Why Apple Intervening In Lodsys Cases Proves Patents Are About Protecting Business Models

by Christopher Paul on June 13, 2011

I’ve been following the Lodsys news since it was first reported. I can’t remember where I first read about it but every Apple blog has probably covered it. If you aren’t familiar a quick summary:

Lodsys claims to have a patent on in-app purchases. Apple says it licensed this technology – something Lodsys doesn’t deny. But Lodsys recently started contacting developers asking for 0.575% of every in-app transaction as a license fee for their “innovation”. Apple believes its license with Lodsys covers it’s app developers; Lodsys disagrees and has sued several iOS developers for patent infringement. Apple has filed a motion to intervene on behalf of the developers.

Apple clearly sees this as risk to its business model. If developers had to pay Apple and Lodsys for every in-app purchase, the costs would add up quickly. It would discourage development on the iOS platform. Plus, if the patent was only applied to iOS developers, Apple would be put at a disadvantage over it’s current app rival: Google. If it wasn’t a risk to its long term strategy, Apple wouldn’t have cared. They wouldn’t have publicly responded the way they did and they certainly wouldn’t be using their legal dollars the way they are.

I have no problems with Apple intervening. To be quite honest, I’m glad they did. Lodsys didn’t invent in-app purchases; they bought the patent from somewhere and are using it to shakedown a popular business. The fact they’re doing this isn’t really new, either. The RIAA, MPAA, and other IP based groups have been shaking down people and companies for years. The big IP case was against RIM for their wireless email technology which they paid to settle.

Apple was willing to license the technology to create a lucrative business. But now that it’s being threatened, the sleeping giant has woken up and is going to defend its lair as much as possible. In an independent effort, Lodsys’ patent is now being scrutinized and, hopefully, invalidated.

But rest assured that Apple is ensuing the safety of its ecosystem and profits. They might argue that the small developer doesn’t have the resources to defend themselves against a heavily funded shell corporation. But this is a defensive maneuver to ensure the long term health of the App Store.

In addition to the reasons I mentioned above, if developers had to pay Lodsys even the smallest percentage, it would add costs to developing for iOS – a cost that Apple doesn’t control. Control is a strong motivator for Apple and it will maintain it as much as possible. It also wouldn’t end with the small percentage being asked now. What’s to stop Lodsys from increasing the payment percentage if iOS development were to slow (to maintain cash flow).

If the patent in question didn’t affect Apple’s bottom line – or threaten its ecosystem – it wouldn’t care if a developer was sued for infringement. Say the patent was on some game algorithm that was truly unique and non-obvious. If Lodsys sued a developer for it, it wouldn’t care. But cost Apple money, control, market share, and it’s business model… Sure. Apple will strike or, in this case, strike for others.

Apple invents. They patent. They sue for infringement. They get sued, too. There are already questions about software patents and its effect on innovation. But in this case, it’s very clear. The Lodsys case isn’t about someone stealing a methodology, it’s about making sure Apple’s supplemental cash cow isn’t threatened in anyway. If that doesn’t say IP is all about the business model – and not a reward for innovation – I don’t know what else does.

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