Dogfight: How Apple and Google Went to War and Started a Revolution (23 page)

In truth there was precious little principle driving Apple’s lawsuit. It wanted to win, and everything it did was driven by the tactics and strategy necessary to achieve that goal, according to those who worked on the case. But for all of Apple’s rhetoric that’s hardly surprising. Most patent lawsuits work this way. Going after Samsung in court was just another way for Jobs and his successors to attack Android. Samsung’s Android phones and tablets were closing the market-share gap between them and the iPhone and the iPad. The likelihood that Apple and Google were in a winner-take-all platform war was high. Apple thought a nasty, protracted lawsuit might slow Samsung’s and Android’s progress.

In fact, the legal assault on Samsung and Android was a marvel of Jobs’s mercenary thinking, according to one of the attorneys involved in the case. It wasn’t just that Apple had sued a member of the Android community in virtually every industrialized country in the world. Apple effectively created one of the largest patent law firms in the world to do it. It kept its in-house legal staff small. But by the time of the Samsung trial, its four outside law firms had roughly three hundred attorneys worldwide working on the case nearly full-time. The attorney estimated the fees to come to about $200 million a year. As of 2012 Apple had about fifty lawsuits going against Samsung alone in ten different countries.

And while Apple stoked the perception that it was taking a big risk standing up to Samsung in public, executives knew Apple wasn’t taking a big risk at all. For a company with more than $100 billion in the bank, the legal fees were a rounding error. It had home-field advantage. San Jose Federal Court is ten miles away from Apple headquarters and five thousand miles from Samsung’s. For the three weeks of testimony in August 2012 that the trial took up, media worldwide would be filled with Apple executives’ testimony accusing Samsung of copying their work and hurting their company. That, no doubt, would help sell more iPads and iPhones. Apple believed that even if it lost, it would win. Legally, it would be on no different ground than before the trial, but it would have sent a message to competitors that Apple would stop at nothing—including a dreaded jury trial—to bludgeon those who would challenge it in the marketplace.

It’s cynical, perhaps, to look at Silicon Valley and the world-changing innovation that bursts out of companies there this way. But in practice, you can’t be a successful entrepreneur without lawyers to help protect your ideas. And your attorneys not only need to play defense by drafting hard-to-challenge patent applications but also to game the patent system aggressively to succeed—to play offense, if you will. Despite conventional wisdom about patents, almost any invention can get one with enough lawyering. Any patent can be challenged in court, and patents often are. With the exception of drug patents—when the patent is for a new and distinct molecule—patent fights typically drag on for years. When they are finally resolved, the winner is often not the true inventor, but the litigant with the biggest bankroll for legal fees.

This is especially true in the software industry today, where, unlike in the drug industry, no one single patent can offer effective protection. Now, when patent attorneys talk to companies about their intellectual property, they divide the pile in two. There’s the pile with the true inventions that the company is proud of. Then there is the bigger pile—prior inventions supplemented with minor or obvious ideas recast to look important by lawyers—that the company tries to patent.

These discussions are not just about how to keep predators away, but how to prey on competitors. Entrepreneurs, executives, and lawyers look at patents the same way the United States and former Soviet Union waged the Cold War: There are allies and enemies. Both sides are in an arms race. They want to stop building weapons, but they don’t trust one another enough to do that. Both worry that if one side gets an edge, that side will attack. So, oddly, the sides seek safety in parity, despite its enormous cost.

Few understood this dynamic better than Jobs. He’d tried to protect the ideas behind the Macintosh from being copied in the early 1980s. He got Gates to agree not to make similar software until a year after the Macintosh shipped in January 1983. The biggest immediate problem with this deal was that the Mac didn’t ship until a year later, and the deal made no provision for that kind of delay. Despite Jobs’s fury, Gates had every right to tell the world about the system that became Windows at the end of 1983. The longer-term problem was that later, when Apple sued, claiming Microsoft had violated copyright law by ripping off the look and feel of the Macintosh, the courts did not agree. Despite more than a decade of legal fights, the courts said copyright law offered little protection for software in which the code itself wasn’t plagiarized. Jobs had no other recourse then, however. In the early days of the software industry, patent protection was not available for software code.

