THE high-stakes court case between Apple and Samsung that got underway in a federal court on July 30th has attracted more than the usual media fanfare. The two technological titans have been trading barbs in court rooms across the world. The present trial in San Jose, California—just down the road from Apple's headquarters—is scheduled to last 40 days. The outcome is expected to have a major influence on the way patent disputes are resolved in future.

Apple has accused Samsung of copying not only its iPhone’s look and feel, but also a feature known as “rubber-banding” that is a highlight of its user-interface. For its part, Samsung says Apple violated two of its “standards essential” patents covering the way mobile phones communicate, as well as three other patents concerning they way they handle music and pictures. Apparently, Apple refused to pay the licence fees, but used the technology anyway.

Samsung has also charged that, far from being unique, the iPhone owes much to earlier Sony and LG Electronics models. In other words, there is plenty of prior art around. It is fairly clear, says Florian Mueller, an intellectual-property consultant interviewed recently by the Wall Street Journal, that Apple did not invent the iPod and iPhone out of thin air—but relied, to some degree, on innovations that already existed. “This is the way innovation typically works.”

Apple has much to lose. At stake is its reputation as the supplier of the most desirable of mobile devices. When it launched the iPhone in 2007, it had the smartphone market essentially to itself. But since Google began offering its free Android operating system to mobile phone-makers everywhere, the competition has become brutal—with Samsung leading the charge. Over the past three months, for instance, Apple has seen its slice of the smartphone business squeezed from 23% to under 17%. Meanwhile, Samsung’s share has increased from 29% to over 32%.

Whether die-hard fans like to admit it or not, the iPhone has fallen behind in appearance as well as technology. Samsung, Motorola Mobility (now part of Google) plus all the other makers of Android phones have been delivering faster and thinner models with bigger screens and ever slicker multi-tasking software at a blinding pace. Once-loyal Apple customers have become less impressed. The new iPhone, due in late September, will be thinner and have a slightly larger screen. But by updating its devices just once a year means Apple is now continually having to play catch-up.

With the magic wearing off, Apple’s global attack on Samsung is aimed primarily at winning injunctions to drive the South Korean company (the most successful of the Android makers by far) off the market. The current court case in San Jose is one of more than a dozen that Apple has brought against Samsung and other Android makers.

But the ploy remains a risky one. If the San Jose court rules in Apple’s favour, Samsung could be forced to cough up $2.5 billion in damages alone. But the ruling could just as easily go the other way. In that case, Apple could be stuck with having to pay Samsung a $14 royalty on every iPhone ever made.

Whatever the outcome, Judge Lucy Koh has made it clear that she will stand no nonsense from either party. Before joining the bench, Judge Koh was an experienced patent attorney and knows the issues intimately. Her instructions to the nine-person jury will be aimed at setting precedents that can be applied to other patent cases Apple has brought against Samsung and other competitors.

The case cannot help but be influenced by a lawsuit brought by Apple against Motorola in June. In that instance, Judge Richard Posner, one of the sharpest minds on the federal bench and an outspoken critic of America’s troubled patent system, dropped a bombshell by dismissing the case entirely. He ridiculed Apple’s overly broad claims about patents covering its user-interface, and summarily dismissed Motorola’s demand for a fat royalty for its basic communications patents.

The 73-year-old Judge Posner, who also teaches at Chicago Law School, is one of the founders of the legal school that interprets patent law in economic terms. His argument last June for refusing to ban Motorola’s products from the shelves, as Apple sought, was that “an injunction that imposes greater costs on the defendant than it confers benefits on the plaintiff reduces net social welfare”. That is the economic interpretation of patent law at work.

If, as it seems, Apple has had to resort to the courts to stifle competition and limit consumer choice, then it is a sad day for American innovation. That the company can do so with such impunity is an even sadder reflection of how dysfunctional the patent system in the United States has become.

The only reason why governments grant patents (and the monopoly rights they entail) is to promote innovation—in the hope of generating jobs and additional sources of revenue. Patents seek to do this by requiring the inventor to make prompt and full disclosure of the idea, so others may seek a licence to use it, or find ways to work around it. In exchange, the inventor is granted the right to exclude competitors for 20 years or so.

