Patents as a form of competition

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Patents as a

form of

competition

Two case studies of companies’ patent

strategies in a multi-invention context

Author: S. Vijfschagt Student number: 1540955 E-mail: s.vijfschagt@rug.nl

University of Groningen

Faculty of Economics and Business Supervisor: D. Seo

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S. Vijfschagt Page 1

Preface

This report examines how companies gain strategic advantage from using and developing their intellectual property. In particular, I have studied the patenting strategies of Rambus, Apple, and Samsung. The case that originally sparked my interest for this topic was the struggle of Apple vs. Samsung over their smartphones and the patents on these devices. Every week brought new

developments in the case, and even now the case has yet to reach a conclusion. The Rambus case was later added to this report as it also provides many legal battles over IP rights.

This thesis was written during the period from February to August 2012 as part of the study Business Administration, specialization Business & ICT, at Faculty of Economics and Business from the University of Groningen.

I would like to thank my supervisor DongBack Seo for her support during this project. Her comments and suggestions on my work were very helpful. Also, her suggestion of examining the Rambus case really improved my research.

Special thanks go out to my family and friends. Their support really helped me finish this project. Finally, I thank you, the reader, for taking the time to read my report. Hopefully, by the end of it, you have gained new insights into intellectual property rights similar to the ones I got while writing this.

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Abstract

This paper aims to examine how a company can gain strategic advantages from the use and

development of their intellectual property. Several options for analyzing a company’s IP strategy are discussed. Then, this paper analyzes the Rambus and the Apple vs. Samsung cases from the multi-invention context framework proposed by Somaya, Teece and Wakeman (2011). To conduct the analysis, news articles covering the cases were gathered using the Lexis Nexis database. The results suggest three ways in which companies can use their IP to gain competitive advantage: 1. by forcing rivals into licensing deals through the threat of litigation, 2. by blocking them from the market through enforcing IP rights or 3. by using IP rights as leverage in cross-licensing deals or litigation

settlements. Finally, the paper proposes the framework of Somaya et al. can be improved by including the notion that the type of competition influences IP strategy, and by including market conditions as a factor which should be aligned with a company’s IP strategy.

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Index

1. Introduction ... 4

2. Theory ... 5

2.1 The purpose and economics of IPRs ... 5

2.2 Setting an IP strategy ... 7

2.3 IP Strategy typologies ... 9

2.4 IP strategy in multi-invention context ... 11

2.5 Theoretical views on the Rambus saga ... 14

3. Methods ... 16

3.1 Data collection... 17

3.2 Data analysis ... 18

4. Results ... 18

4.1 Rambus ... 18

4.1.1 Rambus’ organizational model ... 18

4.1.2 Rambus’ patent strategy ... 19

4.2 Apple and Samsung ... 23

4.2.1 Organizational models ... 23

4.2.2 Patent strategies ... 23

5. Conclusion ... 27

References ... 29

Appendix I Detailed Rambus case overview ... 37

Appendix II Detailed Apple vs. Samsung case overview ... 40

Appendix III Coding classification ... 43

Appendix IV Coded quotation for the Rambus Case ... 44

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1. Introduction

Last year, Apple filed many lawsuits in many countries against Samsung since Apple feels the design of the iPhone is being copied by Samsung’s Galaxy line. However, in this case it also possible the design of the phone is restrained by technical boundaries, i.e. the screen has to be flat in order to read data from it. Apple claims it only seeks to protect their patents so their innovations efforts are not futile, but is this the only reason for the costly legal war between the two giants? Or is this some form of ‘dirty’ competition, where Apple is trying to slow down their competitor through legal action whilst in the meantime establishing a foothold in the market?

Intellectual property rights provide a field of much debate. Not only is it difficult to prove empirically that IPRs have an economic effect (Bessen and Meurer, 2008), but the effects of IPR on technological innovation are also complex, and appear to be highly contingent. Even choosing which form of protection to use for an invention can be difficult. Some IPRs can be used to complement each other, for example developing a new trademark for an innovative product (Mendonça et al, 2004), while other IPRs are mutually exclusive since an invention cannot be kept secret and patented at the same time. Furthermore, some researchers like Davis (2004) argue that the value of IPRs is diminishing through the emergence of technologies like video streaming and file sharing. To solve this problem, Davis proposes to reform the patenting system so the incentive for innovation is repaired. Others oppose this view and state even if the value of IPRs becomes less, it does not necessarily leads to less innovation (Park, 2010; Banerjee and Chatterjee, 2010).

Even the basic purpose of IPR has received many critiques as some companies use their IPRs in strategic roles different from the basic premise (Davis, 2004; Rivette and Kline, 2000). Such uses include, but are not limited to, patent trolling, boosting branding effectiveness and laying the basis for strategic alliances (Rivette and Kline, 2000; Blind and Thumm, 2004). Some industries, however, still view IPRs as legal matters best left to the corporate attorneys to fuss over while the CEOs concentrate on the truly strategic stuff of competitive warfare (Rivette and Kline, 2000; Davis, 2004).

The goal of is this research is to examine how a company can gain strategic advantages from the use and development of their intellectual property. In particular, I focus on the use of patents. Industrial inventors often look to patent rights for the protection of their innovations (Park, 2010), which has made patents the most common form of IPR. Out of the different forms of IPR patents offer the strongest legal protection, and in most industries they have the most effect on commercial success (Rivette and Kline, 2000). I will address the following research question:

How do firms use patent strategies to gain competitive advantage?

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2. Theory

In this section, I will first explain the basic purpose and economics of IPRs. Then, I look at what determines the IP strategy of a company and some different IP strategy typologies. Next, I explain a framework for IP strategy in multi-invention contexts and why I choose to apply this framework. Finally, this section provides a review of key literature concerning the Rambus case.

2.1 The purpose and economics of IPRs

The basic purpose of IPRs is protection. Through offering protection from free-riders, IPRs provide are justified as incentives for innovation or, in the case of trademarks, as an incentive for maintenance of product quality (Statman, Tyebee, 1981, p. 71). These incentives maximize the difference between the social benefits of the creation of information and the social costs, including the costs of

administering these rights (Davis, 2004 p.401). The incentives come from the temporary right of exclusive exploitation of the benefits deriving from the new knowledge protected by the IPRs. This right goes to the knowledge-producers. So, IPRs provide their holders with a temporary monopoly position, but at the same time limit the free implementation of technological knowledge, since other potential users can either not get access to required knowledge or have to pay for it (Blind and Thumm, 2004 p.1584).

Rivette and Kline (2000, p. 56) identify patents, trademarks, copyrights and trade secrets as different forms of IPR. Davis (2004) also discusses utility models, industrial designs, geographical indications and domain names as forms of IPR. He further explains that the economic effects of these IPRs differ. For example, if an invention is new and non-obvious it can be patented and protected. If the invention is an incremental improvement on an existing invention, it cannot be patented but is a utility model instead. While this also protects the invention, the protection period is a lot shorter which makes for fewer benefits.

