Many Don't Understand The Google/Apple/Microsoft Business Model Dynamic Nor How Dangerous This Apple Legal Win Can Be For Consum

Reggie Middleton's picture

In continuing my rant on the Apple v. Samsung verdict, I wish to make clear once again that the vast majority of consumers of Google's and Apple's products are absolutely oblivious to the business model of Google, the business practices of Apple and the shadowy aggressive survival tactics of the behemoth that is Microsoft. If I am correct in this assertion then the potential ramifications of Apple actually defeating Samsung in the patent case decided last week is also lost on most. That is dangerous. Since it has been explained at least as good as I could have done already, let's peruse one of my favorite legal sites, Groklaw, on why understanding Apple's grand objectives in patent litigation matters:

To explain why I think it matters, I need to remind you of other things that have been going on, trying to exclude FOSS from the market. Because that really is what I think this is about.

Remember how Oracle tried to expand copyright law to cover the structure, sequence, and organization of Java APIs? It failed (subject to appeals). But it tried hard. Had it succeeded, it would have upended how any open source software could be built and used, and it would have excluded individual developers like Linus Torvalds in his student days creating Linux in his bedroom, because only those with money to pay royalties would be able to do any coding for the marketplace, if moves like that had succeeded. One of Michael A. Jacobs' law students volunteered to help cover the trial for Groklaw, and she told me that this is what she had learned about the case in class. I take it that means it was its purpose. Do you want a world where only the present incumbents are allowed to create anything meaningful? How does that benefit you or me?

Remember when Microsoft did its patent deal with Nokia and then they both did patent deals with MOSAID, a nonpracticing entity that presumably will be using the patents those two lovebirds provided to sue Android vendors and who knows who else? Patents exclude. That is their purpose. Android is the target. Did you notice how Microsoft crowed in public about the Apple verdict, predicting it would be beneficial to Microsoft?

Remember back when Microsoft helped SCO afford lawyers in the very early days of the SCO saga? What was the goal there? To slap royalties on Linux and get rid of the GPL, so as to block Open Source's free development model, and make it so expensive no one would want to use Linux on servers any more. Remember when SCO even offered to help Linux-using companies move not to SCO's UNIX products but to Microsoft servers?

Now, it's Apple and Microsoft on a jihad against Android and hence Google. That's why you see attacks on Google in an endless stream in the media and even in regulatory bodies, where Microsoft friends who take Microsoft money complain about Google. Android is eating Apple's and Microsoft's lunch in the marketplace, because people love it and OEMs love it, so the proprietary world has apparentely decided o use the legal system give them a win there, since they can't win fair and square in the marketplace. Actually, they could, but they'd rather not.

What are the weapons? IP law. They have copyright, they have patents, and now they have a new weapon of choice -- trade dress and design patents -- thanks to Apple. And that is why this case is so appalling, because Apple has now opened up a new area for litigation and exclusion. That's what the L.A. Times noticed:

Nevertheless, it's worth remembering that Apple made its name building successful, even iconic products based on ideas that other companies pioneered. The iPhone, for example, was a significantly better version of the smartphones Nokia introduced more than a decade earlier. Innovation is by its nature an iterative process, and good patent policy creates an incentive to innovate more. Bad policy just makes it easier for patent holders to extract royalties from anyone venturing within reach of their claims.

The risk is especially great in the area of patents on design, such as the ones that covered the look and feel of Apple's iPhones. There's a fine line between designs that are purely decorative (which, oddly enough, are the ones eligible for patents) and those that serve a function (which aren't). For example, do rounded corners on a phone simply help set it apart, or do they make the device slip more easily in and out of a pocket? ...

If Apple's win slows the wonderfully frenetic pace of product development in mobile devices and leads companies to battle in courts instead of the marketplace, consumers will be the ultimate losers.

