Lodsys argues against Apple’s motion to intervene on behalf of iOS developers

Thu, Jul 28, 2011

Legal, News

Lodsys is not only moving ahead with its lawsuits against both iOS and Android developers, but is expanding the scope of its lawsuit to include big time companies such as EA and Rovio, the developers behind Angry Birds. In the simplest of terms, Lodsys asserts that a number of apps that implement in-app purchasing infringe upon Lodsys owned patents.

Apple clearly has a stake in this battle because if iOS developers have to work under the looming threat of litigation at the hands of patent trolls, they’ll be less inclined to develop apps and the iOS ecosystem as a whole will become weaker as a result.

Consequently, Apple filed a motion with the court in the Eastern District of Texas asking to intervene as a party in the lawsuit on behalf of affected developers. Apple claims that it should be allowed to intervene because 1) iOS developers are expressly licensed under Apple’s license for the patents at issue and 2) the app developers at the forefront of Lodsys’ patent attack are “individuals or small entities with far fewer resources than Apple and… lack the¬†technical information, ability, and incentive to adequately protect Apple’s rights under its license agreement.”

Apple filed this motion on June 10 and now Lodsys has filed a motion in opposition to Apple’s motion to intervene.

Florian Mueller, per usual, does a great job of summing up Lodsys’ filing.

As you”d expect, Lodsys is adamantly opposed to Apple intervening as a party to their litigation and asks that the court dismiss Apple’s attempt to interject.

Lodsys argues that Apple’s “purported interest is, at best, purely economic”, and speculative (referring, for example, to Apple’s claim that Lodsys’s patent enforcement against app developers could “lead to loss of significant revenues from all developers”). Lodsys claims that “courts have consistently held that economic interests do¬† satisfy the requirements for intervention” and that there also must be a legal interest. No doubt Apple will contradict.

Rule 24 of the Federal Rules of Procedure govern Intervention and it reads in part:

(a) Intervention of Right.
On timely motion, the court must permit anyone to intervene who:

  • (1) is given an unconditional right to intervene by a federal statute; or
  • (2) claims an interest relating to the property or transaction that is the subject of the action, and is so situated that disposing of the action may as a practical matter impair or impede the movant’s ability to protect its interest, unless existing parties adequately represent that interest.

(b) Permissive Intervention.
(1) In General.

On timely motion, the court may permit anyone to intervene who:

  • (A) is given a conditional right to intervene by a federal statute; or
  • (B) has a claim or defense that shares with the main action a common question of law or fact.

It would appear that Apple technically has a position to intervene based on Rule 24 (a)(2). Lodsys, in going after small and independent developers, necessarily creates an atmosphere of apprehension and fear amongst the iOS developers that have been behind the success of the iTunes App Store. Further, seeing as how the iTunes App Store is an integral part of the the iPhone/iPad value proposition, any action that threatens iOS developers on a whole can reasonably be viewed to have an impact on Apple’s interests.

Lodsys for it’s part cites case law articulating that “courts should discourage premature intervention that wastes judicial resources” and that courts are not required to “permit intervention based upon speculation that intervention may be useful for protecting one’s rights.”

Again, Apple’s interest in this matter is quite transparent and their interest in the matter is rooted in more than speculation.

Lodsys further stresses that Apple’s motion to intervene is premature as it answered Lodsys’ complaint even before any defendant has. That stance, however, reflects the independent nature of the defendants Lodsys chose and that they more likely than not lack the necessary resources to adequately respond to an intimidating patent shakedown.

In Apple’s original motion, they emphasized that the defendants in the case won’t be able to adequately protect Apple’s rights because Lodsys specifically filed lawsuits against small entities with relatively few resources.

Countering, Lodsys points out that it recently amended its complaint to include big time companies with substantial financial and technical resources, including EA and Rovio.

“Apple cannot seriously dispute,” Lodsys writes, “that the additional defendants will more than adequately represent Apple’s purported interests.”

Perfectly convenient timing, no?

Further attacking Apple’s reliance on Rule 24, Lodsys writes that the interest Apple seeks to protect must be “direct, substantial, and legally protectable.” That said, an economic interest in the outcome of these proceedings is not sufficient to pass muster under the court’s interpretation of Rule 24.

Apple of course claims that its iOS developers are covered for Lodsys’ patents based upon its own licensing rights to the patents in question – which Apple presumably attained while the patents were owned by Intellectual Ventures.

Lodsys, however, doesn’t buy into that and points out that Apple’s agreement with developers expressly states that they share a principal and agency relationship and that developers, “as principal, are, and shall be, solely responsible for any and all claims and liabilities involving or relating to, the Licensed Applications.

Lodsys goes on to argue quite extensively why Apple’s motion should not be granted. Their brief is well-written, articulate, and as persuasive as one could hope given their legal position. We’re not sure where Lodsys is getting its financing from, but they’re clearly well funded with adequate resources to hire solid legal counsel and the ability to take on plaintiffs both large and small across a number of jurisdictions.

The entire motion in opposition is 22 pages and can be read in its entirey (sans redactions of course) over here.

Looking forward, Apple will no doubt respond to Lodsys’ motion with a motion of their own, after which we can expect a decision to be handed down.

Meanwhile, Google has been completely silent on the matter as Lodsys has turned up the heat on Android developers.

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