Litigation Wars: Barnes & Noble's Android Mistake

Share it on Twitter  
Share it on Facebook  
Share it on Linked in  

It appears that Barnes & Noble has gotten Groklaw to present its pleadings to the court of public opinion and Florian Mueller is entering this fight on Microsoft's side, pointing out that Microsoft is arguing that Google is secretly operating behind the scenes (not a huge jump of logic given Google's Android platform is at the core of this dispute). Much like reading just Fox News or MSNBC on U.S. politics, reading one or the other will present a disjointed view of the facts as seen by one side. For folks new to Groklaw, it represents one of the mysteries of the early 2000s.

It is interesting to note that in content Mueller is mostly analysis (which helps you understand the arguments) and Groklaw is mostly a copy of what its side presented to the ITC with emotion added ("boiling blood," "lurid detail"). Unfortunately, they aren't really going back and forth and tend to be arguing different things at the same time, making this less fun than it otherwise could be. To be fair, Mueller is just trying to explain stuff and Groklaw appears to be working more of a PR angle.

In litigation, the side that wins is generally the one that tells the most compelling story consistent with the facts. The fact that is glaringly omitted given that Groklaw copied documents that call out Apple's success in smartphones and tablets against Microsoft's relative failures is that Steve Jobs, Apple's well-loved and iconic CEO, cursed Android with his final words and pledged his entire war chest to end it because he believed it was stolen from him. I think that omission is telling, because it speaks to the core argument of whether Android, at the core, was stolen. Personally, I think the evidence is compelling. However, all of this drama takes people off the real issue.


Let's get to that this week.

Android Is a Distraction

You see, this is the fourth quarter and most of the retail sales of e-books and tablets will likely occur over the next few weeks. Both Amazon, which isn't in this litigation, and Barnes & Noble, which is co-funding it, are in a death match to see who can own the quarter. Barnes & Noble is currently an acquisition target and its valuation, indeed its very survival as a separate company, is now in doubt.

At this critical time, it is spending an inordinate amount of resources arguing this case in the court of public opinion, while Amazon, who paid the royalty to Microsoft, is focused on seeding and selling Kindles. The Nook has historically been an underdog coming late to market and lacking the penetration the Kindle has enjoyed, even though both provide a very similar user experience and pull from similar-sized content libraries.

The new Kindle Fire is an e-store gateway into all of Amazon, and Amazon is a broad retailer with products ranging from clothing to white goods (dishwashers, etc.). Barnes & Noble, not so much. This gives Amazon an advantage because it can sell the Kindle Fire more cheaply and still get a better return if buyers use it as that store front.

In short, Barnes & Noble is already over-matched. But instead of being able to focus on selling product, it instead has to put a significant effort into what appears to be a significant media effort to turn public opinion against Microsoft (search on Barnes & Noble vs. Microsoft). Don't get me wrong, it is an impressive PR effort, but if that same effort could be turned into selling Nooks, the company would likely have a stronger quarter.

Google is already getting a bit of a reputation as a company-killer given the recent disclosures of what happened at Logitech as the result of the Google TV, and this conflict could seriously weaken Barnes & Noble over the critical holiday seasons.

Wrapping Up: What's Important

At the end of the day, vendors want to focus on selling products, not litigation or trying to drive opinion against another large company they don't compete with in order to survive. Being on the wrong side of a technology theft accusation, particularly for a company that sells other people's intellectual property (which is what books are), is hardly something that a book company ever wants to do. Think about it: Being successfully accused of pirating intellectual property could, in an extreme case, put them out of business if the court barred them from doing this. This extreme outcome is very unlikely, but any risk would be unacceptable and I'm sure it didn't anticipate this problem when choosing Android as its platform.

Amazon also started with Android, but it cross-licensed with Microsoft and then forked the code making it theirs. It realized that it didn't matter who it paid the license fee to as long as it could absorb it in the price and move on to selling products. Since Microsoft indemnifies, and it will clearly work to stay within the cross license, this also should prevent the company from being on Apple's litigation short list. Apple doesn't license, it moves to stop shipment. Amazon can instead focus on selling Kindles. Just as Sony, which has an IP defense, does (it has other selling issues, but it doesn't have to worry about Apple and Microsoft).

In short, Sony and Amazon showcase how to use Android successfully. Barnes & Noble, while doing an impressive job with Groklaws help, in the court of public opinion it will likely lose out in the real world because of the related distraction this quarter. This showcases the opportunity cost of Android, which is far from free. It suggests that firms have a choice with Android, but should develop their own IP defense, pay the licenses and don't mess with Apple, or face chances with litigation roulette. I'm not a fan of the latter, and that's Barnes & Noble's Android mistake.