There's no if about it. It certainly will have that effect. My point is, it's all about the same thing -- to make it impossible for Android to survive as it is, and now we will see litigation after litigation -- Apple has already filed another lawsuit against Samsung -- and the end result is to make Android cost more because of encrusting it with high royalty obligations, so it cuts into the vendors' profits sufficiently that it will end up making it undesirable to use. That's why, I believe, Apple offered licenses to Samsung on its first visit to discuss matters at such a high price. It would have cut Samsung's profits so radically, it would no longer make much sense to use Android. I think they had to know Samsung couldn't agree to that price. Apple itself is complaining about a much, much lower price for FRAND patents, after all, saying it can't afford to build its products with that price added. Did Microsoft pay that high price?

But, I hear you say, that's anticompetive behavior. Isn't that patent misuse? Misuse of the courts? I think it is. But I'm not a lawyer. And antitrust law is complicated, and thanks to folks who think business should be unregulated, it's a little bit toothless at the moment.

Time will tell how others view it, but I despise the strategy. The purpose of both copyright and patents is to encourage innovation and progress. The purpose of trade dress protection is to make sure consumers are not confused as to origin of goods and products. Design patents are supposed to protect only ornamental features, not functionality. None of it is supposed to be for the purpose of killing off newcomers to the market. Is it even Constitutional to use them that way? You tell me.

Remember too that Apple itself reaps benefits from Open Source software. It switched from its own software to OSX, which is BSD code. Why? Because it was better than what it had done itself. So it surely knows what FOSS can do. Now, it wants to make sure no one else can offer what it offers, even in such basic elements as rectangles with rounded corners and rows of brightly colored icons or ways to touch a tablet that are simply intuitive. Intuitive is just another word for obvious.

The reason Apple has gone scorched earth on the litigation front is because it is sorely losing the battle on the technology front and rapidly losing market share in an industry that's currently growing like a weed. Why should Apple even care if the industry is growing like a weed? Well, for starters, once that growth slows, Apple's growth slowdown will be amplified and levered several times. Think of growth using margin or gearing. If the market growth stagnates to near 0% growth, then Apple's growth could drastically reverse and go negative!!! Apple had better knock the upcoming iPhone 5 out of the ballpark, because if they don't Android will have captured nearly the entire smartphone market within a year. There will be no extra-normal profits stemming from network effects for iOS if there is no network! Just think about that. They are already at 64% global market share and growing faster than all of their competitors combined.

 Back the Gartner data...


Here's one of the reasons why...

Many people are still totally oblivious to exactly what it is that Google does. Here's a tutorial.

Industry Leading, Subscription Based Google Research

All paying subscribers should download the Google Q1-2012 Valuation Summary, wherein we have updated the valuation numbers for Google using a variety of metrics. Click here to subscribe or upgrade

Google still exhibits the likelihood that they will control mobile computing for the balance of the decade.

Subscription research:

file iconGoogle Final Report 10/08/2010

A couple of bits from our archives...

There are currently 7 Google reports available. Select the "Google Final Report" and click the "Download" button. You will receive a 63 page analysis that looks like this on the cover...

The table of contents outlines how we have broken Google down into distinct businesses and identified both the individual business models and the potential revenue streams, as well as  valuation for each business line.

Page 57 of the analysis shows a sensitivity table which outlines the various scenarios that can come into play and how it will change our outlook and valuation opinion.

Professional/institutional subscribers can actually access a subset of the model that we used to create the sensitivity analysis above to plug in their own assumptions in case they somehow disagree with our assumptions or view points. Click here for the model: Google Valuation Model (pro and institutional). Click here to subscribe or upgrade.

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It is worth noting that the key assumptions that underline the above valuations – (1) iPhone continuing to witness stupendous growth *******  in 2012 and ****** 2013 over a larger base and (2) iPhone margins continue to remain healthy off stable prices and despite increase in material cost – should be keenly watched over the next couple of quarters. 

Then ask them bout the logical argument behind the concern with Apple and the extremely volatile price action of the last few weeks. As stated many times in the past, The BoomBustBlog argument and analysis is solid.

What else is there to the earnings announcement? Well we were absolutely correct in terms of the oncoming margin compression of the the product lines, something that was actually easy to see coming but many refused to admit. Of course, there will be those select few that say, "But wait, the company reported an INCREASE in margins while you said there will be a decrease!". Yes, that's true and both can exist simultaneously.




