MONEY Tech

Why the War Between Apple and Android is Over

A visitor looks at Apple's website on the new Samsung Galaxy Note 4, in a Samsung pop-up shop in Soho in New York.
Richard Levine—Alamy

This is Tim Cook's Apple now—and Cook vehemently disdains litigation.

I will spend my last dying breath if I need to, and I will spend every penny of Apple’s $40 billion in the bank, to right this wrong. I’m going to destroy Android, because it’s a stolen product. I’m willing to go thermonuclear war on this.

– Steve Jobs

You’ve undoubtedly heard this infamous quote by now from the late Apple APPLE INC. AAPL 1.1905% co-founder, which was included in his official biography that was published shortly after his death in 2011. Steve Jobs’ loathing for Google GOOGLE INC. GOOG -0.1312% Android was perfectly captured in this quote.

Over the years, this “thermonuclear war” has raged on, with Apple primarily targeting rival Android OEMs as opposed to Google itself. Naturally, the highest profile case was against Samsung, but Apple has also conducted its patent warfare through The Rockstar Consortium, a joint venture owned by 5 prominent tech companies. Apple and Microsoft are two of the main backers.

Rockstar was the entity that outbid Google in the 2011 auction to acquire Nortel’s massive patent portfolio, winning out with a $4.5 billion offer. Apple put up $2.6 billion of that total, presumably making it the majority owner of Rockstar.

That portfolio included important intellectual property surrounding Wi-Fi networking and cellular connectivity, among many other areas related to mobile technology. Rockstar proceeded to sue Google and numerous Android OEMs like Samsung and HTC with said patents a little over a year ago.

Well, Rockstar and Google just settled their differences, which could signal that Apple’s “thermonuclear war” is over.

War changes

No dollar terms for the settlement were disclosed, but the bigger story here is an underlying strategic shift for Apple. Cisco CISCO SYSTEMS INC. CSCO 0.5315% was also on the receiving end of patent litigation, and similarly just announced a settlement with Rockstar that will result in a $188 million pre-tax charge.

The patent wars have raged on for years, with little effect on the underlying competitive dynamics of the smartphone industry. From a financial perspective, litigation is unlikely to be worth the trouble, and it now seems that Rockstar’s shareholders (the 5 tech companies) are wary of the distraction and want to exit the consortium. Chances are that Rockstar will never come out ahead compared to the $4.5 billion it paid.

Apple also settled its litigation with Motorola Mobility earlier this year, while the handset maker was still officially under Google’s multi-colored flag (Lenovo’s acquisition of Motorola closed in October). At the time, Apple and Google said they would work together in advocating for patent reform. In August, Apple and Samsung settled all of their outstanding patent disputes outside of the U.S. as well. Neither of these settlements includes any cross-licensing agreements.

Why the sudden change of iHeart?

A changing of the guard

There are a handful reasons why Apple’s war on Android would never bear fruit and why it may be giving up.

Apple’s primary goal was never to make money from these patent suits (it makes plenty of money as it is). It was trying to block popular Android devices from the market. But the underlying strategy of trying to preclude Android devices from the market was inherently doomed, considering the open-source nature of the platform and the sheer number of OEMs making Android devices.

Perhaps most importantly, the strategy was implemented under Steve Jobs. As you can see from the quote above, he had rather strong feelings on the matter. So strong, in fact, that they weren’t pragmatic. Not only would spending Apple’s $40 billion in cash (at the time) be an obvious breach of fiduciary responsibility to shareholders, but the company would have no chance of succeeding at keeping Android off the market. Naturally, Jobs was probably just being a little melodramatic.

But this is Tim Cook’s Apple now, which is very different than Steve Jobs’ Apple in more ways than one. Specifically, Cook vehemently disdains litigation. Here’s Cook on the Q2 2012 earnings conference call, less than a year after becoming CEO:

I’ve always hated litigation and I continue to hate it. We just want people to invent their own stuff. So if we could get some kind of arrangement where we could be assured that’s the case in a fair settlement on the stuff that’s occurred, I would highly prefer to settle versus battle. But the key thing is that it’s very important that Apple not become the developer for the world. We need people to invent their own stuff.

Philosophically, Apple just doesn’t want its rivals to continue copying its hardware and software designs. Legally, the company has limited options on how to stop it, particularly as it’s become painfully obvious that patent suits aren’t effective. That’s especially true for a Chinese competitor like Xiaomi, which mostly operates outside the jurisdiction of U.S. patent courts while China is notorious for weak intellectual property rights.

Fighting words

Without a doubt, Apple is just as upset about Xiaomi’s copying ways as it is about Samsung’s copying ways. Design chief Jony Ive has spoken twice in recent months regarding the Chinese smartphone maker. Here’s Ive at a Vanity Fair conference in October:

I’ll stand a little bit harsh. I don’t see it as flattery. When you’re doing something for the first time, you don’t know it’s going to work. You spend seven or eight years working on something, and then it’s copied. I have to be honest, the first thing I can think, all those weekends that I could have at home with my family but didn’t. I think it’s theft, and it’s lazy.

