Innovation Is the Real Winner in Apple v. Samsung

Apple's big win over Samsung for patent violations is monumental in the tech world. It has significant implications for American innovation that go far beyond the products in question. While patents have been a hot litigation topic for years, the outcome of this case sets a precedent for how future cases will be handled. The jury's $1 billion award to Apple for damages, combined with the still-pending injunction decision, not only impacts the smart phone market, but is sending out powerful shock waves about copying popular designs with knock-offs.

The jury got this verdict right. Former I.B.M. executive Al Sabawi said Samsung deserved to lose because they were “lazy copycats ... who think cutting and pasting is an intellectual achievement.” Patents protect research and development by providing both garage entrepreneurs and large corporations alike with an incentive to invest in innovation. Those who make the big investments in innovation and take big risks have the right to big rewards. Otherwise, investments in original ideas will eventually dry up and incremental improvements will be all we can expect. Business may find the status quo more attractive than the next frontier.

The jury's decision has brought screams of protest from would-be innovators. Many of them think all existing designs are fair game to use as platforms to develop improved products. They hope to avoid the high cost and lead time of creating original designs as Apple has done throughout its history. That sounds good to entrepreneurs just starting companies who would like to build on the investments of the majors. But if copycats quell innovation, breakthrough innovations will cease.

I anticipate that IT companies will start to act more like pharmaceutical and medical technology companies in vigorously defending patent rights. They will become much more aggressive in claiming the full value for their inventions, either in the marketplace or through licensing agreements that will be increasingly costly.

This verdict also vindicated Steve Jobs and his work over the years for Apple. Jobs believed that a product’s look and feel is just as important as how it works.  Let's hope this type of verdict paves the way for the next generation of innovators to create and transform entire industries.

The Apple decision also has enormous implications for American competitiveness. The U.S. is far and away the most innovative country on earth and bears the brunt of the costs of research and new product development. This is our strongest competitive advantage in the global markets of the 21st century. If patents are enforced, U.S. inventors and investors will be incentivized to spend more heavily on R&D, attract more creative people, and transform entire industries with yet-to-be-invented technology.

Consider the alternate scenario: If Apple had lost this case, it could have triggered hundreds of companies in Asia and elsewhere to copy its designs and sell them at far lower prices. In the short-run that may sound good for consumers, but the reality is that lack of intellectual property protection will destroy future investments in technology and innovation, and consumers will be the long-term losers.

Kudos to Apple for defending its IP rights and paving the way for others to do the same.

Footnote: Many people are critical of Apple for outsourcing much of its production work to Asian subcontractors. The facts don’t bear out this criticism. Apple currently has 70,000 employees, of which 47,000 are based in the U.S. Since the recession hit in 2008, Apple has added 20,000 employees in the U.S. alone. Thus, for every job sent overseas, two jobs are created in the U.S. Not a bad ratio. Meanwhile, Apple reports that in a study by Analysis Group, it has created, directly or indirectly, 304,000 jobs in the U.S. Wouldn’t it be great if we could create dozens of other companies that take global leadership and become the job creators of this decade? (Source: http://www.apple.com/about/job-creation/)