Saturday, August 25, 2012

Everybody wants to be an iPhone

Yesterday, a jury in San Jose handed down the mother of all lawsuit decisions: it found in favor of Apple over Samsung on a number of copyright/patent infringement claims and awarded Apple $1 billion in damages. And there's a possibility that the damages could even be trebled to $3 billion, along with a massive recall of various Samsung phones that use the features developed by Apple.

There's been a lot of back and forth between the two--Apple and Samsung--for quite a while now. But the unique and innovative design of the iPhone was clearly copied by Samsung, with regard to the look and feel of the iPhone and with regard to the operating system. The iPhone's operating system is a proprietary one, while Samsung jumped into Android as a platform for its offerings, modeling the open source system with features clearly intended--once again--to mimic the iPhone. As the Economist notes, Steve Jobs was particularly enraged by this:
Before his death last year, Apple’s co-founder, Steve Jobs, told his biographer Walter Isaacson that he believed Android had stolen important features from Apple’s iOS operating system and said he would wage “thermonuclear war” on it.
Apple has carried the torch forward with this victory in court. But Samsung has vowed to fight on, arguing that the things Apple claimed to have patented were in reality ideas already in the general market, concepts other companies had developed first, or ones Apple had even stolen. Needless to say, the jury was unmoved by these arguments, mostly because Apple does indeed own the patents and copyrights in question.

Samsung's argument really came down to this: "but people want the things we are making, therefore we should get to make them." And there are many people in the tech world on Samsung's side here. The past market dominance of Microsoft and now of Apple in popular consumer products is and always has been a kind of economic tyranny in the minds of many.

But here's the thing: it is the strict enforcement of greatly expanded property rights that powers capitalism and is therefore responsible for wide-scale wealth creation. It's the whole "reap the benefits of your own hard work" rubric. From the Netherlands in the sixteenth century to England in the seventeenth, on into the United States in the nineteenth, it's the expansion and enforcement of property rights--equitably--that helped drive economic growth. It's this background that creates incentives for innovation, for investment, and for risk.

Sure, Microsoft was a semi-monopoly for a while. Such is currently the case for Apple. But like it or not, both companies rose to the top on the backs of their own of vision and innovation. Their leaders were ruthless, to be sure, but that's just another part of the puzzle. Google--for all the applause it receives from the same people who hate Microsoft and/or Apple--really is no different, in this respect.

In the case of smartphones, Samsung tried to take some shortcuts. Some of them worked, but some didn't. Apple had every right to go after Samsung. Indeed, it owed its shareholders a full attempt at protecting its innovations (full disclosure: I am an Apple shareholder). And it owes its shareholders more: Apple needs to do whatever it takes--legally--to beat back the competition for as long as it can (something the President doesn't seem to understand, with regard to the country as a whole). Because that's the way things work, that the way the economy functions. As Ricky Roma put it in Glengarry Glen Ross:
You filed it, that puts me over the top; you owe me a car. I don't wanna hear any shit, John, and I don't give a shit. Lingk puts me over the top. You filed it, it went downtown, now you owe me the car. You see, because this is how we keep score, bubie.
Samsung may not like it. Google may not like it. But Apple earned it. Apple took the risks and now gets to keep reaping the rewards, 'til someone else comes along to knock them down.

Cheers, all.

1 comment:

  1. That's also the basis of the whole patent system. Patents were introduced so people would share knowledge that would advance general public knowledge and allow for further improvements and understanding. No patents means no sharing. Everything becomes trade secret etc. Of, course, in case of smart phones Samsung might have liked that becasue then there is the option to reverse engineer the sompetitor's product, but in many other fields it wouldn't be like that.