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Indie iOS Devs Under Legal Fire For Offering In-App Purchases (cultofmac.com)
186 points by protomyth on May 13, 2011 | hide | past | web | favorite | 89 comments



Interesting. I would have guessed that they can potentially get more money out of Apple by suing them for providing the feature. On the other hand, the patent is probably on shaky ground so that it's more lucrative to extort the small developers: You would get less money, but they wouldn't fight you either.

Yeah. The patent system clearly fosters innovation and clearly doesn't need an overhaul.


> Interesting. I would have guessed that they can potentially get more money out of Apple by suing them for providing the feature. On the other hand, the patent is probably on shaky ground

And even if it weren't, Apple has the legal manpower and the money vault to lawyer them into the ground.


> And even if it weren't, Apple has the legal manpower and the money vault to lawyer them into the ground.

In some areas of litigation, it might be possible for one side to draw out the case, and to do other things that raise the cost, so that it is possible to force the other side to abandon their case due to budget constraints.

Generally, patent infringement litigation is not one of those areas. A patent infringement case can be expensive for the plaintiff but the costs are reasonably predictable, and a pretty good upper bound can be estimated going in.

There are large, experienced, patent litigation firms that will take cases like this on contingency. They have more than enough set aside for these kinds of cases to cover anything that defendant can do to run up costs.

As far as legal manpower goes, Apple would have to hire an outside firm. Yes, like all large companies Apple has a good and competent legal staff, including IP lawyers. However, they won't have the experience of those at outside firms that specialize in IP litigation. When it comes to legal manpower, the case would come down to lawyers from a top IP firm working for plaintiff (probably on contingency) vs. lawyers from a top IP firm working for defendant (getting paid by the hour).

You can see a series of examples of this if you look at patent suits against Microsoft. Microsoft often uses Weil, Gotshal & Manges, which is one of the top law firms in the world. Plaintiffs against Microsoft are often represented by McKool Smith which is one of the top 3 or 4 patent litigation firms in the US. The net result here is that it doesn't matter how big Apple is compared to the patent owner, they are not going to out manpower them--both are likely to be represented by top 10 IP firms of about equal power.


And even if it weren't, Apple has the legal manpower and the money vault to lawyer them into the ground.

If Apple is going to play the role of "Lord of the Manor" and demand tithes and make arbitrary rulings on what they like and don't like, then it's also their duty to go and fight off the brigands.


Sure, I agree and it seems they're working with those being sued.

But suing Apple's tenants and Apple itself surely does not yield the same reaction, even if Apple has its platform's best intention in mind.


But suing Apple's tenants and Apple itself surely does not yield the same reaction

Now we've sunk to the point where the local feudal lord only halfheartedly protects his own interests, so long as the rocks aren't landing directly on his keep? Same as it ever was.

(Also, look at the state of discoverability in the iTunes infrastructure. It's the same principle, or lack of it. And, certainly, Apple is far from the only company to be so short sighted.)

(Note, I am an avid user of Apple products and an iOS developer.)


Maybe they are going to get a set of wins against the developers and then add those up on a case against Apple for the same functionality. Kind of a "see we won here, here and here for this same thing"


That's what I was thinking. Also means that Apple is more likely to go to bat for the indie devs, in case that might happen.


exactly. in a jury trial, it allows the patent owner to state, "look,all these other companies took a license (settled)", they all think the patent is valid.

...


It doesn't have to be "extortion", as the article puts it. It can simply be that the patent owners are building a court precendent. They don't need to care about settlement/penalty money (although there's no harm in recouping some expenses), it would be useful even even just to build a case by winning enough small battles, and later go after the big boys.


So some patent troll is shaking down developers using a legalized form of extortion.

Shouldn't the Department of Justice have powers to investigate this sort of abuse of the patent system?


It's not abuse when codified in law. Until Congress changes the rules, it only feels like extortion.


No, I'm pretty comfortable calling this ethically repugnant and tantamount to extortion. Law does not make right.


