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IP, Patent, Risk Mangement

Guest Post: Targeting App Developers Only Seems “Unfair”

The following is a guest post by Michael Wokasch, a registered patent attorney with the law firm Quarles & Brady LLP.  Wokasch is a former software developer, and experienced in IP Licensing, Litigation and Patent Prosecution.   

To many, including us hardened, cynical, knee-deep-in-patent folks, Lodsys’ targeting individual app developers seems crazy/insane/stupid/desperate/insert-other-adjective. A great many have called Lodsys’ actions as “unfair.”  And while I don’t disagree that Lodsys seems crazy/insane/stupid/desperate, calling it “unfair” misses the mark.  In reality, it only seems unfair for two unexpected reasons.

1.  It’s Apple’s Fault

The first reason the Lodsys affair seems “unfair” is because of Apple. Apple’s contract with its developers does not have an obligation to defend the developers.  In fact, the developer agreement puts the obligation on the developers to defend Apple.  No matter how despicable you believe Lodsys is for targeting app developers, Apple’s contract [and likely Google’s and others’ contracts] have essentially left the developer’s out to dry.

True, Apple did draft a nice nasty-gram to Lodsys. But this was not a public statement by Apple to fully fund the defense of any app developers targeted by Lodsys.  Whether Apple agreed to do so in private is still unknown. Yet, Apple’s letter likely caused even more heart burn for the app developers because, in a totally expected response Apple’s letter, Lodsys filed suit.  Lodsys obviously felt the need to preserve its venue of choice: the Eastern District of Texas.

This is largely contrary to what usually happens when small players, like app developers, are targeted by patent litigation.  Small players do get sued, and there’s no reason why they can’t be.  The fact is, patent law gives a patent owner the right to exclude others from making, using, and selling a patented invention.  So a defendant can be anyone in the chain: suppliers, resellers, distributors, developers, and even customers. For obvious reasons, patent owners don’t usually do it to collect a pittance. Rather, these targets usually fall by the wayside as the real target is usually someone with deeper pockets further upstream, like Apple.

In the usual situation, that deeper pocket simply “indemnifies” (pays for the defense of) the other party. They do this because no one likes angry customers, they fear letting some party control a litigation that might impact their business, they have legal obligations to do so, they have contractual obligations to do so, etc. When this happens, the targeted small player goes about his or her day without so much as a peep.

By contrast, the Lodsys situation seems unfair because Apple’s contract doesn’t protect the app developers, and Apple hasn’t said it will defend its developers publicly.

2.  Settlement is Too Cheap.

The second reason it seems “unfair” is because Lodsys is asking for literally half pennies on the dollar of each infringing sale.  This may be counter-intuitive.  However, when so little money is at stake, it essentially takes away most leverage-building strategies off-the-table: obtaining non-infringement or invalidity opinions, filing for reexamination, filing for a declaratory judgment, joint defense groups, etc. By making defending yourself the economically irrational choice, it makes the situation seem unfair.

Contrary to some other opinions, seeking that kind of leverage is going to be more expensive than the license itself.  Under Lodsys’ original offer, a developer making $100,000 in sales will pay just $575.  This does not buy much time of even a moderately priced junior lawyer.  A lone developer, even a group of developers, cannot ask for reexamination of the patent or even answer a complaint for patent infringement for $575. So, the only choice to avoid litigation is to pay the demand.

Moreover, even if you do “buy” some leverage, what good is that leverage?  Defendants typically use the leverage to lower the settlement offer.  Using the leverage in that way is nonsensical: the app developer may end up paying a lower amount (say $300) but will have paid out a few thousand dollars extra in expenses.

Of course, since there are so may potential targets, it is possible that having some leverage like a non-infringement opinion or a filed declaratory judgment action in a favorable venue may dissuade Lodsys from pursuing the app developer with that leverage.  In essence, Lodsys may decide to target only the low-hanging fruit and, by taking such posture, they will just move on to some else.  Even applied this way, your “get out of court FREE” card isn’t really free.

This disarming of the letter recipient just seems unfair.

