Blogs & Comment

Apple lawsuit will have one of two outcomes

One is business as usual. The other is that Android suffers a major setback and the competition gets an edge.


(Photo: Paul Sakuma/Associated Press)

Last week was quite the week for Apple news, if you’re into that sort of thing. Of course there was the big one on Friday, where the company won its patent case against Samsung. A court found the South Korean company had indeed infringed on several of Apple’s patents and awarded more than $1 billion in damages.

There was a ton of commentary over the weekend on what happens now, with the likeliest scenario being that Samsung appeals. But should the verdict stand, the biggest effect will be on Android phones overall. Apple’s victory could send a temporary chill through the market, with all manufacturers—not just Samsung—giving second thoughts to their Android devices. After all, no one is going to risk releasing a device that has a good chance of getting them sued. Google may have to work some fundamental redesigns into its operating system to avoid this sort of thing happening again, while manufacturers themselves will have to make sure their actual designs are clearly distinct from Apple products.

The more likely scenario is that Android phone makers will have to pay Apple a license fee on the patents. Earlier this year, the company reportedly offered these manufacturers a deal that would have seen them pay between $5 and $15 on each device. Given the big court win, such a fee could be expected to come in on the high end now. Some critics have said this is going to result in more expensive phones. While that’s true, adding $15 or so to the cost is not going to break anybody’s bank.

Of course, that’s assuming Apple is actually willing to license its technology. If Steve Jobs, who told his biographer in no uncertain terms that he wanted to destroy Android, were still alive, it would be a safe bet that no licensing deals would be offered. This is a company that has resisted licensing its Macintosh operating system for much of its existence, after all. If Jobs’s successors take the same approach, it could indeed be back to the drawing board for Google and its Android partners.

The verdict therefore means one of two possibilities: one is business as usual, with Android phones becoming a bit more expensive. The other is that Android suffers a major setback, which would mean a giant window opening for iPhone competitors.

In a case of perfect timing, Microsoft and Nokia are set to debut the new Windows Phone 8 next week (I’ll be covering the event live—be sure to follow me on Twitter). Microsoft’s Windows Phone 7 hasn’t exactly set the world on fire, but the company is looking amazingly prescient right now. Just about every reviewer has mentioned how “different” Microsoft’s devices are from the other smartphones on the market. There’s certainly no mistaking a Windows Phone for an iPhone, which in the current legal environment is probably the best compliment Microsoft can get.

If Android does indeed get hamstrung by Apple’s patent win, Microsoft would be the obvious winner as wireless carriers desperately look for something else to sell. Research In Motion could also have benefited, but with new BlackBerry devices still months away, the company is likely to miss this big window of opportunity. Again.

Apple’s patent win could thus turn out to be really good news for Microsoft, which is all kinds of ironic.

But there was one other piece of Apple news last week that I personally found more interesting than the patent win. According to Pacific Crest analyst Andy Hargreaves, who met with Apple’s chief financial officer Peter Oppenheimer and senior vice-president for internet services and software Eddy Cue, there’s not going to be any sort of television set from the company anytime soon. As he wrote in a note to clients:

While Apple could almost certainly create a better user interface, Mr. Cue’s commentary suggested that this would be an incomplete solution from Apple’s perspective unless it could deliver content in a way that is different from the current multichannel pay TV model.

Unfortunately for Apple and for consumers, acquiring rights for traditional broadcast and cable network content outside of the current bundled model is virtually impossible because the content is owned by a relatively small group of companies that have little interest in alternative models for their most valuable content. The differences in regional broadcast content and the lack of scale internationally also create significant hurdles that do not seem possible to cross at this point.

That second paragraph about content being owned by a “relatively small group of companies” is true in Apple’s home market of the United States and especially poignant for Canada, which was recently found to have the most concentrated level of media ownership in the G8. If Apple, the world’s richest and most valuable company, can’t crack this cabal and do something innovative in the television market, it’s pretty clear there’s a big problem on both sides of the border.

Of course, there is one other possibility. Jobs told his biographer that he had finally “cracked” the whole television thing. Are his successors now dropping that ball? Making a new product happen and then revolutionizing a market was Jobs’s stock in trade. He upended the music cabal, broke through the wireless oligopolies and even convinced doubting consumers that they needed tablet computers. It seems like getting a TV out there should have been relatively easy in comparison.

If Apple indeed can’t do a TV, it may be the first sign that Jobs’s “reality distortion field”—the ability to make things happen despite facts to the contrary—is truly gone. That would be bad news not just for the company, but for everyone. We should all hope that Apple can continue to shake things up through innovation and sheer force of will and not just through lawsuits.