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Are iPhone App Developers Unionizing?

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This is a critical month for Apple (AAPL) and Google (GOOG), who will each hold their annual developer conferences -- Apple's WWDC and Google I/O. There’s a lot of green to be made in the app development­ game. For some, like Rovio, who’s recently launched Angry Birds Space hit 10 million downloads in three days, business is booming. For smaller developers, however, cries of harsh times and unfair practices abound.

According to, app cloning has blossomed into something of an "endemic" recently, and the fallout of a controversial patent lawsuit has sparked a petition from the App Developers Union, which appears to be the beginnings of a grassroots movement.

App development can be a costly pursuit. Software engineers can take upwards of six months to develop a single app, and spend at least $10,000, although higher-end apps can cost hundreds of thousands of dollars to build. With only 1% of developers making it to the App Store homepage, revenue can be a challenge to come by. One way to cut costs is by "lifting" software designed by Apple -- or app cloning -- which can be as simple as copying Apple’s in-app purchasing algorithm.

App developers who’ve done this much have recently been slapped with a .575% revenue fee. That’s on top of the $99 Apple charges its 248,000 US registered iOS developers per year, and the 30% charge for revenue from the 657,575 apps currently being sold. The trick is the fee isn’t coming from Apple.

It’s coming from Lodsys Group, LLC.

Lodsys is a patent troll -- a company that purchases existing patents and sues those who infringe them -- which acquired a number of Apple patents from another patent troll, the more widely recognized Intellectual Ventures. Adding to the controversy and confusion: Apple is a backer of Intellectual Ventures, along with Amazon (AMZN), Cisco (CSCO), eBay (EBAY), Nokia (NOK), Sony (SNE), Yahoo (YHOO), Microsoft (MSFT), and Google.

Outrage over Lodsys slapping developers with patent infringement charges has culminated in the App Developers Union, which is less of a union and more of a petition. The following is a call to action posted on their website, which dually seeks to put an end to cloning practices -- a win for Apple -- and protect app developers from patent trolls like Lodsys.

From the website:

Beyond this, not much more has been heard from the App Developers Union. Likely they’re having trouble getting off the ground, especially after a number of Android developers tried the same thing last year and didn’t get far. Additionally, the US doesn't have too many trade organizations in the information technology field.

The surprising spin on the issue is that Apple is backing its software developers, regardless of the fact they’ve infringed on Apple patents. Last July, Apple filed a motion asking court permission to intervene in lawsuits filed by Lodsys against iOS developers. About two months ago, a judge finally granted Apple allowance to intervene, although with some restrictions.
POSITION:  No positions in stocks mentioned.