{"id":424,"date":"2022-03-02T14:40:38","date_gmt":"2022-03-02T14:40:38","guid":{"rendered":"https:\/\/scienceandnerds.com\/2022\/03\/02\/inside-sonos-decision-to-sue-google-and-how-it-won\/"},"modified":"2022-03-02T14:40:39","modified_gmt":"2022-03-02T14:40:39","slug":"inside-sonos-decision-to-sue-google-and-how-it-won","status":"publish","type":"post","link":"https:\/\/scienceandnerds.com\/2022\/03\/02\/inside-sonos-decision-to-sue-google-and-how-it-won\/","title":{"rendered":"Inside Sonos\u2019 decision to sue Google \u2014 and how it won"},"content":{"rendered":"

Source: https:\/\/www.theverge.com\/22955336\/sonos-google-lawsuit-ceo-patrick-spence-interview<\/a>
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Sonos has long accused other tech giants of stealing its patents and technology, but in 2020, it actually sued Google for patent infringement<\/a>. Sonos said that it had disclosed details about how its technology worked during negotiations to integrate Google\u2019s voice assistant and that Google had copied the tech and then released cheaper products it subsidized with revenue from search advertising. Sonos recently won that lawsuit at the US International Trade Commission, which ruled that Google infringed all five patents Sonos brought to court. In response, Google had to change how some of its speakers worked, including reducing some functionality. Google is, of course, appealing, but you just don\u2019t see this very often. <\/p>\n

To talk about when a company like Sonos makes the decision to head to the courts and, increasingly, Congress, I sat down with Patrick Spence, the CEO of Sonos, and Eddie Lazarus, his chief legal officer. Software patents are pretty controversial to begin with, so I wanted to understand how Patrick and Eddie decided to take the risk of a lawsuit here. Sonos claims Google actually infringes over 150 patents, so how did they pick five <\/em>to sue over? <\/p>\n

Patrick and Eddie have also both testified before Congress in the past few years, specifically about competition and antitrust issues. Sonos is a small public company compared to the tech giants, and they both say their tech gets ripped off all the time. It\u2019s a big claim, and I wanted to push on it a little \u2014 and push on when that kind of lobbying effort becomes important enough to spend time on.<\/p>\n

This is a fun one. Patrick and Eddie are pretty direct, even though interviewing a CEO with his lawyer in the room sometimes got a little dicey.<\/p>\n

Okay. Patrick Spence and Eddie Lazarus from Sonos. Here we go.<\/p>\n

Patrick Spence you are the CEO of Sonos. Welcome to <\/strong>Decoder<\/strong><\/em>.<\/strong><\/p>\n

PS:<\/strong> Thanks, Nilay. Great to be back.<\/p>\n

Great to talk to you again. We also have Eddie Lazarus, the chief legal officer at Sonos. Welcome.<\/strong><\/p>\n

EL:<\/strong> Hey there. Good to be here.<\/p>\n

I\u2019m glad to have you both. Sonos is in the middle of a few big policy issues in tech: the ever-present patent litigation discussion that happens, and antitrust law. You both have testified before Congress in the United States recently, and <\/strong>won part of a patent lawsuit <\/strong><\/a>against Google that resulted in Google speakers changing some functionality. <\/strong><\/p>\n

I want to talk about all of that, as well as how you make decisions to engage that function as part of your company\u2019s operations as the CEO and chief legal officer, but we have to ask the <\/strong>Decoder<\/strong><\/em> questions first. Patrick, you took over in 2017 as CEO.<\/strong><\/p>\n

PS: <\/strong>Correct.<\/p>\n

You and I have spoken many times since then. One of the things you have mentioned to me over the years is your desire to change the culture of Sonos when you first started: You wanted to make it a more nimble organization that innovated faster. The phrase you used was, \u201cbiased to action,\u201d \u2014 which I have ruthlessly stolen, by the way. How was Sonos structured when you took over? How have you changed that structure?<\/strong><\/p>\n

PS: <\/strong>We really set out an ambition to deliver two new products a year. At that point, I think we were releasing one product over the past couple of years and kind of haphazardly. It was really this intentional bias to action to ship products that we felt could add to the system and be of high quality while at the same time avoiding the cycle that some companies are in, just shipping the same stuff every year. I felt that was a good balance for really what we try to do. We structured the entire organization around that.<\/p>\n

At my leadership level, we have four different product leaders in the conversation. We made it very product-centric in terms of what we\u2019re doing. You can see it\u2019s working in our results and our model \u2014 our system is working. <\/p>\n

The biggest thing at the end of the day is how we\u2019re different from everybody else out there with our business model. We bring out products which our existing customers buy more of. They tell their friends and family to join Sonos. Then we keep introducing at least two new products a year that help bring more people in, increasing the products per home. We have this flywheel that goes and goes through it.<\/p>\n

