Apple v. Lodsys: A View to a Sale

by Mark Wilson

So they’ve got competing theories. Lodsys believes that Apple is sub-licensing Lodsys’ patents to app developers. That would be a no-no unless the license agreement permitted it; otherwise, the developers would need to pay Lodsys (which is what Lodsys insists). Apple believes that it is selling app developers technology which contains Lodsys patents (e.g., the iOS APIs, the App Store, etc.). Under the latter theory, the developers wouldn’t be responsible for paying Lodsys: it’s already been paid.

When you buy that iPod, you don’t have to pay to license the MP3 compression codecs from the Fraunhofer Institute. Apple has already paid them. While you’re ostensibly reimbursing Apple for the price of the license (which is built into the price of the iPod), the relationship between the licensor and the licensee ended after Apple paid for the license. So when you sell your iPod to someone else, that other person doesn’t need to pay the Fraunhofer Institute, either.

The licensor only gets paid once.

The world of software-as-a-service makes everything all the murkier: when I buy a copy of Windows 7, what am I buying? It seems like I’m buying a CD containing some code, with all the rights and privileges that go along with owning something. Microsoft sees it differently: they’re not selling anything; they’re licensing the technology to me. The difference is that, in the latter case, Microsoft can purport to impose all sorts of restrictions on how I can use the software (e.g., no reverse-engineering).

Back in Old Timey Times, when we dealt with “goods,” purchasing a good necessarily used it up. Buy a hammer from the store, and that’s one less hammer available for sale. An object’s inability to exist in more than one place at the same time was a licensing scheme imposed by quantum mechanics.

Not so with software: when I download Windows 7 from Microsoft, that doesn’t decrease the world’s supply of Windows 7, requiring Microsoft to manufacture another Windows 7 to take its place. And so, companies have developed novel ways of making information behave like stuff. In the process, this quandry has increased the world’s supply of yachts for lawyers.