From an economic perspective, IPRs typically take the role of protection. According to Bessen and Meuren (2008), the standard argument is that without patents, inventions will be quickly copied by imitators. Since these ‘free-riders’ can copy the invention without bearing the innovation costs, they will drive down prices, making it impossible for the inventor to earn sufficient profits to recoup his investment in developing the invention. So without a means to earn profits, inventors will not invest in the first place. In this theory, patents provide the rewards that inventors need to invest in innovation by limiting free-riding.

The most common form an IPR takes is that of a patent. Some researchers even use the term IPR and patent interchangeably (Rivette and Kline, 2000; Blind and Thumm, 2004). Varian (2006) argues the focus on patents often means other forms of IPR are neglected. Rivette and Kline offer two

explanations why patents are most used. First, patents are the most tangible form of IPR, with the strongest legal protection, and in most industries they have the most effect on commercial success. Second, they argue that patent databases are a library of information that, with current automated searching, can be valuable sources of rich competitive intelligence. Park (2010) also finds the focus on patents unsurprising, since industrial inventors often look to patent rights for the protection of their innovations (p. 53).

In emerging economies, applying for patents or other forms of IPR might work against inventors. Such economies typically have a weak appropriability regime in which IPRs are not very enforceable. Keup,

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Table 1: Overview of key literature discussing the purpose of IPRs

Year Author(s) Topic Method Findings

2008 Bessen and Meurer Economic performance of patents Survey of empirical research

Positive effects of patents are highly contingent

2004 Davis Changing role of IPR and implications for firm strategy

Review of IPR literature

Four interrelated trends explain the changing role of IPRs. The patent system needs to be reformed. 2000 Jaffe Changing in patent

policy and practice

Survey of theoretical and empirical research

There is little empirical evidence to support the theory that

strengthening IPR protection has a significant impact on innovation. 2008 Ziedonis Effects of patents on

innovation

Discussion of Bessen and Meurer’s arguments

Empirical evidence provides little basis for concluding that public firms outside the chemical and pharmaceutical industries would be “better off” if patents did not exist. profitable and thus gets targeted for imitation (p. 213). In such economies, firms should look for other means to protect their inventions instead.

As table 1 shows, there is a widespread debate over the purpose and economic effects of IPRs. Jaffe (2000, p.531) first makes the disquieting conclusion that there is little empirical evidence to support the widely accepted theory that strengthening IPR protection has a signiﬁcant impact on innovation. He finds three reasons for this: (1) distinction between the effects of policy changes from the effects of other contemporaneous developments is difficult, since many aspects of the environment for

innovation are changing at the same time; (2) significant changes in patent policy may have only limited effects, due to many other determinants; and (3) economic theory makes predictions which sometimes are quite sensitive to model assumptions (p.532). Davis (2004) goes on to argue that IPRs have not, necessarily, become more effective in motivating R&D. He found that CEOs in various industries gave relative low rankings for the effectiveness of IPR (with the exception of

pharmaceuticals). Davis even argues the current patent system need to be reformed since it no longer suits its purpose.

The arguments of Bessen and Meurer (2008) support Davis’ view that the patent system needs to be reformed. They further analyze the economic effects of intellectual property by comparing it with basic property rights. One of their arguments holds that patents may even impose disincentives on innovators in the form of litigation costs and exposure to patent-infringement lawsuits. Their argument states that development of a new technology exposes the innovator to risk of inadvertent infringement if patent boundaries are hidden, unclear, or unpredictable. That risk weighs against the profits that can be made from innovation.

Bessen and Meurer (2008) also conclude that the positive effects of patents appear to be highly contingent. These contingencies depend on differences in technology and industry. Furthermore, they suggest that less developed countries have a harder time realizing benefits from patents or that countries that participate actively in international trade may benefit more. Another important but frequently omitted contingency is firm strategy (Gittelman, 2008).

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S. Vijfschagt Page 7 of the economy (p. 23). One of her reasons is that Bessen and Meurer implicitly assume that the private value firms reap from owning patents is equivalent to the private value those firms derive from the patent system (p. 24). This assumption foregoes the notion that there are several ways in which public firms reap indirect benefits from the patent system (p. 24). Thus, Ziedonis argues, there is little reason to conclude from the authors’ evidence that patents universally discourage innovation outside the pharmaceutical and chemical sectors (p. 28). She argues that the patent system also underpins a broader set of activities that indirectly influence the profitability and growth of established

corporations. Though difficult to prove empirically, if these indirect effects are economically and strategically important, which seems likely to be the case, public firms may be far “better off” in the modern patent system than Bessen and Meurer’s statistics suggest.

2.2 Setting an IP strategy

The previous section discussed the purpose and economics of IPRs. While the basics are quite simply in theory, in practice the value and use of IPRs differs from the thought behind them. I discussed the different views authors have on this and how some feel the current system should be overhauled, while others feel the evidence is not strong enough to jump to conclusions. This section at how companies determine their IP strategy.

There are quite a few theories concerning the factors that set a company’s IP strategy. Table 2 provides an overview of these theories, as well as the methods and typologies used in the articles. Davis (2008) argues that, for IP vendors, an IP strategy is determined by a company’s approach to licensing and the degree of technological cumulativeness of inventions. A company can either choose a ‘stand-alone’ or a ‘licensing-plus’ approach. In ‘stand-alone’ licensing a license serves primarily to specify the legal basis for the transfer of rights and to enable royalties (p. 14). In ‘licensing-plus’ licenses are not only used to extract royalties, but also to support the longer-term relationship with the buyer of the licenses (p.14). Davis explains the degree of technological cumulativeness as the degree to which a company’s research activities are mutually dependent on the innovative activities of other market players (p. 15). A low degree means companies are likely to block rival from imitation by patenting core inventions, and numerous substitutes. Davis refers to this as ‘block-to-fence’. A high degree of technological cumulativeness makes companies more likely to ‘block-to-play’, where owned patents are used as ‘bargaining chips’ in licensing negotiations (p. 15). Somaya et al. (2011) confirm the influence of technological cumulativeness. They state that in many industries, developing new products requires the combination of a very large number of inventions, which leads to “multi-invention” contexts. They even state that in some industries, one needs to use earlier patented innovations simply in order to conduct new research (p. 48). Furthermore, they recognize that a company has to decide how they access proprietary (and patented) technology that is held by others and manage patent rights on their own inventions (p. 50) which supports Davis’ view on licensing choice.

Jansen (2011) recognizes that patents can be used as bargaining chips but also explains a different view on IP strategy. He argues that a patent can enable a firm to signal information about its

innovation in a credible, verifiable way. However, patenting inventions can also yield a more efficient and more “aggressive” competitor in the product market. This expropriation effect gives the

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Table 2: Overview of IP strategy literature

Germeraad (2010) analyzes IP strategy by using the games of innovation model of Miller and Floricel (2004). He argues that innovation strategy sets a company’s IP strategy. In this view, innovation is driven by elements: time-to-prototype and time-to-market. Time-to-prototype refers to the time it takes to create a working prototype of a new product or service. Time-to-market refers to the time it takes for a new product or service to reach the market. Germeraad argues that since best practices to manage innovation and create intellectual property vary by these two elements, it is logical that the practices for managing and leveraging IP would vary by the same elements. He fails to provide compelling proof this hypothesis however, despite his claim that he interviewed IP managers in over 100 companies.

