Category Archives: Patent

Lodsys has gotten a lot of attention for their patent threats against app developers lately, and yesterday came news of Macrosolve doing something similar. Florian Mueller wrote some great stuff about it here, as he usually does.

Basically, Macrosolve is a publicly traded app maker who has done terribly at their core business, losing hundreds of thousands of dollars in the last few years. But they were recently awarded a patent for a “system and method for data management” relating to mobile computers, and now they are going crazy suing small developers.

Unlike Lodsys, Macrosolve isn’t beginning by asking for licenses, and the developers they are targeting run the gamut of mobile operating systems. This is probably a bad idea for multiple reasons: For one, some of the defendants are just going to fight the suit, costing Macrosolve a lot more money than Lodsys, who won’t have to defend their patent. Also, by suing developers on a range of platforms, Macrosolve is more likely to entice Apple, Google, and Blackberry to split the legal costs and fight the patent head on. Apple doesn’t have that option with Lodsys, because Lodsys hasn’t actually sued anybody, and they’ve only asked for licenses from Apple developers.

Still isn’t good for the mobile app ecosystem though, and all of this is demonstrating that the patent system really needs to adjust in some fashion to fix software patents, or risk stifling development in “mobile computers”, a rather broad category that covers every new consumer technology likely to come out in the next ten years. It just doesn’t make sense to reward a company likely Macrosolve, a total loser when it came to making real apps, with the right to IP ownership over such a simple concept. Even if the concept wasn’t simple when Macrosolve “invented” it, clearly others reinvented it quite quickly – nobody was copying Macrosolve, whose most successful app was related to barbeque recipes… and it wasn’t even successful. The patent system allows this logic to prevail when a court looks at whether a patent was “obvious”, but that’s pretty late in the game in terms of litigation, and everybody has spent a pile of money by then. Software patents are a pretty broken system, and hopefully the system will adjust sooner rather than later, before the small app developers are forced out of the market.

Update: The premise of this post was later revealed to be erroneous – Apple probably has a license for the patent in question from Intellectual Ventures, before the patent went to Lodsys…

Last Friday, Lodsys, a patent trolling firm, sued a bunch of small iOS developers for infringing a patent they bought a few years back that they claim covers in-app system features. Lodsys is upset that they are being called a patent troll for suing a bunch of iOS developers for patents reaching back as far as 1992, so they made a blog defending their actions via a Q & A format which treats their readers like children. They also call out individual websites in some of their questions, showing how professional they are.

In short, their defenses are an outrageous joke. Lodsys throws around a bunch of boilerplate defenses to the concepts of patents generally, but don’t address any of the actual criticisms that have been tossed at them. Lodsys, in almost every argument, compares patent law and Lodsys’s actions to classical property issues. Here’s one example, used to “explain” why Lodsys is going after the small developers rather than Apple:

As a comparative example, it is the owner of the hotel who is responsible for the overall service (value proposition) that guests pay for, not the owner of the land that the hotel may be leasing.

The difference between a hotel and an intellectual concept is painfully obvious, but apparently not to Lodsys. Developers have no idea that they are infringing an idea that somebody had back in 1992, because intellectual property isn’t a physical thing. Obvious ideas aren’t something that people assume they can’t use. Hotel owners, on the other hand, know that they are leasing land… they placed their hotel on the land.

Another ridiculous statement comes here:

Historically, the tech industry did not clear patent rights in advance because the amount of time and effort to do so made no economic sense given the relative low cost to create software and the speed at which products were being released… so a norm has arisen where it’s build and ship now, and worry about clearing the patent rights later

If this is accurate, it doesn’t seem like the patents are doing anything to spur innovation in the field at all. If developers are ignoring patents because the cost of finding them are too high (aka all the patent holder did was file a patent, one of tens of thousands issued every year), then why reward the patent holder for disclosing his invention to nobody?

If you want to read a strong critique of Lodsys’s actual arguments regarding patent law, head here. Solid discussion there about how this sort of agressive patent trolling stands to ruin the app market by significantly raising the barrier to entry, but I won’t repeat the entire post here.

What’s more interesting to me is (and it relates to the hotel point), why isn’t Lodsys suing Apple as a third party infringer?

Third party infringement in patent is a very strange, infrequently utilized doctrine, but the key phrases from the Patent Act are “knowledge” and “inducement”. Lodsys claims that Apple has licensed their patents: seems like strong evidence of ‘knowledge’ to me – clearly Apple “knew” of the patent in the strictest sense of the word if they were paying to use it. “Inducement” is typically the wiggle room for defendants, who can often claim they didn’t know that what they were encouraging would be deemed infringement. But how could Apple possibly claim that they didn’t know encouraging use of their in-app system would induce infringement, when they themselves paid to license the patent? Unless the in-app system infrastructure came with a strong warning that using the system opened developers up to lawsuits unless they licensed, Apple seems like they are in trouble.

