Innovation and Patent Wars: A New Era for the Industry

The patent landscape has undergone a significant shift in recent years, with 25-30% of our reporting focused on patent disputes and innovation. This trend is not limited to any particular industry, but rather seems to be a general phenomenon that affects many sectors. As a result, the traditional notion of innovation as a freely flowing concept is being challenged.

"It's like it's almost overtaking the industry," comments [Name], who has been following the developments closely. "We're reporting on people arguing about ideas right and it's it's a pretty it's it's a pretty crazy point in our industry." This shift towards patent wars and intellectual property disputes is having a profound impact on the way companies operate.

In many cases, large corporations are using patents as a tool to stifle innovation rather than promote it. By fighting over market share and trying to protect their own interests, they are often preventing smaller companies from entering the market or forcing them to innovate in different ways. This has led to a situation where companies are forced to think twice about what they're doing and how they're doing it.

The lawyers, of course, are thriving in this new environment. "It's a very good time to be a lawyer," says [Name]. "You'll get sued in the court of Texas and the court of right well." The rise of patent disputes has created a huge demand for legal services, with many lawyers now specializing in intellectual property law.

Despite the challenges posed by patent wars, there are still areas where innovation is thriving. One such area is home automation, which involves the use of smart devices to control and monitor various aspects of a home's environment. "We're actually looking at all the things," says [Name], referring to their company's R&D efforts. "Home automation is a place that seems like a likely area or a good area for us to go." This trend is expected to continue, with many companies investing heavily in smart home technology.

However, as [Name] himself notes, the success of these initiatives depends on getting enough production out to meet demand. The company's focus on building their market and expanding globally has meant that they have had to prioritize their efforts. Despite this, they remain committed to innovation and are looking for ways to improve their products and services.

In the world of smart home technology, thermostats play a key role in controlling and monitoring energy usage. Companies like Honeywell have traditionally dominated the market, but new entrants are challenging their dominance. As [Name] notes, "10 million are sold a year in the US 10 million Honeywell thermostats and you're about to change that." The company's response to this challenge is an important one, as it seeks to adapt to changing consumer needs and preferences.

When asked about his company's strategy for addressing the rise of competition from new entrants like [Name]'s company, [Name] replied, "We hope you are changing it all right Tony." Despite the challenges posed by these new competitors, [Name]'s company remains confident in its ability to innovate and grow. As they continue to develop their products and services, they are committed to making a positive impact on the world.

In conclusion, the patent landscape has undergone a significant shift in recent years, with innovation being stifled by patent wars and intellectual property disputes. However, there are still areas where innovation is thriving, particularly in home automation and smart home technology. As companies like [Name]'s continue to develop their products and services, they remain committed to making a positive impact on the world.

"WEBVTTKind: captionsLanguage: enuh our first guest is an awesome dude incredibly smart uh really good-look and uh has I think some very interesting stories to tell so please welcome Tony Fidel yes yes a hardware competition there how are you great have a seat we got you some we got you some water whoa we got to watch out here not poison that's broken this is our thing we keep saying we're going to replace it but it's more fun to just leave it and also way cheaper anyhow Tony Tony thank you for joining us uh you're a fascinating dude you've done a lot you're doing more stuff uh and and I want to talk about some of it here so I didn't do as much before the internet I actually worked before the internet what did you do what did you do engine you should talk to Paul about this so what did you do you I actually slept better before the internet did you yeah because you didn't get emails every every five seconds yeah do you do you ever wake up in a panic in the middle of the night thinking that you need to like check your email absolutely same thing I refer to that as the editor's nap but I guess you might have a different name for it the engine nap it is kind of insane it is it is insane no literally you got to sleep better you actually could have a weekend there was not this flow Rush of information like oh what do I need to buy now at 2: in the morning did you prefer it h you know sometimes you like to go back here you say you prefer it I'm I'm I'm pretty you just want to go out to the forest and you know chop some trees down and I don't know what did people do I oh I had back in the day yeah you could actually go in in your garage and like saw some wood and build something you so so uh you weren't exactly in a garage but you were at Apple uh a little while ago and you were at Apple during um and a bunch of new stuff that we're going to talk about but I want to talk about this a little bit you were at Apple during a particularly uh exciting time I mean it's always exciting at Apple now but they were they had some dark years and they came out of the darkness and you were there for like that portion right exctly you were you were involved in were you involved in the original iPod uh absolutely you worked on that I I I presented the original model right to Steve did you yes you were like here's what we should do I was a contractor for 6 weeks was the wheel there I was a contractor for six weeks I presented the the business and the and the product uh you know styrofoam form and uh in that meeting we signed off on it and and went went ahead with it and you went you started working at Apple building that yeah just a few weeks later I joined the company and and so who's responsible for the wheel was it you so the responsible for the wheel was actually Phil Schiller really Schiller yeah Schiller was the man very smart guy great guy he is a genius uh hates Instagram now though apparently um so so but so you worked on the iPod you worked on a bunch of iPods 18 Generations so iPod uh Nano just about everyone iPod touch iPod Touch Absol iPod Classic Shuffle Shuffle classic the video iPod the photo iPod is there a mini Nano the mini yeah the fat mini was that was that the was that the mini the fat one yeah oh no that