Ive’s comments at London’s Design Museum last week echo the same notion:

We may seem a little testy when things we have been working on for eight years are copied in six months – but it wasn’t inevitable that it was going to work. It’s not copying; it’s theft. They stole our time, time we could have had with our families. I actually feel quite strongly about it. It’s funny – I was talking to somebody and they said do you think when somebody copies what you do it’s flattering? No.

Naturally, Xiaomi adamantly denies the allegations. You be the judge.

The market will work itself out

By his own admission, Ive is not a shrewd businessman; Ive is a designer and he’s justifiably angry. However, the fact still stands that Apple has little effective recourse to stop companies like Xiaomi or Samsung.

It turns out that the solution is just as easily captured in another Steve Jobs quote. Apple’s most viable strategy in beating Android is simply to compete as aggressively as it can by creating the best products. In 2010, Jobs said, “And if we succeed, they’ll buy them. And if we don’t, they won’t. And it’ll all work itself out.”

TIME Patent Wars

The Apple vs. Samsung Patent War Continues, but the Stakes Are Lower

A man is silhouetted against a video screen with Apple and Samsung logos as he poses with a Samsung Galaxy S4 in this photo illustration taken in the central Bosnian town of Zenica
Dado Ruvic / Reuters

The look and feel of Samsung's hardware isn't an issue this time around.

Apple is once again trying to extract some cash from Samsung’s Android phone business in a new patent infringement trial, which kicks off today.

Many of the headlines have focused on Google’s potential involvement. Because Samsung says four of Apple’s five infringement claims relate to general Android features, Google engineers will reportedly take the stand to testify in Samsung’s defense. That could make the latest case even more of a Google vs. Apple proxy battle than previous Apple lawsuits against Android vendors. (Apple has never sued Google directly, possibly because it’s harder to claim damages on a company that licenses its Android software for free.)

While the potential for Google testimony is noteworthy, what strikes me even more is how mundane this Apple-Samsung lawsuit is compared to the first one, which reached a jury verdict in 2012.

Apple’s original lawsuit against Samsung was unique because it included design patents. Unlike the lawsuits Apple has filed against HTC, Motorola and other vendors, Apple argued that Samsung was ripping off the look and feel of the iPhone and iPad, not just a few software features.

(A common misinterpretation, by the way, is that Apple was claiming ownership over obvious design elements, such as rounded rectangles. In reality, Apple claimed that the way many of those individual elements came together had been copied by Samsung.)

A jury eventually found Samsung guilty of infringing on Apple’s design patents for smartphones, but not for tablets. But as I noted back in 2012, Samsung had already hedged its bets at that point. The company drastically changed the look of its phones starting with the Galaxy S III, so they hardly resemble the iPhone.

In terms of actual consumer impact, this was arguably the most noticeable outcome from the original case, and it happened long before the trial wrapped up. Older phones that were found to have infringed on Apple’s designs were already outdated when the trial was over, and Apple has failed to get them banned anyway.

This time, Apple isn’t making any trade dress claims. Instead, the five patents deal specifically with software features, including slide to unlock, background data syncing, auto-complete, universal search and turning certain messages data into links. For these alleged infringements, Apple is seeking about $2 billion in damages, according to the Wall Street Journal — roughly $500,000 less than what Apple sought in the first trial.

If you’re a typical Samsung user, the dollar figures don’t matter much. Even if Apple wins, the two companies will spend years arguing over money owed — as they still are for the original case — and the final amount will be a fraction of what both companies make in any given quarter.

What matters more is the potential impact on Samsung’s products. But as we’ve seen in other cases, software patents can often be worked around in ways that are barely noticeable. For instance, Samsung dealt with Apple’s “overscroll bounce” effect in the 2012 lawsuit by using a different visual effect as you scroll past the boundary of a web page. That same year, HTC worked around an Apple patent governing what happens when you tap on a phone number, taking users into the phone’s dialer instead of showing a pop-up dialog box. Whereas the physical design of a phone must be planned months or years in advance, a software update can be delivered instantly at no cost, so there’s less risk of future products being jeopardized.

Perhaps just as importantly, this won’t be a case where Apple can embarrass Samsung in the court of public opinion, as it did last time when Samsung’s lawyers couldn’t tell an iPad from a Galaxy Tab. That’s a design issue, and it won’t come up in this case. So while the dollar figures are similar this time around, there’s a lot less on the line.