The appropriability regime of the countries a company operates in is mentioned by multiple

researchers as a main determinant of IP strategy. Building on the work of Teece (1986), who predicts that in a weak appropriability system innovators will probably lose their competitive advantage to imitators, Keup, Beckenbauer and Gassman (2009) examine IPR strategy in China. They find that in weak regimes different IP strategies are required to be successful. Their argument is that patenting can facilitate local illegal imitation as it identifies the profitable products suitable for imitation. Also, complementary measures for IPR protection rely on the assumption of a strong appropriability system and a legal system that threatens imitators and effectively sanctions persons who infringe on treaties

Year Author(s) IP strategy determinant(s)

Method IP strategy typology

2008 Davis A company’s approach to licensing The degree of technological cumulativeness of inventions Focus on IP vendors, literature review on firm appropriability choices and economic theories of organization, and case studies

Four different strategies based on the two determinants proposed in the paper

2010 Germeraad Innovation strategy

Interviews with R&D and IP managers at over a hundred companies

representing each of the eleven innovation strategy types

11 different IP strategies based on seven attributes, one for each innovation strategy discussed in the paper

2011 Jansen Type of competition

Applied game theory for Bertrand and Cournot competition modes

-

2009 Keup et al. The appropria-bility regime of a country Case studies of 13 foreign firms in China through interviews with managers and in-depth observation

Five IP strategies prevent imitation. In practice, firms use a combination of these strategies 2011 Somaya et al. Complexity of innovations Company’s approach to commercializing inventions Literature review, case study of four companies in multi-invention contexts

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S. Vijfschagt Page 9 (p. 213). These assumptions are unrealistic in weak appropriability contexts such as China. Section 2.3 will further discuss the strategies proposed by Keup et al. (2009). Jansen (2011) and O’Hearn (2008) also recognize the importance of the strength of the appropriability regime.

2.3 IP Strategy typologies

As discussed in section 2.2 Davis (2008) believes that a company’s approach to licensing and the degree of technological cumulativeness set a company’s IP strategy. In his research, he proposes a typology of four separate strategy types for IP vendors. This typology is shown in figure 1.

Nature of the contractual agreement Degree of techno-

logical cumulativeness

Stand-alone licensing Licensing-plus

Low The independent strategy The directed strategy

High The complementor strategy The reciprocal

knowledge-sharing strategy Figure 1: Davis’ typology of IP strategy (Adapted from Davis, 2008)

Followers of an independent strategy develop a new product or process to the point where they can demonstrate its potential commercial value, and then license it out (p. 16). A complementor develops an invention that is complementary to the prospective buyer’s technology (if unbeknownst to the buyer) and patents it. In the meantime, this prospective buyer keeps on investing in the technology. When the buyer becomes aware that the vendor’s patent covers an invention to which it must have access, it enters into a license agreement or compensates the vendor in some other way. Otherwise, the buyer realizes it faces major financial exposure by not dealing with the vendor (p. 19). In the directed strategy, the IP firm invests in an invention and patents it. It then tries to enter into a contract with a buyer that includes the license as well as other R&D agreements. The vendor continues to devote resources to developing the invention. The buyer can either develop the technology commercially (incurring financial exposure), or not (perhaps waiting for a resolution of technical or market

uncertainty) (p. 21). In the reciprocal knowledge-sharing strategy, the goal is the rapid diffusion of the technology. This strategy revolves around cross-licensing between suppliers, competitors and

customers. The inventor enters into a complex licensing and product development agreement with several or many market participants. The vendor develops and patents the invention at and then searches for potential partners with whom to cross-license. In the long term, this strategy enables further cross-licensing and continuous improvements to the technology (p. 22).

Germeraad (2010) links IP strategy to innovation strategy. He combines the 11 types of innovation strategy from the games of innovation model with IP strategy through identifying seven attributes of IP and assigning values to them for each strategy. Table 3 provides an overview of Germeraad’s attributes of IP. While each strategy and the attributes are discussed in detail the academic value of his work is unclear since Germeraad fails to describe his methodology and provides little proof of his hypotheses.

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Table 3: IP Strategy attributes (Adapted from Germeraad, 2010)

Table 4: IP Strategies for weak appropriation regimes (Adapted from Keup et al., 2009)

strategy typologies conducted in Western countries, but believe that in weak appropriability regimes different strategies are needed. This is line with Teece’s (1986) argument that in weak appropriability regimes, often the owners of specialized complementary assets earn the lion’s share of the profits rather than the original inventor. After several case studies of western firms in China, Keup et al. found that firms used combinations of five IP strategies in weak appropriability regimes to prevent imitations. These strategies are captured in table 4.

The discussion above has made clear that there are several typologies for IP strategy and that each typology has different means by which it can be best applied. Both cases I analyze in this study take place within the IT industry. In particular, the semiconductor (Rambus), and the smartphone and tablet computer (Apple vs. Samsung) industries. Gittelman (2008) recognizes the major split that has

emerged in IPR theory between “high tech” industry and the pharmaceutical industry. She argues that in complex, component-based technologies, such as semiconductors, and telecommunications

equipment, intellectual property is often fragmented across many parties, inventions are cumulative, and product life cycles are typically fast paced (p. 24). These industries have particular challenges concerning IP with set them apart. For example, to produce a single product a firm may need hundreds

Attribute Definition

Portfolio size the size of a patent portfolio required to compete effectively in an industry or segment. (p. 12)

Patent fences extend patent protection on the core technology by protecting products incorporating the most commercially important aspects of it, creating longer-term and more solid protection for the company's most valuable and commercially important technologies. (p. 12)

Patent velocity refers to the time between the granting of initial patents and the patenting of follow-on technology. (p. 13)

Portfolio momentum describes the growth trend in a company's IP portfolio. (p. 13)

Claim quality reflects the enforceability of a patent claim in a litigation proceeding. (p. 13)

Claim scope refers to the breadth of technology and uses covered by a single patent. (p. 14)

Geographic coverage may range from broad, spanning over a hundred countries, to specific coverage limited to just those countries of greatest interest. (p. 14)

Strategy Explanation

Technological specialization managers try to make imitation impossible by increasing the complexity of the product or the process technology (p. 215) De facto secrecy attempts to keep all knowledge secret or reserves a ‘key’ of tacit

specialized knowledge, without which the final product will not work (p. 216)

Internal guanxi Managers who use an internal guanxi strategy understand the importance of social relationships in China and use it to protect their firm’s IPR (p. 217)

External guanxi Exploit the de facto power of official bodies by establishing good relationships with external official bodies and institutions (p. 217) Educate the customer Not doing anything about imitation because the poor-quality

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S. Vijfschagt Page 11 of patents to assemble the necessary intellectual property rights. If these rights are owned by rivals, firms may need to rely heavily on cross-licensing to access the needed fragments of intellectual property (Hall and Ziedonis, 2001). Furthermore, hold-up problems can be a major issue which can lead to firms adopting patenting strategies that will create bargaining power vis-a-vis owners of complementary patents (Ziedonis, 2004). Finally, Gittelman (2008) recognizes that in these conditions no individual patent is of great importance and value accrues to a portfolio of patents that can be traded or assembled on component-based products. She argues that this can cause firms to file patents that are relatively low quality to get a larger portfolio and thus better bargaining power (p.24). Germeraad (2010) does not mention this critical difference between industries in his study. This is easily explained from his more general viewpoint but it diminishes the value of his work for the fast paced, complex industries of the cases. Furthermore, Germeraad’s work is specifically aimed at company patent committees and the choices such committees face, i.e. when should an invention be patented? He only discusses patenting strategies at an operational level, which makes his framework an unlikely choice for this study.