was fat Nano Nano right fat Nano and then Nano got really skinny right exactly they like we're just kidding it's the only one I really didn't do was the uh the one the touch Nano that's out now oh yeah the one that like basically everybody wants to make into a watch exactly uh and but you also worked on the iPhone yes the first three generations so you were there for the Inception the creation of the original iPhone absolutely and how did that so how did that go like how where did that come from was that did Steve you know run into the engineers I don't know where he would run into did he run anywhere probably not did he did walk in somewhere and say yeah but like I want to make this thing here's what it looks like or was it a it was there was all kinds of different gestations of it actually we did three different types of iPhones there was a iPod plus phone and then there was the iPhone and then there was the next generation iPhone and that's the one that actually shipped did any have a keyboard uh none of them had a was there there was never virtual keyboard yeah but like there was never a vertual like a Cy never had one really was it was it even discussed uh well it was definitely discussed it was it was was a heated topic really yeah absolutely were there people that were for it and people that were against it absolutely were you for it or against it uh I had known a lot about touchscreens and uh given my 15 years at the time and so I was skeptical I wanted to try it first oh so you were like a hardware guy you were like let's do a hardware keyboard uh no I was just I want to try it I want it to work because it made sense that you wanted a full screen you didn't just want a little keyboard what the biggest problem with the uh the iPod plus phone was that we had a little screen and we had this Hardware wheel and we were we were stuck with that so you literally like we were making an iPod and making calls exactly that seems like it would be kind of uh not intuitive well you could make the old dial wheel yeah no I mean like a perfect Recreation of a phone that hasn't been made in 50 years sometimes you have to try things to throw it away yeah and so but so you were there for the for the original iPhone the the 3G and the 3Gs that's right and then you bailed you're like I hate I hate making all these wonderful successful products no no I actually and I hate all this money Apple money that I after the first year I actually met my wife at Apple and uh we were there for nine years and we were running and and working so hard and we had two little ones a one and a two-year-old is that common is there a lot of romance on the Apple campus yeah a lot of lot of hooking up yeah absolutely real like real I have some interesting stories real nasty stuff orgies orgies on the Apple campus I never heard of those but maybe my wife did she was head of HR you are in trouble right now okay and my apologies to your wife for such a weird story um anyhow but so you left Apple in what year was 200 uh uh officially 2010 okay so not that long ago and then you you were like okay I can finally make a thermostat see did you ever pitch a because did you ever go in there and say guys we got to build a thermostat no I did not you like Steve I did not Pitch ther the next wave man no thermostat the first person I pitched was my wife and she went what what she was like I'm the iPod guy what well it's got It's got a wheel kind of it does you know absolutely so okay so you went into business you and you were like I want to make a thermostat what was the what was the what was the desire behind that like where where did that come from well really I was I was with my wife designing a the a Next Generation home a green home and a connected home a fully connected home uh we were starting this design before the iPhone came out and before the iPad came out so I knew I knew that those things were coming and so I was saying when you have a device in your hand all the time your interface to the world how does the world around you change is that isn't that illegal if you know the product is coming to build a product uh based on it was just for me and my wife and my oh you're like I just just going to build one we know we were just building a house oh okay we were building a house okay so you were like the iPad is coming and we said okay how is this house going to change when you have this interface right and so we went through every single system lights and all these different things and at the end of the day I was going well I obviously you want to control your thermostat because this is in Lake Tahoe and you want to change it because it's very expensive to heat and cool the house right and so I wanted to change it from anywhere so I was looking all over the Internet for something couldn't find anything and I just said they have like wi but they have Wi-Fi connected thermostats at Home Depot uh have you tried them honey well makes a great uh Wi-Fi uh product not that I know of actually great tremendous no do they not H not that I know of I don't know I'm not really I honestly don't know that much about thermostats I'll be honest with you before you came along I never thought before you before Nest existed I don't think anybody in our industry thought about thermostats I mean maybe if you had to replace one you're like uhoh better call someone to replace this thermostat exactly you did it maybe once every therat on my wall I mean ours you know my house they're like painted over you can't even see the numbers on them isn't that I feel it's a common thing and and most people forget that $1,500 a year is what you spend that thermostat controls so you're like why is something so underappreciated that costs so much money and uses so much energy so you said you were thinking thinking about you know holding these devices and wanting to control them why not just make a box a simple box and have the control always be on an iPhone or that's what a lot of people have said to me and you know what I say and they go or why doesn't the the cell phone just you know when you go away from your house it just shuts this the house down and then you you know when you drive up it turns on again well typically the people you talk to who bring up those ideas they don't have a family they don't have kids they don't have people who are in the house so like does everybody have to a cell phone how does this all work so you have to think about you you don't want the kids messing with the thermostat though that's always a disaster they're going to turn it way up turn it way down you got to teach them rip it off the wall you got to teach them the nest cannot be ripped off the wall though can it it's actually I don't know maybe it can I can't afford one and they were sold out when I tried to buy one and it's but now we we have one just back in stock in so let's talk about the nest explain to me it's got a circular control it's got a DI These Guys these guys