Wednesday, June 8, 2011

All four Lodsys patents under invalidation attack in federal court

I have news concerning Lodsys because a Michigan company named ForeSee Results Inc. has filed a declaratory judgment suit against Lodsys's four patents with the U.S. District Court for the Northern District of Illinois. I'll get to that in a moment. On a related note, there's no news related to Lodsys's lawsuit against app developers from Apple and Google at this point.

More than a week after Lodsys sued seven little app developers, Apple and Google (a reminder: one of the accused products is an Android app) still have not declared publicly that, how and to what extent they will cover developers who have been or may in the future be sued by Lodsys. It's a bit too early to say that this means they won't act, and I think it makes sense to wait at least until the end of Apple's ongoing Worldwide Developer Conference (WWDC), but it's getting time for the big players to answer the question of coverage.

Apple's letter to Lodsys is not enough. Not by far. It didn't prevent Lodsys from suing, and the defense presented by Apple is not necessarily going to work in court.

I understand that large companies need time to turn things around, but in this case, they've already had several weeks. Lodsys's lawsuit was not at all surprising. When I analyzed Apple's letter to Lodsys, I said that unless Apple and Google pay something to Lodsys to make the threat go away, there was going to be some next step in the process. And it was very obvious that Lodsys would sue developers. Lodsys had consistently said, from the beginning, that Apple's and Google's licenses to the patents in question don't extend to the way the accused apps allegedly practice the claimed inventions. So Apple and Google have known for weeks now where this was heading, and what they've done so far is insufficient. Apple's letter was good news at the time being, but all by itself it's not enough. Google hasn't said or done anything (at least nothing that the media would have reported on).

Quick explanation of the concept of declaratory judgment

Since Lodsys has forced many people who'd rather write code than read about the law to give thought to patent issues and litigation, I guess this post will be read by many app developers, so I'll try to explain in simple terms what a declaratory judgment action is about.

The thing you'd typically associate with a legal action in terms of lawsuit is a complaint by which one party (the plaintiff) demands that the other party (the defendant) do or stop to do something. Or both: Oracle, for example, wants Google to pay big bucks for (alleged) past infringement of its Java patents and to stop distributing Android's Dalvik virtual machine unless it gets a license from Oracle, on Oracle's terms.

If someone files a declaratory judgment action and wins, there's none of those effects. It is, as the name indicates, merely declaratory: the court speaks out on an issue, in an effort to clarify who's right on a disputed question, and that's it. But that can still have a lot of value in itself. It can prevent a lawsuit, or even a whole series of lawsuits, by resolving an issue pre-emptively.

It happens frequently that declaratory judgment is requested as a pre-emptive strike by those who consider themselves or their customers/partners likely targets of an infringement suit. And that's what has now happened to Lodsys: a company whose customers received Lodsys's assertion letters decided not to wait until Lodsys might sue those customers, but instead asked for declaratory judgment.

Requests for declaratory judgment don't have to be proactive. They can also be reactive: as a counterclaim against a company that has already sued. That's also happened to Lodsys recently (I'll talk about that below). A company that's sued for alleged infringement of a patent could just raise certain defenses, the two most important ones of which are invalidity -- the defendant disputes the validity of the asserted patent(s) -- and non-infringement -- the defendant disputes that the asserted patent(s) read(s) on the accused product(s). But additional declaratory judgment counterclaims go further because they ensure that the questions of validity and infringement really have to be adjudicated on their own and with definitive clarity (unless the parties settle, of course).

Declaratory judgment actions against Lodsys

On February 11, 2011 -- about three months before Lodsys sent its first known assertion letters to little app developers --, the company filed its first infringement suit. I mentioned that one in previous posts. The defendants are Brother, Canon, HP, Hulu, Lenovo, Lexmark, Motorola Mobility, Novell, Samsung, and Trend Micro.

In that lawsuit, Lodsys asserted three of its patents: the '078 patent for which it provided claim charts according to which it reads on in-app upgrades; the '565 patent that it also asserts in its suit against seven little app developers; and another one, the '908 patent. The particularly (in)famous '078 patent is asserted against all defendants; the '565 patent against all but Hulu; and the '908 only against Samsung and Trend Micro.

Meanwhile, all of those defendants have reacted with an answer to Lodsys's complaint or a motion to dismiss it in its current form, except for Novell, which requested -- and was granted -- multiple extensions (understandable since it was just acquired and is probably undergoing some significant structural changes).

Two of the defendants have not only raised defenses but also brought counterclaims: Brother and Lenovo asked for declaratory judgment on (a) non-infringement by their products and (b) invalidity of the two patents over which Lodsys is suing those companies as well as seven little app developers ('565 and '078).

The non-infringement part is product-specific and since that's about printers, its outcome can't put to rest the question of whether in-app upgrades infringe those patents. However, a declaratory judgment of invalidity -- in this case even by the same court -- would be very helpful if it happened in time. App developers would no longer have to worry if both patents asserted against them have been found invalid. Of course, the big problem is that little app developers generally don't have the resources to defend themselves, so unless Apple and Google finance their defense, they may be forced to give up before the lawsuit even gets to the point at which a possible invalidation decision would help.

Yesterday, the aforementioned Michigan company -- ForeSee Results, Inc. -- filed a proactive declaratory judgment action against all four Lodsys patents. In that complaint, ForeSee Results Inc. said that Lodsys had "threatened assertion" of one or more of its four patents against ForeSee's customers. Foresee names three examples of customers that received letters from Lodsys:

  • Adidas (I have published that assertion letter on Scribd so you can take a look at it; it includes a claim chart that looks similar as the ones that many app developers received, though it relates to a different patent)

  • Best Buy

  • WE Energies

ForeSee did the right thing by taking action against all four patents, not just the one to which the relevant claim charts related. I think Apple should also have taken some similarly forceful action to protect its app developers and customers.

By suing in another district first, ForeSee has greatly reduced the likelihood of any infringement assertions against its customers being decided in the Eastern District of Texas. If Lodsys filed any such lawsuits there, ForeSee could request transfer to the Northern District of Illinois on a first-to-file basis and would be reasonably likely to succeed. Apple was so slow that Lodsys was able to deliver the first strike.

One of the reasons for which ForeSee Results filed in the Northern District of Illinois is stated in paragraph 11 of its complaint:

"Upon information and belief, this Court has personal jurisdiction over Lodsys because Lodsys' Chief Executive Officer and sole employee resides in, and conducts business from, this Judicial District."

If this is true, Lodsys is only formally headquartered in East Texas (because of that district's reputation for troll-friendly decisions) but its actual operations -- at least at the level of the CEO, and it's questionable whether the company has any other employees than him -- are in Illinois.

It's also worth mentioning that ForeSee Results is represented by McDermott Will & Emery, a top-notch law firm that does a lot of work for major technology companies. Five years ago that firm helped Creative Technology get a $100 million check from Apple as a result of a patent settlement.

If ForeSee's declaratory judgment action against Lodsys succeeded before the case against the seven little app developers is decided, it could be helpful, but the court in East Texas is very fast. And even though I repeat myself, the real issue with little app developers is that they can't really afford to defend themselves, which will in many cases require them to take licenses from patent holders no matter how doubtful the validity of the relevant patents or the infringement allegations may be...

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