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Is Apple Exercising Monopoly Power in Its Patent Actions in the US and Abroad?

Sun Feb 12, 2012 8:04 AM EST
technology, apple, iphone, samsung, cellphone, epo, software-patents
By politicalcenter
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As many know, I am no fan of Apple products. They are not innovative, but instead work on design.

Apple products' central focus is the control of both software and hardware, making them a unique product in terms of market force.

Apple has begun a scorched earth approach to patents they claim do everything from open your phone to permit vocal search of the Internet. In the future, this fight could determine the health and welfare of the cellphone and search industries.

With such a huge marketplace at stake, where is the US government? For that matter, where are all governments with competition laws?

Apparently, sitting on their hands while the cellphone wars take place.

True, software patents are not easy to consider. In many situations, they face huge amounts of prior art which could preclude their enforcement and/or validity.

To date, the patent minefield is strewn with examples of software patents, many of which are specifically tied in some way to various hardware components because a purely software patent is not patentable in many countries.

The European Union is one example, where the European Patent Office allows multiple patent filings and searches in many European countries. While a truly consolidated patent office is yet to take effect, there is general agreement in Europe that a technical aspect of software patents is required before a patent can be obtained.

In many ways, this is easy to obtain. Thus, the following are examples of "technical" aspects that have resulted in successful software patent applications.

The EPC – as interpreted by the boards of appeal – enables and obliges the EPO to grant patents for many inventions in which software makes a technical contribution, including inventions for: allowing a novel and inventive computer-controlled process to operate a robot arm; enhancing a graphic display; controlling data storage between memories; and routing diverse calls through a telephone exchangein response to demand. The things that are "done" are the "further technical effects". If the thing done lies in the excluded area, it is of no consequence to the assessment of inventive step.

Apple claims to have several such patents that may raise questions as to fundamental search functions on the Internet. According to CNET, in discussing Apple's patent claims in Europe:

The unified search patent, which involves voice assistant Siri's way of searching the Net, could be a direct threat to Google's core search business, Mueller says, and he adds that the word-completion patent may cover functionality involved in Google's mobile search app.

It is well and good for Apple fans to find comfort in this assertion. Perhaps Google should lose its rights to central issues involved in searching the Internet.

However, there are competition laws around the world that preclude the use of monopoly power even if through the exercise of lawful patent rights.

The current cellphone wars are expanding among Motorola, Apple and Samsung. But they are not yet focused on unlawful exercise of monopoly power.

They should be.

Apple will claim that they are merely the result of innovation, which cannot be curtailed by any lawful means. They will assert that Google has gone too far in its Ice Cream Sandwich software, which they claim steal some of Apple's innovations.

But this is where the rub comes in.

Recently, major cellphone carriers have admitted that they have charged not only Apple customers, but effectively all cellphone users including those who use the phones of other suppliers, a premium so they can use Apple software. Sprint was required to increase the charges on all users, not just the ones who use their phones, for the use of Internet enabled software programs and the length of time one could try out all devices from thirty to fourteen days in order to obtain the iPhone.

The ability to extract that additional money is not only a sign of monopoly power, it is also potentially a violation of consumer-related laws which preclude unfair competition.

Could those facing Apple's claims, including Samsung and Motorola, claim that these charges were in effect an unlawful charge on their products which extract unlawful royalties on patents they claim do not affect their products, or at the least an amount equal to the royalties Apple seeks to obtain for those products? Could a consumer who was required to pay more and try out cellphones for less time sue Apple?

Perhaps. Especially because Apple operates with a very large market share in an oligopoly.

This battle of the titans does not appear to have the eyes and ears of the US government yet.

But it should.

And the place to start is whether Apple has sufficient monopoly power and unlawful control sufficient to violate the US antitrust laws.

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  • Public Discussion (34)
politicalcenter

I confess that this article would require much more research in order to confirm the points raised. The information about being able to change entire policies is public knowledge, as is the fact that there are very few firms that make cellphones, certainly making the market oligopolistic. But the need for review is what this article seeks to have happen. I seem to remember that some review has taken place to date. More is needed, especially in order to ensure that the government is not being used to foster unlawful exercise of monopoly power. Even that remains open to interpretation, however.

