Patent Litigation and the Internet - Article Example

Table of Contents References 4 Literature Review The paper aims to present a review of the literature on the market for cell phones, and the prospects for Samsung smart phones in the wake of the ruling awarding Apple US 1 billion dollars in its patent suit against Samsung. The eventual goal of the literature review is to surface support for the hypothesis that such patent lawsuits are aimed at giving Apple monopoly power in the smart phones market. This, as Apple has moved ahead after the verdict to have Samsung's Galaxy line of smart phones banned from entry in the United States, further escalating the patent war and shoring up its defense of the American market for smart phones (Associated Press, 2012). In all the reports are that 21 smart phones in Samsung's lineup, including the newest iteration of its Galaxy line the Galaxy S III, are being targeted for the ban (Reuters, 2012). The goal, it seems clear, is to shut out Samsung from this important market, and in other key markets around the world (Associated Press, 2012; Reuters, 2012). Taking a step back, differentiation for Samsung comes, first from scale and the ability to compete on scale economics rather than design, and later with innovations around design, manufacturing, software and apps, new materials, further improvements in scale for component parts (Cromar, 2010). The case highlights the notion of the smart phone industry in general as being an area that is fraught with litigation, where patents are being used as weapons in a kind of arms race for supremacy in the space. The estimates at present are that about 250,000 different patents cover a smart phone from skin to electronic board, and each of those patents can be used to claim some stake in the whole technology. That claim can be used to ignite patent litigation. It is noteworthy that Apple's patents cover areas tied to design, which moving forward are considered to be harder to enforce in comparison to the nuts and bolts engineering and technological patents that other patent holders, such as Nokia and Samsung, hold. In the fray too, are patents from other major players, such as Microsoft, and to a lesser extent, Google, the latter being the indirect target of the Apple patent suits against Samsung. Experts note that Google is really the ultimate target of the Apple suits, and linked to Google, all the other major players in the Android ecosystem, including HTC. Yet smart phones technologies and patents differ too, in one crucial respect, in that while patent lawsuits can temporarily derail market advancement, in the long run engineers are able to create workarounds that skip using contested technologies and patents altogether, or else manufacturers such as Samsung are forced to enter into patent licensing agreements when the patents in question are essential and irreplaceable. This latter point makes the case for companies investing billions of dollars to develop and patent essential technologies and engineering innovations tied to the smart phone (Lohr, 2012; Lloyd et al., 2011; Cromar, 2010; Gerardin and Layne-Farrar, 2011; Seppala and Kenney, 2012; Layne-Farrar, 2012; Boldrin and Levine, 2012; Siren, 2011; Gotts and Sher, 2012; Hagiu and Yoffie, 2011; Allison et al., 2012). Literature on intellectual property and the enforcement of patents, in general, provide the backdrop to this power struggle between Samsung and Apple, and an intimate knowledge of the intricacies of intellectual property law has implications for the ability of Samsung to innovate and compete with Apple, and to go with them toe to toe in the vital areas of intellectual property and the patenting and licensing of important technologies and innovations (Gerardin and Layne-Farrar, 2011). It is important also to note that the patent wars in the court rooms are giving way to companies such as Apple doing what it can in order to further shore up its hoard of patents, resorting to buying patents in the market place in order to do so. The example of Novell and the way Apple, together with a few other players, aggressively pursued Novell's patents when they went up for sale, is a case in point. Another example is the Nortel bid, where Apple, working with a consortium that includes Microsoft, was able to snatch Nortel's patents and was willing to pay a premium for those patents, ending up being valued for $4.5 billion dollars. Moving forward, it is easy to see that smart phone companies such as Samsung would do well to shore up its trove of patents as well, in order for the company to be able to compete with Apple and other players in the space. It seems that in this current legal atmosphere in the US and elsewhere, the recent victory of Apple over Samsung in patent litigation proves the wisdom of the Apple patent acquisitions and its aggressive bids for more patents in the space. These moves are indicative of Apple's intent to dominate and monopolize the US and other key markets, via a strong IP portfolio, and a willingness to defend those patents and keep the market away from the reach of entrants such as Samsung (Layne-Farrar, 2012). It is important to note too, that Apple and Samsung are not just battling for IP rights and patents in the US, but in many arenas