You are absolutely correct, but "ethically repugnant and tantamount to extortion" are not crimes. Congress needs to change the laws so these behaviors are illegal.

Unfortunately, most legislators from my state seem to believe in business by extortion. I'm so frustrated with them I've given up even communicating with them. Does Hatch ring a bell? :(


One could find it ironic that such a morally conservative state produces such exploitative business and political practices.


For better or worse, that's how the system works today. DoJ will just conclude that it's legal.

Now certainly I don't like it - but the law is on their side, at least until/unless it gets changed.


I think a patent should automatically expire if you have no direct product revenue from it


Trademark law is like that


What I find interesting is that this puts Apple in a role that I don't think it wants - going to bat in the courtroom for all those independent developers. It's not that they don't have the resources to do so, it's just that it is somewhat contrary to the way in which Apple has structured these relationships through the AppStore Guidelines, i.e. Apple doesn't owe developers much of anything except a portion of the revenue if and when Apple decides to allow sales of their app. It will be interesting to see how Apple responds to the attack on its vassals.


I think the only thing we'll find out, is how highly Apple values in-app purchases as an App Store feature.

I, for one, couldn't care less if they go away. I think the patent is bad, the troll is deplorable and Apple will be setting a terrible precedent that will have non-trivial fallout in their dev community.

But on this topic, I just don't care how it shakes out. 90% of the in-app purchasing I see is predatory (smurfberries, virtual poker chips) or tantamount to it.


There are a lot of legitimate uses for IAP, for example games that sell additional levels. There are essentially 3 types of IAP: non-consumable, consumable, and subscription. The type you are referring to (consumable) lends itself well to predatory practices, but I dare say 90% is hyperbole. Apple has taken steps to mitigate the issue, and a lot of times it's pretty obvious when the developer is just trying to nickel-and-dime their customers to death.

A lot of developers rely on using IAP to make money off their existing (and often small) customer base, and if IAP went away so would a lot of indie game developers.


> "There are a lot of legitimate uses for IAP"

I agree that good apps and good uses exists, that's just the minority in what I've personally seen. The only app I have personally used that had reasonable IAP was Camera+.

And to be fair, I hand-waved 90% not considering subscriptions. [1] If we roll those in, I agree there's a much lower rate of 'smurfberry' use.

> "Apple has taken steps to mitigate the issue"

Sorry if I've missed that. But last I checked they had just changed the top-revenue rankings to include IAP, and smurfberry-bearing titles shot to the top. To change that algorithm the way they did looks more like celebrating that nonsense. [2]

[1] I've been thinking of subscriptions as their own beast for a while and just didn't think of them. But I do agree, they're IAP.

[2] Surely Apple tested the proposed ranking change and rolled it out knowing full well what titles would dominate under that scheme.


>Sorry if I've missed that. But last I checked they had just changed the top-revenue rankings to include IAP, and smurfberry-bearing titles shot to the top. To change that algorithm the way they did looks more like celebrating that nonsense. [2]

I just looked at the top free game list, and most of the top 25 don't appear to be smurfberry titles. About 7 or 8 of them appear to be like that. Most of the ones with IAP are for removing advertising, upgrades to the full version, or additional content, all of which are pretty legitimate uses for it.


Regardless, if Apple were to just to remove IAP and let the devs rot on this the message would be terrible - that the devs, who likely have minimal resources to fight back, are now fair game for using Apple's platform in the way Apple prescribes. What other features can be trolled?


Apple does not indemnify its developers against patent claims so unless a suit is brought against Apple directly it doesn't technically need to do anything.

This is a taste of Apple's own medicine from when it brought suit against weaker device manufacturers instead of Google directly for Android related patent infringement.


"Apple does not indemnify its developers against patent claims so unless a suit is brought against Apple directly it doesn't technically need to do anything."

