Apple’s Evil Empire

Apple isn’t evil, of course. They do what every for-profit corporation strives to do: maximize shareholder value, drive revenues, and defend their intellectual property. But the way in which Apple does this screams schoolyard bully.

Apple has a long history in the consumer electronics and software industries, having launched the year after Microsoft (the latter was founded in 1975). Throughout much of its history, Apple was seen as the rebellious alternative to Microsoft’s three-piece suit evil corporate dominance. In the mid-90s, Apple started building its brand around that intangible feeling of warmth and happiness that accompanies sunshine and rainbows. And butterflies and kittens and all other things soft, warm, and fuzzy in the world.

I suspect though, that we may have been dealing with a wolf in sheep’s clothing all this time. This isn’t a Mac vs PC debate- rather, what I want to meditate on here is Apple’s business practices and how it chooses to manage its relationships. As a disclaimer, let’s be clear on the intent of this article: I’m not suggesting or stating that Apple has done anything illegal- ultimately, that’s for the justice system to decide. My commentary relates solely to business ethics and draws on that which has already been reported by reputable journalists.

Shall we begin?

1. Apple sues Samsung over the ‘look’ of its Android-powered smartphones

This is just pure foolishness. Here, Apple is trying to claim that the physical look and feel of the iPhone is subject to copyright protection. In other words, Apple is arguing that the way its popular mobile device looks is so novel that it’s actually an artistic creation- and thus, copyrightable under current intellectual property laws. To add a little dynamism to this battle, Samsung is one of Apple’s biggest suppliers (Samsung manufactures the screen used in the iPhone). So, we have not only a dubious intellectual property lawsuit… but a very public dispute between two large tech firms that have previously enjoyed a profitable strategic relationship. Apple supporters may argue that if Samsung valued the business relationship, it shouldn’t have so closely copied the aesthetic design of the iPhone. This suggestion has some merit, but Apple doesn’t own the rights to the design process. Whether by accident or design, Apple came up with a physical device layout that lends itself very well to the user experience requirements of touchscreen consumer mobile devices and their application environments. That doesn’t mean that no one else can benefit from their design advances, merely that they were early pioneers in the space.

In fact, Apple tried something similar in 1988 when it sued Microsoft over the visual design of its Windows operating system. In essence, Apple claimed that Microsoft had infringed upon its copyrights by utilizing a graphical user interface (GUI). In hindsight, we now look back and scoff at how ridiculous the idea of copyrighting the concept of a GUI is, but the case was a watershed event. Had Apple won, I suspect that the development landscape would be very different today. Since US copyright protection lasts for seventy years, GUI designers wouldn’t have been able to get into the game until around 2060 without paying licensing fees… and the entire field of User Experience (UX) in tech might not even exist today, as the UX field grew out of and is closely related to the User Interface (UI) field.

To draw a parallel- do you remember when North American auto manufacturers began to incorporate curved body styling, and more recently, the swept-back headlamp housings that give cars a sportier — almost fierce — look? Those design elements originated in Europe (which the domestic guys initially used as a marketing plug), but did we see BMW or Mercedes-Benz launch nine figure lawsuits against GM, Ford, or Chrysler? No. Has Rawlings sued Wilson because the latter’s baseballs look too much like their own offering? No. One has to wonder whether Apple is actually going after Samsung, or is using this as an opportunity to strike at Google over its Android operating system (currently the subject of a similarly wishy-washy patent-infringement suit by Oracle, who owns Sun Microsystems).

Enough with the litigation, Apple. Get back to the innovation.

The Ethical High Ground Not Taken:

Own the copycats. Take the fact that they’re now playing catch-up on your UX breakthroughs and transform it into brand equity. Do this by poking some fun at the competition in an ad campaign and stick the iPhone beside a similar-looking competitor’s handset. Place some text below it (or use a voiceover) saying something along the lines of ‘so groundbreaking that the other guys decided to do it too.’ Then ask the consumer if they’d rather have the gold-standard, or settle for the knock off.

Run this campaign for awhile, and continue on with the business relationship that you have with Samsung. After all, switching to a new supplier of high-quality screens is going to hurt your bottom-line in the short term while the wrinkles get ironed out, and you’ll incur unnecessary expense here (in addition to the unnecessary expense of a ridiculous lawsuit which you have no hope of actually winning).

