Jon Alper's probably insufficiently humble opinion

If you read the WSJ and NYT and a few other sites with paywalled content I won’t link to, you’ll hear about the ‘fear of an Apple tax’. The idea is that, because Apple won the lawsuit, Samsung and others will have to pay Apple to license patents and the cost of your phones will go up.  The anti-Apple angst in this argument  is absurd on it’s face because:

1) Apple pays license fees to Nokia, Motorola, Samsung and countless others who have IP in the wireless telecom business now as part of the price of every chip they buy.

2) Apple pays a “Samsung Tax” now because Apple buys components from Samsung that Samsung makes a tidy profit from selling to Apple. It’s naive and childish to imagine the idea that any product as complex as a smart phone isn’t already ‘taxed’ in a very tangled web. You may say Apple’s IP will be additive but even if it is, it’s just so much noise below much louder signal.

3) The patents in question are not difficult to work around at all, that is unless you want to make product that looks and feels like an iPhone.

Beyond this Apple Tax hogwash is a segment of the internet’s population that wants to make Apple the villain and Google the great ‘Open Source Savior Of Our Freedom’.  They loathe Apple, they want to make Apple a villain that goes and whines to the courts. They cite history they don’t understand to paint Apple poorly.

Unfortunately the only legitimate thing they can cling to as proof of Apple’s evil is the infamous quote:

“I will spend my last dying breath if I need to, and I will spend every penny of Apple’s $40 billion in the bank, to right this wrong,” Jobs said. “I’m going to destroy Android, because it’s a stolen product. I’m willing to go thermonuclear war on this.”

“I don’t want your money. If you offer me $5 billion, I won’t want it. I’ve got plenty of money. I want you to stop using our ideas in Android, that’s all I want.” – Steve Jobs Via Walter Isaacson

Well fine, be mad at Steve for his typical tone. When you’ve been in any kind of meeting where there is a multi-million dollar argument going on and you haven’t heard somebody take that tone, or, the more dangerous one, the quiet calm and subtle one, get back to me.

That quote is what we in the business call… business.

Remember that Apple has been on the receiving end too: ZDNet: Nokia likely netted $600 million plus in Apple patent settlement.

A few things these great “Message Board Marauders” should probably know before they step up to paint Apple the big bad wolf in an industry full of sweet warm fuzzy sheep:

– Apple’s ‘look and feel’ lawsuit against MS was because MS agreed to licensing terms with Apple when they launched Excel.  Excel, for those who don’t know, was a Mac *first* application built with Apple support and (according to Apple) licensing for MS to use some UI functionality) and Apple objected to MS’s taking license (poetic not legal) in MS’s interpretation of the agreements around Excel by using them in Windows. And..  before you jump up and down and say “Apple ripped off what they saw at Xerox PARC!” remember, Apple paid for that (in advance, not after getting sued by the way).

– The lawsuit settled in 1997 with the patent cross licensing agreement with Microsoft was not the ‘look and feel’ license suit but another one over QuickTime and Video For Windows sharing some of the same actual code because MS used the same company to support VfW dev as Apple had used for the QuickTime port to Windows.

– Apple did try to negotiate with Samsung before filing suit.

– Samsung countersued trying to use patents that fall into a class many courts have described as “standards essential” and therefore must be licensed under “Fair, Reasonable And Non-Discriminatory” (FRAND) terms. and, in this case, were “exhausted” because Apple had paid for the chips from vendors who had paid already to license Samsung’s patents. In other words, iPhone buyers were already paying a “Samsung Tax”,

You can have all the opinions you like about which company in the shark lagoon of the tech industry  is the poor persecuted underdog worthy of your activist support but make the arguments you use to support your opinion with some awareness not only of the facts but their historical context.

As I might actually agree (and I do) that the US patent system is a disaster in need of reform the intent of the patent system is a good one, a necessary one:  “if you invent something, you should have a reasonable period of time to make money off your efforts before others can use what you invented without paying you.” or.. as it’s said in the US Constitution: “To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries;”

Here’s my take on the current state of affairs:

– Samsung nakedly ripped off Apple in several small but important ways and got spanked for it.

– Google bought Android they didn’t ‘innovate it from whole cloth like conquering heros’ and Android is not, in any practical way like Linux or other FOSS because the carriers maintain control of most Android devices in the wild and they do it in cahoots with the Samsungs and HTC’s of the world. Thinking Android protects your rights as a consumer is delusional at best.

– Until Apple managed to cut their deal with ATT for the original iPhone exclusive, phones in the US were positively buried in crap designed to preserve and extend carrier revenue.  Verizon locked out Bluetooth and wire-connected contact syncing direct to the device so you had to use their online service to manage your contacts off the phones on *many* models of phones. They all had horrible and little ‘carrier branding animations’ at phone startup and ugly badging on the phones. They all  set it up so ringtones were things you could only buy from a carrier at absurd pricing. If a phone had any ‘smart’ at all, it was crammed full of bundled ‘crapware’ even less removable than the junk you find on el-cheapo consumer PC’s.