I agree. However, the choice not to protect the developers creates problems for Apple which may be as bad as those created by protecting them. And the dilemma of a PR disaster and the precedent of establishing a B2B relationship with developers is what makes the situation so interesting.


"This is a taste of Apple's own medicine"

This analogy seems pretty thin since Android's ecosystem is equally at risk here. This isn't going to scare these devs to another platform, it's going to scare them into not using the API.


Do you mean to say that they're just going to eschew in-app purchases? The Apple developer agreement, unless I'm mistaken, requires you use their API for in-app purchases or not have in-app purchases at all.


Agreed.

Wouldn't surprise me if Google were behind it.

Apple may have lots of money, but something tells me these particular patent trolls could get the money they need if it came down to it.


You think that Google, creators of an opposing app store & in-app purchases, wants to establish legal precedent that some patent on in-app purchases is enforceable?


It would surprise me.

Quite a lot.


I'm not a lawyer, so no one should take this as legal advice.

After a quick read of the iOS developer agreement, it doesn't appear that Apple has any obligations in this matter, rather it appears that the application developers are required to pay for the defense of Apple due to their "(vi) [Your] use of the Apple Software or services, Your Application, Licensed Application Information, metadata, Registered Devices, or Your development and distribution of any Application." (See Section 11 - Indemnification). Depending on what Apple decides to do this could get interesting.

Apple should immediately amend their agreement to indemnify all developers against patent lawsuits stemming the required use of their APIs. Otherwise, some developer will cave and pay these guys off which will start a cascade of additional lawsuits. Additionally, no one should think this is an iOS only problem. If the patent applies to iOS in app purchases it will apply to Android as well.


The problem is that the API doesn't violate the patent. Spyro7 linked the patent(http://news.ycombinator.com/item?id=2544889), and it appears that having a "rate me" or IAP button violates the patent. The usage of the API violates the patent, not the API itself.

This is actually worse than just iOS and Android. It applies to basically the entire gaming industry, because any game with a "Buy DLC" button infringes on the patent. Hell, this could apply to any program that has a "Rate this here" button, as well.


Understood. The point I was trying to make, maybe not clearly enough, was that Apple, wants/requires developers to use their in-app API if they want to sell anything. Since they are forcing developer to potentially violate a patent, they should indemnify developers. It is also in their interest to do so.


Disclosure: I am a low level C API developer, so I have a lot of self interest in this.

The problem that I have with a blanket indemnification like this is how large the coverage could be. Sure, you should cover cases that involve your business model, like the app store or IAP, but what about cases that are just usage of functionality?

Hypothetically, if the patent was over the shape of the buttons used(which would be more of a copyright or trademark issue, admittedly), and that changing the shape would make it not infringe, should the API owner, cover that? Or if the API is used as an input or output for a patented algorithm, like an audio or video codec, should that be covered? I honestly don't believe that the API owner should cover either of those cases, because they are too broad, and make them responsible for a LOT more cases than before.

In this case, however, I do agree that Apple, Google, and a LOT of other companies(Valve, Sony, and MS because of gaming DLC) have a vested interest in squashing the trolls as quickly as possible, because this patent covers a good portion of their business models for their markets.


If they were to go broad'ish with and indemnification, it would probably have the effect of scaring off the true trolls since they would know at some point, they'd need to face someone with deep-pockets.

The strategy here, is to go after the smallest pocketed person you can find, get a settlement, and then use that to go after the next. Get enough settlements and you can you establish precedent.


As useless an idea as IAP is to me (I've never used it, it seems dangerous with a kid around, etc), I think it would behoove Apple to take a stand here, because a lawsuit could essentially be a death-sentence for many apps and puts a chilling effect on app development in general.


IANAL, but let me share with you how this works from the perspective of someone who is well versed in being kicked in the nuts by people with more expensive lawyers.

The person with the advantageous position gets to demand indemnification. Everyone else gets to pound sand.

