One factor that’s held true through the history of the small computer business (meaning after the exclusively mainframe days) is that there is a basic division between companies that innovate and companies that exist mainly through litigation. Companies that occupy those places in the industry occasionally change sides, but those that start spending too much time on the litigation side invariably find themselves on no side at all, because they fade into nothingness. Usually what happens is that these companies put their energy into fighting other companies that innovate in ways that they don’t like, instead of putting their energy into building better products.
An early example of this is the sad story of a company that probably no one remembers except for those of us who were around this business in the early 1980s: Ashton-Tate, which developed the first really useful database software for small computers, called dBASE. It sold very well, and provided customers with a level of functionality and ease of use that simply wasn’t available until then. About the time that Windows started to become popular, other companies started to create database software that also performed useful functions.
Ashton-Tate, which had then launched dBASE III, started suing everyone in sight over patent and copyright issues. Eventually, sapped of its resources, its programming language in the hands of others, the company quietly faded away. More recently, SCO has had the same thing happen to it as it’s tried to fight the innovation of Linux open source with nonstop litigation. SCO is almost gone, and one would hope for it to die a self-inflicted death in the near future.
But once again, the competition-through-litigation process rears its ugly head as companies try to kill innovation through the courts. Oracle (which interestingly was Ashton-Tate’s first real competitor) is now suing Google over its Android OS. Meanwhile Microsoft is suing Motorola, as is Apple. Both are suing over patents that they claim either Motorola or Google has violated. Whether these legal actions will be ultimately successful in some way remains to be seen.
But the lawsuits seem strangely timed. After all, nobody bothered Google or Motorola until the Droid series of smartphones suddenly took off, and since Android became the hottest smartphone OS in history. Now, suddenly, there are lawsuits galore.
There are two basic reasons why companies sue each other in this manner. The first is because their patents actually do violate something that the company initiating the suit has a legitimate patent for, but when this happens, those suits usually seem to happen right away, and the companies usually ask for a licensing arrangement if the lawsuit is legitimate. Normally, these suits are settled, and everyone is happy. After all, the point of a patent is to give the inventor a way to make money on his invention.
The Preemptive Strike
But then there’s the lawsuit as preemptive strike. Think of it as the business version of a low-yield nuclear attack. Your goal is to interrupt the sales of the target company’s product, to scare away customers or to slow down development as the target diverts resources to defending itself and away from innovation. This is basically what’s going on with the suits against Motorola and Google. Android scares the hell out of Microsoft and Apple, and both companies will do what they can to slow it down. Oracle, on the other hand, isn’t scared of Google or Android, it just wants a piece of the action, which Google is reluctant to provide.
If you look at the history of innovation at both Microsoft and Apple, you can see why they’re scared. Microsoft’s smartphone efforts got mired in lack of innovation years ago, and its recent attempt with Kin was at best pathetic. Windows Phone 7 is its last hope of remaining relevant in the red-hot mobile market. Unfortunately, the company that actually thought that Kin would sell doesn’t necessarily have a lock on sales with its new phone. No surprise that Android scares the pants off Microsoft.
Apple is a little different. The iPhone 4, antenna problems aside, is a pretty nice smartphone, but it’s an evolutionary step from the iPhone 3GS. In other words, the iPhone 4 is better than its predecessor in many ways, but it’s not really the level of innovation you’d expect from Apple. What’s worse from Apple’s view is that Android activations are ahead of iPhone activations starting earlier in 2010, and the rate of change is getting worse. Clearly Android has to be stopped.
Both Microsoft and Apple could fight the situation by doing something truly innovative in the mobile space, but what they’re doing instead is delivering more of the same old stuff, if slightly enhanced. Then they’re fighting the object of their fear through litigation. This is a lot like the reactions of Ashton-Tate and SCO when confronted by innovation. Their long-term success is likely to be similar as well. While it’s unlikely that either Apple or Microsoft will be brought down by focusing on legal actions, it’s entirely likely that their culture of innovation will fade away because their resources are directed elsewhere.
In other words, without innovation they might not die off, but they could well become irrelevant, and that’s just as bad.