BY EMAIL AND FIRST-CLASS MAIL

May 23, 2011

Mark Small
Chief Executive Officer
Lodsys, LLC
[Address information removed]

Dear Mr. Small:

I write to you on behalf of Apple Inc. (“Apple”) regarding your recent notice letters to application developers (“App Makers”) alleging infringement of certain patents through the App Makers’ use of Apple products and services for the marketing, sale, and delivery of applications (or “Apps”). Apple is undisputedly licensed to these patent and the Apple App Makers are protected by that license. There is no basis for Lodsys’ infringement allegations against Apple’s App Makers. Apple intends to share this letter and the information set out herein with its App Makers and is fully prepared to defend Apple’s license rights.

Because I believe that your letters are based on a fundamental misapprehension regarding Apple’s license and the way Apple’s products work, I expect that the additional information set out below will be sufficient for you to withdraw your outstanding threats to the App Makers and cease and desist from any further threats to Apple’s customers and partners.

First, Apple is licensed to all four of the patents in the Lodsys portfolio. As Lodsys itself advertises on its website, “Apple is licensed for its nameplate products and services.” See http://www.lodsys.com/blog.html (emphasis in original). Under its license, Apple is entitled to offer these licensed products and services to its customers and business partners, who, in turn, have the right to use them.

Second, while we are not privy to all of Lodsys’s infringement contentions because you have chosen to send letters to Apple’s App Makers rather than to Apple itself, our understanding based on the letters we have reviewed is that Lodsys’s infringement allegations against Apple’s App Makers rest on Apple products and services covered by the license. These Apple products and services are offered by Apple to the App Makers to enable them to interact with the users of Apple products—such as the iPad, iPhone, iPod touch and the Apple iOS operating system—through the use or Apple’s App Store, Apple Software Development Kits, and Apple Application Program Interfaces (“APIs”) and Apple servers and other hardware.

The illustrative infringement theory articulated by Lodsys in the letters we have reviewed under Claim 1 of U.S. Patent No. 7,222,078 is based on App Makers’ use of such licensed Apple products and services. Claim 1 claims a user interface that allows two-way local interaction with the user and elicits user feedback. Under your reading of the claim as set out in your letters, the allegedly infringing acts require the use of Apple APIs to provide two-way communication, the transmission of an Apple ID and other services to permit access for the user to the App store, and the use of Apple’s hardware, iOS, and servers.

Claim 1 also claims a memory that stores the results of the user interaction and a communication element to carry those results to a central location. Once again, Apple provides, under the infringement theories set out in your letters, the physical memory in which user feedback is stored and, just as importantly, the APIs that allow transmission of that user feedback to and from the App Store, over an Apple server, using Apple hardware and software. Indeed, in the notice letters to App Makers that we have been privy to, Lodsys itself relies on screenshots of the App Store to purportedly meet this claim element.

Finally, claim 1 claims a component that manages the results from different users and collects those results at the central location. As above, in the notice letters we have seen, Lodsys uses screenshots that expressly identify the App Store as the entity that purportedly collects and manages the results of these user interactions at a central location.

Thus, the technology that is targeted in your notice letters is technology that Apple is expressly licensed under the Lodsys patents to offer to Apple’s App Makers. These licensed products and services enable Apple’s App Makers to communicate with end users through the use of Apple’s own licensed hardware, software, APIs, memory, servers, and interfaces, including Apple’s App Store. Because Apple is licensed under Lodsys’ patents to offer such technology to its App Makers, the App Makers are entitled to use this technology free from any infringement claims by Lodsys.

Through its threatened infringement claims against users of Apple’s licensed technology, Lodsys is invoking patent law to control the post-sale use of these licensed products and methods. Because Lodsys’s threats are based on the purchase or use of Apple products and services licensed under the Agreement, and because those Apple products and services, under the reading articulated in your letters, entirely or substantially embody each of Lodsys’s patents, Lodsys’s threatened claims are barred by the doctrines of patent exhaustion and first sale. As the Supreme Court has made clear, “[t]he authorized sale of an article that substantially embodies a patent exhausts the patent holder’s rights and prevents the patent holder from invoking patent law to control postsale use of the article.” Quanta Computer, Inc. v. LG Elecs., Inc., 553 U.S. 617 (2008).

Therefore, Apple requests that Lodsys immediately withdraw all notice letters sent to Apple App Makers and cease its false assertions that the App Makers’ use of licensed Apple products and services in any way constitute infringement of any Lodsys patent.

