Monday, May 23, 2011

Analysis of Apple's letter to Lodsys

The first app devs to have received Lodsys's letter were only a few days away from a deadline to respond, and under that circumstance I already felt forced to recommend to app developers to be cooperative and ask Lodsys to provide its license agreement for review, despite previously having pointed out that paying Lodsys the 0.575% royalty it demands could open Pandora's Box and result in further exacerbation of the troll problem app developers face.

Hours later, Apple sent various app developers a copy of its letter to Lodsys. The text of that letter -- dated May 23, 2011 -- was shortly thereafter published by Macworld. In my view it's very good news, but I think Apple's letter in and of itself is not yet a reason to celebrate. This could still get quite unpleasant for some app devs.

The most important passage consists of the following three sentences in the very first paragraph of the letter:

"Apple is undisputedly licensed to these patent[s] and the Apple App Makers are protected by that license. There is no basis for Lodsys' infringement allegations against Apple's App Makers. Apple intends to share this letter and the information set out herein with its App Makers and is fully prepared to defend Apple's license rights."

At the end of its letter, Apple says this:

"Apple requests that Lodsys immediately withdraw all notice letters sent to Apple App Makers and cease its false assertions that the App Makers' use of licensed Apple products and services in any way constitute infringement of any Lodsys patent."

So is this the "blanket coverage" concerning Lodsys that I said app developers need because otherwise they have to take a license? I can't give you definitive legal advice. Chances are that a really cautious lawyer might tell you that Apple's sending you a copy of that letter to Lodsys is not a substitute for a detailed and highly specific agreement under which Apple would hold you harmless no matter what the outcome of a possible lawsuit might be.

Despite Apple's letter, Lodsys could still sue app devs

App developers have to understand that Lodsys can still sue them. Apple's letter does not prevent Lodsys from doing that, and it would be a way for Lodsys to pursue its agenda. It wouldn't make economic sense for Lodsys to sue a few little app developers based on the damage awards or settlements Lodsys might get out of such a lawsuit. However, for Lodsys it would still be worth it if this resulted in a lucrative settlement with Apple, or if it (alternatively) scared potentially thousands of app developers so much that they would pay. Lodsys would sue some app devs only to set an example, and for the ones to whom it happens, that would be an unpleasant situation.

Assuming you are one of the app devs Lodsys might choose to sue, you could certainly contact Apple and say that in Apple's opinion, this is all about Apple's technologies and Apple claims to have a license to that patent. I can't imagine that they would leave you in the lurch in that situation. Again, a lawyer might say you need a more specific agreement with them, but considering that Apple has taken a clear position here, I think it's a given that they will then stand by you and provide the resources you need for your legal defense. Their letter to Lodsys is (at the very least) implicit coverage for you in this regard, also considering the reputation Apple has at stake. Apple would likely also try to join the fray as a counterclaimant and/or start its own legal action against Lodsys (maybe they're already preparing that).

But wait: even if you rely on them doing this, it's still going to be very unpleasant to be sued by Lodsys. Apple would probably do whatever they can to shield you from the need to spend much time on this, but you would have to approve any pleadings and motions in your name, and you might have to testify in court if they successfully subpoena you.

Assuming they sue you in Eastern Texas, you might have to travel there. I'm confident that Apple would cover reasonable travel expenses. I don't know whether they would also reimburse you for the time you have to spend on this -- time that you can't use productively.

Now let's look at the possible outcomes of such a lawsuit. If Lodsys loses and Apple covers your legal fees, you're fine. However, if the final ruling is that there is/was an infringement of a valid patent and that Apple's license does not benefit iOS app devs, the position taken by Apple in today's letter to Lodsys would be proven wrong. To be clear, I think Apple's letter explains very convincingly why Apple is right and Lodsys is wrong. But there's always some uncertainty about litigation of this kind. So on a purely hypothetical basis, if Lodsys won, Apple would have been wrong. In that case, it would be hard for app devs to claim that Apple has a legal responsibility to cover them -- including whatever the damage awards would be -- since the court(s) would have found that the app developers are liable for their own creations.

Even in that negative scenario it would make sense for Apple to cover its developers. You should just make sure that if you get sued, you work this out with Apple at that point. You can cross that bridge when you get there, but you should really work this out at the start of a lawsuit. Again, the most cautious approach would be to work this out with Apple even before possibly being sued. But one might also place a lot of trust in Apple based on its strong and clear letter to Lodsys and considering the reputation it has at stake.

Other patent infringement claims

Lodsys claimed that it owns four patents, and only one of them was claimed to be infringed by in-app upgrades. Lodsys might still try to assert any or all of the other three patents against some app developers (or even the same one again but in connection with different infringement allegations). Since Apple has a license, it would certainly take a close look at such assertions to determine whether its license also benefits its app developers. But it's hard to tell what Apple would do if Lodsys made assertions that relate to the apps themselves and not at all to the platform Apple provides.

For now, no intervention by Apple against MacroSolve is known. That is a case in which some app developers are already being sued, but the allegations don't appear to relate as closely to Apple's API as the ones made by Lodsys in its letters to app developers.

If your app is also available for other platforms (of which Android would likely be the most relevant one at this stage), Lodsys could also make assertions against those versions of your product. Apple's decision to defend its license doesn't automatically mean that Google or others would defend their license to those patents, too. I would be quite optimistic that, for example, Google would not want to appear to stand by its app developers to a lesser degree than Apple, but that's still not a guarantee.

I don't mean to be negative here. I just want to make all app developers fully aware of the issues they may still face. Since Lodsys is already suing a group of large players, which is collectively even more powerful than Apple, it would be irresponsibly optimistic to assume that Apple's letter all by itself is going to make Lodsys give up. Unless Apple settles the deal with Lodsys (neither the terms of such a deal nor the mere fact might ever be announced -- Lodsys might simply never follow up on its original infringement assertions), there will be some next step in this process, and things could still get nasty. So let's be optimistic today, but let's also be cautious.

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