Thursday, July 7, 2011

App developers targeted by trolls are given irresponsibly risky advice

It's bad enough to see the likes of Lodsys and (even worse) MacroSolve shake down little, economically defenseless, app developers. But it's even worse to see some launch misguided initiatives and/or give ill-conceived advice to app developers. I urgently caution all app developers against signing up on a website like unless you know beforehand that

  • there's very substantial funding behind such an effort (in this case, all that's known about the website is that it was started by an open source developer named Larry E. Masters aka "PhpNut", who's probably a well-meaning activist; there isn't even an "About us" section on the website itself);

  • there's blanket coverage for those participating in such an effort including potentially high damages awards; and

  • you deal with a very reputable organization that will treat your information confidentially, given the risks involved (again, I guess Larry Masters means well, but I don't know him).

Note that blanket coverage is a big issue here. It's not enough to just fund a declaratory judgment action. If you file a "DJ" against a Lodsys or MacroSolve, you can set your watch by them because by the time they file their defenses to it, they will make counterclaims and say that you do infringe the patents. They will do that even if Apple, Google, IBM, Microsoft and Oracle jointly fund your effort. They will assert infringement. And what if the court agrees with them? Then you've provoked a litigation that you probably could have avoided (by signing a license agreement), and that litigation can ruin you if the damage award is high enough and/or if litigation costs exceed the available funds.

Bad advice from certain "fanboi" patent attorneys

I have previously criticized on more than one occasion the unrealistic suggestions by various "Apple fanboi" patent attorneys that app developers should defend themselves against an apparently well-funded troll like Lodsys even without hard and fast guarantees -- along the lines of blanket coverage -- from major platform makers like Apple and Google.

There are only two reasons for which patent attorneys give such bad advice:

  1. They are unable/unwilling to recognize that little "indie" app developers have completely different financial situations than those who can truly afford to defend themselves in a U.S. patent litigation, and it's pretty clear that they aren't truly on the side of app developers but are purely self-serving.

  2. They are concerned about the potential political backlash of hundreds of thousands of app developers now having to consider themselves reasonably likely targets of patent trolls.

    If those patent attorneys truly meant to support app developers against trolls, they'd advocate either the abolition of software patents or enforcement restrictions concerning little guys. But they just want to make people believe that the problem caused by Lodsys can be solved within the patent system.

    The problem is not only about litigation costs but even more so about the risk of damage awards (especially if one can't afford very good legal counsel, one can lose a lawsuit big-time). While one can argue that app developers shouldn't be liable for huge damages, the trolls can make damages claims based on all sorts of theories and then it's typically up to the jury.

    There's no doubt that patent law can do something about bad patents. Reexamination, for instance, can be very impactful if you do it in time or if you can afford to take your chances in a potentially protracted lawsuit with an uncertain outcome. But it often takes years. Once you get approached by someone like Lodsys or MacroSolve, you have to make a responsible decision. If you can't afford to litigate, it's unrealistic to expect that reexamination will solve your problem. It may, but even if you hope for the best, you have to prepare for the worst.

  3. It's additionally possible that some of them are such "fanbois" that they don't want to call out Apple (and Google) on their failure to really provide app developers with the guarantees that would be needed. Instead, Apple limits its damages to $50 per app developer.

Whatever the reasons are, the way those "fanboi" patent attorneys (none of whom works for a firm that I've ever seen engaged in any high-profile litigation in the areas I monitor) have misled developers and raised false expectations has already had some really bad effects. Let me provide two examples from emails I recently received from two app developers targeted by Lodsys:

  • When I pointed a mailing list of concerned developers to my suggested course of action for addressing the Lodsys situation cost-effectively, a discussion ensued and one of them claimed that "no one will go bankrupt" because of Lodsys. That claim is wrong because there is considerable risk. If Apple and Google don't cover their developers, one or more of the developers who refuse to take a license may indeed be sued and may face a devastating damages award. I'm not saying that it's certain to happen -- but it's not certain that it won't. So you can't ignore the risk.

    By resisting Lodsys, you can't do away with trolls in general and software patents in particular. You don't make the world a better place. So think carefully about what you have to lose vs. what you have to gain.

  • Another developer told me that he's "only had the initial claim notice" so far. What, "only"? All those notices that I saw tell people to commence licensing talks with Lodsys within 21 days. There's a high risk of being sued. They don't have to send you even one letter to sue you, and after they send one, they don't have to send you a reminder. Ignore their first letter at your peril. (I told that to that developer directly. But I want to warn everyone else here.)

    It's important to understand that Lodsys is a serious, apparently well-funded patent troll. This is not the kind of scam emails involving bank accounts in certain African countries that you can click away. Once they've sent you a letter, you have to make a responsible decision whether or not to respond by their deadline.

It's always easier to raise false hopes than to tell people the harsh reality they face. I think TiPb's Rene Ritchie summed it up well. He called my recent write-up on how app developers should deal with the Lodsys situation "a heart-breaking yet pragmatic set of recommendations for developers".

ESET moved its declaratory judgment suit against Lodsys from Southern California to Eastern Wisconsin

I previously reported on antivirus software maker ESET's declaratory judgment action against all four Lodsys patents. The original lawsuit was filed in Southern California, where ESET's U.S. subsidiary is headquartered.

Yesterday, ESET refiled its suit (at its own initiative) with the U.S. District Court for the Eastern District of Wisconsin.

This move appears to be a reaction to Lodsys's recent court filings, according to which its CEO Mark Small is based in Wisconsin. ESET's new declaratory judgment complaint states this:

"On information and belief, Mark Small is the Chief Executive Officer of Lodsys, LLC, is Lodsys's sole employee, and conducts that company's business from an office located in Oconomowoc, Wisconsin, within this judicial district."

The problem that ESET has it that Lodsys sued ESET in Texas before ESET's new declaratory judgment action in Wisconsin. ESET's California lawsuit came first, but the one in Wisconsin is a new one in formal terms. Lodsys has the first-filer advantage here.

However, at least ESET avoided the mistake that four other companies made by suing in the Northern District of Illinois based on the assumption that Mark Small lives there. They saw his LinkedIn profile, which says "Greater Chicago Area". But that's an interpretable term. According to Google Maps, Oconomowoc (which is located near Milwaukee) is about 120 miles outside of Chicago. Chicago is a big city, the United States is a huge country, so Mark Small apparently considered "Greater Chicago Area" an appropriate description of where he's based.

There will be some more wrangling over venues between Lodsys and various defendants. But none of that is going to solve the problem that app developers face right now.

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