probably no but let's just go through let's go through the the steps what what does it do explain the nest The Nest is a simply a round dial and 99.9% of the time all you want to do is turn up or down the uh the thermostat right you just want to make it cooler or warmer so very simply you just have a ring and that's it and uh it's got a display on it and it's got a display on it it's a color display and it just gives you the current temperature and it shows you the target temperature and that's about it it gives you a little leaf on it to show you when you've actually selected a temperature that's more energy efficient than than you typically than you typically uh select and if you have more than one in your house they can talk to each other they talk to each other and you can control it anywhere from anywhere in the world from a iPad an iPhone an Android phone are they apps or is it just like a it's a it's an app or there's a a web browser a web browser app for uh any uh Safari or or Chrome or I I and so so Hardware startups are really hard I mean that's my understanding it's very difficult to be a small company making Hardware we it's hard to give them finance and it's hard to find the talent because most of that Hardware Talent has moved offshore right most people don't design Hardware so what do the how does that work I mean how do you how do you go to you know from thinking of this thing to actually going and I mean you don't have to give me every step but I mean obviously you had to pitch this to to people with money and say I want to make a thermostat did were were people resistant to this idea I mean was it seemed to me like people would go we got the money in less than 24 hours really yeah well i' I've been in the valley over 20 years I've been doing hardware for over 25 years I've been doing connected services for over 15 years so basically it's nice to have a a hopefully a good track look I made the freaking iPod okay give me money and I'll I'll deliver so so you did so you did deliver you sold a ton of these how many do you know how many you've sold I guess you would know how many you sold we've sold a lot you share a number we are not sharing numbers but we are breaking all of our what our our targets where we're breaking busting through them people are freaking out over this thermost that we sold 5 months of inventory in 72 hours in the first 7 5 months of inventory we thought we were going to open the store 3 weeks later we didn't open for five more months because we had so much demand and now finally the store is open for all comers that is insane for a thermost for thermostat for thermostat you must feel pretty good it's great the first day when we actually had our launch party we just invited a bunch of friends we had 500 to 800 people celebrating a thermostat you now can you can you can do whatever you want to anybody and just remind them of how well the nest sold and they'll just let you do it you can be like I'm going to steal your car I created The Nest get out of my face you know we we did a we did a little bit I'm leaving I'm leaving dinner in the middle of dinner I don't care what you say Tony Fidel I made the nest right do you do that I would uh no not really I'd like walk into people's houses and like knock a vase off of table to say oh you have a problem with that well I created The Nest sold out sold out in 72 hours come get me what have you done you don't do that not really that'd be my first thing that I do as soon as I soon as I sold sold through um but you so they're back in stock now they in stock so I can go buy one too you can go to Best Buy and buy one you can go to uh and nest.com to buy one and they're what $250 $249 $249 49 I'm sorry and most of them are actually installed by why don't you sell them for 250 H why not just say 250 well it's not $249.99 It's $249 okay it's a full dollar sa it's a full dollar it is a mental thing though isn't it I mean people really do you know there's like 199 is The Sweet Spot 99 is The Sweet Spot 249 is like it's kind of Premium but it's not 250 is it but no it's not 250 right so so you've attracted a lot of attention for nest the nest what do you call it we call it the Nest learning thermostat you really every time you talk about it uh we call it the nest it's kind of a mouthful learning thermostat piece and does it it does learn it actually it absolutely learned it sees your patterns your habits your the temperatures of the house and well with the first thing is 10% of thermostats installed there's 250 million thermostats in the US only 10% of those are any are program to save any energy because it's so difficult to program right and so literally when we now have data that shows all of our Nest customers actually by it by learning um have 99 99% of them have uh schedules that they've actually save energy do you do you know how much energy they're saving or kind of we've seen anywhere between 10 % and 60% on average it's about 20 to 25% because they they literally just track your habits when you wake up you turn it into one temperature when you when you go away another temperature when you go to sleep a different temperature so we just learn those patterns and then we just play them back and then you share that data to Facebook and someday your Nast will be like check out this new zingga game do you imagine it's a perfect display for like playing Tempest Tempest that would be amazing you should do that some should hack it is there any opportunity of a game of Tempest on the nest cuz I that would be like I'm buying one no question and then I would it would be like oh I got it's cold in here and then 20 minutes later my wife would be like what are you doing level level 18 in Tempest got out my face I do I do get stuck do you do this I mean are you a tinker I get stuck doing things where I'm like got to go do this and I pick up a phone for a second and then I'm just like yeah you're lost zone out for a half an hour absolutely so anyhow as I said the nests attracted a lot of attention some of it lot lot of it very positive here it comes lot of lot of people excited about it yes very excited some people are heated some people forgive the pun some people are getting worked up about it a little hot under the collar uh honey well you've been uh you've been sued by honey well yes we have for for uh patent infringement yes seven patents seven seven patents seven patents and uh now honey well has been around uh for a thousand years before I was born they Honeywell has been around a long time they and really do you know a lot of companies that make thermostats but I have Honeywell thermostats in my house there aren't I know there are other companies I'm sorry well and I said they're painted over and they're old and they've got the dial and I can't see I'm like I guess it's on uh so they're suing the crap out of you how does that make you feel uh validated really validated y you know look we're we're new guys on the scene