    Reply#1 - Sun Feb 12, 2012 8:11 AM EST
    Brian Ford

    This...

    The ability to extract that additional money is not only a sign of monopoly power, it is also potentially a violation of consumer-related laws which preclude unfair competition.

    ...baffles me.

    What's the basis for that logic? The same rates cover Apple. (Though, to be honest, I'm leaving it open that you're not as accurate as you could be in your assertions, especially given that you admit that in your first comment.)

    Apple's not doing a very good job of abusing their "monopoly power" (which, by definition doesn't actually exist) if they're not negotiating deals that benefit their own products while hurting other products.

    • 5 votes
    #1.1 - Sun Feb 12, 2012 11:24 AM EST
    politicalcenter

    Monopoly power is defined as:

    Under the Sherman Act monopoly power is considered the ability of a business to control a price within its relevant product market or its geographic market or to exclude a competitor from doing business within its relevant product market or geographic market. In order to meet this definition, it is only necessary to prove that the business had the power to fix prices or exclude competitors. The plaintiff does not need to prove that prices were actually raised or that competitors were actually excluded from the market.

    While I might quibble a bit with that definition, it suffices to show that Apple has it.

      #1.2 - Sun Feb 12, 2012 11:32 AM EST
      Brian Ford

      That's monopoly POWER.

      You skipped the definition of a monopoly, which is what you need to establish to assert that Apple can exercise monopoly power:

      The first prong is deciding whether a company even has a monopoly. A general definition of a monopoly is where nearly all of one product type or service is owned by one person or group of people within a community or area. Thereby, the sole control of this product or service is given to one party to the elimination of all others within the marketplace. Courts will usually look at a company’s market share for a particular product or service to see if a monopoly exists. If a company has a market share of greater than 75 percent, they will probably be considered a monopoly. For market share purposes, courts will make an apples-to-apples comparison by looking at identical products or products that are so similar they could be substituted to determine market share.

      I'm not sure how you missed that.

      • 4 votes
      #1.3 - Sun Feb 12, 2012 11:35 AM EST
      Reply
      I'm Ringo

      What Apple has been trying to do is patent the ability to do something, instead of just a WAY of doing it.

      The equivalent in transportation would be something like this: inventing the skateboard, but instead of filing a patent for a skateboard, filing a patent for 'any form of personal, non-motorized, wheeled transport'. So even though bicycles, tricycles, roller-skates, etc have been around for years, and don't have anything to do with skateboards, they're still trying to get government support to take control of them.

      Some of their products aren't bad, but they are neither innovative in their products nor ethical.

      I'm finally switching to a smartphone this month......Galaxy Nexus baby. Maybe when I replace it in a few years the iPhone will have finally caught up to where some of the Android phones are now.

      • 2 votes
      Reply#2 - Sun Feb 12, 2012 9:23 AM EST
      Brian Ford

      Some of their products aren't bad, but they are neither innovative in their products nor ethical.

      How are they not ethical and when you answer this i'll ask why you're so enthusiastic about but so willing to overlook Samsung's track record on that front. (Nevermind that Samsung builds its reputation by offering me too products.) I'd say the only reason they've been as successful as they have is because they're the best at copying Apple's "not innovative" ideas.

      • 6 votes
      #2.1 - Sun Feb 12, 2012 11:00 AM EST
      politicalcenter

      Way to go, I'm Ringo!

        #2.2 - Sun Feb 12, 2012 11:33 AM EST
        I'm Ringo

        How are they not ethical

        You mean like harassing lawsuits against other companies for no reason other than trying to bend them to Apple's will?

        Samsung might offer 'me too', but that's better than 'me too in a couple years when I catch up'

          #2.3 - Sun Feb 12, 2012 5:02 PM EST
          politicalcenter

          Yep.

            #2.4 - Sun Feb 12, 2012 8:23 PM EST
            Brian Ford

            You mean like harassing lawsuits against other companies for no reason other than trying to bend them to Apple's will?

            Yes, that's exactly the sort of hyperbole I mean.

            Thanks!