Echoing what a number of Apple executives have said to me, one of them, who would not give his name, said, “Steve was very colored by the feeling that his company had been the first to innovate in the space [making PCs more user-friendly] … and that when Apple tried to stop [Microsoft from ripping it off], it had not been successful. And so his view about patents was ‘We don’t have patents to make money on them. We don’t have patents to trade them. We have patents to protect the innovation and the investment in innovation of the company.’ And for him that really got reduced to a very simple proposition, which is that, if you have patents, you can tell someone to stop using your technology and sue them if they don’t stop.”

*   *   *

Nothing illustrates Jobs’s obsession with patents as weapons better than his comments about them during the first iPhone launch in 2007 and the private meetings he had surrounding them in 2006. In the fall of 2006, as Apple’s engineers were scrambling to ready the iPhone for its January unveiling, the topic of what technologies Apple should patent in the iPhone came up at one of Jobs’s weekly senior-management meetings. It was a short discussion. Before anyone could begin to ponder the question, Jobs answered it completely and definitively: “We are going to patent it all.”

The ripple effects inside Apple were immediate. Soon, Apple’s engineers were asked to participate in monthly “invention disclosure sessions.” One day, a group of software engineers met with three patent lawyers, according to
The New York Times
. The first engineer discussed a piece of software that studied users’ preferences as they browsed the web. “That’s a patent,” a lawyer said, scribbling notes. Another engineer described a slight modification to a popular application. “That’s a patent,” the lawyer said. Another engineer mentioned that his team had streamlined some software. “That’s another one,” the lawyer said.

The aggressive filing procedures were designed not just with maximum protection in mind, but maximum stealth. Patent filings are public, and Apple’s competitors are always on the lookout for them as a way of divining what the company is going to do next. So Jobs would file them in bunches. That way the public saw a slew of ideas all seeming to contradict one another, said Andy Grignon, the early iPhone engineer. Grignon said his patent on one of the early iPhone dialers—it turned the iPod click wheel into a rotary phone dialer—was conceived in early 2005, but it wasn’t filed until late 2006. That was not only more than a year after conception but nearly a year after Apple had decided not to use the invention in the iPhone at all. “We basically tried to patent everything,” an Apple attorney said. “And we tried to patent it as many different ways as we could, even the stuff that we weren’t one hundred percent sure would go in a product,” because it would prevent another company from trying to patent an idea that Apple had thought of first.

Jobs was clever when he talked about these issues. Seven and a half minutes into the first iPhone presentation in January 2007, he introduced the iPhone’s touchscreen like this: “We have invented a new technology called multitouch, which is phenomenal. It works like magic. You don’t need a stylus. It’s far more accurate than any touch display that’s ever been shipped. It ignores unintended touches. It’s supersmart. You can do multifinger gestures on it. And, boy, have we patented it.”

It was a great laugh line; but Jobs had much more tactical reasons in mind. Jobs knew that defending patents is as much about bluster as about the law. Apple was unveiling a product in an industry—cell phones—that was jammed with big, well-financed companies sitting atop enormous patent portfolios of their own. Nokia was the largest cell phone maker in the world. RIM was the leading smartphone maker for businesses. And Motorola had invented the modern cell phone in 1973. If the iPhone was successful, they and others in the cell phone business would likely want to sue Apple for patent violations as a way of slowing the iPhone’s rise. Jobs wanted to make sure they thought twice about that, according to Nancy Heinen, who was Apple’s chief counsel until 2006.

Jobs hadn’t invented multitouch, and everyone inside Apple knew it, but he’d certainly improved it by sticking it in an iPhone and adding other innovations, and he wanted those innovations protected. So he was following the centuries-old game of chicken: make your enemies worry that you are crazy enough not to swerve in hopes that they don’t even bother to challenge you.

