iOS developers targeted over in-app purchase patent infringement

Approximately a dozen iOS developers have received letters contending they are infringing on the rights of patent holding company Lodsys by implementing in-app purchase options within their iPhone and iPad releases. Patent 10/732,102--which Lodsys acquired in 2004 from inventor Dan Abelow--covers "methods and systems for gathering information from units of a commodity across a network," e.g. in-app purchases like upgrades from lite to premium versions. iOS developers James Thomson, Patrick McCarron and Matt Braun are among those confirming via Twitter and other channels that they've received patent infringement notices from Lodsys requesting they discuss licensing options.

In a series of Q&A entries posted to its blog, Lodsys says that in cases where iOS applications are offering in-app upgrades, it is seeking 0.575 percent of U.S. revenues over the period of the notice letter to the expiration of the patent, plus applicable past usage. "So on an application that sells U.S. $1m worth of sales in a year, the licensee would have an economic exposure of $5,750 per year," Lodsys states, denying claims it is pressuring iOS developers in an attempt to pressure Apple (NASDAQ:AAPL) into licensing its patent. "Apple is licensed for its nameplate products and services," Lodsys says. "Google (NASDAQ:GOOG) is licensed for its nameplate products and services. Also, Microsoft (NASDAQ:MSFT) is licensed for their nameplate products and services."

Lodsys goes on to contend that "The scope of their current licenses does NOT enable them to provide 'pixie dust' to bless another (3rd party) business applications. The value of the customer relationship is between the application vendor of record and the paying customer, the OS (is acting as an enabler) and the retailers (are acting as a conduit to connect that value), and taking their percent for that middleman role."   

The Guardian reports Apple is "actively investigating" Lodsys's claims. In the meantime, the blogosphere has rallied in support of the iOS developers in the Lodsys crosshairs. "Lodsys is trying to abuse the patent system in a way that could ultimately destroy the entire mobile apps economy, which is not only thriving on its own but has been and continues to be a key factor in making new mobile devices so useful and popular, to the benefit of corporations and consumers alike," writes intellectual property activist Florian Mueller on his blog. "Most apps address very small niches. Those app developers can't afford to defend themselves, and if they lost a patent case (even if they were reasonably confident that the patents are weak, they'd have to consider the worst case), they'd be out of business and, without the protective umbrella of a limited liability company, might be financially ruined for the rest of their lives."

Apple first rolled out support for iPhone in-app purchases in October 2009. In-app transactions across free and premium apps now account for 49 percent of iPhone developer revenues and 29 percent of iPad developer income, according to data issued earlier this year by app store analytics firm Distimo.

For more:
- read this Guardian article

Related articles:
Apple bolsters password controls on iPhone in-app purchases 
FTC confirms probe into iPhone in-app purchases
Lawmakers urge FTC to probe iPhone in-app purchases
Distimo: In-app purchases now half of iPhone developer revenues

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