ARCHIVES: This is legacy content from before Marketing Dive acquired Mobile Marketer in early 2017. Some information, such as publication dates, may not have migrated over. Check out the new Marketing Dive site for the latest marketing news.

Are lawsuits the cost of doing business in mobile?

While the list of mobile-related lawsuits seems to be getting longer by the day, many of the companies involved simply see it as the price that has to be paid to operate in the competitive mobile space.

Mobile is growing quickly and many companies see the channel as an opportunity to make money, especially if they can get to market first with groundbreaking technology. Increasingly, however, technological innovation is not enough ?  because of the stakes involved, companies are wagging lawsuits as well as defending themselves against another company?s legal moves as they try to stay in competition

?The answer is definitely yes [lawsuits are the cost of doing business in mobile],? said Jason Koslofsky, an attorney with ArentFox LLP ,Washington, DC. ?The bigger the company, the harder these guys will fight to protect their intellectual property.?

It is not so much that there a lot suits compared to other industries. Instead, mobile?s visibility is driving awareness of the suits.

?I don?t know if mobile is attracting a larger number of lawsuits or if the very fact that mobile is so visible means the lawsuits are attracting attention,? Mr. Koslofsky said. ?If Apple gets sued it generates news because of their success in the marketplace.?

Big legal budgets
Part of what is going on is that mobile is a relatively young industry. No one knows who the winners are because that is still being sorted out.

Additionally, many still wonder  how existing laws apply to new technology.

Companies are putting a lot of money and resources behind their legal moves.

For example, Apple is putting significant marketing weight behind its App Store at least partially so it can try to establish that ?App Store? is not a generic term and can by protected against trademark infringement.

However, these efforts have not been very successful so far with a judge recently suggesting that Amazon will win the right to continue using ?AppStore? for its application marketplace.

?These companies are all hiring very good law firms,? Mr. Koslofsky said. ?The Apple legal budget is probably huge but it is tiny when compared to the research and development and design budget.?

Multifaceted companies must factor in the potential for and cost of lawsuits into their decisions about how much R&D, sales and marketing efforts should be focused on mobile products.

Appropriate contractual language, as well as the investigation and protection costs around intellectual property must also be factored into the legal budget for mobile.

If the legal costs get too high in mobile, there may be less innovation.

?This is particularly true for the smaller and newer companies, which may lack both deep patent portfolios to use defensively, and resources to defend against both legitimate and frivolous suits from competitors and patent trolls alike,? said Jonathan Ezor, counsel at Olshan Grundman Frome Rosenzweig & Wolosky LLP, New York.

Competitive moves
When a company?s advertising is the focus of a suit, the implications may be less of innovation and more of increased regulation.

Still, when a lawsuit questions the type of technology involved, it is likely that some companies will hesitate from using that technology until the suits are settled and companies have a better sense of where the lines are drawn, per Gonzalo Mon, attorney with Kelley Drye + Warren, Washington.

?Many of the suits involve allegations that marketers failed to adequately disclose material terms,?  Mr. Mon said.

?It's unlikely that these suits alone will adversely affect innovation because, in many cases, avoiding legal trouble may simply be a matter of communicating terms more effectively,? he said.

?The bigger risk in this area is that regulators may decide the market isn't doing enough to self-regulate and may pass draconian laws that require companies to do more than is reasonable.?

Innovation is of course key to remaining competitive in the mobile space as companies such as Research In Motion, which has lost its competitive edge due to a lack of innovation, have found out.

This speaks to why the asking price is so high in some of these suits. Oracle is reportedly asking for up to $6.1 billion in a patent lawsuit against Google that claims the Android mobile operating system infringes upon Oracle?s Java patents.

If Google were to have to pony up that much, it is not clear how this would affect Android?s role within the company. Android would then become the supposedly free and open operating system that cost over $6 billion.

?These companies have shown a tenacity when it comes to protecting their intellectual property and their market position,? ArentFox?s Mr. Koslofsky said. ?They want to establish strong footholds in the marketplace and don?t want to have competitors pass them by while they are looking at some other product or property.?

?Wanting to compete in the marketplace often means competing in the lawsuit world so you can insure further innovation is protected,? he  said.

The focus of a lot of these suits is on patent and trademark infringement exactly because these companies want to remain competitive going forward and do not always know which of their existing patents will be useful in the future.

?This is probably because the key competitive advantages for mobile are based in intellectual property,? Olshan Grundman Frome Rosenzweig & Wolosky?s Mr. Ezor said.

?Other than the carriers themselves ? who must control radio spectrum and build and maintain physical antennas ?  the other major participants distinguish themselves and try to avoid commodization based upon hardware and software design and function,? he said.

Final Take
Chantal Tode, Assoc. Editor, Mobile Marketer