Infinite Loop / The Apple Ecosystem

Lodsys claims momentum in patent fight as some indie devs leave US (Updated)

With foes like Lodsys "you'd have to be insane to launch anything significant" in the US.

Aurich Lawson

Patent holding company Lodsys claims it's gaining momentum in its battle with independent developers. The company posted two new blog posts on Monday evening—after almost a year and a half of silence—claiming it has both gained the favor of the US Patent and Trademark Office and made a number of new patent licensing deals with smaller companies. But some of the indie developers targeted by Lodsys have begun chest-thumping in response, declaring that Lodsys "needs to be stopped."

In its first post, Lodsys claims more than 150 companies have paid to obtain the rights to its patent portfolio, with "more than 4 out of 5" choosing to do so outside of litigation. "These companies have realized significant savings by taking advantage of lower licensing rates," Lodsys wrote.

Indeed, it's no surprise that a number of companies have chosen the licensing route. When Lodsys began going after mobile app makers in 2011, first starting with iPhone developers and then spreading to Android and other platforms, it threatened expensive patent infringement lawsuits if the developers didn't cough up some cash to license the patents. Some developers—apparently "more than 150"—ended up being scared into going the licensing route due to their relative size, as many mobile app makers are small shops with limited resources.

Apple has also been green-lighted to intervene in Lodsys' lawsuit against some iOS developers. (The lawsuit targets developers who made use of Apple's API for in-app purchasing, but Lodsys says the developers owe licensing fees regardless of the fact that Apple itself owns a license for that functionality.) But Lodsys' second post this week touches on the in-app purchase patent by bragging that it has the USPTO on its side.

"As a part of the Inter-Parties Reexamination requested by Google, the USPTO recently issued an Office Action confirming Claim 24 of US Patent 7,222,078. This claim is particularly relevant regarding in-app purchases and free-to-paid application upgrades," the company wrote. "In addition, we have every confidence that all claims will ultimately be confirmed through this lengthy process. In-app purchase features and free-to-paid upgrades will be a part of the litigation process that is now swiftly moving forward."

The patent firm goes on to point out that Apple's ability to extend its own licensing rights to third parties "remains unresolved and clearly contested."

Other app makers have been fighting back against Lodsys on their own. A number of iOS developers banded together last year to create a group—open to developers of all platforms—called the Appsterdam Legal Defense team in order to fight back against non-practicing entities (NPEs) like Lodsys. By the end of 2011, the group brought on board its own intellectual property attorney. And, in June of this year, the group went a step further by teaming up with "patent research community" Article One in order to help independent app makers look up prior art and make informed decisions about licensing.

The group's founder, Mike Lee, was hardly surprised at Lodsys' latest claims. "Lodsys is designed to fight companies like Apple and Google. What they're not designed to do is fight thousands of tiny players, all determined to make themselves the biggest pain in the ass possible through guerrilla legal tactics, all worth very little actual money," Lee told Ars on Tuesday.

But Lee thinks there is more at stake than just individual developers being bullied. He said ever since creating Appsterdam and the Appsterdam Legal Defense Team—which he is no longer running, but continues to be involved with—he's now exposed to a steady flow of programming talent looking to move from the US to Europe in order to avoid such lawsuits.

"Every non-American organization trying to unseat Silicon Valley as the world leader in technology production should be popping champagne" over Lodsys' continued claims, Lee said. "More patent madness means more talent flowing into Europe, which is great, because it means we can start using our embassies to kick some of that over to countries like Greece and Italy who could definitely use the work."

Lee confirmed his apparent glee at the benefit to the European economy is meant to be ironic, because he believes software patents are costing jobs in the US by forcing developers to move their operations overseas. As a result, Lee added that NPEs like Lodsys should be stopped ASAP.

As an example, Lee pointed out that his two new companies have engineers from San Francisco who have moved to Amsterdam to launch their technology. "[T]he fact that any new technology coming out of the US is immediately infected by parasites like Lodsys means you'd have to be insane to launch anything significant there."

Update: Article One has issued a statement in response to Lodsys' blog posts. "The 150+ licenses that Lodsys is fighting for is money that is being deferred from innovation by small app companies in order to only further inflate the pockets of Non-Practicing entities," Article One CEO Cheryl Milone told Ars. "In order to keep the doors of innovation open, small companies need to have the flexibility to invent without being penalized."

Appsterdam Legal Defense Team has also issued a statement in response to Lodsys.

"Remember the creepy kid in high school that tried to convince you that huffing gas was cool because 'everyone was doing it'. In a set of disturbingly short posts, Lodsys uses the same trite argument to justify its extortionist business model," attorney Mike McCoy told Ars."The timing of the posts follows Apple's statement that it sold 5 million iPhone 5s during launch weekend. That's a lot of new iOS users and developers around the world are most likely seeing a sales boost. Think of these posts as yet another knock on the development community's door, followed by a "businessman" in a very expensive suit saying, 'Look, just pay up like everybody else and keep quiet.'

"Unfortunately for Lodsys, the numbers are pretty disappointing. Given the sheer volume of licensing "requests" sent to developers over the past year, 150 licensees is a pathetic return on investment. Within the Appsterdam community, I believe that developers have been sufficiently warned about Lodsys and their scare tactics. Outside of that sphere, unfortunately, it appears some have chosen to enter into a license.

"And therein lies the principal problem with patent trolls. If even one license is secured, it gives unnecessary credibility to a horribly written patent."

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