Litigation Frustration Wreaks Havoc in the Apple Ecosystem
Texas-based Lodsys is casting a shadow over the iOS developer community, threatening some devs with legal action for alleged patent violation involving how in-app purchases are made. Lodsys is asking the accused developers for a portion of their revenues, but some app makers say they'll simply drop in-app purchases if it comes to that.
Dick the Butcher's line in Shakespeare's play Henry IV about killing all the lawyers probably took on additional flavor this week.
First, there's the matter of Lodsys, a company that has sent several iOS app developers scrambling for cover, accusing them of infringing a patent that governs in-app payments.
Next, a second lawsuit alleging infringement of privacy over the location tracking features of the iPhone and iPad has been filed against Apple.
This comes on the heels of a Congressional grilling of Apple and Google over the issue of mobile user privacy.
Meanwhile, Barclays Capital suggests that Apple's shares have been hit by concerns regarding when it'll release the next iPhone and how much of an improvement over the current model the next handset will represent.
Barclays also says that Mac sales for April fell far below March sales figures.
Still, the news overall is good. Barclays expects Mac sales to pick up in May and thinks the iPhone 4, the iPad and overseas sales will continue to drive the company forward.
Further, Apple has been granted patents for the iOS virtual keyboard and other technologies.
Apple shares closed at US$336.14 Tuesday, up $2.84.
Fishing for Patent Payments
Texas-based company Lodsys has reportedly contacted about a dozen iOS developers stating that they've breached its in-app payment patent.
The scope of Apple's current licenses does not protect apps developed on its platform, Lodsys asserts in its company blog.
Lodsys says it purchased the patent from its developer, Dan Abelow.
It is seeking 0.575 percent of U.S. revenue from the time its notice letter was received to the expiration of the patent, plus applicable usage. Lodys calculates that this would cost the developer of an app raking in $1 million worth of sales a year about $5,750 annually.
No Fear Among AppDevs
Lodsys' move will not significantly impact app developers, Joshua Greenman, president of Mercury Development, told MacNewsWorld.
Most apps in the App Store don't use in-app purchases and don't make money, Greenman explained. Larger developers, such as Rovio, will "naturally consult with their attorneys to determine the course of action that's best for them," he said.
"I believe we will eventually see a developer large enough to stand up to the bully tactics and perhaps see these claims adjudicated in a court of law," Greenman remarked.
If, on the other hand, Lodsys' claim pans out, developers "can resume the practices they pursued before in-app purchases were rolled by Apple, selling additional functionality as a separate application or selling several versions of the same app with different functionality bundles," Greenman stated.
"If Lodsys comes after us, we'll just remove in-app purchase from our apps and adapt accordingly," Dave Howell, founder and CEO of Avatron Software, told MacNewsWorld. "We'll neither fight nor capitulate."
Howell suggests the first thing any developer should do if Lodsys contacts it is to "get ahold of its partnership manager at Apple and explain the situation."
Apple May Strike Back
Reports that Apple is looking into the issue are making the rounds, but Apple did not respond to requests for comment by press time.
Still, it's likely that Apple will get into this fight.
"I'm fairly confident that Apple will be resolving this one for us," Howell stated. "Lodsys' patent trolling is a direct attack on Apple's in-app purchase model."
The company also threatens Apple's entire ecosystem, Howell pointed out.
"Apple has too much riding on the apps experiment to allow these punks and their ilk to take it down," Howell fumed.
An unfavorable judgment could "set a precedent with Apple as the next likely target," Greenman warned.
Privacy? What Privacy?
While Apple and Google were being grilled by Congress over the question regarding the location data stored on the iPhone and iPad 3G, a consumer reportedly filed a lawsuit alleging infringement of privacy.
The suit, filed in the United States District Court for the District of Puerto Rico by Lymaris M. Rivera Diaz, is the second such legal action against Apple on this issue. The first was filed in late April.
Diaz reportedly also included the Weather Channel and Pandora Media in the suit.
The suit alleges the defendants intentionally intercepted personally identifying information.
Apple states in its FAQs on location data that it's not tracking the location of customers' iPhones.
Barclays on Apple
Barclays Capital on Tuesday said NPD data indicated Mac unit sales grew 9 percent year over year. That compares unfavorably with the 47 percent year over year figure chalked up in March.
March sales were below Barclays Capital's estimate of 22.5 percent sales growth year over year for April, analyst Ben Reitzes told investors in a note.
However, he expects the new iMacs launched May 3 to boost sales. Reitzes pointed out that NPD data for the first week of May shows Mac sales grew 35 percent year over year.
He expects that Mac sales will grow, as will demand for the iPad. Further, the iPhone 4, the iPad and overseas sales will give Apple a boost, Reitzes predicted.