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Lodsys - Piling It On, A Possible Reason
Monday, July 25 2011 @ 07:59 AM EDT

To really understand why Lodsys is doing what it's doing, we thought it would be worthwhile to ask a patent lawyer to explain it, so we contacted Patrick Igoe, the lawyer who writes the Apple Patent blog and who has pointed out some real weaknesses in the Lodsys patents.

Why, we wondered, was Lodsys first going after the little people, so to speak, first and now hitting up Rovio and Electronic Arts? Is it like SCO, lots of headline seeking, hoping people will be so scared they'll just pay them to stop? Is it all just so much "legal" theater, in other words, with analysts popping up and advising the little people to settle with Lodsys? I gather that didn't work. If Lodsys was following a traditional playbook and hoped to use any licensees as a foundation to next go after the big fish, are they now acknowledging that failure and heading for the deeper pockets, in hopes that will work better?

And why only claim 27 of the '545 patent, which is what Lodsys is alleging is infringed? What is claim 27, anyhow? How could a game violate it?

Here is how Igoe explained it to me (so don't read on if you don't want to read claim 27) and how he analyzes Lodsys's latest moves:

One thing to remember is that we do not know when, or actually even if, these larger companies got letters. EA's GC doesn't jump on Twitter and announce that they've received a demand from a troll. So, the addition of the larger companies could just be a signal of a breakdown of negotiations from letters sent back in May when the small developers received them. Any large company would have said the 21-day deadline was ridiculous and taken more time to assess. Lodsys would have been wise not to name those companies in a suit if there was any hint an easy settlement was possible. However, at this point, there would have been enough time for the attorneys for the larger targets to read the claims, realize there are strong invalidity and non-infringement defenses, and tell Lodsys they won't settle for any non-trivial sum.

Another possibility is that these *are* new additions to the target pool. In that case, it could indicate Lodsys' strategy is failing and they are throwing a Hail Mary. Failing to obtain enough small settlements, or even build their list of licensees to help intimidate others, they may now want to see if they can get a larger fish to pay up to fund operations, or to get some payout before this all falls apart in re-exam or one of the DJ actions.

The assertion of claim 27 of the '565 was in the original complaint [PDF]. Here's claim 27:

27. A tangible computer readable medium having stored thereon, computer executable instructions that, if executed by a computing device, cause the computing device to perform a method comprising:

  • monitoring a product for an occurrence in the product of a trigger event of a predefined plurality of trigger events,
  • incrementing a counter corresponding to the trigger event upon detection of the occurrence of the trigger event in the product;
  • displaying a user interface, configured to probe for information regarding a use of the product, if the counter exceeds a threshold;
  • storing an input received from the user interface on a device; and transmitting the input to a server.
The app developers don't provide the "readable medium."

The '565 is easier to infringe than the '078, but far, far easier to invalidate, especially if you can use Lodsys' broadened interpretation. Again, consider a Xerox device from the 90s with numerous component/consumable usage counters, a machine operator interface, and a "RIC" modem that reported machine stats and operator/machine interaction data to Xerox. More generally, look for any metered service that warns a user a limit has been reached, gets a response, perhaps authorization for purchase of additional units of usage, and reports that interaction to a server. If you broaden "regarding a use of the product" as Lodsys is doing, a credit card gas pump may even anticipate these claims.

My gut reaction on day one of this was that there was a FUD component. See Lodsys v. Apple Devs: FUD for the App Store Era?

As you know, Igoe already wrote a detailed analysis of the '078 patent, showing why in his view developers don't infringe that patent, despite Lodsys's claims.

What does it all add up to? Well, scare headlines, of course. Lots of frightening talk, as at this conference highlighting Florian Mueller's "the Sky is Falling" presentation, now on YouTube. His "advice" has changed from "just settle" to "organize all the developers and hit Apple and Google up for protection".

You know what it all reminds us of? Remember when SCO first started to sue and threatened to go after end users? Talk about scare headlines! Of course, patents are worse, because the US patent system is broken, even if the US Supreme Court doesn't yet recognize it fully. The Lodsys situation is fairly obviously Exhibit A.