It\u2019s been cultural change throughout the entire organization, whether it\u2019s product or go-to-market. We\u2019ve really ramped up our activity. We\u2019ve just moved faster, quite frankly. <\/p>\n

Obviously, we started to get into new categories as well. That\u2019s an important part of it. We\u2019ll do roughly $2 billion in sales this year. The global audio market is $89 billion a year in sales. There\u2019s a lot of room for us to seize more opportunities. We do it in a unique way. I keep saying, we\u2019re the story of software eating audio. That\u2019s a lot of room to run to take more and more of that $89 billion.<\/p>\n

The team\u2019s done an incredible job. It was probably an advantage that we were distributed from the start, starting simultaneously in Santa Barbara, Boston, adding Seattle along the way, and obviously Amsterdam. We\u2019ve had China in the mix and Malaysia now as well. When the pandemic struck, we were able to more easily shift because we were already using video chat. All of the things that so many companies picked up in the pandemic were already a normal course of operating for us. We didn\u2019t lose any steam during the pandemic in terms of our new product introductions. We\u2019ve been doing two new products a year. The team\u2019s done an incredible job.<\/p>\n

Actions speak louder than words. Just look at our track record and the actions we have taken over the last five years. I\u2019m super proud of the team. We\u2019re just at the beginning of the opportunity ahead with such a big market to go after and a lot of new categories we don\u2019t play in yet.<\/p>\n

NP: You mentioned the pandemic and, obviously, remote work. Have you changed where you\u2019re hiring? Are you still hiring in Santa Barbara and Boston or are you hiring for software jobs anywhere now?<\/strong><\/p>\n

PS: <\/strong>Yeah, we shifted that. I\u2019ll say a couple things about that. One is that we started to hire from anywhere and that\u2019s been tremendous in terms of tapping into new talent pools. A lot of people have reevaluated where they want to work. I think we have an advantage in that. We have a really great culture. We build a product that people love and are proud to share with their friends and family. We\u2019ve been able to pick up some talent we never would\u2019ve been able to before. It\u2019s been a real advantage for us.<\/p>\n

Our attrition has stayed steady through this period. We\u2019re not seeing a great resignation. In fact, I think it\u2019s an advantage for us. Prior to the pandemic, we had 15% working from home. We have these amazing people inside the organization. Our strategy was, \u201chave a conversation with your manager about where you can be most effective going forward.\u201d We\u2019ll have roughly 60% working from home, post-pandemic. We\u2019re building great hardware and some of these things, so some people need to be in the office.<\/p>\n

In this day and age, the kind of people we hire will know where they can be most effective. We don\u2019t need to lay out some one-size-fits-all rule. Our team will figure out how to work most effectively. But that is a pretty big shift in terms of what we\u2019re doing from work from home. We\u2019ll need to make sure that we\u2019re doing the kind of things that the office helped serve a purpose for, for connection in particular. <\/p>\n

That\u2019s one of those things that we\u2019re being very thoughtful about: how we bring people together. I just had my team together in person last week. There\u2019s still nothing like that for certain conversations, discussions, debates \u2014 just having dinner and lunch and breaking bread together.<\/p>\n

It\u2019s going to look very different. Anybody who says they know exactly what it\u2019s going to look like a year or two from now is just fooling themselves. We\u2019re going to learn and iterate as we go through this, but I am so excited about the fact that we\u2019re adding a lot of people throughout the country. We\u2019ve taken the shackles off of where our offices are located and we\u2019re picking up great talent to add to our already amazing team.<\/p>\n

How big is the Sonos team? How many people do you have?<\/strong><\/p>\n

PS: <\/strong>1,719.<\/p>\n

Down to the one. That\u2019s pretty impressive.<\/strong><\/p>\n

PS: <\/strong>I try to know all the names and the backgrounds as much as I can. I try to keep it as small as possible in terms of that feeling, culturally, but it\u2019s hard at this number, certainly.<\/p>\n

You mentioned hardware. What\u2019s the split between the people who work on hardware and the people who work on software?<\/strong><\/p>\n

PS<\/strong>: It\u2019s about two-thirds software and about a third hardware right now. That\u2019s kind of the mix on the engineering side. That\u2019s a surprise to most people in terms of the team, but it is the magic of Sonos. It\u2019s the way the system works together. It really is the core of the system and why we can introduce new products that make the system better over time.<\/p>\n

Once you commit to that mindset \u2014 the magic is the software \u2014 your software cost tends to grow. We had the CTO of John Deere on the show. John Deere now employs more software engineers than tractor mechanical engineers, which is utterly surprising if you think about it. But it does seem like once you make that decision, it is inevitable that you will employ and spend more resources on software than hardware.<\/strong><\/p>\n