Still get a lawyer

All of this said, I still recommend that any letter recipient at least consult with a lawyer to assist in understanding the actual exposure.  Patent litigation and the scope of the license and settlement letter are still very complex issues.  Any particular developer may be better served pursuing one or more other strategies.  In addition, I make a strong assumption that any particular app developer does not have significant damages at stake.  Yet, as of the writing of this, there is some indication that not all targets are alike. Yesterday, an app development company, ForeSee Results, filed for declaratory judgment against Lodsys asking the court to declare the patents invalid or their apps non-infringing.  It is interesting to note, ForeSee Results cites letters from Lodsys to two big customers: Best Buy and Adidas.  ForeSee is either being forced by its customers to indemnify them or sees more at stake for its business than a few hundred dollars.



17 thoughts on “Guest Post: Targeting App Developers Only Seems “Unfair”

  1. Mike,

    Fantastic post, and thanks for contributing. I agree, ForeSee is most likely feeling pressure from their customers. But the DJ lawsuit isn’t really cause for celebration among app developers, though they are treating it that way. It may just provoke Lodsys to “up the ante” and bring more lawsuits now to avoid getting roped into additional DJs.

    Looking at this situation as an arm-chair QB, er, analyst, it appears that no company is too small to register on Lodsys’ radar. I’m curious how this strategy will play out in the end from an ROI perspective.

    Posted by Patrick | June 9, 2011, 8:16 am
  2. Here is the question that never seems to get asked any more: Did the apps developers even do a preliminary patent clearance search? It easy for people who are computer literate to do a quick search of the patent database with today’s tools to see if they are likely to infringe any patents.

    If you were going to build a garage, a shed, a building, etc., you would first undertake a simple search to determine if I owned the land on which this structure was going to be built. This is just basic common sense. Why do we constantly excuse patent infringers for failing to do the simplest due diligence before they undertake building their products? A simple clearance search makes good business sense. It ensures that the company is not reinventing the wheel, it is good competitive market information, and it makes sure that you are not going to be sued for building on someone else’s property. Patent clearance searches are just good, basic business practices that too many lazy business fail to perform.

    Posted by dbhalling | June 9, 2011, 10:17 am
    • I think it’s more like “if I were building a garage, would I think to check if someone had a patent on a building in which a car could be stored”, rather than checking if someone else owned the land.

      Posted by Al Cameron | June 9, 2011, 11:37 am
      • Al – Not at all. It’s like Dale said. In his analogy, the “garage” is your new product and the “land” is the technology practiced by the product.

        Posted by Patrick | June 9, 2011, 11:40 am
        • I completely disagree. The “land” is apples API but the patent is a barely recognizable fossil buried 100m below the surface. The patent holder then claims a right to charge rent on the garage because his ancestors were there first.

          I also find the article to be a terribly warped view of reality that could only come from somebody living off the back of this sorry state of affairs.

          Posted by D Smith | June 9, 2011, 5:12 pm
          • Further discussion of this analogy may have reached the point of diminishing returns ….

            But you cut to the heart of the problem, which is that the Apple’s role in enticing developers to use technology that may turn out to infringe another’s property rights, and then offering an agreement that says, basically, Good Luck. I could make some analogy about “entrapment” or maybe “attractive nuisance” … but again, analogies and diminishing returns and all ….

            Love the discussion. Keep it going.

            Posted by Patrick | June 9, 2011, 6:20 pm
        • (notwithstanding your comment further down about the discussion having already jumped the shark… 🙂

          My un-clear point was not that the analogy was incorrect, but that it was not the right analogy for this situation.

          Posted by Al Cameron | June 9, 2011, 7:39 pm
    • Part of the problem here is that Lodsys is taking such an extreme reading of its own claims — invalidity be damned — that I doubt a reasonable reviewer would assume that the garage was going to be built on land owned by someone else.

      Posted by mmm | June 9, 2011, 2:16 pm
    • Your ridiculous example makes it sound as if patent searching were a simple thing to do.

      What you’re actually asking people to search for with software patents is more akin to whether placing a screw in a piece of wood is patented and whether screwing that screw in a certain way using a specific screwdriver, or whether sawing the piece of wood in a certain way and a certain direction is.

      Of course it’s even more difficult than this because you can remove the term “wood” and replace it with a more generic “medium”, change the term “screwdriver” and replace it with a “tool”, change the term “screwing” and replace it with “applying”. Then you would get closer to the generic nature of these software patent concepts.

      So now multiply this process by about 1000 (on the low end) and you’ll have the number of concepts you could probably pull from any piece of software. Then take this process and multiply it by the number of potential patents.

