Patents

IP theft in high tech--A way of life?

In light of the Apple/Samsung ruling, what, if anything, should companies do about their theft of their intellectual property?

Few were surprised last week when the U.S. District Court in California issued a ruling for Apple,  requiring Samsung to pay Apple $1.05 billion in damages for six iPad patent violations. Click here to see the Wall Street Journal account.

The theme is all too familiar if you work in high tech. It was "yesteryear" when I was a corporate executive in the semiconductor equipment industry and we had an offshore customer purchase a one million dollar piece of equipment from us. The customer proceeded to reverse-engineer the product and began competing against us in the market a year later! There was little we could do then because of loose enforcement of patent laws in Asia--so we took the hit and moved onto our next R&D (research and development) project.

What we knew then and still know is that IP (intellectual property) theft in high tech is a risk that every company in the industry understands it must manage--whether it's the thief or the victim.

Even if it appeals the court decision (which seems likely) and again loses, does it make sense for a company like Samsung to "take the hit" of the court decision awarding damages to Apple and move on? The answer is yes when you do the math, because even a $1.05 billion penalty for damages pales in comparison to the $12 billion in revenue that the company earned last year and the 14 billion in cash it has in the bank.

If you manage R&D in one of these high tech organizations, you also understand the immense pressures that confront your staff each day to innovate so the company can keep pace with a market that is technically savvy and in the case of consumer devices, also captivated by the latest fads. Driven by innovation, high tech companies lose key technical contributors to each other in bidding wars each day. These "top dollar" designers bring in ideas and concepts that they cultivated in other places. Some even believe that the designs that a court might interpret as "IP theft" from another company were their own creations!

Then, there is the consumer himself. Does an accusation of IP theft damage the perception of your brand in the market long-term? In a commodity market where consumers feel they might benefit if your company takes from another that would otherwise have a monopoly on the technology and the price---this is unlikely. The bottom line is that the marketplace seems to favor the accused tech "thief" pretty well.

But there is also the other side of the fence. This is the angered innovator of the technology that gets "stripped" not only of an idea but of potential market share. This is where I found myself a number of years ago. In our case, we dusted off our knees and went back to the shop to develop the next innovation. Sure, our attorneys pursued litigation---but back at the shop, an aggressive market didn't give us much time to lick our wounds. We were driven to innovate.

Apple is like this. It is an innovator and a leader. Because it excels at what it does, which is designing form, fit and function into technology that "fits" the human beings who use it, Apple will always be a target for IP theft whose products others strive to emulate. Companies like Apple know that there will be constant attempts to take their technology, which is one reason they maintain legions of attorneys to wage the inevitable battles. But while this is going on, they continue to move to the next innovation. This is why they remain so resilient, even at times like this.

So what are the lessons to be learned if you are a high tech company?

Expect to be engaged in IP theft. It is a way of life and it may even be a coincidence, since many of the same engineers move from company to company and take their ideas along with them.

Continue to innovate no matter what happens in court, because to your customers, you're only as good as your next innovation.

About

Mary E. Shacklett is president of Transworld Data, a technology research and market development firm. Prior to founding the company, Mary was Senior Vice President of Marketing and Technology at TCCU, Inc., a financial services firm; Vice President o...

26 comments
cgcenet
cgcenet

Basically your article demonstrates a breathtaking sense of entitlement. You believe that being first to market with an idea should give you the right to ban anyone else from entering the same market space and hold up innovation in it. I'm sorry but what you describe your customer as doing is NOT "IP theft", but LEGITIMATE COMPETITION. If you can't handle competition, then you shouldn't be in the tech business. You say that you "took the hit and moved onto our next R&D project". Well yes, that is what you are supposed to do when your product is no longer novel — you innovate. But when you do so, you should not whine like a cry-baby that other people have "stolen" your idea. That is what Apple are doing. They employ "legions of attorneys not so much to protect their innovations as to try to outlaw their competition in the hope of gaining an monopoly position so that they do not have to innovate. Unfortunately, as seen in the recent judgement, patent laws are too often biased in favour of the claimant, making it easy to sue over frivolous patent claims. And IP law is too often used as a substitute for innovation NOT as a way of protecting it. Apple should be trying to compete in the market place and NOT in the courtroom. And so should you be.