The chances of app developers receiving indemnification from Apple is nil for some reasons that are lawyer-ish, and some that are basic math. Consider that there are thousands of app developers, and only one Apple. If the agreement granted indemnification to every app developer, Apple would be on the hook for a whole lot of attorneys in cases just like this. No lawyer is going to put that in to a contract, because it violates the client's interests. In other words, "you're on your own buddy."


I think that this is the patent in question:

http://www.google.com/patents/about?id=nA2AAAAAEBAJ&dq=7...

If this is the one, then this is an unbelievably broad patent. I encourage everyone to at least skim through this thing, it is incredible that this can constitutes a valid patent.

The way that patent system in this country works for software patents is wrong, period. If it is this easy for someone to get sued then it should be made easier to fight back against these type of lawsuits.

At least doctors can get medical malpractice insurance to protect against the liability of losing a frivolous lawsuit. Software developers are on their own.


See patent liability insurance or errors and omissions insurance. Just because people don't get it doesn't mean it doesn't exist.

Doctors get malpractice insurance because they need it. As soon as software entrepreneurs need patent liability insurance everyone will have it. But we're going to need a lot more frivolous patent suits against small developers to make that happen.


Ah, I didn't know about patent liability insurance. I find it really heartbreaking that the independent developer has to worry about being crushed by lawsuits before they ever have a chance to make it. Just thinking about all of the innovation that will never happen as a result of this is saddening.

Maybe I'm just naive, but everyone always talks about a free market, but one of the most important features of a free market is ease of entry. If software entrepreneurs have to purchase patent liability insurance then this is an artificial barrier to entry. Yet another thing that you have to consider in the course of running your online business.

Every once in a while I use Google patents to browse software patents. What I see is disheartening. There are literally patents on almost anything you can do with a web application.

Even worse, most of the companies behind these patents are not technology companies but law firms with vast portfolios of multiple, redundant patents covering a broad array of topics. They bide their time - waiting for when some unsuspecting web company turns a profit. Then they swoop in to take their cut. I find this to be disgusting. Tech firms get stomped and lawyers get very, very rich.

The worst part of it is that there doesn't seem to be any solution. It seems as though insurance of some kind to protect against patent lawsuits will eventually be a mandatory requirement for any tech startup.

The problem with entrepreneurs purchasing insurance against frivolous patent lawsuits is that it will encourage the proliferation of these lawsuits even more. If everyone is insured then when they are sued they may be more likely to settle - rewarding the patent holders.

Over time the number of lawsuits would increase and so to would the premiums on purchasing this patent liability insurance. Eventually, the cost would become prohibitive for first time entrepreneurs and they would be prevented from being able to enter into the market.

Think about it. People keep talking about how they are looking for the next Google. As software patents pile up in the hands of unscrupulous patent trolls, it becomes less and less likely that there will ever be such a thing.

I don't mean to hyperventilate, but software patents sometimes cause me to lose sleep at night. Getting hammered by a patent infringement lawsuit is my personal worst nightmare. Is anyone with teeth doing anything to fight the patent trolls???


I encourage you to visit www.patentinsurance.com, Intellectual Property Insurance Services Corporation.


So it starts at $20k per year. Ouchie.


I use in-app purchases as well. My first thought was "being in Europe, am I safe from this?".

AFAIK Europe does not have software patents, so I should be safe. But IANAL and my understanding of this subject is quite poor.

Does anybody have a good answer?


Well one of those hit is James Thomson who is based in Glasgow, Scotland so from the p.o.v. of the suer the answer to your question is "no".

In terms of European s/w patents, sadly according to the FSF:

"In Europe the legislation has decided that software is not patentable. But laws are always interpreted by people, and in this case interpretations of the law differ. So the European Patents Office (EPO) grants software patents by declaring them as "computer implemented inventions"

Source: http://fsfe.org/projects/swpat/swpat.en.html


I very much doubt he has an European patent on "in-app purchases", so my bet is that they threaten to sue him in the US. I'm not sure if the outcome is enforceable in Europe though.