Maybe the real purpose of these suits is to extort licenses from the small guys as further evidence against Apple of third party infringement, giving Lodsys a stronger bargaining position if Apple winds up paying Lodsys for the patent outright. All this for a patent covering a technology that, in all likelihood, Apple independently reinvented themselves. I’m all in favor of patents on technologies that the inventor actually uses, or that the inventor at least DISCLOSES in some meaningful way to the public. But that is clearly not what’s been happening here.

Since Lodsys seems to be reading blogs that reference them, here is my suggestion: If you take an EXTREMELY unpopular position, don’t spur further debate on the subject by responding with blog posts. If the system is broken in your favor, abuse it quietly, if you must abuse it.

The Supreme Court heard oral arguments yesterday in Microsoft v i4i, a case which many patent pundits have been following for it’s potential to change the patent system pretty dramatically. The case turns on a point of evidence: issued patents are presumed valid in litigation, only overturned by clear and convincing evidence, a very high standard. The problem is, patents are issued in a non-adversarial setting (Patent office and inventor talk back and forth, but both parties generally want the patent to work out), and often evidence that would invalidate the patent is not considered in that process. But then, when a company is sued for infringement and they find evidence suggesting the patent should be invalid, they face this giant evidentiary hurdle that they can rarely meet, so many “bad” patents are upheld in court.

Most of the world is in favor of changing the evidentiary standard to something much lower, so that if a defendant finds evidence suggesting the patent shouldn’t have been granted in the first place, it’s easier to convince a jury to invalidate the patent. This would presumably make it much easier to beat bad patents in court, reducing the costs for infringing patents that probably should never have been granted.

As much sense as those arguments make, I’m going to say Microsoft is a 10:1 underdog in the case to win the point. After reading the oral arguments, i4i’s attorney absolutely cleaned up. I don’t usually oggle over oral arguments (because, wow, who wants to read about THAT?), but if you have any small sliver of interest in seeing how excellent you can be at oral advocacy, read the transcript of Mr. Waxman arguing for i4i. Oral arguments often make no difference in Supreme Court cases, but if they did here, he won i4i the case. (I’m not the only one who thinks he is good: apparently he won the 2010 “bet the company litigator of the year” award, and may have been considered for a position on the supreme court himself). I’m not sure what sports analogy is best for what Waxman did as compared to his opponent, but it’s probably most akin to pitching a no-hitter, or draining 10 half court shots in a row.

Microsoft had an uphill battle from the start: the current evidentiary standard was interpreted by the court years ago, and has been precedent essentially for 50 years. There are some great policy arguments for Microsoft, but courts don’t tend to like reversing 50 years precedent. Reading the oral argument transcript, it’s pretty clear where two justices, at least, are going: Breyer is going for Microsoft if he can find any conceivable justification for it (and I think he can), and Scalia is going for i4i (mostly because that’s just how he votes on these kinds of precedent challenges). A tie favors i4i (one justice recused himself for owning a ton of Microsoft stock), but I’d be surprised if Microsoft got more than 2 votes. Back to the drawing board for those looking for a way to fix the patent system.

Round Rock is the name of a patent trolling “business” run by an attorney who left a major law firm, bought a giant patent portfolio from Micron, and has now become THE example for how heinously broken the patent system is. The attorney has forced “licenses” out of major companies simply by threatening legal action, even though nobody is really sure what patents he has, or what exactly they cover. The whole thing is a crazy shakedown, and even staunch supporters of non-practicing entities (groups that hold patents but don’t produce anything) would have trouble defending Round Rock.

Last week, Round Rock took trolling to new heights, auctioning off a covenant not to be sued by the attorney in the future. There were four covenants put up for auction, and while only one sold, it sold for over $35 million. In terms of patent trolling, this is pretty heinous, because nobody really knows what the patents cover, and obviously the patents and Round Rock are adding nothing of value to society through this trolling. The auction probably seemed like a great way to make some quick money without the hassle of patent litigation, claim construction, or, you know, even READING the patents.

I wonder if the auction won’t come back to bite Round Rock later, though. Now, it’s not even clear that Round Rock will ever actually sue anybody; seems like “business” is booming on just the threats of suits. But if they ever sued and made it all the way to the damages phase, they are going to have set a precedent that the value of licensing their entire portfolio is $35 million. In a post-Ebay world, I couldn’t imagine a court giving Round Rock an injunction. Which means the court will be looking at some type of damages, and will likely wind up assessing a reasonable royalty, where a court will look at how much the patents have been licensed for in the past. With Round Rock having just publicly auctioned off a covenant not to sue (and there being some case law suggesting that such a covenant is akin to a license, albeit in a slightly different context), it wouldn’t surprise me if Round Rock just effectively capped the amount they can blackmail a company for at $35 million, a pretty low number, all things considered. Still way too much for patents that nobody has looked at, but probably less than Round Rock has already extorted out of some companies.