Tuesday 30 November 2010

A Mini Case Study: The Matter of Skyhook Wireless

I face a constant challenge in trying to find case study materials that are appropriate for my MBA course on IP Management and Strategy. Rarely to never do I find materials that are ideally suited for my teaching needs. Against that backdrop, let me share my toughts about an item that appeared in the September 27 issue of Bloomberg Business Week here and its potential value in building materials of this kind.

The article is entitled "Don't Be Evil (or Commit Tortious Interfence)". It recounts the story of Skyhook Wireless and its suit against Google, filed on September 15 in a state court in Massachusetts. The background to the suit was a deal between Skyhook and Motorola, whereby Motorola would use Skyhook's software, designed to pinpoint the location of Motorola smartphones, instead of adopting Google's version of this technology. It is noted that Motorola makes use of Google's Android operating system in its smartphones.

By using Skyhook's technology, Skyhook, and not Google, would be able to take advantage of data on the location of users. In principle, Google makes the Android available without cost in order to reap the benefits of such services as providing users on ads geared to the user's location. Under Skyhook's arrangement with Motorola, Google would presumably be deprived of this business opportunity.

According to Skyhook, senior persons at the Android unit of Google advised Motorola that the Skyhook technology raised issues of compatability with Android, a claim that Skyhook alleges had never been raised previously. Skyhook alleges that Google advised Motorola that a Motorola smartphone phone using Android also had to contain Google's location technology. Ultimately, it appears, Motorola sold the smartphones without any Skyhook code. Skyhook followed with an action for tortious interference. It also filed an action for patent infringement in a federal court.

I have no idea whether or not Skyhook has valid claims against Google, as described in the article.What is interesting for my purposes is a series of IP-related questions that arise based on this account, whatever the result of the litigation.

1. The role of Android as an open system-- Let us assume that the attraction of Android, as an open system, is that any person may make use of the operating system to develop compatible products. But Skyhook claims that Google has sought to exploit the system to promote its own products and services. This raises the issue of potentially multiple flavors of open source platforms from the commercial point of view.

Questions-(i) What should the potential user of an open source program for application development purposes consider, when choosing to adopt an open source platform? (ii) What happens if the purveyor of the open source program is also a commercial actor, even a potential competitor, in related applications? (iii) Does this differ from the position of an open source purveyor such as Linux? (iv) What happens with the licensed availability of open source under the copyright laws runs up against private or semi-private arrangements for compatability and specifications?

2. How far can superior technology take you?--Skyhook, since 2003, has developed a means for identifying the location of a phone by reference to proximity to Wi-Fi hot spots. Skyhook claims to have built a database of 250 million hotspots world-wide. Wi-Fi, and not GPA tracking, is apparently the superior technology for dense urban settings. It is mentioned that Google and Skyhook discussed a possible licensing deal, but ultimately Google developed its own technology. Skyhook charges 50 cents per device (and claims that the cost reflects certain technological advantages for its product), while Google gives its product away for free. Further, while Skyhook has contracts with Dell, Hewlett-Packard and Samsung, it has recently lost its major client, Apple, which also has developed a tracking technology of its own.

The CEO of Skyhook laments that "entrepeneurs are taught to pick something important to focus on. But maybe we chose something too important." Perhaps. But perhaps the real issue is the recurring phenomenon whereby the pioneer of a technology fails to reap long-term commercial benefits. As David Teece explained nearly 25 years ago, it is only where the pioneer's IP is so strong that it allows no viable imitators will the IP itself confer a decisive competitive advantage. Otherwise, superior manufacturing, marketing, distribution and the like (so-called "complementary assets") may ultimately prove to be more important.

Questions--(i) Did Skyhook properly evaluate the strength of its IP and technology as the source of its competitive advantage? (ii) How easy is it for the functionality of Skyhook's technology to be imitated without running the risk that any claim by Skyhook for patent infringement would effectively block competitors? (iii) Would Skyhook have been better off seeking to keep confidential more of its technology (if feasible)? (iv) Or should Skyhook have sought to partner its technology with someone who could who parlay Skyhook's technology with competitive capabilities in the relevant complementary assets?

In short, an interesting series of questions, focused on various aspects of IP, are raised in these events. They might well serve as a fruitful basis for discussion.

1 comment:

Unknown said...

Great post, Neil. I think I will build it out a bit more in my blog. The concepts conform very well to something my start up team has been dealing with as we move toward drafting our patent applications.