Why Apple's win signals the beginning of the end

Apple’s clear victory in its patent battle with Samsung in the US is a huge short-term loss for consumers everywhere. It could also mark the zenith of Apple’s trajectory in the technology battle, from where it can only go down. Samsung has emphasised the loss to consumers after its defeat, while Apple has talked about the gain for the American patent system and innovation. The truth, as usual, lies somewhere in-between. The loss for consumers is temporary, since the rivals will now redouble their efforts to beat Apple – ensuring innovation and better products. But there is no denying the short-term loss to consumers – who will surely be irritated by this. Since it is now more or less established that Samsung copied some key design features of Apple’s iconic phones and tablets, a lot of money will change hands between the two companies, and between companies and future consumers. Apple’s rivals will have to invest more in innovation – which means higher costs for everyone. [caption id=“attachment_430362” align=“alignleft” width=“380”]  Apple’s rivals will have to invest more in innovation – which means higher costs for everyone.[/caption] Samsung will have to fork out $1.05 billion to Apple, but the customers of both Apple and Android devices will end up paying more for their products: the old premium in the case for Apple products will get reinforced, and users of the latter will pay higher prices as other device manufacturers pay Apple more licensing technology they already use. If Apple had lost its case, the opposite would have happened. It would have had to lower prices and margins to retain and grow market share. Instead, in the near future, as several Samsung and Android devices go off the market , the consumer will also see a shortage of choice (see the list of Samsung phones that will be impacted by the verdict here ). This means a gain for Apple in terms of market share and profits – as the sharp rise in its share prices after the verdict indicates. But, with this verdict, Apple has probably peaked in terms of popularity. From here it can only look down the mountain. Here’s why. First, the world does not like monopoly. It likes choice and competition. The verdict has the effect of reducing choice and competition. This means the losers will now band together more often to beat Apple in whichever way they can. Apple has thus put itself in the same category that Microsoft saw itself in around 10-15 years ago, when everybody from consumers to anti-trust activists went after its operating systems monopoly. Second, Apple has sometimes been using patents and patent litigation not for really safeguarding breakthrough innovation, but to stall and delay competitors – as this verdict by Judge Richard Posner in an earlier Apple versus Motorola case notes (read here). Tim Worstall, a technology writer, wrote in his Forbes.com column that “over-wide (patent) issuances are being used to restrict invention and innovation in subsequent rounds of technological development. As an example, there cannot be that many outside Apple itself who really believe that the European case against Samsung over the Galaxy Tablet is really about design patents. The general assumption is that it’s about keeping a competing product off the market by any means possible. For long enough that it doesn’t get a foothold in said market.” Third, Apple deliberately designs its products to ensure that things we take for granted – like USB ports, and slots for SIM cards – are different in Apple products. Thus, once a customer buys Apple products, she is forced to upgrade within the same range. It is very difficult to shift from one brand to another even though they may offer the same benefits. This is not to say Apple is the only guilty party, but that consumers don’t like it one bit. Inter-operability and compatibility (for example, the ability to easily move an address-book from one phone to another) should be mandated by law – and companies like Apple or Blackberry are currently able to lock-in customers only because regulators in a slowdown have lost the appetite to force companies to think about them. The more dominant concern is to avoid deflating the one sector that is still booming - technology. Hence the hands-off policy on Apple. Trying to create separate standards for separate devices is not a viable long-term strategy for any company – even though it gives you super-high profits in the short run. Sony tried to do that with some of its products (Betamax, etc) and lost it place in the Sun. When companies try to design products that will exclude other people’s add-ons and ability to develop things that can connect to it, rival (open) platforms will emerge to challenge this monopoly. Hence Android, Chrome, et al. Apple’s closed architecture and tendency to use patents to protect its monopoly in some product areas is an open invitation to the world to gang up against it and create alternatives. This is why I think Apple’s dominance has peaked. The San Jose court’s verdict will mark the beginning of its decline unless it migrates to more open systems and chooses to cooperate with rivals as much as it wants to compete with them. Co-opetition is the key to Apple’s longevity as a market favourite, not monopoly.