The Apple [AAPL] versus Samsung spat’s certainly grown partisan, but the connection between the two firms remains symbiotic -- Samsung needs Apple’s money, and Apple needs to ensure it keeps its grip on Samsung’s ample supply of parts.
[ABOVE: Steve Jobs notes the "year of the copycats". Where are those copycats now? A lot of them are in landfill.]
Status update: 'It's complicated'
The way the firms talk about each other you’d think this was a hate affair, but the two sides are remaining fairly pragmatic in their relationships, with the Korean company making sure there’s an internal wall between the fate of its mobile arm and that of its component supply business.
A Reuters report reveals the depth of Samsung’s divide between its two business units, for example at an emergency meeting following last week’s ruling against it, Samsung’s CEO -- the man in charge of the components business -- didn’t take a seat at the panel. That’s despite one Samsung executive saying the judgement was the “worst possible” outcome for the firm.
That divide between Samsung’s internal units lends an interesting light on the complex relationship between it and Apple.
- Samsung products comprise 26 percent of the component cost of the iPhone. These include the processor, memory and displays used within the device.
- Apple’s components business contributes 8 percent to Samsung’s estimated group profit for next year, says Morgan Stanley.
- Samsung and Apple made attempts to negotiate a peace deal, but these have so far been unsuccessful.
It seems important to note that, despite the partisan nature of so much public debate on the matter, the situation is extraordinarily complex. As FOSS Patents’ Florian Mueller (often castigated for his advisory links to big firms, but also a frequent source of pragmatic industry analysis) notes: "Apple isn't that stupid (to risk its Samsung parts deal). Apple's agreements with Samsung will ensure that Samsung has no choice but to comply and supply.”
There’s some critics of the court decision who seem to have decided it would be in Samsung’s best interests to simply deny component supplies to Apple. It wouldn’t be a good decision at all, it would decimate its supply business. As Mueller puts it:
"Samsung's other customers would lose faith if it turned out unreliable. And since Apple threatened Samsung with litigation two years ago, it's had plenty of time to identify alternatives."
Should the legal battle continue?
And that’s the point. Some may argue that the licensing deal Apple offered its ally was set at levels that were too high. Perhaps that’s true (I’ve seen figures between $30-50 per handset discussed), but surely a deal could have been reached? That’s assuming Apple’s statement that it wanted to avoid litigation were true, but CEO’s of globally valuable firms tend to speak something like truth when they make public statements. This leads me to think it safe to presume Apple was willing to negotiate some form of deal, but Samsung felt -- or was, perhaps, poorly advised -- that it might prevail in litigation.
There’s lots of people who argue Apple shouldn’t have been entitled to some of the patents it is fighting to protect. What they need to understand is that those matters were argued over in the courts as part of this case, and the legal system which both participants chose in preference to reaching a negotiated settlement declared that Apple’s patents count. Those which don’t were dismissed or put aside for a future judgment.
Those who argue against patent law would be advised to think on this: international business interests want to keep patent agreements as they are, though they would like changes to prevent so-called patent “trolling”. Arguments to change the system may eventually prevail, but patent law as it is is not going to disappear fast. Too many corporations make too much cash out of the system as it is.
Does the patent system need changing?
My biggest personal criticism of the way patent works today is the system’s cost. The need to file and refile and to pay significant fees to patent authorities worldwide in order to win an international patent puts such protection outside the reach of individuals, creating a system systemically controlled by larger enterprises and corporations.
I recall one instance in which I attempted to secure a trademark for one enterprise I was previously involved in. Unfortunately a trademark for that word was simultaneously filed by a large media company. We lacked the resources to successfully protest that filing and, while we were eventually able to agree a deal in which we won permission to use that trademark for our small enterprise at no cost, we were left unable to expand into other sectors.
The existing system is expensive, complex and beyond the financial reach of most individuals. That’s a scenario which enables larger players to gobble up the ideas of smaller operators, who lack the resources to protect their patents. It's a dog-eat-dog conflict, in other words. Think on this: no matter where you are in the debate, both Apple and Samsung are big dogs, certainly big enough to fight for themselves. Samsung’s dog lost the fight. Apple may have been the larger dog this time round, but says it tried to avoid the fight in favor of sharing the dinner.
Better innovation ahead
That’s not to say the repercussions of this conflict aren’t impacting the industry. News from giant tech show, IFA, in Berlin, Germany this morning, is that Samsung has introduced a bundle of smartphones and tablets. Word from the show is that while all players are considering the impact of the US verdict, Apple’s victory has not stifled innovation: but may force competitors to develop tablets that follow a different blueprint.
That’s precisely what Apple was fighting for, of course. While many complain that the company’s aggressive defense of the form of its devices means others can’t make devices that look the same, it doesn’t mean competitors can’t make devices that look different.
Applauding the victory, Apple CEO Tim Cook explained: “We chose legal action very reluctantly and only after repeatedly asking Samsung to stop copying our work. For us this lawsuit has always been about something much more important than patents or money. It’s about values. We value originality and innovation and pour our lives into making the best products on earth. And we do this to delight our customers, not for competitors to flagrantly copy.”
It’s no surprise competitors want a little Apple in their products. The impact of Apple design is huge. There’s no denying it. An interesting report today observes that white recently became the most popular car color. From Apple 2.0: “According to Sandy McGill, BMW Designworks' lead designer in color, materials, and finish, this is Steve Jobs' doing. "Prior to Apple, white was associated with things like refrigerators or the tiles in your bathroom. Apple made white valuable."
Good news for all
The news for consumers isn’t that Apple has stopped innovation. It has merely moved to prevent imitation. This suggests tablet and smartphone manufacturers will now begin to explore different sizes, shapes and capabilities for their hopefully uniquely-designed devices. This means it is possible consumers will benefit from even more choice within device categories in future.
For Apple, the down side of this legally-enforced drive for originality could be that competitors manage to manufacture devices that capture consumer imagination more than those coming out of Cupertino. And why would that be a bad thing for people in the market for such devices?
It is surely in everybody’s best interests that the industry begins to “Think Different”. That was the remedy which gave Apple a new lease of life, after all, now, with competitors in a similar position on strength of depressed PC sales, it’s looking like time they did the same.
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