystem. Google may now need to revamp Android from the bottom up.

If there’s a winner besides Apple, it is Microsoft, whose new Windows Mobile 8 smartphones have struggled to gain traction. Its design is original in many ways but runs way behind with just a few points of market share. I would expect to see new Windows phones from companies such as HTC, LG and even Samsung to join those from Nokia.

But the verdict is much more than just who won and who lost, who will profit and who will lose. It gets to the fundamentals of the creative process and innovation in new product development. Some companies value originality and innovation. They develop products that make leaps over their competition or create an entire new product category. But that often takes huge investments into research and development and results in a product that costs more and takes much longer to get to market.

Other companies focus on leveraging off of others’ inventions and outright copy. That’s an accepted practice in every industry, as long as there’s no violation of trademarks or patents.

Apple is known to agonize over each element of its design. It’s in the company's DNA. It strives for perfection, particularly in its software. And much of the time it comes out with products that often surprise and delight and are full of original concepts (and often cost more). Apple contended that Samsung basically incorporated much of its designs into its own products. Samsung contended that many of Apple’s patents were invalid or that Apple copied from others. It lost on all but one claim, the use of a rectangular shape with rounded corners, in which the jury sided with Samsung’s contention that the shape was obvious, and how many ways could a tablet be shaped?

While Samsung said Apple's victory was bad for consumers because it will stifle competition, it’s good for the consumer, forcing these companies to compete on innovation. It’s particularly good for small entrepreneurial companies, whose products are often copied as soon as they are released. It will force companies to put more effort into original products and not rely on others' hard work for their ideas.

One of the dangers of Apple winning its suit is that it becomes more complacent about its designs and becomes fixed on litigation. It can take a scorched earth policy and go after everyone, or it can use its victory to license judiciously. That would be a mistake.

Eventually, companies need to get away from suing one another. While Apple’s suit was justified, there are hundreds of suits going on between virtually every player: Motorola, HTC, Microsoft, Google, etc. that are the results of companies buying patents from others that cover tiny aspects of phones and tablets. With hundreds of patents, it’s difficult to build a product without incurring some technical violation.

This is a reflection of our broken patent system, which forces companies to divert funds to litigation rather than to innovation. And the broken patent system often puts the small innovative company at a disadvantage. It allows big companies to go after the smaller ones with frivolous lawsuits that also stifle competition.