Apple v Samsung: iJury

As most of you are aware Apple crushed Samsung in it's suit. Every patent of Apple's was upheld and Samsung owes Apple just a touch over $1Billion. This is going to do a great deal to chill innovation. Many other people are commenting that these patents and the idea of copying isn't new and that Apple has stolen a great deal themselves. In one discussion with an author at the Urban Times, he seemed to argue that the theft of these ideas is more honest than copying and that Apple was a better company for doing so. Well, there's a major flaw in that idea, the theft of an idea is essentially copying the idea, the only difference is you act as if it was always yours and that you didn't copy someone else.

One author thinks that one billion is a small price to pay to be the second largest mobile manufacturer in the world. While I understand the thinking behind this, sure they copied a great deal from Apple and it only cost them a portion of what it could have cost. However, this is a short sighted view. The manner in which Apple has attacked Samsung isn't going to stop and will likely intensify. The ruling in San Jose wasn't the only ruling that came in yesterday. In Korea a judge ruled that both companies were infringing each other and banned both products from being imported to the country. The judge also found that Samsung didn't copy and in the UK a judge also said that Samsung didn't copy and wasn't cool enough to be confused with an i Anything - ordering them to post it on their website.

The idea that Apple's design for the phone's desktop being unique is a bit absurd. They simply changed the way the buttons looked, but there had been interfaces that were extremely similar for years. I had a Sony Cliq PDA in 2001 and 2002 and some of the way that product looked was similar to the iPhone. Apple repackaged things extremely well. Judge Koh did not allow Samsung to present all the information to the jury related to prior art, which certainly didn't help Samsung's case (Samsung released it to the public though).

The other major issue with this case is the idea that laypeople can really understand the issues with patents. They are difficult to understand, written in legalese and intended to be so broad that they can be interpreted in many different ways. I've read through several patents and they quite frankly are confusing and in many cases don't convey the information they are required to convey (how to manufacture or build whatever is patented).

For a patent to be valid it only has three conditions to meet: Novel, which means that nothing like it has been done before; Non-Obvious, which means that (originally) that an expert in the field wouldn't see this as a natural extension of previous work; now it must be non-obvious to a layperson; the final one is the possibility of industrial application, this means that the technology must be useful in some way. Many of Apple's patents do not meet the threshold for the first two, novel or non-obvious. Now of course people that disagree will argue that in hindsight these patents are obvious because Apple did such a god job at inventing them. I disagree primarily because many of the patents are reapplication of ideas from the computer to the smart phone.

I'm extremely worried about the future of innovation in light of this ruling. I think that there will be serious repercussions and whatever comes out of this will be terrible for consumers.

Finally check out this video discussing what Apple has invented:

The Philosopher CEO

In my group at work, we have been accused of having a group of philosophers and a group of doers. This is typically mentioned with some serious disgust. As if having a group of people thinking about how the business is run is a bad thing. I think part of it stems from the idea that this means that they aren't doing anything productive or value added for the company. The perception is incorrect of course. The "philosophers" are actually a process improvement methodology team that provides course development, course training, mentoring for Lean Six Sigma certification, continual guidance for projects in flight and manages projects themselves. There are only two of them. That's a tall order to be honest.

But the idea of a philosophy group really got me thinking. Would it be a bad thing to have a group that looks at the ethical, moral or sustainable behavior of the company? I lump sustainability in with the morality and ethical question, because in a lot of ways sustainability is not looking to be a social issue and is another way of looking at the ethics of recycling and energy usage. I've talked about morality and MBA's specifically in my last post. Singling out the MBA crowd might not have been the fair as there is no reason why engineers couldn't behave in unethical ways, there's no requirement for engineers to take ethics courses.

Why does this matter? Well, we've seen a huge number of seemingly unethical choices coming out of companies. In some cases they may have been selected in a harmless way. For example the new MacBook Pros have a glued on battery, the choice may have been made to reduce the amount of time it takes to secure the battery. Putting a fast acting glue on the battery may have accomplished this, while screwing in the battery would take more time. This selection could have been made without the consideration of the repairability or replacability for components within the laptop. However, since this is Apple I'm talking about here, I find this unlikely. The next question would be, was this choice unethical? From a sustainability perspective it could be construed in that manner, which iFixit does do just that. The computer also lost its environmental certification by using the glue and some of the other design characteristics. This design also continues with Apple's decisions to make it more difficult to upgrade or do anything with their product once you've bought. This increases the number of times you have to purchase their products and exasperates the throwaway culture of many other products.

