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.


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...

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