Lodsys LLC. V. Combay Inc. et al.
United States District Court, Eastern District of Texas
Case No. 11-cv-00272, Filed May 31, 2011

Seven developers of iPhone applications, including the developers of games like Labyrinth and Mega Poker Online Texas Holdem, were sued on May 31, 2011, by Lodsys, a Texas company that had licensed its patents to Apple. Lodsys claims that its agreement with Apple did not give third-party developers free rein to use the patented technology. Less than two weeks later, on June 9, 2011, Apple filed a motion to intervene in the suit in an effort to protect its third-party software developers …and the substantial stream of revenue they generate for the company.

The main patent in question is U.S. Patent No. 7222078, “Methods and systems for gathering information from units of a commodity across a network” (the ‘078 patent). Lodsys had previously sent letters to the developers informing them that their apps violated its exclusive right in the ‘078 patent, and asking them for a small but not insignificant licensing fee. Lodsys threatened suit for non-compliance. Apple itself responded with a stern letter asserting that it had already licensed these patents and this license extended to its customers and business partners.

Despite Apple’s response Lodsys proceeded to file suit against the developers, saying that “Unfortunately for developers, Apple’s claim of infallibility has no discernible basis in law or fact.” Given that these are small independent app developers, and that patent suits are expensive to fight, Apple’s motion to intervene is welcomed by the defendants. Apple argues in its motion that it has the right to intervene because it has a vested interest in the property at issue, because the suit has “fundamentally disrupted Apple’s relationships with … developers, and places in jeopardy the revenue that Apple derives from those relationships,” and because independent developers “lack the resources to fully and fairly litigate the issue of whether Lodsys’s claims are exhausted” under the doctrines of first sale and exhaustion.

Further complicating the issue is the fact that Lodsys itself is being sued in the Northern District of Illinois. ForeSee results, an online survey company, is asking the court for declaratory judgment that four Lodsys patents, including the ‘078 patent in question in the Apple suit, are invalid. In what could be argued as a forum shopping technique, Lodsys is incorporated in Eastern Texas, apparently for the benefit of filing patent infringement suits there, but its allegedly sole employee actually operates out of Illinois. If a declaratory judgment against Lodsys were entered in Illinois before a trial ended in Texas, Apple and the developers could move to dismiss the lawsuit.

For further coverage see Ars Technica

Digital Reg v. Adobe
TTAB Affirms Disney's Rights in "Pooh" Trademarks