Consumers are also starting to become more aware of the unethical behavior of companies. We've seen this with the recent banking scandals, we've seen this with the investigation into Foxconn and we're likely to see it moving forward in other sectors. We're starting to hear about more unethical behavior in the ag industries, in regard to their treatment of animals or in the case of Monsanto basically suing farmers when seeds of their crops land in their field. The increase in consumer awareness through the increased usage of social media and other social networking tools is going to significantly increase both information and disinformation about these topics.

It is likely that there will be an increase in the number of watch dog organizations in existence and more reliance on government agencies, like the Consumer Protection agency in the US now. The banks have argued for a long time that these regulations are unnecessary as they can regulate themselves. We do know that profit pressures can prevent ethical behavior and encourage unethical behavior. Perhaps it's time that every organization has an Internal Affairs organization similar to what the police have. I do not believe that these organizations are perfect and can become corrupt (or have the appearance of being corrupt), but I think that they can be useful.

Penn State is going to have to set up an organization like this. I think for the University this was going to be required for them to even have a chance at ever regaining their credibility. The records for that group need to be wide open for everyone to view. I think this type of office needs to be in any publicly traded company. It will ensure greater transparency, allow watch dog groups and consumers to choose the actual ethical companies and these groups would be auditable. This could be a certification process similar to ISO9001 (a manufacturing document control quality system), where the members of the team are given ethics training in a wide range of topics including morality and then are expected to train the employees of the company, CEO included.

By creating organizations such as this, companies can greatly clarify how their behavior is ethical and moral. Once several large companies create agencies like this other companies will be shamed into doing it as well. Thus increasing the number of Philosopher CEOs out there.

Cash reserves, risks and innovation

In my last post I discussed the large cash reserves that companies have been holding since the 2007 recession. As I mentioned there are several reasons for this, some of it has to do with lack of R&D investment. R&D is an expensive investment. This requires both train scientists and equipment to conduct the research. In addition there are extra requirements for technicians and other employees to support the R&D effort. This isn't cheap. As we can see in the bottom half of the chart all types of research funding has decreased recently.

R&D is not a certain thing by any stretch of the imagination. This is why companies are paring with universities to share the burden of R&D. Universities are doing much of the basic and applied research, while industry is developing it into product. This is where the money is and the greatest amount of certainty. You can't really blame companies for this, but they need to work to develop their own technologies regardless of the work being performed at universities. To compensate many companies do engage in corporate venturing. This is where they fund a start up to conduct research and get a product to a certain position and possibly buy that company after a certain maturity point, set up an exclusive license or license the technology once it's mature. This reduces the large company's risk exposure.


The final piece that has increased since the late 80's has been the amount of litigation due to patent infringement. In 2011 the amount of money spent on patent litigation was $29 Billion. That is a lot of money. That's a quarter of the money that Apple has in it's reserves. We also know that Apple is one of the largest spenders on litigation. I know there are a lot of Apple lovers out there, but they could have invested that money into more products and reduced their risk of a flop with the next iPhone. We all know that iOS6 was a major disappointment for many people, spreading their revenue stream into more sources with some cool research could mitigate any fall out from that or if iOS7 is more of the same. 


Litigation is such an outsized risk because it can lead to your entire firm being shut down by a non-producing entity. This reduces the incentives for innovation and increases the incentives for hoarding cash.

Social network patent war?

Today the first salvo has been launched in what will likely be a brutal and bloody patent war in the social networking world. Yahoo! has decided to go after Facebook with several patents which were bought from Friendster a now long defunct social networking site. As I've mentioned in previous posts companies that start suing over patents likely have lost their competitive edge. However, I think this is going to have long reaching impacts.

Facebook will likely try to find something they can use to counter-sue Yahoo! Which I believe will open a huge can of worms. A large number of companies have put forth effort into creating social networks and there are companies that are built on top of those networks. Essentially, this is an entire ecosystems of companies and products that interconnect and work together. Until now, it has been rather peaceful except for a few angry words tossed back and forth.