uh we think we're doing something really important and they feel threatened uh it's appears so yeah it appears so because they didn't call us they didn't say hey hey let's work this out manto man they didn't want to settle they weren't like you know what we see you guys are doing some things that look similar maybe we can talk sit down let's talk you they didn't want to do that they didn't want to do that they just wanted to uh publicly address it address it in the court of law exactly and uh and how do you think you're going to fair in this well uh we just issued our response and actually you guys posted on the website you very we did we did post it 56 page I think response did we post the whole response yes well we're we like like to be thorough and you know Nei is a lawyer so anything that's remotely legal he's like start like salivating and you know it's like he has to take his jacket off he's like I got to go to work he like clears his desk that actually happens you think I'm kidding it's a little frightening uh but but so so you're going to you're going to go to court on this over this well that's what they want to do we'd rather not but right but you can but you think that you've got a you got a chance to defend yourself and to win here well when we looked at it all seven patents they were clearly invalid and what we've said was you baseless and and and did you say they're worse than a patent troll I have actually said yeah let me let me describe why if you look at yeah damn right I said damn right I said they're worse than Tony Fidel I created The Nest knock over vase or yeah just go just go for it no literally if you look at uh IP protection out there you see things like Apple suing HTC and that is all about Innovation but Apple's saying let's play fair and then you look at somebody like Microsoft and you saw what they selling patents and all these other things they treat it as a business but once again they're treating Innovation as something that is good to have we just want they want to get paid for it it's a business uh if you look at you know even classic patent trolls they want in Innovation to thrive and exist out there and so why do they want that because they have some patn they would like to get paid for theirs as well in all three cases they want Innovation to thrive and be a great thing in our case these guys want to stay the status quo they want to be number one and they want to use basically crap patters against us to try to intimidate us intimidate our Market intimidate our Channel and intimidate our customers they're not they they do not want Innovation to thrive they're not like let's find a way to work this out they're like we're going to sue you out of just threw it into court they never called us right so to me that who would call you the CEO he what is he no I've never met him use the rotary phone I've never met it's honey well I wish he would have called me it's honey well damn it I don't I don't know what I know who that is he's actually not really honey well he's actually Allied signal oh of course he's Allied signal and he changed his name to Honeywell when he bought Honeywell you're talking about this backstage that that Honeywell was Honeywell and then they were bought by a company called Allied which by the way sounds like a total totally nefarious like you Allied signal is not something you want to deal with but then they went they became honey well yeah they moved their headquarters from Minneapolis over to New Jersey and they CH other Jersey and they changed their name to H you're going to die okay I just want you to know yes they friends they're going to say guys your house and you're dead man it was wonderful knowing you all right soy boys so you're going to go you're going to go you're going to fight this we have to well I know you have to we have to and we have the best we have the best in the business business we actually have um the person who was next to me for getting basically sued at Apple every every week uh chip lton who joined the team he was the head of the chief patent council at Apple has now joined our team he is now part of us he has been advising us for a Year honey well is going down they're gonna they're Apple doesn't screw around and I'm sure this guy doesn't screw around chip is awesome so I'm sure you've got a pretty good shot well I you know we're going to be tracking it obviously I mean we're we're fans of innovation I think this I mean you know for our readers and even for the editors at the site it's this patent stuff is like it's almost it just seems to be overtaking the industry I mean the fact that we're reporting you know 25% 30% of our stuff now I feel like we're reporting on people arguing about ideas right and it's it's a pretty it's it's a pretty crazy point in our industry I mean does it does it scare you do you feel like Innovation is being stifled I mean I I it looks like Innovation is being stifled I I think that it it is being stifled in the smaller companies in the larger companies what they're really doing is they're just fighting about market share and trying to uh make sure they get either get paid or keep them out of the market or make them innovate differently um so it does put everybody on to to to think twice about what they're doing and and how they're doing it but and it does enrich the lawyers absolutely enriches the lawyers good time to be a lawyer in Valle it's a very good time to be not just in Silicon but anywhere because you'll get sued in the court of Texas and the court of right well I mean yeah but but there are a lot of there's a lot of Silicon Valley lawyers are very active right now absolutely and uh you know they're they're loving it and now you've got one we have we have a great set of lawyers absolutely uh okay so so you're doing the thermostat you're G to fight honey well you're going to take honey well down you're GNA you're going to ruin you're going to ruin honey well I'm quoting you those are your words uh I didn't say that and I quote uh we're going to put honey well in the ground so help me Tony Tony Fidel you said those words they're a very big company um so what's after the thermostat is there is there a n is there something beyond the thermostat is well right now right now we actually ship 2.0 of our software and so we're continuing Tempest Tempest exactly actually putting in More Energy Efficiency into the the the thermostat just via software upgrades that happened in the background but next week we're actually going to announce uh an energy report that comes with your your thermostat so each month you get a kind of a history of what you've done and how you can save more that's personaliz but but it makes sense though you've got these things on the walls they're connected they can talk to each other home automation is a place that seems like a likely area or a good area for you to go is that something you've considered I mean home automation to me I have a new house