Tag: patents

OM in the News: Apple vs. Samsung Is Really About Supply Chains

By now, everyone has heard the results of the law suit out of San Jose in which Apple was awarded $1.05 billion for damages incurred by Samsung’s infringement on  Apple patents (The Wall Street Journal , Aug.25-26, 2012). The  sweeping victory for Apple provides ammunition for more legal attacks on its  rivals in the $250 billion smartphone market–in which Samsung and Apple are #1 and #2. The jury found that Samsung infringed all but one of the seven patents at issue, and also decided Apple didn’t violate any of the five patents Samsung asserted in the case. “Today’s verdict should not be viewed as a win for Apple, but as a loss for the American consumer,” Samsung said. “It will lead to fewer choices, less innovation, and potentially higher prices.”

Apple, which prides itself on the style of its products, broke new ground by heavily relying on patents covering the physical design of its iPhones and iPads. (This is called “trade dress,”  the overall look and feel of a device.) Tech companies have more commonly relied on utility patents, which cover the way products work rather than how they look.

The bigger story from an OM perspective, though, may be in the fact that the rival companies have a $5 billion supply chain relationship. Apple is Samsung’s biggest customer for microprocessors. The current case in many ways resembles the 1996 lawsuit by GM against rival VW. GM’s VP for Supply Chains, Jose Lopez, was accused of  stealing GM’s plans for a new type of factory, dubbed “Plant X”, when he defected to VW. The settlement, in GM’s favor, recognized the role of each company as a supplier to the other. VW paid GM $100 million  and was required to buy $1 billion in parts from GM.

In today’s world, competition–as we say in Chapter 11–is often between supply chains, not between companies.

Discussion questions:

1. Ask students to research details of the GM-VW lawsuit and discuss them in class.

2. The Samsung-Apple lawsuit in Korea played out differently. Why?

OM in the News: China’s Drive to Innovate

We have  blogged several times about China’s success at reverse engineering such products as bullet trains, solar technology, drones, jet fighters, wind turbines, and computers. And, indeed, one of our strengths in the US has been the ability to stay ahead of  competition through innovation (See Ch.5 and Figure 5.2).  But The New York Times (Jan.2, 2011) has just reported that China has issued a new government policy aimed at increasing the number of inventions in that country. China’s goal is to have 2 million patent filings/year by 2015. (In 2009, there were 300,000 in China and 480,000 in the US).

So can China become a prodigious inventor?  The answer will play out over decades–but also shape the global economy. “The leadership in China knows that innovation is its future, the key to higher living standards and long-term growth”‘, says the Director of US Patents. But the Chinese approach is an innovation by-the-numbers mentality, says one consultant. It is “emphasizing the quantity of innovation assets more than the quality.”

China’s strategy is guided and sponsored by the state. Should this be  a source of concern  for the US? Despite China’s inevitable rise, the US has a comparative advantage because it is the country most open to innovation. Our culture  forgives failures, tolerates risk, and embraces uncertainty.

Discussion questions:

1. In the 1980’s, Japan was considered a similar threat to American industry. What happened?

2. Will China overtake the US one day as the world’s leader in innovation?

3. Comment on China’s use of metrics to meet the goal. What incentives are they using?