Lodsys, LLC v. Combay, Inc. et al

Filing 4

MOTION to Intervene by Apple, Inc.. (Attachments: # 1 Text of Proposed Order, # 2 Exhibit A - Answer and Counterclaims, # 3 Affidavit of Sanders, # 4 Exhibit B to Sanders Declaration, # 5 Exhibit C to Sanders Declaration, # 6 Exhibit D to Sanders Declaration, # 7 Exhibit E to Sanders Declaration, # 8 Exhibit F to Sanders Declaration)(Findlay, Eric)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF TEXAS
MARSHALL DIVISION

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

LODSYS, LLC,
Plaintiff and CounterDefendant,
v.
COMBAY, INC.;
ICONFACTORY, INC.;
ILLUSION LABS AB;
MICHAEL G. KARR D/B/A SHOVELMATE;
QUICKOFFICE, INC.;
RICHARD SHINDERMAN;
WULVEN GAME STUDIOS,

JURY TRIAL DEMANDED
APPLE INC.’S [PROPOSED]
ANSWER AND COUNTERCLAIM IN
INTERVENTION

Defendants,
v.
APPLE INC.,
Intervenor and CounterClaimant.
Introduction
1.

Plaintiff Lodsys, 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 seven 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.
Fourteen billion Apps have been downloaded from the App Store, and the App Store offers more
than 425,000 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.

Moreover, because Lodsys has chosen to sue Developers that are

individuals or very small companies that possess far fewer resources than Apple, those
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.

In addition, 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 Complaint for Patent Infringement
(the “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 Complaint, and on that basis denies each
and every allegation contained therein.

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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 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 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 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 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 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 Complaint, and on that basis denies each
and every allegation contained therein.
JURISDICTION AND VENUE
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 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).

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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 Complaint, and on that basis denies each
and every allegation contained therein.
ALLEGED INFRINGEMENT OF U.S. PATENT NO. 7,620,565 B2
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 Complaint, and on that basis 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.”
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 Complaint, and on that basis denies each
and every allegation contained therein.
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 Complaint, and on that basis denies each
and every allegation contained therein.
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 Complaint, and on that basis denies each
and every allegation contained therein.
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 Complaint, and on that basis denies each
and every allegation contained therein.
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 Complaint, and on that basis denies each
and every allegation contained therein.

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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 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 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 Complaint, and on that basis denies each
and every allegation contained therein.
ALLEGED INFRINGEMENT OF U.S. PATENT NO. 7,222,078 B2
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 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 Patent”), which
issued on May 22, 2007 and is titled “Methods and Systems for Gathering Information from
Units of a Commodity Across a Network.”
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 Complaint, and on that basis denies each
and every allegation contained therein.
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 Complaint, and on that basis denies each
and every allegation contained therein.

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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 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 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 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 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 Complaint, and on that basis denies each
and every allegation contained therein.
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 Complaint, and on that basis denies each
and every allegation contained therein.
JURY DEMAND
41.

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

42.

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 complaint and without assuming
any burden it would not otherwise have, alleges the following affirmative defense:
License/Exhaustion of Patent Rights and First Sale
43.

Apple realleges and incorporates herein by reference the matters set forth

in paragraphs 1-42 above.
44.

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.
45.

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
46.

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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47.

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
48.

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.
49.

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.
50.

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
51.

Apple realleges and incorporates herein by reference the matters set forth

in paragraphs 1-50 above.
52.

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.
53.

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.
54.

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
55.

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 complaint, (ii) that Lodsys’s 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.

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Dated: June 9, 2011

Respectfully submitted,

By _/s/ Eric H. Findlay____________________
Eric H. Findlay
State Bar No. 00789886
FINDLAY CRAFT, LLP
6760 Old Jacksonville Hwy
Suite 101
Tyler, TX 75703
903/534-1100
903/534-1137 Facsimile
[e-mail]
GEORGE M. NEWCOMBE
[e-mail]
JONATHAN C. SANDERS
[e-mail]
SIMPSON THACHER & BARTLETT LLP
2550 Hanover Street
Palo Alto, California 94304
Telephone: [phone]
Facsimile: [phone]
Attorneys for Intervenor
APPLE INC.

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