That doesn't really matter if they can just force Apple (a US company) to pull it from the app store.


Actually, the App Store in Europe is provided by iTunes S.à r.l, a Luxembourg (EU) company, not Apple Inc., so a US court can't really force anything to be pulled from the App Store in Europe.


[IANAL]

If you only sell your software in countries that either don't recognize software patents, or in which the plaintiff doesn't hold a patent that you infringe upon, you're fine. [1]

But if you sell your software in the US, you are not safe. Foreign firms pay a pretty penny for US patents and searches to determine if they are clear of infringing US patents, so they can sell their products in the US. Software patents included.

Again, IANAL.

[1] Determining whether you may infringe on a patent is a chore in and of itself. And one that any IP lawyer will advise you strongly not to do yourself. If you look and infringe, the wronged party can potentially argue that you saw their patent and infringed anyway [2], which leads to far worse penalties than infringing due ignorance.

[2] And as it is very difficult to show what you didn't see, it's very difficult to defend against that accusation other than via an in-stone policy that the actual engineers and inventors never ever do searches themselves.


IANAL, but what would happen anyway? They would sue him in the US (maybe), would get a default ruling in a civil court, and then what?

The only issue might be if he moves to the US. At worst.


Basically, until they get legal satisfaction for the judgment, they could make a mess of any business he wants to do in the US or with US-based companies. Any money owed to him by any US company would be at-risk of a claim.

These risks are notably less to a developer if they've incorporated, or are selling the software through a publisher. But for the lone developer, it could be quite the hassle.

Also, though the real costs of pursuing such claims might deter actual action by the patent holder, the risk doesn't go away and the 'debt' resulting from the judgment could be sold to people who have lower opportunity cost and even less moral fiber.


Anyone heard which company is actually suing them?


I have no specific information, but I suspect it's Dan Abelow (http://www.abelow.com), a patent troll who runs a bunch of patent trolling LLCs (Lodsys, Webventions, etc).


What a sad little man. He should stick to his 'hobby' (whose inclusion on the site just adds that extra soupçon of patheticness)


How do you know he runs Lodsys or Webventions?

Do you have any evidence he's a patent troll?


1.) I read his website.

2.) I Googled terms including "abelow", "lodsys", and "patent troll".

In other words, he plainly states he runs those businesses on the provided links and has a history of patent trolling.


1) His website says his patents are owned by Lodsys and Webventions. I did not see anything that said he runs those companies. What I find by Googling is that one or both of these companies may be owned by Intellectual Ventures, or if not owned by IV, they likely acquired their Abelow patents from IV. Abelow seems to be at least two steps removed from both companies.

2) I see nothing in those Google searches that shows a history of patent trolling, unless you are using a very broad definition of patent trolling (one so broad as to be close to meaningless).


Lodsys has now verified that they acquired the Abelow patents from IV, which acquired them from Abelow.


It's called MacroSolve.

Edit: Never mind, they're a completely different patent troll feeding on indie iOS developers. Shameful.



My guess is that it's this company called Lodsys LLC. Yesterday someone posted in the TouchArcade developer forum that they received patent claims from them for similar functionality.



Here's a list of their patents: http://www.lodsys.com/our-patents.html


It seems the "inventor" behind lodsys was also involved in webvention lawsuits [1] for the image rollover patents [2] and demanding $80000 for licensing fees [1] http://arstechnica.com/tech-policy/news/2010/10/patent-troll... [2] http://patft.uspto.gov/netacgi/nph-Parser?Sect1=PTO2&Sec...


Hmm, if they are suing a bunch of small developers couldn't they band together to pay for a lawyer to get the patent invalidated?


It's the reverse of a class action lawsuit, the plantiff is singular and the class is getting sued. I wonder if there is a mechanism for that.


Apple will almost certainly defend these people. It would be a major setback for their platform if they allowed these lawsuits to be lost. In fact, even just making it to court would be a pretty major problem for them.


Why on earth would you think that?