            • 2 votes
            #2.5 - Mon Feb 13, 2012 9:43 AM EST
            I'm Ringo

            Yes, that's exactly the sort of hyperbole I mean

            Then obviously hyperbole is a word that you need to look up, since you clearly both want to use it and don't know how

              #2.6 - Mon Feb 13, 2012 6:59 PM EST
              Reply
              Brian Ford

              Would be interesting to see a company that doesn't lead the market charged with an illegal monopoly.

              It's also worth noting that Apple is one the most sued companies in existence. I'm not sure there is a market with more existing healthy and potential competition than the smartphone market, and certainly not than the mobile industry.

              Maybe the real question is: are your questions motivated by actual concerns an evidence or on your admitted (and entirely subjective) bias against Apple's products?

              • 5 votes
              Reply#3 - Sun Feb 12, 2012 10:53 AM EST
              politicalcenter

              I am afraid that I am unaware of your point of reference here. "Most sued?" Whatever it is, I know that it has never experienced anything like the electrical equipment manufacturers price fixing cases. No one ever will, in all likelihood. And wherever you got that information, it is without a doubt flawed and inaccurate.

                #3.1 - Sun Feb 12, 2012 11:35 AM EST
                Brian Ford

                Oh, sorry. I didn't realize that we had to back up our claims with evidence or links. I was just following your lead.

                Here you go: As world's most-sued tech company, Apple is forced to 'lawyer up'

                If your premise is that Apple's patent lawsuits could possibly amount to an abuse of monopoly power (it can't, as we've already established that Apple can't possibly have a monopoly in the smartphone market) it seems relevant to find out whether Apple is suing more or BEING sued more.

                An article about software patents and their use might be interesting (though, you can't trip without landing on one) but an article that ignores that landscape to argue that Apple's participation in the war could mean that they're a monopoly?

                That's a bit odd.

                • 5 votes
                #3.2 - Sun Feb 12, 2012 11:41 AM EST
                Reply
                Brian Ford

                Just so we're all on the same page:

                A monopoly (from Greekmonos μόνος (alone or single) + polein πωλεῖν (to sell)) exists when a specific person or enterprise is the only supplier of a particular commodity. (This contrasts with a monopsony which relates to a single entity's control of a market to purchase a good or service, and with oligopoly which consists of a few entities dominating anindustry)[1][clarification needed] Monopolies are thus characterized by a lack of economic competition to produce the good or service and a lack of viable substitute goods.[2]

                How exactly does Apple qualify, again? I agree that this article could have used quite a bit more research, though.

                • 6 votes
                Reply#4 - Sun Feb 12, 2012 11:18 AM EST
                politicalcenter

                Naturally, the first assumption is that Apple is correct with its patent claims. If so, it will have a monopoly assuming Google cannot avoid some of the patents. However, monopoly power is something far different. And one can have an attempt to obtain a monopoly at a much lower market threshold. Moreover, and most importantly, one needs to define the product and geographic markets.

                Central to monopolies, however, is not the market share but the ability to control prices. As indicated earlier, Apple is vulnerable to a claim that it is engaging in unfair competition, since it is capable of forcing changes to entire company policies in order to allow their products to come to market.

                One of the main reasons I said what I did in my first comment is that there are many other potential problems with how Apple operates that go well beyond their limitations on products and services. The precise amount of such restraints and how the affect the marketplace is unknown until economic study occurs.

                It is long due for this imperialist company.

                  Reply#5 - Sun Feb 12, 2012 11:43 AM EST
                  Brian Ford

                  Naturally, the first assumption is that Apple is correct with its patent claims. If so, it will have a monopoly assuming Google cannot avoid some of the patents.

                  Now you're just going off the deep end. You can just as easily "assume" that all the people suing Apple will be "correct" in their claims. You're now making a completely new argument: That apple MAY, in fact, SOMEDAY be a monopoly.

                  I suppose that's true. So might Samsung. Or Google.

                  However, monopoly power is something far different. And one can have an attempt to obtain a monopoly at a much lower market threshold.

                  What? Says who? What information can you provide that shows its possible to exert monopoly power without being a monopoly? I think you're confusing shrewd business tactics with monopoly power.