2. Hey GetJar: @#$$ off!

Recently, Apple sent third-party application market a rather nasty cease and desist letter (according to the company’s founder, during a recent interview on the Lang & O’Leary Exchange). What was Apple’s beef? Well, GetJar referred to its website as an ‘App Store’ in some of its marketing materials. GetJar may be in a bit of trouble here, as Apple does have an active US Trade-Mark for ‘App Store’ (77525433). However, the word ‘App’ has since entered the common lexicon as short for ‘Application’, and Apple certainly doesn’t have any exclusive rights to the word ‘Store’. If this Trademark is opposed (it was published for opposition by the USPTO in late 2010), it may be wiped off the record (had Apple chosen to file as a design mark, using a logo, any opposition would likely be rebuffed unless Apple clearly copied another design).

Apple would have a much stronger moral argument if GetJar blatantly branded itself around the words ‘App Store’ and mimicked the UX design used in the “iTunes Store” or the “App Store”. But if you look at the GetJar website, this is simply not the case. In fact, I’d go so far as to say that both the UX and graphic design of GetJar intentionally try to avoid looking like the App Store (GetJar’s business model is based around offering free apps from independent developers, while Apple’s is not).

The Ethical High Ground Not Taken:

Drop the Trade-Mark application for ‘App Store’ as a wordmark, and resubmit it as a design mark. ‘App’ has become a generic word, and any company that tries to enforce intellectual property rights over the common language with which we communicate is in for a world of hurt- if not in the litigation arena, then in the brand perception one.

3. Ripping off the Wireless Sync app

Anyone who’s previewed Apple’s upcoming iOS5 and covered the various advancements in it has thus far raved about the built-in ability to sync Apple devices over WiFi, instead of relying on the traditional USB sync via PC or Mac. It’s a great improvement in functionality and user experience that leverages the trend of consumer electronics devices increasingly going wireless. Some would call it a quantum leap forward, some would call it a common sense step forward. The problem is that Apple didn’t actually come up with the idea, nor the application that it integrated into iOS5. A college student in the United Kingdom submitted the application to the App Store in May of 2010, and was personally contacted by an Apple representative to inform him of the rejection- and to solicit his resume (normally a standard-form rejection letter is sent). The student declined, and began to sell his app via an independent application market shortly thereafter. A year later, this was promoted as a core function of the upcoming operating system during an Apple PR event. Did Apple infringe upon a patent or other intellectual property with this move? It appears not, as the developer didn’t seek patent protection. Not that I blame him, the patent process is a long and expensive one- and even more convoluted than normal in the case of software patents. In all likelihood, the software technology he created would be obsolete by the time the patent was even opened for public inspection (usually, a patent is opened for public inspection 18-24 months after submission). Still, it seems a bit hypocritical of Apple to appropriate the kid’s idea, given the company’s outlandishly protective stance on copyrights (how can you claim that competitors unfairly copied the way your product looks, and then turn around and gobble up an actual, working technology without paying for it?).

The Ethical High Ground Not Taken:

License the application from its rightful creator. Or alternatively, purchase it outright for future use in iOS. Aside from the whole doing-the-right-thing bit, this would also make good business sense: expenses related to technology acquisitions generally qualify as tax write-offs. Apple would also increase goodwill amongst the developer community (without the support of developers, the app store part of Apple’s business model falls apart).

The bottom line:

Apple generates a whole lot of value for its shareholders. The stock closed on the NASDAQ today at $390.48. It also generates a whopping $25.26 in earnings per share (by comparison, Microsoft generates only $2.69). The company is profitable, produces massively-popular product lines, and dominates in a variety of technology markets which it created (did we buy digital music and movies online before the iTunes store? Not really). The question mark really is how they carry on business, and it boils down to this: do you, as a business person (or consumer), want to be involved with an organization that shamelessly screws not only the little guy, but its own strategic partners? I sure don’t. Good relationships are built first and foremost on trust, and second on opportunity.

Disclosure: at time of writing, I did not own an equity position in any of the companies mentioned in this article.

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