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Patents: the Ultimate Weapon Among Smartphone Companies

By: Stephen C. Pritchard *

Beneath the flashy advertisements, network speed comparisons, and ever-changing features of smartphones, there is a war being waged among the greatest tech companies in the world over the most essential components of any smartphone, patents. In the United States, the federal government protects patent owners for a specified length of time by granting a monopoly on a design or invention, allowing the owner to fully realize the benefits of his or her work free of competition from others. In return, after the time period has lapsed, the patent is made available to the general public, thus promoting overall growth and advancement for everyone.

Smartphone patents, the source of every “ooh!” and “aah!” over a new phone, are vital assets in a way that no other resource owned by a smartphone company can be, and have become an asset class all of their own (it is estimated that over 250,000 current patents are related to smartphones). While property holdings, equipment, employees, and other assets are all important to a company, those in the smartphone business could never exist without their patent portfolios. This realization has led to fierce competition in research and development, patent purchasing and licensing, and in courts around the world.

In today’s climate, the demand of being on the cutting-edge of phone technology has resulted in companies including Apple, Google, Samsung, RIM, and HTC filing lawsuits for patent infringement against one another for nearly any conceivable reason. The trend seems to have started with suits over Apple’s “slide-to-unlock” feature, which the company claimed was infringed in similar uses by Google, HTC, and Samsung, among several others. With that beginning, approximately $20 billion has been spent on patent lawsuits in the smartphone industry during the past two years, indicating just how important the legal rights attached to such innovations truly are. The two largest smartphone competitors, Apple and Google, even spent more money on patent litigation and purchases than they did on research and development last year.

Apple, as the arguable industry leader, itself has filed 416 patents related to smartphones since the introduction of the iPhone and has been party to 142 smartphone patent lawsuits since 2006. In articulating their commitment to protecting Apple’s assets, former CEO Steve Jobs stated he would, “spend every penny to fight copycats;” and current CEO Tim Cook said, he “will not stand for having [Apple’s] IP ripped off.” The success of the iPhone can be attributed, at least in part, to the patents Apple has created and acquired, in addition to the company’s tenacity in defending its portfolio. Such protectionist attitudes are probably worth their costs in the long run, particularly if one looks at some of Apple’s as yet unused patents, which give clues to possible advancements beyond the recent iPhone 5. The company has patents that could revolutionize the industry, yet again, including a miniature power supply that could fuel iPhones for weeks and a multimedia hypertext that allows users to simply tap a word and receive related multimedia information from context. It is patents similar to these, likely holding the key to future innovations in smartphones, which providers are so willing to protect at almost any cost. In the end, each patent could prove to be the one crucial piece to shift the public’s fascination and desire to a different operating system or company and push it to the pinnacle of the smartphone world.

Patents, though intangible, are now surpassing many other assets owned by companies in terms of value. They have reached a new level of worth, especially in smartphone companies, and the war to obtain and create new patents is unlikely to decline until the costs eventually run too high to outweigh the benefits to some of the companies involved. When that finally occurs, the industry is likely to be left with two or three dominant companies, each with its own niche in the market, but there is sure to be a subtle patent war still taking place just out of the true public’s eye.

* Stephen C. Pritchard is a second year law student at Wake Forest University School of Law. He holds a Bachelor of Science in Information Systems and Operations Management, with minors in Economics and Political Science, from the University of North Carolina at Greensboro. Upon graduation, he intends to practice corporate and entertainment law.