Thwarted: Apple Wanted an Audacious $40 for Every Android Sold, But Lost — Consumers Win in Big Court Case
Apple CEO Tim Cook
Photo Credit: Markus Spiering / Creative Commons
Although the weekend's headlines read that Apple was victorious in its latest patent suit against Samsung, nothing could be further from the truth. The $119.6 million Apple won for having two of its patents infringed upon was less than 10% of the $2.2 billion it was seeking. In addition, Apple had sought a $40 per-unit fee for each Samsung Android phone it said infringed on its patents. Some legal analysts are calling the latest legal showdown between the smartphone giants a victory for Samsung, saying that Apple likely spent close to the amount it won in legal fees.
But the outcome of this lawsuit was actually a rare victory for consumers.
Apple was looking for a patent royalty rate that would allow it to collect billions from Samsung every year for five features it claimed to have patented: data tapping, unified search, data synchronization, slide-to-unlock, and auto-complete. The $40 per-unit fee would not only apply to the 37 million Samsung devices it says are infringing patents, but also those yet to be sold. If the jury had given Apple all it had asked, it would have opened the door for subsequent lawsuits with other Android manufacturers.
Those numbers would have been startling when you consider that some 1.3 million Android phones are activated per day. The potential was there for Apple to make a cool profit of $19 billion per year without having to sell a single phone.
This trial is only the latest in a series of news items over the past year that paint Apple as a corporation more and more motivated by unbridled avarice.
Its $159 billion in cash holdings are staggering, and yet Apple doesn't seem inclined to share this wealth with its employees, customers, shareholders, and the tax man. Apple's cash on hand is so remarkable that Nick Bilton of the New York Times pointed out the company could fund a mission to Mars (yes, the planet) with all that cash.
Apple could pay its 30,000 retail employees — who earn an average of $25,000 a year —another $10,000 (a living wage for an adult with a child) without it smudging the ledger. That collective bump in salary for the retail employees is also shy of the $378 million in restricted shares the Apple board awarded Tim Cook when he took over as CEO in 2011.
Apple won't even let the U.S. government get its slice of the pie. The Cupertino, Calif. electronics manufacturer has taken advantage of numerous loopholes and tax havens in countries such as Ireland, where it set up a network of holding companies to route some 64% of its corporate profits (all from foreign sales) without paying taxes anywhere. Last year, a U.S. Senate investigation revealed that Apple set up a complex corporate shell game allowing it to reel in $44 billion in offshore income without paying a dime in taxes.
It's not new to suggest that Apple products are more than a tad on the expensive side. Apple's loyal consumers seem willing enough to fork over 30-60% more for the Apple experience over comparable desktop computers, laptops, tablets, and smartphones. Even the recent rumor that the new iPhone 6 will cost wireless providers about $100 more per phone doesn't seem to inspire rebellion among Apple's fanbase.
Perhaps Apple is worried about its dwindling market share. It once reigned over the smartphone market, but it's been eclipsed by phones using Google's Android software in the past few years. One reason Android phones are so popular is that they come at various price and feature levels, from the high-end Samsung Galaxy (the iPhone's most direct competitor) to very inexpensive phones that can handle text, email, photos, video, and data for a quarter the price of an iPhone. It's those cheap phones Apple fears the most — and not the rival Samsung Galaxy — as they are collectively becoming a force in the market.
All the major wireless companies offer free Android smartphones with two-year contracts and no contract phones can be purchased for as little as little as $110. A $40 hike would probably not have been absorbed by the wireless carriers, and would have put an end to cheap phones.
Low-priced smartphones — paired with affordable data plans — have been an important tool in crossing the digital divide between rich and poor. Yet it would have been the low-income demographic that relies on smartphones for most, if not all of their Internet access that would have paid most dearly had Apple succeeded. Android users outnumber iPhone users 2 to 1 among those earning less than $30,000.
Apple won little more than bragging rights with this hollow victory over Samsung. In the end, it was consumers — and most notably low-income consumers — that, for once, won a small victory over this corporate Goliath.