If the lawyers, rather than the technologists, start to guide the future of Silicon Valley, we could see a massive realignment of power in the tech industry.
Thus far, Amazon, Apple, Facebook and Google have emerged as the clear “winners” of the latest Internet boom. Not only do they dominate entire industries, from search to social networking to e-commerce, they are also flush with cash. Apple's cash hoard of nearly $100 billion is downright staggering, Google continues to churn out multi-billion-dollar revenue quarters, and Facebook is almost ready to cash in its IPO chips. (Full disclosure: The Washington Post Co.’s chairman and chief executive, Donald E. Graham, is a member of Facebook’s board of directors.)
However, storm clouds are already starting to appear over this technology paradise.
Most notably, the tech world’s patent squabbles continue to play out in public, with the latest example being Yahoo's new patent infringement claims against Facebook. The patent wars are especially troubling, since they touch on such basic features of the social Web, such as the ability to change settings on profiles and instant messaging. It’s hard to ignore the sense of desperation in these patent attacks, as once-great companies like Yahoo attempt to re-muscle their way into the tech elite. I find that their tactic can be summed up simply as: If you can't beat 'em, engage 'em in a patent war.
And Yahoo is not alone, Apple, Facebook, Google and Amazon are clogging up the legal gears as well. Instead of working to expand the size of the Internet pie, it sometimes feels like these four giants are fighting over what their respective size of the pie should be. The battle for advertising dollars and digital downloads has become an almost zero-sum game. Not only have there been reports of alleged price collusion among the big e-book players, the latest attacks almost always seem to center around legal challenges. From this perspective, Web favorite Pinterest could become a "copyright time bomb," as E-consultancy.com’s Dave Wieneke wrote on March 14. Meanwhile, companies such as Path have come under fire for their privacy policies as well.
In a Silicon Valley that has always prided itself on the power of ideas, this is unprecedented. It is now the best lawyers, not the best ideas, that win.
Sure, there are some positive signs that players in the tech world are looking for more constructive ways to engineer a Silicon Valley realignment. Second-tier players such as Twitter appear to be looking for the magic pivot that will restore their market mojo. Will Twitter hashtag coupons save Twitter? How about an acquisition of once-hot tech startup Posterous? Companies will continue to look for a way into the hot areas such as gaming and location-based services, potentially putting players like Zynga and Foursquare into play.
The wildcard in any Silicon Valley re-alignment, of course, is mobile. As if to highlight its victory over Microsoft and the Windows PC, Apple prefers to refer to this as the “post-PC” world. Whether you agree with that moniker or not, it’s hard not to see that mobile is now one of the defining forces that will determine the future of the Internet. Apple is clearly the leader in rolling out new products and services in this arena. While Google has Android Market (oops, now it's Google Play) and Amazon has Kindle Fire, it’s quite obvious that the current battle in mobile is as much about creating entrenched, proprietary ecosystems, as it is about creating truly breakthrough products. It’s all but guaranteed that all of this proprietary IP will only lead to more lawsuits.
It would be a shame if, in the efforts to re-shape the competitive landscape to weaken the power base of the big giants, Silicon Valley falls into a legal race to the bottom. The race to win the post-PC world has already started with patent lawsuits lodged against not only device makers but also operating systems. The “post-PC” world may be one where lawyers are even more prominent, and any realignment results not from new innovation, but from a particularly well-executed legal parry. So, what’s the answer? To paraphrase Shakespeare, “the first thing we do to save Silicon Valley, let’s get rid of all the lawyers.”
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