Lodsys, LLC v. Combay, Inc. et al

Filing 107

APPLE INC.'s ANSWER to 26 Amended Complaint,, COUNTERCLAIM against Lodsys Group LLC by Apple, Inc..(Smith, Melissa)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF TEXAS
MARSHALL DIVISION

LODSYS GROUP LLC,

CIVIL ACTION NO. 2:11-cv-272-JRG

Plaintiff,

JURY TRIAL DEMANDED

v.
APPLE INC.’S ANSWER AND
COUNTERCLAIM IN
INTERVENTION

COMBAY, INC., et al.,
Defendants,
v.
APPLE INC.,
Intervenor and CounterClaimant.

Introduction
1.

Plaintiff Lodsys Group LLC (“Lodsys”) asserts claims of infringement of

United States Patent Nos. 7,620,565 (the “’565 patent”) and 7,222,078 (the “’078 patent”)
(collectively the “patents in suit”) by software development companies (collectively
“Developers” or “defendants”) who create software applications (“Apps”) that run on Apple
products, such as the Mac, iPhone, iPod Touch, iPad and iPad2 (collectively the “Apple
Products”).
2.

Intervenor Apple Inc. (“Apple”) is licensed to the patents in suit

(“License”) and expressly permitted, among other things, to use, sell, offer to sell or otherwise
distribute to its Developers products and services that embody the technology covered by the
patents in suit.
3.

Lodsys purchased the patents in suit subject to Apple’s License.

4.

Apple’s ability to use the technology embodied by the patents in suit in

products and services offered to its customers is the essence of the value of Apple’s License to
the patents in suit.
5.

Apple offers products and services to the Developers to enable the

Developers to offer their products to the end users of Apple Products. The products and services
Apple provides to the Developers consist, among other things, of Apple application program
interfaces (“APIs”), Apple software development kits (“SDKs”), and Apple’s operating system
(“iOS”) through which the Developers’ programs access Apple hardware and software that
permit interaction between the Developers and Apple end users through the App Store. Apple
also provides a comprehensive set of Apple hosting, marketing, sales, agency, and delivery
services that allow Developers to provide Apps to millions of Apple end users.
6.

Apple’s business with its Developers is extremely valuable to Apple. In

return for providing these products and services to the Developers, the Developers pay to Apple
a percentage of the revenue the Developers earn from selling their Apps to Apple end users.
Over twenty-five billion Apps have been downloaded from the App Store, and the App Store
offers more than 550,000 Apps in over twenty different categories, including games, business,
news, health, and travel.
7.

Lodsys’s claims of infringement are based on the Developers’ use of the

products and services provided to them by Apple.
8.

Because Apple is licensed to offer products and services that embody the

patents in suit to its Developers, under the patent law doctrines of exhaustion and first sale,
Developers are entitled to use, free from claims of infringement of the patents in suit, those
products and services to which Apple is licensed.

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9.

By commencing this suit against the Developers based on their use of

products and services offered to them by Apple and by threatening other App developers, Lodsys
has diminished the value to Apple of its License. There has been at least one report of an effort
to organize a boycott of further use of Apple’s licensed technology by App developers until this
issue is resolved. Apple’s interest is direct, very real, and of extraordinary importance to the
continued success of Apple’s business, and will be prejudiced absent intervention to assert the
defenses set out below.
10.

Some of the Developers are very small companies and all possess far

fewer resources than Apple. Moreover, none of the defendants in this action possess the detailed
knowledge and expertise regarding Apple’s licensed products and services necessary to respond
to Lodsys’s infringement allegations. In addition, the Developers may not have the same
motivation as Apple to assert the defense based on Apple’s License. Accordingly, the
Developers may lack the ability, information, and motivation to protect Apple’s rights under the
License to offer products and services for use by Developers free from any claim of infringement
of the patents in suit.
11.

Apple’s interest in defending its rights in the License raises issues that are

common to the main action.
12.

To protect the value of its License and the business that is permitted under

the License, Apple intervenes in this lawsuit. Lodsys has no legal basis upon which to assert
infringement claims based on Developers’ use of licensed Apple technology.
THE PARTIES
13.

Apple lacks knowledge or information sufficient to form a belief as to the

truth of the allegations set forth in Paragraph 1 of Lodsys’s Amended Complaint for Patent

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Infringement (the “Amended Complaint”), and on that basis denies each and every allegation
contained therein.
14.

