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Monday, May 16, 2011, 07:20 am PT (10:20 am ET)

Lodsys explains its legal threats: Apple is licensed, iOS developers are not

Following a number of legal threats that were sent by Lodsys to third-party iOS developers over in-app purchases on the iPhone App Store, the company has taken to its official blog to explain and justify its actions.

The answers were given on Sunday in a number of posts made to the company's official blog, in which the company revealed that Apple has not been sued because the company is licensed to offer in-app purchases. But Lodsys believes that developers do not have the right to offer in-app purchases through Apple's system without licensing as well.

"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," the company said.

"Lodsys' patent portfolio is being used as part of an overall solution and we are seeking to be paid for the use of patent rights by the accountable party."

In addition to Apple, Lodsys explained that both Google and Microsoft are licensed for their "nameplate products and services." But the scope of those licenses, Lodsys believes, does not entitle any company to provide services to third-party developers.

"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 % for that middleman role," the company stated.

Lodsys


The question-and-answer posts also reveal that Lodsys is seeking 0.575 percent of U.S. revenue over the period of the notice letter to the expiration of the patent, plus applicable usage. That would amount to $5,750 per year for an application that makes $1 million in annual sales.

Last week, developers began receiving letters from Lodsys, and were accused of patent infringement. The letters gave developers 21 days to license technology related to in-app purchases, a feature that Apple offers iOS developers through its App Store.

Lodsys has accused developers of infringing on U.S. Patent No. 7222078, entitled "Methods and Systems for Gathering Information from Units of a Commodity Across a Network." The original patent was filed in December 2003, but dates back through continuations to earlier applications as old as 1992, and is credited to Dan Abelow.

Intellectual Ventures bought Abelow's patent portfolio in 2004, and later sold them to a private rights ownership group, which set up independent companies. Lodsys said that neither Abelow nor Intellectual ventures are involved in the licensing activities.

"Dan does have a consulting agreement to work with Lodsys on matters pertaining to the Lodsys patents," they said. "This agreement is for a fixed fee, and if that fee is exceeded, then he is paid a consulting day rate. Dan has no direct economic interests in the patent licensing activity."

Apple debuted its in-app purchasing system in 2009 as part of iOS 3.0 for the iPhone. Though the feature was initially restricted to pay software, later that year Apple granted creators of free applications the ability to charge for add-ons and additional content.

Just like purchases made directly through the App Store, in-app purchases are charged by Apple to a user's iTunes account. Apple takes a 30 percent cut of all transactions made for software on iOS devices.