I'm not really aware of what patents are out there for these types of sites, however, it is likely that all the major companies are going to be scrambling for patents. Some of the companies involved have already been in patents wars, Google for example. I don't think Google is going to sit by and allow other companies to attack them the way that Apple has gone after Android. This would be an extremely foolish business move so, I think it makes sense for Google to actively defend (attack) competing firms by acquiring patents and aggressively targeting firms that may be infringing.

Apple has also tried to get into the social networking side of things with their Ping network. Based on their previous patenting strategies, it seems likely that they have built their own war chest of patents and we know how Apple likes to use them.

Yes, much of this is simply speculation. However, as the entire ecosystem of social media and networks have developed into a huge new area of business and marketing, we need to be aware of how these could impact us. Systems that allow access to multiple different social media accounts could be shut down using patents to enforce the use of each platform. I use tweetdeck and I know other people that use Hootsuite they essentially work in the same way (results may vary), but could a patent derail their use? I don't know at this point, but i'm not happy about the prospect. I've mentioned before my distrust of Facebook, which is why I use tweet deck and sign in using Incognito. An all-out patent war could seriously disrupt this growing environment and reshape the way we use these networks.

Router = Computer

According to the online magazine Techeye.net an ADSL modem/router is considered by a German court. The dispute is over if a user is allowed to install software that changes the ADSL modem's firewall settings. It was actually a battle between two companies, the company that makes the router and the company making software for the router. I think that this ruling has some extremely interesting implications.

First, by defining a router as a computer it opens the door for a HUGE number of devices to be defined as a computer. Most of us wouldn't think of a router as a computer. It's a switch, it has a very specific purpose of deciding which packet gets through to the network at a given time and to prevent congestion on the network. In this case, it has the additional function of pulling out the high speed data from the phone line as well. It does have a user interface, but it's typically restricted to a web browser. This is hardly something the average user would consider a computer. Which tells me something about the judge in the case - he understands technology and computing. The US and rest of Europe could use more judges like this.

Second, since a broad range of devices are now considered devices, at least in Germany, it could force companies to open up their hardware to user software manipulation. I see a few areas where I think this will cause major companies problems.

The first would be video game consoles. If a router is considered a computer there is no way that a company could argue that a video game console is not a computer. Consider the following, you are able to install software video games onto the console, you actually interact with an operating system, you are able to browse the internet and of course play games on the console. These are all things you are able to do on your PC. There are more restrictions on the console than the PC of course. Now, let's say a third party company wants to come along and create something that will allow you to increase the functionality of the software or the machine in someway. In Germany, the user should have the right to do that.

The second would be cell phones. It's pretty obvious that cellphones are computers and this ruling would just cement that. I think this will cause more problems for iOS than for Android. For two reasons, first Android already allows third party app stores onto the devices which increases the control of the end user over the computer. Second, Apple controls what software can be allowed into the app store thus controlling what a user is able to install on their computer. The German ruling basically says that a company cannot stop a user from installing software onto their computer if they want to install it. Apple and the App store are directly controlling what a user can and cannot install onto their device. I would not be surprised if this type of control is challenged in the German courts.

One other implications could be that as you own the computer user may be able to stop companies from remotely installing software onto their computer they don't want on there. For instance, in the US it's not uncommon for Verizon Wireless to push software out to specific devices without notifying you. You are giving implicit consent by using their networks. However, if the same thing happened to my PC from Comcast there would be a law suit. Since phones are in a weird quasi state of rights in the US there isn't the same sort of feelings. However, I believe as the gap between PC and phones close and the desire to control what goes on the phone and what doesn't increases there will be lawsuits over installing and deleting software from your computer.

Enabling Technological Convergences

In my last post I discussed technological convergences. I didn't really discuss anything ground breaking or earth shattering. We all know these things happen. Even if we never really make a note of it. What's a more interesting question though is why do some companies, like Apple and Blackberry, succeed and others like Microsoft and Rio (early MP3 maker) fail, either in creating technologies that converge or create technologies that then fail.

One of the first reasons is the culture of the company. To create a totally different product that will shake the core business firms may have to do something called "corporate venturing." This is where a company decides they are going to take people that normally work on the major product and put them into a different area and seclude them and allow them to create a new product. Whatever sort of leadership structure develops, develops. It really doesn't matter if this matches the rest of the firm. Essentially, these people are put into a position where they are starting a new company. Apple famously did this with the original Macintosh program. It was called a skunk works area. Of course recombining the two portions of a company creates huge problems, but good management can figure out how to deal with this.

