For a few App Store developers, it has been a tough few days.
Word got out late last week that a technology company, Lodsys, had started filing patent dispute claims regarding ownership of the intellectual property behind in-app purchases. Lodsys apparently has a patent on the technology for buying things from within mobile apps, and Apple (AAPL) pays a licensing fee to use that patent. So too, it appears, do Microsoft (MSFT) and Google (GOOG) for their respective mobile operating systems, Windows Phone 7 and Android.
But according to Lodsys, those licensing agreements don’t extend to third-party app developers making use of IAP technology in their apps, and they need to pay a licensing fee as well. So rather than go after Apple, Lodsys has started sending out lawsuits to tiny publishers, according to a story from TidBITS.
It’s an interesting legal quandary. As PC World notes, Lodsys has mentioned in Q&A blogs it has posted about the situation that Apple’s licensing agreement doesn’t sprinkle “pixie dust” on all the developers using their software, and therefore they should have to pay a small fee (it works out to be 0.575 percent of revenue, or as Lodsys puts it, $5,750 per million dollars made off an app) to use it.
The trouble is, as TidBITS shows in pretty painstaking detail, Apple’s user licensing agreement clearly claims ownership over the IAP technology as it relates to developers, and the legal agreement developers enter into when they develop for Apple’s iOS platform states that they use it as such. It also states that developers aren’t allowed to make a settlement without Apple’s consent or do anything that would legally bind Apple in any way. So the developers receiving these lawsuits – so far, small, independent companies that couldn’t mount much of a legal defense or pay much in a settlement anyway – really have few options.
As it stands, developers are a bit stuck. Apple has been pushing the uptake of in-app purchases for developers, especially those who sell content in other venues like magazine subscriptions, and all those apps are sure to run afoul of Lodsys as well. Lodsys claims it isn’t trying to put pressure on Apple – it already has a license agreement, the company states – but rather to get value from its invention from the people who are making money using it, and not necessarily the middle man.
It seems most of the developers involved have contacted Apple and are waiting for further instructions and weighing their legal options. The complexity of the issue makes it seem as though this situation might take a bit of time to sort out, and that it could have a big effect on the way developers work in the iTunes App Store (or don’t, if Lodsys’ lawsuits and licensing fees start to have a chilling effect), or cause Apple to take broad action to keep apps on its virtual shelves.
