Apple vs Samsung: Copycats really don't need any more help
As if President Elect Donald Trump threatening to force Apple to move its manufacturing to the US wasn’t bad enough, this week another branch of the federal government messed with Apple.
In a unanimous verdict, The Supreme Court reversed a lower court ruling on that old Apple v. Samsung case about copying the iPhone. Oh, Samsung copied the iPhone’s core design-- both UI and hardware-- no question. But the Supreme Court ruled that it shouldn’t have to forfeit the entire profits just because it copied the design, not the entire phone.
A host of industries-- from gadgets to fashion-- cried foul, saying the decision was a win for knock off artists everywhere. Last June, Nike filed an amicus brief with the court according to Quartz:
It has a “substantial interest” in the case given that it “holds the third-largest portfolio of design patents in the United States.” Nike went on to add that it invests a great deal of resources in design, and that effective protection of its intellectual property is “vitally important to Nike’s brands’ success, competitive position, and growth potential.”
Copycats didn’t necessarily need to be emboldened. Back when the case was first decided, Farhad Manjoo (back when he wrote for Pando, not the New York Times) argued persuasively that Samsung won, even with the then larger $1 billion verdict leveled against it.
In the fall of 2008, just a year after it released the iPhone, Apple became the most profitable phone maker in the world.
because rivals couldn’t match Apple’s average sales price and profit margins, they were falling behind. In the fourth quarter of 2008, Nokia, which had long been the phone industry’s profit leader, sold 113 million devices worldwide, about 15 million of them smartphones. It made about $1.2 billion in profit on all those phones. That same quarter, Apple sold just 4 million iPhones. But that single device earned Apple a profit of $1.3 billion.
These numbers—which Asymco’s Horace Dediu has helpfully archived here—provide the backstory to an industry in panic. If you were a phone maker watching the iPhone’s sudden rise in 2008, you had to make a quick decision. A storm was blasting through your business and your survival depended on how you reacted.
One option was to do nothing. A lot of firms opted for this path—Nokia and RIM, for instance, seem to have decided that the iPhone was a blip, a cultish device that would never reach mass appeal, so why bother taking it on?
Another option was to try to leapfrog Apple. You could spend many months, maybe even years, working on devices that aimed not just to match the iPhone’s innovations, but to beat them. This was Palm’s idea. Belatedly, it’s what Microsoft began to do, too.
Then there was a third choice. You could just copy Apple. You could borrow the iPhone’s key ideas, make a half-hearted attempt to dress them up in your own brand, and bake them all into your product line-up…
...It’s tempting, after such a sweeping verdict in Apple’s favor, to conclude that Samsung’s decision to mimic the iPhone was a terrible mistake. The firm will now be on the hook for at least $1 billion in damages, and the judge could triple that amount. Samsung will likely face sales injunctions on many of its products, and will be forced to quickly design around Apple’s patents in its current and upcoming devices, if not to pay a steep licensing fee. Other companies that took inspiration from Apple—including Motorola, HTC and, at the top of the chain, Google—will also be stung by this decision.
But if you study what’s happened in the mobile industry since 2007, a different moral emerges. It goes like this: Copying works.
Of the three paths open to tech companies in the wake of the iPhone—ignore Apple, out-innovate Apple, or copy Apple—Samsung’s decision has fared best. Yes, Samsung’s copying was amateurish and panicky, and now it will have to pay for its indiscretions. But the costs of patent infringement will fall far short of what Samsung gained by aping Apple. Over the last few years, thanks to its brilliant mimicry, Samsung became a global force in the smartphone business. This verdict will do little to roll back that success.
The other two strategies, meanwhile, haven’t panned out. ..
...And copying Apple didn’t just result in monster profits. It also helped Samsung earn a reputation, among consumers and tech reviewers, as a company that can make compelling devices. Yes, it was clear that many of Samsung’s ideas weren’t original. But customers don’t care about originality—if they did, Windows wouldn’t have won the PC world, and we’d all be using Friendster instead of Facebook.
Combine it with the “ask forgiveness, not permission” attitude of the disruption era, the swashbuckling brazen copying of the Samwer Brothers, and the rise of global me too apps, and it’s hard to imagine copycats needed another push.