Another piece required for a firm to successfully move into a new product space is the ability to identify the market need. This one is pretty obvious, but it still needs mentioning. In many cases it's really obvious that there's a product space and that some one should fill it. When companies don't move into it there must be some sort of reason.

One of those reasons comes down to firm capabilities. Every firm has something at its core that it's best at. I would argue that Microsoft is best at taking advantage of a virtual monopoly of a platform and moving into new directions within that platform. Internet Explorer and the Office Suite are the best example of this. Microsoft has also tried to do this with servers and other peripheries. Which is why Microsoft has had difficulty moving into other platform positions. They have failed (or mixed results at best) over and over again with phone OSes because it doesn't rely on their dominate platform.

Another company that is an R&D powerhouse in energy but has failed at anything outside of their major focus is Shell. As a major energy company you'd expect Shell to be moving into other types of energy production to make massive amounts of money in the transition from fossil fuels to renewables. You'd actually be right. They have tired and failed. Aside from having a failed solar industry Shell has a moderately successful Wind program. Between the two it actually makes sense why solar failed and wind is doing well.

First, wind is closer to extracting material from the ground than making energy from the sun is. Now hang on, I know, but Shell has to maintain offshore oil rigs in tough conditions. Understanding how to build a wind farm out in the ocean has some similarities. Shell doesn't actually make the windmills themselves, they buy the windmills and put them together to harvest energy. Shell was trying to make solar panels. Intel would be a significantly better solar panel producer than Shell. Why? Because solar panels are semiconductors. You make them with similar machines the technologies are adjacent to each other.

What's technological adjacency? It's whenever you are able to use your current skills and apply them with some research to a related technological field. I'll discuss this more in my next blog.

Technological Convergences

Convergences happen in all different ways. They happen in books or book series, where a good author can plan to have plotlines converge in a specific time and place. In the case of the series I just finished, the Malazan Book of the Fallen, the author was able to get two totally unrelated characters meet in really unexpected ways. It happens in films too, Crash and 21 Grams are two great examples of this. This happens in technology as well. Most of the time, we as consumers never even see it happening. When we look back though we realize it was incredibly obvious that it would happen. Two great examples of this happened with cell phones.

MP3 players have been wildly popular since they came out in the late 90's. Napster and easy to rip CD's made them incredibly useful and provided hours of great listening. Around the same time cell phones were becoming smaller and more popular. No unexpectedly, phone manufacturers decided that it would be useful to put a music player onto the phone. These were clunky and really only used when people didn't have a better MP3 player. Apple had created a great MP3 player and realized, like the phone manufacturers that users only wanted to carry one of these devices. This is one of the reasons that drove them to make the iPhone. Great interface and good music experience. At this point they already had the music infrastructure and the loyal fan base to be sure of a high number of sales.

Around the same time as the MP3 boom businessmen were starting to use Portable Digital Assistants (PDA). This was a replacement to the calendar and phone book. It also provided a few applications that allowed some work on documents. It could also be used to schedule emails when the PDA was synced with the computer. It was obvious that this would be a great device to connect to some sort of network aside from plugging it in. Blackberry used to make two way pagers and figured out a way to send emails and other useful data over the pager network. This was one of the earliest smart phones. Eventually Microsoft and Palm got into the phone manufacturing game for the same reason. People didn't want to carry two device a PDA and a phone. If you put them both together you'd have a better product and would sell more.

These two technologies converged on a similar product, smart phones. Both types of phones had a very different set of users initially. However, since the iPhone there has been a further convergence of these phones into general purpose phones. Blackberry, while still catering to the business side, is shifting to compete directly with the iPhone because business users want the apps that the iPhone has. Palm has vanished from the market being unable to compete and Android has appeared as the first PC based OS. Android is a distribution of Linux, it doesn't run well on PCs but MS and Apple are moving in a direction of merging mobile OSes and PC OSes (sure it's a Mac, but it uses Intel so there's no different besides the OS).

If we look back at these convergences, aside from new competitors and firm failure, they appear to be pretty obvious. Why wouldn't these companies move into these market spaces? I'll discuss some of that in my next blog.

