

Apple to Lodsys: you'll have to go through us to sue iOS devs - canistr
http://arstechnica.com/apple/news/2011/08/apple-tells-judge-intervention-against-lodsys-should-be-granted.ars

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grellas
A few thoughts:

1\. Under Rule 24(a)(2) of the Federal Rules of Civil Procedure, the court
must grant Apple the right to intervene as of right if Apple can show: (1)
that it has filed a timely motion to do so; (2) that it claims an "interest"
in "property" that is the subject of the action; (3) that its ability to
protect its interest in that property may as a practical matter be impaired or
impeded if the legal action is allowed to be disposed of without its
participation; and (4) that existing parties cannot adequately represent that
interest.

2\. Consistent with this rule, Apple's legal argument boils down to the idea
that it has a license from IV to protect, and rights under that license, all
of which will be impaired or impeded if Lodsys is allowed to pursue
infringement claims against developers who develop apps for the environment to
which Apple's license applies. Hence, Apple must be allowed to step in to
defend the integrity of its license and to argue, based on that license, that
Lodsys is barred by the doctrine of "patent exhaustion" from pursuing claims
against the developers.

3\. Apple thus argues that it needs to be in the case to protect its own
interests, not those of the developers. Now, _de facto_ , this might amount to
the same thing since Apple does not want to face a revolt among its
developers. But there is irony here in that Lodsys is arguing, as one of its
major points on why Apple should not be allowed to intervene, that Apple has
no obligation legally to hold the developers harmless (i.e., based on Apple's
agreements, the developers are on their own). In seeking to intervene to argue
the patent exhaustion doctrine, then, Apple is saying it will protect its
license rights primarily and developers only incidentally and, again, without
undertaking any legal obligation to indemnify any developer.

4\. All that said, "patent exhaustion" is a potent defense, the effect of
which (if upheld) would be invalidate the patent for misuse. "Misuse" here
lies in the idea of extending the exclusive rights afforded by the patent
grant beyond their legitimate scope. Apple's ability to prove misuse, though,
is by no means easy. To show misuse, it will essentially have to show that the
IV license was intended to cover separate products (apps) that did not even
exist when the license was granted and that do not constitute an integral part
of the Apple product when sold. This will be tricky at best and obviously will
take a party of Apple's sophistication and wherewithal to marshal the
arguments and factual development effectively. That, of course, is why Lodsys
does not want Apple in the case. It would much prefer to bully smaller and
less sophisticated parties because that is how patent bullying works best.

~~~
TimH
Is the fact that Apple earns revenue from the 3rd-party developers' sales
material to the case for either party?

~~~
grellas
It is relevant on at least two counts:

1\. Motion to intervene: the fact that Apple earns revenues from third-party
developer sales confirms that its interest in the "property" at issue in the
litigation (the IV license) is potentially impaired if Lodsys is allowed to
sue the developers for infringement when in fact (as Apple would claim) its
patent rights were "exhausted" in this area when it (or its predecessor)
granted the license to Apple. This fact, then, strengthens Apple's claim that
is has a right to intervene to protect its interests.

2\. On the merits: Apple will claim an unimpaired right to earn revenues from
its developers owing to the strength of its license - this bolsters its
substantive case that Lodsys is abusing its patent by trying to double-dip in
having taken payment for the license in the first place (from Lodsys's
predecessor) and then over-reaching to try to get further licensing revenues
from those who should have the right to rely on Apple's license.

------
lukejduncan
Bears repeating:

Lodsys acquired its four patents from former Microsoft CTO Nathan Myhrvold's
Intellectual Ventures patent holding company. It turns out that Apple already
has a license to those patents by virtue of an investment deal in Intellectual
Ventures.

~~~
Cushman
It also bears repeating that "Lodsys" is a shell company with a vacant office
in Marshall, Texas whose sole business is licensing and litigating four
patents purchased from IV under (we can only assume) a secret revenue-sharing
agreement. For all intents and purposes here, Lodsys _is_ IV.

------
guildchatter
I hope the two-pronged defense works.

1) Apple tries to shield the iOS developers using its previous licensing
agreement.

2) Someone else tries to get the patents invalidated. _Several companies whose
clients were targeted by Lodsys have filed preemptive lawsuits requesting
declaratory judgements that Lodsys' patents are invalid, and some independent
developers led by former Apple engineer Mike Lee have formed a legal defense
fund to fight Lodsys and other patent trolls. Even if Apple believes the
patents wouldn't stand up to reexamination, it is suspected that the secret
terms of the license agreement with Intellectual Ventures prohibits Apple from
attempting to have the patents invalidated._

------
marcamillion
What Apple should do, is worse come to worse, if they can't intervene in all
Lodsys cases against each individual developer, they should setup a 'trust
fund', with say $2B earmarked just to cover the legal costs for all developers
that get sued by Lodsys.

It might be expensive, and maybe even get abused, but the positive PR it would
generate and the goodwill it would build up among third-party developers would
far exceed the $2B spent (if it even gets spent) on behalf of said developers.

That would be a first and be very interesting.

~~~
drgath
That's exactly what Lodsys would like. If Joe Startup sees a patent lawsuit
and Apple is offering to pay the bills, heck yeah, just let them take care of
it. In which case, all the money likely goes to a patent troll for them to
scoop up more and repeat the cycle.

~~~
r00fus
Wrong. Lodsys would like the little devs to pay the license fees and possibly
settle after Lodsys sues them.

Having a defense fund would force Lodsys to actually do more than put up a
front and go and sue each licensee... this becomes much much more costly
either in time (serial cases) or money (parallel cases).

~~~
marcamillion
Exactly..I agree with r00fus.

If both Lodsys and Apple go head to head in the courts, then it really comes
down to a game of attrition. Who has the most cash to pay the attorneys. Even
if Lodsys is run by attorneys, and the principals work free, they still have
to pay everyone else.

Lodsys can't outpay Apple. They just don't have the cash. So it should be a
deterrent.

------
rdl
I'd really like to see the corporate veil pierced and individuals civilly or
criminally responsible for abuse of the patent system. (this would probably
require some modifications to the law, either by congress or by a seriously
activist court, but the end result would totally be worth it)

~~~
jrockway
Why is this an abuse? They patented something and are suing people they think
are infringing on their patents.

The problem is the concept of software patents in general, not the various
ways of "enforcing" them.

~~~
mvzink
_> Why is this an abuse?_

From Wiktionary:

 _abuse: (n.) Improper treatment or usage; application to a wrong or bad
purpose; misuse; perversion._

In my understanding, the intended purpose of the patent system is to protect
and foster innovation. Clearly, the patent system is being _misused_ for a
very different purpose, which many would call _bad or wrong_. As such, this
_perversion_ of the patent system qualifies as abuse to those who agree.

The patent system itself being "the problem", as you say, in no way makes this
abuse of it _less_ of a problem.

If you don't believe that this is abuse, it might be because of your second
statement:

 _> They patented something and are suing people they think are infringing on
their patents._

Lodsys did not patent this. At best, Intellectual Ventures patented it, and
Lodsys "bought" the patents, probably through some more nefarious means, with
the sole intent of profiting through litigation. No innovation there.

~~~
jrockway
_Lodsys did not patent this. At best, Intellectual Ventures patented it, and
Lodsys "bought" the patents, probably through some more nefarious means, with
the sole intent of profiting through litigation. No innovation there._

I see this on some level, but on some other level, it makes sense to be able
to transfer property. You invented something. The government gave you
exclusive rights to sue anyone who did anything remotely resembling what you
invented. You decided the best way to profit from your invention was to sell
this right to someone else.

Clearly, this is fine. The problem is not that you cashed out on your work.
The problem is that the government shouldn't have given you the right to sue
other people for doing something similar to what you do.

We can't blame Lodsys for exploiting the holes in the patent system. For that,
we have to blame the system itself.

The right way to monetize innovative software-related ideas is to write
innovative software, which is protected by copyright. But the law says
differently -- just coming up with an idea is more valuable than coming up
with a product that uses that idea to be innovative. And there's your problem.

