The Lodsys Lawsuit and Apple’s Opportunity

So Lodsys made good on its threat. This really isn’t surprising. They sent the demand letter and now they’ve filed suit.

Lawsuits are filed every day. Crooks sue homeowners for tripping over the sprinkler when breaking in. Crazy stuff happens. All you need to file a lawsuit is a few pieces of paper and the filing fee. The trick, as Lodsys will discover, is proving your case.

I view these lawsuits as a crossroads for Apple. They could parachute in and protect their developers or they could abandon them as they enter the meat grinder that is patent litigation.

It seems to me that there really is only one choice for Apple, to step in and defend. There are a lot of reasons for this starting with the most important, it is in Apple’s own best interest. If Apple lets developers get sued for using Apple’s API’s, developers are going to to go elsewhere. Gold rush or not, nobody wants to get sued. While I’m sure the developer agreement has some draconian terms that say Apple has no responsibility, I don’t think Apple is going to leave these developers hanging out this way.

While the cost of patent litigation is truly daunting, Apple has the money and is already well lawyered-up. None of these defendants are in a position to defend themselves as well as Apple could.

Finally, stepping in is a huge win for Apple on the public relations front. Developers will see that and the iOS will benefit. If Apple were to take the other route and and leave the developers on their own to deal with this litigation, the exact opposite would happen.

As I’ve said before, I don’t possess a lick of knowledge about how to run a patent case but I have seen first hand the way litigation kills small companies. I suspect that in the next 30 days, the lid will come off and we will find out how far Apple is willing to go for its developers. For everyone’s sake (including Apple) I hope it is a long way.

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5 Comments The Lodsys Lawsuit and Apple’s Opportunity

  1. adam@esquiremac.com

    The amounts at stake are relatively small. Unless the developers want to stand on principle and litigate this to the death, they should probably settle up.

    From Lodsys: "In the case of an Application doing an in-application upgrade (and only this scenario), Lodsys is seeking 0.575% of US revenue over for the period of the notice letter to the expiration of the patent, plus applicable past usage. So on an application that sells US$1m worth of sales in a year, the licensee would have an economic exposure of $5,750 per year." http://www.lodsys.com/1/post/2011/05/q-what-are-you-charging.html

    I don't know how many of the developer-defendants have grossed over $1M to $2M, but they will spend vastly more than $5k to $10k on attorneys' and expert fees litigating the matter. Plus, they are now open to additional damages due to a potential finding of willful infringement since they have been put on notice of the existence of the patents they are allegedly violating.

    I agree that it would be great for Apple to assume the role of the White Knight and either buy up the necessary rights itself or provide a legal defense and indemnification for the developers, but, failing that, the developers should consider making an economic decision that best suits their bottom line – settling and purchasing a license.

    Reply
  2. adam@esquiremac.com

    The amounts at stake are relatively small. Unless the developers want to stand on principle and litigate this to the death, they should probably settle up.

    From Lodsys: "In the case of an Application doing an in-application upgrade (and only this scenario), Lodsys is seeking 0.575% of US revenue over for the period of the notice letter to the expiration of the patent, plus applicable past usage. So on an application that sells US$1m worth of sales in a year, the licensee would have an economic exposure of $5,750 per year." http://www.lodsys.com/1/post/2011/05/q-what-are-you-charging.html

    I don't know how many of the developer-defendants have grossed over $1M to $2M, but they will spend vastly more than $5k to $10k on attorneys' and expert fees litigating the matter. Plus, they are now open to additional damages due to a potential finding of willful infringement since they have been put on notice of the existence of the patents they are allegedly violating.

    I agree that it would be great for Apple to assume the role of the White Knight and either buy up the necessary rights itself or provide a legal defense and indemnification for the developers, but, failing that, the developers should consider making an economic decision that best suits their bottom line – settling and purchasing a license.

    Reply
  3. adam@esquiremac.com

    The amounts at stake are relatively small. Unless the developers want to stand on principle and litigate this to the death, they should probably settle up.

    From Lodsys: "In the case of an Application doing an in-application upgrade (and only this scenario), Lodsys is seeking 0.575% of US revenue over for the period of the notice letter to the expiration of the patent, plus applicable past usage. So on an application that sells US$1m worth of sales in a year, the licensee would have an economic exposure of $5,750 per year." http://www.lodsys.com/1/post/2011/05/q-what-are-you-charging.html

    I don't know how many of the developer-defendants have grossed over $1M to $2M, but they will spend vastly more than $5k to $10k on attorneys' and expert fees litigating the matter. Plus, they are now open to additional damages due to a potential finding of willful infringement since they have been put on notice of the existence of the patents they are allegedly violating.

    I agree that it would be great for Apple to assume the role of the White Knight and either buy up the necessary rights itself or provide a legal defense and indemnification for the developers, but, failing that, the developers should consider making an economic decision that best suits their bottom line – settling and purchasing a license.

    Reply
  4. adam@esquiremac.com

    The amounts at stake are relatively small. Unless the developers want to stand on principle and litigate this to the death, they should probably settle up.

    From Lodsys: "In the case of an Application doing an in-application upgrade (and only this scenario), Lodsys is seeking 0.575% of US revenue over for the period of the notice letter to the expiration of the patent, plus applicable past usage. So on an application that sells US$1m worth of sales in a year, the licensee would have an economic exposure of $5,750 per year." http://www.lodsys.com/1/post/2011/05/q-what-are-you-charging.html

    I don't know how many of the developer-defendants have grossed over $1M to $2M, but they will spend vastly more than $5k to $10k on attorneys' and expert fees litigating the matter. Plus, they are now open to additional damages due to a potential finding of willful infringement since they have been put on notice of the existence of the patents they are allegedly violating.

    I agree that it would be great for Apple to assume the role of the White Knight and either buy up the necessary rights itself or provide a legal defense and indemnification for the developers, but, failing that, the developers should consider making an economic decision that best suits their bottom line – settling and purchasing a license.

    Reply
  5. adam@esquiremac.com

    The amounts at stake are relatively small. Unless the developers want to stand on principle and litigate this to the death, they should probably settle up.

    From Lodsys: "In the case of an Application doing an in-application upgrade (and only this scenario), Lodsys is seeking 0.575% of US revenue over for the period of the notice letter to the expiration of the patent, plus applicable past usage. So on an application that sells US$1m worth of sales in a year, the licensee would have an economic exposure of $5,750 per year." http://www.lodsys.com/1/post/2011/05/q-what-are-you-charging.html

    I don't know how many of the developer-defendants have grossed over $1M to $2M, but they will spend vastly more than $5k to $10k on attorneys' and expert fees litigating the matter. Plus, they are now open to additional damages due to a potential finding of willful infringement since they have been put on notice of the existence of the patents they are allegedly violating.

    I agree that it would be great for Apple to assume the role of the White Knight and either buy up the necessary rights itself or provide a legal defense and indemnification for the developers, but, failing that, the developers should consider making an economic decision that best suits their bottom line – settling and purchasing a license.

    Reply

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