Apple lacks knowledge or information sufficient to form a belief as to the

truth of the allegations set forth in Paragraph 2 of the Amended Complaint, and on that basis
denies each and every allegation contained therein.
15.

Apple lacks knowledge or information sufficient to form a belief as to the

truth of the allegations set forth in Paragraph 3 of the Amended Complaint, and on that basis
denies each and every allegation contained therein.
16.

Apple lacks knowledge or information sufficient to form a belief as to the

truth of the allegations set forth in Paragraph 4 of the Amended Complaint, and on that basis
denies each and every allegation contained therein.
17.

Apple lacks knowledge or information sufficient to form a belief as to the

truth of the allegations set forth in Paragraph 5 of the Amended Complaint, and on that basis
denies each and every allegation contained therein.
18.

Apple lacks knowledge or information sufficient to form a belief as to the

truth of the allegations set forth in Paragraph 6 of the Amended Complaint, and on that basis
denies each and every allegation contained therein.
19.

Apple lacks knowledge or information sufficient to form a belief as to the

truth of the allegations set forth in Paragraph 7 of the Amended Complaint, and on that basis
denies each and every allegation contained therein.
20.

Apple lacks knowledge or information sufficient to form a belief as to the

truth of the allegations set forth in Paragraph 8 of the Amended Complaint, and on that basis
denies each and every allegation contained therein.

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21.

Apple lacks knowledge or information sufficient to form a belief as to the

truth of the allegations set forth in Paragraph 9 of the Amended Complaint, and on that basis
denies each and every allegation contained therein.
22.

Apple lacks knowledge or information sufficient to form a belief as to the

truth of the allegations set forth in Paragraph 10 of the Amended Complaint, and on that basis
denies each and every allegation contained therein.
23.

Apple lacks knowledge or information sufficient to form a belief as to the

truth of the allegations set forth in Paragraph 11 of the Amended Complaint, and on that basis
denies each and every allegation contained therein.
24.

Apple lacks knowledge or information sufficient to form a belief as to the

truth of the allegations set forth in Paragraph 12 of the Amended Complaint, and on that basis
denies each and every allegation contained therein.
JURISDICTION AND VENUE
25.

Apple lacks knowledge or information sufficient to form a belief as to the

truth of the allegations set forth in Paragraph 13 of the Amended Complaint, and on that basis
denies each and every allegation contained therein, except that Apple admits that this action
purports to arise under the patent laws of the United States and that Lodsys purports to ground
subject matter jurisdiction in 28 U.S.C. §§ 1331 and 1338(a).
26.

Apple lacks knowledge or information sufficient to form a belief as to the

truth of the allegations set forth in Paragraph 14 of the Amended Complaint, and on that basis
denies each and every allegation contained therein.
ALLEGED INFRINGEMENT OF U.S. PATENT NO. 7,620,565 B2
27.

Apple lacks knowledge or information sufficient to form a belief as to the

truth of the allegations set forth in Paragraph 15 of the Amended Complaint, and on that basis

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denies each and every allegation contained therein, except that Apple admits that Lodsys
purports that Exhibit A is a true and correct copy of U.S. Patent No. 7,620,565 (the “’565
Patent”), which issued on November 17, 2009 and is titled “Customer-Based Product Design
Module.”
28.

Apple lacks knowledge or information sufficient to form a belief as to the

truth of the allegations set forth in Paragraph 16 of the Amended Complaint, and on that basis
denies each and every allegation contained therein.
29.

Apple lacks knowledge or information sufficient to form a belief as to the

truth of the allegations set forth in Paragraph 17 of the Amended Complaint, and on that basis
denies each and every allegation contained therein.
30.

Apple lacks knowledge or information sufficient to form a belief as to the

truth of the allegations set forth in Paragraph 18 of the Amended Complaint, and on that basis
denies each and every allegation contained therein.
31.

Apple lacks knowledge or information sufficient to form a belief as to the

truth of the allegations set forth in Paragraph 19 of the Amended Complaint, and on that basis
denies each and every allegation contained therein.
32.

Apple lacks knowledge or information sufficient to form a belief as to the

truth of the allegations set forth in Paragraph 20 of the Amended Complaint, and on that basis
denies each and every allegation contained therein.
33.

Apple lacks knowledge or information sufficient to form a belief as to the

truth of the allegations set forth in Paragraph 21 of the Amended Complaint, and on that basis
denies each and every allegation contained therein.

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34.

Apple lacks knowledge or information sufficient to form a belief as to the

truth of the allegations set forth in Paragraph 22 of the Amended Complaint, and on that basis
denies each and every allegation contained therein.
35.

