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Let me be clear from the very beginning. I have been very critical on Apple’s (NASDAQ:AAPL) leadership. Not because the company’s stock is falling. I have been rather concerned about the flurry o lawsuits the company has been bringing against competitors--even partners for infringing its patents.
This isn’t to say that Apple shouldn’t protect its intellectual property from copycats and imitators, but it should carefully weigh the economic costs of pursuing every case.
Most notably, the company shouldn’t let litigation come ahead of innovation on its priorities list by settling rather than litigating patent disputes, as was the case today with HTC.
“We are glad to have reached a settlement with HTC,” said Tim Cook, CEO of Apple in the company's official site. “We will continue to stay laser focused on product innovation.”
As I wrote in a previous piece for almost a decade, Apple has been competing the old free enterprise way: developing and marketing high quality innovative products that changed consumers’ lives, like the MacBook, the iPod, the iPhone and the iPad. But recently Apple seems to be moving away from this business model, engaging in prolonged legal battles with once main partner Samsung (KSE:005930.KS), which in the end may hurt smartphone customers.
There are several reasons business strategists become concerned about the future of companies that spend a great deal of time in the courtroom defending their products.
First, legal battles divert leadership from looking after the basic corporate functions — most notably, the discovery and exploiting new business opportunities. Microsoft’s (NASDAQ:MSFT) leadership, for instance, spent a great deal of time battling the US and European governments in a period when Apple defined the market for mobile devices. MCI spent too much time fighting AT&T (NYSE:T) in court rather than in the marketplace. We all know what happened to the company.
Second, legal victories create a sense of complacency — that the company is insulated from competition, which undermines any urgency to innovate and keep up with high quality standards.
And third, litigation may hurt the company’s image among consumers. Especially if they result in fewer choices, higher prices, and quality compromises, as was the case with Apple’s Iphone map disaster.
Also read:
One Encouraging Sign for Apple's Stock
Disclosure: Long and short on AAPL
