Mobile Patent War On The Little Guy Demands Response From Apple

Apple’s iOS platform would not be the overwhelming success it currently is without the efforts of a small army of application developers large and small that made the iPhone and now the iPad into compelling computers. But if we’ve learned one thing in the tech industry, it’s that with success come lawsuits: only this time, it’s the little guys that are on the firing line.
Developer angst is growing over a new type of mobile patent troll. Lodsys, a company with not much else going for it but a swath of incredibly broad patents, has been sending threatening letters to a number of iOS application developers informing them that their applications infringe on one of those patents, and asking for royalties on revenue they have earned from the sale of those applications through Apple’s App Store. Lodsys is seeking 0.575 percent of all revenue from U.S. application sales until the patent expires, which doesn’t sound like a lot per application developer but collectively represents a huge amount.
Apple has been as litigious as the next guy when it comes to defending and enforcing mobile patents, getting involved in several lawsuits with the likes of Nokia (NYSE: NOK) HTC, and Motorola (NYSE: MMI) over the past year. But this legal showdown is different: Apple apparently already owns a license to the Lodsys patents through a mass licensing deal, but iOS developers do not share in the protections afforded by that agreement due to the nature of the developer contract they signed with Apple (NSDQ: AAPL). And as part of that agreement they are also required to use the in-app purchasing method that Lodsys is claiming it has patented.
Huge corporations like Apple face dozens of lawsuits a year, and have experienced armies of legal talent with which to throw at nuisance lawsuits. Most application developers do not, and the prospect of simply forking over money to Lodsys or hiring an expensive patent attorney to fight the requests for royalties (which have yet to escalate into lawsuits, to be clear) has them nervous about the future: not just with respect to Lodsys, but as far as what kind of precedent might be set.
Perhaps now Apple has found something it can do with the nearly $65 billion it has in cash and securities. As the Electronic Frontier Foundation noted Friday, “By putting the burden on those least able to shoulder it, both Apple and Lodsys are harming not just developers but also the consumers who will see fewer apps and less innovation. We hope that going forward companies like Apple will do what’s right and stand up for their developers and help teach the patent trolls a lesson.”
Unfortunately it’s not quite that simple. Mandating the way iOS developers implement certain technologies helps ensure that apps run smoothly on the operating system, and if Apple were to assume patent-liability protection for all app developers creating iOS applications, it would be deluged with lawsuits from the inevitable infringement of legitimate patents that will occur anytime you have over 350,000 individual pieces of software in a single collection, billions of dollars in the bank, and a patent office that has been rubber-stamping technology patents for decades. Apple can cut its risk by licensing patent pools and cutting cross-licensing deals with some of the bigger companies in the industry, but unless the patent system changes (don’t hold your breath) small patent trolls will fly under the radar with long-dormant patents just waiting for their opportunity.
And in this particular case, it’s understandable that Apple may not want to provide legitimacy to Lodsys’ claims by simply purchasing blanket coverage for its developers until Lodsys forces the issue by actually filing a lawsuit against an iOS developer. Lodsys’ claims may never stand on their own, and a more well-heeled developer who is willing to take the company to court could solve the issue for the entire iOS developer community.
So what can Apple realistically do? Such are the hard choices a company faces when it is the steward of a computing platform that has changed the technology industry, and Apple is not a company that responds to the outside world until it is good and ready.
Respond it must, however, because if iOS developers leave San Francisco in three weeks following the conclusion of Apple’s annual Worldwide Developers Conference without any insight into the next step, they’re going to get increasingly nervous. In the meantime, those developing for Apple’s iOS platform should take a long hard look at their legal exposure (Florian Mueller of FOSS Patents has an FAQ here).
Unless it is willing to change its developer agreement or (much less likely) allow developers more choice in how they implement certain technologies, Apple may have to set up some sort of malpractice insurance pool for developers to pay into (with a matching contribution from Apple) and tap if they need to defend themselves against legal threats that come because of how Apple has mandated they develop their applications. Such an effort might be expensive, but the opportunity cost of having to pull an iOS application because of legal threats is potentially greater for both the developer and Apple.
Apple, Microsoft (NSDQ: MSFT), and other companies have been waging a proxy war against Google (NSDQ: GOOG) by suing handset manufacturers using Android for patent infringement, in hopes of convincing them that the cost of doing business with Android is not free. The cost of playing on iOS has never been free, but if the legal threats from Lodsys and others gain traction, it could be about to go up.