~~~
nitrogen
_We can't blame Lodsys for exploiting the holes in the patent system. For
that, we have to blame the system itself._

Yes, we can. We can blame Lodsys, IV, et. al. for behaving legally but
unethically and/or counterproductively to society, while also blaming the
system itself.

Otherwise, this statement is roughly similar to saying that you can't blame
bullies for beating up nerds; it's the nerds' fault for being weak, and the
playground's fault for not having nerd protection.

------
consultutah
I complain about apple a lot - even though I keep buying their stuff, but this
is definitely a case of apple doing the right thing for its developers.

~~~
drgath
I applaud them as well. It's better than just sitting on the sidelines (see:
Google & Microsoft) while their "partners" get sued.

But, let's not forget there is a lot for Apple to lose in this if Lodsys is
victorious. If developing iOS apps becomes a patent minefield, AAPL stands to
lose a lot of money.

~~~
pyre
I think that Apple probably has more of a leg to stand on when it comes to
intervening because of the way their app marketplace is setup.

------
blutonium
The article mentions that Google and others (Microsoft) got in on the same
financing deal granting them similar licenses. RIM licensed the same portfolio
this past March.

Anyone know why Google/MS/RIM haven't filed to intervene as well?

Edit:

List of investors: [http://www.patentlyo.com/patent/2011/05/intellectual-
venture...](http://www.patentlyo.com/patent/2011/05/intellectual-ventures-
revealing-investors.html)

RIM:
[http://www.intellectualventures.com/newsroom/pressreleases/1...](http://www.intellectualventures.com/newsroom/pressreleases/11-03-30/Research_In_Motion_Enters_License_Agreement_with_Intellectual_Ventures.aspx)

~~~
shaggyfrog
>Anyone know why Google/MS/RIM haven't filed to intervene as well?

Perhaps because, in terms of dollars spent by users, the iOS market is by far
the biggest ongoing concern.

I'm sure that, for RIM at least, the cost-benefit analysis is pretty
prohibitive.

------
Cushman
Even if it weren't a term of their protection agreement with IV, it's not so
surprising Apple isn't questioning the validity of the patents. Apple already
pays for it, so if they get their protection extended to iOS developers,
invalidating the patents would only be bad for Apple.

~~~
revscat
I think it's more likely that as a part of the licensing agreement Apple
agreed to not challenge the validity of the patents. This is not uncommon.

~~~
Cushman
That's what I mean by "protection." I did read the article.

------
ConceitedCode
It's good to see apple stand up for their developers, but does the license
Apple has apply to the developers? The developers are, after all, the ones
technically infringing on the patents.

~~~
nl
From the article: _This defense is known as "exhaustion" — the third parties
in question should be covered by the original license, so patent owners can't
claim infringement by those third parties._

 _The company asserts that developers are its business partners, and therefore
Apple has a material interest in protecting those partners from being sued
over technology that it has previously licensed. The heart of the dispute
hinges on the licensing terms Apple received from Intellectual Ventures,
though the details of those terms apparently cannot be publicly revealed._

Apple believes the licence it has protects its partners. Without seeing the
terms of the licence it is impossible to say if this is the case, but it is
certainly possible.

~~~
elithrar
> Apple believes the licence it has protects its partners. Without seeing the
> terms of the licence it is impossible to say if this is the case, but it is
> certainly possible.

And it certainly seems silly that Apple would not have sought those terms in
its license. Of course, patent licenses don't often appeal to common sense,
but the one thing Apple has is foresight.

------
trurl
Okay, as (nearly) the most valuable company in the world, why don't they avoid
all the legal maneuvering and resolve the problem with an acquisition?

~~~
Construct
For the same reason you don't negotiate with terrorists: If Apple pays up
without a fight, then patent trolls everywhere will begin suing iOS devs with
hopes of being acquired by Apple.

~~~
trurl
Okay, that's a pretty good point. I clearly do not think enough like patent
troll.

------
felipemnoa
I would not be surprised if this is just a proxy attack from google and
apple's enemies. Main suspect: Microsoft. Second suspect: Nokia

~~~
axefrog
Ten years ago called and wants its anti-Microsoft conspiracies back.

