Lodsys explains its legal threats: Apple is licensed, iOS developers are not
Following a number of legal threats that were sent by Lodsys to third-party iOS developers over in-app purchases on the iPhone App Store, the company has taken to its official blog to explain and justify its actions.
The answers were given on Sunday in a number of posts made to the company's official blog, in which the company revealed that Apple has not been sued because the company is licensed to offer in-app purchases. But Lodsys believes that developers do not have the right to offer in-app purchases through Apple's system without licensing as well.
"It is the owner of the hotel who is responsible for the overall service (value proposition) that guests pay for, not the owner of the land that the hotel may be leasing, not the travel agent that sold the reservation, not the manufacturer of tools such as hammers, nor the provider of materials such as nails or steel beams, which may be used in building the hotel; nor is it the outsourced linen washing service or the architect of the building who is responsible," the company said.
"Lodsys' patent portfolio is being used as part of an overall solution and we are seeking to be paid for the use of patent rights by the accountable party."
In addition to Apple, Lodsys explained that both Google and Microsoft are licensed for their "nameplate products and services." But the scope of those licenses, Lodsys believes, does not entitle any company to provide services to third-party developers.
"The value of the customer relationship is between the Application vendor of record and the paying customer, the OS (is acting as an enabler) and the retailers (are acting as a conduit to connect that value), and taking their % for that middleman role," the company stated.
The question-and-answer posts also reveal that Lodsys is seeking 0.575 percent of U.S. revenue over the period of the notice letter to the expiration of the patent, plus applicable usage. That would amount to $5,750 per year for an application that makes $1 million in annual sales.
Last week, developers began receiving letters from Lodsys, and were accused of patent infringement. The letters gave developers 21 days to license technology related to in-app purchases, a feature that Apple offers iOS developers through its App Store.
Lodsys has accused developers of infringing on U.S. Patent No. 7222078, entitled "Methods and Systems for Gathering Information from Units of a Commodity Across a Network." The original patent was filed in December 2003, but dates back through continuations to earlier applications as old as 1992, and is credited to Dan Abelow.
Intellectual Ventures bought Abelow's patent portfolio in 2004, and later sold them to a private rights ownership group, which set up independent companies. Lodsys said that neither Abelow nor Intellectual ventures are involved in the licensing activities.
"Dan does have a consulting agreement to work with Lodsys on matters pertaining to the Lodsys patents," they said. "This agreement is for a fixed fee, and if that fee is exceeded, then he is paid a consulting day rate. Dan has no direct economic interests in the patent licensing activity."
Apple debuted its in-app purchasing system in 2009 as part of iOS 3.0 for the iPhone. Though the feature was initially restricted to pay software, later that year Apple granted creators of free applications the ability to charge for add-ons and additional content.
Just like purchases made directly through the App Store, in-app purchases are charged by Apple to a user's iTunes account. Apple takes a 30 percent cut of all transactions made for software on iOS devices.
The answers were given on Sunday in a number of posts made to the company's official blog, in which the company revealed that Apple has not been sued because the company is licensed to offer in-app purchases. But Lodsys believes that developers do not have the right to offer in-app purchases through Apple's system without licensing as well.
"It is the owner of the hotel who is responsible for the overall service (value proposition) that guests pay for, not the owner of the land that the hotel may be leasing, not the travel agent that sold the reservation, not the manufacturer of tools such as hammers, nor the provider of materials such as nails or steel beams, which may be used in building the hotel; nor is it the outsourced linen washing service or the architect of the building who is responsible," the company said.
"Lodsys' patent portfolio is being used as part of an overall solution and we are seeking to be paid for the use of patent rights by the accountable party."
In addition to Apple, Lodsys explained that both Google and Microsoft are licensed for their "nameplate products and services." But the scope of those licenses, Lodsys believes, does not entitle any company to provide services to third-party developers.
"The value of the customer relationship is between the Application vendor of record and the paying customer, the OS (is acting as an enabler) and the retailers (are acting as a conduit to connect that value), and taking their % for that middleman role," the company stated.
The question-and-answer posts also reveal that Lodsys is seeking 0.575 percent of U.S. revenue over the period of the notice letter to the expiration of the patent, plus applicable usage. That would amount to $5,750 per year for an application that makes $1 million in annual sales.
Last week, developers began receiving letters from Lodsys, and were accused of patent infringement. The letters gave developers 21 days to license technology related to in-app purchases, a feature that Apple offers iOS developers through its App Store.
Lodsys has accused developers of infringing on U.S. Patent No. 7222078, entitled "Methods and Systems for Gathering Information from Units of a Commodity Across a Network." The original patent was filed in December 2003, but dates back through continuations to earlier applications as old as 1992, and is credited to Dan Abelow.
Intellectual Ventures bought Abelow's patent portfolio in 2004, and later sold them to a private rights ownership group, which set up independent companies. Lodsys said that neither Abelow nor Intellectual ventures are involved in the licensing activities.
"Dan does have a consulting agreement to work with Lodsys on matters pertaining to the Lodsys patents," they said. "This agreement is for a fixed fee, and if that fee is exceeded, then he is paid a consulting day rate. Dan has no direct economic interests in the patent licensing activity."