Keup et al. (2009) also do not mention the issue raised by Gittelman. Their work becomes even more difficult to apply because it is only useful for companies operating in weak appropriability regimes whereas the major events of the cases take place in companies with strong regimes. Furthermore, their strategies are derived from local case studies in only one country with a unique culture and

government (China) which makes it difficult to assess whether their theory holds true for other countries.

The work of Davis (2008) seems a more suited choice for this study since he accounts for the issue by incorporating the degree of technological cumulativeness and the companies’ approach towards licensing as the determining factors in his framework. Both factors are dependent on industry characteristics, and will thus differ per industry. However, Davis specifically focuses on what makes IP vendors unique. IP vendors are firms that specialize in solely in the generation and licensing of intellectual property. They are not traditional suppliers, since they do not engage in production or sales (p.6). While Rambus matches this description of an IP vendor, Apple and Samsung do not.

Successfully applying Davis´ framework to the Apple vs. Samsung can therefore be an issue.

2.4 IP strategy in multi-invention context

Somaya, Teece and Wakeman (2011) argue that in many industries today, developing new,

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Table 5: Somaya et al.’s three domains of patent strategy (p. 65)

comes up with a very complex model that is difficult to apply. Somaya et al. choose to focus on of the more important aspect of innovation, namely how firms choose commercialize inventions, and clearly state how each of their strategies fits in to each type of innovation. For these reasons, I have chosen to adopt the framework of Somaya et al. (2011) in my study. Their framework combines the viewpoints of Davis (2008) and Germeraad (2010) without becoming overly complex and also recognizes and also avoids issues from the major split that has emerged in IPR theory between “high tech” industry and the pharmaceutical industry by focusing on one side (Gittelman, 2008).

Somaya et al. (2011) argue that innovators face a two-part management challenge when

commercializing in multi-invention contexts. First, an organization has to choose an ‘organizational model’ for commercializing the innovation. This model determines how the organization accomplishes the design, manufacturing, and distribution of end products based on their inventions (p. 50).

Innovators have a choice between two “archetypal” organizational models: integrated and non-integrated. An integrated organizational model entails bringing as much as possible of the

complementary technologies and assets required for commercialization within the same innovating firm. By contrast in a non-integrated (or “open innovation”) organizational model the innovator combines its inventions with those of others through a series of market relationships (p. 57). A non-integrated model can be a licensing model, where the company commercializes through licensing, or a component model, where innovations are embodied in tangible components (p. 58).

The second part of the challenge involves how innovators access proprietary (and patented)

technology that is held by others and manage patent rights on their own inventions. The set of choices an innovator has to make form their patent strategy. These choices involve the innovator identifying strategies for in-licensing patented technology held by others; and identifying strategies for out-licensing its own technology to others or choosing not to license others to use its technology (p. 50). Somaya et al. (2011) identify three different but related domains in which a firm conducts its patent policy. They argue that a successful patent strategy will combine elements from all three domains. In each of these domains, the firm can look “inward” to the company’s own innovations, or “outward” toward the IP rights covering others’ innovations (p. 65). A firm taking an outward-looking approach focuses on others’ patented technology: identifying and (possibly) avoiding infringing others’ patents, obtaining permission to use others’ patents (by in-licensing or cross-licensing), or setting up a

Mexican standoff” situation. Table 5 provides an overview of the three domains.

The importance of patent strategies has been widely recognized (Blind and Thumm, 2004; Rivette and Kline, 2000). Some even argue that for small, technologically oriented firms patents may be their most marketable asset. (Ziedonis, 2008; Ziedonis and Hall, 2001). In Somaya et al.’s framework a firm can

Domain Explanation

Patenting involves the firm’s decisions as to what inventions to seek patent protection for, in what countries, and when and under what circumstances to let patent protection lapse.

Licensing involves the firm’s decisions as how to gain access to other’s patented technology, and how to commercialize and permit access to its own patented technology: whether to refuse to license it to others and commercialize it some other way, whether to out-license it in exchange for cash royalties or other consideration (such as cross-licensing), and whether to leverage it into business relationships. Enforcement concerns whether, how, and where to pursue others who are using the firm’s

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Table 6: Generic patent strategies in different domains of patent activity (adapted from Somaya et al., 2011 p. 67)

use three ‘generic patent strategies.’ These strategies are proprietary strategies, defensive strategies, and leveraging strategies (p. 66). Each strategy has different implications for the firm’s activities in each of the three policy domains, as is shown in table 6. A successful patent strategy will combine elements from all three domains described in table 5 (p. 65).

A proprietary strategy is a strategy of deploying additional resources to strengthen an innovator’s patent position in select technology areas. When pursuing a proprietary strategy in an area, the firm typically expends resources to shore up the quality and breadth of its patent rights by obtaining well-researched and well-written pioneering patents, and patenting potential “invent arounds” and follow-on and complementary inventifollow-ons (p. 67).

A defensive patent strategy is needed to protect against unwitting and unforeseeable infringement. The most straightforward defensive strategy is preemption—either patent or publicly disclose the relevant inventions yourself, or take a preemptive license from other patent owners. However, in most multi-invention contexts perfect preemption is not easy because it is difficult to predict which technologies will be relevant in the future, and who will own those patents. So preemption needs to be combined with ex post defensive strategies that can be used later, after patent rights become clearer (p. 68). Leveraging strategies ultimately rely on leveraging the patent holder’s ‘power to exclude’ to achieve other goals. Even when the firm is not pursuing either a proprietary or a defensive strategy. patents may hold potential value for the firm which puts a firm in a leverage situation. Leveraging strategies take advantage of patents obtained in the course of the company’s inventive efforts to generate revenue and cement alliances (p. 69).

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Table 7 Organizational model and patent strategy alignments (adapted from Somaya et al., 2011 p. 70)

to the Rambus and Apple vs. Samsung cases. But first I will discuss the theories others have applied to explain the Rambus case and how my research contributes to this case in section 2.5.

2.5 Theoretical views on the Rambus saga

As table 8 shows, the first set of papers that discusses the Rambus case began to emerge in 2004 after the Adminstrative Law Judge overseeing the proceeding of the FTC against Rambus enters an initial decision in favor of Rambus. Most of these papers analyze from a legal perspective. Alban (2004) uses the case to address two issues. First, he compares Federal Circuit’s interpretation of the SSO IP policy with other courts’ interpretations to discuss whether the Rambus decision is consistent with previous courts. Second, Alban discusses the benefits of SSOs’ IP policies as a form of private governance. This refers to the policies SSO’s implement that outline the spectrum of obligations for owners of IP covered by proposed standards. These policies should provide a contractual safe harbor designed to prevent IP owners from unfairly leveraging their IP and capturing a standard (p.310). He suggests that a broad duty to disclose facilates technological competition while having little impact on the incentive to invent. Alban argues that the court’s decision in the Rambus case weakened the effectiveness of IP disclosure policies by creating a very narrow disclosure duty. Tsilas (2004) and Naugthon and Wolfram (2004) take similar approaches and, unsurprisingly, find similar results. Naughton and Wolfram do note that the facts and circumstances of the Rambus case are unique but still find the case instructive for SSOs (p. 700).

