Former Apple general counsel Bruce Sewell led the company’s legal department for eight years, seeing the company through major lawsuits such as the iBooks antitrust case and Samsung’s smartphone patent trial. Now he’s speaking openly about how Apple has strategically embraced high-risk legal strategies to gain competitive advantages — using a gigantic legal budget to back business decisions that could result in highly favorable or unfavorable outcomes.
Having retired from Apple in 2017, Sewell spoke candidly with Columbia Law School student Doreen Benyamin for a YouTube series titled “Before You Take the LSAT” (via AppleInsider), designed to help prospective lawyers know what they’re getting into before they apply to law schools. In the video, Sewell explained that his job at Apple was not to stay clear of the line dividing legally risky actions from clearly safe actions, but rather to “steer the ship as close to that line as you can, because that’s where the competitive advantage lies … you want to get to the point where you can use risk as a competitive advantage.” A legal team becomes an asset to a company when it can help it venture as close to a blurry legal/illegal line as possible, he said, and then manage the “nuclear” situation if it gets into trouble.
Sewell suggested that the keys to a high-risk legal strategy’s success are proper funding and executive support. When he retired, the company had a staggering annual legal budget of $1 billion — enough to support 350 lawyers simultaneously working on a single big case, such as the Samsung trial, which involved reviewing around 8 million documents and 200,000 billable hours of labor, to say nothing of the company’s other cases. Apple CEO Tim Cook backed the lawyers through thick and thin, which Sewell said was important “because every so often, you’re going to get it wrong.”
The “very ugly” iBooks lawsuit, which saw the U.S. government sue Apple and book publishers for fixing prices during the launch of the iPad’s iBookstore, was a critical example of getting it wrong, Sewell noted. While he believed Apple’s conduct had been innocent, “there were some things going on amongst a group of publishers that I didn’t know about … But, in the end, I got it wrong. Apple ended up being sued by the government and having to pay a large fine.” Yet Cook was reassuring, saying Sewell had made the best choice he could with the information he had:
You didn’t know about these other things. Don’t let that scare you. I don’t want you to stop pushing the envelope because that’s why legal is an important function in the company.
While “pushing the envelope” may represent a viable corporate legal strategy, it explains some of the less savory elements of the company’s business practices, namely acting in ways that — legal or not — may run afoul of moral or ethical standards and using its cash pile to dissuade or intimidate smaller entities from enjoying their own legal rights. As just one example, Apple has been warned by multiple regulators over misleading warranty repair practices and in some cases has told customers in so many words that they’ll have to sue the nearly $1 trillion company to obtain repairs.
The company has also faced international criticism over tax payments that rode the fine edge of legality while denying revenues to countries where it does business. While maintaining that it hadn’t done anything wrong, Apple reluctantly agreed to pay over $15 billion in back taxes and fines to the European Union pending an appeal. More recently, Apple initiated a massive international legal battle against Qualcomm in an effort to drive down patent licensing fees, but settled early in the trial.