The Apple Way: Repeated Innovation + Patent = Domination
|Written by Gene Quinn
Patent Attorney & Founder of IPWatchdog
Zies, Widerman & Malek
Follow Gene on Twitter @IPWatchdog
Posted: Jan 24, 2010 @ 12:00 pm
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.
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?
About the Author
Gene Quinn is a US Patent Attorney, law professor and the founder of IPWatchdog.com. He is also a principal lecturer in the top patent bar review course in the nation, which helps aspiring patent attorneys and patent agents prepare themselves to pass the patent bar exam. Gene started the widely popular intellectual property website IPWatchdog.com in 1999, and since that time the site has had many millions of unique visitors. Gene has been quoted in the Wall Street Journal, the New York Times, the LA Times, USA Today, CNN Money, NPR and various other newspapers and magazines worldwide. He represents individuals, small businesses and start-up corporations. As an electrical engineer with a computer engineering focus his specialty is electronic and computer devices, Internet applications, software and business methods.