Does The iPhone Need Patents?

from the questions,-questions dept

A bunch of folks have noted that Steve Jobs seemed mighty excited about the 200 or so patents Apple has filed around some of the technology involved in the iPhone (or whatever it's going to be called). A few have asked my opinion on the patents -- but not knowing what the patents are on, it's tough to have that much of an opinion on them specifically. However, Tim Lee points us to a blog post from someone who claims that the iPhone shows why patents are necessary, since "The investment necessary to develop a radically new interface like Multi-touch requires that Apple have a way to protect that investment. If Nokia, Sony, and Motorola could all simply copy it in their new phones, why would Apple even bother?" A few others have suggested the same sort of thing, but those two statements together actually seem to contradict each other. If it was so expensive to develop the multi-touch technology (which isn't new at all and similar technology has been demonstrated publicly in the past), then how would those other companies be able to just copy it? If it's so easy to copy, then it shouldn't have cost that much to develop.

Either way, Tim's response at the Tech Liberation Front is well worth reading, as he points out how silly that argument really is, noting that if the technology works as well as the demo, then Apple is going to make a ton of money with or without patents -- because people will buy the phone. In other words, the market is what gives Apple the incentives to develop these technologies, not patents. As Tim says: "Blafkin seems to believe that Nokia, Sony, and Motorola have a magical technology copying machine that can instantaneously duplicate Apple's innovations. But cloning a breakthrough new user interface is actually quite difficult. Just ask Microsoft, which spent six years trying to clone the Macintosh interface in the late 1980s.... Even if Nokia does a lot better than Microsoft and manages to clone the iPhone interface in, say, 2 years, that still means that they'll be perpetually 2 years behind. Why would consumers buy a knockoff of the 2007 iPhone from Nokia when they can buy the 2009 version from Apple?" That last point is key. The way to compete isn't by catching up and "copying" someone else, but to continuously innovate. Then, even if someone else catches up, you're still ahead -- and, if anyone can keep on coming up with new innovations, it appears to be Apple. So, even without patent protection, Apple would make more than enough money to recoup their development costs. But, the downside is that Apple doesn't need to keep up the same pace of innovation now. Others won't be able to compete and push Apple to innovate as fast because Apple can block them with patents. At the same time, those who don't want to live by Apple's rules (Cingular-only, 2 year contracts, no 3G, no ability to develop additional apps, no VoIP, etc.) but want a phone with a similar design will be out of luck. That's bad for innovation and bad for the economy.

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  1. identicon
    Anonymous Coward, 14 Jan 2007 @ 6:18pm

    "If it was so expensive to develop xxxx, then how would those other companies be able to just copy it? If it's so easy to copy, then it shouldn't have cost that much to develop."

    Mike, you have to be kidding!

    How much time and money do you think went into producing the star wars movies? How much does it cost to hit record on your VCR and have an exact copy of the resulting work?

    The innovator ALWAYS incurs the additional cost to develop a product:

    Cost of product = development cost + manufacturing cost + profit

    But, the copy-cat only has the "manufacturing cost" to deal with:

    Cost of product = manufacturing cost + profit

    So, if the innovator had to spend $1 million to develop a product, and wants to make $1 profit on each sale, then they may need to sell the product for $1.50, where 50 cents of that serves to reimburse their investment into the R&D of the product.

    But, for the copy-cat, then never spent any money on R&D, so there's no need to add a surcharge, thus they can sell the product for only $1.00 and still make the same $1 profit per sale as the innovator.

    So, why would any consumer buy the product from the innovator, when they can buy the exact same thing from the copy-cat for 33% cheaper ($1.00 instead of $1.50)? Answer: They wouldn't.

    So, why would any company bother to spend any money on R&D (to innovate) when they could never get that money back because if they tried to recoup their R&D expense within the product price, it will most certainly set the product's price above it's copy-cat competitors? They wouldn't, thus without patents, innovation would suffer because it wouldn't make much business sense to spend money to innovate a new product without a high chance to recoup that expense back in addition to making a profit.

    Patents help the innovator by giving them a reasonable amount of time to recoup their R&D expense by keeping the copy-cats out of the market, thus making "innovating" a worthwhile activity - which encourages innovation.

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