14 DAY TRIAL // Microsoft is weighing in on the Apple vs. HTC legal dispute over patent violation claims by the Cupertino-based hardware vendor, downplaying the relevance of the lawsuit when it comes down to the overall evolution of the mobile market. Putting in his two cents, Horacio Gutierrez, corporate vice president and deputy general counsel, revealed that he didn’t believe Apple’s lawsuit would impede in any way the development of innovations for smartphones. In fact, Gutierrez indicated that the lawsuit was only a step along the path of addressing IP rights in smartphones, and that it had been catalyzed by the very evolution of the market.
As smartphones have replaced plain vanilla mobile phones, the actual value of the devices has shifted. Windows Phone 7 Series, the iPhone, the Droid, are no longer about the radio stack, in the sense that their primary functionality is no longer limited to making phone calls. Instead, the new devices, and those that will continue to emerge are designed to function more and more like PCs with mobile-phone capabilities.
“As is clear from advertising by all of the major brands – Apple’s iPhone, RIM’s Blackberry, Palm’s Prē, Motorola’s Droid, and Windows Phones – people buy smartphones because they are fully functional computers that fit in the palm of your hand. The radio stack is still valuable, as it allows the phone to connect to the Internet. But what is most valuable is not the connection per se, but the new things that users can do with it – find nearby restaurants and movie theaters, send and receive email, and watch video, just to name a few. The primary driver for adoption and sales in this market is the software on and available for the device,” Gutierrez stated.
In Microsoft’s perspective, the smartphone market is only nascent. And it was this primordial nature of the market that had catalyzed IP rights confrontation, Gutierrez argued. Because multiple third-parties own various pieces of innovation that need ultimately to be used in concert in order to make a single device, the Redmond company believes that it’s best to decide what company has the rights over which innovation. One way to do it is through IP infringement lawsuits such as Apple vs. HTC.
“Smartphones are a product of the ‘open innovation’ paradigm – device manufacturers do not do all of their development in-house, but add their own innovations to those of others to create a product that users want. Open innovation is only possible through the licensing of third party IP rights, which ensures that those who develop the building blocks that make a new technology possible are properly compensated for their investments in research and development. After all, technology just doesn’t appear, fully-developed, from Zeus’s head. It requires lots of hard work and resources to create,” Gutierrez stated.
Recently, Apple sued HTC over a number of patents, alleging that the Taiwanese company was infringing on its innovations. Critics of Apple’s actions have pointed out that the Cupertino-based company was actually gunning for Google, aiming to attack the Android platform instead. Google has reacted to the lawsuit against HTC, and sided with the partner that helped it deliver the Nexus One phone.
“The industry is in the process of sorting out what royalties will be for the software stack, which now represents the principal value proposition for smartphones. In the next few years, as the IP situation settles in this space and licensing takes off, we will see the patent royalties applicable to the smartphone software stack settle at a level that reflects the increasing importance software has as a portion of the overall value of the device. In the interim, though, we should expect continued activity. Apple v. HTC was not the beginning of this process, and it isn’t the end of the story either,” Gutierrez concluded.