Friday, June 10, 2011

Apple enters the fray against Lodsys, files motion to intervene

Nine days after Lodsys sued seven little app developers in the Eastern District of Texas, Apple filed a motion to intervene in the proceedings. I have uploaded the motion and its attachments (except for a sealed one) to this Scribd folder.

If the court grants Apple's motion to participate as an intervenor, Apple has already submitted its answer to the complaint, and its counterclaim.

Lodsys can oppose Apple's motion to intervene. That may happen, but I believe Apple is fairly likely to be admitted as an intervenor.

The app developers whom Lodsys sued appear to be bound by a non-disclosure agreement (which makes sense), so they can't speak out on their current relationship with Apple. While I don't have any confirmation from anyone that Apple has agreed to cover those defendants' costs and potential risks, it's hard to imagine how else this could work. In its motion, Apple states explicitly that the sued app developers are "are individuals or small entities with far fewer resources than Apple and [...] lack the technical information, ability, and incentive to adequately protect Apple's rights under its license agreement."

Apple's proposed defense against Lodsys's claims is exclusively related to the assertion that the alleged infringements are covered by an existing license agreement in Apple's favor (which I'm pretty sure harks back to when Lodsys's patents belonged to Intellectual Ventures). That is consistent with Apple's recent letter to Lodsys. Apple does not raise any other affirmative defenses, such as claiming that the patents are invalid or that they don't read on the accused products. The sued app developers may still raise those defenses (and possibly even more). They will definitely do so if Apple provides them with the necessary funding, and others are already trying to have Lodsys's patents declared invalid (in other lawsuits). But for Apple's own proposed participation as an intervenor it makes sense to focus on the theory of exhaustion (meaning that Lodsys can't get paid twice for a licensed use of the patents in question). In connection with that particular defense theory, Apple has by far the strongest basis for asking to be admitted as an intervenor.

As I indicated further above, I'm reasonably optimistic that Apple will get to intervene. There appears to be precedent for that. Apple cites three interventions admitted in more or less comparable cases (Intel against Negotiated Data Solutions, Intel against U.S. Ethernet Innovations, and Microsoft against TiVo). It's another question whether Apple's exhaustion theory will ultimately win the day. I'll be happy about whatever helps to protect app developers, but at this stage I honestly can't discount the possibility that Lodsys's infringement theory may trump the exhaustion argument. But even if so, the good news is that Apple takes action.

That said, there are still some important questions that Apple's filing doesn't answer:

  1. What shall other iOS app developers do in response to Lodsys's royalty claims?

    I know that Lodsys has continued to send out letters to app developers. The most recent one I've seen is dated June 1, 2011. Those developers have to decide now how to respond. While there are strong indications that Apple will stand by iOS app developers attacked by Lodsys, there's no definitive certainty about that. I think Apple should make a crystal clear public statement that app developers don't have to worry because Apple will stand by them in case they are sued. Maybe Apple will be prepared to do so after being admitted as an intervenor.

  2. Google must answer this:

    What shall Android app developers do in response to Lodsys's royalty claims?

    One of the accused apps in the ongoing Lodsys suit is an Android app (a game named Labyrinth). At least one Android app developer who received a letter from Lodsys has posted a note to a Google discussion group. Ideally, Google will also intervene on the same grounds as Apple tries to. Maybe Google will do so after Apple's motion has succeeded, but it should do so soon, and more importantly, it should make a statement so that Android app developers know how to handle the situation. We're talking about a serious problem here for little guys: a U.S. patent lawsuit is way beyond what most of them can afford. They must get guidance for how to deal with this. Google can't remain silent for too much longer.

  3. How shall app developers contacted by Lodsys respond to questions on Apple's iCloud concerning legal issues facing their apps?

    InformationWeek reported a few days ago that "[a]fter prompting developers to agree to the newly updated iOS developer agreement, one that encompasses the legal issues related to the upcoming launch of the company's iCloud service, Apple is presenting developers who access iTunesConnect, its app management service, with a web submission form titled iCloud Legal Information."

    A developer sent me the following two screenshots of that questionnaire:

    (Click on the pictures to enlarge them.)

    On Twitter, one app developer (whose company is being sued by Lodsys) said it's unrelated to Lodsys. However, the way Apple asks the question, developers have to answer with "Yes or "No", and any apps that have legal issues "will become unavailable to be restored and/or downloaded as a previous purchase by App Store customers."

    I understand that Apple can't tolerate illegal apps and the associated liability risks, but in the current situation it would be helpful if Apple could clarify that assertions by Lodsys are not a reason to answer with "Yes".

  4. Looking beyond Lodsys, what will Apple, Google and other platform makers do to protect their app developers against patent assertions?

    Everyone in this industry understands the importance of ecosystems and developer communities. But in order for the big players to be able to offer a "long tail" of hundreds of thousands apps, it takes huge numbers of little guys to develop an app for this and "an app for that". While Apple, Google and other major players can defend themselves against patent infringement claims, their app developers cannot. It's in the interest of the big players to contain the problem not only in a Lodsys-like situation where they claim they already have a license to the patent that extends to their developers. The problem is much bigger than that.

    I recently read this story of how Apple purportedly removed several baby tracker apps after a patent holder made assertions. That story is a couple years old and it's quite depressing because it shows that some patent holders are far more demanding than Lodsys. (Frankly, Lodsys is a very reasonable troll compared to most others. I have seen Lodsys's license agreement and while I wouldn't recommend to anyone to sign it without legal advice, it doesn't strike me as being fundamentally unfair under the circumstances.)

    Removing apps because of patent infringement claims -- which are often very dubious but Apple itself has now stated in its court filing that little app developers lack the resources to deal with them -- is a way to protect the big platform makers, but it's a shortsighted fix and ultimately this environment will discourage innovation by app developers, as more and more patent holders will try to exploit the little guys' defenselessness.

    Apple, Google and other platform makers still have not come out (at least not to my knowledge) in support of any of the 30 app developers sued by MacroSolve. In that case, there's probably no prior license agreement in place, but they should be concerned given the scope of MacroSolve's litigation against app developers. By the way, those app developers will now also have to respond to Apple's iCloud question about legal issues, and if they tell the truth, which is that they do have a legal issue (they are being sued), their apps will be taken down.

    One of the app developers sued by MacroSolve, WidgetPress, is asking for donations to finance his defense. That example shows the desperate situation in which more and more app developers find themselves. The big players who benefit so much from the patent system should make much more of an effort to help little app developers.

Again, it's good news that Apple now wants to confront Lodsys in court, but let's not lose sight of the broader picture, and in particular, of the four related issues I just outlined above. I hope that at least some of them will be answered very soon by Apple and Google.

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