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

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