all over the world, especially in the most lucrative and advanced markets for smart phones all over the world. This makes the case for a strong global intellectual property and patent position for Samsung as a must moving forward. It is highly unlikely that the patent litigation and legislation landscape will change in the foreseeable future. It therefore makes sense for Samsung to play by these rules, and shore up its own patent portfolio, litigating when necessary, as it has done in a global tiff with Apple involving at least 30 different arenas all over the world (Seppala and Kinney, 2012). It is also worth noting that the dynamics of the competition between Apple and Samsung is marked by Samsung being likewise a key supplier of component parts to Apple, making the competition unique, in that the two are competing and are forced to cooperate at the same time. Apple needs Samsung in order to compete, via a stable supply of quality components, while at the same time Samsung is also partly reliant on Apple to drive components sales. This, even as Samsung also turns around and competes with Apple in the manufacturing and marketing of its own line of smart phones. This reality of cooperation and competition is an important dynamic that cannot be ignored in any discussion on strategies and technology decisions involving Samsung and how it can compete with Apple moving forward (Seppala and Kinney, 2012; Gerardin and Layne-Farrar, 2011; Seppala and Kenney, 2012; Layne-Farrar, 2012; Boldrin and Levine, 2012; Siren, 2011; Gotts and Sher, 2012; Hagiu and Yoffie, 2011; Allison et al., 2012). It is likewise in the interest of Samsung to explore IP related trading dynamics further, in order to make the most out of any strategy to better compete with Apple as far as patents and intellectual property are concerned. In this regard, expert knowledge on IP, IP pools, and market mechanisms for the acquisition and trading of patents are key. The take is that IP law and IP trading dynamics are the rules by which Samsung has to learn how to play. The substantial impact of the Apple litigation victory against Samsung recently underscores the need to shore up Samsung expertise in this space (Lohr, 2012; Lloyd et al., 2011; Cromar, 2010; Gerardin and Layne-Farrar, 2011; Seppala and Kenney, 2012; Layne-Farrar, 2012; Boldrin and Levine, 2012; Siren, 2011; Gotts and Sher, 2012; Hagiu and Yoffie, 2011; Allison et al., 2012). References Allison, J. et al. (2012). Patent Litigation and the Internet. Stanford Technology Law Review 3. Retrieved from http://stlr.stanford.edu/pdf/allison-patent-litigation.pdf Associated Press (2012). Apple calls for ban on Samsung Galaxy smartphones. Fox News. Retrieved from http://www.foxnews.com/tech/2012/08/27/apple-calls-for-ban-on-samsung-galaxy-smartphones/ Boldrin, M. and Levine, D. (2012). The Case Against Patents. Research Division, Federal Reserve Bank of St. Louis. Retrieved from http://research.stlouisfed.org/wp/2012/2012-035.pdf Cromar, S. (2010). Smartphones in the US: Market Analysis. Business Strategy for Lawyers. Retrieved from https://www.ideals.illinois.edu/bitstream/handle/2142/18484/Cromar,%20Scott%20-%20U.S.%20Smartphone%20Market%20Report.pdf?sequence=2 Gerardin, D. and Layne-Farrar, A. (2011). Patent Value Apportionment Rules for Complex, Multi-Patent Products. Santa Clara Computer & High Technology Law Journal 27 (4). Retrieved from http://digitalcommons.law.scu.edu/cgi/viewcontent.cgi?article=1528&context=chtlj&sei-redir=1&referer=http%3A%2F%2Fscholar.google.com%2Fscholar%3Fhl%3Den%26q%3Dsmart%2Bphones%2Blitigation%2Bpatents%2B%26btnG%3D%26as_sdt%3D1%252C5%26as_sdtp%3D#search=%22smart%20phones%20litigation%20patents%22 Gotts, I. and Sher, S. (2012). The Particular Antitrust Concerns with Patent Acquisitions. Competition Law International. Retrieved from http://www.wlrk.com/webdocs/wlrknew/AttorneyPubs/WLRK.21973.12.pdf Hagiu, A. and Yoffie, D. (2011). Intermediaries for the IP Market. Harvard Business School. Retrieved from http://www.hbs.edu/research/pdf/12-023.pdf Layne-Farrar, A. (2012). The Brothers Grimm Book of Business Models: A Survey of Literature and Developments in Patent Acquisition and Litigation. Edegan.com. Retrieved from http://www.edegan.com/pdfs/LayneFarrar%20%282012%29%20-%20The%20Brothers%20Grimm%20Book%20of%20Business%20Models.pdf Lloyd, M. et al. (2011). The Smartphone Patent Wars. Griffith Hack. Retrieved from http://www.iam-magazine.com/blog/articles/GriffithHackSmartphonesReportFinal.pdf Lohr, S. (2012). Apple-Samsung Case Shows Smartphone as Legal Magnet. The New York Times. Retrieved from http://www.nytimes.com/2012/08/26/technology/apple-samsung-case-shows-smartphone-as-lawsuit-magnet.html Seppala, T. and Kenney, M. (2012). Competitive Dynamics, IP Litigation and Acquisitions- The Strggle for Positional Advantage in the Emerging Mobile Internet. ETLA- The Research Institute of the Finnish Economy. Retrieved from https://www.etla.fi/files/2949_no_1288.pdf Siren, A. (2011). Apple, Nokia and RIM- Rivalry or Cooperation Between Three Mobile Phone Corporations. Lappeenranta University of Technology Faculty of Technology Management. Retrieved from http://doria17-kk.lib.helsinki.fi/bitstream/handle/10024/72522/nbnfi-fe201111075807.pdf?sequence=3 Read More