Lodsys posts FAQ on its in-app purchase patent

The patent holdings firm that's going after app developers who use Apple's in-app purchase tools have detailed how much they're seeking in terms of a licensing fee, as well as how Apple is or isn't involved.

Josh Lowensohn Former Senior Writer
Josh Lowensohn joined CNET in 2006 and now covers Apple. Before that, Josh wrote about everything from new Web start-ups, to remote-controlled robots that watch your house. Prior to joining CNET, Josh covered breaking video game news, as well as reviewing game software. His current console favorite is the Xbox 360.
Josh Lowensohn
3 min read
Apple's in-app purchasing icon.
Apple's in-app purchasing icon. Apple

Lodsys, the intellectual property holdings firm behind last week's letters telling iOS app makers their use of in-app purchase was stepping on the toes of a patent, has come out with an FAQ (frequently asked questions) on the matter. In short, the group says that by creating and selling applications that make use of in-app purchase, app developers are responsible for paying a licensing fee.

The FAQ, which has been posted as a series of individual posts on the company's blog, delves into a number of topics, though primarily how its patent pertains to in-app purchases and why it should be entitled to a portion of revenues from apps that make use of it.

"The economic gains provided by the Lodsys inventions (increase in revenue through additional sales, or decrease in costs to service the customer) are being enjoyed by the business that provides the product or service that interacts with the user," the group wrote. "Since Lodsys patent rights are of value to that overall solution, it is only fair to get paid by the party that is accountable for the entire solution and which captures the value (rather than a technology supplier or a retailer)."

Lodsys says that payment amounts to 0.575 percent of U.S. revenue from the time a developer is sent a notice letter about the patent, to when the patent expires, which is 2023. The group also says that deal is retroactive, effectively letting fees go back to as early as 2009 when the in-app purchase was first made available to app developers on iOS.

As to how Apple fits into all this, Lodsys explains that it's not trying to "force" Apple into an in-app purchase license of its own. The FAQ says that Apple, as well as other companies with app stores like Google and Microsoft, are licensed for their "nameplate products and services," and that the onus of cost falls on the app makers:

The scope of [Apple's] current licenses does NOT enable them to provide "pixie dust" to bless another (third-party) business applications. 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 percentage for that middleman role.

Lodsys has still not answered questions about how many more developers and publishers it's planning to target with notices about paying up for the use of its patent, except to say that it's seeking a "large volume of licensees." In the FAQ it notes that it would rather go through direct sales for patent use versus litigation, which the group contends is not ideal for smaller developers based on the cost of going to court. Nonetheless, two of the developers who received notes about the issue last week were given a deadline in which to comply before facing legal action.

Since last week's events, Lodsys says it's gotten an "amazing amount" of name-calling e-mails, spam, and even death threats aimed at Mark Small, the group's contact person.

"In any event, name calling, threats and irrationality don't help. In particular, the death threats are seriously uncool," the group wrote.