Jobs had built Apple into the world’s biggest tech company, and so he could really do no wrong in the eye’s of Apple shareholders and aficionados. But the fact is that starting a global thermonuclear war, or spending every cent of the company’s money in pursuit of a principle, is not good business. That path leads ultimately to shareholder revolt!
Jobs’ successor, Tim Cook, has therefore inherited a potential ticking time-bomb. Apple had some early wins in the patent disputes which it started, but as the various court proceedings drag out over months – and those months will become years, unless there is a settlement – the company is finding itself increasingly mired in suits, countersuits, side issues and appeals.
It should therefore some as no surprise that Cook is trying to recast the battle as one which has a rational business foundation, and in which Apple is on the side of goodness and light. The cost and distraction of all these law suits must now be justified to observers and shareholders as something more than the result of one person’s outrage.
So, when questioned about the ongoing IP disputes, Cook has taken to responding that, while he would prefer to settle, Apple will not be the world’s developer. At Apple’s quarterly conference call on 24 April 2012 (as reported by CNET) Cook said ‘I would highly prefer to settle than to battle. But it’s important that Apple not become the developer for the world. We need people to invent their own stuff.’
DEVELOPING FOR THE WORLD?Again this week, at the D10 conference, Cook (in only his second ever public interview, as reported by Intellectual Property Magazine) said:
From our point of view it's important that Apple not be the developer for the world. We take all of our energy and all of our care, and to have someone else put their name on it? The worst thing in the world that can happen to you if you're an engineer and you've given your life to something, is for someone to rip it off and put their name on it. We just don't want people ripping us off.
But this rationale is in need of closer examination in light of one of the other claims Cook made during the interview. According to Intellectual Property Magazine:
The patent feuds have grown increasingly bitter over time, and Apple has accused some companies of suing it over standards-essential patents which they are obligated to licence on fair, reasonable and non-discriminatory terms (FRAND). Both Samsung and Google-owned Motorola are being investigated by the EU watchdog for violating their FRAND commitments.
"Apple has not sued anyone over standards-essential patents that we own, because we feel it's fundamentally wrong to do that," Cook continued. "The problem in this industry is that if you add up what everyone says their standards-essential patents are worth, no one would be in the phone business. It's maddening. It's a waste. It's a time suck. Does it stop innovation? Well, it's not going to stop us, but it's overhead. I wish we could settle this stuff."
Well, Cook had the opportunity to settle much of this ‘stuff’ on 20 & 21 May 2012, when he and Samsung CEO Choi Gee-Sung sat down together in court-ordered mediation sessions in California. But, as The Verge put it, any chance of settlement seemingly ‘lost out to Apple's longstanding desire to see competitors '”invent their own stuff.’’’
In our view, this all makes Cook a first-class hypocrite. It is all very well for him to take the high-ground over the use of standards-essential patents, but exactly which Apple patents is he referring to? Apple may not wish to be the ‘developer for the world’ – and this is absolutely its right – but surely that is exactly what companies such as Samsung, Nortel, Ericsson, Motorola, Nokia and numerous others were doing when they elected to participate in the standards-setting process for mobile communications technology.
STANDARDISATION AND PARTICIPATIONOf course there are benefits from participation in the standards process. Participating companies get a ‘head start’ on developing the standardised technology. They also gain the potential to collect royalties on any patented contributions which are accepted into the standards. But, by the same token, they are spending money in their own R&D divisions on developing ideas and technologies to address the needs of the standards. Some of those ideas may come to fruition and be accepted into the standards, but no doubt many are not.
When you sign up to be an active participant in standards-setting, you are signing up to be a developer for the world. The resulting standards make Apple’s entire mobile business possible. So while Apple is entirely within its rights to direct its R&D spend on developing its own proprietary solutions, and to focus its IP protection and enforcement strategies on non-standards-essential technologies, it could at least do us all the courtesy of acknowledging that this is what it has done. And while it has turned out to be a very effective business strategy, it does not entitle Cook to occupy the moral high-ground over standards-essential patents.
The fact is that, compared to many of its rivals, Apple does not have many standards-essential patents to enforce, even if it had the desire to do so. There is a good reason for this – the company has allowed others to be its developers for standardised technology, while steadfastly refusing to make contributions itself.
Obviously, we need standards for things such as communications technologies, otherwise devices would not be able to talk to each other, or to the networks which connect them. But, as users, we would all also benefit from greater standardisation in user interface, or ‘user experience’ (UX), technologies. Ideally, every touch-screen device would work in much the same way, so that once you had mastered one you would be able to pick up another and know already exactly how to interact with it.
So when the World Wide Web Consortium (W3C) – of which Apple is a member, along with Microsoft, Google, Mozilla, Opera and others – set about developing a specification for handling of touch events by browsers executing on touch screen devices, it would be nice to think that maybe Apple would make some contribution.
However, its selfish refusal to be a ‘developer for the world’ is precisely why it did not participate in that particular exercise. Had it done so, it could have influenced the standard to operate according to its own preferences, e.g. to work the same way as an iOS device. But then it would have been required to pledge its corresponding patents on a royalty-free basis.
So Apple did not participate. Instead, it simply disclosed its relevant patents – as required – at the last possible opportunity, and now the W3C is left to determine whether the proposed specification will infringe Apple’s patents and, if so, then go back and find a workaround. And, as explained in this article from Ars Technica, it is not the first time that Apple has done this.
NO MORAL HIGH-GROUND FOR APPLEAgain we must emphasise, Apple is entirely within its rights here. It is under no obligation to share its technology. It is OK to be a bit selfish, if it is legal and makes good business sense. Our criticism of Apple is not that it has some sort of ‘evil’ business strategy. Our criticism is that Cook is a hypocrite for claiming the moral high-ground in the debate over standards-essential patents, and he should not be permitted to get away with it!
Samsung and others have perhaps only recently come to realise that they made an error in diverting so much of their R&D efforts to the development of standards-essential technologies. In the current disputes with Apple, this has placed them at a strategic disadvantage. Not only are legal questions being raised as to their ability to use standards-essential patents in their defence, but they are also losing the public relations war, as their rivals, self-appointed experts, commentators and the media portray them as unprincipled ‘FRAND abusers’.
WHERE TO FROM HERE?If we are to believe much of the commentary out on the internet, there are only two types of FRAND. There is ‘good FRAND’ – where everyone agrees not to charge too much, not to sue anyone, and never, ever seek an injunction – and then there is ‘FRAND abuse’ – which is pretty much any other conduct by standards-essential patent holders, no matter what the circumstances. But like most mutually-exclusive polar opposites, this is a hopeless basis for any real-world compromise. For meaningful progress to occur, we need to have a more nuanced discussion about the role of FRAND licensing, and standards-essential patent rights.
This is not to say that injunctions should always be available on standards-essential patents. Nor will it eliminate the need for the courts – or some other independent arbiter – to step in sometimes to determine exactly how much is ‘fair and reasonable’ as a royalty rate. But there are no ‘good guys’ or ‘bad guys’ in this debate. There are just companies trying to run profitable businesses in a competitive environment, and we need to stop letting people tell us otherwise.
So next time you use your smartphone, your notebook PC, your tablet, your e-book reader, or whatever other wireless communications device happens to be your poison, spare a thought for all the companies that were involved in developing the standards and technologies which make that device possible, and maybe ask yourself: are they really receiving fair treatment now, after the contribution they have made to the industry? And, quite frankly, to Apple’s bottom line.