Apple debuted its in-app purchasing system in 2009 as part of iOS 3.0 for the iPhone. Though the feature was initially restricted to pay software, later that year Apple granted creators of free applications the ability to charge for add-ons and additional content.
Just like purchases made directly through the App Store, in-app purchases are charged by Apple to a user's iTunes account. Apple takes a 30 percent cut of all transactions made for software on iOS devices.
Comments
Wait what? They license their nonsense to Apple? Is that what they're claiming here? I can't tell through all the terrible analogies.
Yep that is what they are claiming. So lets see the paperwork, it is possible that that licensing actually does give Apple the right for developers to use the tech without also paying. After all that is why Apple would want it so why wouldn't they make sure it was included.
It's greedy worthless companies like this ruin it for everyone else. The comparison they offer is terrible, it makes no sense in the software world.
I doubt Apple will let this happen and am surprised they have no stepped in, yet. There is no way they'd risk losing their developer base over greed like this, especially with Lodsys having the ability to target (most) ANYONE who develops for iOS, small time or major player.
Patent should be reserve to real product and manufacturing process only. Shouldn't be able to patent theoretical and wishful thinking like majority of pseudo software patent and gene patent.
I should summit this patent: Method to interact with an electronic device via key or tactile input peripheral. And sue every tech company in this world..
I'm a software developer, I make a piece of software. I can install the software on applicable devices - stick it on, hey presto it works.
So, I want to distribute my app and maybe make some money (always useful), so I decide which platforms I want it to work on, i think that iOS is popular - quick look see. Ah yes, I like this in-app purchase system they're offering, I'll use that.
software developer = developer
apple = publisher.
App store = medium
Apple has license for technology used on their App store.
Really simple, oh no that isn't an analogy at all is it?
Oh we want an analogy - it'd be a bit like making musicians pay a license to have their music on cds.
Seems like another troll will troll case
I should have been a patent attorney.
Why would you want to be an ***hole? Oh, sorry, you said patent attorney, not patent troll.
“Utility and plant patents issued prior to June 8, 1995 expire 17 years from the date of issue with the payment of maintenance fees. …Patents are not renewable. Under special circumstances, a patent term may be extended.” Does a patent last forever? (Georgia Tech Library and Information Center, “Patent Facts,” Georgia Institute of Technology, Atlanta, Georgia, June 18, 2008)
I have a hotel and buy a certain sliding glass door, and it turns out that the company that makes the door DID license the sliding door technology, but Lodsys decides they really only meant that the door company can run the door to test it at the factory and that every hotel that uses the sliding doors now is infringing and should be sued.
OK, that's a bit closer. So... does it work that way in real life or not? Would someone sue every customer that bought a car if they felt that the manufacturer didn't license something correctly, or would they sue the manufacturer? I mean, I can be using that car as a taxi and making money... so am _I_ getting sued because the far meter that's installed violates a patent? I'm guessing no, but I'm not an attorney. Or troll.
Just wish China and India would give the US the middle finger and blatantly disregard all these patents.
If you can't make a physical product out of your ideas it should not be patentable. We all pay the costs for these patent trolls' greed.
I think this company's got no chance .... its developers using Apples developed and produced solution (API's) for IAP ... dev's cannot use their own home-brewed solution on iOS AppStore .... therefore surely dev's are basically using the code Apple has licensed
Seems like another troll will troll case
Exactly. It's a troll case and I look forward to Apple fighting this suit to protect their developers. That's why everything goes through the Apple App Store and there is an API.
Apple will have to fix this fast, since it renders their IAP system useless for developers.
It doesn't make it useless, but it does add at minimum one half a percent of their revenue as a cost of doing business, as well as open the door for other patent trolls to try and take advantage of developer's with little profit from mobile apps. Agree with some others that Apple should step in here.
FWIW. I'm very curious if Apple is paying continuing/one-time license fees to Lodsys regarding this patent claim as the article hints at.
Land? Let's fix the analogy...
I have a hotel and buy a certain sliding glass door, and it turns out that the company that makes the door DID license the sliding door technology, but Lodsys decides they really only meant that the door company can run the door to test it at the factory and that every hotel that uses the sliding doors now is infringing and should be sued.
OK, that's a bit closer. So... does it work that way in real life or not? Would someone sue every customer that bought a car if they felt that the manufacturer didn't license something correctly, or would they sue the manufacturer? I mean, I can be using that car as a taxi and making money... so am _I_ getting sued because the far meter that's installed violates a patent? I'm guessing no, but I'm not an attorney. Or troll.
Good argument and nice perspective. This reinforces my feeling that Apple will be running point on this to protect their developers to protect their platform to protect their HW to protect their sales to protect their profits.
As mentioned by others, this whole notion of dreaming up patents for ideas is a nonsense! Anyone sitting there and thinking 'I'll add an update button' has only a limited number of ways of translating that into a function. Not only that but we have got used to the concept of a standardised UI so when we look for an update button it should be fairly obvious. Why should I/we have to pay someone for this?
The sooner legislation is brought in to eradicate these trolls the better. The only people gaining from these activities are the lawyers while everyone else is being screwed!