Apple lacks knowledge or information sufficient to form a belief as to the

truth of the allegations set forth in Paragraph 23 of the Amended Complaint, and on that basis
denies each and every allegation contained therein.
36.

Apple lacks knowledge or information sufficient to form a belief as to the

truth of the allegations set forth in Paragraph 24 of the Amended Complaint, and on that basis
denies each and every allegation contained therein.
37.

Apple lacks knowledge or information sufficient to form a belief as to the

truth of the allegations set forth in Paragraph 25 of the Amended Complaint, and on that basis
denies each and every allegation contained therein.
38.

Apple lacks knowledge or information sufficient to form a belief as to the

truth of the allegations set forth in Paragraph 26 of the Amended Complaint, and on that basis
denies each and every allegation contained therein.
39.

Apple lacks knowledge or information sufficient to form a belief as to the

truth of the allegations set forth in Paragraph 27 of the Amended Complaint, and on that basis
denies each and every allegation contained therein.
ALLEGED INFRINGEMENT OF U.S. PATENT NO. 7,222,078 B2
40.

Apple lacks knowledge or information sufficient to form a belief as to the

truth of the allegations set forth in Paragraph 28 of the Amended Complaint, and on that basis
denies each and every allegation contained therein, except that Apple admits that Lodsys
purports that Exhibit B is a true and correct copy of U.S. Patent No. 7,222,078 (the “’078

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Patent”), which issued on May 22, 2007 and is titled “Methods and Systems for Gathering
Information from Units of a Commodity Across a Network.”
41.

Apple lacks knowledge or information sufficient to form a belief as to the

truth of the allegations set forth in Paragraph 29 of the Amended Complaint, and on that basis
denies each and every allegation contained therein.
42.

Apple lacks knowledge or information sufficient to form a belief as to the

truth of the allegations set forth in Paragraph 30 of the Amended Complaint, and on that basis
denies each and every allegation contained therein.
43.

Apple lacks knowledge or information sufficient to form a belief as to the

truth of the allegations set forth in Paragraph 31 of the Amended Complaint, and on that basis
denies each and every allegation contained therein.
44.

Apple lacks knowledge or information sufficient to form a belief as to the

truth of the allegations set forth in Paragraph 32 of the Amended Complaint, and on that basis
denies each and every allegation contained therein.
45.

Apple lacks knowledge or information sufficient to form a belief as to the

truth of the allegations set forth in Paragraph 33 of the Amended Complaint, and on that basis
denies each and every allegation contained therein.
46.

Apple lacks knowledge or information sufficient to form a belief as to the

truth of the allegations set forth in Paragraph 34 of the Amended Complaint, and on that basis
denies each and every allegation contained therein.
47.

Apple lacks knowledge or information sufficient to form a belief as to the

truth of the allegations set forth in Paragraph 35 of the Amended Complaint, and on that basis
denies each and every allegation contained therein.

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48.

Apple lacks knowledge or information sufficient to form a belief as to the

truth of the allegations set forth in Paragraph 36 of the Amended Complaint, and on that basis
denies each and every allegation contained therein.
49.

Apple lacks knowledge or information sufficient to form a belief as to the

truth of the allegations set forth in Paragraph 37 of the Amended Complaint, and on that basis
denies each and every allegation contained therein.
50.

Apple lacks knowledge or information sufficient to form a belief as to the

truth of the allegations set forth in Paragraph 38 of the Amended Complaint, and on that basis
denies each and every allegation contained therein.
51.

Apple lacks knowledge or information sufficient to form a belief as to the

truth of the allegations set forth in Paragraph 39 of the Amended Complaint, and on that basis
denies each and every allegation contained therein.
52.

Apple lacks knowledge or information sufficient to form a belief as to the

truth of the allegations set forth in Paragraph 40 of the Amended Complaint, and on that basis
denies each and every allegation contained therein.
JURY DEMAND
53.

Apple denies that Lodsys is entitled to a jury except as permitted by law.
PRAYER FOR RELIEF

54.

Apple denies that Lodsys is entitled to the relief requested in paragraphs

(a)-(f).

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AFFIRMATIVE DEFENSE
Apple, as a further and separate defense to the Amended Complaint and without
assuming any burden it would not otherwise have, alleges the following affirmative defense:
License/Exhaustion of Patent Rights and First Sale
55.

Apple realleges and incorporates herein by reference the matters set forth

in paragraphs 1-54 above.
56.