Josh.hackney13
Josh.hackney13

wtf is this shit you call reporting? Apple is one of the biggest theives there are when it comes to infringement, it's jus the people they steal from do not have the 12 billion dollar resources they do. The fact that they have the balls to sue samsung for a fucking design they ripped off anyways is mind boggling... justice system? we have people critiquing our courts that have no idea wtf a fucking iPhone is, and you expect them to "deliver justice" between two companies that one (samsung) made the iPhone and the other (apple) patented and exploited all others to profit from? c'mon now....

Normanw18
Normanw18

It's the patent office that needs to be addressed. Who controls the patent office, I guess the government. Then seems that 'radleym' has a good point. I encourage people not to support companies who obtain these ridiculous patents.

mckinnej
mckinnej

According to their own statements, the jury basically let one guy make the decision and that guy is a patent owner, so his motives for establishing precedence are definitely suspect. All the jury was interested in was getting out of there on time. The judge should throw it out. Hopefully it will get overturned in the appeal. Besides that I have yet to see one single person that thinks this ruling was a good thing. One would think that if the jury was a cross section society like they're supposed to be, they would have the same opinions. I smell not just fish, but a whole fish market. Our American IP laws are ruining innovation across the entire world.

ggeo99
ggeo99

In CSI, the detectives "move" photos and documents with their hands on transparent boards, "tossing" them over to another detective across the room with amazing accurancy with a signle move of their hands. I guess we saw that first on "Minority Report". Maybe Spielberg should patent this "technology" and sue that f** Jerry Bruckheimer who lives ripping off other people's ideas. Maybe Apple is already "inspired" (others steal, Jobs was "inspired")by those movies and has already patented this "technology". Maybe big-screen-artists should join the patent system.

Nitramd
Nitramd

In a recent conversation, Hal 9000 nailed it for me with, "Patenting Inventions they are actually Inventing patents". It is the US patent office who should be sued for holding itself & the Us legal system up to international ridicule ,for issuing the trivial & bleeding obvious, and anger as this can also be viewed as blatent trade protectionism, to be added to ITAR & the reguations imposed globally,outside of US juristricion upon dollar denominated transactions that dictate Wall streets cut. Policy reform of US Patenting is an urgent necessity not only to ensure free trade, but also to restore its original purpose to stimulate innovation & the economy, and not be used to forward alternative goals, that are seen todo the opposite by wasting resourcses & stifle innovation, as could be easily interpreted from what looks like a highly partisan result of the recent Apple vs Samsung trial.

n.smutz
n.smutz

It would seem Apple is stealing from the public domain by asserting rights to things like rectangles and icons on new platforms. That's not innovation; that'scalling dibs. Kindof like squatting on public land.. with a shotgun.

lastchip
lastchip

really need to get this patent nonsense sorted out. Right now, you're the laughing stock of the world, acting like frightened little children who don't want to loose their toys. For the contributors who commented on patents for rounded corners and suchlike, I whole heartedly agree. Patients should be for truly [i]unique one off[/i] invention. Rounded corners or tapping a screens in my view, does not come close. What are your idiot regulators in the patent office doing? You're damaging your reputations and being viewed as fools. If you think that's the way to continue doing business throughout the world, you're very disillusioned.

cwarner7_11
cwarner7_11

Patent law, as currently implemented, is a joke, and defeats the purpose for which it was originally intended. When the legal system ignores "prior art", when original patent reviewers are insufficiently acquainted with the technology such that they can not distinguish "the obvious", and when the patent office resolves potential conflicts by "letting the courts sort it out", innovation, especially by those without deep pockets, will be stifled, and the only ones benefiting from the system are the legal professionals and patent trolls. Based on the results of this particular case, it would appear that Apple is evolving from an innovative organization to a defensive "also ran". This hurts Apple's reputation far more than it hurts Samsung's. Rounded corners on an icon? How trivial! Is this what the new definition of "innovation" is evolving to? What is really disturbing is the obvious attack on the Open Source community- Apple borrows freely from the community, with their PC operating system being a direct clone of BSD- they want the benefits without paying the price...

