Why Are All the Cellphone Companies Suing Each Other?

Apple is suing Motorola, Samsung and HTC; they're all suing Apple back. RIM and Kodak are suing each other. Kodak is suing Apple. Sony is suing LG. Microsoft is suing FoxConn and Barnes and Noble. Oracle is suing Google.

Nokia and Apple have already settled a suit.

And since Google now owns Motorola (pending regulatory approval) it is very much an interested party in case of Microsoft vs. Motorola, which landed in the US International Trade Court yesterday WHAT THE HELL IS GOING ON HERE?

How did this start?

Nobody in the mobile industry sweated patents until after the fact. The philosophy has largely been to go for it in terms of building products, and let legal catch up. Engineers developed, and worried about intellectual property rights later. Meanwhile individual companies filed for patents, and snapped up smaller firms that owned patents. It meant there were lots of competing claims for similar technologies. And then the lawsuits began—They started in earnest in 2009, accelerated last year, and are really starting to come to blows now.

Why are they suing?

There's no other way to tell who has the valid claim. Each company is stocking up on patent portfolios, trying to shield itself and have a bludgeon to use against others. Google bought Motorola largely for 18 key patents, but scored thousands more in the bargain. When you have two (or two hundred) patents that ostensibly cover the same technology, the only way to settle it is to hand it over to a judge.

The real answer, ultimately is that they're suing each other because the patent system is broken.

What is at stake?

Tens of billions of dollars in the form of licenses and future sales. Successful patent enforcement can let one company totally freeze another out of a market. Apple won a preliminary ruling against HTC that would keep the latter from selling its phones in the United States. And Apple was able to use a patent injunction to make Samsung stop selling the Galaxy Tab in Germany.

That's the theory, anyway. In reality the winners will likely let the losers pay exorbitant licensing fees and then collect for years and years to come.

There's also the barrier factor. If a company can successfully enforce a patent, say for a particular antenna design, and doesn't license it, it means everyone else has to come up with a new design. That takes time, costs a ton of money, and lets the patent holder have a market to itself.

Why is it exploding all the sudden?

Short answer: because there's a lot of money on the table that isn't spoken for yet.

Smartphones are finally taking off. The market is expected to grow by about 50 percent globally in 2011. The tablet market is growing even faster; it's expected to grow 300 percent this year. And yet, globally, hardly anyone has a smartphone and far, far fewer people have tablets. That's going to change (at least the former) over the next decade. Companies want to lock in rights now and collect on all those future phones for sale.

What will it mean for consumers?

It means that your prices will go up. But not by much. Let's say Google has to pay a 1-cent licensing fee to, say, Samsung for every Android phone sold in 2012. That's a lot of money in total, but the price passed along to the individual consumer isn't great.

Where it will cost you, however, is in having a better phone. Money spent on licenses and legal fees is money not spent on making better products.


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