Remembering Steve Jobs

This post will piss a lot of Apple Fans off. I'm going to say that now.

Steve Jobs was a great designer. He built a company up twice based on maximizing control over the hardware, design and the software. He was able to do this an incredibly well. He was able to use this skill to dominate the early computer industry. However, under more competition Apple faltered as it relied heavily on a single creative driver. The designs that Apple created were radical design, these designs in a way constituted a type of radical innovation. The components within the computers themselves weren't radically improved over the competitors, the design was what made it special.

This is the same for the iPod. By the time the iPod came out there were already many MP3 players and many of them were doing very well. What Apple was able to do was make it simpler to move music onto the device and interface with the device itself. This is the radical portion of the iPod. I feel that this is exactly what happened with the iPhone as well. They created a radical design for the interface, but in many cases didn't even have legacy features.

Apple does a great job in marketing what any other phone maker would have expected as a normal feature. Even some of the biggest changes, like the fantastic screen it's an incremental innovation. As a consumer I fully expected some of the newest phones to have amazing screens.

One of the things Jobs did best was to get people to buy the newest version of Apple's phones. The iPad was also a very similar type of innovation. It's a gigantic iPhone. However, the reason it worked so well was the fact that iOS was able to scale up and work well on it. In the end I feel that Jobs was able to use cases of Radical Design innovation with incremental technological innovation a loyal consumer base to turn products into massive success.

However, Jobs has also turned Apple into one of the largest patent trolls in the world. With the level of control that Jobs had over Apple, it seems unlikely that he would not have initiated the litigation. Jobs did remember how they lost the PC war in the 80's and 90's. I think that Jobs is attempting to use patent law to control the market. There were no software patents during the initial PC battle, however there are software patents now and Apple has been patenting a great deal in order to control how devices are marketed and developed.

Finally, I think that Jobs was what Jim Collins called a level 4 leader. Similar to Lee Iacocca (of Chrysler), Jobs was able to control Apple through sheer personality and create a great company. However, he doesn't like dissent and would probably pull a George Lucas and change the original Star Wars trilogy.

Jobs did have a vision of what devices should look like and how they should work. He was excellent at creating great designs. He will be remembered for saving a trouble company, bringing design back into mobile devices and forcing a huge number of companies to compete in the mobile market space.

Technological Layers and Layer Ownership

This ars technica article outlines in extraordinary detail what is at risk in the smart phone wars. It discusses the various different layers involved with the smart phone industry. These layers are extremely important. Control of a layer allows you to move into another layer and can help you extract monopoly rents* from those layers as well. My friend Sean was complaining about bloatware** earlier today that comes a computer supplier. They are actually attempting to get into a different layer. If a PC company is able to provide support which can allow them to get money from a customer on a returning basis, monthly or yearly, they can help ensure return purchases on more expensive purchases as well as getting a lot more money out of first sale. Additionally, the manufacturer may also be using the bloat ware they install to subsidize the cost of the product you bought. If a third party asks to have software pre-installed the manufacturer could ask for money to put it on, which may be passed to you as a consumer, so you could get a computer at a slightly lower price.

Ars Technica, isn't the only group of people that views this phenomenon as a stack with different layers in it. This is actually an economic model as well. Which was used in the original Microsoft EU case explaining how these different layers can be leveraged to foreclose on a new market.

Another way of looking at this is in a traditional manufacturing sense. When you are making a car you have many different suppliers. You have paint, tires, batteries, steel, etc... There are several different ways to make it cheaper for you to produce a car. You can become vertically integrated, with a very high production level, where you make the steel, tires, paint and the full car. If you were extremely good at producing steel you would be able to get the steel at cost whereas traditionally you would have to pay a higher cost so the producer could earn a profit.

We can see this same sort of thing happen within IT. There is serious concern with corruption of content and content providers, like Comcast, purchasing a wide range of companies. If they control the material and access to the material they could control what people can access and impact society in a serious manner.

I don't think that Comcast is going to be able to significantly impact the smart phone layers as they have with TV. However, a company like Google or Apple definitely could. Google is actually attempting to get into every single layer in this market. They tried to purchase wireless spectrum (they are also installing a super fast network in Kansas City), they are going to purchase Motorola, they have an OS and they are an app provider.