it's I think all the time like God I just wish there was some like the nest seems like this very self-contained sensible beautiful system for doing something that happens in the the house that you don't think about that much is that a place you might go I mean there's a lot you can do in a house if you got things talking to each other have you thought about that we we think about it all the time I have my R&D house that you know I go through and and a lot of times my wife doesn't like what I do to the house when I automate it so I learned through that what are you doing to the house yes I can't tell you I'll give away too many things strobe lights turning beds turning beds yeah boy you're just in a lot of trouble tonight uh so is that so you would that's something You' consider uh we we're looking at all the things but frankly you know it's we're still small we're still trying to get enough production out for everyone we're still trying to get to other countries Nest are in all 50 states we've actually seen them light up in Canada all across Europe in Saudi Arabia and Japan so we're still just trying so people are are taking they're buying them in the states and then taking them all around the world so we still just have to build our Market there's a huge appetite for this for for thermostats there's billions of therat guess this well when you look at it thermostats 10 million are sold a year in the US 10 million Honeywell thermostats and you're and you're about to change that yeah well we hope you are changing it all right Tony thank you so much for joining us really appreciate it tonyell everyone and uh you gotta you gotta you have to come back you got to come back either when you're in the thick of it with honey well you probably won't be able to say anything then but but when you win you come back and talk about it um thanks so much really appreciate it nuh our first guest is an awesome dude incredibly smart uh really good-look and uh has I think some very interesting stories to tell so please welcome Tony Fidel yes yes a hardware competition there how are you great have a seat we got you some we got you some water whoa we got to watch out here not poison that's broken this is our thing we keep saying we're going to replace it but it's more fun to just leave it and also way cheaper anyhow Tony Tony thank you for joining us uh you're a fascinating dude you've done a lot you're doing more stuff uh and and I want to talk about some of it here so I didn't do as much before the internet I actually worked before the internet what did you do what did you do engine you should talk to Paul about this so what did you do you I actually slept better before the internet did you yeah because you didn't get emails every every five seconds yeah do you do you ever wake up in a panic in the middle of the night thinking that you need to like check your email absolutely same thing I refer to that as the editor's nap but I guess you might have a different name for it the engine nap it is kind of insane it is it is insane no literally you got to sleep better you actually could have a weekend there was not this flow Rush of information like oh what do I need to buy now at 2: in the morning did you prefer it h you know sometimes you like to go back here you say you prefer it I'm I'm I'm pretty you just want to go out to the forest and you know chop some trees down and I don't know what did people do I oh I had back in the day yeah you could actually go in in your garage and like saw some wood and build something you so so uh you weren't exactly in a garage but you were at Apple uh a little while ago and you were at Apple during um and a bunch of new stuff that we're going to talk about but I want to talk about this a little bit you were at Apple during a particularly uh exciting time I mean it's always exciting at Apple now but they were they had some dark years and they came out of the darkness and you were there for like that portion right exctly you were you were involved in were you involved in the original iPod uh absolutely you worked on that I I I presented the original model right to Steve did you yes you were like here's what we should do I was a contractor for 6 weeks was the wheel there I was a contractor for six weeks I presented the the business and the and the product uh you know styrofoam form and uh in that meeting we signed off on it and and went went ahead with it and you went you started working at Apple building that yeah just a few weeks later I joined the company and and so who's responsible for the wheel was it you so the responsible for the wheel was actually Phil Schiller really Schiller yeah Schiller was the man very smart guy great guy he is a genius uh hates Instagram now though apparently um so so but so you worked on the iPod you worked on a bunch of iPods 18 Generations so iPod uh Nano just about everyone iPod touch iPod Touch Absol iPod Classic Shuffle Shuffle classic the video iPod the photo iPod is there a mini Nano the mini yeah the fat mini was that was that the was that the mini the fat one yeah oh no that was fat Nano Nano right fat Nano and then Nano got really skinny right exactly they like we're just kidding it's the only one I really didn't do was the uh the one the touch Nano that's out now oh yeah the one that like basically everybody wants to make into a watch exactly uh and but you also worked on the iPhone yes the first three generations so you were there for the Inception the creation of the original iPhone absolutely and how did that so how did that go like how where did that come from was that did Steve you know run into the engineers I don't know where he would run into did he run anywhere probably not did he did walk in somewhere and say yeah but like I want to make this thing here's what it looks like or was it a it was there was all kinds of different gestations of it actually we did three different types of iPhones there was a iPod plus phone and then there was the iPhone and then there was the next generation iPhone and that's the one that actually shipped did any have a keyboard uh none of them had a was there there was never virtual keyboard yeah but like there was never a vertual like a Cy never had one really was it was it even discussed uh well it was definitely discussed it was it was was a heated topic really yeah absolutely were there people that were for it and people that were against it absolutely were you for it or against it uh I had known a lot about touchscreens and uh given my 15 years at the time and so I was skeptical I wanted to try it first oh so you were like a hardware guy you were like let's do a hardware keyboard uh no I was just I want to try it I want it to work because it made sense that you wanted a full screen you didn't just want a little keyboard what the biggest problem with the uh the iPod plus phone was that we had a little screen and we had this Hardware wheel and we were we were stuck with that so you literally