Have You Been Threatened By Lodsys? Please Share Your Story

from the speak-up dept

One of the worst patent trolls out there has been Lodsys, a company that got a few crappy patents from Intellectual Ventures, which it claims covers some rather basic functionality found in lots and lots of mobile apps. It then started to threaten basically everyone if they used things like Apple's own in-app payment offerings, even though Apple (via a deal with Intellectual Ventures) already technically has a "license" to avoid infringing on the patents. It's been pretty clear that it's something of a shakedown business. Lodsys has sent out tons of threatening letters to lots and lots of app developers, but tends to run and hide when a company actually fights back. Lodsys is so petty that it appeared to choose one of its targets because an app developer called them a patent troll -- something that Lodsys' lawyer admitted. Oh, and apparently, Lodsys asks to be paid via a Swedish bank in an effort to avoid paying taxes. And, unfortunately, plenty of app developers do pay, because it's too expensive to fight back. Promising apps are stymied because of this.

And Lodsys just keeps on going. The folks over at the the Application Developers Alliance (disclaimer: in the past they've sponsored some stuff we've done) have been fighting back against Lodsys for quite some time, and have now set up a Lodsys Victim Survey, hoping to collect information and data about Lodsys' threats. Part of the reason that trolls like Lodsys get away with what they're doing is that they can effectively act in secret much of the time. Recipients of threat letters are often quite afraid to speak out, and that leaves them isolated, giving Lodsys much more power. Similarly, with many patent trolls, they seek to include gag orders on settlements (and some patent trolls have even tried to place gag orders on threat letters or early negotiations). Hopefully, collecting useful information and finding others who have been similarly targeted, it will be easier to fight back against egregious patent trolls like Lodsys. If you, or someone you know, has been threatened by Lodsys, please consider filling out the survey.

Filed Under: app developers, apps, in app payments, patent reform, patent trolls, patents, threats
Companies: lodsys

Developer Claims Patent Troll Lodsys Demanded To Be Paid Via Swedish Bank To Avoid Taxes

from the no-that's-not-scammy-at-all... dept

In the past few months, we wrote about how patent troll Lodsys sued app developer Todd Moore because he called Lodsys a "patent troll." Stunningly, Lodsys' lawyer more or less admitted this to Moore's lawyer, and that allowed Moore to hit Lodsys with an anti-SLAPP motion for trying to stifle free speech. Lodsys quickly ran away, which happens semi-frequently. If you don't recall, Lodsys, which got some patents from Intellectual Ventures (though it's unclear if IV still gets a cut of any proceeds), likes to claim that a very large percentage of mobile apps infringe on its patents, and has spent the past few years sending around demand letters to shake down app developers.

However, at a lunchtime talk in DC recently, Todd Moore spoke about the legal battle with Lodsys, and apparently added a fascinating tidbit that I had not seen anywhere before. As reported by Rob Pegoraro, who was in attendance, Lodsys apparently demanded Moore pay up to a Swedish bank:

Moore noted the fundamental asymmetry of patent trolling, saying he could only fight because he had pro bono representation: "Most people who can't get a free lawyer like me will settle."

He also described some blunt bargaining by Lodsys--"how much will you give us so we go away?"--with the funds to be deposited in a Swedish bank account to avoid U.S. taxes.

So, not only is Lodsys up to some fairly questionable practices concerning demanding payment over a highly questionable patent -- and sometimes going after people for exercising their free speech rights -- according to Moore's statements at this event, the company may also be trying to dodge US taxes to boot. It makes you hope that perhaps Lodsys is on the list of 25 companies that the FTC plans to investigate in detail, to understand how they operate.

Filed Under: apps, patent trolls, patents, taxes, todd moore
Companies: lodsys

Patent Troll Lodsys Dismisses Suit Against Kaspersky Labs Rather Than Go To Trial

from the won't-test-merit-of-claims-because-claims-have-no-merit dept

The ultimate patent troll, Lodsys, has filed to dismiss with prejudice its lawsuit against the only defendant (out of 55) not to settle, Kaspersky Labs. This follows 18 months of defendant after defendant (including big names like Symantec, Samsung and HP) settling rather than taking this to court.