I think that other technology companies are aware of this. This is part of the reason why Google is being attacked on all sides. While until Google gets a hold of Motorola, they will be mostly in the top most two layers, OS and Applications. Google is clearly trying to move into every layer possible. This will allow them to have the greatest likelihood of a customer going onto a website and click an ad to give them money.

To prevent this, almost everyone is suing Google or some aspect of their technologies. Google is trying to get around this. They want the control.

I'm going to be gone for a little while. My brother is coming into town and I'll be in Amsterdam for the next few days and then Munich this weekend. Hopefully I'll have a post up Thursday or early next week.

Further Reading: The New ICT Ecosystem by Martin Fransman


*monopoly rents means higher prices from controlling the market. It allows a manufacturer to sell a product for a higher price than they would be able to do under a competitive market. Microsoft is able to do this with Windows. However to protect themselves from other OS providers undercutting their prices, MS sells the same OS at lower price points. They give discounts to students and charge a lower price in poor countries. This allows them to increase their monopoly to new markets.

**excess software which slows down a computer or smart phone.

Antitrust and Cell Phones

In my last three posts (one, two and three) I have been discussing the risks of antitrust for Google. With Android Google controls what applications are installed as the base as well as the search function. In South Korea apparently this is a big deal. Which took me the points of IE and WMP in my last post. Most people use the default programs on their computer or phones unless they have some external reasoning to use a different product. In the case of iTunes and WMP it was the iPod which drove the usage away from the default. However for many people that don't have an iPod there isn't much point is using anything else. Especially if you only play CDs on your computer or you have a very small MP3 collection.

There are, of course, other factors which may drive users to other products, such as seeking the ability to play lossless files instead of MP3s. On computers, in my opinion, it is much easier to take control over the device and install other applications or systems to replace the default. You just need to know how to find the program you want and install it. With phones this is much more difficult. I think that the Google Search functionality is going to be the first of many of these investigations.

For other applications that serve the same function as the search, it may be difficult to acquire a different app. At the app store for whatever phone you're using, there's a gate keeper (is there a confused keymaster too?). In the case of Apple they reject applications that duplicate a program which comes preinstalled on the phone. I'm fully expecting that these rejections will eventually become the target of some antitrust investigation. Google is better than Apple in this regard, however there is control over what goes into the app store. Interesting note there are at least 4 Bing search apps in the Android market place.

Google does allow third party app stores on Android. I think that this is a really smart move. This will actually prevent some future antitrust investigation that I think Apple will have to face. There will be a market of app market places that cater to different kinds of needs or may be phone company specific. For instance Samsung has their own app store on my Galaxy S. I would not be surprised if Steam, EA and other digital content providers are already planning on creating app stores for the phones. While some of the major game developers aren't creating games for phones yet, I believe that will change in the future. With Windows 8 going to be used for PCs, Tablets, and phones why wouldn't larger game developers created stripped down versions of their games to be played on phones?

However, I've wandered a bit from my initial point. While phones are different than computers in some pretty significant ways, they are small computers. They are more powerful than the computers I grew up with. Google will need to be aware of this and will need to evolve how it deals with the android system. The controls put on users in phones will eventually be forced out of existence by law suits and users demanding more freedom over their phones. Eventually, phones will require as much freedom as a PC, especially as we start to bridge between the two platforms.

Google's Anti-Trust problems III

In my last two posts (one and two), I've been discussing the current problems as well as potential problems that will be facing Google in the antitrust arena. Yesterday I mentioned I was going to discuss Windows Media Player (WMP) and how this pertains to Google. However, I realized I need to go one step back first. First, we need to look at what happened with Netscape and Internet Explorer (IE). Initially Netscape was THE internet browser. It was the browser to program websites to be displayed on, IE wasn't even really on the radar. Also, at this time with the web, these programs were being sent out by CD, it would take an extremely long time to down load this application. Why? because it was over a telephone line. A modem that was getting about a tenth or less of the download speed you have now with whatever your broadband connection is. That and your mom would probably pick up the phone to call some one while you were trying to download the software, or while playing War Craft 2 against a friend.

Since the medium of delivery for the browser was over CD it was a level playing field for both browsers to compete. You'd get one in the mail for whatever browser, Netscape, IE, AOL, etc. However, Microsoft realized the importance of this market. They figured out a way to leverage their desktop monopoly to foreclose on the browser market. They started installing IE onto all of their operating systems. Then went as far to integrate everything together to ensure market dominance. It worked because of slow connections and the fact that people are lazy. If something already works they will use it.