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snblitz's picture

"If you cannot innovate, style. If you cannot style, sue"

The first half of that thought comes from the book "The Waste Makers" about the automobile industry, but applies quite well to Apple.

I had been to Xerox Park about the same time as the Steves and their engineers.  Apple stole lots.

malikai's picture

Wow, Reggie. Be confident that you are on the right track when you attract such a large amount of trolls and naysayers.

jaffa's picture

Criticism of Microsoft has followed the company's existence because of various aspects of its products and business practices. Ease of use, stability, and security of the company's software are common targets for critics. Thanks a lot.
Website Development Companies

ebworthen's picture

I invented the question mark, I just can't afford a bunch of high powered attorneys and don't have a stock that is 10% of the NASDAQ and keeping CALPERS alive.

Cthonic's picture

I KNEW you were Dr. Evil's father!

aleph0's picture

@Reggie ... great article

" based on ideas that other companies pioneered."

You mean like these from Xerox PARC ? :

# the GUI
# the Mouse
# the first commercial Microprocessors
# Ethernet as well IIRC

All done by Xerox PARC in the early to mid 70's ... & after Bill Glavin invited Jobs to visit PARC .. the rest is history.

Cthonic's picture

Has anyone glanced at the ridiculous patents at issue?  It's absurd.  How many different flick gestures is the world supposed to learn because every gd gui has to invent new ones or risk stepping on something patently obvious?  Y'all keep railing at the bankers and I'll keep railing at the true enablers, the f*ing lawyers.

NuYawkFrankie's picture

After the verdict....


Sam sung the blues...

withnmeans's picture

Don't you think that they had the trial in California for a reason, they knew they could not lose. Samsung had not a chance in hell before they even opened the courthouse door.

California is BROKE, they know who pays. The fix was in, can you say WINDFALL......

Funny how the Japan trial has gone the other way.....

Watch out, they collect info too, much like GOOgle, and now more with their mapping program.

Ying-Yang's picture

All good Reggie... and then there was Metro. Heh

Love a 3 horse race!

epwpixieq-1's picture

As, nature has its evolutionary efficiency, in such a way software world has its own. Copyright Law can not stop that, they can only postpone it and slow down it speed.

As one panel speaker mentioned, on a High Performance Computing Conference in the Microsoft building at NYC: "The biggest change that has happened in the server world in the last 10 years, is the advent of Linux, with market share from less than 5% to 85% of all servers.". It actually was funny that it was mentioned on the conference hosted by Microsoft, and of course the Microsoft representatives were not very happy. :)

So, the same will happen with any "protected" software and designs, finally they will go where every inefficiency ( system not allowed to grow in a natural/free way ) go, in the trash can of the history, in this case the technology history.

notadouche's picture

How's that Apple short work out for you most of the last couple of years that you have been able to brag about for all of about 72 hours during that time, otherwise it's crying time again.   Don't worry another something will come up at some time and you will be able to claim victory for about a day.  

billsykes's picture

I don't know, sometimes failures are good.

Linux is great for a server (for now), the numbers have proven that, but as a desktop or cloud it sucks. always has, its that shitty package mgt.

All os's suck right now. hopefully, we will look back in 20 yrs and go my god was that archaic. The way we are going though is win7 will still be usable in 2022.

We are still stuck using the same filing systems, freaken bios's in computers- from the 50's, its so ancient. 

Oracle should have won, java blows anyways- it could have helped kick start some new thinking in other directions.

The programming languages, the implementation of AI its all super clunky- we won't see any real advances until things go biological and go quantum. The world needs a computer language where its more intuitive and is able to adapt to changes automatically at lower levels of operations.

ipv4 we still haven't moved to ipv6 even, everything is really archaic and its going to take a long time at the rate we are going.  2050 before anything good is going to happen.






TheFourthStooge-ing's picture

billsykes started drinking a little early today:

Linux is great for a server (for now), the numbers have proven that, but as a desktop or cloud it sucks.

I see you're still living in 1997. I've been using Linux as a desktop for more than a decade and don't miss Windows in the least. The "cloud" comment reveals an understanding of technology which is superficial at best, on a level comparable to a CIO that believes everything from Gartner and makes a habit of parroting the tech buzzwords du jour.

