OK, Apple won their epic patent battle with Samsung; there was really very doubt that they would. But, given the nature of the strategic relationship between the two firms, there’s less here than meets the eye.
As I think everyone expected, Apple knocked the stuffing out of Samsung in their patent-infringement case. Whether you agree with design patents or not, the case on their validity is closed; if you invent a new user-interface metaphor and properly secure patent protection, you’ll win in court. And Apple won a bit more than a billion dollars here – less than they wanted, but still a good-sized chunk of change. Apple shares are up about 2% as I write this, and Samsung is down about 7%. You don’t want to lose a case like this; equity traders rarely think strategically.
What’s really interesting here, though, is that Apple also has a critical supplier relationship with Samsung. I heard a report on CNBC today that more than 40% of the content in a iPhone comes from Samsung. Samsung is thus in a position to knock some different stuffing out of Apple if they wish. Such an arrangement is often called “coopetition” or cooperative competition, or a Mexican standoff or a deadly embrace or some other less-than-flattering term. Coopetition is way more common than most people know, and it can lead to terrible consequence unless cool heads prevails.
And I’m predicting they will in this case. Apple doesn’t want Samsung’s money. Apple wants to sell a unique product and wants others to stop copying their innovations (just as they once did in stealing big chunks of the original Macintosh user interface from Xerox PARC, but that was before lawyers entered this domain, I guess). There will be an appeal which could take years to resolve, but Apple and Samsung will eventually put in place a cross-licensing and modest mutual royalty scheme, and Apple will wag a finger saying don’t try to clone what we’ve done every again or next time you won’t get off so easy.
Of far greater importance, though, is the shot Apple has now fired across the bow of Google, its real target in all of this. Google, who have their own enormous patent hoard, will have to innovate around Apple’s patents, and, who knows, they might just do a great job of that. I think we still need to take another look at the patent process overall, but, regardless, in the age of coopetition, the value of competition in the legal domain alone isn’t as great as most people think.