Flash forward about 5 years. MP3s have gotten popular through Napster and other digital Peer 2 Peer file transfer systems and the next big market is music players. Winamp was a major player at this time and WMP was not really any sort of competition for it either. In Windows XP WMP got a major over haul and was at least able to compete with Winamp. Microsoft decided to bundle the software in the same manner they had done with IE.

This is where the story changes though. The EU filed suite against this claiming this was anticompetitive. At this time the iPod had just come out and there was no reason to expect the product to come to the PC. It seemed like it was a long way from happening. Plus, even if the iPod was going to PC it was still going to be a niche market. So, the law suit. We all know now that because of the pace of technology and the fact that there were other factors involved with the selection of the music player it prevented market dominance of Microsoft. Without the requirement for iTunes with the iPod who knows what player would have won the market.

How does this relate to Google though? Well, looking at the search engine suit from Korea I mentioned yesterday, I think this has some pretty significant implications. Using a platform to control the method in which you use other functions can be shown to be anticompetitive. Google search engine is the first for mobile phones, however, I see no reason why it will be the last.

More on this topic in my next blog.

Disruptive technologies and long term impacts

So what is  disruptive technology first of all? It's any technology to causes a shift from a position of knowledge to a position of ignorance within the knowledge production community. That's not exactly clear. No it isn't. It's difficult to define disruptive technologies in a manner like this. However, we all have used disruptive technologies. In the music industry there have been a large number of disruptive technologies. One is as simple as sheet music. Another is the Gramophone and vinyl records (and later turntables and receivers), then 8 tracks, cassettes, CDs, and then finally MP3s. Each of these technologies impacted society in a greatly unpredictable manner. The gramophone and records gave greater access to an amazing array of music to a wider audience. It created an entirely new market, new technologies were created to improve sound quality and increase the production rates. When the 8 track was introduced it had an impact both the home audio and car audio. It gave people access to their own music while driving. You couldn't do that with records. Most of the knowledge that was generated with records and record players was nontransferable to 8 tracks.

What does this mean? Well it means that through disruptive innovations/technologies, we are able to create dynamism within our economy. A disruptive technology can allow for new firms to break an incumbent's grip on a market. For instance, in consoles video games there are disruptive technologies every 5 years or so when each of the big players release a new video game system. Over the 30 some odd years of video games and console systems we've seen a wide range of entrants and exits. NEO GEO, Atari, Sony, Nintendo, Sega, Microsoft are some examples. Microsoft was able to take advantage of a period of disruptive technology introduction during a generation change in the technologies. This allowed Microsoft to come in at nearly a level playing field. While there was a lot of skepticism within the consumer market and within the technology industry, they were able to take advantage of their technology and get enough game producers to sign on to make games for them.

For consumers disruptive technologies lead to a chance to make a break with a previous technology producer. For instance, when new versions of Apple OS X and Windows Vista were released around the same time a consumer has a much easier time switching to a new OS when buying a new computer. If Windows Vista hadn't come out around the time of a purchase then it would be very easy to stay with the previous Windows OS. There's not nearly as much learning required when switching to a new computer with the same OS. However, if you have to learn a new OS, you are free to learn either OS as there are likely similar levels of learning required to actually use that OS.

In my next post I'll discuss how these can disruptive technologies can impact firms in other ways.

Software Patents are the new Copyright

In one of my previous posts I commented that I was seeing a convergence withing copyright activities. I believe that something just as horrible is starting to happen within the software patent world. I think that it will threaten the free software movement as well. We've had patent trolls around for a long time now. Almost since the first patent was created, however, this didn't interact with our daily lives. It was similar to the way that copyright didn't affect you and me on a daily basis. Sure, changes in prices or the removal of a product could affect us, but typically we were able to find a replacement or dealt with the price change. However, I think that this new type of patent troll is more dangerous. Yesterday I saw a post on Ars Technica discussing how Lodsys is going after Apple app developers. Apple isn't happy about this at all, because it threatens to ruin the base they have developed.