like we were making an iPod and making calls exactly that seems like it would be kind of uh not intuitive well you could make the old dial wheel yeah no I mean like a perfect Recreation of a phone that hasn't been made in 50 years sometimes you have to try things to throw it away yeah and so but so you were there for the for the original iPhone the the 3G and the 3Gs that's right and then you bailed you're like I hate I hate making all these wonderful successful products no no I actually and I hate all this money Apple money that I after the first year I actually met my wife at Apple and uh we were there for nine years and we were running and and working so hard and we had two little ones a one and a two-year-old is that common is there a lot of romance on the Apple campus yeah a lot of lot of hooking up yeah absolutely real like real I have some interesting stories real nasty stuff orgies orgies on the Apple campus I never heard of those but maybe my wife did she was head of HR you are in trouble right now okay and my apologies to your wife for such a weird story um anyhow but so you left Apple in what year was 200 uh uh officially 2010 okay so not that long ago and then you you were like okay I can finally make a thermostat see did you ever pitch a because did you ever go in there and say guys we got to build a thermostat no I did not you like Steve I did not Pitch ther the next wave man no thermostat the first person I pitched was my wife and she went what what she was like I'm the iPod guy what well it's got It's got a wheel kind of it does you know absolutely so okay so you went into business you and you were like I want to make a thermostat what was the what was the what was the desire behind that like where where did that come from well really I was I was with my wife designing a the a Next Generation home a green home and a connected home a fully connected home uh we were starting this design before the iPhone came out and before the iPad came out so I knew I knew that those things were coming and so I was saying when you have a device in your hand all the time your interface to the world how does the world around you change is that isn't that illegal if you know the product is coming to build a product uh based on it was just for me and my wife and my oh you're like I just just going to build one we know we were just building a house oh okay we were building a house okay so you were like the iPad is coming and we said okay how is this house going to change when you have this interface right and so we went through every single system lights and all these different things and at the end of the day I was going well I obviously you want to control your thermostat because this is in Lake Tahoe and you want to change it because it's very expensive to heat and cool the house right and so I wanted to change it from anywhere so I was looking all over the Internet for something couldn't find anything and I just said they have like wi but they have Wi-Fi connected thermostats at Home Depot uh have you tried them honey well makes a great uh Wi-Fi uh product not that I know of actually great tremendous no do they not H not that I know of I don't know I'm not really I honestly don't know that much about thermostats I'll be honest with you before you came along I never thought before you before Nest existed I don't think anybody in our industry thought about thermostats I mean maybe if you had to replace one you're like uhoh better call someone to replace this thermostat exactly you did it maybe once every therat on my wall I mean ours you know my house they're like painted over you can't even see the numbers on them isn't that I feel it's a common thing and and most people forget that $1,500 a year is what you spend that thermostat controls so you're like why is something so underappreciated that costs so much money and uses so much energy so you said you were thinking thinking about you know holding these devices and wanting to control them why not just make a box a simple box and have the control always be on an iPhone or that's what a lot of people have said to me and you know what I say and they go or why doesn't the the cell phone just you know when you go away from your house it just shuts this the house down and then you you know when you drive up it turns on again well typically the people you talk to who bring up those ideas they don't have a family they don't have kids they don't have people who are in the house so like does everybody have to a cell phone how does this all work so you have to think about you you don't want the kids messing with the thermostat though that's always a disaster they're going to turn it way up turn it way down you got to teach them rip it off the wall you got to teach them the nest cannot be ripped off the wall though can it it's actually I don't know maybe it can I can't afford one and they were sold out when I tried to buy one and it's but now we we have one just back in stock in so let's talk about the nest explain to me it's got a circular control it's got a DI These Guys these guys probably no but let's just go through let's go through the the steps what what does it do explain the nest The Nest is a simply a round dial and 99.9% of the time all you want to do is turn up or down the uh the thermostat right you just want to make it cooler or warmer so very simply you just have a ring and that's it and uh it's got a display on it and it's got a display on it it's a color display and it just gives you the current temperature and it shows you the target temperature and that's about it it gives you a little leaf on it to show you when you've actually selected a temperature that's more energy efficient than than you typically than you typically uh select and if you have more than one in your house they can talk to each other they talk to each other and you can control it anywhere from anywhere in the world from a iPad an iPhone an Android phone are they apps or is it just like a it's a it's an app or there's a a web browser a web browser app for uh any uh Safari or or Chrome or I I and so so Hardware startups are really hard I mean that's my understanding it's very difficult to be a small company making Hardware we it's hard to give them finance and it's hard to find the talent because most of that Hardware Talent has moved offshore right most people don't design Hardware so what do the how does that work I mean how do you how do you go to you know from thinking of this thing to actually going and I mean you don't have to give me every step but I mean obviously you had to pitch this to to people with money and say I want to make a thermostat did were were people resistant to this idea I mean was it seemed to me like people would go we got the money in less than 24 hours really yeah well i' I've been in the valley over 20 years I've been doing hardware for over 25 years I've been doing connected services for over 15 years so basically it's nice to