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January 17, 2007

Why Did Steve Jobs Hype the iPhone Patents?

Mike over at TechDirt posted that Apple doesn’t need the 200 or so iPhone patents to gain from the innovation in phone design it’s done because technology like this isn’t easy to clone.  In a later post he also points out that the perception of Apple as an innovator and a design leader and the rest of the strengths of the Apple brand also obviate the need for patent protection.

If Mike’s right, and he is in general, then why did Steve Jobs make such a big deal of the patents in his presentation at MacWorld?

The reason is at the end of Mike’s first post:

“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.”

Exclusivity, especially one-way exclusivity, is a terrible business strategy.  It means you have agreed to restrict your market to those who also want to buy a product or service from the partner you’ve bound yourself to.  It means that those who want your product or service and don’t want to bind themselves to your partner HAVE to look for an alternative to what you’re selling.  Sometimes little companies bind themselves to exclusive relationships with big companies in order to gain distribution and in the knowledge that some market share is better than none – even then, it’s usually a bad strategy.

The ONLY way the exclusivity strategy can work for Apple is with vigorous enforcement – perhaps to the point of harassment – of its patents.

The existence of  the iPhone and the enormous excitement that Apple is capable of generating (and has generated in this case) almost guarantee that there’ll be a huge market for sexy integration of phones and MP3/video devices.  Obviously, not everyone will switch to carriers with whom Apple has a regional exclusive relationships.  So there’s an enormous opportunity created for other device manufacturers – unless they’re prevented from entering the market by the threat of patent litigation from a deep-pocketed plaintiff.

That’s why Steve made such a big deal of the patents.

BTW, the patents themselves ARE necessary to protect Apple from patent trolls who will claim to have invented every obvious and non-obvious aspect of the iPhone.  But making patents part of the message for a consumer product is almost unheard of – do you care whether you’re using a patented device or not if it has the functionality and interface you want?

The “patented” message is obviously aimed at competitors, not consumers.

Will the strategy of exclusivity plus patent protection work?  I don’t think so but that may be wishful thinking.

Fortunately, there are lots of good things for competitors NOT to copy: poor battery life, closed architecture preventing 3d party innovation, locked to a slow network, AND exclusivity.  These will lead to the product being outflanked just as the Macintosh eventually was even though the Mac was incredibly innovative (and I had great fun and a good business developing software for it).

In case you haven’t had a surfeit of iPhone posts:

Steve Jobs and the Orifice

Apple’s iPhone Strategy - Machiavellian or DOA? – Readers Comment

Apple Fails to Reinvent Telecommunications Industry – Too Bad

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