A company that is waging a patent battle against iOS developers over their use of in-app purchases defended the practice Sunday, arguing that it is "only fair to get paid" for its innovations.
Lodsys made headlines over the weekend for contacting iOS developers and threatening legal action for patent infringement. The patent in question covers "methods and systems for gathering information from units of a commodity across a network," which translates into in-app purchases, like upgrades from lite to paid versions.
Lodsys said it did not target Apple directly (or Google or Microsoft) because those three companies are licensed for their products and services. Why go after the little guys? The company likened the approach to to a hotel.
"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, not the travel agent that sold the reservation, not the manufacturer of tools such as hammers, nor the provider of materials such as nails or steel beams, which may be used in building the hotel; nor is it the outsourced linen washing service or the architect of the building who is responsible," Lodsys wrote on its blog. "Lodsys' patent portfolio is being used as a part of an overall solution and we are seeking to be paid for the use of patent rights by the accountable party."
Lodsys argued that Apple's license does not let it "provide 'pixie dust' to bless another" third-party app. So far, Apple has not contacted Lodsys in order to purchase a license that would cover its iOS developers, but "economically, the best return is probably to license each Application vendor for a piece of value, rather than to include in a 'buyout' for an OS vendor," Lodsys said.
The company said litigation is the most expensive approach, but "companies are reluctant to pay unless they have to, [so] the force of litigation sometimes [becomes] necessary."
Lodsys is demanding 0.575 percent of U.S. revenue for the period of the notice letter to the expiration of the patent, plus applicable past usage. On an app that makes $1 million in a year, that would be $5,750, Lodsys said.
In February, Lodsys filed suit against several high-profile tech companies, including Brother International, HP, Hulu, Lenovo, Lexmark, Samsung, and more, for violating the in-app patent, as well as two others.
The company denied that it was "shooting in the dark" when it selected apps and companies to target with patent lawsuits. "There is a consistent pricing model, so what a small licensee has paid for their license will proportionally align to the pricing that a potential large licensee such as the companies in the February 11, 2011 litigation would pay," Lodsys said.
The patents in question were developed by Dan Abelow, who sold his patent portfolio to Intellectual Ventures in 2004. Intellectual Ventures then sold the rights to a private rights ownership group, which set up individual companies to focus on licensing the patents.
In-app purchases have been available via Apple's App Store since October 2009, via BlackBerry App World since September 2010, and for Google Android apps since March.