Apple vs. Samsung and How Innovation Suffers

By now you’ve probably heard that jury selection started today in San Jose, California in the Apple vs. Samsung patent trial that will impact both the smartphone and tablet market segments.  It will also impact the relationship between the two companies since Apple is Samsung largest customer, supplying displays, FLASH storage, and chipsets to Apple, for both the iPhone and iPad platforms.

Apple’s Argument

Apple filed a lawsuit against Samsung last year alleging that its devices are “illegal knockoffs” of Apple’s iPhone and iPad and is demanding $2.5 billion in damages and the barring Samsung’s offerings from store shelves in the US.

Samsung’s Counter Argument

Samsung has countered by stating that Apple is using design elements and technical features such as rounded rectangular corners, that have been a feature of various smartphone brands for years, and copied the iPhone’s design from Sony, and one might argue, from LG’s Prada, a touchscreen smartphone from late 2006. Samsung has also stated that the iPhone and iPad would be impossible to make were it not for Samsung’s own component technologies. The Asian vendor has gone further by also going after Apple on its use of Samsung’s 3G patents, which Apple is required to use by law. Current UMTS standards mandate that specific 3G patents be used and licensed to ensure that spectrum does not get overwhelmed by mobile data demands. Apple argued that Samsung’s licensing fees were unreasonably high, though Apple makes one of the highest profits of any device brand. It is speculated that Samsung’s 3G licenses would amount to $2 per iPhone and iPad.

The Innovation Impact

This is just the latest in a mobile patent war that has been going on for some two years now. At stake are intellectual property rights of many different players in the mobile ecosystem. All of the lawsuits have been settled out of court, without going to a full trial, and usually as a cross licensing agreement between both sides. That is of course, after the legal teams on both sides are paid off handsomely. In fact, the cost of legal fees and litigation has exploded across the mobile market in the past decade as brands seek to protect themselves from patent trolls, while also aggressively protecting and enforcing their IP, whether they take it to market or not. As the Reuters infographic from a year ago shows, the world of mobile patent suits is become harder and harder to discern as time goes by. The fact that Apple vs. Samsung has gone to trial implies that whatever the verdict, there will be direct impacts to the smartphone and tablet markets directly, and to Android, and it might change competition today as we know it.

But at what price does true innovation pay when battles over IP get this heated?

Apple in its third quarter 2012 results just reported shows R&D spending of $876 million on revenues of $35 billion, or 2.5%. Compare that to other technology brands and it’s rather small in comparison. Apple is clearly a leader in design while Samsung is clearly a leader in component technology, and increasingly in consumer electronics products. However, when it comes to mobile, most of today’s products are actually manufactured by the same five Chinese companies. What varies is the size of engineering stamp from the brand itself. But R&D truly happens on both sides of the fence, between the brand itself and its manufacturing partner.

The problem is that because there is so much IP and patent turmoil today, brands are not making big leaps in innovation, or R&D, but are instead making tiny, conservative steps that are more evolutionary versus revolutionary. Yes, the iPhone and iPad were revolutionary when they debuted, and shook up existing product segments — smartphones and tablets were hardly new. However, since then Apple’s revisions to both platforms have been just that, revisions and not breakthrough enhancements. And the same can be said for all the brands participating in the Android camp as well. Every five years there has been a new smartphone leader, going back to the late 1990’s.

Innovation is clearly paying a price as all brands are now more cautious

The tech world used to operate through a sharing of ideas as engineers moved from firm to firm over time, and these ideas and processes were shared in forums and in standards bodies. It was the way Silicon Valley and the industry as a whole worked. But increasingly, brands have moved to more restrictive and closed platforms today, with large teams of lawyers and lobbyists to defend them. These silos have instead focused on content deals as short term solutions to innovation, from a services perspective. But the average American consumer can increasingly get just about any of today’s digital music or video services on any of their device these days — TVs, smartphones, and tablets.

Innovation doesn’t win in this scenario, and neither do consumers, no matter what the outcome of Apple vs. Samsung becomes.

image credit: androidauthority.com

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Randy Giusto is SVP, Innovation Research and Industry Analyst at Ipsos Vantis. He leads innovation, research, and strategic and tactical marketing; and consults with technology, media/content, and service provider brands on new product development, content strategy and branding measurement. You can follow him on Twitter.