I'm not sure how many of those defendants are kicking themselves now (perhaps not many -- defending against patent trolls can be prohibitively expensive), but it's apparent Lodsys has no desire to actually defend the merit of its claims in court. That's a risky proposition even in the friendly confines of East Texas courtrooms. All it would take is one loss and a profitable settlement business is ruined.

And of all the shaky patent troll claims out there, Lodsys had some of the shakiest, according to the EFF.

We believe that Lodsys is unlikely to prevail on the merits of its claims. First, the principle of patent exhaustion should protect developers using Google and Apple’s APIs. Lodsys purchased its patents from Intellectual Ventures, who many believe is the biggest troll of all. (When "selling" its patents to supposedly "independent" companies like Lodsys, Intellectual Ventures has retained as much as 90 percent of ongoing profits.) Apple and Google both licensed the patents when they belonged to Intellectual Ventures. By suing individual app developers for using Apple and Google services, Lodsys is attempting to get to two bites of the apple, so to speak.

Second, Lodsys’ patents have nothing to do with the hardware or software of today’s smartphones and tablets. To the extent they are even comprehensible, the patents discuss a method for providing remote customer feedback for early 90s technology like fax machines. Using intentionally vague claim language like “trigger event” and “perception information,” Lodsys argues that the patents cover today’s technology. This is an abuse of the patent system.

Lodsys isn't likely to stop with its trolling, though. In this case alone, it secured settlements from 54 defendants. Kaspersky is just the one that got away. It's still pursuing thousands of iOS app developers and since the merits of these patents weren't tested, it can deploy them against any companies and developers it didn't think to include during its initial mass suings.

The upside is that Lodsys obviously knows its patents won't hold up in court, even when argued in front of the "home crowd." This should give more companies the confidence to stand up to its legal threats in the future (something Lodsys obviously fears, considering its efforts to block Apple from intervening in its suits against iOS developers). Defending against patent trolls is still expensive (something a "loser pays" system would help mitigate), but at least it's not unwinnable, as Twitter, Newegg and Kaspersky Labs have proven.

Filed Under: patents
Companies: intellectual ventures, kasperseky, lodsys

EFF And App Developers Alliance To Court: Don't Let Patent Troll Lodsys Avoid Apple's Attempt To Intervene In Bogus Threats

from the patent-exhaustion-is-exhausting dept

We've covered patent troll Lodsys a bunch of times. If you don't recall, it's one of many patent trolls using patents it obtained via Intellectual Ventures, to shake down tons of mobile app developers, not for anything unique that they developed, but rather because they use Apple and Google's basic in-app payment mechanisms to let people buy stuff from within the app. Lodsys has been particularly aggressive in going after smaller independent developers who likely can't afford a full defense. Lodsys has claimed that Apple and Google each have licensed the patents, and that shows the validity of the patents in question, but they ignore that those licenses came from deals with IV that covered a wide portfolio of patents, not this one in particular. Furthermore, Lodsys, really, really wants to avoid anyone pointing out that the fact that Apple and Google already licensed these patents suggests that developers who use Apple and Google's tools are covered by those licenses under the concept of patent exhaustion, which says that if a supplier licenses a patent to build it into a product, the patent holder doesn't get to double/triple/quadruple collect, by demanding licenses from everyone up and down the supply chain.

Apple, in fact, has tried to intervene in the cases that Lodsys has actually filed (against a subset of the companies to which it has sent threatening demand letters). However, it appears that Lodsys has been quite aggressive in getting companies in such cases to settle (likely by making such a settlement super cheap -- much cheaper than actually going to court) and then arguing that Apple cannot intervene since the case is actually settled.