TIME Patent Wars

Apple Wants $2 Billion from Samsung, but the Real Target Is Google

The Apple logo at its flagship retail store in San Francisco, on Jan. 27, 2014.
The Apple logo at its flagship retail store in San Francisco on Jan. 27, 2014 Robert Galbraith—Reuters

Apple and Samsung are jumpstarting their multibillion-dollar legal war over patents on Monday, with each accusing the other of blatantly copying design features, but Apple is really going after Google's Android mobile operating system

Apple and Samsung are set to resume their patent battle when the two tech titans square off in California federal court on Monday. The conflict between two of the most powerful technology companies in the world — with billions of dollars at stake — has been escalating for years, and underscores the ferocious struggle for advantage in the highly competitive smartphone and tablet markets.

Apple and Samsung have accused each other of blatantly copying design features used in each company’s smartphones and tablets. For Apple, the campaign against Samsung amounts to a proxy war against Google’s Android operating system, which powers the most popular Samsung devices. Apple has already won one major patent infringement case against Samsung, resulting in damages that were ultimately pegged at $930 million. Samsung is appealing that verdict.

The new case covers recent mobile devices, including the iPhone 5 and the latest models in Samsung’s Galaxy line. Apple is demanding about $2 billion in damages, and asking that Samsung be ordered to pay a $40 licensing fee for each phone. Patent expert Florian Mueller thinks Apple’s claim is outlandish. “Give me a break,” he wrote last week. “Reality distortion would be a total understatement for this.”

For Apple, this case isn’t about money so much as principle. Apple is nearing $200 billion in annual revenue and sitting on tens of billions in cash. Apple doesn’t need $2 billion. What it wants more than money is validation that its engineers were responsible for inventing the modern smartphone.

Apple’s late CEO Steve Jobs was convinced that Google and its partners copied most of the Android operating system and form-factor from the iPhone. The rift caused Google chairman Eric Schmidt to be politely dismissed from Apple’s board of directors five years ago. Jobs famously vowed to wage “thermonuclear war” against those whom he felt had ripped off the iPhone, and the multibillion-dollar lawsuits against Samsung and other Android hardware makers are the legacy of Jobs’ conviction.

(MORE: Apple’s $1 Billion Patent Win Over Samsung Rattles Google’s Cage)

Apple charges that Samsung “systematically copied Apple’s innovative technology and products, features, and designs, and has deluged markets with infringing devices in an effort to usurp market share from Apple. Instead of pursuing independent product development, Samsung slavishly copied Apple’s innovative technology, with its elegant and distinctive user interfaces product design, in violation of Apple’s valuable intellectual property rights.”

Samsung has filed a countersuit denying that charge and claiming that Apple “has infringed and continues to infringe,” on Samsung patents. “Without the ability to enforce its intellectual property rights, such as those relating to mobile device technology at issue in this action, Samsung would not be able to sustain the extensive commitment to research and development that has enabled it to lead the way into numerous improvements across a broad range of technologies, including the mobile device technologies at issue in this action,” Samsung said.

The patents involved in the case relate to the iPhone’s universal search feature, as well as technology that enables links inside text messages, and syncs calendar, email and address book data. Another patent involves the iPhone’s predictive text feature, which suggests text after the user has entered a few characters. Perhaps the most controversial patent in the case applies to the slide-to-unlock feature, which has become a familiar ritual for millions of smartphone users around the world.

(MORE: Aereo Boss Says He’s ‘Confident’ Ahead of Supreme Court Battle)

Over the last decade, an escalating patent arms race has gripped the tech world. Most of the major tech giants, including Apple, Google, Microsoft, and Samsung have engaged in patent litigation and counter-litigation in multiple jurisdictions around the globe. So far, the biggest winners have been patent lawyers, who reap millions of dollars in fees during these multiyear legal disputes.

Many patent experts believe that rampant intellectual-property litigation hinders competition, increases prices for consumers, and impedes innovation by slowing new products to market. “There’s a widespread suspicion that lots of the kinds of software patents at issue are written in ways that cover more ground than what Apple or any other tech firm actually invented,” Notre Dame law professor Mark McKenna told the Associated Press. “Overly broad patents allow companies to block competition.”

Last week, Apple allowed Greg Christie, one of its top software engineers, to speak publicly about the early development of the iPhone. Christie is one of several Apple employees who are listed as inventors on the slide-to-unlock patent, which was filed in 2009. In an interview with the Wall Street Journal, Christie described how his team worked for years to meet Steve Jobs’ exacting standards. Fortune writer Philip Elmer-DeWitt suggested it was no coincidence that Apple trotted Christie out just days before the trial. Apple wanted to make a point: We invented this technology.

Although Apple and Samsung will be the two tech titans squaring off in Judge Lucy Koh’s San Jose courtroom on Monday, Google will loom large in the proceedings. That’s because Apple’s multiyear patent battle against Samsung and other handset makers is really a proxy war against Google’s Android operating system, which powers their most popular devices. Several Google executives could be called to testify. The trial is expected to last through early March.

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