Thankfully, there is some literature that takes a strategic perspective. Tansey, Neal and Carroll (2005) highlight the antecedents, strategic goals, tactics and outcomes of the Rambus v. Infineon trial. They argue Rambus successfully pursued a ‘‘do or die’’ litigation campaign against a larger rival, and changed the rules of engagement for the semiconductor industry as a whole.Specifically they note the innovative nature of Rambus’ strategy. By analyzing the case from a ‘‘dominant logic’’ and

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Table 8: Overview of literature on the Rambus case

Year Author(s) Topic Method Findings

2004 Alban IP rights in

SSO’s Comparison of the court interpretation in the Rambus case with similar cases,

The court’s decision weakened the effectiveness of IP disclosure policies by creating a very narrow disclosure duty 2004 Naughton and Wolfram Effects of participation, and the terms of participation for a firm in SSOs.

Comparison of Rambus case with other anti-trust cases

SSOs must establish clear rules regarding search, disclosure and licensing in order to make the standard-setting process more efficient, less susceptible to conflicting interpretation by its members, and thus likelier to achieve its objectives. 2004 Tsilas Disclosure duties in SSOs Summarizes and analyzes Rambus litigation

SSOs should establish clear IPR policies that provide guidance on what, when, how, and to whom SSO members must disclose patent information. SSOs must educate their participating members so the

members understand their obligations under these policies.

2005 Tansey et al. Patent litigation strategy Case study of Rambus by using a ‘‘dominant logic’’ and ‘‘effectuation’’ framework

Rambus used a new form of predatory litigation strategy to dramatically alter the semiconductor industry patent disclosure rules. 2009 Besen and

Levinson

Disclosure and royalties in SSOs

Examines the logic of FTC and D.C. Circuits decisions in the Rambus case

The Rambus decision will have adverse consequences, not only for the licensees of patented

technologies, but also for ultimate consumers who may experience higher prices for the products that they purchase and also slower rates of innovation. 2009 Simcoe et al. IPR strategy of firms in SSOs Examination of litigation rates in a sample 949 US patent of 13 SSO’s

small firms are more likely to litigate their standards‐related IP after a new standard is created, while large‐firm litigation rates remain unchanged or perhaps decline.

2009 Wallace Patent hold-up problem in SSO context

Examination of the Rambus litigation by facts and rulings in the FTC and D.C. Circuit

The D.C. Circuit's decision in Rambus was inconsistent with previous precedent. Given the important nature of standards in today's technological society and economy, the authority of SSOs in facilitating standard selection and adoption should be buttressed. 2011 Besen and Levinson Remedies against non-disclosing IP owners in SSOs Analysis of remedies sought by FTC and EC in Rambus case

Standards bodies, antitrust agencies, and the courts each have roles to play in reducing the incidence of

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S. Vijfschagt Page 16 using any of these means to devise multiple new creative judicial strategies for establishing their firm’s dominant logic as the new industry IP licensing model. More specifically, they mention that through the combination of predatory values and effectuation principles a new form of IP strategy emerged: high-risk predatory litigation (p. 94).

In 2008, the Court of Appeals of the District of Columbia Circuit clears Rambus of monopolization standards violations. Again, many authors examine the case from a legal perspective. Besen and Levinson (2009) examine the logic of both the FTC and D.C. Circuit’s decision in the case. They also examine the implications of the decision for the future behavior of participants in SSOs and for patent royalties for technologies that are included in standards (p. 234). In a different article, Besen and Levinson (2011) use the Rambus case to illustrate the remedies that should be imposed when an intellectual property owner fails to disclose its holdings to other participants in a standard-setting organization (SSO). Wallace (2009) takes a similar approach to Besen and Levinson (2009). Wallace derives three implications from the Rambus case. First, he finds the D.C. Circuit's decision

inconsistent with precedent, and argues it could cripple the standard setting process. Second, he finds SSOs should require royalty commitments from their members at the outset of the standard-setting process, but at the same time they must be mindful to not overregulate. Finally, Wallace argues that SSO participants and non-participants should challenge the enforceability of secret patents held by participants during the standard-setting process under the doctrine of waiver (p. 662).

Most studies involving the Rambus case thus take a legal perspective and conclude with implications for SSOs and their participants. Tansey et al. (2005) took a strategic perspective and found a new strategic form applied by Rambus but did not explain the implications of this for a firm’s IP strategy. Simcoe, Graham and Feldman (2009) specifically study the IP strategy of participants in SSOs. They examine the litigation rates in a sample of patents disclosed to thirteen voluntary Standard Setting Organizations (SSOs). They interpret their results as evidence of a “platform paradox” for platforms such as the Internet, the personal computer and cellular phones. They explain that open standards create favorable conditions for innovation by technology entrepreneurs while simultaneously

providing them incentives for opportunistic behavior that can undermine a platform’s openness (p. 2). In their study, they specifically mention Rambus as an example of a firm that uses of strategy in standards-setting to create or reinforce a position of market power. In this case, by delaying or withhold important technical information from competitors (p. 5). It is pretty clear Rambus’ IP strategy had great effects on its market position and on SSO theory. However, an exact description of Rambus IP strategy from an IP strategy framework is missing in the current literature. I believe applying such a framework to the Rambus case could provide valuable new insights to Rambus course of action throughout their many litigations. Section 2.4 has explained the framework I will apply to the case, chapter 3 will explain how I applied the framework.

3. Methods

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3.1 Data collection

The data was gathered using search queries which matched the company’s names i.e. ‘Rambus,’ ‘Apple,’ and ‘Samsung’. From these results I pieced together a short description of the cases as well as an overview of the key events in each case. These descriptions can be found in the appendices I and II. For the Rambus case I searched the database from 1990 to 2008. I set the search to include all English sources. I searched for ‘Rambus’ in each year by setting a limit of January 1st

through December 31st for each year. To reduce the number of duplicate articles I set duplication reduction on the moderate similarity setting. In the period from 1990 to 1994, I found a total of 168 results of which some were not relevant at all. So to improve the relevancy of my search I included company ‘Rambus Inc.’ as a search requirement. This lead to 2520 results for the period from 1995 to 1999. From this point I only scanned articles with a high relevancy since a lot of the search results were barely related to Rambus. I did this by only viewing the ‘group results’ under ‘company’ and then selecting ‘Rambus Inc.’ This greatly improved the usefulness of the articles I found. From the year 2000 onward to 2008 I found 3752 results.

