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How Concerned Should App Developers be about Getting a Lodsys Nastygram?

Many in the mobile development community, particularly those who develop for iOS, have read stories about Lodsys, Apple, their patent disagreement(s), and potential lawsuits from Lodsys.  We talked with IP and business attorney Rob Cogan of Continuum Law about this situation and how mobile developers should proceed.  An audicast of the conversation will follow, but here are the main points to consider:

First, understand that the Lodsys patents in question are generally related to commercial websites where the site can gather feedback from its users of the website. This may also apply to mobile apps and, Lodsys claims, in app purchases.  Lodsys has four patents and their summary is that the patents are directed toward sites that offer a product or service, and functionality that is used to interact with and gather feedback from users of those products or services, and transmit information to the provider. That’s pretty broad. When it comes down to it, any mobile app has an interaction. The qualifier is to “gather information from the users.” Buying something probably does not qualify. But if you’re using a questionnaire online, that likely puts you in Lodsys’s crosshairs.

There’s no critical detail to consider here. The only real critical consideration is whether Lodsys thinks you’re stepping on their turf, and that’s solely up to their discretion.  This isn’t something  where we have specific answers, but only generalities. Try not to think about it in strict legal terms. It’s really about business exposure—do you think Lodsys could go after you? In that way, the specific claims don’t matter. Don’t worry about whether it’s possible, probable, and/or “right” for you to get sued in this area –in the U.S. anyone can sue for just about anything.

So far, Lodsys has sued some big companies: Best Buy. The New York Times. Small developers, it seems, have just received information packages notifying them of infringement (i.e., “nastygrams”).

If you receive one of these nastygra… Err, “information packages” there are a couple of things you should think about from the outset.

Read it, see what they’re saying, and then put it aside and don’t worry about it for a day or two. Whatever it says will not make sense at first. Come back to it later, and you’ll probably understand what they’re asking for. In many cases, Lodsys is asking for 0.575% of U.S. revenue until patents expire. If the developer is doing $1 M revenue, that’s $5,750—does that fit within your margins? Don’t try to play lawyer, but stick to the business side. Your goal is to stay in business, right? Can you do so after getting a packet from Lodsys? Most likely the answer is yes. You may feel that what they’re doing is wrong, but if you can pay and still have a profit margin and stay in business, that’s good.  Can you stay on the sidelines and below the radar? NYT and Foresee have sued Lodsys saying that the patents are invalid—and they can do that because they’re big companies. You probably can’t. Does it fit within your margins to just stay under the radar and not turn this in to a Big Deal?

The only thing you really can do, legally, is to consult counsel. Knowing that small developers can’t afford that, look at the letter for facts—what they’re accusing you of, what are the specifics, what they’re asking for—and present that to counsel. If you have a pretty good understanding of the situation, you can probably get a useful business answer from counsel easily (and affordably). One likely possibility is to read through the information and ask counsel “if I sign this and pay them, will that allow me to do my business without further interference?” That might be the most cost-effective and cost-justified way to go.  If it’s $2 a week to make it go away, is that worth it?

If you’re developing for iOS, should you continue doing so? What functionality should you take out to avoid being on the receiving end of a Lodsys “information package”?

For the most part, it doesn’t matter because it’s not what you’re doing, it’s what Lodsys believes that you’re doing and they are acting based on that. You shouldn’t base your business plan or business decisions on whether the media accounts of all of this are true.

But what if it’s just the tip of the iceberg? Maybe additional companies will start going after mobile app developers.

The concern from small developers about this environment is understandable. Many are starting to say that this means they won’t develop for iOS any longer because the legal uncertainty makes it unworthy their time to invest and innovate in that space.

There have been other patent enforcement campaigns in other industries, and generally it hasn’t happened that other non-practicing entities have come forward.

Business considerations are key. Forget additional non-operating patent holding companies. What is the cost-benefit analysis?  If you’ve already made back your initial investment, would this actually put you out of business? Even if the number, letter, and agreement seem like something you can deal with, make sure you have a lawyer look at it anyway. Make sure that what you see is right.

Think about this, too: non-practicing entities probably won’t sue someone who doesn’t have the money to pay them (e.g., small developers).

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One Response to “How Concerned Should App Developers be about Getting a Lodsys Nastygram?”

By Anonymous - 22 September 2011 Reply

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