                  Central to monopolies, however, is not the market share but the ability to control prices.

                  No. That's wrong. I've now provided two definitions (one from a link you provided) and I'll quote it again:

                  Courts will usually look at a company’s market share for a particular product or service to see if a monopoly exists. If a company has a market share of greater than 75 percent, they will probably be considered a monopoly.

                  You go on:

                  One of the main reasons I said what I did in my first comment is that there are many other potential problems with how Apple operates

                  Fine. Present evidence to back up this assertion. I think what you'll do instead, is present your subjective opinion that this is the case, and it won't be a very detailed analysis of the overall market, but instead will be based on the one thing we all know, because you admitted it:

                  As many know, I am no fan of Apple products. They are not innovative, but instead work on design.

                  Of course, that's why Apple's products are so successful? Consumers are too stupid to choose better, more innovative products, instead we're all suckered in by fancy design?

                  • 4 votes
                  #5.1 - Sun Feb 12, 2012 11:54 AM EST
                  politicalcenter

                  Already did some of the things you mention. However, wanted to point out that the source of your comment on the most sued company was not only qualified by "technology" company, but also was for the period since Apple released the iPhone.

                  As far as another point about what Apple does wrong, here is one that speaks to its morality.

                  The comment was made during a 1996 PBS documentary called "Triumph of the Nerds," and looks a smidge hypocritical in light of today's events. As does this one:

                  "We have always been shameless about stealing great ideas."

                  Design counts in this world, especially with handhelds. Apple uses AC3, a media file technology from 1994. Microsoft's WMA was developed over many years, improved in each year, and is clearly superior to AC3. "Newer versions of WMA became available: Windows Media Audio 2 in 1999,[12] Windows Media Audio 7 in 2000,[13] Windows Media Audio 8 in 2001,[14] and Windows Media Audio 9 in 2003."

                  While Apple fans will contend that its products are technologically superior, their only superiority comes from Apple's refusal to open up its hardware, making it capable of developing hardware with interrupts and old-time technologies.

                  Its iPhone is nothing but a piece of design. Nothing is or was new, including the messy interface.

                  The only thing that was Apple's was the start of Windows, which they licensed to Microsoft and then sued them for violating a license later sustained by the court.

                  They are not the most sued. They are the most arrogant and limited technology company in the world. They exist because their users consider themselves "with it." It is a cult, not a technology company.

                  • 1 vote
                  #5.2 - Sun Feb 12, 2012 4:18 PM EST
                  Brian Ford

                  Really? WMA? That's the argument you're pinning your hat on.

                  Whatever.

                  Its iPhone is nothing but a piece of design. Nothing is or was new, including the messy interface.

                  That's what I like to see, a completely subjective comment put forth as an objective argument. With that said, it's interesting that "nothing is or was new" yet what did phones look like before the iPhone became popular. What do they look like now? What did all these other companies say about the iPhone when it was released (most of them laughed and said such a device would never catch on) and where are they now?

                  They are not the most sued. They are the most arrogant and limited technology company in the world. They exist because their users consider themselves "with it." It is a cult, not a technology company.

                  Ah, that old argument. Apparently, millions and millions of people only use Apple because they're in a cult. I can see now that you weren't really looking for an answer to your question -- you were looking for a sucker to show up and provide an answer and a platform for your rambling.

                  • 3 votes
                  #5.3 - Sun Feb 12, 2012 4:25 PM EST
                  politicalcenter

                  I do not know how long you have had smart phones, or for that matter mobile phones. There was nothing unique about the Apple interface. HTC had similar interfaces. So did most other phones. They were more limited in various ways, and the interfaces were different technically.

                  If you want to learn about smart phones, multitouch and web browsers written by someone not pro-Apple, look at this, this, and this.

                  I have had technologically advanced phone since the cell phone existed. I lived this history.

                  But I will note that Ars Technica and other publications chock full of Apple promoters (how many are paid by Apple?) have claimed that the Apple iPhone was better or had the first multitouch or other BS.

                  The facts speak for themselves.

