Apple’s (NASDAQ:AAPL) $1 billion legal victory against Samsung Electronics eliminates a major threat the company faces in the smartphone market: Competition from similar products from Asian manufacturers. But it doesn’t eliminate the ultimate threat every product faces: Market saturation. Once consumers get enough smartphones, demand will taper off, as was the case with Sony’s (NYSE:SNE) video players and cameras, Corning’s (NYSE:GLW) fiber optic cable, and Cisco’s (NASDAQ:CSCO) Internet gear.

While this threat doesn’t seem urgent, given the low degree of market saturation for smartphones at the present, it cannot be ignored because the lifetime of technology products is relatively short. The long-term question, therefore, isn’t how many legal battles Apple will win to defend its competitive edge in the smartphone market, but how many new products it will churn out to win new markets.  Simply put: What is next for Apple? Will legal victories strengthen or weaken its innovative drive? Only time can tell.

However, economists and business strategists are concerned about the future of companies that spend a great deal of time in the courtroom defending their products for several reasons. 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. Second, legal victories create a sense of complacency that the company is insulated from competition, which undermines the urgency to innovate. Third, it may hurt the company’s image among consumers, especially if they result in fewer choices and higher prices.

The Bottom Line: The future of Apple will be determined in the market place, not in the courtrooms.

Disclosure: Active investor; currently long on AAPL

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