October 2, 2013 | By Daniel Nazer

Patent Troll Lodsys Settles for Nothing to Avoid Trial

Today we learned just how determined the patent troll Lodsys is to avoid a ruling on the merits of its claims. When software security company Kaspersky Lab refused to surrender, Lodsys settled for nothing (yes, you read that right—absolutely nothing) rather than take its claims to trial.

First, some background: Lodsys is the poster child for the worst kind of patent trolling. A shell company with no apparent business other than "monetizing" patents, it has sued or threatened thousands of application developers. While it has sued some big players, most of its targets have been tiny app developers who lack the resources to defend patent litigation. And these developers are being sued simply for using Apple or Google’s in-app purchase APIs. In this, Lodsys is part of growing trend of patent trolls targeting the end-users of technology.

We believe that Lodsys is unlikely to prevail on the merits of its claims. First, the principle of patent exhaustion should protect developers using Google and Apple’s APIs. Lodsys purchased its patents from Intellectual Ventures, who many believe is the biggest troll of all. (When "selling" its patents to supposedly "independent" companies like Lodsys, Intellectual Ventures has retained as much as 90 percent of ongoing profits.) Apple and Google both licensed the patents when they belonged to Intellectual Ventures. By suing individual app developers for using Apple and Google services, Lodsys is attempting to get to two bites of the apple, so to speak.

Second, Lodsys’ patents have nothing to do with the hardware or software of today’s smartphones and tablets. To the extent they are even comprehensible, the patents discuss a method for providing remote customer feedback for early 90s technology like fax machines. Using intentionally vague claim language like “trigger event” and “perception information,” Lodsys argues that the patents cover today’s technology. This is an abuse of the patent system.

Lodsys is doing everything it can to avoid a ruling on the merits of its claims. Earlier this week, it successfully dodged a decision on whether Apple’s license shields iOS developers. And as a number of cases in the Eastern District of Texas approached trial, Lodsys settled all of them. Except for one. Kaspersky Lab refused to pay a dime. Faced with the prospect of having to actually prove its case, Lodsys surrendered. Lodsys would rather get nothing than see a binding decision on the merits of its claims.

We congratulate Kaspersky Lab on its victory. It joins a select group of companies, like Twitter and Newegg, that have proven willing to stand up to patent trolls. As these cases show, when they are actually forced to litigate, patent trolls frequently lose or give up, particularly when software patents are at issue. One study found that, among the most frequently litigated patents (those asserted in eight or more lawsuits), non-practicing entities won only 9.2% of their cases.

Unfortunately, fighting back is expensive. Defending a patent case can cost well over $1 million and defendants rarely get that money back. So few companies have the resources or the appetite to take on the trolls. And Kaspersky Lab’s victory in this case will not stop Lodsys. Since it surrendered before a decision on the merits, Lodsys can continue to use its vague patents, and the cost of litigation, to leverage settlements. Ultimately, we need fundamental patent reform to stop the trolls.


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