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The Apple Way: Repeated Innovation + Patent = Domination


Written by Gene Quinn
President & Founder of IPWatchdog, Inc.
Patent Attorney, Reg. No. 44,294
Zies, Widerman & Malek
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Posted: January 24, 2010 @ 12:00 pm
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Those who are readers of IPWatchdog.com on a regular basis are familiar with the jousting that goes on in the comments between myself and a core group of patent believers and those who are, shall we say skeptical of the value of patents and would prefer that patents simply not exist, or at least not exist in certain areas, such as software. Without getting into that debate directly here and now allow me to observe that if you are an independent inventor, start-up or small business one successful way to responsibly move forward is to pattern yourself on successful companies. There is no mileage in following the lead of a company in decline, so lessons can be learned by observing successful companies and weaving together a strategy that will lead to market success. Perhaps no other company today so aggressively pursues patents on core technologies and products than Apple, and they enjoy enormous success. So why not take a page from the Apple playbook? Innovate, patent, commercialize and dominate.

It is hard to characterize Apple as anything other than wildly successful, as indicated by their market dominance and copy-cat products that seek offer substitutes for the iPod and iPhone. So if a highly developed patent strategy is appropriate for Apple, why wouldn’t a patent strategy that fits within your budget be a bad idea for you? The short answer is that if patents work for Apple they can work for you too. Stop thinking that Apple is in a different league and start remembering that like Microsoft, Apple was at one point just two guys. The dynamic duo of Bill Gates and Paul Allen, and the dynamic duo of Steve Jobs and Steve Wozniak, are but two illustrations of the American dream. Starting off small and growing into a mega-giant corporation. In the tech sector these stories are real, and in all cases innovation is followed by proprietary protection.


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Detractors of the patent system are always quick to point out that it is their belief that patents do not contribute to innovation. It is, however, extremely difficult to argue that Apple products are not innovative, so what gives? The truth is that the patent system certainly contributes to innovation because it allows those who innovate and are willing to take advantage of the rights offered to create barriers to entry. Patent provide a market advantage that investors like, making them more willing to invest and so the circle of funding, innovation and more funding continues.

The fact that Apple is so aggressive with its patent portfolio demonstrates that patents can and do lead innovative companies to succeed. Through its patent portfolio Apple is able to successfully prevent competitors from getting too close, creating an advantage. Apple is also a perfect example of how the patent system is intended to work. Patents are strong, but waste over time because technology grows stagnant. To continue to reap the benefits of a patent portfolio you must continue to innovate and continue to protect that innovation. Patent are fragile because if you obtain a patent I could obtain a patent on an improvement, thereby blocking you, the original patent owner, from making, using and selling the improved version of your own invention. For that reason, when you get a patent on a valuable product you must immediately start to innovate again, improve, push the envelope and obtain additional patent protection so as to prevent competitors from blocking you. So the nature of the patent right, which allows for blocking, forces the march of innovation or the original innovator will be out of luck, locked out of further advances on their own innovation.

It is this fragile nature of patents that guarantees that patents foster innovation where there is a commercial market demand. The motivating factor is the desire by innovators, fueled by investors, to enjoy a a market advantage. This greed leads innovators and investors to continually push the envelope of innovation. Of course, there are times when companies grow so large that they are unable to innovate, not because investors don’t want innovation and not because companies fail to see the importance of innovation, but because they get so large that it is not possible for good ideas and inventions to get green-lighted through the various required corporate steps. It is when this happens that individuals and small businesses are presented with opportunities to innovate, protect and conquer, or be acquired by a company that is too big to innovate. In either situation, a progressive and well developed patent strategy can lead individuals and small businesses in a profitable direction, whether to become the next great corporation or to enjoy a handsome buyout.

Of course, not all companies who pursue sound patent policies will be rewarded with riches. There are many reasons why things fall apart or otherwise go awry, but without a sound patent policy the task of getting to where you want to go asymptotically approaches zero. Whether anyone wants to admit it to themselves, and trust me there are many companies and individuals who hate this reality as simple and true as it is… but a patent and/or patent application is an asset which can be sold, licensed or shared. While the most valuable of these assets would be a strong, issued patent on a product that has been built, works and enjoys a strong and growing market, rights and advantages can and do attach upon the filing of a patent application, thereby creating a piece of property that can be licensed, sold or shared. Without a patent or at least a patent application pending there is no asset and at best you have a trade secret, which vanishes never to exist again once the secret is no longer a secret. While many would like you to believe confidentiality agreements protect you, the reality is they are very difficult to get the “right” people to sign, you know, the ones you need help from to do the deal or get money from. The other reality is that if they violate the confidentiality agreement, or through some careless oversight the secret gets out, you no longer have a trade secret and depending upon how the information was released you might not even have a claim for misappropriation or breach of contract.

