Archive for July, 2012

STRATEGY AND TACTICS: KNOWING THE DIFFERENCE IN PATENT PORTFOLIO CREATION

Monday, July 23rd, 2012

My thanks to Janal Kalis for this guest post:

The smartphone patent wars have been effective in identifying which of the players are mere strategists and which players are both strategists and tacticians. Before looking at the specific actions taken by companies in the smartphone wars, it is useful to consider the definitions of strategy and tactics. Strategy is as follows:
1. A plan of action or policy designed to achieve a major or overall aim.
2. The art of planning and directing overall military operations and movements in a war or battle.

The definition is tactics is as follows:

An action or strategy carefully planned to achieve a specific end.
The art of disposing armed forces in order of battle and of organizing operations, esp. during contact with an enemy.

Apple and Microsoft are companies that have displayed effective strategy and tactics. Google has displayed strategy but not tactics. Apple has used Google’s weakness in the patent litigation war. Microsoft has used Google’s weakness to harvest hundreds of millions of dollars from Android smartphones without substantial litigation and without making anything.
Apple’s strategy was to invent the iPhone and iPad first and to obtain patent protection on every feature possible. Apple’s strategy also included developing and protecting a structure for enabling the creation of software applications for its iPhone and iPad. Patent Power Scorecards has ranked Apple as having the most powerful patent portfolio in consumer electronics. (See http://spectrum.ieee.org/at-work/innovation/apple-has-the-most-powerful-patent-portfolio-in-consumer-electronics). Apple achieved this ranking by being the first to invent new types of consumer products, thereby displacing companies like Hitachi, Panasonei, and Sony. Apple has also created multiple thickets of patents to protect its core technologies.
Apple has displayed effective tactics by purchasing patents on inventions that it did not create. The Nortel patent portfolio purchased, with the Rockstar Consortium, has been well publicized. The purchase of image transfer patents from the Kodak portfolio is another example. Apple has taken action to understand the full landscape of its patent portfolio and to identify its strengths and weaknesses. Apple has used tactics of patent purchases to shore up weaknesses in its own portfolio and, in some instances, to offensively weaken the portfolio of others. (i.e. http://www.reuters.com/article/2012/06/19/us-kodak-apple-idUSBRE85I0X420120619)
Google has, historically, relied upon its market power and superior products, not patents, to keep its competitors at bay. It entered the smartphone market as a junior player and initially, did not appear to appreciate that it was vulnerable to multiple charges of patent infringement from Apple and others. The strategy appeared to be that if Google created a superior product and market for its Android smartphone, it would prevail, patents be damned. It did not take long for Google to realize that its weak patent portfolio rendered it vulnerable in the smartphone patent wars.
Google strategically tried to purchase the Nortel portfolio. Apple and others tactically thwarted Google’s effort. Google strategically purchased the Motorola Mobility company and patent portfolio only to find that neither have been a complete solution to its vulnerability. To date, Google does not appear to have a grasp of its patent portfolio landscape sufficient to understand where it might have tactical advantage against its competitors.
Microsoft is the frogfish of the smartphone wars. That is part of its strategy–camouflage. It looks like a software company that is not really a player of contention. Microsoft does not make smartphones. Its patent portfolio size is enormous but is not generally associated with smartphone technology. However, Microsoft entered into an agreement with Nokia to use their combined patent portfolios to extract a lot of money in the form of royalties from the smartphone players. Microsoft is now paid royalties on 70% of US Android smartphones. http://arstechnica.com/civis/viewtopic.php?f=2&t=1165164. Microsoft achieved this objective using tactics that have included targeting purchases of patent portfolios.
Both Apple and Microsoft were once in the position that Google is today with respect to their patent portfolios. There is no reason to believe that Google will not develop more nuanced strategy and tactics, over time. For more information on patent strategy in the smartphone wars, check out the following:

http://www.fosspatents.com/

http://www.iam-magazine.com/blog/Detail.aspx?g=c48f69ef-91b3-4494-813e-6fa21057969e