                    #5.4 - Sun Feb 12, 2012 4:41 PM EST
                    Jay Butler

                    The iTunes store actually sells its tracks in MPEG-4 AAC, not AC-3 (a Dolby technology). MP4 AAC was defined in 1997. CD's were commercially shipping in 1982. Does that make them an inferior format to any of the encoding technologies introduced since. There was a brief effort to push SACD's that provided higher quality audio. But, since they needed updated players to decode this and people generally thought that CD quality was already excellent, it failed.

                    Who cares when the format was designed or how many times Microsoft had to update theirs? The mainstream consumer cares about how to purchase music, get it onto their devices and play it. In that, Apple delivered the simplest end-to-end solution.

                    • 1 vote
                    #5.5 - Sun Feb 12, 2012 4:42 PM EST
                    Brian Ford

                    But I will note that Ars Technica and other publications chock full of Apple promoters (how many are paid by Apple?) have claimed that the Apple iPhone was better or had the first multitouch or other BS.

                    Dunno. You're the one making the dumb and baseless insinuation. You tell me. I'll not hold my breath.

                    The facts speak for themselves.

                    For such a lippy bunch, they sure don't seem to say what you want them to say.

                    • 3 votes
                    #5.6 - Sun Feb 12, 2012 5:05 PM EST
                    politicalcenter

                    aac is correct. the technology is and was inferior to the constantly improved wma imo. and it is ancient, basically even older than ac3. but thanks fir the correction!

                      #5.7 - Sun Feb 12, 2012 8:21 PM EST
                      politicalcenter

                      Sorry working from phone. Brian, I provided the facts. Missed yours. By the way, the absurd quote of most sued. Pulled down from original quote in Bloomberg. Apparently the authors no longer write for Bloomberg. Wonder why.

                        #5.8 - Sun Feb 12, 2012 8:27 PM EST
                        Reply
                        Pacific Northwest Blogger

                        The passage of the Sherman Act in 1890 was associated with a populist emphasis on the need to protect the public from corporate monopolies, including those based on patent protection, and raised the prospect of conflicts between patent policies and the promotion of social welfare through industrial competition. Firms have rarely been charged directly with antitrust violations based on patent issues. At the same time, a number of landmark restraint of trade lawsuits have involved technological innovators. In the early decades of the 20th century these included innovative enterprises such as John Deere & Co., American Can and International Harvester, through to the numerous cases since 1970 against IBM, Xerox, Eastman Kodak and, most recently, Intel and Microsoft.

                        The evidence suggests that, holding other factors constant, more innovative firms and those with larger patent stocks are more likely to be charged with antitrust violations. A growing fraction of cases involve firms jointly charged with antitrust violations that are linked to patent based market power and to concerns about "innovation markets."Source

                        Apple and Google have certainly put themselves in a position for AntiTrust. I suspect both companies will face them at some point but with their vast assets I doubt that either will feel a long term impact.

                        Hopefully though it might lead to a better revision of the patent system focusing on the patent "institutions" and remove aspects of buying patent portfolios. If they didn't invent the art or the process but simply have the cash to buy up entire patent portfolios then is it trade, an open market with competition or buyer take all? Today it's buyer take all and that doesn't help innovation or the next startup company to emerge, it's a monopoly based on how many patents can be purchased - again, did they create the art or process or use their capital to buy them?

                        • 1 vote
                        Reply#6 - Sun Feb 12, 2012 2:36 PM EST
                        Brian Ford

                        Success leads to scrutiny, there's absolutely no doubt about that. It doesn't really change the legal ramifications, though.

                        At any rate, I'm not sure Apple or Google have "larger patent stocks" than any other companies, at this stage.

                        In fact, I don't think Apple, at least, is even close and Google is even less so.

                        So, Samsung is selling more mobile phones than almost all companies and has FAR more patents than most.

                        By the arguments I'm seeing here, isn't it Samsung that should be facing scrutiny?

                        Motorola is up there, too -- and there's an argument being made currently that they're not licensing some of their necessary patents under FRAND terms. Perhaps we should throw them into this discussion, as well?

                        • 3 votes
                        #6.1 - Sun Feb 12, 2012 3:38 PM EST
                        politicalcenter

                        Motorola, which had the largest cell-related patent portfolio in the world, effectively invented the industry, and continues to march ahead in this regard, was purchased by Google largely because of its portfolio.