Here are some helpful hints for you. Stay away from, sell your tech stocks before March 2000 and put the money into gold, in 2001 you'll be squawking about "portals", and sell your house by 3Q2005.

By the way, in the year 2000, we still won't have Jetsons style flying cars.

always has, its that shitty package mgt.

Care to be a little more specific? There is quite a variety of package managers available nowadays. To paraphrase an insurance company commercial, it's so easy, even a CIO can do it.

We are still stuck using the same filing systems, freaken bios's in computers- from the 50's, its so ancient.

You're only off by at least four decades or so. Do you still have to wait for the tubes in your "car phone" to warm up before using it, and making calls by feeding it a stack of punch cards? Please, I invite you to join the world of the future, where you can enjoy wonders such as magnetic tape, stereophonic sound, color TV, and electronic calculators.

The programming languages, the implementation of AI its all super clunky- we won't see any real advances until things go biological and go quantum.

You're probably a faithful believer or Ray Kurzweil's singularity crap, too.

The world needs a computer language where its more intuitive and is able to adapt to changes automatically at lower levels of operations.

So are you saying the world needs a higher level low-level language or a lower level high-level language?

ipv4 we still haven't moved to ipv6 even, everything is really archaic and its going to take a long time at the rate we are going.

Nobody is stopping you from using IPv6. A lot of places haven't migrated to IPv6 because, aside from the additional address space, they see no compelling reasons to move from IPv4. Perhaps if someone like you could explain all of the advantages, they could justify the expense of a migration.

2050 before anything good is going to happen.

Perhaps if you hold your breath, it will speed things along.

billsykes's picture

Look geeks, this is a finance website not /. 

I want what a power business user wants- a means to an ends, in the most productive, efficient way possible.  I am not some geek Indian programmer who cannot afford to use windows. 

I am not going to use open office- but software that is top notch, like MS office. Stop it, I know what you are thinking, let me stop you- VBA code and excel.  

PC is a fucking tool, that's it- I don't want to have to polish and forge a hammer if I was a carpenter, I want to pound nails.

I don't give a fuck about linux, its a sub of a sub of a sub within a sub culture- the desktop numbers speak for themselves.

You had 10+ yrs to make even a cunt hair better than win2000 or xp but it is not. why? because no body fucking cares about it.

Get your average business user to install a driver or maintain the system in Linux. cant.  OR else you would see everyone using it.

I am unequivocally right.


Even mac is better than linux. 









akak's picture

I have a sneaking suspicion that your wife or significant other (if any) does not win many arguments.

TheFourthStooge-ing's picture

I'll let you in on a little bit of wisdom that I've somehow managed to acquire over the years:

Never argue with a woman. You cannot win, and if by some remote chance you do win, you'll end up wishing you hadn't.

malikai's picture

As a linux user and developer for almost two decades, I have to disagree with you on all fronts. But by all means go ahead and say whatever nonsense you like.

Zero Govt's picture

Reggie wearing his Goofball heart on his sleeve once again, such a surprise.

"Android is eating Apple's and Microsoft's lunch in the marketplace, because people love it and OEMs love it.."

Goonbubble is eating others lunch because it's given away its 3rd rate software with food stamps for free... otherwise known as dumping (which is illegal not to mention commercial stupidity/suicide) for which Goofballs should already be in court for trashing the marketplace

You have to ask Reggie if Goofball can't charge for their crap they're neither a commercial organisation nor competitive nor is their product worth anythinbg (if they can't enter a market on a commercial basis and charge for their product)

Desperate trash Reggie

billsykes's picture

You are right andriod is trash. unchecked unvetted virus ridden trash.

I think the biggest underdeveloped market is smart phone firewalls and virus protection. how are those stocks doing. 

you can pay for shit with your cell, but are afraid to surf the net without a virus scanner on your pc?

Zero Govt's picture

i'm strictly a shower person mate

do you know what planet Reggie is on?

my guess is it's the one between Saturn and Neptune

malikai's picture

Reggie is spot on on this one. If you take a historical view of the tech industry, it is copying + a little tweaking + a little more tweaking + a little more copying. This has led to the progressive improvement of all components, software and hardware, ever since the days of Colossus.