In any event, most would agree that Apple is one of the most innovative companies in the world. For example, here is what some popular news outlets have said about Apple’s innovation:

Forbes says: “When it comes to innovation, many executives in the consumer goods industry are chasing Apple. Who can blame them?”

In March 2008, Forbes Magazine ranked Apple No. 1 in the 10 most admired for innovation. The companion article, What Makes Apple Golden, explains: “Apple has demonstrated how to create real, breathtaking growth by dreaming up products so new and ingenious that they have upended one industry after another: consumer electronics, the record industry, the movie industry, video and music production.”

According to Research & Markets, “Apple has managed to sustain its innovation efforts with calculated, consistent increases in R&D spending and rapid-fire launches of new products and upgrades. What lies behind Apple’s success is not luck—the company has very deliberately focused its efforts on generating better ideas faster.”

Presently, the talk of Apple and innovation is all over the web, thanks to Apple having formally announced a special event for Wednesday, January 27, in San Francisco to reveal to the public its “latest creation.” Apple has sent invitations to select journalists to cover the announcement, and speculation ranges from the announcing of a new multimedia tablet device to a 22-inch touch-enabled all-in-one PC to perhaps an iPhone 4G for Verizon Wireless. Perhaps no other company stokes the flames of tech passion like Apple, leading to rampant speculation and chatter whenever an announcement is pending. Perhaps the most interesting thing is that continually Apple seems to live up to the hype they create, which in the tech-gadget sector is far from the rule.

While it is unrealistic to believe that independent inventors or small businesses have the finances to follow in the footsteps of Apple, there are indeed a variety of ways to lay the foundation for a patent portfolio in a responsible way. Having solid technology and a growing portfolio can lead to early stage investors willing to take a risk, and then when patents start to be obtained additional funding can be obtained. So rather than believe what sounds too good to be true; namely you don’t need patents, wouldn’t it be better to learn from how Apple handles their business affairs?

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Posted in: Anti-patent Nonsense, Apple, Companies We Follow, Gene Quinn, Inventors Information, IP News, IPWatchdog.com Articles, Patents, Technology & Innovation

About the Author

is a Patent Attorney and the founder of the popular blog IPWatchdog.com, which has for three of the last four years (i.e., 2010, 2012 and 2103) been recognized as the top intellectual property blog by the American Bar Association. He is also a principal lecturer in the PLI Patent Bar Review Course. As an electrical engineer with a computer engineering focus his specialty is electronic and computer devices, Internet applications, software and business methods.

 

19 comments
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  1. [...] Those who are readers of IPWatchdog.com on a regular basis are familiar with the jousting that goes on in the comments between myself and a core group of patent believers and those who are, shall we say skeptical of the value of patents and would prefer that patents simply not exist, or at least not …read more [...]

  2. At the same time, Apple stock drops like a rock every time Steve Jobs sneezes! I personally don’t care for Apple or their products, but I can’t argue with their track record. Apple innovates a lot more than the other kid on the block and their products are generally much better, but that ins’t saying very much.

    I think that for small businesses and individual inventors, especially in the software arena, the biggest problem is knowing what is patented, which is there is some good advice for, but more importantly, recognizing patentable inventions in their own work. I would personally like to see more information, not about why and how to obtain patents, but how to determine when one of your ideas, implemented of course, can and should be patented.

  3. POP-

    I agree. Apple is going to need to do something about the Jobs Effect, or when he finally is not around any more for whatever reason stockholders are going to be very unhappy.

    I like your suggestion of topic in terms of how to determine when one can and should pursue a patent. It will likely need to be a series of articles though, there are a lot of considerations. I can probably put something together that lists the considerations and some basic information and then follow up with details to expand upon each over time.

    Thanks.

    -Gene

  4. [...] This post was mentioned on Twitter by TweetDiscovered, TweetDiscovered, ipwatchdog, Jose Fajardo, ipdotcom and others. ipdotcom said: The Apple Way: Repeated Innovation + Patent = Domination. http://bit.ly/5Npcev (via @ipwatchdog) [...]