But in the beginning of the SCO saga, analysts popped up urging IBM customers to provide indemnification. Remember all that? Here's one of the earliest examples:

After sending out 1,500 letters to corporate Linux users in May of this year, SCO announced this week that it has received U.S. copyright registrations for its Unix System V code and is asking commercial Linux users to purchase licenses to run the open-source software legally. Several commercial Linux users, including Red Hat (NYSE: RHT) and SuSE, have expressed doubt about the need for the licenses –- which have yet to be priced officially by SCO. However, Yankee Group senior analyst Laura DiDio is advising customers not to dismiss SCO's licensing offer, despite the arguments of those who think SCO's claims will not be taken seriously in court.

"The customers who received these 1,500 letters from SCO have been told this isn't going anywhere," DiDio told TechNewsWorld. "I don't think anyone should listen to such empty assurances."

Soft Pitch for License

DiDio, who said SCO's copyright registrations illustrate the company's seriousness about its claims and represent a step toward possible litigation, described SCO's actions as "a very wise course." "They went out of their way to say they are holding Linux customers harmless," she said. "They're not being greedy. Under the law, if they prevailed [in the IBM suit], they could hold the infringers liable." DiDio criticized IBM's lack of indemnification of customers in the legal case and noted that by stating Linux creator Linus Torvalds had inherited the copyright violation and was therefore not responsible for it, SCO is "trying to ruffle as few feathers as possible."

It's funny, looking back in time, but when this junk first showed up, everyone was terrified. It went on and on for months, with Laura DiDio and Rob Enderle over and over raising the issue. Well, IBM never did offer indemnification, because it said SCO's claims were meritless. They did, in time, prove to be exactly that. So that was the right call. Imagine if IBM had done so, by the way.

Why, then, did analysts claim that it was urgent for everyone to get IBM to provide indemnification? Did they simply not understand, or were they receiving "encouragement?" We don't really know, but it is a fact that in due time, Microsoft came out with indemnification for its customers, did it not, using it as a distinguishing factor for choosing them instead of Linux. The same day a report from DiDio was splashed on Microsoft's Get the Facts page, saying how great indemnification was. It's disappeared now, of course. But here's a snip from what she wrote:

Corporations that use proprietary Microsoft Windows and Office software get the broadest, most comprehensive indemnification coverage in the industry because it’s bundled into the cost of the license. Corporations that use open source and Linux distributions receive only conditional, limited indemnification protection—or in some cases, none at all—because they don’t pay for the license.
And here's DiDio advising to factor in a lack of indemnification in the total cost of ownership. Blah blah blah. Total and complete nonsense, as time proved. SCO never even owned the copyrights they were threatening folks with. You don't need indemnification if a claim is without merit.

Now it's Lodsys. It's patents now, but the strategy seems very similar, to us. Step one is Scare Everybody. Here's one of Florian Mueller's early analyses, urging Apple and Google to pay off Lodsys, or the developers would have to:

Apple's letter to Lodsys is not enough. Not by far. It didn't prevent Lodsys from suing, and the defence presented by Apple is not necessarily going to work in court.

I understand that large companies need time to turn things around, but in this case, they've already had several weeks. Lodsys's lawsuit was not at all surprising. When I analysed Apple's letter to Lodsys, I said that unless Apple and Google pay something to Lodsys to make the threat go away, there was going to be some next step in the pcess. And it was very obvious that Lodsys would sue developers. Lodsys had consistently said, from the beginning, that Apple's and Google's licenses to the patents in question don't extend to the way the accused apps allegedly practice the claimed inventions. So Apple and Google have known for weeks now where this was heading, and what they've done so far is insufficient. Apple's letter was good news at the time being, but all by itself it's not enough. Google hasn't said or done anything (at least nothing that the media would have reported on). …

And even though I repeat myself, the real issue with little app developers is that they can't really afford to defend themselves, which will in many cases require them to take licenses from patent holders no matter how doubtful the validity of the relevant patents or the infringement allegations may be...

If Lodsys is just SCO-with-Patents, what do you bet that, down the road, you find analysts urging everyone to develop for Microsoft or vendors to only use Microsoft stuff in their products?

Call us cynical, but this just smells very familiar to us. Apple, the primary target of all this as far as we can see, has already asked the court to let it intervene. What? Did you *really* believe that Apple would allow all their apps developers to be scattered to the winds by a patent troll? Or just pay Lodsys off to make it stop? It clearly plans to fight to the death. And, my friends, as we saw in the Psystar litigation, Apple knows how to fight.


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