Apple’s Long History of Courtroom Combat

Like many of its competitors in the tech industry, the company has a long history of patent litigation

   

This is the first of three articles highlighting Apple’s approach to intellectual property and patent litigation. Next: “Fighting Fire with Fire in the Center of the Patent War.”

Apple (NASDAQ:AAPL) has had a long and complicated relationship with copyright and patents. The current situation the company finds itself in — stuck in a seemingly endless series of lawsuits with Samsung (PINK:SSNLF), Motorola (NYSE:MMI) and others — is indicative of a tactic currently being employed throughout the technology industry.

Companies don’t just compete for costumers based on product, they increasingly compete for market share by moving the fight to the courtroom and trying to hobble competitors based on intellectual property lawsuits.

Even though we seem to be seeing a real upswing in patent-related lawsuits, attacking the competition based on intellectual property is nothing new. Going back a few decades, similar battles were being waged (although they typically involved a broader copyright aspect rather than specific patents), and just like today, Apple was both aggressor and defendant. The most famous of these is the so-called “look and feel” case filed against Microsoft (NASDAQ:MSFT) over use of the graphical user interface (GUI) in its Windows operating system.

An early legal bout

Although Apple had licensed parts of the Mac GUI to Microsoft for Windows 1.0, Microsoft continued to incorporate additional elements in subsequent Windows versions. As Windows-based PCs began to dominate computer sales, Apple launched a 1988 lawsuit claiming Microsoft had violated copyright by stealing the “look and feel” of the Macintosh GUI by incorporating 189 different elements that were similar.

The suit dragged into the 1990s, with Apple eventually asking for $5.5 billion in damages. In 1993, the lawsuit was thrown out. Apple then filed suit against Microsoft for allegedly incorporating elements of Apple’s QuickTime video software in the Video for Windows multimedia program, again asking for billions in damages.

In 1997, an ailing Apple agreed to drop all the litigation in return for what amounted to a bailout by Microsoft that included $150 million in cash, an agreement to continue offering the critical Office productivity suite for the Mac platform, and a patent cross-licensing deal between the two companies for five years. The resolution of over a decade of legal battles bought newly returned cofounder Steve Jobs the time needed to begin the turnaround of Apple.

An inspired trade

Another issue worth reflecting on is the origin of Apple’s user interface and the mouse, the combination that led to the revolutionary Macintosh personal computer in the first place. The idea for the Mac user interface was inspired by a 1979 visit by Apple’s Steve Jobs and his Macintosh design team to the Xerox PARC (NYSE:XRX) research labs, where they saw demonstrations of a prototype GUI and computer mouse. Xerox allowed Apple’s engineers to study this innovative system based on an arrangement where Xerox would gain the right to buy pre-IPO stock from Apple.

The Macintosh GUI was heavily influenced by the system demonstrated at Xerox PARC, and while Apple went far beyond what the Xerox system offered — by allowing direct manipulation of icons, cascading windows, and adding the trash can, for example — the Mac GUI took major inspiration the Xerox demo.

There were questions over whether Apple had gone beyond the terms of the agreement in releasing the Mac operating system. While Xerox did eventually sue Apple over its use of the GUI and mouse, that case was dismissed because of significant improvements Apple had made on the GUI, instead of simply copying it, and because the computer mouse was invented and patented in the 1960s by the Stanford Research Institute (SRI). Apple licensed the mouse patent from SRI.

A different era, a different outcome

If that same Xerox lawsuit had been filed today using current legal tactics, it’s quite possible that even if the end verdict had been the same, Apple could have been prevented from selling its computers in various markets. And if Xerox had been more aggressive in patenting its software (something that was legally untested in the 1980s), Apple might have been stopped outright or forced to pay licensing fees. Either way, given Apple’s precarious health at the time, the company may not have survived to go on and reinvent itself.

In many ways, those epic legal battles of the 1990s merely set the stage for what was to come. While hardware had been protected by patents, after the Apple v. Microsoft battles tech companies began to aggressively accumulate patents for their software as well, stockpiling ammunition for another round of legal battles that would eventually erupt in today’s mobile computing market.


Article printed from InvestorPlace Media, http://investorplace.com/2012/03/apple-in-court-like-the-1990s-all-over-again-aapl-msft-xrx/.

©2014 InvestorPlace Media, LLC

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