  5. Gene,
    I have read that the Wright Brothers spent the rest of their lives (after their airplane invention) in court, fighting off infringement, leaving little time or energy for innovation. I have also read some of the early history of patents in the Bell System. Bell was successful in defending its most important, and broadest, claims, while pursuing a very aggressive level of innovation, at least for the first 25 years of its existence. At the same time, Bell worked with outside inventors such as Edison, Roosevelt, and Berliner, acquiring the best of their work.
    Apple seems to have formulated its own unique method of using the patent system, closer to Bell’s than to Wright’s.
    I spent almost 20 years working for IBM, and was always impressed by the level of innovation within that company, but I think the business model went stale at two points: when software became a separate product and when the IBM PC was developed without enough proprietary protection.

  6. Gene,

    I’m wondering if you have time to tell me what you think of the fashion industry, an industry where copying is rampant, but the higher end designers are still doing quite well.

    I’m not talking about knockoffs of Rolex watches, Gucci handbags,…which are an issue of trademark infringement, but instead the clothing that you can buy at big-box retailers that looks a lot like a design product.

    I’m thinking of this article that was in the Virginia Law Review:

    John

  7. John-

    I am happy to give you my thoughts, but let me preface it by saying that I would not consider myself an authority on the fashion industry. Perhaps that means I should pass, but I do have some thoughts and I will try and keep it to what I know based on the law and what I have observed.

    First, whether you are talking about knockoffs or copies sold in the big-box stores, based on what I have personally observed, the quality seems exceptionally low. Wal-Mart, for example, is great for many things. They sell clothing that from a distance looks like any other, and typically for a fraction of the cost. But it seems to me that if you buy clothes off the back of a truck (extremely low quality usually) or from a big-box (higher quality) they still do not approximate the quality of the high end designers. People know this and those who are buying for quality buy the high end designer fashions.

    Second, those selling knockoffs and in big-box stores are not competing with the high end designers. Those who would buy a knockoff or a lesser quality copy are not the market for the high end designers. They sell to people who want the high end stuff, but cannot afford it or are not willing to pay for it. So the existence of knockoffs and lesser quality items does not cost the high end designers any sales.

    I think that copying matters most in business where the copy is viewed as an adequate substitute. Where there is no adequate substitute then copying is less of a concern, particularly where there is a great price differential and no overlapping between markets.

    What do you think? Does this make sense? Comments anyone?

    -Gene

  8. Tom-

    I would agree with you. I think the difference is between those that invent as a calling and those that invent as a business. If you invent as a calling and stumble onto something great it clouds decision-making, at least from maximizing value. I don’t know that is what happened to the Wright Brothers, but Bell and Edison seem to have well developed business strategies in place and innovation and patents were a part of the strategy, not the end. I think this is perhaps best illustrated by the Kearns dispute with Ford.

    Another factor, there is no doubt that being involved in a lawsuit can be a drag, become consuming and get in the way of business success and innovation. Everyone reacts differently to such disputes, and those who can keep their eye on the ball as things are going on around them tend to be most successful.

    Any additional thoughts anyone?

    -Gene

  9. “I don’t know that is what happened to the Wright Brothers.”

    Tom/Gene,

    The Wright Brothers tended to be better inventors and engineers than businessmen. I’ve read the book called “The Bishop’s Boys” which gives a very good insight into Wrights’ reliance on the courts to justify or vindicate their principles. Their father was a clergyman who was involved in a very protracted lawsuit in which Wilbur was heavily involved and which vindicated his father’s position.

    That carried over into the patent wars the Wrights had with Glenn Curtiss and others over the airplane. The Wrights viewed Curtiss and other as “steailing’ their invention, and thus pursued their patent right vigorously in court. From a business, standpoint, the Wrights might have been better off financially coming to an accomodation with Curtis and others. That in fact occurred during WWI when the famous, or some would say infamous, airplane patent pool came into being. In fact, and ironically, the Wright and Curtiss companies merged in the 1920′s or 1930′s to become Curtiss-Wright which still exists today.

    Seth Shulman his book “Unlocking the Sky” attributes much more malevolent, vindictive motives to the Wrights in their patent battles with Curtiss. I don’t buy Shulman’s view. The Wrights may have been stubborn and willing to stand on their principles, even when it made not business sense. But their patent battles with Curtiss were completely within the Wrights” character of vindicating their principles though the courts.