Apple did more for your ‘freedom’ in that deal they cut with ATT than Android ever has.

If you love Google so much, instead of whining on message boards about ‘big bad Apple’  think about this; Google could use this situation as an opportunity to fix the Android ecosystem and we’d all win.

How?

Google licenses “Official Android” branding and access to Google’s Android marketplace to phones that meet certain hardware and openness standards including:

– Users can upgrade to new versions of Android from *Google* not at the carrier’s whims.

– Google will indemnify handset makers from lawsuits from Apple and anyone else over the software.

– Google will “badge” phones that meet minimum specs for current and roadmap Android versions so customers know they won’t have a locked down phone with hardware quirks that make Android development both absurdly complex and profitless.

Google then innovates Android away from Apple’s patents or, if you think they can’t manage that, or that Apple’s patents are bull#$%^, Google can sues to invalidate those patents.

If Google did that? Android would get better. Windows Phone would get better. iOS would get better and the carriers would be left to compete on their quality of their service to attract and retain customers instead of thinking they had any business in the content game that kept them wasting money, and crapping up your phones, hoping to cash in on the next ‘flash of cultural lunacy’ that was the ringtone market.

For more from somebody far more ‘in the know’ on this see: Jean-Louis Gassée’s:  The Apple Tax, Part II

And… in the pity for Samsung department, see the previous post below.

Have a look at this video clip: Macworld Expo 1997 Park Plaza Castle, Boston

If you don’t have the time for the whole clip, just watch the last third or so outlined below.

Remember, if you’re old enough, what was being said in the press at the time.  If you were ‘in the industry’ back then my hunch is, even as you watch you’ll notice things that actually happened that were, at best, mischaracterized in the press and in the thing people didn’t yet call ‘the blogosphere’.

After the summary, I’ll let you in on the real deal.

At about 2/3rds into the clip Steve Jobs talks about Apple’s relationship with Microsoft: “The discussions actually began..uh… because there were some..uhh… patent disputes.” – Steve Jobs who very rarely says “uhh”

The results of that discussion?

1) A five year deal to cross-license patents. I think, quite likely, this agreement has been renewed and this is why we have a Mail.app that can talk to Exchange servers and other useful elements of MacOS and Windows interoperability. (Update 8.13.2012: The Verge seems to have dug up the actual agreement.)

2)  Microsoft committed to 5 years of support for Office on the Mac including the same number of releases for Mac as for Windows.

3) IE would become the default browser on MacOS.

The crowd booed.  You may recall, there was a little bit of tech industry drama at the time around the issue of Netscape vs IE.  My how times haven’t really changed.

Remember, at the time, Netscape Navigator and the OpenDoc-based CyberDog were also installed as alternative browsers with IE on MacOS 8 because, as Steve says in the clip “…we believe in choice”.

An amusing side note, especially for those who were at Macworld Expo in ’97 is that throughout the conference, Apple employee presentations where reference was made to IE the phrase “My Browser Of Choice”  came with it.  The phrase “My Browser of Choice” was uttered with the same formality and occasional knowing smirk one often sees on the sports star holding the Gatorade bottle label-out toward the camera when drinking. The same glance that says “Yeah but when the camera looks away, we both know I’m going to spit this Lion piss  out and drink water.” in a manner so subtle it lets them keep the endorsement, barely.

4)  Apple and Microsoft will collaborate on Java to ensure compatibility.

Listen to Steve as he says this in the presentation. One gets he sense he and Gates agreed even then that client-side Java would turn out to be about as useful as… well… about exactly as useful it has turned out to be.

5) Microsoft would invest 150 million dollars at market price in non-voting shares of Apple Computer . Microsoft would hold those shares for at least three years. You can google for yourself what those shares would be worth now and find out how much too soon Microsoft sold. (Disclosure: I have been long AAPL since right around then)

Gates then shows up on the big screen before the gathered faithful and says , among other things, that Microsoft had more than 8 million customers on Macintosh. Think about that number when you recall the talk of the Mac’s allegedly non-exitstent market share at the time. Think about that word ‘customers’.  That number from Gates didn’t count Macs in the installed base, it was a count of customers, not seats of Office shipped on trivial-to-copy floppy disks. The press at the time would have had the world believe there were no Macs in use other than the million or so sold in a typical quarter at the time. Considering that I personally touched about a thousand Macs in 1997 as part of my consulting practice it always struck me absurd when I’d read how many people thought Mac market share was the same as quarterly sales.

Bill Gates announced Office ’98 for Mac.  Those who remember those days will recall that the version of Office in the wild prior to ’98 was 4.2.1.  Many may recall how many people fought to keep Word 5 working because the version of Word that came with Office 4.2.1 was Word 6. A version of Word so bad that MacOS 7.5.2 seemed like stable software. (Hint: 7.5.2 is considered by many to be the single worst major release of MacOS in Apple’s history and yes, 7.5.2 was a major release despite the version number. PowerMacs, Open Transport, fun, fun, fun) As Gates promised, Office 98 was pretty darned good and actually very Mac-like especially for a Microsoft product.

