Monday, August 8, 2011

Calling Michael Porter

The snarky exchanges between Google and Microsoft continue. The latest is "When patents attack Android" a shallow attempt at riding the anti-patent troll sentiment generated by the NPR This American Life broadcast, "When Patents Attack." The exchanges are taking place on Twitter and the Google blogs - a testament to the reach of new technology in the public relations wars.

Google is pouting that the Rockstar Bidco bullies are trying to prevent them from selling Android devices. It's not fair. It's hindering innovation. That the Rockstar guys are banding together to add $15.00 per device to the cost of each and every Android device. (The $15 number is another one of those patent urban legend numbers that lives on its own without a lot of detail behind it.) I pay a premium every time I buy an Apple device and I'm happy to do it because I perceive that I am getting value for my purchase. Do these guys really think that a $15 surcharge is going to be a critical factor in a user's decision to buy an Android device?

And what about that dubious statement that "A smartphone might involve as many as 250,000 (largely questionable) patent claims, and our competitors want to impose a "tax" for these dubious patents that make Android devices more expensive for consumers." So where did this come number come from? I'm sure this commentary endear's Google with the folks at USPTO but more importantly, if google was so worried about the "largely questionable patent claims" why didn't you challenge the claims when the applications were published instead of waiting for your competitors to whack you in the head with the granted patents? (I like the fact that the link to the word might included in the post sends you to a Financial Times article that you can't read unless you are a registered user - way to go on the transparency front.)

Perhaps it might be a good time for these smart guys at Google to take a look at some of Michael Porter's work on competitive advantage and competitive strategy. There is the part about first mover advantages in which the first guy in a market has a competitive advantage and the other guys play catch up. . Kind of like Apple running Nokia and RIM out of the smartphone market and leaving Microsoft empty handed in the tablet market. Apple had first mover advantages in the smartphone/touchscreen world - oh and great design and an awesome marketing plan.

Lots of patent guys get this first mover thing - consider Apple and the iPod and Apple and the iTunes store. Apple, a patent savvy organization, licensed the infamous One-Click patent from Amazon. While I could fill pages with a discussion on whether business methods patents like the Amazon One-Click patent are valid or useful, that's not the point. Patent savvy guys figure out what they need to license, get the best price they can, build it into their cost structure and head out to the market to sell their stuff. Ask Barnes & Noble what happened to their 1999 holiday sales when they didn't have a license for the One Click patent.

Then consider barriers to entry - yep, patents are one of those things that restrict entry into an industry - in this case the mobile device space. Note to Google - see the Polaroid v. Kodak case where Polaroid kept Kodak out of the instant camera business. It wasn't pretty. When you enter the game late, the playing field isn't level. The guys who got there first have competitive advantage.

Google pointed out in its blog post that DOJ is demanding the winning group (Microsoft, Oracle, Apple, RIM, Sony, EMC) give a license to the open source software community. What's curious here is that Google seems to imply that this is a done deal - that the Rockstar team is going to be forced to license the technology. It doesn't look like DOJ has finalized such a demand yet. This doesn't change the equation though - developers of Android products are still going to have to pay royalties, the real question is where will the numbers come out in light of the earlier $15.00/device royalty. Things are not going to change any time soon.

I find it interesting that a company founded on a patent is whining that patents are impeding their ability to innovate. Maybe Google should take part of the money it didn't spend on acquiring the Nortel patents and invite Dr. Porter in for a discussion on the state of the technology markets and how to achieve competitive advantage.

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