Clarity of NPE Lodsys’ business plan revealed in suit with Kaspersky Labs

Lodsys is a nonpracticing entity (NPE) with a business plan to buy technology patents that impact mobile app developers and go after potential infringers in court. The idea is that most of the app developers the company pursues will not have the wherewithal to engage in a court battle (patent infringement defenses can cost $1M and up). The revenue stream comes from settlements, and thus the value of the technology patents is dependent upon settlements.

That established, what happens to the value of the patents held by Lodys if firms being sued do not settle the lawsuits? Lodsys sued security firm Kaspersky Labs (and dozens more) for infringing on patent claims related to in-app purchases. Kaspersky decided to litigate, and the nature of the Lodsys business plan was laid bare for all to see.  Rather than risk the value of the patents at issue, on the eve of their trial, Lodsys withdrew. The judge in the case dismissed the case with prejudice, meaning it cannot be brought again. The judge further ordered that each side pay its own legal fees.