Zero Govt's picture

actually Reggie has historically lost his marbles, like Goonbubble

they're dumping their crap for free and trashing the market ..probably because they're too insecure to earn (a profit) by charging for it in a commercial stylee and work in a professionaal manner to earning market share

Goofballs dumping strategy is a sign of complete desperation from this dinosaur, as are Reggies uber-biased articles

historically speaking dumping and trashing your way to market share bodes ill for the consumer and i simply cannot wait for Goofball to unravel or 'bang' goes another free market dominated, like Microshite before it, by a Trabant maker


malikai's picture

Sorry, but you're wrong. You do not understand the open source model. If you did, you would know just how incorrect you are. I suggest you take a look at companies like RedHat, Canonical, etc for examples. New business model does not mean "dumping their crap for free".

BTW: I'm not the one downvoting you. Although I think you're wrong, you're being civil, which is what makes discource valuable.

Sabibaby's picture

Have you seen the latest iBrick? It's a brick with an apple on it, only $200. Samsung or Google can't match that! Who would buy a brick with an android on it? 

trichotil's picture

good job zooming out enough to show off that big gold watch,

more refreshing humility.

Zero Govt's picture

over 90% of luxury goods in China are purchased for Govt bribes

one wonders what trappings Reggie gets for his constant bias and ever more shrill ramping of Goonbubble

Sokhmate's picture

A more accurate description of Apple/MS 'jihad' is Apple/MS 'crusade'

carambar's picture

Is this Reggie subscription discount day?

 Another worthless paper. Who doesnt know that over protection of IP kills inovation

and will end up hurting the very company that fights to protect it? Who?



NotApplicable's picture

Apple will just have to be happy with a bigger slice of an ever shrinking pie.

I own an iTouch 3, but I'll never purchase another Apple product again.

"Tonight there's gonna be a jail-break, somewhere in this town."

machineh's picture

'I'll never purchase another Apple product again.'

Me neither. The rotten Apple has morphed into a Microsoft clone. Unacceptable.

Plus the competition offers more value for the money.

aleph0's picture

Remember the days when hippies were camped out on the Apple campus, offering to work for free ?
They were out to get "Big Blue" .. they thought !
Since then , Apple has become an even bigger proprietry hardware/software/marketing company.
Ironic hey ?

Zero Govt's picture

Coca-Cola got a bunch of hippies on a hill to chime, "I'd like to teach the World to Sing" and they're still doing ok

Zero Govt's picture

if you purchase an Apple "value for money" is secondary to having a product that works smoothly and reliably and is cutting edge (leads the market)

your new "value for money" claim suggests your circumstances have changed and you now want cheaper crap

malikai's picture

This is incorrect. The most powerful smartphone on the market today is the HTC One-X, which, oddly enough runs Android.

Zero Govt's picture

i don't think it "odd" that the HTC runs Android, they get the software for free because Goofball is dumping the product on the market (cough)

how are HTC One-X sales versus the 4S ?

malikai's picture

Again, look at companies like Redhat and Canonical. Redhat has been around and profitable for, what, almost 20 years now? They must be doing something right.

bank guy in Brussels's picture

The US courts are just one more 'game' in the rigged US casino, and that is why Apple won ... 

US company Apple won in a crooked US court against Korean company Samsung ...

But Apple just LOST their case in a Japanese court which doesn't have America's bribed judges ... as reported also today in a minor note on ZeroHedge and on Bloomberg

The US bribed judges not only protecting Apple, but also all the hedge funds and pension funds owning Apple stock

Apple won a case before America's crooked judges, loading and stacking the procedure, what is admissible as evidence, and jury instructions in favour of USA companies ... in USA courts where juries are typically selected for their prejudices and ignorance ... the prejudice that makes them jail innocent black people who look like Reggie Middleton ... the prejudice that makes them decide in favour of US parties against foreign parties

But it is different when Apple is against US giant Google - Google is one of the biggest friends of America's bribed judges and ruling elite, because of its censoring and manipulating search results to benefit America's elite ... including censoring websites about US judge corruption and bribery ... Google is as 'inside' as Goldman Sachs and JP Morgan

Microsoft is pretty 'insider' too ... Microsoft founder Bill Gates, his father was a lawyer in the US political mafia dating back decades, a partner in the Bogle Gates firm ...

