I don't think getting Apple out of the market would stifle innovation. I don't think Apple does much real innovating. There is nothing innovative about an exposed antenna or curved lines and edges let along a button at the bottom middle of the front of the phone. Capacitive screen and touch interfaces were on the way without Apple and Apple hasn't done anything since then other than fail to catch up to Android.
I would argue that Apple has hurt innovation by lowering the bar so far for what a user expects from a smart phone. dumb phones could run apps. My first Kyocera could run apps. Sure the screen was smaller and gray-scale but there was an appstore I could use to purchase BREW apps on my phone. That is only one example. The bar was much higher with Windows Mobile 6.x and earlier. Long before any iPhone it had basic features like LED notifications, widgets, and standard bluetooth file transfers, all things that the iPhone 5 still really does not have. If Apple wouldn't have flooded the market with such sub-par devices companies that are innovating would have higher sales and more resources for more innovation.
I'm not saying I want Apple out of the market but I'd love it Windows Phone was in the position of the iPhone. I think it's just as simple and far more versatile than iOS. I'll be happy though if Apple just stops suing everyone else.