I think there are some other problems with this as well. Historically, if a company, that produces software, was looking to go for an IPO or bought by another company there's a thing called due dilligence, where the products are checked for stolen code. This is a big deal, because if I stole the code from Linux or some other open source software, my entire project falls under the GPL, and forces my source code to become open as well. This can create massive headaches for companies.

There is a key difference between what used to happen in the past and what is happening now. Before it was the method of making something happened that mattered. For example if I took a really fast way to sort something from open source how it was sorted was what mattered, not that it sorted. Why does this matter? Well the code is also technically copyrighted and owned by the writer. Now the outcome matters as well. What if some one had a patent on sorting. I've mentioned how crazy this would have been in the past and how this would impact innovation.

Let's say some one decided to put in for a patent on shooting animals at some sort of target through a controlled interface. Once the animal hit the target the animal interacted with the target which changed the user interface to indicate that the change had occurred. I have two games on my phone right now, Angry Birds and Monkey Blaster that would both be impacted by this patent. Both of them have very different goals and methods for shooting an animal at a target and different results once it hits the target. Indeed, the definition of target is different between these two games. However, neither of these developers are going to be looking for patents when they have an idea about what's the next game they want to make.

The patent that is mentioned in the Ars article is absurd. It should never have been approved. There's nothing novel in the development of the in app purchase. That is something that should be obvious from any one in the computer industry. You could easily see the relationship between a website and an application. In fact, I'm sure that there have been cases of this in the past. Another question that remains to be seen is this going to impact services like Steam? The article notes that Lodsys has already gone after EA.

This change in behavior towards apps and software patents is a very bad change. We need to work to address these types of problems. Returning to the requirement of producing a product to have on the market within a certain number of years could help address these problems. However for software this will likely just lead to a crappy product put on the market that no one buys and no one knows about.

Innovation and Software Patents

Whenever a new type of product is released there are a lot of difficulties with intellectual property. This is being played out in biotechnology and software. As recently as last year it was possible to patent human genes in the US. See this link for the recent verdict against it. The ACLU also had a write up from 2009 when this case was still ongoing about the history of genetic patenting. Software is another case of this. Many people argue that since software is an algorithm or series of statements that leads to a result it should not be patentable. This makes sense as mathematical proofs are unable to be patented. The argument is that for proofs these are discoveries and more natural processes than creating technology.

In the EU it is not possible to obtain a software patent at all. They claim that with software there are multiple different methods to obtain the same output. Software patenting is a very recent trend. The most famous example is the Amazon.com one-click to buy button. Which, if you don't know what it is, basically allows you to store an address and a credit card and automatically buy whatever product you're looking at. Fairly simple right? Well there was a lawsuit against a major competitor, Barnes and Noble about this in '99. Some how this patent managed to survive the re-review, even though it's a fairly obvious idea and could be implemented in about a billion different ways. On the billions, I'm not even exaggerating. There would be so many different interactions that could make the actual implementation totally different. These range from database types, information request, how the data is actually stored in the data base. There could be nothing similar between the implementation at all, yet Amazon ones all the methods to do this. In terms of patents this is effectively an amazing patent.

Let's put this more simply. If software patents had been allowable in the 70's when software first started to take off we would be living in a different world. BIOS have been owned by IBM until 1990 or so, which would have made manufacturing computers a two horse race between Apple and IBM. Microsoft or Apple could have patented the Operating system, and then the graphic user interface. IT innovation would have been non-existent. Think of this, some one could have patented data sorting. There are a many different ways to sort data in the CS world and all of them would have been covered by a single patent. Then some one could have decided to patented sorting on a multi-core computer (by then sorting as a patent would have expired).

Software is more like a mathematical proof than it's like inventing the computer.

Innovation in the software world has been amazing because it has been something of a free for all. However, there are drawbacks to this lack of IP protection. In the most recent version of iOS, iOS5, Apple has been accused of lifting many of it's new "innovations" from apps that have been rejected from the app store, or that have been selling in the jailbroke iPhone app store. Here's the link for the article. How do we deal with cases like this, either Goliath stealing from David or David stealing from Goliath? There needs to be some sort of protection.

Potentially copyright should cover this, or a registered design. Perhaps in the case of the app stores a non-compete agreement should be signed if the app is rejected by Apple. Meaning Apple won't steal it. However, there is no easy solution. Software design thefts are going to be very difficult to manage and deal with.