You left out differentiation, which has always been Apple's primary way of competing. Differentiation becomes a lot harder when the competition can simply copy you.
Apple already did differentiation, that's how they became a leader in smartphone products and sales. It took how long for the competition to "copy" Apple? How much has Apple's market share, and market cap, increased since the original iPhone differentiating point? Maybe it's time Apple start differentiating their products again, now that the tech that made them different to begin with is commodity.
What you are suggesting is exactly what has happened: It is called the iPad, with books and periodicals in iTunes to boot. By his own admission, it is the first device to satisfy the ultimate vision of Alan Kay, the father of the modern personal computer. See http://en.wikipedia.org/wiki/Dynabook
The interface potential of this device is enormous. Expect to see a whole new generation of must-have applications taking advantage of multitouch on a larger screen.
Hah! Touche, yeah the closed platform was not his vision at all, but the iPhone dev kit must be good enough he is quoted as saying that a bigger iPhone would constitute a dynabook.
even so, the ipad technology will become a technology that is common as muck in even shorter time it took the industry to mimic and build on the concept of the iphone. what then?
This is the situation patents and IP law where designed to deal with. The real cost of innovation includes all the the failed ideas. When people can wait for a first mover and then copy them there is little to no value in being a first mover.
Perhaps some sort of short term look and feel right with a mandatory licensing agreement might be the best way to deal with this stuff. You can make as many iPhone / iPad knockoffs as you want but you need to pay 10 cents a pop.
Yes, Apple continues to innovate in new areas, but being a leader doesn't seem to be enough for them/Jobs if they are going to attempt to keep their leadership in markets that are becoming a commodity by enforcing patents on what amounts to commodity technologies.
It can actually be a pretty wilily to upset one industry, let everyone spend their time catching up and dealing with it becoming a commodity, while you move on to upset the next industry. Apple is doing that with the iPad, and they still have, and will continue to have, a lead position in the smart phone market letting them have some influence over where that industry is headed, especially with things like the App store and their market penetration. But how much time and effort is it worth looking back at previous industries they've upset while they upset the next industry? Apple has had more success at exploiting their good brand name to enter markets that they wouldn't necessarily have been in and upsetting them, complaining about other companies copying them, after they've already reaped the rewards for their effort (and continue to do so), is not the mark of a true leader.