EFF and the App Developers Alliance (disclosure: the App Developers Alliance sponsors this blog, but we've been covering Lodsys since long before they existed, and will continue to cover them going forward as is newsworthy) have now filed an amicus brief arguing that the court should deny Lodsys' attempt to keep Apple out of one of these cases, because it should be determined once and for all if app developers are immune from Lodsys' questionable threats via Apple's own license. As the brief notes, without this, app developers have significant uncertainty when receiving a threat letter -- and with it a strong incentive to just settle, even if they strongly believe they do not infringe upon the patent (or that the patent is invalid).

If this Court rules in Apple’s favor, it would also grant certainty to the millions of app developers in this country who face an open-ended threat from Lodsys. It would have the added benefit of putting litigants and potential targets in other en masse end-user suits on notice of the scope of risk they might be undertaking when they face these demands.

Filed Under: patent exhaustion, patent trolls, patents
Companies: app developers alliance, eff, intellectual ventures, lodsys

Massive Patent Troll Lodsys Drops Its Bogus Patent Lawsuit Which Was Filed To Silence A Critic

from the what-happens-when-they-can-defend-themselves dept

Back in July, we wrote about how notorious patent troll Lodsys -- a "company" (and I use that term very, very loosely) that was set up with some patents from Intellectual Ventures, and has been going around threatening and suing a ton of app developers -- sued Todd Moore's company TMSOFT. The incredible thing here was that Lodsys's lawyer actually admitted to Moore's lawyer that the reason Lodsys had targeted Moore was that Moore had called Lodsys a patent troll on his podcast. In other words, the patent lawsuit had almost nothing to do with patent infringement, but rather was pretty clearly a SLAPP suit, designed to shut up a critic. And, incredibly, Lodsys more or less admitted this.

Moore was lucky to team up with Dan Ravicher from PUBPAT who represented him pro bono. While I don't always agree with Ravicher on a variety of patent issues, I respect the work he's done over the years to fight bad patents, and he is one of the few patent lawyers out there who will work on cases like this. Because he didn't have to pay legal fees, Moore could actually fight back, and Lodsys and its lawyers must have known that they were going to lose big time, and with Texas' strong anti-SLAPP law on the books, it was going to cost them. So, it's little surprise to see that Lodsys quickly agreed to dismiss the case with prejudice without Moore having to pay anything. They did get three concessions out of him, though. He had to agree not to sue to invalidate Lodsys' patents, to dismiss his own counterclaims against Lodsys (i.e., the anti-SLAPP stuff) and then make a donation to charity.

The charity bit seems weird, but the guess from Ravicher is that if Moore had turned down the offer, it would be used by Lodsys in court to suggest that Moore wasn't being reasonable, since the case could be ended with just a small donation to a charity (in this case, the Make-a-Wish foundation, after Lodsys rejected both EFF and PUBPAT).

But the latter part of Moore's discussion of what happened reveals why patent trolling is such a big business: this whole thing cost Lodsys next to nothing. Moore fought back because it cost him next to nothing too, but that was only because Ravicher was willing to work pro bono. If Ravicher had charged regular rates, just this month or so of activity would have cost a significant amount:

The total costs to my company would have been $190,000. And that’s just for the initial response to this lawsuit. We hadn't even gotten to court which would have increased that amount into millions. Remember that it only cost Lodsys about $450 to file the lawsuit. This is why small businesses will usually always settle. It’s just not worth it to fight. And even if you could win and get awarded your attorneys fees and costs, which are very rare, you probably won’t see a dime of that money.

Many of the lawyers representing patent trolls do so on a contingency basis -- they get paid a cut of whatever comes in -- so the costs to the trolls really is basically just the actual filing costs, while the cost to do even the most minimal defense, as was the case here where it was a slam dunk, quickly jumps into the six figures and beyond. That's a pretty graphic demonstration of why the system is completely and totally broken.

