How Technology Makes Patents Irrelevant: An IP Lawyer Discusses Apple v. Samsung

Samsung is a copycat, the jury ruled, after just three days of deliberation, awarding Apple over a billion dollars in damages. For the inventor of the iPhone, it was a convincing victory. In their eyes, it took Samsung just three months to steal something the company had invested five years to produce. Apple made the classic argument for patents: making cool stuff is really hard and they deserve protection for the time, effort, and capital they've put in to make this amazing product. In other words, allowing companies like Samsung to copy is bad because it gives companies like Apple less incentive to innovate.

Yet it's hard to look at this verdict and get the sense that the consumer is winning. Should Apple have a monopoly on intuitive "inventions" like a sleek rectangular smartphone or finger controls like "tap-to-zoom?" Did Apple really come up with them in the first place?

We generally regard copying as "bad" because of how it stifles innovation. But what if it was a good thing? What if, by giving users more options and creating competition, it actually fostered innovation instead of killing it? That's the question posed by the authors of The Knockoff Economy: How Imitation Sparks Innovation.

"Copying has destructive effects—that’s why we have patents," Kal Raustiala, a professor of law at UCLA and one of the book's co-authors, told me. "But it also has productive effects." For Raustiala, Apple's case against Samsung is more about stifling competition than fostering innovation — which could ultimately be a bad thing for consumers. "Apple is clearly concerned about how successful the Android ecosystem has been. So this case is about more than just knocking down Samsung," he said. "The effects on innovation are complex.This may force more radical designs from other firms. But people may not want radically different designs, and so we may see fewer good refinements, which is often the way things have progressed in the past."

I had the privilege of discussing the ruling at length with the book's other co-author, Christopher Sprigman, a professor of law at the University of Virginia and former antitrust and intellectual property lawyer (and one of the lawyers that litigated the appeal in the federal government's case against Microsoft back in the 90s).

What are your thoughts on the verdict?

Well the verdict's a huge thing. I feel more incredulous at some parts versus others. For instance, the design patents.

Why is that?

Apple has a set of design patents on the basic shape of the iPhone. They have a design patent on its rectangular shape and also on the arrangement of four regularly spaced columns of icons on the cellphone screen. So with respect to the rectangular shape of the iPhone, the Samsung phones are similar in that they're rectangular. But of course, lots of phones are rectangular.

The Samsung phones are also not immediately identical. They have different button placement. A lot of the Samsung phones also look quite different. I always thought that in order to violate the design patents — and that's if they're valid in the first place — they'd have to be more or less exact. Because there's something in patent law called the doctrine of equivalents. It used to be anything in the ballpark would be infringing but that narrowed substantially. So the fact that the jury held infringing designs that are similar but not the same or even really close is dismaying. It's an overbroadening of the scope of design patents, design patents I think in this case are invalid in the first place.

Why do you believe that Apple’s design patents are invalid?

The Apple rectangle patents are not novel and are obvious based on prior art — there have been both older foreign patents and previous phones and tablets (including LG’s Prada on the phone side) that have similar rectangular designs.

In addition to the prior art, which in my view is disqualifying, there is also another bar to the Apple rectangle design patents: the rectangular design is functional. Design patents are for novel ornamental features, not for useful features; that’s the domain of utility patents. But in my estimation the rectangular feature is functional — it’s the natural shape for a smartphone that’s made up mostly (or nearly wholly) of a screen, which is almost always rectangular and for good reason given what the phone does.

See the LG Prada phone: the rectangular screen is split up into two square areas stacked top to bottom. The bottom square is for the keypad and other functions; the top is for displaying call information. The iPhone takes a different, icon-based approach, but the point is that for smartphones, rectangular screens, and a rectangular phone shape, are functional. Defenders of Apple’s design patents sometimes point to the rounded corners. These, they say, make Apple’s rectangle special. Well, no, because previous designs also had rounded corners, and for good reason: pointed corners are weak and tend to break off, and they also tend to poke people.

The upshot: these are bad patents.

Why do you think the jury reached such a quick conclusion?

I think juries don't really faithfully apply, in these kinds of cases, the complex rules of patents because they don't really know them. And so they just make a gut decision about who they like and who they don't like.

They see Apple as an innovator. It's an American company with a lot of credibility. For Samsung, I think they decided pretty early on that they are a bunch of copyists and they have this gut reaction that copyists are bad.

