Google just suffered a major defeat in its legal battle with Sonos. A judge ruled that Google infringed on five of Sonos’ audio patents. If the ruling is upheld, Google could pay hundreds of millions and face a ban on importing everything from Pixel smartphones to Nest speakers.
This isn’t a trivial development. It’s the latest in a string of lawsuits intended to stop Big Tech from pilfering from smaller companies. In recent years, Big Tech firms have increasingly infringed on smaller rivals’ IP. Those smaller firms have started fighting back. Now, the largest tech companies could face tens of billions in damages.
If Big Tech executives continue, their firms could suffer irreparable financial and reputational damage. Stealing rivals’ IP is no longer merely unethical – it’s a business decision so disastrously short-sighted that it constitutes a breach of duties to shareholders.
For a long time, giant technology firms like Apple figured they could freely prey on smaller competitors, who wouldn’t have the financial firepower to fight back. That’s no longer the case.
Small firms have decided suing is worth the cost – and have won big. In three cases this past year, juries awarded small firms more than $1 billion.
In August, Apple was ordered to pay PanOptis $300 million over 4G technology infringement. Last year, a court ordered the company to pay $1 billion to VirnetX, a VPN patent holder. Last October, a federal court ordered Cisco to pay nearly $2 billion to Centripetal Networks, a cybersecurity firm.
IP theft has the potential to put a dent into Big Tech’s bottom lines. Cisco’s payout cost it 4% of its annual revenue. Apple recently threatened to pull out of the United Kingdom entirely rather than face a $7 billion patent-infringement fee in British courts.
Even if big firms can weather the financial penalties, the reputational damage is considerable. Congressional committees regularly haul executives into their chambers for hearings about anti-trust and privacy infractions. Consumers increasingly regard Facebook, Google, Apple, and Amazon with distaste. If politicians and customers learn these companies’ profits rest on persistent theft, their reputations will take a pounding.
Big Tech executives have a duty to their shareholders. Executives who turn a blind eye — exposing their firms to immense legal and reputational risk – will eventually find their morally questionable decisions reflected in share prices.
Shareholders, rank and file employees, and other stakeholders should hold executives to account. It’s in the interest of investors to pressure Apple and others to settle cases and hash out licensing agreements.
If Big Tech starts operating within the bounds of IP law, they’ll prime the entire sector for success. Consumers and shareholders should want both small and large firms to thrive. Smaller firms develop software, applications, and hardware that often end up in consumer-facing products.
But when the big guys bully the little guys, pillage their best ideas without paying, the little guys have no incentive to innovate.
It’s time for Big Tech to stop patent theft.
Andrew Langer is President of the Institute for Liberty.