Apple is having a good year — in fact, its "most successful year ever," according to CEO Tim Cook. Last month, the tech behemoth announced more than $234 billion in earnings so far this year, pushing its cash on hand to more than $205 billion. That's nearly twice as much as the United States' foreign exchange reserves. But don't expect the schoolyard bully to play nice — or by the rules.
Despite windfall profits, Apple continues to pursue a path of litigation profiteering. It's now seeking to collect about half a billion dollars from rival Samsung over a patent dispute, even though the United States Patent and Trademark Office (USPTO) invalidated one of the software patents and admitted that it should never have been issued in the first place.
It's enough to make one wonder why the world's most valuable company — whose founder Steve Jobs once boasted, "We have always been shameless about stealing great ideas" — now insists on taking on its competition in the courtroom instead of the marketplace. It seems that for all its success, Apple is worried about losing its market share to increased completion and has made aggressive lawsuits a key part of its business strategy.
That reality is spelled out by market dynamics. In the second quarter of this year, Apple controlled just 17.7 percent of the global smartphone market share, down from 19.6 percent at the end of last year. By comparison, Samsung captured 24 percent of the market.
In a move that could prove critical in the Apple-Samsung dispute, earlier this month the USPTO dismissed a petition by Apple to intervene in the reexamination of a key design patent in the lawsuit, referred to as D'677, the patent for the shape of the device. The government agency had recently deemed the patent invalid and stated that it should not have been awarded in the first place. It took Apple less than 24 hours to file its opposition to the ruling.
Apple's pedal-to-the-metal approach is telling. As Florian Mueller, an intellectual property rights expert, put it: "[Apple] knows that from a pure policy perspective, it has a losing case: a patent that shouldn't have been granted in the first place should not entitle anyone to a damages award."
Time and consideration are Apple's enemies in this case. It's no wonder, then, that the company is putting on a full-court press to collect damages even after the patents in question have been deemed invalid. It's a question of whether patents wrongly issued by the USPTO should carry damages liability — a decision that will set a precedent reaching far beyond the Apple-Samsung case. The answer is even simpler than the shapes Apple claimed as their own: "no."
Earlier this year, the Hispanic Leadership Fund filed an amicus brief with the United States Court of Appeals for the Federal Circuit regarding the Apple v. Samsung case. We are invested in the outcome of this lawsuit because the implications will impact consumers, particularly those from minority and low-income communities. A ruling in favor of Apple would disrupt the smartphone market and reduce competition, limiting choices for everyday individuals and families who rely on affordable smartphone options the most.
Apple has a hard-earned reputation for throwing elbows, and it's not changing its strategy now by trying to rush a decision in court. But the outcome won't only affect Apple's bottom line. It will have serious consequences for smaller businesses that don't have the deep pocketbooks to defend against claims made with wrongfully granted patents — the upshot of which would be to slow innovation and competition.
Valued at more than some countries, Apple has a lot of weight to throw around. The courts shouldn't allow that clout to cloud their judgment. The right path would be for the courts to allow the Apple-Samsung case to continue through the full appeals process so that the USPTO's course correction on the patents that should never have issued can ultimately result in justice and innovation.
Lopez is president of the Hispanic Leadership Fund, a nonpartisan advocacy organization that promotes liberty, opportunity and prosperity for all Americans.