Smartphone Patent Litigation: A Necessary Evil

Increase In Smartphone Litigation Highlights Smartphone Prosperity

Each week it seems as though more companies are filing lawsuits over patents, and who knows this better than the smartphone industry? Microsoft sues Google, Google uses HTC to sue Apple, and Apple sues just about everyone who’s anyone. Only adding fuel to the fire, each company involved usually shoots back a counter-suit of their own, which in turn ends up in a dramatic mess usually resulting in pricey licensing deals.

In theory a patent was originally designed to cultivate innovation while offering protection to the inventor for inventing an original process. Sure, this sounds great in theory, but things tend to get tricky fast. Since the invention of software, patents have vastly become a quicksand of ambiguity. Can anyone really patent an algorithm of any kind? Or should we only be able to patent those algorithms of complex nature, or maybe just the ones that are “non-obvious”? As long as patents have been around these have been the age old questions plaguing inventors and patent trolls alike for decades.

Now with the introduction of the smartphone, patent litigation is at an all time high, and we can’t seem to shake it. Unlike the modern day PC, the smartphone is immensely complex with its multiple radios, Bluetooth, Wi-Fi capability, multi-band cellular radio/modem, light sensor, humidity sensor, capacitive touchscreen, two cameras, (and the list goes on and on) all wrapped up in lust worthy hardware that leaves us incapable of leaving the house without it. With that undeniable complexity comes a burst of new technologies just begging to be patented.

It comes as no surprise then that with the rise of the smartphone industry comes enormous revenue stakes. This year, the iPhone alone is expected to yield approximately 65% of Apple’s estimated $100bn revenue. Think about it, that’s a staggering percentage chalked up to the smartphone alone. Apple isn’t the only tech giant to rely heavily on its smartphone niche, as Google has a staggering stake in smartphones as well. Their Android devices unit sales are significantly larger than Apple’s sales and have only seen steady growth over 2011. Throw in some of the other major players like Nokia and RIM, and you’ve got an industry which saw approximately 475M smartphone devices shipped in 2011 alone.

So, what does all this mean? Well, you’ve got a tremendous amount of innovation and high stakes revenue which results in an entire population of patent holders attempting to suck out royalties out of each smartphone produced. This thirst has created a constant exchange of money in what we know as modern day patent warfare. Back in 2006, Blackberry maker Research In Motion (RIM) agreed to pay  a well known patent troll, NTP, $612M for “full and final settlement of all claims”.  Recently in the news, Nokia’s CEO, Stephen Elop, Nokia’s CEO announced that he was “very pleased to have Apple join the growing number of Nokia licensees.” The rumors had the licensees totally up to an unconfirmed $600m. If that wasn’t enough, we’ve now grown accustomed to Google playing dirty by buying a patent, only to sell it to HTC who then uses it to sue Apple.

What does this mean? We’re willing to bet that smartphone patent litigation filings are far from over, and will continue on throughout 2012 and even far beyond it. Especially if patent lawsuits like those generated by Apple against Google are successful at generating revenue in the form of long term licensing agreements. We don’t see patent litigation going anywhere anytime soon, especially with the recent consumer fixation centered around tablets, which are in essence just a larger version of a smartphone running on a very similar OS. Samsung and Apple are extremely familiar with tablet related patent wars, as we saw numerous lawsuits fly back and forth during 2011 over Samsung’s Galaxy Tab 10.1 and Apple’s iPad 2.

In the long term the increase in smartphone litigation won’t necessarily give an exact advantage to any of the big players. Inevitably, everyone will win some and loose some suits, and cross license technology in between. Regardless, the increase in patent warfare could simply be celebrated as an unavoidable side effect of a robust and thriving smartphone ecosystem. Even the most robust organism can’t evolve without its encounters with parasites, er, patent trolls. We can’t help but wonder if we would still be holding our Nokia candy bar phone if it weren’t for companies like Apple and Google always looking to get their hands dirty and go to war all in the name of patent warfare.

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