All Hail the Patent Troll

Why Lodsys is doing us all a favor

RSS

Last week the patent holding company Lodsys, LLC, began contacting individual iOS developers to demand payment using technology that they claim is in their “patent portfolio.”

The primary patent in question (they seem to note in their blog that there could be other patents in play) deals with “an Application doing an in-application upgrade.” Most of us know this as an In-App Purchase, or IAP.

As expected, the Apple developer community rose up in near-unison with a message that went something like this:

“Screw you… you mean Lodsys patent trolls! We don’t want to pay you… and we hope Apple steps in and saves us, and by the way, someone should do something really bad to your CEO, like… maybe even… um, KILL HIM!”

(I’m paraphrasing here).

As the mystery Lodsys blogger points out: “the death threats are seriously uncool.”

True.

As for the rest of Lodsys’s claims, I’m looking forward to further clarification along with everyone else.

But let’s assume for the moment that Lodsys does in fact have legitimate patents in their “portfolio,” and that these patents really do apply to in-app purchases made on Apple’s iOS platform.

What next?

The iOS developer community matures a little. That’s what.

I, for one, think this is a good thing.

Why is it that iPhone users (who think nothing of buying $29 dongles, $79 headphones, and $2,500 laptops) scoff at apps that cost more than $5.99? Even other Apple software retails for far more: iLife goes for $49, iWork goes for $79.

Does every app in the App Store have to be priced as an impulse buy? Who made that rule?

Lodsys points out that they are going after everyone, not just the big app development companies:

“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.”

This, in particular, seems to have set off the iOS developer community. Comments posted to an article covering the saga include:

‘It’s in everybody’s best interest on every platform to make sure patent trolls don’t harass small-time developers.’

‘Lodsys is demanding the money of minor developers who have no option to compete in the legal space with them.’

Why don’t these “minor developers” have an option to “compete in the legal space” with Lodsys?

Because they’re lucky to get paid more than 70 cents for each download! (After Apple takes their cut.)

But doesn’t the problem get worse if patent trolls take an even larger cut?

According to the Lodsys blog:

“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.”

Assuming the Lodsys patents are legitimate, it’s hard to make the argument that they are price gouging. 0.575% is literally nickels and dimes (on the dollar).

If small-time app developers have to actually do some work to ensure that their apps aren’t ripping off someone else’s intellectual property, the natural effect is for prices to go up. In addition, some of the really small time players will probably bail out and decide to go back to sniffing glue (or something).

This is a good thing for the rest of us that run legitimate businesses and pay for all of the software we use.

In the early days of the web, I had countless conversations with prospective clients that went something like this: “My 13-year old nephew built a website and I think it’s great, what do you mean my website is gonna cost $10,000?!”

As many app developers know, a version of this argument is rampant in the mobile app space today. (Note: for an excellent discussion of commercial iPhone app development costs, check out the Stack Overflow topic: How much does it cost to develop an iPhone application?)

We all want to get paid for our work. Assuming Lodsys has real patents that, per the law of the land, actually apply to in-app purchases made on the iOS platform, we should applaud their recent actions.

Software development is hard work, and professional companies that produce (or acquire) valuable software should be fairly compensated for it.

Derek Olson

Derek Olson Vice President For over 10 years Derek has been providing strategic advice to clients large and small—across a wide spectrum of industries and non-profit sectors. Derek has been evangelizing user-centered software design for over a decade, and believes that most of the world’s software is in need of a good spanking. He can often be cajoled into speaking at length on these matters. Derek’s hobbies include cooking with cast iron, massive home remodels, and teaching his boys which lizards are safe to eat raw.

Comments (2)

  1. 1
    Reply

    Hunter

    on May 18, 2011 said:

    I agree with your overall argument that quality software is worth paying for and I’m all for increasing prices in the App Store but I don’t think I agree that these guys are doing anyone a favor.

    My biggest concern, if this ends up being profitable for these guys: the slippery-slope it will create.

    If they have success with this, then every single thing from location services to basic animations will be claimed as infringing on some overly-broad patent and you’ll end up having to pay thirty different companies to ship any type of app, hiring an expensive lawyer to handle all the clearances. That’s money not being spent on making the product better.

    Given the chilling effect that this could have on iOS development, I expect Apple will find a way to solve this. I doubt that this is what Apple intended when they introduced these different platform capabilities and it’s far more efficient for them to secure a blanket license that covers their customers. The App Store and iOS ecosystem are their biggest business and they’ll do whatever they have to to protect it and keep it healthy. Given the terms of the iOS developer agreement, it’s actually against the rules for an individual to even settle with a third party like this for something that’s in Apple’s SDK.

    One of my favorite tech writers (who used to be a lawyer himself), Nilay Patel, wrote a few more words on the topic which are worth reading if you’re following this story.

    I’d rather focus on earning higher prices the old fashioned way – making great software.

    There are a lot of examples of companies with apps in the $10-$50 range that do quite well, even if they’re not in the top ten charts: OmniFocus, OmniOutliner, ForeFlight, etc… Even Apple makes several apps in the $10 range that do incredibly well. There’s the theory of the ‘Two App Stores‘ – the hit driven, chart dominated equivalent of the music singles market and then the top grossing, business building productivity app market where your customers can’t live without your product.

    Both of those markets can bring financial success but there’s only one you can build a real business on.

    • Derek Olson
      1.1

      Derek Olson

      on May 18, 2011 said:

      Hey Hunter,

      Thanks for your comments.

      To be clear: I heartily agree that Lodsys is a patent troll, at least per Wikipedia’s definition: “Patent troll is a pejorative term used for a person or company that enforces its patents against one or more alleged infringers in a manner considered unduly aggressive or opportunistic, often with no intention to manufacture or market the patented invention.”

      Agree that Nilay Patel’s write-up is a good one. I guess the problem lies here (quoting Nilay): “It’s legit on paper”

      While I’d love to see iOS users adjust their expectations about app pricing… it sounds like folks in the U.S. Patent Office need to do some adjusting as well!

      -Derek

Leave a Comment

All fields are required unless marked as optional.

Some HTML is okay.