Joy And Peril of Unintended Consequences

I saw an item on AppleInsider where they report that some handset makers may be considering moving more toward Windows Phone 7 over Android, in light of recent legal victories for Apple over HTC. Apparently the preliminary ruling by the International Trade Commission about HTC violating Apple patents may go deeper, and actually involve technology at the core of Android. The upshot is that all Android handset makers may be required to pay some kind of royalty to Apple, and the expectation is that Apple will set those royalties fees to a fairly high value.

The plus for Apple is that, if the ruling stands and the interpretation on royalties is true, the rise of Android could be blunted if some handset makers scale back or abandon the platform entirely. The downside, though, is that Apple may be giving a boost to Windows Phone 7. It is obviously far too early to see if this has a meaningful effect on the sales rate or installed base for any of these platforms. This fight isn’t over, since the ruling still has to be reviewed. Beyond that, even if the final ruling is in Apple’s favour, the next (and sometimes bigger) step is actual enforcement.

I suspect this isn’t quite what Apple was hoping for. In a fight like this, the general expectation is to slow down the competitors directly in front of you. While I wouldn’t expect that a shift in platforms, rather than simply slowing one platform, is entirely a surprise to Apple senior management, I also suspect it wasn’t what they wanted. In short, it comes down to being an unintended consequence, and not one with a happy outcome. Instead of making more room for Apple, all they may have done is changed the landscape, but not raised their opportunities.

A part of this situation is similar, in some ways, to when Apple tried to licence Macintosh clones. The original goal was to try to create more space for Apple products, by offering customers the Macintosh experience, but from multiple vendors. It didn’t result in any increase in marketshare for Macintosh overall. Instead, it just meant that Apple was competing for the same slice of the pie, but with competitors of their own making. When Steve Jobs returned, it was one of the first things he shut down. He realized all it did was hurt Apple’s bottom line, without increasing the revenue opportunities for the company through increased overall marketshare.

Is the ruling itself  a good thing, in the end? I’m not sure. I’ve become ambivalent over software patents over the years (and in the interest in full disclosure, I am co-inventor on 2 patents, one software and one a business method, as well as co-inventor on a software patent application still in review). I was a big proponent at first, since it gave smaller software companies an avenue for protecting their ideas that wasn’t previously available. But, as I saw the dubious quality of the patents issued, and the rise of patent trolls who make nothing but expect to be paid, working more as extortionists (in my mind) than firms that advance the state of the art, I’ve become skeptical. The ruling could be good for Apple, at least in the short term, since it has the chance to cast some fear and doubt on Android. It’s not great for Android, since it could blunt it’s rise in the marketplace, and in a worst case scenario, cause it to stagnate. That’s a low probability event, but it is still a non-zero one.

It could be a boost of Windows Phone 7, which currently holds a miniscule and almost insignificant portion of the mobile smartphone market. That could be a mixed blessing for Apple. On the one hand, it increases WP7’s fortunes, but it also means Apple has to compete against Microsoft rather than Google. Microsoft, quite frankly, is an easier target for Apple. You can expect Microsoft will manage to either shoot themselves in the foot, or at least graze a toe or two, in their efforts to improve their position in the market. Perhaps this was part of Apple’s goal all along.