                        However, the problem is that as technology goes, most was never patented. Literally hundreds of thousands of patentable ideas (and in Japan which allows paper patenting many more) are in the public domain.

                        The people who need to be kept in mind are those with this history, which are by my reckoning largely with Motorola and Google.

                        The very fact that few patents exist has allowed Apple to act by stealing, as Jobs admitted. In the end, many of these admitted thefts are out of date by this point.

                        One of the difficulties with US patent cases is that they are judged by normal federal judges at the trial level. It is even worse in Europe litigation, where many judges are clueless.

                          #6.2 - Sun Feb 12, 2012 4:24 PM EST
                          Brian Ford

                          The very fact that few patents exist has allowed Apple to act by stealing, as Jobs admitted. In the end, many of these admitted thefts are out of date by this point.

                          I'm starting to think that you just say things that come to your mind, and that you don't actually have very much of a background in technology related subjects.

                          Stick with politics.

                          • 3 votes
                          #6.3 - Sun Feb 12, 2012 4:27 PM EST
                          Pacific Northwest Blogger

                          Perhaps he meant this

                          "We have always been shameless about stealing great ideas."
                          —PBS Documentary, Triumph of the Nerds, 1996

                          • 1 vote
                          #6.4 - Sun Feb 12, 2012 4:52 PM EST
                          politicalcenter

                          Perhaps this was inartfully and incompletely stated.

                          I also think you did not read what I said or simply took the quote out of its intended context.

                          But to be more complete, patentable subject matter existed with regularity in the early years.

                          Almost none was patented. In fact, software in general was not patented very much until more recently.

                          Most people know that this makes prior art in the software field very difficult to determine. While there is much more rigorous patent examination today, this was not always the case. And it remains very deficient in this arena.

                          Those subject matters that were patented only lasted seventeen or so years. Thus, their life has run out by now for most of the early patents that did exist. They are still prior art which could provide a defense for some or all of the claims, resulting in a decision invalidating part or all of the patents claimed by Apple.

                          I know a ton about technology and patents and related IP. I have practiced IT and IP law for more than 30 years, have owned my own Apple and PC computers and handhelds for the last 30 years, and have run my own networks. I have used at least four major operating systems, and two server environments.

                          Maybe I am still stupid in this arena, but most do not think so.

                            #6.5 - Sun Feb 12, 2012 4:55 PM EST
                            Brian Ford

                            Maybe I am still stupid in this arena, but most do not think so.

                            I can only go by what you're saying here.

                            • 4 votes
                            #6.6 - Sun Feb 12, 2012 5:07 PM EST
                            politicalcenter

                            Deep pockets matter. As stated earlier, lawful exercise of patents could result in problems, especially if a bad motive is involved.

                              #6.7 - Sun Feb 12, 2012 8:31 PM EST
                              Brian Ford

                              Deep pockets don't matter when it comes to the question you asked. Though, it seems as though you've simply moved on to chit-chatting with like-minded individuals about your subjective opinions relating to the quality of Apple's products.

                              Probably a better course of action.

                              • 3 votes
                              #6.8 - Sun Feb 12, 2012 9:10 PM EST
                              Reply
                              Jonathan-1917156

                              Just so you know, innovation is far more than 'technical' points. Yes Apple products generally don't have much 'technical' innovation, but neither does MS products or phones based on Android. Why Not? because they don't create the hardware, they create the environment.

                              but on your point of 'design', that is exactly where the innovation lies. Every other product in the smart phone space that I have tried just doesn't work as well as the iPhone. So the innovation is exactly in their design, which is something that the user spends far more time interacting with rather than CPU speed, or some other technical factor that in the end doesn't mean a hill of beans.

                              As far as patents/monopoly, holding a patent is exactly what that means. It is a LEGISLATED MONOPOLY for a period of time. Does the patent system need reform? hell yes, Are patents being issued willy nilly, hell yes, but don't blame apple for that, that is the patent office, not apple.

                              • 1 vote
                              Reply#7 - Tue Feb 14, 2012 1:07 PM EST
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