Apple, A Monopoly?

In the aftermath of the jury’s verdict in favor of Apple on almost all counts in the trial over intellectual property, people have been quick to proclaim out the possible implications of the decision, to the likely consequences for the market.   One of them is that Apple could  turn into a monopoly.

Most watchers have assessed correctly that it’s really Google in Apple’s cross-hairs rather than Samsung.  Apple’s  in this case, is really aimed at Google.  Apple’s crucifixion of Samsung is just a head piked on a stake at the edge of Google’s territory.

Google has been the most extraordinarily silent partner, the most absent un-indicted co-conspirator ever not to be in a trial.  Its cryptic statement on Monday did little to change that status.  As Microsoft has pointed out time and again, Google has failed to indemnify its customers and properly license intellectual property it uses in its software, which it gives away to its customers and on which it collects no royalties.

Rather, Google has perfected a business model in which it gives away things of value in return for eyeballs on the back-end.  Money enters Google’s system via advertisers.  Hard for any rival, or any public authority, for that matter, to connect the software Google makes and gives away with how it makes money.  And Google has threatened the business models of companies like Microsoft, which sells software, and Apple, which sells hardware.

In this matter, Microsoft and Apple are allies, more alike than either is similar to Google.

In all of history, there has probably never been a situation in which one company (Microsoft) collects nearly half a billion dollars in annual royalties from another company’s (Google’s) customers.  Microsoft collects Android license fees from Samsung.

But Apple doesn’t want money from Samsung.  Well, that’s not true; of course Apple is happy to add funds to it’s already staggering hoard, but this matter is not primarily about money.  It’s about wanting Google dead.

So, now Google stands facing the cobra of Apple’s wrath with only the shred of Motorola’s patent portfolio to shield it.

Unfortunately for Google, its Motorola purchase has not been enough to gain it a seat at the main table with Apple, Microsoft, and a handful of others with big portfolios of intellectual property.  This group horse trades among its members.  Whatever disputes they have in other areas, Apple and Microsoft have a gentleman’s agreement not to sue each other.  All quiet on the Apple-Microsoft front.

When the Nortel patents came up for sale, a group that included Apple and Microsoft made sure Google didn’t get them.  They were keystone patents that could have blocked others in mobile communications, enabling Google to get in on the horse trading.

Steve Jobs harbored a well-known vendetta against Google based on his belief that Eric Schmidt, while sitting on Apple’s board, had leaked the iPhone’s critical characteristics to his own design teams, who then copied it.  Jobs swore he would spend as much of Apple’s considerable wealth as necessary to stop Google cold, and he wasn’t interested in licensing to Google’s partners.  The offer that Apple made to Samsung, which came out during the trial, would have absorbed all of Samsung’s profit.  In other words, the terms were unreasonable, and Samsung rejected the offer.  But Apple wasn’t serious, or else it would have done something more like what Microsoft has done: license on reasonable terms.

Apple seems to want to drive all viable competitors from the high-mobility game (in which the pieces are smartphones, tablets, Ultrabooks, and basically any device you can carry around and operate all day without plugging into a wall socket).  If Apple succeeds, then it will have no viable competitors and might draw attention from public authorities around the world.

Microsoft may gain a better position in high mobility over the next few years with Windows Phone 8 and Windows 8 on tablets.  And the aforementioned gentleman’s agreement between Apple and Microsoft will allow the latter at least the opportunity to give it a go.  But Microsoft has no position in this market today.  Only Google does, by way of Samsung, HTC, and others.

It would be a bad thing for the market if Apple were to become the only supplier of high mobility products, software, and related services.  And yet, that’s where we’re heading.

Samsung has said it will request that the judge set aside the verdict and otherwise will appeal to a higher court.  A higher court might be more sympathetic to Google’s proxy if it sees Apple starting to look more like a monopoly.  The Supreme Court would likely weigh heavily the potential harm to consumers of there being no viable competitor to Apple.

Intel has made good use of Advanced Micro Devices as a straw competitor and has thus avoided some of the problems that, for example, Microsoft faced.   And that Apple could face.

A proper settlement of this case would be for Apple to license on a reasonable basis to Samsung and other Android customers.  Microsoft already does.  A lot of consumers like Android.

Google can argue that Apple’s patents are overly broad and should be invalidated.  It can say, Apple, with its filings on “ways of doing things” is trying to patent the blue of the sky and the warmth of the sun.  And that’s not right.  Apple can’t claim to have invented “roundness” or “black.”

Over the years, whatever the final disposition of the case, the outcome will affect the shape of the high-mobility market — and our lives — dramatically.

What do you think?

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