Very truly yours,

Bruce Sewell
Senior Vice President & General Counsel
Apple Inc.

Nokia sued Apple in October 2009 and filed the complaint with the Commission in December. Apple said that Nokia’s motive is to force surrender access to proprietary technology that makes the iPhone different from other smartphones. Apple filed an International Trade Commission against HTC in March over patent infringement with a trial expected to start in February. Motorola filed an ITC complaint against Apple in October over the infringement of 18 patents and Apple responded by filing a case against Motorola claiming that the Droid is using some of Apple’s I.P. without permission.

Bruce Sewell joined Apple as the general counsel last year after leaving Intel, where he worked for 15 years. Before working at Intel, Sewell worked at Brown & Bain, where he had represented Apple in a copyright case against Microsoft. Other lawyers that Apple hired include Robert Krupka (Kirkland & Ellis), William Lee (Wilmerhale-Boston), and Matt Powers (Weil, Gotshal & Manges LLP).

Krupka helped Apple negotiate a settlement where Apple agreed to pay $100 million to Creative Technology. Lee represented Broadcom Corp. in a lawsuit against Qualcomm and won the case. Powers had successfully defended a patent on Merck & Co.’s biggest asthma drug product called Singular.

[BusinessWeek]

Gizmodo even received a legal letter from Apple asking for the device back. “Dear Mr. Lam, It has come to our attention that GIZMODO is currently in possession of a device that belongs to Apple. This letter constitutes a formal request that you return the device to Apple. Please let me know where to pick up the unit.” Signed by Bruce Sewell, SVP and General Counsel of Apple Inc.

Looks like there will be no surprises when the new iPhone is announced. It appears that Powell deleted any traces of finding him on the Internet now. His Facebook account is gone, Flickr account is gone, his Twitter account is gone, and so is his LinkedIn profile. But there are Facebook Pages being created that support Powell for losing the device. The I’m With Powell Facebook page says that 159 people like it and the Save Gray Powell page currently says 11 people like it [Facebook search on Gray Powell].

“Other companies must compete with us by inventing their own technologies, not just by stealing ours,” stated Apple General Counsel and SVP Bruce Sewell.

Below is the full response from Apple:

In 2007, Apple introduced the iPhone a ground-breaking device that allowed users access to the functionality of the already popular iPod on a revolutionary mobile phone and Internet device. The iPhone is a converged device that allows users to access and ever expanding set of software features to take and send pictures, play music, play games do research, serve as a GPS device and much more….The iPhone platform has caused a revolutionary change in the mobile phone category.

In contrast, Nokia made a different business decision and remained focused on traditional mobile wireless handsets with conventional user interfaces. As a result, Nokia has rapidly lost share in the market for high-end mobile phones. Nokia has admitted that, as a result of the iPhone launch, “the market changed suddenly and [Nokia was] not fast enough changing with it.

In response, Nokia chose to copy the iPhone, especially its enormously popular and patented design and user interface….

As Anssi Vanjoki, Nokia’s executive Vice President and General Manager of Multimedia, stated at Nokia’s GoPlay event in 2007 when asked about the similarities of Nokia’s new offerings to the already released iPhone: “[i]f there is something good in the world, we copy with pride.” True to this quote, Nokia has demonstrated its willingness to copy Apple’s iPhone ideas as well as Apple’s basic computing technologies, all while demanding Apple pay for access to Nokia’s purported standards essential patent. Apple seeks redress for this behavior.

Both Sewell and Gelsinger are joining other major corporation. EMC Corporation hired Gelsinger as the President and COO of information infrastructure products. Sewell is becoming the General Counsel and SVP of Apple Inc.

Since Intel’s CEO Paul Otellini is relatively new to the position, it was uncertain that Gelsinger would have a chance at becoming CEO of Intel. Gelsinger may have a better chance becoming CEO of EMC down the line. Suzan Miller, the Intel deputy general counsel will fill in for Sewell temporarily.

Daniel Cooperman, Apple’s General Counsel and SVP of Legal and Government Affairs is retiring at the end of September which opened up the position for Sewell. “We are thrilled to have Bruce join our executive team, and wish Dan a very happy retirement,” stated Apple CEO Steve Jobs in a press release. “With Bruce’s extensive experience in litigation, securities and intellectual property, we expect this to be a seamless transition.”