Watch CBSN Live

Apple Looks to Burn Google with 3rd Party In-App Purchase Patent [Update]

Google (GOOG) has widened Android's U.S. smartphone lead over Apple (APPL). In the quarter that ended in August, Android handsets had a 43.7 percent market share, according to comScore, versus 27.3 percent for the iPhone. And given that there's no iPhone 5, the lead could continue to extend.

Apple has spared no effort in trying to injure its arch mobile rival through the courts, like blocking Android vendors from important markets through patent and trademark infringement suits. Now it's developing an additional angle: an attempt to patent in-application purchases from third parties, as an application filed on April 26, 2010 and made public on Thursday made clear. Here's what the patent, if granted, would actually cover, and why the impact would be hard on Google.

The patent details
Patent application number 20110246290 is called In Application Purhasing. Typically, patent applications try to grab as much ground as they can get, but generally the inventors and lawyers have to construct their claims around what already exists. Rarely do you see wording as broadly stated as the first independent claim in this application:

A method comprising: presenting an application offering a product for purchase, the application being from a first entity; presenting a purchase interface overlaid the application, the purchase interface being from a second entity; and completing a sales transaction without navigating away from the application.
If this wording makes it into a granted patent, it would cover any application that offered an overlaid purchasing interface for a product or service from a company other than the one that owned the application. It wouldn't cover an application that, for example, integrated an ordering mechanism directly within it.

But when there's a third party involved, an overlay is fairly important to distinguish the two companies. (A pop-up box or other featured display would likely fall into the category.) Furthermore, some of the dependent clauses that extend this first one move it into the area of advertising:

The method of claim 1, wherein the application is an advertisement.
The method of claim 1, wherein the application is from an application server that targets applications to users.
The method of claim 1, wherein the purchase interface is for purchasing a product directly from an online store.
Trying to undercut Google's potential revenue
That's where this could, if granted, come crashing down on Google. Under Apple's definition, if Google served an ad that provided a way of buying a product, Google owns the ad and the advertiser or someone else owns the product. So, if the patent was granted, Google would have to get permission from Apple to do this.

That's not necessarily such a big deal in current search ads. But if an ad is in an Android app, it could be a problem. Google has made a fortune on ads. Although it continues to expand its financial base, the mechanism, in mobile as elsewhere, still runs on an ad framework.

Adding the ability for advertisers to sell their wares directly without pulling users away from everything else they're doing could be critical. That's true whether the delivery mechanism is an app, a browser, or an operating system. If Apple held the patent it seeks, it could achieve the following three goals:

  • directly attack Google by limiting its potential revenue,
  • prevent Android ad-supported apps from letting users directly purchase from advertisers without leaving the developer's app, and
  • encourage advertisers to choose Apple's ecosystem over Google's for greater freedom to do business.
Getting something like this intact through the patent office won't be a cakewalk, particularly with the advertisement-as-application angle. There are probably many examples of prior art in this area in ad-supported software and ads run by existing advertising networks and media companies. But, stranger things have happened at the U.S. Patent and Trademark Office.

[Update: It's come to my attention that some other sites miraculously came across a mention of this patent filing a full day after I wrote about it. Their take was, I think, largely off-base. This isn't about trying to come up with a counter to the Lodsys patent, as they claim. If the Lodsys patent is vulnerable to a challenge, then Apple could do that easily, even without getting into a lawsuit. If the Apple patent were granted, it would take some years and still wouldn't invalidate the Lodsys patent. Furthermore, what kind of real pressure could Apple bring to bear, given that Lodsys is a non-practicing entity, as they say, and doesn't have products or services that are vulnerable? Google still seems far more likely a target.]


Image: RGBStock user TACLUDA.
View CBS News In
CBS News App Open
Chrome browser logo Chrome Safari browser logo Safari Continue