What if it's valid?


There are no valid software patents.


touché


I added this article that John Gruber at Daring Fireball had linked to analyzing the rock and hard place iOS developers are in with this patent claim: http://news.ycombinator.com/item?id=2546140

(Disclosure: I'm one of them and potentially in violation.)


That analysis looks wrong to me -- Adam Engst claims that the developers can't settle with Lodsys because it would "affect Apple's rights or bind Apple in any way". That's wrong. Lodsys isn't claiming anything against Apple's rights -- they are claiming the developer's "buy now" button violates their patent, and there's no reason why the developer and Lodsys can't settle this between them, without it affecting Apple's rights or binding Apple at all.

I think it's an absolute bullshit patent and I hope everyone vigorously fights it, but there's no reason why developers can't settle, if they feel they should.

I'd love to see Apple indemnify developers, too, but that would probably create as big a headache for Apple as this situation will.


I think what he is saying is that the agreement with Apple says we can't form legal agreements that include Apple's SDK and APIs, which in app purchase is apart of. This could or could not be covered under those mechanisms.

You might be right. The way Lodsys is going after us is for the button (or something) that connects to the mechanism that performs the in app purchase. Either way, as everyone else here has pointed out, it really is a sticky widget.


another interesting facet to this development: http://tidbits.com/article/12174


I already blogged about this problem 6 weeks ago: http://fosspatents.blogspot.com/2011/03/new-smartphone-paten...

The new stories that surfaced today sounded similar, but James Thomson told me on Twitter that it's about a different company and patent this time around.


If Apple fails to protect the developers, whoever got served should take initiative to mine through the app store for all other potential victims, and ask for their financial support. I would certainly provide some support if I were to be included in the resulting settlement.


Out of curiosity, is there Google-facilitated In-App Purchase for Android apps, or do Android devs handle this on their own?



I assume that Apple's IP lawyers knew about this patent when they were researching about in-app purchases. Morally right or wrong, why didn't they just license it then? Patent trolls are one of the few groups of people I'd rank beneath telemarketers on the scum of the earth scale, but they are a known quantity and can be avoided for much less than the settlements they ask for later. Especially for a company with a multibillion dollar IP fund like Apple.


Don't be so sure that Apple knew about this. There is a school of though on doing patent research before developing a product. It says do no research. That way, if you are sued and loose, the infringement can not be views as willful - which would treble the damages.


Waiting to see what grellas has to say about this.


Mobile web, it's the future...


I would just send a reply letter "Fuck off"


I really hope Apple does the right thing and throws this complaint out.


If ever there were a better argument for eschewing app development in favor of the mobile web, this must be it.


I disagree. I think things like "Apple can change the rules on you", "Apple has to approve your app", "Apple makes you pay the 30%", etc are much better arguments against it. This is just about patent trolling. It could just have easily been a troll on some (surely hypothetical) patent for "Payment-Accepting Web Site That Delivers Alternative Experience for Mobile Users". In fact, an iOS dev may be in a better position than if the corresponding thing happened to a mobile web dev, in that there's a decent chance Apple's going to step in and smack down this nonsense.


Do you mean to imply that patent trolling shouldn't affect how we develop software? I hope you don't, because then you're suggesting that we remain at the behest of those who set patent policy. No other way to say it, that's just a bad plan.


Your first post implied to me that native apps are somehow more susceptible to being trolled, and therefore it's safer to code for the mobile web. Is there evidence of this trolling discrepancy? (If there is then I'm totally wrong, but it seems to me this particular case just happens to be targeted at app developers. The next patent troll issue that makes the HN frontpage could easily be targeted at mobile web devs.)

I feel like your more recent question is not directly related to the previous points (so maybe I'm misunderstanding), but I'll answer anyway: no, I don't think hackers should worry too much about patent trolls when building stuff (or else the trolling is working and limiting creation), but I do think hackers should make a stink when patent trolls do their thing--especially when they do it to the little guy.




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