For the Apple vs. Samsung case I searched from the year 2011, were the conflict began, to June 30th 2012. I searched for the key words ‘Apple’ and ‘Samsung’ within the same paragraph and added the term ‘litigation’ to the search. The search was set to include all English sources. I also used

duplication reduction on moderate similarity and filtered the search results to refer to Apple Inc. and Samsung Electronics Co. For 2011, I searched from January 1st through December 31st and found 1729 results. For 2012, I changed the search to end at June 30th but left the other parameters intact. This search came up with 794 results. The search results often referred to some of the other legal conflicts Apple was involved in at the time. To get a complete picture of Apple’s patent strategy I extended my search for litigation involving Apple to include the year 2010 as well. I searched the database from January 1st through December 31st for the term ‘Apple’ with company Apple Inc. as a filter. I searched all English sources and set the duplication reduction to moderate similarity. This search came up with another 951 results.

To determine whether a news article was useful for analysis I created a set of criteria. These criteria were partly based on the patenting domains described in table 5. Using these criteria I went through the search results and excluded non-relevant articles. The word ‘company’ in the criteria descriptions can refer to either Rambus, Apple or Samsung. The criteria I used were:

- the article covers the company’s patents, patent applications, or announcements about inventions.

- the article covers the company’s licensing deals, programs or requested royalty payments. - the article covers the litigation the company is or might be involved in, responses and actions

in the litigation or the (possible) settlement of litigation.

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3.2 Data analysis

Sections 2.3 and 2.4 discussed the various IP strategy typologies and why most of them were not suitable for this study. I explained why I felt Somaya et al.’s framework for IP strategy is the most suitable choice for this study. In this section I will explain how I used the framework to analyze the data I gathered. First, I determined the organizational models for commercializing inventions of the companies in the cases. I did this by using relevant quotations from the articles. However, in the Apple vs. Samsung case, the news articles did not provide sufficient information regarding the organizational models of the companies. So, in these cases, I also gathered information from the company’s websites and recent annual reports.

Next, I took quotations referring to the patent domains and classified them by using the coding table found in Appendix III. Typically, each quotation is a relevant sentence from a news article. In some cases, single sentences were not clear enough to be coded. In these cases, I checked if the relevant context could be found within the same paragraph, and if so, I added the extra sentences to the quote for clarification. Sometimes there was not enough context to code a sentence and I had to exclude the sentence from the results. Also, I encountered similar sentences referring to the same instance a few times. In such an event, I only quoted one of the sentences and excluded the others to prevent duplication of data by counting the same event in the case multiple times. Each unique instance was assigned a number, so changes in strategy for different instances could be viewed. An instance refers to both the company and its actions in general, relationships with and actions taken against rivals and/or customers, or actions taken by individual executives. I proceeded to count the number of times coded quotes referred to a certain strategy and which instances were linked to this strategy. In doing so, I managed to draw a picture of the patenting strategies of Rambus, Apple, and Samsung, and how the patenting strategy might differ over time and for different instances. Chapter 4 covers these results. Appendices IV and V provide the full lists of instances as well as the coded quotations for both cases. A key argument of Somaya et al. (2011) is that it is critical for patent strategy with their chosen organizational model in multi-invention contexts, and that these two aspects are inter-dependent and should be developed together and become mutually aligned (p. 69). For this reason, I also checked the alignment of the IP strategy to the organization model to help explain how companies seek to gain competitive advantage from their strategy. The next chapter describes my search results and chapter 5 discusses their implications.

4. Results

4.1 Rambus

4.1.1 Rambus’ organizational model

Rambus was founded in 1990 by filing a US patent application with claims directed toward DRAM. This technology addressed a problem that at the time was acute for computer designers. Rather than make better memory chips itself, Rambus’ goal is to set a new technology standard by selling rights to its patented designs. Geoff Tate, president of Rambus explained: "We figured out a long time ago the world didn't need another supplier of memory chips or microprocessors.” (Pollack, 1992)

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S. Vijfschagt Page 19 licensing organizational model. Furthermore, Rambus’ model is specifically designed to promote Rambus technology as a standard. Rambus encourages its licensees to develop DRAM products which incorporate Rambus technology, so they can improve their income from royalties on these products. For example, in 1996, when Rambus was getting frustrated by disappointing royalty revenues and a softening memory market, Rambus decided to put the pressure on its licensees to design more products that use its technology. Although, DRAM manufacturers privately complained about this approach they would continue to license Rambus technology. Mainly due to Rambus pushing

licensees to incorporate their technology into hot-selling products or risk losing the license (Hachman, 1996). Contrary to the manufacturers, market analyst favor Rambus’ business model for what they call the "chipless chip" business model, merely selling intellectual property (Robertson, 1997).

4.1.2 Rambus’ patent strategy

Table 9: Counting of codes and related instances for Rambus from 1992 to 1999 Patenting Domain Licensing Domain Enforcement Domain Proprietary Strategy Total quotations: 0 Related instances: - Total quotations: 0 Related instances: - Total quotations: 0 Related instances: - Leveraging Strategy Total quotations: 4 Related instances: 1. Total quotations: 49 Related instances: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. Total quotations: 0 Related instances: - Defensive Strategy Total quotations: 0 Related instances: - Total quotations: 0 Related instances: - Total quotations: 0 Related instances: - Figure 2: Key events in the early years of the Rambus case

As table 9 shows, in the period from 1990 to 1999 the patenting and licensing domains of Rambus’ patent strategy are pretty clear in the quotations and all relate to a leveraging strategy. Figure 2 provides an overview of the key events in these years. For a more detailed case description, see

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S. Vijfschagt Page 20 appendix I. The focus of Rambus on obtaining many licensees is especially obvious with 49 unique quotations in 26 separate instances. The enforcement domain remains unclear in this time period, as there are no quotations referring to it. In 1992, Rambus made its first public announcement which identified three of Rambus’ major licensees, NEC, Toshiba, and Fujitsu (instances 2. 3. and 4.). These three Japanese companies said they would produce and sell dynamic random access memories, or DRAM's, and other chips that incorporate the Rambus technology. At the time Rambus also claimed to have other licensees, but did not identify them yet (Pollack, 1992). Clearly, Rambus is willing to license its technology, as Business Wire (1992) also states Rambus technology is open for licensing by any Integrated Circuit (IC) company. Furthermore, Rambus’ stated its technology can be applied to a wide range of computer systems and consumer electronic products, which indicates Rambus aims to patent technologies other might find useful.

By 1995, Rambus had been broadly licensed to six of the leading memory manufacturers. These manufacturers were NEC Corp., Toshiba Corp., Samsung Electronics Corp. (instance 10.), Hitachi Ltd. (instance 5.), LG Silicon Co. Ltd. (instance 11.), and Oki Electric Industry Co. Ltd. (instance 6.) (Hachman, 1995; Business Wire, 1995). At the time, market conditions were favorable for Rambus as many of the leading manufacturers had high expectations of Rambus. Mark Ellsberry, vice president of memory marketing for Samsung Semiconductor Inc. explained: "We think the solution is not to make the parts wider, as we've been doing in the past, but to give them a higher pin speed, and Rambus is one possibility that would allow us to do that." (Mayer, 1995). As such, Rambus had no apparent reason to change its patent strategy.

