What Price Victory? Apple, Samsung, and the Legacy of the Smartphone Patent War

The Court of Appeals for the Federal Circuit, a major venue for litigating intellectual property disputes in the United States, recently issued a significant ruling in the long-running smartphone patent war between Apple and Samsung. In this case, the court reviewed a previous judgment against Samsung that held the firm liable for infringing on an array of iPhone-related patents. The Federal Circuit overruled some aspects of the previous decision, but it mostly affirmed Apple’s previous win in asserting an array of design patents.

This is a consequential case for many reasons. For Samsung, the ruling probably cuts substantially the amount it will be required to pay Apple for its infringement (at trial, a jury found the firm liable for almost $1 billion in damages). For innovators, it invalidated (for now) the argument that most aspects of the look and feel of a smartphone – its “trade dressing” – are not eligible for IP protection. For lawyers and aspiring patent trolls, the case enhanced the value of design patents, raising the specter of even more litigation in the future as entities attempt to extract high-dollar settlements or judgments. Together, none of this bodes well for consumers. Indeed, the case offers little hope and certainty for the average consumer because it ultimately endorses and legitimates Apple’s strategy of wielding its patents as a powerful weapon in the fierce battle for market share, profits, and prestige that has long raged throughout the smartphone space.

There are several ironic elements to the ongoing dispute between Apple and Samsung. First and foremost, since these cases arose, both companies have introduced dozens of new phones. Features that were once seen as potentially groundbreaking have since become commonplace. Such is the nature of the modern smartphone market, where firms compete for a slice of a global market that, in 2014,delivered over a billion devices to consumers. Apple’s use of its patents to ward off a competitor and grow its market share is also ironic because the company’s success has long hinged on improving existing products, not inventing new ones. In some cases, like the visit by Steve Jobs to Xerox in 1979 while designing what would eventually become the Macintosh, the company has been accused of outright stealing (Jobs was once quoted as saying, “we have always been shameless about stealing great ideas”).

Equally as relevant in the context of the Samsung case is Apple’s long-held animus towards Google and the companies that work with it in the smartphone space. In his biography of Jobs, Walter Isaacson described one of Apple’s first smartphone patent suits, which was filed against HTC, a firm that built its phone around Google’s Android operating system. Isaacson quoted the Apple founder as saying, “Google…wholesale ripped us off. 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 willing to go to thermonuclear war on this…”

Whether this kind of sentiment fueled or shaped the legal strategy that Apple has pursued since its founder’s death is uncertain, but it is nonetheless revealing of an increasing acceptance in the smartphone space to wield patents, rather than ideas, as the primary means of competition. Apple is not alone in its use of IP rights as both a shield and a sword for these purposes, but it is certainly among the most aggressive.

What is the impact of this new dynamic in the smartphone space? As previously noted, innovation has continued apace – Apple, Samsung, and numerous other companies have continued to design and release cutting-edge devices while the patent battles have raged in the background. But the results of those battles – high jury awards; the garnishing of total profits made on infringing devices; the legitimacy and increased value of vague design patents – raise the possibility of more perverse outcomes for consumers in the future. Innovation could slow from its breakneck pace if a company fears that a rival might somehow succeed in convincing a court or jury that a new feature, icon, display or service infringes on one of its patents, no matter how irrelevant that patent might be to the overall product or whether or not it even contributes to driving its sale. Similarly, and perhaps most unfortunately for consumers, the cost of pursuing and settling litigation could drive prices up. Smartphones are already incredibly expensive, so any cost increases could push these increasingly vital devices beyond the means of more consumers. Indeed, price increases would be felt disproportionately by the very populations that rely on smartphones for accessing the Internet.

Where do we go from here? Despite some efforts to settle outstanding suits, there appears to be little desire among smartphone companies here in the U.S. to stop using litigation as a means of undermining competitors. In addition, the courts appear to be increasingly willing to enforce a broad range of design patent rights, creating fertile ground for additional suits (and possibly fomenting the emergence of a new class of patent trolls eager to cash in on the design patent bonanza). The only viable avenue for recourse, then, appears to be Congressional intervention. This could be carried out on two parallel tracks: targeted fixes to some of the outdated or open-ended sections of the IP laws in the short-term (including those provisions related to design patents and the practice of awarding total profits, both of which are fueling the current round of smartphone patent litigation), coupled with a longer-term effort to modernize the entire body of patent law. Regardless of the strategy and timeline that’s ultimately pursued, though, some form of relief is desperately needed. Otherwise, the innovative character of the U.S. smartphone space will dissolve amidst never-ending litigation.

Michael J. Santorelli is Director of the Advanced Communications Law & Policy Institute at New York Law School. 

Morning Consult