Now, what they didn't hear really was how Apple started out. Apple started out when Steve Jobs went to the Xerox research facility in Palo Alto and he saw Xerox's early version of the graphical user interface and mouse. He took those ideas and he improved upon them and out came the Macintosh computer. There's a video on YouTube if you care to look, where Jobs is talking about that and he's like look: "Good artists borrow, great artists steal. We're shameless about stealing."

Speaking for myself, I happen to think that that's often good. Innovation often involves people taking other people's ideas and improving upon them. Edison, who is thought of as the ur-inventor is essentially the ur-tweaker. He took a bunch of ideas from the light bulb designs out there and made them better. He made the first light bulb filament that worked and lasted.

That's the way a lot of innovation happens and what Apple did with Xerox's GUI. In a sense, this is what Samsung did with Apple designs. They were inspired by those designs but frankly, I don't think they copied them point for point. They differentiated themselves enough that if I were looking at this as an expert rather than as a jury member with basically no background in any of this, I would have said that these things are not in the scope of the design patents.

And as for the design patent on the regular arrangement of phone icons into four columns, it's like — give me a break. Like that's novel?

What about the non-design patents?

Well, there are the utility patents. And on utility patents — at least for some of them, I have my doubts as well — but I think the problem has to do with what happened at the trial.

Early on in the trial, when Samsung was responding to Apple's discovery requests, they produced a bunch of evidence of invalidity they had on the utility patents, but it was buried so deeply in these gigantic voluminous filings that the magistrate who was overseeing discovery decided that Apple doesn't really have a fair chance to find this stuff.

And so the magistrate judge banned Samsung from introducing a lot of the evidence they had regarding the invalidity of several of these patents, a decision that was upheld by the district court — none of which I really have a quarrel with. The courts sets deadlines and Samsung didn't meet them.

The court says you have to identify, in your discovery responses, evidence that would support an argument of patent invalidity. Samsung doesn't fairly comply, which sends Apple on a very expensive wild goose chase. So I get why the court did what it did.

But the result is that the jury never heard much of any of the evidence about patent invalidity. As far as the hearing is concerned, these are all perfectly valid patents. These are all inventions of Apple's, unprecedented by anybody else's work, which I think is actually not right for several of these patents.

What does this ruling mean for the industry? For consumers? For innovation? Could it reach the Supreme Court?

First of all, it's too early for anyone to say with any confidence but one possibility is that Samsung carries this to the federal circuit and some of these awards get pared back, although I wouldn't hang my hat on that.

It's possible I think that this could go to the Supreme Court on the question of: What are the standards for infringement on the design patent? Are cellphones that look roughly similar to Apple's patented design but not the same — are those phones close enough? What's close enough in the design patent world? That's actually a surprisingly hazy question. I wouldn't be surprised if the Supreme Court cuts back substantially under the circumstances in which you're going to be held in violating a design patent.

Another possibility, which I find more likely, is that at some points these parties settle. Apple has sent a message to the market that everyone needs to take a license and so everyone starts licensing — and those licenses are very expensive — and this blunts competition.

One of the big competitive advantages for Android-based phones is that Google gives its operating system away for free. That advantage is compromised as phone manufacturers pay a fixed fee per phone to license Apple's technology.

Wouldn't that force competitors to come up with better, more creative solutions?

Yeah, maybe. But the paths to innovation are hard to predict. Look at the market right now. You have another major platform, Windows, that looks very different from the Apple platform, and it's very unpopular. And rectangularly shaped phones with the screen taking up most of the device, that's just a really efficient design for a smartphone, at least, insofar as we understand how they work at the moment.

I'm not saying that we won't have pathbreaking innovation. In terms of stuff like one-finger scrolling or pinch-to-zoom, there's a problem because Android phones have already been using these functions for a while and people have invested in learning them and have gotten used to them. Now you're asking people to invest in learning a whole bunch of new phone functions, a whole bunch of new gestures. That's not a huge investment but it's still an investment and are people going to want to do that?

If I were Samsung right now, I would be asking that — so it might make sense to license these patents because they don't want to drive people away by making the phone interface unfamiliar. This isn't to say that there aren't innovations to be made that are different and move away from Apple's designs but that can take time.

How then do we create an environment that finds the right balance between protecting ideas while fostering healthy competition?