Furthermore, Rambus announced that Rambus-based integrated circuit programs were underway for a wide range of system applications such as PC graphics, 3-D workstations, PC main memory, 3-D video games, TV sets, top cable boxes, and ATM (Asynchronous Transfer Mode) communications (Business Wire, 1995). Also, Rambus announced it was developing a new specialized interface that could easily be added to chips. These two examples indicate that, in the patenting domain, Rambus is also pursuing a leveraging strategy by patenting a wide array of technologies useful to others. In May 1996, Rambus’ willingness to license is proven as 10 of the 20 DRAM manufacturers around the world have become Rambus licensees. Analysts also note that the support Rambus has gained from Intel (instance 13.) is very important in its success (Scouras, 1996). Later that year, it becomes clear Rambus has also developed a licensing program as Rambus’ vice president of marketing (instance 14.), Subodh Toprani said: “We ask all our customers to promote our technology, and we have never changed this policy. We expend a great deal of money in engineering resources, and we expect a return on our investment” (Hachman, 1996). The development of such a licensing program fits into a leveraging strategy in the licensing domain. However, not all DRAM vendors support Rambus because of the licensing fees and royalty payments that they must dole out to Rambus if they use the technology.

Even though the last Japanese holdouts begin to license Rambus DRAM technology (Robertson, 1997) in 1997, many chip manufacturers develop an aversion against Rambus because of its royalties. Rambus tries to allay fears of added cost for its technology (Cathaldo, 1997). Nevertheless, in 1998 the DRAM industry is still reluctant to give RDRAM its exclusive endorsement because of the

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Table 10: Counting of codes and related instances for Rambus from 2000 to 2004 Patenting Domain Licensing Domain Enforcement Domain Proprietary Strategy Total quotations: 0 Related instances: - Total quotations: 0 Related instances: - Total quotations: 16 Related instances: 5. 18. 21. 27. 28. 31. 32. Leveraging Strategy Total quotations: 4 Related instances: 1. 28. Total quotations: 10 Related instances: 1. 3. 10. 20. 21.29. 30. Total quotations: 7 Related instances: 1. 5. 14. 21. 27. Defensive Strategy Total quotations: 0 Related instances: - Total quotations: 1 Related instances: 13. Total quotations: 0 Related instances: - Figure 3: Key events in the Rambus case from 2000 onward

licensing deal Rambus offers while others refuse, because they belief Rambus deceived the standard-setting organization.

In January 2000, Rambus files its first lawsuit. As can be seen in table 10, from this point onward Rambus uses aggressive enforcement if other means fail to achieve licensing deals. Figure 3 provides a quick overview of the key events in the case from this point onward. The first suit is filed against Hitachi Ltd. (instance 5.) for willful patent infringement. The suit was filed after the patent negotiation for the DDR-SDRAM technology broke down. “We had a meeting with Hitachi in 1999 during which we reviewed the details of the infringement with them, but they failed to respond,” said Avo

Kanadjian, Rambus' vice president of worldwide marketing. “We feel that a company that wants the use of our intellectual property for the development of non-Rambus-compatible products will have to get a separate license (Robertson, 2000a).” Rambus sought injunctions against Hitachi products infringing their patents and punitive damages, which indicates a proprietary strategy in the

enforcement domain. However, the suit was settled in June 2000 after Hitachi agreed to a worldwide licensing agreement on a variety of Rambus products. Under the settlement, Hitachi agreed to pay

2000 Rambus sues Hitachi 2002 2004 2006 2008 Rambus settles with Hitachi Rambus sues Infineon FTC charges Rambus of anti-competitive acts

ALJ enters initial decision in fa-vour of Rambus

Complaint coun-sel overturns the ALJ’s decision

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Table 11: Counting of codes and related instances for Rambus from 2005 to 2008 Patenting Domain Licensing Domain Enforcement Domain Proprietary Strategy Total quotations: 0 Related instances: - Total quotations: 0 Related instances: - Total quotations: 1 Related instances: 36. Leveraging Strategy Total quotations: 0 Related instances: - Total quotations: 4 Related instances: 3. 33. 34. 35. Total quotations: 5 Related instances: 1. 10. 27. 28. 36. Defensive Strategy Total quotations: 0 Related instances: - Total quotations: 0 Related instances: - Total quotations: 0 Related instances: -

Rambus a fee, plus quarterly royalty payments to license from Rambus its semiconductor memory technology (Wong, 2000). It would seem Rambus’ aggressive lawsuit was aimed at forcing Hitachi into a licensing deal.

In August 2000, Rambus files suit against other memory producers and former licensees, Infineon (instance 27.), Micron Technology (instance 21.), and Hyundai (instance 18.), which refuse to license DDR technology from Rambus. The patent suit was filed against Infineon after it appeared that licensing negotiations had broken down, explained Avo Kanadjian (Robertson, 2000b). Thus far, the suits are quite similar to the earlier suit against Hitachi. Furthermore, Rambus takes an aggressive approach in seeking injunctions against the companies, but this time Rambus also files suit in Germany, and even in Italy against Micron.

In 2001, Rambus loses it first legal battle against Infineon, but vows to appeal. Rambus CEO, Geoff Tate, explained Rambus was merely defending itself: "Rambus will continue to fight to protect our intellectual property. It is our right, and indeed our obligation to our shareholders, to take all appropriate measures to protect our patented innovations. Though Rambus is a relatively small company, we will not be cowed by the aggressive tactics of some industry giants who would take our innovations without any compensation (Business Wire, 2001a)."

In 2002, the litigation saga becomes even more complex as the Federal Trade Commission files antitrust charges against Rambus for deceiving JEDEC in the standard-setting process. The FTC complaint cited internal Rambus documents saying, “We will be in a position to request patent licensing (fees and royalties) from any manufacturer of the new computer memory technology (Bridis, 2002).” This statement provides another example of Rambus using a leveraging strategy in the

patenting domain.

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S. Vijfschagt Page 23 longer uses a proprietary strategy to enforce its patents like it did earlier. However, in one case

Rambus still sued NVIDIA (instance 36.) after licensing talks broke down and also filed for injunctions.

4.2 Apple and Samsung

4.2.1 Organizational models

Both Apple and Samsung follow an integrated model towards innovation. Apple’s business strategy specifically mentions Apple’s ‘ability to design and develop its own operating systems, hardware, application software, and services to provide its customers new products and solutions with superior ease-of-use, seamless integration, and innovative design (Apple, 2011).’ More specifically, Apple positions itself as an innovator which many ideas from other products and then creates a new product which incorporates all these features. This new product is designed and produced not only to

outperform the competition, but also to look the part (Furfie, 2010). The iPhone is often used as an example of a such a product (Weber, 2010). The combining of multiple ideas into a single product, and the in-house development of operating systems for Apple’s products serve as perfect examples of Apple integrated approach to commercialize their inventions.

Samsung also views innovation as crucial to its business. Samsung’s innovation strategy explains: ‘Through the interplay of creative, imaginative people; a global R&D network; an organization that encourages collaboration and cooperation among business partners all along the supply chain; and a strong commitment to ongoing investment, Samsung has put R&D at the heart of everything we do (http://www.samsung.com/us/aboutsamsung/ourbusinesses/researchdevelopment.html).’ Basically, Samsung has created a corporate culture where ‘innovation is everything’ (Wolff, Jones and Lee, 2006). Unlike, Apple which is not necessarily the first-to-market, Samsung wants their products to reach the market swiftly. Furthermore, Samsung’s investment policy has enabled it to manufacturer the necessary parts in-house and to develop a wide range of products (Strategic Direction, 2006). In doing this, Samsung uses an integrated organizational model to commercialize on their inventions.