rahn
rahn

When someone can patent something like rounded corners on an icon, the whole system is a joke and needs to be demolished. This crap leads to the "if you can't innovate then legislate" type of thinking.

martin.mato
martin.mato

The Samsung/Apple ruling was, in my opinion, sad. I understand that IP should be protected, but who, pray tell, is it that gets ideas from things unfamiliar? The courts should be careful that they do not make people afraid to think!

alfred
alfred

While the movement of people between companies may cause IP drift the real problem is the definition of software IP. I believe that any competent team of programmers isolated from knowledge of other people's patents in software would fall foul of several patents in any substantial program development. This would not be IP theft but due to the patenting of too many obvious solutions to program problems. In another field I was in a research lab where we saw a patent application by a rival company. Another team there said they had been using that technique for years but considered it so ordinary that they had not considered a patent.

Deadly Ernest
Deadly Ernest

case so they can sue Apple for eleven billion dollars because they can prove prior art on that design by over a decade.

radleym
radleym

...then US companies register whatever nonsense they want, then US juries award US companies for ridiculous IP violations. Neat scam to boost US manufacturers in a tough tech war.

janitorman
janitorman

all over the world. American companies should build products IN America, and sell them here. We don't need to "outsource" since we have a very large population, which is now looking for work, who could be put to work in factories, if need be. The Japanese can make THEIR own and sell in THEIR own country. The Communist Chinese can make THEIR own and sell in THEIR own country to THEIR peasants. This "global economy" crap is a joke.

maj37
maj37

That was what I was thinking the other day when I read about the verdict. Of course if we really searched back I guess we could see that all Star Trek did was electronify a clip board. I wonder who owns the patent on that?????

sarai1313
sarai1313

but the franchise is now own by C.B.S. who not only cnet and zdnet are a part of their team they also own a very large chunk of apple.so none of That( prior art) is protected and Roddenberry gets nothing for coming up with that idea

maj37
maj37

Perhaps you forgot to read the article and the part about selling a $1M product to an overseas company that reverse engineered it and put out a competing product a year later. What redefinition of IP did that company scam the other company with? I don't know what foreign country you troll for but please stop making ridiculous unfounded claims. Sure the IP and patent system in the US is messed up but so is the one in most other countries, especially China where the idea of IP doesn't really even exist.

robo_dev
robo_dev

The playing field is not so level when we spend billions on R&D only to have another country steal that IP and run with it. It's no simple coincidence that the Russian Sukhoi T-50 aircraft is a virtual clone of the Lockheed F-22. The F-22 program cost was around $50B (that's billion). A very significant part of that cost was the work of literally thousands of engineers and software people (I was part of it). In a very real sense, these people are pure creators of IP. Whether you're for or against defense spending like this, the point is that ripping off the overall design was a theft of tens of billions of dollars, plus if you get into theft of things like avionics or weapons systems designs, it's probably three times that cost. On top of that you add not only the loss of money but also the loss of military advantage. While there may be abuses of the court system for trivial made-up IP issues, the enormity of the issue cannot even be measured, much less fixed through legal action.

gscratchtr
gscratchtr

as long as THEY don't decide to call the loan...