People have been trying to get this stuff done for a long time but it's like pushing a very heavy rock up a very steep hill.

One solution is making the Patent and Trademark Office (PTO) do a better job. But the more I think about what that would entail, the less optimistic I am that this is ever really going to meaningfully get done. I don't think there's enough money you could give them or enough administrative reforms you could push through.

I just think with the system we have, the PTO is going to be an uncertain cop on the beat when it comes to preventing the issuance of bad patents — so I'm not terribly sanguine.

So what else could you do? You could adjust patent doctrine. Like what I mentioned earlier about the question of how similar do things have to be to violate a design patent where basically what juries are going to judge is whether or not things seem "close enough." I think for, various reasons, that this is a terrible rule.

I'm not a great believer in design patents to begin with. Under current circumstances, they're not terribly valuable as drivers of innovation, they're much more useful as litigation chips. I think the case against design patents is much more powerful in general than against utility patents. A wide standard of liability for design patents exists and for that to be a fixed standard, you have to make sure the lower courts adhere to it. It's a twilight struggle, to make sure that the courts actually follow the law.

Then in terms of patents generally, frankly, I think people have to wonder. In software, people are starting to question if patents make any sense. Are they relevant? Do they actually incentivize enough innovation that it's worth having this very costly, cumbersome, litigation system? I wouldn't be surprised that if this melee expands into software, if the market becomes less competitive, less vibrant and less consumer friendly.

What can we do then, about companies abusing the system to protect their existing monopolies?

These questions are hard because one thing I learned as an antitrust lawyer — I was an antitrust lawyer before I became an intellectual property lawyer — innovation often overwhelms even the most acute monopolies. Think about Microsoft. I was involved, back in the day during the Clinton administration, in the federal government's case against Microsoft. I was one of the lawyers who litigated the appeal in that case on behalf of the federal government.

For all we knew, Microsoft was a juggernaut and Apple was the 98 pound weakling. Apple was beaten. They had three percent of the computer market and declining. Think about the world now. We're talking about cellphones where Microsoft is a substantial but relatively niche player and we're talking about Apple being the juggernaut, with the Android operating system and open source being the other leading platform. This configuration, no one would have guessed. So you can't underestimate the power of innovation to displace what seemed like secure dominant positions.

With that said, the ruling smells bad to me. In the end, this is really a battle between Apple and Google. Apple wants to put a tax on the Android operating system: either pay us or use an operating system that doesn't imitate us, like Windows. That's the strategy here.

Design patents are a funny thing because they're kind of the red-headed stepchild of patent law. They don't normally get a lot of respect and main reason is because of the very high rate of invalidation and litigation. This decision might be the moment in which design patents start getting some respect and frankly, that worries me.

But this is a big multi-jurisdictional World War III of patents and this is just the first major episode. It's not over.

How does Samsung come out of all of this from a consumer perspective?

There are some people saying that, basically the message being sent to consumers is that Samsung makes phones just like the iPhone except cheaper. And they make a tablet just like the iPad but it's cheaper. I don't think anyone actually knows this is true. I think you'd have to do a lot of research consumer perceptions to figure out if people really think this and see if there is a change in sales volumes.

The other possibility however, is that people now think there's an aura that attaches to Apple: they're the innovator and Samsung is the appropriator. That makes me throw up in my mouth a little bit because Samsung is definitely the appropriator, but so is Apple. The truth about creativity, the truth about innovation is that no one creates something out of nothing, and certainly not Apple. They created their signature products by taking inspiration from technologies that they saw around them. There's nothing wrong with that.

You guys have made this case that copying can be good. When is copying bad?

Exact copying of music has been very bad for the music industry. Right now, the major labels have definitely suffered terribly. From their perspective, that's really really bad, and I certainly don't think it's good. The RIAA member firms’ revenues have fell off by 60 percent since Napster, and I don't think that's good either.

That said, there is a difference in saying, the music industry has suffered from copying — which I think is true — and saying, music has suffered from copying — which isn't true. Today, you have more and better popular music than ever before. Actually, they've done some empirical work now, by Joel Waldfogel, an economist, which shows that this is true in terms of both quantity and quality. Since Napster, both have gone up.

