Apple is not "undisputedly licensed" with rights that extend to 3rd party Developers.  

On May 22nd, Apple’s chief lawyer Bruce Sewell unequivocally announced that Apple’s license to the Lodsys patents gave Apple’s 3rd party developers complete and “undisputable” freedom to use the covered inventions without paying royalties or fearing lawsuits. There was a very positive reaction in the press and blogs.  Apple appeared to give the Developer community what they wanted. Unfortunately for Developers, Apple’s claim of infallibility has no discernable basis in law or fact. 

The letter was very surprising as Apple and Lodsys were in confidential discussions and there was clearly disagreement on the interpretation of the license terms of Apple’s agreement.  Before, during and after these interactions, Lodsys has carefully considered this issue and consulted several legal experts to consider Apple’s claims.  We stand firm and restate our previous position that it is the 3rd party Developers that are responsible for the infringement of Lodsys’ patents and they are responsible for securing the rights for their applications.  Developers relying on Apple’s letter do so to their own detriment and are strongly urged to review Apple’s own developer agreements to determine the true extent of Apple’s responsibilities to them.

In a private communication, simultaneous to this posting, Lodsys has sent a detailed legal position on the license interpretation issue, in writing to Apple that has been previously only verbally communicated.  Apple has our permission to publish that letter, in its entirety, should developers wish to review our dispute and evaluate the risks with their own counsel.   While we have nothing to hide, we cannot unilaterally publish the letter because it refers to information that was obtained with an obligation of confidentiality to Apple and we do not have their permission to do so. 

Platform providers such as Apple and Google actively encourage 3rd party Developers to develop on their platforms and provide enabling technology in the form of development kits, APIs…etc.  The real debate is what promise they are making to 3rd party Developers who choose to develop applications on that platform and what kind and scope of IP rights will be included (or more likely, not).   

The perception seems to be that in exchange for the control, approvals, and the 30% cut of sales that Apple charges, the participants in the iOS world will be fully served by the Apple “bundle.” However, the contractual reality (credit: Electronic Freedom Foundation, and Apple; ) clearly states that Apple is explicitly never anything more than an “Agent” of the Developer with respect to the distribution of applications and the operation of the App Store. Through that construct, and in several other ways, Apple has specifically absolved itself of any legal responsibility it has with respect to 3rd party patent infringement by Application Developers.  It does not just stop there. Every action taken by Apple in the distribution, sale, offer for sale, importing and exporting of applications provided by Application Developers (not to mention the creation of the applications in the first place) is the responsibility of the Application Developers as the Principal in the Principal-Agent relationship between the Developer and Apple. 

If Apple’s contracts, or APIs, or actions cause damage to the Application Developer, then Apples total liability to the Application Developer is limited to a maximum of $50.  So, Apple’s downside risk to fight this is $50 per developer and the Application Developer is expected to self-insure for everything remaining.

What Apple marketing is selling, and, in this case, what Apple Legal really has to offer, are not aligned.  Apple marketing is selling you on the idea that they have what you need and it is yours and you are covered free and clear. Apple legal doesn’t have those rights to offer, and they absolve themselves of all responsibility in your agreement and they have offered you nothing, no license, no indemnification, no obligation to defend you, they offer nothing other than the $50 and no clear way to even get that.

Google has not explicitly addressed patent rights for Android.  There are 30+ patent litigations active related to the Android platform at this time, so IP clearance is a visible and known issue with Android.

For many people, it is easier to call Lodsys and other rights holders names for trying to be compensated for their rights, within a system that is established and known, than it is to consider one’s own responsibility, or the promises and motivations of the platform provider. 

While it is true that Apple and Lodsys have an obvious dispute about the scope of Apple’s license to the Lodsys Patents, we are willing to put our money where our mouth is and pay you something if we are wrong.  Therefore, Lodsys offers to pay $1,000 to each entity to whom we have sent an infringement notice for infringement on the iOS platform, or that we send a notice to in the future, if it turns out that the scope of Apple’s existing license rights apply to fully license you with respect to our claim relating to your App on Apple iOS. 