  10. Apple and innovation is different than what people think, especially when it comes to IP. The test to this is to ask yourself to identify an Apple product. An Ipod looks like and Ipod, a mac looks like a mac, MacOSX looks like MacOSX, etc..etc..

    Apple’s success in the market is not there technical innovations (utility patents) but the look of there products (design patent’s) and there marketing.

    The best example is the original Ipod. It was and still is the least innovated product in the market. When it came out it had the least number of features. The thing they did right was market the product and did they ever market it. Apple is marketing machine from ipod to iphone to macosx they have consistently produced a poorly featured product that looks really cool. They sell a look not innovation and they do it well. Apple is a marketing company through and through.

    Apple’s only hold on the market is there design patent portfolio, without it they wouldn’t not exist today.

  11. This is a great article, my favorite part is where you say to stop thinking that you’re in a different league than Apple. If more people thought like this they’d realize, now more than ever, they are on equal playing ground with many of the BIG guys. This is due in part to the ability to get seen on YouTube, Viddler, Twitter, FaceBook, iTunes etc. It’s so easy to build a following if you have a GOOD PRODUCT. I capitalize that because many people are trying to hock an inferior product and this is not good.

    Now if you’re going to be out there trying to build a following you definitely want to make sure you’ve protected your assets to the best of your ability. I think this article has done a really good job of pointing that out.

    -Cheers

  12. [...] See the rest here: The Apple Way: Repeated Innovation + Patent = Domination … [...]

  13. [...] IP piece o’ the day: IPWatchdog.com’s Gene Quinn presents The Apple Way: Repeated Innovation + Patent = Domination. « Medical Device IP Highlights For 2009 You can leave a response, or trackback [...]

  14. GQ, you have presented one of the more compelling arguments that I have ever read to support the existence of the patent law system. However, I would suggest that the Gordon Gecko-style “greed is good” perspective can lead (and, perhaps, has recently led) to a superfluity of junk patents, and to the creation of an unsustainable patent “bubble” whose days are numbered. I believe that a major part of Apple’s success has been the company’s continued focus not only on innovation, but also on the quality of its inventions — i.e., to quote R&M, “BETTER ideas faster” (emphasis mine). Although I would agree with Kevin that a large part of this has to do with marketing and design, I don’t agree that that is the entire picture. And even if, say, 70% of Apple’s success had to do with their marketing and design, I’m not sure that I see anything so wrong with that. Either way, they’re still creating innovative products that people want.
    http://www.GeneralPatent.com

  15. [...] not after failure.  One company that every inventor should learn more about is Apple.  See The Apple Way: Repeated Innovation + Patent = Domination. While they have made some bad business mistakes in the past, they are a true innovator and when [...]

  16. This is a great article. To those who said Apple success is purely good design etc would be an under-statement. I had read somewhere, that when ipod navigation was being designed, one of the goals set for navigation was : user should be able to find his choice of song in 20 seconds. Objective criteria are key to innovation. Apple is a fine example. Gene is right to say, follow the leader !! Till the iphone came in Nokia, Motorola for years were handing our cordless phones with ability to roam outside home. Innovation needs more than mere good marketing.

  17. One of the unique things about the iPod Touch is its full multi-touch screen. This has allowed game developers to become extremely creative about the amount of functionality they can give to their game. Rather than relying on a specific set of buttons, game developers can create virtual buttons on the screen which can change depending upon the game or even the stage of the game that the player is at.

  18. A great quote you mentioned on what forbes said.. and i believe it.

    Look at facebook and all these other tech companies, apple is in a league of their own and I find it very interesting that they were able to uphold their patent. Good for them! they’re innovation will only be duplicated by those chasing them.

  19. This was a great article to read.

    I think it is so important that you pointed out how small business and every day inventors should stop having the mentality that they are below these larger companies. The laws pertain to larger business just like to they do to the every day inventor. To a single person with an invention idea, they surely feel overwhelmed or that they may be “out of their league” when competing with these larger companies, but with hard work and a great support system behind them, it is possible to be successful.

    I also found it interesting to read through all of the comments and discussions regarding Apple surviving basically on their design patents and marketing. Both of these things are highly important in this industry. Design patents can be of value to any inventor. If you want another perspective on design patents, you will find this blog interesting and informative.

    http://patentlybrilliant.com/blog/?p=1389