By: Debby Winters
A family member recently purchased a new smartphone. After being an iPhone user for years, she decided to switch to the new Samsung Galaxy, partly because the sales person told her that is was more advanced than the iPhone 5, the most current iPhone on the market. I have blogged many times about the Smartphone Wars and the implications it has on Intellectual Property,but after her purchase and seeing what she had to go through to make that switch work, I thought I should once again revisit what is going on in the Smartphone Wars.
The smartphone industry is a fast-evolving and fiercely competitive market. Smartphones are constantly advertising sophisticated innovations that consumers factor in when making their purchasing decisions. Consumer marketing is the key to success in this business and these innovations drive sales as the various companies compete for business. Not only can the competitive landscape change drastically, but companies can also earn a lot of revenue in a relatively short period of time. Development of innovative designs and features appears to be the key to competitive success.
With a lot of money at stake and an intensely competitive marketplace, companies are recognizing the value of patents and are securing competitive advantage through intellectual property. Companies are no longer just using their intellectual property portfolios to protect their turf through lawsuits and cross-licensing deals with its competitors; they are also using patents as standalone sources of revenue and as strategic business tools. To strengthen their own patent portfolios, companies like Apple and Microsoft are purchasing patents from Novell for millions of dollars. Furthermore, a consortium known as the anti-Google consortium, which includes Apple and Microsoft are acquiring thousands of patents by outbidding Google. But don’t worry about Google, it has acquired about 1,000 patents from IBM for an undisclosed amount, and purchased Motorola Mobility billions. Throw in the sale of 1,100 Kodak patents for $525 million from another consortium of companies and you can see how this becomes quite complicated.
In addition to purchasing patents, companies are also aggressively filing for patents in the mobile space and acquiring patent portfolios of a staggering size. Samsung was granted the most U.S. mobile-related patents in 2012, replacing Nokia for the top spot. IBM came in second in the number of granted patents in 2012. How about Apple, which is involved in probably the most high-profile of the mobile patent wars? It didn’t even make the top 10. What does all of this mean?
For starters, most of the value of these portfolios resides in a small group of patents. An estimated 18 patents out of a portfolio of 17,000 acquired by Google may be useful for Google. One of these 18 covers a feature that automatically disables the touch screen when the handset is held to the ear to prevent inadvertent call-ending or other phone usage. This one patent will prove very useful in the market but Google had to buy all 17,000 to get that 1 of maybe 18 that it will be able to make use of.
The bottom line is that because the smartphone is in a very high-stakes and competitive industry, protecting intellectual property is absolutely vital for the competitors. With innovations evolving rapidly in areas such as screen definition, processing speed, and battery life companies are rushing to be the first to file for patent protection. It has been estimated that one-quarter of U.S. patents issued in 2013 will likely be related to mobile t
echnology. Protecting intellectual property in the areas of next-generation smartphone technology will allow companies not only to obtain a marketing advantage over their competitors, but also to use patents in these areas to change the competitive landscape of the smartphone industry. Stay tuned as the Smartphone Wars continue.