      Gosh, it is a wonder that people don’t just do a “cursory search” huh?

      I would love to see you take even a simple piece of software and be able to tell me for certain that it does not infringe on any patent. It’s basic common sense right?

      Posted by JoB | June 9, 2011, 4:54 pm
  3. Patrick what are your thoughts on Apples latest move? (Motion to intervene).
    I think a lot of people will be pleased to see them do this, I really think they are obliged to
    after effectively drawing app devs into (alleged) infringement.

    Posted by D Smith | June 10, 2011, 11:08 am
  4. The nature of software is that it is both the design of the product and the product itself. Human beings are by nature, creative beings. Patents are simply a particular form of state monopoly that destroys creativity. Really, the only people that benefit from a state created monopoly are attorneys. I know, I’m an ex-attorney and a current software developer. I keep a very low profile to avoid what is nothing more than a mob-style “shake down.” If software patents ceased to exist tomorrow, creativity and competition would flourish. Only the patent attorneys would lose.

    The poster who suggested a patent clearance fails to understand that these developers are small businesses. It is not worth spending thousands of dollars trying to clear a piece of software through tens of thousands of broad and vague patents, especially when that software earns the developer, maybe, $100,000 (and that’s in a really good year).

    The important difference between software patents and real property is the definition of the boundary and the ability to exclude. The boundary of real property can be precisely determined. Software patents create vague, broad, non-visual boundaries making exclusion extremely difficult. Further, the physical space of real property can only be occupied by one person or thing at a time. Not so with software. The reason: software is not property. Software is simply the creative use of mathematics.

    Posted by ebreismanEvan R. | June 11, 2011, 9:56 pm
  5. This is why I develop Android applications because it is all open and you do not have to answer to “The Man”. Apple is losing market-share big time because of all their unreasonable restrictions.

    Posted by Ken Bingham | June 18, 2011, 10:32 pm
  6. Programming patents are ridiculous because while writing a program you are not inventing something you are instructing the computer to do something that it already has the inherent ability to do. It is akin to patenting a song. Computer hardware yes but software is a stupid idea and most software developers agree.

    Posted by Ken Bingham | June 18, 2011, 10:36 pm
    • Ken,

      You have no idea what you are talking about. Of course, when you are programming you cannot create something the computer cannot do. When you create an electronic circuit each of the components and the circuit only performs what it can do. When you build an internal combustion engine you are only creating something the metal, air and gasoline can do. Are you suggesting that only black magic should be patentable? All inventions in the history of the world are combinations of known elements and all these elements perform according to the laws of physics. Thus, all inventions are only made up of things that are possible. If the standard for patentability is that the invention must be impossible, then we should just shut down the Patent Office.

      The arguments against software patents have a fundamental flaw. As any electrical engineer knows and software developer should know, solutions to problems implemented in software can also be realized in hardware, i.e., electronic circuits. The main reason for choosing a software solution is the ease in implementing changes, the main reason for choosing a hardware solution is speed of processing. Therefore, a time critical solution is more likely to be implemented in hardware. While a solution that requires the ability to add features easily will be implemented in software. Software is just a method of converting a general purpose electronic circuit (computer) into a application specific electronic circuit. As a result, to be intellectually consistent those people against software patents also have to be against patents for electronic circuits.

      Posted by dbhalling | June 19, 2011, 4:47 pm
  7. Patents are not a state monopoly, they are property rights. You clearly do not know the difference. Here is a simple three question test to determine if something is a property right or monopoly.

    1) Does the right arise because the person created something?

    Creation is the basis of all property rights. The law is just recognizing the reality that the person is the creator and without that person the creation would not exist. This is consistent with Locke’s Natural Rights and Ayn Rand’s Objectivism.

    2) If someone else was the creator would they have received the right in the creation?

    This ensures that the right does not arise from political favoritism.

    3) Is the right freely alienable?

    Freely alienable means that right can be sold, transferred, divided, leased, etc. This is a key feature of property rights.

    For more information see http://hallingblog.com/2011/04/14/monopolyrent-seeking-vs-property-rightsintellectual-property/ and http://hallingblog.com/2010/09/30/more-on-the-myth-that-patents-are-monopolies/ and http://hallingblog.com/2009/05/31/the-myth-that-patents-are-a-monopoly/

    Posted by dbhalling | June 19, 2011, 4:52 pm


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