Vendors still talk as if engineering innovation were the king of tech, but they are in the process of conferring that title on the lawyers. Microsoft, Apple and Google are among the tech companies that are increasingly seeking competitive advantage not from
their research labs and design suites, but from lawyers and the courts. Billions of dollars and vast markets are at stake.
Google is a good place to start to understand the shift. In May, Google bought Motorola Mobility for $12.5 billion, which seemed to be a very high price for a company that had been surpassed by competitors -- notably Samsung and HTC -- in the cutthroat mobile business.
Many people believed that Google was mostly interested in Motorola's cache of 17,000 patents, not its hardware or engineers. In a mobile landscape increasingly dominated by tit-for-tat lawsuits, those patents are an important means of self-defense.
In mid-August, Google lent credence to that view by announcing plans to lay off 20% of Motorola's workforce. On the same day it made that announcement, Google made a filing with the Securities and Exchange Commission that noted that Motorola had lost money in 14 of the previous 16 quarters. A company in such bad financial shape must have something other than its primary business to make it worth $12.5 billion. Those thousands of patents certainly seem to be the attraction.
So is that it? Does Google just want Motorola's patents? Following the layoff announcement, Jeff Kagan, an independent analyst, told Computerworld, "Everyone at Motorola is asking and fearing the answer."
Google can't really be blamed for this. Both it and its partners have been sued by Apple and Microsoft, which claim that Android violates several of their patents. The tactic has worked for Microsoft, which launched a massive legal broadside against makers of Android devices, claiming that they infringed on Microsoft patents. Most of those device makers have decided to pay Microsoft licensing fees rather than fight. You might wonder why vendors find these patent lawsuits worthwhile. The answer: easy money. Analyst firm Trefis claims that just two companies, Samsung and HTC, paid Microsoft $792 million in royalties in a single quarter. Microsoft lawyers Brad Smith and Horacio Gutierrez wrote in a blog back in October that Microsoft had patent deals in place that bring in royalties for more than half of all Android smartphones sold in the U.S. And while that revenue stream is nothing to sneeze at, an even bigger advantage for Microsoft might be that the royalties will drive up the prices of Android phones, making Windows Phone devices more price-competitive.
Meanwhile, Apple and Samsung were in the midst of a patent suit when this went to press. Apple had charged that Samsung Galaxy devices infringe on various Apple mobile patents. Big money was at stake: An accountant testifying for Apple claimed that Apple should be due at least $2.5 billion in damages, based on Apple's claim that 22.7 million smartphones and tablets violated its patents.
These are just a few of the most visible lawsuits. There are countless others, spanning the globe.
I can't say that I know which of these lawsuits have legal or moral validity. But that's not really the point. The point is that, in the tech world today, it might be more important to have good lawyers than it is to have good engineers.
Preston Gralla is a Computerworld.com contributing editor and the author of more than 35 books, including How the Internet Works (Que, 2006).
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