PS: <\/strong>From everything I\u2019ve seen, I think that is right. We\u2019ve created a world in which customer expectations continue to increase as well. You want to be bringing out new features and functions and making sure you\u2019re making it better over time. Wi-Fi networks are changing all of these things. It is an evergreen investment.<\/p>\n

Then the other thing that most companies like ours are thinking about is other areas you can go. You\u2019re always investing ahead of the curve as well. We\u2019re hiring people in software to go into new areas that we\u2019re not in today. It\u2019s easier in hindsight to understand that a company has been working on all of these great things. We just didn\u2019t see it at that moment in time.<\/p>\n

How many blockchain engineers do you have at Sonos?<\/strong><\/p>\n

PS:<\/strong> We\u2019re watching the whole Web3 area to see what its impact on music and the industry will be at this point. For me, the real test with Web3, blockchain, all of these areas, is, \u201cwhat\u2019s been built that solves a customer problem in a better way?\u201d <\/p>\n

I hear a lot about the technology. Obviously, from my perspective, I get into that. I love to see the new technology and talk about some of the possibilities, but at the same time, I\u2019m really looking for those customer problems to solve. I just haven\u2019t seen the technology yet applied in a way that there\u2019s an \u201caha!\u201d moment for consumers.<\/p>\n

We\u2019ll keep an eye on it, see what develops in that particular area. But that\u2019s kind of what I\u2019m looking for: actual customer problems being solved by this, as opposed to technologies that potentially hold a lot of promise. Over the last 20 years, you and I have seen that there are always lots of technologies and lots of philosophical discussions about what they might do, but when it comes down to brass tacks, what problems are we actually solving? That is something I\u2019m still trying to figure out with some of the Web3 technologies.<\/p>\n

NP: I think that is true for many of us. It\u2019s easy to see on a spreadsheet that investing in engineers and hardware tooling will pay off and generate revenue if you get it right. Poor Eddie\u2019s over there \u2014 the lawyers just cost you money. They rarely make money for any company, unless you run a law firm. How do you think about allocating resources for Eddie to go talk to Congress to fight patent lawsuits? Eddie, how big is your team?<\/strong><\/p>\n

EL:<\/strong> Around the world, we have 26.<\/p>\n

NP: 26. Then you obviously have outside counsel and things like that too.<\/strong><\/p>\n

EL:<\/strong> We have more lawyers than you can shake a stick at, yes.<\/p>\n

NP: Do you sit in a yearly budgeting meeting deciding how much to spend on hardware engineering versus legal services? How do you make that decision?<\/strong><\/p>\n

PS:<\/strong> Innovation is at the core of everything we do. We have a long conversation on innovation and how much we need to be investing to continue to drive our business and grow our business. We\u2019re proud that we\u2019ve been able to do that for the going on 17 years we\u2019ve shipped products. Despite all the new entrants jumping into what we knew would be a big growing market, we continue to grow and be successful in that. That is job one. That is where 99% of my time goes.<\/p>\n

Then Eddie and I have a conversation with Brittany [Bagley], our CFO, around the right investments to make. It\u2019s really led from the strategy of, \u201cWhat do we want to achieve in that particular area?\u201d <\/p>\n

Eddie obviously looks at what we need to serve the business, but then we also ask ourselves, for instance, \u201cwhat do we need to do to stand up in the Google situation for our intellectual property?\u201d Remember, a big part of Eddie\u2019s team is on the intellectual property side \u2014 actually patenting the inventions that are there and collaborating with the engineering team. That\u2019s why your intellectual property people are here, they love the products as much as all of us do, and they want to make sure that we are protecting those inventions. We know that this is a big, exciting space and more and more people may want to copy those. Eddie, I don\u2019t know if you want to add anything. <\/p>\n

EL:<\/strong> We have an incredibly small team that works on this. We don\u2019t have a single lobbyist \u2014 not one Sonos employee on the ground in Washington, DC. We don\u2019t have any regulatory people in Europe. It\u2019s really the Sonos story that does the work for us.<\/p>\n

I have one fellow on my team who works part-time with me on the policy stuff. Otherwise, it\u2019s just me. I guess I have the advantage of having been born and raised in Washington, DC, but the Sonos story resonates. That\u2019s why we\u2019ve been asked to testify on the Hill. That\u2019s why we\u2019ve been asked to go in to see people in the White House. That makes my job a lot easier and it lowers our investment costs. <\/p>\n

Yes, we have lots of lawyers that we hire to litigate around the world, but our cost in telling our story on the antitrust front or to the extent we do media around the IP work and how we defend our innovations \u2014 frankly, it\u2019s a very small band.<\/p>\n

NP: This is a totally random question. This might be the only business podcast where anyone ever asks this question. How do you pick a law firm? What\u2019s your process? Are you like, \u201cI just vibe with these guys,\u201d or do they do decks? How does that work?<\/strong><\/p>\n

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