At the time, the MacBU, The  Mac Business Unit  at Microsoft (Pronounced MacBoo) was the most profitable unit at Microsoft. Note, profit doesn’t mean revenue, clearly Windows and Windows Office and, perhaps even Flight Siumlator dwarfed the MacBU in sales but Microsoft themselves described MacBU as ‘the most profitable unit’  around and after the release of  MacOffice 98.

Common themes in the coverage then were ‘Apple taking sides in the Browser War’, ‘Apple being bought by Microsoft’, ‘Apple settled the “look and feel lawsuit”,  ‘Apple concedes that Microsoft won the fight for the desktop’, ‘Apple bailed out by Microsoft’ (go look at the financial history. Even at the time, 150 million did not , by a long shot, constitute a bailout), Generally speaking the press missed the point.

Don’t believe me that those beliefs became the ‘conventional wisdom’ about that day in 1997?

Here’s two easy links: http://www.wired.com/thisdayintech/2009/08/dayintech_0806/ and http://lowendmac.com/orchard/06/apple-vs-microsoft.html.

Search, you’ll find more.

Now that you’ve seen what I saw when I was there, here are a few things you may not have been aware that reveal the real nature of the deal .

The press described, on the rare occasions they mentioned it at all,  the patent cross licensing deal as if it was settling the old ‘look and feel lawsuit’. It wasn’t, that lawsuit. It was this one. At the time one could find on the interwebs side by side comparisons of Microsoft Video For Windows and QuickTime for Windows source code.  (some comparison is still here) Whole chunks of code matched byte for byte line after line. I saw it. The San Francisco Canyon company ‘helped write’ both products for two different clients.

The press at the time would also have had us (existing and would-be customers of beleaguered Apple Computer) believe that Microsoft’s rummaging in their couch and pulling out $150 millon in Cheeto-crumb-covered change to buy a few Apple shares was a concession in the famous United States of America. vs Microsoft anti-trust trial. You don’t have to be a lawyer to realize that if you are accused of being a monopolist, buying a stake in the other company you share 100% of a market with isn’t going to make you less of a monopolist.

The investment was part of a settlement deal. Just that simple.

Microsoft wanted Apple to “Knife the Baby”. Wanted Apple to kill QuickTime in exchange for Microsoft’s willingness to continue to make a tidy profit from selling Office to Mac users.

Where did I get such a vile turn of phrase as “Knife The Baby”, why from legal testimony of course.  Give that document a read.  (It was also printed  as “Don’t Knife The Baby” on some t-shirts  produced by [redacted] and circulated within the QuickTime engineering team at the time.)

Having read it, ask yourself if the patent dispute that brought Apple and Microsoft to the table for a discussion  was driven by evidence that source code for Video for Windows and QuickTime for Windows were, alledgedly, so similar .

Could Apple have, perhaps won a lot of concessions, been able to ‘facilitate’ collaboration because Microsoft might have preferred announcing cooperation to announcing that they’d settled a lawsuit they may have thought they’d lose horribly?

Now, those astute among you may be scratching your chin thinking about why Apple doesn’t want Flash on iOS and whether it’s the exact same reason Microsoft was worried about QuickTime.

Those who have been paying really close attention might remember QuickTime Wired Sprites. Some might even recall this little footnote: http://lists.apple.com/archives/quicktime-users/2007/Dec/msg00050.html. (Disclosure: As it happens, I was honored to have won enough support from Apple to get some of the movies built in projects I worked on onto Apple’s “known to be safe” list. I am eternally grateful to my friends then on the QuickTime Team for being willing to help.)

A grizzled veteran might likely speculate that “Multiple vulnerabilities… in QuickTime’s Flash media handler” were just too much to patch. It’s logical to assume Apple had to rely on Adobe to fix those vulnerabilities and, perhaps that Adobe wouldn’t or couldn’t.  This was the first time QuickTime ever ‘broke content’ in any significant way. These were dark days.

Now, knowing all this, and why Microsoft wanted Apple to “Knife The Baby”, perhaps it’s one might conclude it’s time to encourage Apple to do the one thing they never did back in the ‘good old days’:  Create and sell tools to author HTML 5 rich media. This notion, beloved readers, will be a topic for another day: Truly enable a standard and not leave it to languish or fragment as a ‘third party opportunity’.

Google’s move re: h.264 in Chrome appears lame and disingenuous. I’d write something but Daring Fireball did it perfectly: http://daringfireball.net/2011/01/simple_questions

Summary: Going forward, Google’s Chrome Browser will only support Google’s own WebM (VP8) and Theora video codecs but it appears they plan to continue to support Flash. Whyzat?

Remember, MPEG-LA has committed to cost-free use of h.264 IP for free content. The looming threat of license fees was lifted.

****************Update 1.17.11****************

Link of interest: http://antimatter15.com/wp/2011/01/the-ambiguity-of-open-and-vp8-vs-h-264/