Filed Under: patent trolling, patents, slapp, texas, todd moore
Companies: lodsys, tmsoft

Lodsys Sues App Developer For Patent Infringement Because He Called Them A Patent Troll

from the wow dept

Lodsys, as you may recall, is the rather infamous patent troll, which is demanding payment from a ton of app developers, claiming to have broad patents (which it got from Intellectual Ventures, of course) that cover all sorts of smartphone apps. Todd Moore, who runs app developer TMSOFT, was recently sued by Lodsys, claiming patent infringement, because his White Noise app has a hyperlink that would open a URL in another app -- a rather basic thing that tons of apps do. However, it seemed odd to go after TMSOFT, given that, as Moore notes, the app itself only made $500, and Lodsys itself insists that it's often just asking for less than 1% of revenues. But, in this case it's not:

Lodsys is seeking a percentage of revenue from the time they sent me the letter to the time their patent expired. Usually they request around 1% of your in-app-purchases. My company made about $500 with in-app-purchase during this time period and 1% of that is $5. What? I'm getting sued for $5? Given it cost Lodsys $350 to file the lawsuit I assumed they would ask for more than that. And they did.

Lodsys offered to settle with my company for $3,500.

Why? Well, it appears this has little to do with actual patent infringement, and a hell of a lot to do with Lodsys trying to get Moore to shut up:

This all started in May, 2011 when my co-host and I re-launched Tech 411, formerly a radio show in Washington DC, as a podcast on iTunes. Our first couple shows discussed how Lodsys was going after app developers. I commented that Lodsys was "patent trolling" with "evil letters" that were "complete b.s." Around this time Apple had featured our show and it quickly became the #1 tech news show on iTunes.

[....] Dan contacted the lawyer for Lodsys, who actually admitted to him that this wasn't about money. It was about the things I said on my tech podcast and blog. During that time, the CEO of Lodsys, Mark Small, was getting a lot of negative media coverage and even wrote on his blog that he received several death threats. Mark obviously didn't like the comments I made about his company and retaliated by sending a patent infringement letter.

Moore is refusing to pay, and has smartly filed a motion to dismiss under Texas' anti-SLAPP law, the Texas Citizens Participation Act. Texas currently has probably the best anti-SLAPP statute around, and that's useful since Lodsys, like so many patent trolls like to sue in Texas. In his blog post, Moore notes that paying up would only lead to more trolling:

If I pay them off, what is stopping the next troll from knocking on my door? Nothing. And I've heard that if you pay a troll to go away it can lead to more trolls showing up. It's like your company gets added to a spam list. That's not a list I want to be on. I'd rather be able to talk about this issue and hope that at some point in the future our patent and legal system will change to address this serious problem. In the end, it's dragging down our economy because small innovative companies have to spend time and money defending themselves against bogus lawsuits instead of hiring new employees.

Moore is being represented by Dan Ravicher of PUBPAT and the motion to dismiss is a worthwhile read. I've actually been wondering in the past if those who speak out against patent trolls, and then are sued by them, might have a First Amendment/anti-SLAPP argument, and now we'll have a test case to see how that works, at least under Texas law.

Filed Under: anti-slapp, free speech, patents, texas, todd moore
Companies: lodsys, tmsoft

Oracle Sues To Stop Lodsys Patent Trolling

from the oh-irony dept

Oracle apparently has no sense of irony when it comes to patents. The day after a judge issued a complete smackdown in Oracle's "big" patent and copyright lawsuit against Google, Oracle has suddenly decided that it doesn't like patent bullies. Well, as long as the bully isn't Oracle. It filed its own case against Lodsys -- the quite infamous patent troll that has been threatening and suing tons of companies for daring to do in-app payments. Apparently, Lodsys has targeted Oracle customers and the company has had enough. It's actually good to see more tech companies fight back against Lodsys, but it does seem a bit odd on the timing for Oracle, given its over-emphasis on the importance of not violating patents in the earlier case.