4.2.2 Patent strategies

Before Apple first sued Samsung in April 2011 Apple had already sued other major competitors. In 2010, Apple sued Nokia, HTC and Motorola for patent infringement and in all these cases Apple aimed to ban sales of competitor’s products incorporating the infringed technology. These suits provide the first signs of Apple following a proprietary strategy in the enforcement domain.

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S. Vijfschagt Page 24 Figure 4: Key events in the first year of the Apple vs. Samsung case

Table 12: Counting of codes and related instances for Samsung from January 1, 2011 to September 9, 2011 Patenting Domain Licensing Domain Enforcement Domain Proprietary Strategy Total quotations: 0 Related instances: - Total quotations: 0 Related instances: - Total quotations: 2 Related instances: 2. Leveraging Strategy Total quotations: 0 Related instances: - Total quotations: 0 Related instances: - Total quotations: 0 Related instances: - Defensive Strategy Total quotations: 3 Related instances: 1. Total quotations: 1 Related instances: 2. Total quotations: 3 Related instances: 2.

Table13: Counting of codes and related instances for Apple from January 1, 2010 to October 5, 2011 Patenting Domain Licensing Domain Enforcement Domain Proprietary Strategy Total quotations: 4 Related instances: 1. 6. Total quotations: 0 Related instances: - Total quotations: 19 Related instances: 1. 2. 3. 4. 5. Leveraging Strategy Total quotations: 1 Related instances: 1. Total quotations: 0 Related instances: - Total quotations: 0 Related instances: - Defensive Strategy Total quotations: 0 Related instances: - Total quotations: 0 Related instances: - Total quotations: 1 Related instances: 2. Apr ‘11

Apple files suits against Sam-sung in U.S.

Samsung coun-tersues in se-veral countries

Aug ‘11 Sep ‘11 Dec ‘11

Samsung delays release of Galaxy Tab 10.1 in Australia Steve Jobs resigns as Apple’s CEO Galaxy Tab 10.1 gets banned in EU

Samsung loses its appeal to overturn the EU sales ban

Apple fails to get injunctions on the Galaxy tabs and smartphones in U.S. and Australia

Oct ‘11

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Table 14: Counting of codes and related instances for Samsung from September 9, 2011 to June 30, 2012 Patenting Domain Licensing Domain Enforcement Domain Proprietary Strategy Total quotations: 0 Related instances: - Total quotations: 2 Related instances: 2. Total quotations: 16 Related instances: 2. 4. Leveraging Strategy Total quotations: 0 Related instances: - Total quotations: 0 Related instances: - Total quotations: 0 Related instances: - Defensive Strategy Total quotations: 8 Related instances: 1. 2. Total quotations: 0 Related instances: - Total quotations: 6 Related instances: 2. 3. In June 2011, Apple’s strategy in the patenting domain becomes more obvious as Apple settles its dispute with Nokia (instance 2. in table 13). The settlement teaches Apple that numbers matter in patenting conflict and as a results Apple more aggressively pursues Nortel’s 6000 patents at the June 20th auction. Market analyst Mike Abramsky notes: “While Nortel’s patents may help reduce royalty payments to third parties, Apple's primary motivation is likely to keep the patents out of Google's hands, which has a weaker patent portfolio in wireless and is Apple's primary competitor in the smartphone wars (Ratner, 2011).” In a quote of Steve Jobs (instance 6. in table 13) by the Guardian Unlimited (2011) when releasing the iPhone in 2007 Apple’s proprietary strategy in the patenting domain is also confirmed. Concerning the multi-touch screen interface Jobs said: “Boy, have we patented it”, as a warning to would-be rivals.

July and August 2011 show that Samsung attempts to avoid litigation when possible. On July 2, Samsung dropped its US lawsuit against Apple, officially to ‘streamline the legal proceedings’ (International Business Times, 2011). Furthermore, on August 2, Samsung agreed to delay the release of the Galaxy Tab 10.1 in Australia in an attempt to avoid further escalation of the conflict. On August 12, The Korea Times writes that “Samsung seems to want a cross-licensing deal with Apple, and due to the partnership over components, Apple will have to consider this.” Apple on the other hand, keeps up its aggressive enforcement as it asks for a preliminary injunction against sales of Samsung tablet and phones in the US suit.

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Table 15: Counting of codes and related instances for Apple from October 5, 2011 to June 30, 2012 Patenting Domain Licensing Domain Enforcement Domain Proprietary Strategy Total quotations: 0 Related instances: - Total quotations: 0 Related instances: - Total quotations: 7 Related instances: 5. 6. Leveraging Strategy Total quotations: 0 Related instances: - Total quotations: 0 Related instances: - Total quotations: 0 Related instances: - Defensive Strategy Total quotations: 0 Related instances: - Total quotations: 0 Related instances: - Total quotations: 6 Related instances: 4. 5. 6. 7.

Figure 5: Key events in first half of 2012 in the Apple vs. Samsung case

as CEO Choi Gee-sung says: “From our perspective, we are not entirely happy (about the litigations) (Kim, 2011b).” There is some evidence of this in table 14 as the patenting domain still clearly shows only quotations relating to a defensive strategy. The enforcement domain however, shows 16

quotations of a proprietary strategy against six quotations for a defensive strategy.

As figure 4 shows, on October 5th, 2011 former Apple CEO and co-founder Steve Jobs dies at home and his death marks a change in Apple’s patent strategy as can be seen in table 15. Apple is no longer pursuing a full proprietary strategy in the enforcement domain as it shifts to a more defensive and passive strategy. Samsung however, continues to follow its more aggressive strategy as it now also seeks bans on the newly released iPhone in France and Italy. A spokesman for Samsung warns that it is "virtually going into an all-out war" with Apple (Agence France Presse, 2011a). Samsung later also files injunction motions in Australia and Japan. In the patenting domain, Samsung remains defensive as it announces it will soon release upgraded version of the Galaxy smartphones in Europe to get around the sales ban. (Alrroya.com, 2011a). The upgraded phones are released in November 2011 and a Samsung spokesman says: “We modified the model to reflect Apple's claims.” (Alrroya.com, 2011b) Figure 5 presents the events in the first half of 2012. January 2012 provides conflicting news about Apple’s strategy. On January 1st

, Apple continues to aggressively enforce its patents by providing more evidence of Samsung alleged copying in a Seoul court. Samsung responds by filing material which is aimed at proving Apple does not have exclusive rights, as most of the technology has already been out there for a while (The Korea Herald, 2012). Contrary to this case, Apple settles its dispute with Elan Microelectronics; the settlement includes a patent-licensing agreement between the firms. At this point, some industry sources still believe Apple will continue its aggressive enforcement. One of

Jan ‘12

Samsung loses its appeal to overturn the German sales ban

Mar ‘12 May ‘12 Jun ‘12

U.S. mediation talks between Apple and Samsung fail

U.S. court blocks the sales of Galaxy Tab 10.1 and Galaxy Nexus A Dutch court rules