have a a hopefully a good track look I made the freaking iPod okay give me money and I'll I'll deliver so so you did so you did deliver you sold a ton of these how many do you know how many you've sold I guess you would know how many you sold we've sold a lot you share a number we are not sharing numbers but we are breaking all of our what our our targets where we're breaking busting through them people are freaking out over this thermost that we sold 5 months of inventory in 72 hours in the first 7 5 months of inventory we thought we were going to open the store 3 weeks later we didn't open for five more months because we had so much demand and now finally the store is open for all comers that is insane for a thermost for thermostat for thermostat you must feel pretty good it's great the first day when we actually had our launch party we just invited a bunch of friends we had 500 to 800 people celebrating a thermostat you now can you can you can do whatever you want to anybody and just remind them of how well the nest sold and they'll just let you do it you can be like I'm going to steal your car I created The Nest get out of my face you know we we did a we did a little bit I'm leaving I'm leaving dinner in the middle of dinner I don't care what you say Tony Fidel I made the nest right do you do that I would uh no not really I'd like walk into people's houses and like knock a vase off of table to say oh you have a problem with that well I created The Nest sold out sold out in 72 hours come get me what have you done you don't do that not really that'd be my first thing that I do as soon as I soon as I sold sold through um but you so they're back in stock now they in stock so I can go buy one too you can go to Best Buy and buy one you can go to uh and nest.com to buy one and they're what $250 $249 $249 49 I'm sorry and most of them are actually installed by why don't you sell them for 250 H why not just say 250 well it's not $249.99 It's $249 okay it's a full dollar sa it's a full dollar it is a mental thing though isn't it I mean people really do you know there's like 199 is The Sweet Spot 99 is The Sweet Spot 249 is like it's kind of Premium but it's not 250 is it but no it's not 250 right so so you've attracted a lot of attention for nest the nest what do you call it we call it the Nest learning thermostat you really every time you talk about it uh we call it the nest it's kind of a mouthful learning thermostat piece and does it it does learn it actually it absolutely learned it sees your patterns your habits your the temperatures of the house and well with the first thing is 10% of thermostats installed there's 250 million thermostats in the US only 10% of those are any are program to save any energy because it's so difficult to program right and so literally when we now have data that shows all of our Nest customers actually by it by learning um have 99 99% of them have uh schedules that they've actually save energy do you do you know how much energy they're saving or kind of we've seen anywhere between 10 % and 60% on average it's about 20 to 25% because they they literally just track your habits when you wake up you turn it into one temperature when you when you go away another temperature when you go to sleep a different temperature so we just learn those patterns and then we just play them back and then you share that data to Facebook and someday your Nast will be like check out this new zingga game do you imagine it's a perfect display for like playing Tempest Tempest that would be amazing you should do that some should hack it is there any opportunity of a game of Tempest on the nest cuz I that would be like I'm buying one no question and then I would it would be like oh I got it's cold in here and then 20 minutes later my wife would be like what are you doing level level 18 in Tempest got out my face I do I do get stuck do you do this I mean are you a tinker I get stuck doing things where I'm like got to go do this and I pick up a phone for a second and then I'm just like yeah you're lost zone out for a half an hour absolutely so anyhow as I said the nests attracted a lot of attention some of it lot lot of it very positive here it comes lot of lot of people excited about it yes very excited some people are heated some people forgive the pun some people are getting worked up about it a little hot under the collar uh honey well you've been uh you've been sued by honey well yes we have for for uh patent infringement yes seven patents seven seven patents seven patents and uh now honey well has been around uh for a thousand years before I was born they Honeywell has been around a long time they and really do you know a lot of companies that make thermostats but I have Honeywell thermostats in my house there aren't I know there are other companies I'm sorry well and I said they're painted over and they're old and they've got the dial and I can't see I'm like I guess it's on uh so they're suing the crap out of you how does that make you feel uh validated really validated y you know look we're we're new guys on the scene uh we think we're doing something really important and they feel threatened uh it's appears so yeah it appears so because they didn't call us they didn't say hey hey let's work this out manto man they didn't want to settle they weren't like you know what we see you guys are doing some things that look similar maybe we can talk sit down let's talk you they didn't want to do that they didn't want to do that they just wanted to uh publicly address it address it in the court of law exactly and uh and how do you think you're going to fair in this well uh we just issued our response and actually you guys posted on the website you very we did we did post it 56 page I think response did we post the whole response yes well we're we like like to be thorough and you know Nei is a lawyer so anything that's remotely legal he's like start like salivating and you know it's like he has to take his jacket off he's like I got to go to work he like clears his desk that actually happens you think I'm kidding it's a little frightening uh but but so so you're going to you're going to go to court on this over this well that's what they want to do we'd rather not but right but you can but you think that you've got a you got a chance to defend yourself and to win here well when we looked at it all seven patents they were clearly invalid and what we've said was you baseless and and and did you say they're worse than a patent troll I have actually said yeah let me let me describe why if you look at yeah damn right I said damn right I said they're worse than Tony Fidel I created The Nest knock over vase or yeah just go just go for it no literally if you look at uh IP protection out there you see things like Apple suing HTC and that is all about Innovation but Apple's saying let's play fair and then you look at somebody like Microsoft and you saw what they selling patents and all these other