Once you've bought into the Apple lifestyle, it's pretty hard to extricate yourself. This is known as the Apple ecosystem lock, and it's a good business model: Apple products are tightly integrated, and so the more you have embraced one facet -- say, storing your iPhone photos in Apple's cloud -- the more likely you are to make use of its other products and services. It works the same way with Apple's app store -- the more applications you've purchased, the less likely you are to jump to a competing phone system, like Android, because you'd lose access to all those apps you already paid for.
Call it an ecosystem lock by persuasion. Offer enough goodies, and a customer will willingly buy in. This tactic isn't an Apple invention, and it isn't limited to Apple -- most companies try to get you to embrace their unique flavor of offerings; Apple's just been more successful than most. It’s one of the reasons Apple has become the most valuable publicly traded company ever, and will perhaps become the first company to break a trillion dollar valuation.
But in addition to this well-known ecosystem lock, Apple has developed another self-perpetuating business model. This business model is more nefarious, as it ends up limiting consumer choice by eliminating potential competitors. It involves hardball tactics, lawsuits, and asking courts to prohibit other companies from selling competing products. The end result is less choice for consumers. Let’s call this one an ecosystem lock by litigation.
For years, Apple has been locked in legal battle with Samsung, a primary competitor in the smartphone market. This provides a good example of how litigation lock-in works. Apple has challenged Samsung over various features that are similar to those found on iPhones, such as linking numbers and email addresses to the relevant actions (call, compose email, etc.); slide-to-unlock; and auto-correct. This past Wednesday the Federal Circuit heard oral argument in a case alleging Samsung’s alleged infringements caused Apple not just loss of market share, but also injury to its “reputation for innovation.”
Samsung could find itself on the hook not just for the actual damages, but be precluded from integrating the disputed features in its products, and to refrain from making, selling or advertising any products that contain the alleged infringing technology. In other words, the most valuable company in the world is trying to squash its competitors, ensuring its dominance not by innovation but by judicial fiat. Their reputational concerns related to their innovations may be better served by investing in further product development rather than lawyers.
Even if one is inclined to side with Apple, here's the crucial point: Samsung is not the only party impacted by Apple’s judicial offensive. When Samsung can’t develop products, not only does it lose potential sales; potential consumers lose marketplace choices and new innovations.
That’s the long and short of the litigation lock-in. When people buy Apple products, they’re paying not just for technology but for lawsuits to stop others from developing their own technology. They’re paying for lawyers to try to convince courts and layperson juries that Samsung’s innovations are too similar to Apple’s. In the end, the more money people pay to Apple, the greater Apple’s dominance becomes, by any means necessary.
At least Samsung has the financial resources to pour millions of dollars into a legal defense of its own. What happens when Apple turns its lawyers’ sights on to smaller companies? If Samsung can throw everything it has into a legal defense and still lose, what chance does the little guy have? As smaller companies are either sued into oblivion, or find their own innovative features banned, there will be fewer companies around who can mount an actual competitive challenge to Apple. Considering Apple’s Android competitors are often priced far lower than Apple's top of the line products, low-income consumers who typically prefer Android phones could find themselves disproportionately harmed.
When Apple introduced the iTunes Store in the early part of the century, it faced competition from other online music stores, but founder Steve Jobs wasn’t worried: Competitors would never make enough money selling songs, he said. Neither did Apple. But it didn’t matter, he said, because the whole point of the iTunes Store was to sell iPods. Apple wasn’t in the song business — it was in the iPod business. Today, Apple is in the lawsuit business. It might boost Apple's bottom line, but it's awful for consumers, who are paying their way into an iPhone prison.
Alford is the cofounder, president and CEO of the National Black Chamber of Commerce.