These 'court decisions' from the US are just more crooked shite

YHC-FTSE's picture

+1 Here, here. I've just read the jury foreman's justification for the $1.05 billion fine in the California case, and clearly the moron did not understand the case nor the instructions on the fact that this is not a case about punitive damages. They awarded financial damages to Apple on Samsung devices that apparently was not even contested, ignored Apple's infringments, and decided to basically fuck this Korean company over in the mistaken belief that generic size and shaped designs can be protected by intellectual property law.

It just makes me hopping mad, and the dire consequences for this incredibly important market - in innovation, consumer choice, and price differentials - is going to be felt for years unless Samsung fights back and fights back hard with undeniable proof that Apple themselves are one of the biggest culprits of copyright/ ip theft on the planet. Samsung should use the same channels - the msm - to do to Apple what was done to them. 

mendigo's picture

It would be incredible if this is not overturned or set aside or retried. It is disappointing that our legal system let this be so mishandled. Additionally in the US patent system, being granted a patent in itself is no gauratee of any protections - many companies can be quite forceful about pushing through a patent and I suppose they generate revenue. So it is some company with a law firm vs a patent examiner (ie government employee). So they take the filing fee, grant the patent and leave it to the hot-shot corporate lyers to sort the shit out. Frequently companies just use patents to muddy the waters. I hope that apple is thoroughly trashed over this.

Freddie's picture

I hope Samsung F over Apple in Asia.  Korea and parts of Asia are a better market anyway.  America is filled with TV watching sheep who love dear muslim.  Idiot serfs brainwashed by TV but ZH is filled with morons who support The Matrix by watching TV.  F em!

williambanzai7's picture

Practically speaking, if the Asian courts enforced IP the way the US does, a whole lot of local business would be lost. Copying IP and industrial design has been a way of doing business out here for decades. Whatever they can get away with they will.  There is no denying that.

onebir's picture

Maybe so in China, but I believe Apple just lost the same case in Japan, which I'd have thought was somewhat neutral territory (Samsung being Korean, and Korean-Japanese relations not always having been 'the best'.)

I don't know if the groklaw piece quoted mentions it, but in the California case

a) the jury's decision was demonstrably inconsistent (awarding damages where there were no infringements)

b) the jury foreman may have had a beneficial interest in some Apple patents

c) the jury foreman instructed the jury to *ignore prior art* (which is pretty fundamental, because you can't patent prior art...)

I'll be gobsmacked if this isn't overturned...

NotApplicable's picture

Decades? How about millennia?

A.k.a. "The history of mankind."

dark pools of soros's picture

Reggie, Samsung was blatantly copying Apple. You say you want to protect the 'little guy' but no little guy would of had the resources to gamble on making the iPhone. Both sides need to be protected. New ideas are still allowed, not copy cats that undercut since they have no R&D costs and risk.

Why didn't Samsung take some more time to deliver a different experience since Android is different than iOS? They didn't want to confuse the customer; rather sway the ones that Apple set the table for.

It isn't easy to win patent cases, Samsung were blatant assholes

YHC-FTSE's picture

Samsung was NOT blatantly copying Apple. For FUCKS SAKE stop echoing the corporate line aped by the msm. If you know ANYTHING about patent law, you would know that you cannot patent size and shape, and the argument that Samsung copied the generic designs that had been pioneered already by IBM, MS, and Sony is as ridiculous as the dancing wankers on Apple adverts. 

Read this CLICK ON LINK TO DAILY TECH ARTICLE then come back and dare to suggest again that Apple made original designs. From Apple's theft of Xerox's GUI to the ripping off of Samsung's G3 technology, it is the thieves themselves who are going all out to sue their competitors and apparently winning. 

If there was patent infringement it was done by Apple. That should be fucking clear even to their biggest fans.