Most successful Application Developers have chosen to develop their applications on more than one platform and sell them in more than one store (where they are contractually allowed to do so).  The press and the blogs seem focused on the specific instances of small developers, who are only on Apple iOS, so those particular developers will be especially well served by our offer.  And, in the event that Lodsys is correct, then we have a fair licensing arrangement on the table.

For those Application Developers who are also providing their Apps on other platforms such as Android, BlackBerry, Windows Phone, Symbian , Windows, Mac OS X, Facebook...etc., and/or on other app stores such as Android Market, Amazon, Ovi, Handango...etc..., then the economic responsibility still applies to those units in addition to the iOS units.  Please note that this offer only applies to the iOS portion of the licensing responsibility. 

In the May 15, 2011 blog posting, we clearly stated that we are attempting to license every App Developer that utilizes the functionality, regardless of size, and regardless of enabling technology, and that those licenses would be proportional.   

The stories have focused on narrow complaints

Patents and the licensing of them:  a complicated system and how it’s wrong or broken (although many aspects do work well and a few aspects have challenges… like any complicated system). 
  • The small developer being unfairly picked on (without mentioning the many developers that do understand and play by the rules).
  • Rolling developers into belonging to the enabling platform (Apple’s developers or Android developers) and how they are under attack from a troll (rather than it being a rights holder attempts to get paid for its property and questioning the full scope and veracity of the platform provider’s promises, or that App Developers have choices of what functionality to put in their applications and which platforms to sell on)
This story is about accountability for actions. If you are a Developer, it’s about knowledge about the scope and risks of your own business.  

Lodsys has only one motivation:  we want to get paid for our rights.  There is a more complicated set of motivations from the platform providers and the app developers concerning profit margins, control, ownership of the customer relationship, responsibility for liabilities, cloning, IP rights clearance, what is fair to expect a small developer to understand, who pays and who gets away without paying… all of which are much more intellectually interesting and worthy of analysis and commentary.

Lodsys chose to move its litigation timing to an earlier date than originally planned, in response to Apple’s threat, in order to preserve its legal options.
There are lots of bills in life that it would be preferable to not pay if one didn’t have to.  Lodsys is just trying to get value for assets that it owns, just like each and every company selling products or services is, trying to do business and make a profit.  Its odd that some of the companies that received notices had such a visceral reaction.   Some of these companies have our favorite apps, for which we paid the asking price.   We realize you have to get paid for your work and so do we.

In any event, name calling, threats and irrationality don’t help.  In particular, the death threats are seriously uncool.

Golden rule: do unto others as they would do to you.  You would like people to pay for your product and services, so would we.   Finally, you would like to be treated in a human manner, so would we. 

Apologies for taking some time to respond, however the “flash mob” speculation of the blogs/press, the amazing amount of spam (death threats, hateful bile) to Mark’s email, and just a lot to respond to, on top of day-to-day business… it’s taken some weekend time to read everything and respond in a thoughtful, and hopefully, complete manner.

Given the amount of questions raised… straight to some answers:

The economic gains provided by the Lodsys inventions (increase in revenue through additional sales, or decrease in costs to service the customer) are being enjoyed by the business that provides the product or service that interacts with the user.  Since Lodsys patent rights are of value to that overall solution, it is only fair to get paid by the party that is accountable for the entire solution and which captures the value (rather than a technology supplier or a retailer).    

As a comparative example, it is the owner of the hotel who is responsible for the overall service (value proposition) that guests pay for, not the owner of the land that the hotel may be leasing, not the travel agent that sold the reservation, not the manufacturer of tools such as hammers, nor the provider of materials such as nails or steel beams, which may be used in building the hotel; nor is it the outsourced linen washing service or the architect of the building who is responsible.  Lodsys’ patent portfolio is being used as a part of an overall solution and we are seeking to be paid for the use of patent rights by the accountable party.  

As an extended metaphor, in the hotel example, no one would expect the architect to not be paid, or for the nails to come for free.  They get paid some subset of the overall value, but they get paid for their contribution to the solution under an agreement they have with the hotel owner. 

No, that’s not what’s happening.   Apple is licensed for its nameplate products and services.  
So far no one has asked this, or speculated on it, but it’s a logical question for a business that has created applications on multiple platforms.  Google is licensed for its nameplate products and services.  Also, Microsoft is licensed for their nameplate products and services.