Mobile developers that employ in-app purchasing that let users unlock extra functionality in exchange for payment have been sent requests by the patent holders that they hand over 0.575% of their US based revenue in exchange for a licence.

The application in question is an extremely well used an popular one that is facilitated by mobile platforms such as iTunes (Apple), Google Marketplace and Ovi Store (Nokia). The platform companies have, it seems, paid for licences from the patent holder Lodsys [1] for their own 'nameplate products and services', but not for onward sale or giving away. That is, the facilitator does not have the power to to provide 'pixie dust' to bless third party business applications.

The holder of the 20 year old US patent (7,222,078), Lodsys, is now approaching the developers that utilise these patents for a slice of the action. Their argument for going to the developers and not the facilitators is that it is the developers that provide the service to the end user.

This means that Lodsys has claimed a patent over the 'upgrade button', which lets people upgrade from a free or lite version to the fully paid up version. Lodsys has given developers 21 days to licence or face legal action.

This turn of events has come as a surprise to many developers and they have approached Apple, which is the only facilitator firm targeted so far,  for legal advice.

The problem for Apple is that their developer agreement forbids developers entering into binding agreements with other companies without Apple's permission as it may compromise Apple's position if not the whole App Store ecosystem.

Lodsys is not the original inventor but a subsequent purchaser of the rights and so has attracted claims that it is a 'patent troll' just holding on to a few wide ranging patents in the hope of earning from them down the line. There is a huge cost to defending against claims of patent infringement and this puts many companies, especially the smaller ones, off of defending their position in the courts however good their case.

Lodsys has put its side of the story on its blog [2].

If this one proves to be lucrative for Lodsys then we can expect to see a lot more of these types of claims in the future, as well as a lot of wealthier patent lawyers. As for Lodsys, although they have not said it, Google and Microsoft could be next.


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