As set out above, Apple is licensed to the patents in suit under the License.

The License expressly permits Apple to offer and otherwise make available to its Developers
products and services that embody the inventions contained in the patents in suit. Plaintiff’s
infringement claims against the Developers are based substantially or entirely on the Developers’
use of products and services that Apple is authorized to provide under the License and which
Lodsys claims embody the patents in suit.
57.

Under the patent law doctrines of exhaustion and first sale, the Developers

can use the products and services Apple provides to them free of claims of infringing the patents
in suit. Therefore, Lodsys’s claims against the Developers are barred by at least the doctrines of
patent exhaustion and first sale.
COUNTERCLAIM
Without waiver of any of its rights, including the right to seek dismissal and/or
transfer of this action, Apple, by and through its undersigned counsel, and by way of a
counterclaim against Lodsys, alleges:
Parties
58.

Apple is a corporation organized under the laws of the State of California

and maintains its principal place of business at One Infinite Loop, Cupertino, California 95014.

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59.

Lodsys purports to be a limited liability company organized under the

laws of the State of Texas that maintains its principal place of business in Marshall, Texas.
Jurisdiction and Venue
60.

This counterclaim arises under the United States patent laws, 35 U.S.C. §

1, et seq., and seeks relief for which this court has subject matter jurisdiction pursuant to 28
U.S.C. §§ 1331, 1338, 1367, and/or 2201-2202.
61.

Venue is proper under 28 U.S.C. § 1391 because, among other reasons,

Lodsys purports to reside in this district and further purports to conduct business in this district.
62.

This Court has general and specific personal jurisdiction over Lodsys

because, among other reasons, Lodsys purports to reside in this district and further purports to
conduct business in this district.
First Counterclaim for Declaratory Relief
63.

Apple realleges and incorporates herein by reference the matters set forth

in paragraphs 1-62 above.
64.

Lodsys has invoked federal patent law to control the post-sale use of

Apple’s licensed products and services. Absent a declaration and order as sought by Apple,
Lodsys will continue wrongfully to assert patent claims that are subject to the License and
therefore exhausted. An immediate, real, definite, and concrete dispute exists between Apple
and Lodsys over whether the License and the doctrines of patent exhaustion and first sale
preclude Lodsys’s ability to sue and threaten Developers for using Apple products and services
that allegedly embody the patents in suit.
65.

A declaration that Lodsys’s claims against the Developers are barred by

the doctrines of patent exhaustion and first sale will render moot many, if not all, existing claims
and defenses in this action. Apple is authorized under the License to offer and otherwise make

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available to Developers products and services that embody the patents in suit. To the extent that
these products and services do embody the patents in suit, the Developers are permitted to use
them free from suit by Lodsys under the doctrines of patent exhaustion and first sale.
66.

Therefore, Apple is entitled to a declaration that Lodsys’s claims against

the Developers are barred by the doctrines of patent exhaustion and first sale.
JURY DEMAND
67.

Pursuant to Rule 38 of the Federal Rules of Civil Procedure, Apple

respectfully requests a trial by jury on all issues to which it is entitled to a jury trial by law.

PRAYER FOR RELIEF
WHEREFORE, Apple respectfully prays that (i) Lodsys take nothing against any
defendant by way of the Amended Complaint, (ii) that Lodsys’s Amended Complaint be
dismissed with prejudice, (iii) that the Court issue an order declaring that Lodsys’s claims
against the Developers are barred by the doctrines of patent exhaustion and first sale, and (iv)
that the Court award Apple such other and further relief as it deems proper.
Dated: April 13, 2012

Respectfully submitted,
By /s/ Melissa Richards Smith
Melissa Richards Smith
Texas State Bar No. 24001351
GILLAM & SMITH, L.L.P
303 South Washington Avenue
Marshall, Texas 75670
Telephone: [phone]
Facsimile: [phone]
E-mail: [e-mail]

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Jeffrey E. Ostrow (admitted pro hac vice)
SIMPSON THACHER & BARTLETT LLP
2550 Hanover Street
Palo Alto, California 94304
Tel: [phone]
Fax: [phone]
[e-mail]
Counsel for Intervenor and Counter-Claimant
Apple Inc.
CERTIFICATE OF SERVICE
I hereby certify that all counsel of record who have consented to electronic
service are being served with a copy of this document via the Court’s CM/ECF system per Local
Rule CV-5(a)(3) on this the 13th of April, 2012.
/s/ Melissa Richards Smith
Melissa Richards Smith

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