Smartphone industry is exposed to senseless litigation that may cost consumers

Apple’s September release of the new iPhone 6 means that the company has finally jumped on the large-screen bandwagon. The phone has been extremely successful, even by Apple’s lofty standards, selling ten million units in just the first weekend.

The release of the iPhone 6 has also rekindled the feuding between Apple and its many Android archrivals, a contest that has played out in both healthy and unhealthy ways over the past several years. While no one would argue that the competition has been anything but beneficial for consumers, the industry has also been mired in court battles since 2009 have the potential to disrupt markets and raise costs for consumers.

{mosads}Apple’s ongoing lawsuits have been particularly troublesome, with the American company seeking billions in alleged damages from various Android-based phones. Apple has chosen a constant pattern of doing competitive battle in the courtroom instead of the boardroom.

Unfortunately, it is unlikely that the companies themselves will end up footing little of any damages. Instead, costs will be passed down to consumers. That means higher prices, counteracting the cycle of innovation that marketplace competition has fostered.

There are a variety of legal reforms that could clamp down on this kind of abusive and excessive litigation. But Congress has been slow to act on them, a leaving a host of industries throughout our economy vulnerable to the kind of legal shenanigans that thwart innovation and the speed to which new products are introduced to the market.

In the mobile phone industry, this situation is particularly problematic when you consider the customer base of Apple and Android phones.  More than 60 percent of iPhone 6 buyers make over $75,000 per year. That’s not a surprise when a contract free phone costs upwards of $949. Even the soon to be outdated iPhone 5c, supposedly Apple’s entry into the affordable smartphone market, costs about $450 without a long-term contract. Additionally, many cell phone service providers offer an attractive pay-per-month installment plan for an annual phone upgrade option. However, while this may seem appealing to many and provide a reasonable monthly financial hurdle for the less fortunate, the monthly installment over time may cost the consumer twice as much.

Android, by contrast, has numerous offerings for low income consumers. Many Android-based phones put a greater emphasis on serving customers who cannot afford the newest gadgets with prepaid low-cost phones available from retailers like Walmart.

As I have long argued, this is especially vital for low income consumers, who rely on economical smartphones to get online at rates far higher than whites. Even as Android phone manufacturers bridge the digital divide in ways that Apple is not, the lawsuits that Apple is pursuing against other smartphone manufacturers effectively pushes the costs of this litigation on those who can least afford it.

No one begrudges Apple’s desire to dominate the high end smartphone market, just like no one minds that Rolex and Tesla fill the same role in their respective markets. The difference is that Rolex and Tesla do not routinely sue Timex or Ford for billions of dollars as innovation proliferates, whereas Apple has been actively pursuing extraordinarily expensive lawsuits that disproportionately affect low income consumers. This difference makes Apple’s approach far more problematic in the marketplace, and a matter of concern for anyone who cares about the impact smartphones can have in uplifting underserved communities by connecting them with the vast amount of information and innovation online today.

As Congress struggles to reach consensus on a solution to economic threats posed by litigation, there are productive paths companies can pursue on their own. Consider a recent deal that allows Apple to license an advanced Samsung microchip. This is powerful evidence that these companies can work together in mutually beneficial partnerships to benefit the market as a whole if they choose to do so.

Unfortunately, the excessive litigation that has pervaded the smartphone ecosystem ends up financially impacting low-income individuals far more than the corporate executives who nominally pay any damages. When these companies innovate, they help bring on the mobile revolution that has allowed millions of the underserved to access the Internet for the first time. When they litigate, that progress can be rolled back. It is in everyone’s best interest for these companies to knuckle down and focus on beating their competitors’ products, not their lawyers.

Burnet is a business consultant, entrepreneur and former candidate for new York City Comptroller. He is a resident of Harlem. Follow him on Twitter @IamJohn Burnett.