Monday, May 23, 2011

Lodsys: Why Marco Arment is Wrong.

Marco Arment's advice to simply roll over and pay Lodsys could be damaging not only to the developers taking his advice, but to the independent development community as a whole.

Marco Arment is the founder of Instapaper and was a co-founder of Tumblr.  He currently has a podcast on Dan Benjamin's 5by5 network called Build and Analyze. I am a paid user of Instapaper apps and a fairly regular listener of Build and Analyze and Benjamin's other shows.  I think Arment and Benjamin are smart guys. When Arment or Benjamin's other co-hosts talk about what they know, the shows can be educational and inspiring. Occasionally, though, the co-hosts speculate about things they don't know, and the shows can be disappointing and infuriating.

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In episode 25 of Build and Analyze, Benjamin and Arment spent a good deal of time discussing the Lodsys situation. Within the first minute of discussion, Arment misstated the number of patents held by Lodsys, the term of a patent, and the title chain of the patents. Those were fairly benign errors. Far more dangerous, though, was Arment simply taking at face value Lodsys's broad characterization of the scope of the '078 patent, exaggerating it even further as support for his anti-patent arguments, and then implying a proper course of action for developers based on that misinformation:

Arment: "This company has a couple of what sound like very broad patents... and one of them in particular... I'm not a lawyer of course, so please take all of this with a grain of salt... It just sounds like it could apply to any kind of communication over a network." (~19:30)

No. The patent does not apply to, or sound like it could apply to, anything close to "any kind of communication over a network."

Patents end with patent claims. Those claims define the bounds of the legal monopoly granted by the patent. Arment either did not even look at the claims before broadcasting his views to thousands of developers, or did not understand them. I suspect the former.

As discussed at length in my previous posts, the Abelow '078 being asserted by Lodsys has significant limitations related to which party actually practices the invention, the scope of the system that is claimed, and the type of information that is collected on user perception. Each of those limitations are relevant to whether iOS developers infringe. The patent does not cover "any kind of communication over a network."

 

Arment later discusses how he would respond to a Lodsys letter:

Arment: "It's a horrible thing in principle, but if they ever hit me, I'd just pay it.  because the reality is... Yes, it sucks to lose that money, but it's not that much money and the alternatives are so much worse.  This is the kind of thing... you know, you can try to argue, oh you should make a big political stand...  The fact is you're going to lose, and you're going to lose a lot of money doing it." (~28:15)

Arment is correct that standing up will cost money. I take serious issue with his assertion to developers, however, that "you're going to lose," especially when it appears he has not even read the patent claims.

With the claim limitations described above, I have been unable to come up with a plausible explanation as to how the targeted developers could be, especially without Apple as a joint infringer, directly infringing the patent. Patent litigation is unpredictable, and yes, developers could lose nonetheless, but based on my read, this is far from a slam dunk for Lodsys.

I also question whether, if everyone rolls over as Arment suggests, that it won't be "that much money." Arment seems to be making implicit assumptions that a Lodsys success will not inspire more NPEs, that other NPEs will request similarly low percentages of revenue, and that the total percentage of revenue sought across NPEs will still be low. I question all of these assumptions.

There are plenty of issued patents out there. I assure you that NPEs are looking right now to buy more that might be stretched to arguably read on the Apple ecosystem. With such patents in hand, an NPE looking to replicate Lodsys's strategy could sensibly target the same developers who rolled over for Lodsys (or successful developers who publicly stated in podcasts that they would roll over). Those "small percentages" will add up.

 

A Lodsys-like business model seems to depend heavily on developers holding beliefs like Arment's. Making money by collecting small amounts from large numbers of developers requires a low transaction cost for each collection. Developers who roll over based on these beliefs keep transaction costs low.

If the transaction cost rises, however, perhaps through legitimate defenses or declaratory judgment actions, the NPE's costs skyrocket.  I think it is no coincidence that Lodsys is starting with a small group of developers. Achieving critical mass to jointly fund a declaratory judgment action for non-infringement or invalidity would be hard under any circumstances, but especially if there are never enough threatened developers at any one time to reach that critical mass.  If no one stands up and says "we're not infringing" in this round, though, what do you think Lodsys will do once it collects its first round of checks? Those who settle in early rounds will likely be funding the actions against other developers.


Developers should not take legal advice from the Internet, and especially not from a software development podcast. Whether it is expensive or not, see an attorney. Show the attorney the claim chart you received from Lodsys. Spend some time, perhaps, on the claim language that Lodsys left out of the claim chart and why they left it out. Assess whether you could even be capable of infringing the patent given your role in the Apple ecosystem. Then, discuss with your attorney whether to roll over based on cost concerns. At least be informed when you do so.


Update 5/23 1:50P: Marco responds here.  He mischaracterizes what I said (re-read the final paragraph above; he doesn't seem to have read the end of the patent or the end of my post), but clarifies his own opinion a bit.

 

(Quick note: Dr. Drang took issue with the same Arment podcast and beat me to the punch.  I think our posts are complementary, though. Go take a look.)

 

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1 comment:

crikeymo said...

I think the point is that for a small iOS developer, even something like $100,000 of income would be a significant amount.

With the Lodsys patent troll tax currently set at 0.575% that would cost maybe $575. I doubt a competent patent lawyer would even get out of bed for that much. Getting a decent patent lawyer involved would cost maybe 100 times that much.

Sure there is the risk that a pack of patent trolls might come along to feast but as things currently stand, there is a fair bit of logic to what Marco is suggesting.