Programming Note: This site will be on break through the holidays and return in January. Be sure to subscribe or check back for updates!

Article: There’s That ‘Apple Tax’ Again

by on August 25, 2012

In the wake of Samsung’s huge patent trial loss, a number of media outlets are jumping to speculation mode. There already is the notion that Apple will simply be litigating all the time since it has money and won once. I’m not so sure about that.

In an article for the Wall Street Journal, Spencer E. Ante thinks we may see more expensive products from Apple’s competitors:

After its stunning victory against rival device-maker Samsung Electronics Co., experts say consumers should expect smartphones, tablets and other mobile devices that license various Apple Inc. design and software innovations to be more expensive to produce.

“There may be a big Apple tax,” said IDC analyst Al Hilwa. “Phones will be more expensive.”

I knew we’d see articles like this, but I think what both Ante and Hilwa fail to recognize are original ideas from companies like Microsoft and Palm (RIP) that didn’t blatantly copy anything from Apple. What surprised me was that the usually even-keeled Andy Ihnatko from the Chicago Sun-Times is buying into it, too:

The biggest losers here are consumers. If the verdict stands, then the costs of the judgment will be reflected in the cost of mobile devices. Furthermore, other manufacturers will feel the need to buy Apple’s official permission to build useful phones, passing down the possible $20-per-handset fee.

And it’s possible that the next great phone, the one that shames the iPhone the same way that the iPhone buried the Blackberry, will never make it to market. Designing and selling an advanced smartphone just became a dangerous business.

I disagree. While there are patents focusing on how a smartphone actually works, most of the ones that have come into question have been based around the user interfaces and interaction with the device. If anything, the result of the trial may be that some companies are scared to blatantly copy patented ideas (not just from Apple, but Google/Motorola, Nokia, and RIM), but find new ways to perform tasks.

If people want an iPad or iPhone, they are going to get an Apple product, not some cheesy, blatant ripoff from another company. With all the work Microsoft is doing to get away from the grid-of-icons interface found on many phones and tablets, it is obvious that there can be some originality in the mobile space.

Marco Arment also commented on Ihnatko’s article about simple business and how licensing patents won’t necessarily hurt consumers’ wallets:

Smartphone and “tablet” manufacturers will keep doing what they always do: sell us their products at the highest prices they can possibly charge for them to maximize total revenue.

Maybe we’ll pay this theoretical “extra $20” in patent-license fees for our smartphone up front, a surcharge less than any carrier in the U.S. will charge to “activate” it, because it’s a drop in the bucket relative to the $2,000-over-two-years contract. In that case, this discussion is moot.

Or that extra $20 is significant, we won’t pay it, and the manufacturers will find a way to save $20 somewhere else to remain competitive and continue selling us their products that are so close to the iPhone that they run into these patents.

Furthermore, the jurors came back with a decision so quickly because it was so obvious that there were very lazy copies of patented ideas:

In the CNet interview with another Apple v. Samsung juror, Manuel Ilagan reiterated that it was “clear there was infringement”. When asked for specifics, he said:

“Well, there were several. The e-mails that went back and forth from Samsung execs about the Apple features that they should incorporate into their devices was pretty damning to me. And also, on the last day, they showed the pictures of the phones that Samsung made before the iPhone came out and ones that they made after the iPhone came out. Some of the Samsung executives they presented on video [testimony] from Korea — I thought they were dodging the questions. They didn’t answer one of them. They didn’t help their cause.”

For those who think lawsuits like this one will simply create an industry bent on suing one another, it seems that the jury wanted to send a message, but also offer some restraint, which, in my opinion is a good thing:

In determining the award amount, [jury foreman Velvin] Hogan reports that they felt Apple’s demands of $2.75 billion was “extraordinarily high”, especially taking into account the uncertainty in Apple’s ability to have sold significantly more iPhones due to component supply constraints. That said, Hogan told Reuters they did want a send a message.

“We didn’t want to give carte blanche to a company, by any name, to infringe someone else’s intellectual property,” Hogan told Reuters a day after the verdict.

Ilagan even provides a bit of smart commentary on the general topic that some tech writers seem to be missing:

“I realized that’s a big deal if Samsung can’t sell those phones…But I’m sure Samsung can recover and do their own designs. There are other ways to design a phone. What was happening was that the appearance [of Samsung’s phone] was their downfall. You copied the appearance…. Nokia is still selling phones. BlackBerry is selling phones. Those phones aren’t infringing. There are alternatives out there.”

I think the biggest takeaway is that this does send a message to the industry (and hopefully Apple, too) that blatantly ripping off ideas just can’t happen. In fact, a positive byproduct may be that some companies will have to work together for not only development (licensing and such), but also to fight arguably frivolous patent lawsuits, like the Lodsys one. I do think the patent system is a broken one, and Apple is just playing the game. It doesn’t come down to money, influence, or the “cool” factor.

This post has been filed in Articles