“Remember, [Jobs] was the best marketer on the planet,” Heinen said. He didn’t have to have invented multitouch as much as convince the cell phone industry that he had the money and the will to defend that assertion in court for a long time. “So he was sending a message … I’ve a got a sledgehammer, and I am going to use it anytime you come too close,” she said. “It’s a business strategy. There were true innovations in the iPhone, but we were not first by a long shot into this area. So if you’re not the first in, you have to be robust in covering every possible invention or feature or little thing because it’s a crowded environment. You don’t know what is going to survive [patent-office and legal challenges], and you don’t know what other things are going to be coming out from competitors in the space.”

*   *   *

The Apple-Samsung verdict produced a stream of hand wringing from lawyers, entrepreneurs, and executives, who accused Apple of recklessly twisting the legal process to their advantage. America’s innovation economy could not survive long term in the face of such bullying, they said. The problem was that advances in technology were happening so fast, especially in software, that they had outstripped the U.S. patent office’s ability to read, analyze, and hand down credible patents.

There is some truth to this. The number of patent applications has been steadily on the rise. In 2000 the U.S. Patent and Trademark Office (USPTO) received 315,000 applications; in 2010, 520,000; and in 2012 it processed 577,000 applications. And while the backlog of unprocessed patent applications fell in 2013, it was after at least a decade of steady increases. The agency hadn’t hired enough examiners to keep pace with the increased workload. By the time of the Samsung verdict, the typical wait time for a patent decision had grown from 25 months in 2000 to 32.4 months in 2012, and the patent backlog had ballooned from 158,000 in 2000 to more than 600,000 in 2012.

Also, the rules that enable software to get a patent are far squishier than the rules governing what merits a patent on a drug. With a drug you have to actually create a new molecule. With software you can get a patent simply for coming up with a new way of doing something even if there are many different ways to write the software to accomplish that. One of the most famous and controversial examples of this is the “Buy now with 1-Click” button on
Amazon.com
. Amazon has a patent on that, meaning any other website that wants to let customers buy with one click has to pay Amazon a license fee.

A patent for 1-Click, known as the “method and system for placing a purchase order via a communications network,” was issued to Amazon in 1999. The company now has licensees worldwide, including Apple, which licensed the 1-Click method in 2000 for use in its online store and then later for iTunes. The patent has even withstood court challenges. In 2006 it was challenged by an Auckland, New Zealand, patent enthusiast and actor, who produced prior art filed by a company called DigiCash a year before Amazon’s patent. The actor, Peter Calveley, told reporters at the time that he challenged the patent “because he was bored.” The USPTO reexamined Amazon’s claim, Amazon amended it, and the USPTO regranted the patent in 2010.

There is something slightly misleading about all the howling, however. The rhetorical premise behind it is that we are living in unprecedented times. That’s false. If you spend enough time talking to patent historians and lawyers, you discover long, drawn-out patent fights over new and important technologies have been remarkably common since the USPTO was established in 1871.

We celebrate entrepreneurs in history textbooks, and that is a good thing. But the distillation necessary to make these tomes palatable—and to establish entrepreneurs as heroes—often leaves out the scheming, conniving, and hard work of getting this recognition. Virtually all of these entrepreneurs ended up in history books not just because they invented something but because they were able to defend it in court better than competitors.

Alexander Graham Bell and Elisha Gray fought for a decade over who had the right to call himself the inventor of the telephone. The title is still controversial among telephone-history enthusiasts. Bell and Gray submitted their patents to the USPTO on the same day—but Bell’s was the fifth patent application of the day and Gray’s was the thirty-ninth. The USPTO ignored the fact that Gray’s patent was a kind that required Bell’s application be put on hold until the two patents could be compared. Despite the nearly six hundred lawsuits filed because of the oversight, courts consistently sided with Bell.

The Wright brothers spent years defending their patent on the method for controlling flight. The most famous case, brought against them by aviation pioneer Glenn H. Curtiss, lasted four years. Patent suits against the Wrights would have gone on longer but for the start of World War I. The U.S. government was in desperate need of planes to fight its battles and ultimately forced the industry to pool its patents and create cross-licensing agreements so they would stop fighting one another and assist with fighting the war instead.