In a series of blog posts, Lodsys responds to the accusations it’s been trolling regarding in-app payments for iPad, iPhone and iPod touch apps, as reported on this site and elsewhere over the past few days. Some highlights:
There are lots of bills in life that it would be preferable to not pay if one didn’t have to.
“Pity us! We want feeding too!” (There are also lots of bills in life that aren’t in fact legal threats issued by patent trolls, whose entire business rests on buying vague patents and bullying other companies into paying them, under threat of legal doom.)
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.
Not exactly like other companies. The iOS devs in question have created something and are selling value. You’ve bought something that might be related to IAP and are taking a scattergun approach to developers, hoping to force money out of them for a mechanism that Apple owns and they merely utilise. It’d be wrong to use the word ‘extortion’, but we’re not a million miles away from that, are we?
Its odd that some of the companies that received notices had such a visceral reaction
Yes. You’d have expected “Pay up or we’ll sue you into oblivion—MWAHAHAHAHA!” to have received responses along the lines of: “Oops! Sorry, sir! Please have some money, sir! What else can we do for you, sir?”
Some of these companies have our favorite apps, for which we paid the asking price.
And which might not exist for much longer, because of you.
We realize you have to get paid for your work and so do we.
Your work being ‘sending threatening letters out of the blue, demanding payment for a system Apple makes available for its developers’. That is JUST LIKE IOS DEVELOPMENT!
In any event, name calling, threats and irrationality don’t help. In particular, the death threats are seriously uncool.
I don’t wish you dead, semi-anonymous blog poster; Lodsys, on the other hand…
Golden rule: do unto others as they would do to you.
Ah, so you want iOS devs to all sue you, using some spurious patent claim, perhaps over something unavoidable such as the fact you’re ‘hosting a website’ or ‘breathing air’? OK, got it.
Lodsys is specializing in selling rights efficiently in a manner that likely does not make sense for Intellectual Ventures to do. Lodsys is seeking an economic return to sell the lawfully acquired rights, providing work and income for people and doing all the same steps as any other tech company to solve a problem and to make money.
Lovely. So, presumably, that’s the reason why you waited to launch this nasty threat bomb on iOS, rather than, say, threatening Apple the second it made quite a big deal out of IAP? Phew! I NOW UNDERSTAND!
Q: Is Lodsys •shooting in the dark• hoping for a payout?
No, Lodsys is methodically selling its product (patent rights) in the most efficient means it can.
Efficiently suing random indie developers.
Ideally, we can sell as much as possible through direct sales, rather than having to use litigation. It’s less expensive and more efficient for both parties.
“We’d much rather you give us money directly in future, without us even having to ask.”
Q: What are you charging?
Surprisingly, no one has asked this question in the Internet dialog.
Surprisingly, everyone was more concerned about the indie devs who may have their entire businesses killed than asking how much money a patent troll was going to make. IMAGINE!
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.
It’s OK to sue the pants off of indie devs if only a small amount of their income is going to be affected, see?
Our goal is to popularize the technology, have it used by many people and to make relatively small amounts per licensee, but to have the large volume of licensees aggregate to be a worthwhile business.
“Our goal is to make money, hand over fist, for sending out letters.”
There is a misalignment in the market where the litigation costs greatly influence the incentives. At the low end, the cost of litigation exceeds the value of the license and this puts strong pressure on small vendors to take a license rather than litigate
“We can scare small devs into paying us, under threat of being sued.”
However, above a certain threshold, there is a perverse incentive for the larger market players to not pay (even if they should) and to force the rights holder into litigation since the higher expenses of litigation and the risk may knock out the need to pay. This cost of doing business often means that individual inventors cannot afford to attempt to license (or they don’t have the expertise), and so they sell to companies that specialize in rights licensing and which have the economic reserve to deal with the litigation costs and/or they partner with contingency law firms. Ironically, contingency law firms take a % that is in the range of what Apple and Amazon charge to retail digital goods.
From a fairness perspective, we have decided that Lodsys should attempt to license all users of the patent rights, on proportional terms, rather than let many ‘free riders’ not pay while only selected companies pay.
“We probably won’t bother suing big companies, though, because that would cost us money.”
Dan Abelow is an independent inventor who visualized/created metaphors, documented for the world to see (in exchange for exclusivity) and created value for doing so.
“Dan Abelow, like lots of people, managed to get the USPTO to give him a parent for something wonderfully generic, enabling us to cash in! KA-CHING!”
Many industries study the IP landscape prior to releasing a product or service and either design around or acquire necessary patent rights if they need them to do their solution.
“It’s all the fault of the developers, see, for not getting lawyers to check whether every aspect of iOS development didn’t have some patent troll hiding in the bushes, waiting to pounce.”
Historically, the tech industry did not clear patent rights in advance because the amount of time and effort to do so made no economic sense given the relative low cost to create software and the speed at which products were being released, so a norm has arisen where it’s build and ship now, and worry about clearing the patent rights later.
Yes, those nasty indie iOS devs. What really happened is they thought “screw the consequences” and just shipped their apps, knowing that poor little patent troll Lodsys (who they’d never heard of before) would be out of pocket for its insanely wide-ranging patent. SPOT THE LOGIC PROBLEM!
Q: I developed on Apple iOS (or other platform), why isn’t Apple (or other OS vendor) responsible, or taking care of this issue?
The scope of their current licenses does NOT enable them to provide ‘pixie dust’ to bless another (3rd party) business applications.
“We’re getting all angry now. WHEEL OUT THE PATRONISE-O-TRON!”
The value of the customer relationship is between the Application vendor of record and the paying customer, the OS (is acting as an enabler) and the retailers (are acting as a conduit to connect that value), and taking their % for that middleman role.
“Those guys saying Apple can deal with this on behalf of indie devs? Nuh-uh.”
One blogger suggested that an OS or device vendor or retailer could choose to contact Lodsys and purchase a license on behalf of its application ecosystem, but so far such discussions haven’t taken place.
“Apple doesn’t care about you.”
From Lodsys’ perspective, it is seeking to be paid value for rights it holds and which are being used by others. Economically, the best return is probably to license each Application vendor for a piece of value, rather than to include in a ‘buyout’ for an OS vendor.
“Also, we’re pretty scared of Apple, so we’d rather you indie guys just give us money and we can all forget that Apple even exists. Deal?”
Q: Why is Lodsys contacting Application publishers and website publishers rather than Operating system vendors, or device manufacturers?
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).
“Also, because Apple doesn’t allow you to do IAPs in any other way, WE WIN! WOO-HOO!”
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.
“We really like pointless, lengthy analogies. We hope they distract you and make us sound like ‘one of the guys’.”
As an extended metaphor
Yes, please extend it!
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.
“Dear iOS devs: your room service bill is now ready: $HUGECHUNKOFYOUREARNINGS for ‘misc. patent troll charges’. HAVE A NICE DAY!”