The Last Refuge of the Simple Competitor

Selling technology is a tough business, as I pointed out in my most recent column for the print edition of HousingWire. It is difficult and expensive to develop good tools, can be very difficult to educate a market to the point of purchase and then requires additional work to ensure adoption. Overall, it’s very hard to effectively market new technologies, especially when you’re up against competent competitors. Lawsuits, in contrast, are relatively simple to initiate. Lawyers who work in the consumer electronics space can attest to this. For many years, companies working here have spent about as much time in front of judges as they have in front of consumers. Palm is a case in point. Palm didn’t bring the first digital assistant to market, but the company did bring a competent team of marketers to bear and quickly began to gain market share. Part of what made the product cool was a handwriting recognition technology it bought from 3Com. Unfortunately for Palm, 3Com bought the technology from U.S. Robotics who, a federal judge later upheld, infringed on a technology originally developed by Xerox. Ouch. Meanwhile, NCR, a provider of office technology since our granddads were young lads, had a strong client base and not all that much need of marketing. That is until Palm starting tearing into its market. In 2001 NCR filed suit against Palm, alleging that the company infringed on patents it won ten years earlier. A year and a half later, a federal court judge ruled that NCR’s case was unfounded, but the damage was done. Reeling from multiple lawsuits, the company never caught up. The handheld organizer market has since morphed into the smart phone market and things have really heated up. Recently, Apple, AT&T, LG Electronics, Motorola, Research In Motion (RIM), Samsung, and Sanyo have all been named in a lawsuit for infringing on patents from a company called Smartphone Technologies. It got some coverage in the press, but not much because over the past year or so, Apple has sued HTC, Kodak sued Sony Ericsson and Samsung, Nokia sued Samsung, LG Group, Toshiba and Hitachi, and RIM sued Sharp and Motorola. And that’s just a sampling of the court’s business in that space. Keeping up with who has sued whom has become a veritable cottage industry. All of these companies share something in common. They all offer technologies that are very difficult for the average consumer to differentiate between. A plasma TV is an LCD TV is a high-def TV, isn’t it? Of course not. But it’s a whole lot easier to get a judge to give you a win than it is to get a couple million consumers to agree on your brand. Look at AT&T and Verizon. Despite the fact that the former knew for a fact that its 3G network was not as extensive as that of Verizon, it filed suit to force the company to quit making map comparisons in its national television advertising. When a judge rejected AT&T’s request to force Verizon to stop the ads, AT&T dismissed its lawsuit. Recently, AT&T has pulled out all the stops in the 3G network upgrade process when it looked like Apple would allow Verizon to have a shot at its iPhone handset. Ah, how much easier it would have been for the company to just have its day in court, get a judge to shut down the competitor and worry about making a better product later. Companies in our space are also subject to court room shenanigans. One of the realities of the modern mortgage business is that you can’t do anything without adequate technology. If you want a competitive edge, you want to get the best technology. Eventually, it will become clear to market participants that there are only a handful of technology solutions that actually provide superior efficiencies and it will get tough to tell them apart. Those are the guys you can usually count on ending up in court because it’s really, really hard to get buyers to see the difference in products, at least compared to filing legal paperwork. Last Friday, First American CoreLogic took its case to court, filing a suit against a host of industry players that it claims have been infringing upon one of its property valuation technologies. The company made the move one week ahead of one of the industry’s most important technology conferences. Generally, plaintiffs hope to settle out of court and gain concessions from their competitors, which could include the cessation of more effective advertising campaigns or even cash payments for licensing technology. While going to court is a valid strategy when used by a company that has a vested interest in protecting its intellectual property, too often it’s more akin to a playground bully, pushing around smaller companies in order to gain an unfair advantage. Larger players sometimes use this strategy to bleed off their competitor’s cash or stop their marketing, even though they know they will probably eventually lose and may have to reimburse court costs. It appears that AT&T was pursuing this strategy and would have won big if it could have blown a hole in Verizon’s successful marketing campaign. Is First American hoping to put a damper on some marketing messages at MBA Tech? I’m not sure yet, as the company just filed its suit last Friday. I’ll be watching it with great interest.