Nitramd
Nitramd

The world distribution of resources, material, intellectual and financial, that the US needs to maintain its global influence & living standards, could not be generated domesticaly to support such an isolationist view, even if austerety measures were employed. Chief amongst resources is oil, which you are the greatest per capita userof & have fought 2 Gulf wars, compromised integrity by the support of dubious regemes, ( overlooking Saudia's human rights record (your not alone on this to our shame ). Remember that oil is essential to drive agriculture to feed the population. Add to this loss of trade to your highly profitable High tech export industries IT, Phamacuticals, chemical, Aerospace & many more (most oil dependant too!) I think the last time protectionism of that scale was tried resulted in the great depression of the 30s & took a world war to really solve, (with due respect to the New deal). This leads on to the Marshall plan that rebuilt the defeated axis nations. It can be considered as one of best investments ever made by the US, not only on humanitarian grounds, but strategically by building strong allies against Communism both in Europe & the far east. It must also be remembered that many of the seeds of WW2 were sown in the treaty of Versiailles with the severe financial retribution served on Germany,(simular to what you advocate), which stress allowed the rise of the Nazi party under Adolf Hitler. For the record, my grand father served WW1 as a Royal Marine in the trenches of the Dardinels (Turkey) & the Somme, blown up, invalided out &. left to bring up a family through the depression on a megre war pension. My parents survived WW2, the blitz, driving ambulances through it, performing intelligence duties, building aircraft & studying engineering through it all. So sorry, take note of history, (still recent to some of us), isolation will not help you, other less benign powers will take your place, and the world will be a poorer place for it.

lastchip
lastchip

That's exactly the inward looking protectionist thinking, that identifies the USA to the rest of the world. You have a huge continent with many resources, but to believe you can live in isolation, is a complete myth. Furthermore, do you really think your contemporaries would be prepared to pay $1499 for an ipad instead of $499? Dream on! Tell it to Apple or Microsoft or Boeing and get their reaction. As for me, you can keep them all, so close your borders, put up the drawbridge and lock yourselves in. We can do without all the crap that's coming out of the USA regarding your ridiculous patenting system. If that's your attitude, you deserve everything you get.

Deadly Ernest
Deadly Ernest

a rectangular shape with rounded corners and it operated by touch and slide processes - just like Apple bitched about having a patent on.

janitorman
janitorman

Oh wait that would be for espionage and you can actually get SHOT for that. HOW about suing China for everything they've stolen. How about hanging any US or European country that has basically GIVEN AWAY our technology to our enemies, the Communist Chinese, or shooting the executives of US companies that have their products made elsewhere, such as in enemy countries like China or Japan? My dad fought the Japanese in WW2 and now we're buying cars made there, due to OUR REBUILDING our enemies factories, instead of doing the proper thing and NOT ALLOWING THEM OUT OF THE STONE AGE, and selling them chevy's and fords and NOT allowing them to build Toyotas and Datsuns, since they LOST THE WAR? I say, shut the borders, shoot the lawyers, or let technology be free. What's more, to HELL with the fads, I hate touchscreens and I don't need a damn camera on my phone, thank you very much! These big companies need to be put in their proper place, and their money, STOLEN from you and I, given back to the common worker, who could then just build his OWN house and till his own land, raising his own food, and live without all this modern crap we seem to "need" that we didn't need 100 years ago!

rustys
rustys

By he xenobpobic rants in other threads I am guessing janitorman could not afford the $499 iPad.

robo_dev
robo_dev

We have the most powerful military in the world, why not simply claim some territory and be done with it? The US spent Billons in Iraq, a country brimming with oil, and we just leave and give them all the stuff we built there? Just take over, kick all the warring factions out, build a really tall wall between Iraq and it's neighbors and we're all set. Lots of free oil and some nice desert property ideal for golf courses. I mean, seriously, they could not hate us any more, and what are they going to do...start an insurgent campaign?? Same goes for Canada and Mexico. You solve the border issue not by building fences, but by claiming sovereignty. Mexico has lots of low-cost labor, oil, and some nice vacation areas. Similarly, Canada has lots of well-behaved skilled labor (cept at hockey games), lots of oil, and some really pretty land out Alberta. The US needs places to dump nuclear waste and garbage, and Canada has vast stretches of frozen uninhabitable territory....it's not like some bears are going to complain if a couple of new landfills spring up.