And why is that? Because a lot of things like technological trends, the internet, digital platforms, they make piracy easier, but they also make creating, distributing, and telling people about new music easier. These networks facilitate piracy but they also facilitate artists communicating directly with their fans. The internet facilitates piracy, but it also facilitates iTunes and a million other ways music gets distributed, talked about, published and sold. Digital technologies make piracy easier, but they also make recording high quality music vastly cheaper than it used to be. With technological advancement, as one hand gives, the other takes away.

The question is: what's the balance? The balance seems to be that music as a whole is doing fine, it's just that certain players are worse off or better off. So the record companies are worse off. Probably the megastars are worse off because it's a less friendly environment for them to sell zillions of albums.

But probably a lot of musicians, who would have been broke nobodies in the old system, have somewhat more of a fighting chance to carve out a decent career in the new system. It's strengthened the notion of a musical middle class.

You can think of the old business model of the record companies as being analogous to the old oil companies. You drill a thousand dry holes. One turns out to be a gusher and that one gusher pays for all the thousands of dry holes. If you think now of music and a lot of musicians, it's not a gusher and it's not a dry hole. You dig a hole and some stuff comes out. But it's enough hopefully over time to sustain them a modest career, where they can build a fan base, sell merchandise and connect with their fans. They can make very good music at much lower cost. The old days was like oil wildcatting in Texas. Now it's more like becoming a teacher. It's a middle class existence. For a lot of musicians, it's not great, but it's not terrible.

Does that mean less big gushers then?

That's a good question. It might be that, in the new music industry, over time you have fewer mega stars. You might have less spectacle, but more accessibility. Is that trade off good or bad? I don't know. That's not an economic question, it's more of a cultural question. What do you like better?

Can you imagine a world without patent law?

Yeah, but I wouldn't want that. I think of the pharmaceutical industry. There's the poster child for why we need IP. You've got to invest hundreds of millions of dollars in some new drug or some new process of manufacturing it. Enormous amounts of capital need to be devoted and it's really risky.

God only knows if you find the right compound and then God only knows what the side effects are or if the FDA will approve it. And there, I get the whole motivation of patent law. If you're going to sink that kind of investment, you want to make sure that if everything comes up aces, that you're going to enjoy the profits for some period of time.

This isn't to say that in some distant future, where our sciences just advance enormously, that things might change. But that's not the world we live in. On the other hand, making records and distributing them has gotten much cheaper. We're not loading plastic discs up on trucks anymore. We're not putting them onto expensive store shelves. In the most prosaic and stupidly simple ways, the whole business and cost structure has shifted.

So given that, the record industry is looking less and less like the pharmaceutical industry everyday. You've got to begin to ask, what is it we need here? Do we really need property rights of the type that we have? I'm not saying that we abolish them but we have to start asking in the new world: What good do they do? What do they actually do?

Take software, for instance. Software is relatively cheap compared to the innovation of pharmaceuticals. Do you need patents in software? I don't think so and if you have them, they should be very short.

How short is short?

Less than five years.

Apple seemed to do just fine, just being the first mover — even with the alleged infringement.

With patents in software or maybe in phones, just give them maybe two to three years of first mover advantage and then get the patents out of the way. That's because smartphones really operate in a network. My son just switched from an Android phone to an iPhone, he's thirteen. His comment to me was that it integrated so much better with the platform. That's a big advantage. Whatever platform corresponds to the phone that you invested in first is probably the platform that you stick with.

This doesn't mean that people don't change platforms, but platforms are pretty sticky. Being the first mover really helps. Now how long do patents need to last to trigger some longer-term first mover advantage? I don't know the answer to that question. It depends on context, but that's a question we can ask and answer in specific technological contexts. That's a question I'd like people to start asking.

Any closing thoughts?

There's a lot here and I think it's a really compelling area. I hope that this book will lead people to start thinking — to not think so theoretically, and actually look at the world and say: What's going on? What are people doing when they innovate? That's what's interesting to me.

I'm a law professor and law school is full of theory, so I get that as much as anybody else. But I enjoy actually looking at what artists, musicians, programmers, fashion designers, chefs, magicians, and standup comedians are actually doing.

In a lot of these industries, the IP law really doesn't do any work. There's no copyright and there's very little to no patents, but lots and lots of creativity? How does that happen? Well it turns out there's a reasonably rational explanation for that and I think it's emblematic of the kind of approach that we're taking.

Follow Alec on Twitter: @sfnuop