things they treat it as a business but once again they're treating Innovation as something that is good to have we just want they want to get paid for it it's a business uh if you look at you know even classic patent trolls they want in Innovation to thrive and exist out there and so why do they want that because they have some patn they would like to get paid for theirs as well in all three cases they want Innovation to thrive and be a great thing in our case these guys want to stay the status quo they want to be number one and they want to use basically crap patters against us to try to intimidate us intimidate our Market intimidate our Channel and intimidate our customers they're not they they do not want Innovation to thrive they're not like let's find a way to work this out they're like we're going to sue you out of just threw it into court they never called us right so to me that who would call you the CEO he what is he no I've never met him use the rotary phone I've never met it's honey well I wish he would have called me it's honey well damn it I don't I don't know what I know who that is he's actually not really honey well he's actually Allied signal oh of course he's Allied signal and he changed his name to Honeywell when he bought Honeywell you're talking about this backstage that that Honeywell was Honeywell and then they were bought by a company called Allied which by the way sounds like a total totally nefarious like you Allied signal is not something you want to deal with but then they went they became honey well yeah they moved their headquarters from Minneapolis over to New Jersey and they CH other Jersey and they changed their name to H you're going to die okay I just want you to know yes they friends they're going to say guys your house and you're dead man it was wonderful knowing you all right soy boys so you're going to go you're going to go you're going to fight this we have to well I know you have to we have to and we have the best we have the best in the business business we actually have um the person who was next to me for getting basically sued at Apple every every week uh chip lton who joined the team he was the head of the chief patent council at Apple has now joined our team he is now part of us he has been advising us for a Year honey well is going down they're gonna they're Apple doesn't screw around and I'm sure this guy doesn't screw around chip is awesome so I'm sure you've got a pretty good shot well I you know we're going to be tracking it obviously I mean we're we're fans of innovation I think this I mean you know for our readers and even for the editors at the site it's this patent stuff is like it's almost it just seems to be overtaking the industry I mean the fact that we're reporting you know 25% 30% of our stuff now I feel like we're reporting on people arguing about ideas right and it's it's a pretty it's it's a pretty crazy point in our industry I mean does it does it scare you do you feel like Innovation is being stifled I mean I I it looks like Innovation is being stifled I I think that it it is being stifled in the smaller companies in the larger companies what they're really doing is they're just fighting about market share and trying to uh make sure they get either get paid or keep them out of the market or make them innovate differently um so it does put everybody on to to to think twice about what they're doing and and how they're doing it but and it does enrich the lawyers absolutely enriches the lawyers good time to be a lawyer in Valle it's a very good time to be not just in Silicon but anywhere because you'll get sued in the court of Texas and the court of right well I mean yeah but but there are a lot of there's a lot of Silicon Valley lawyers are very active right now absolutely and uh you know they're they're loving it and now you've got one we have we have a great set of lawyers absolutely uh okay so so you're doing the thermostat you're G to fight honey well you're going to take honey well down you're GNA you're going to ruin you're going to ruin honey well I'm quoting you those are your words uh I didn't say that and I quote uh we're going to put honey well in the ground so help me Tony Tony Fidel you said those words they're a very big company um so what's after the thermostat is there is there a n is there something beyond the thermostat is well right now right now we actually ship 2.0 of our software and so we're continuing Tempest Tempest exactly actually putting in More Energy Efficiency into the the the thermostat just via software upgrades that happened in the background but next week we're actually going to announce uh an energy report that comes with your your thermostat so each month you get a kind of a history of what you've done and how you can save more that's personaliz but but it makes sense though you've got these things on the walls they're connected they can talk to each other home automation is a place that seems like a likely area or a good area for you to go is that something you've considered I mean home automation to me I have a new house it's I think all the time like God I just wish there was some like the nest seems like this very self-contained sensible beautiful system for doing something that happens in the the house that you don't think about that much is that a place you might go I mean there's a lot you can do in a house if you got things talking to each other have you thought about that we we think about it all the time I have my R&D house that you know I go through and and a lot of times my wife doesn't like what I do to the house when I automate it so I learned through that what are you doing to the house yes I can't tell you I'll give away too many things strobe lights turning beds turning beds yeah boy you're just in a lot of trouble tonight uh so is that so you would that's something You' consider uh we we're looking at all the things but frankly you know it's we're still small we're still trying to get enough production out for everyone we're still trying to get to other countries Nest are in all 50 states we've actually seen them light up in Canada all across Europe in Saudi Arabia and Japan so we're still just trying so people are are taking they're buying them in the states and then taking them all around the world so we still just have to build our Market there's a huge appetite for this for for thermostats there's billions of therat guess this well when you look at it thermostats 10 million are sold a year in the US 10 million Honeywell thermostats and you're and you're about to change that yeah well we hope you are changing it all right Tony thank you so much for joining us really appreciate it tonyell everyone and uh you gotta you gotta you have to come back you got to come back either when you're in the thick of it with honey well you probably won't be able to say anything then but but when you win you come back and talk about it um thanks so much really appreciate it n\n"