The cost to society of allowing a monopoly to flourish has long been assumed to be outweighed by the benefits that accrue from encouraging individuals to spend their own resources inventing useful things that did not exist before. In short, patents have been seen as a necessary evil for fostering innovation.

That assumption is now being challenged. Indeed, a debate has been raging in the United States over whether patents—especially those granted for protecting software ideas and business processes—help or hinder innovation. Mostly, it is thought they do the latter. All the evidence suggests that after patent protection is obtained, it tends to be used as a means for hurting competitors and inhibiting progress. In other words, patents are, in many instances, an unnecessary evil.

In recent times, the courts in America have contributed to this sorry state of affairs. In particular, the Federal Circuit (the centralised appellate court established in 1982 to hear patent disputes among various other things) has been responsible for a number of bizarre rulings on software patents in particular. The problem with the Federal Circuit is that, because of it diverse responsibilities, it has never developed the kind of expertise in patent law that its more specialised counterparts in Europe and Japan have acquired.

Meanwhile, the United States Patent and Trademark Office (USPTO) has itself played fast and loose with the rules of patentability. Admittedly, the sheer size and complexity of modern software have made it difficult for patent examiners to judge whether a program contains features that are genuinely novel, non-obvious and useful—the three criteria for patentability. The USPTO’s failure to apply the novelty and non-obviousness requirements rigorously enough has led to a proliferation of shoddy, overly broad patents. At best, these have often proved to be old and obvious; at worst, simply embodiments of well-established practices. This plethora of poor-quality patents is clogging American courts. They are what lie at the heart of the current patent dispute between Apple and Samsung in Judge Koh’s court.

The America Invents Act, signed into law last September, did much to encourage lone inventors with limited resources, but left intact some of the more egregious patent practices that hobble innovation in America (see “Programmed nonsense”, October 7th 2011). In particular, the overhaul did nothing to rein in the overly broad software and business-process patents that have given rise to the protection racket operated by “non-practising entities”. These entities (commonly known as “trolls”) produce nothing themselves, but amass patent portfolios solely to bully others into settlements. The usual victims are small companies lacking the time and money to challenge such litigation.

A recent study by James Bessen and Michael Meurer of Boston University showed the median company sued by such entities had little more than $10m in sales. All told, patent trolls sued over 5,800 companies in America last year, accruing some $29 billion in settlements. That is money that small-to-medium enterprises could ill afford and would have better spent on innovation.

The good news is that where Congress has feared to tread, American courts have lately shown themselves more determined. A growing chorus of judges is bent on bringing a healthy dose of economic sensibility to patent law. Their approach is to favour financial remedies over injunctions that constrain competition. What Judge Koh will finally recommend is impossible to say. But both Apple and Samsung could well find themselves ruled equal losers. And if that gives industry some pause for thought, all to the good.

Squigsquasher wrote:This is why I'm with Sony.

Fafnir wrote:I find it quite interesting how Apple tries to maintain an image of "innovation" and "creativity," while mostly using technology already in existence and buying it up so they can claim they invited it.

LordofHats wrote:

Fafnir wrote:I find it quite interesting how Apple tries to maintain an image of "innovation" and "creativity," while mostly using technology already in existence and buying it up so they can claim they invited it.

Fixed. Apple hasn't innovated much for well over a decade. Steve Jobs, and Apple by extension, was a man who knew how to market technology. That was his real talent.

Melissia wrote:Or worst, depending on your stance.

sourclams wrote:I'd say Apple has been a leader in innovative concepts.

A music player smaller than my thumb
A phone that is a camera
A phone that is a music player
A phone that is an internet browser
A phone that is a gaming device
A computer that is so thin it can slice a tomato

Before Steve Jobs, that didn't really exist. Apple created stuff we didn't even know there was demand for.

sourclams wrote:I'd say Apple has been a leader in innovative concepts.

A music player smaller than my thumb
A phone that is a camera
A phone that is a music player
A phone that is an internet browser
A phone that is a gaming device
A computer that is so thin it can slice a tomato

Before Steve Jobs, that didn't really exist. Apple created stuff we didn't even know there was demand for.

Piston Honda wrote:
Sad day when you go to your favorite bar and most of the talk is about this lawsuit and not the upcoming NFL season.