Filed Under: apps, irony, patent troll
Companies: lodsys, oracle

Lodsys Continues Demanding Cut Of Smartphone Apps; Developers Hit Back In Court

from the innovation? dept

The story of Lodsys is, by now, quite an infamous one in smartphone app development circles. The "company" (and I use that term loosely) owns a few patents, which it basically claims covers any iPhone app that involves in-app payments:

• 5,999,908: Customer-based product design module
• 7,133,834: Product value information interchange server
• 7,222,078: Methods and systems for gathering information from units of a commodity across a network
• 7,620,565: Customer-based product design module

This is despite the fact that Apple offers in-app payments as a feature of its platform, and Apple, in fact, holds a license to the patent in question. Of course, Lodsys and its supporters argue that Apple's "license" only applies to Apple and that it's proof that the patent is valid. That's not accurate however. The patents Lodsys holds were spun out of Intellectual Ventures, so it's most likely that Apple's "license" to them comes from the fact that it's one of the many large tech companies who have paid off IV to be protected from such patents. Apple has said that it will defend iPhone developers in court if they take on Lodsys, but it's still an expensive proposition, and even some of the most principled app developers are realizing that it's cheaper to settle than to fight.

This is, of course, exactly what Lodsys (and many other patent trolls) rely on. The patent system today is such that if you get sued, you're almost guaranteed to have to spend at least $1 million defending yourself in court. This is not fair. This is not reasonable. But it's a key element in our broken system, and the trolls exploit it as much as they possibly can.

Thankfully, some companies are trying to fight back. Despite Apple's promises to fight on behalf of its developers, Lodsys continues to both threaten and sue, including going after some big companies, like Dell, Rosetta Stone and Overstock. Of course, one reason why Lodsys wants to keep going is that at least one of its patents expires in a few months -- and it probably wants to squeeze as much out of it as possible. As the article linked here by Jeff Roberts highlights, a Seattle app developer, A Thinking Ape, has decided to jump ahead of the line by filing for a declaratory judgment against Lodsys. Lodsys's initial threat letter and A Thinking Ape's filing are embedded below. The filing includes details of many other declaratory judgment filings against Lodsys and argues that the patents are both invalid and that A Thinking Ape doesn't infringe them anyway. It certainly would be nice to see Lodsys smacked around in court a bit, but Lodsys and its secretive "owners" are still likely making out like bandits by effectively taxing tons of app makers.

Filed Under: app, patent troll, smartphone
Companies: a thinking ape, apple, dell, lodsys, overstock, rosetta stone

College Student/Developer Gives Up, Pays Lodsys

from the exactly-what-lodsys-wanted dept

Lodsys, the Texas-based shell company (with some connection to Intellectual Ventures) that has threatened tons of developers for daring to offer in-app payments for mobile apps using either Apple's or Google's app store payment system, is apparently getting some developers to pay up. Paid Content has the unfortunate story of Michael Karr, a college sophomore and app developer, who says he simply can't afford to move forward and can't wait to see if Apple steps in and protects developers. So he's agreed to pay up. Of course, because this is the way most patent trolls work, he can't say what kind of agreement he came to with the company. This is pretty ridiculous, and if the situation doesn't make you angry, you're not paying enough attention to what's going on here. Basically a company that does absolutely nothing is shaking down tons of companies and individuals for using Apple's and Google's own payment mechanisms. First, there shouldn't be anything patentable here. Second, through deals with IV, both Apple and Google have technically "licensed" the tech already, so under basic patent exhaustion concepts, the developers should be immune from such suits. But Lodsys and the trolls like it abuse the system, knowing that the cost of fighting them greatly exceeds how much they'll settle for. It's a pure loss. Money that was going to innovation now goes into the dirty pockets of some innovation-killing patent lawyers. Sickening.

Filed Under: apps, developers, patents
Companies: intellectual ventures, lodsys

Lodsys Strikes Again: Sues Rovio For Patent Infringement Over Angry Birds

from the where-does-the-mighty-eagle-stand-on-patents? dept

You almost have to wonder if Lodsys is filing its patent infringement lawsuits solely to demonstrate how ridiculous the system is. Its latest lawsuit is against Rovio, the makers of the nearly ubiquitous destroyer-of-productivity game Angry Birds. One hopes that Rovio, with the many millions of dollars its raised recently, can afford one mighty eagle of a lawyer, and perhaps it can show Lodsys what happens to pigs with bogus patents.

Filed Under: angry birds, apps, patents
Companies: lodsys, rovio