As of October 8, 2012, there are greater than 150 companies which obtained the rights to use the Lodsys Group patent portfolio, and more than 4 out of 5 of these companies have entered into licenses outside of the litigation process. These companies have realized significant savings by taking advantage of lower licensing rates.

The “significant savings” of paying for a license over continuing to pay the costs of an extensive legal battle is, as my colleague Jeff Roberts has put it, an offer many of these small companies can’t refuse. The licensing fee is rumored to be around 2.5 percent of revenues.

Apple stepped into the dispute last year, claiming that its own licensing of the technology from Lodsys protects its developers from having to do the same. Lodsys disagrees with that position and says that it will continue to move forward even as Apple has joined the fight.

In a separate blog post Monday, Lodsys wrote that it has ”every confidence that all claims will ultimately be confirmed through this lengthy process.”

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A Russian hacker has posted a YouTube video and accompanying instructions on how to get around having to pay for in-app purchase content in iOS apps. 9to5Mac found the video and posted a report on Friday.

The hacker, who doesn’t identify himself — but whose YouTube username is ZonD80 — says there’s no jailbreak involved. Instead, he’s done it by installing two certificates and changing the phone’s Wi-Fi settings. In the demonstration he’s using iOS 6 (the beta version) and an iPhone 4S.

9to5Mac tried his method and said it works for some apps, but not all. The video had at the time of this writing racked up fewer than 350 views, so it’s not clear that many people know about it or have even had much success with it. He also admits that the project is in its “early stages,” and he is (naturally) asking for money to keep the development going.

This will be alarming for app makers that the paywall for additional content within their apps can be circumvented, especially for those who rely on in-app purchases to make a little profit on their apps. Statistics from early 2012 indicate that almost 70 percent of the top-grossing apps on the App Store relied on in-app purchases by users.

Obviously it should be concerning to Apple as well, which is only a week removed from dealing with an App Store issue of its own making.

Apple is looking into it but doesn’t have a solution just yet. “The security of the App Store is incredibly important to us and the developer community. We take reports of fraudulent activity very seriously and we are investigating,” said Apple spokeswoman Natalie Harrison on Friday.

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The report, from its IHS Screen Digest division, notes that in-app purchases accounted for about 39 percent of app revenues in 2011, and it predicts that in 2012 that proportion has gone up to 49 percent. By 2015 it will account for 64 percent of all revenues.

In terms of actual value, IHS says that in-app payments were worth $970 million in 2011, and will be worth $5.6 billion in 2015. (Sound too big to you? Please comment below.)

Update: More on why those revenues will be so big. Ian Fogg, head of mobile for IHS Screen Digest, pointed out to paidContent in an email that the $5.6-billion figure “is driven by the vast numbers of new smartphones that will ship over the next few years. As the number of smart devices is so great, the app market revenues will grow greatly, and hence so will the in-app revenues.” He also noted that many pay-to-download apps also feature in-app purchasing options; that will additionally contribute to the total size of in-app revenues. [original article continues]

This represents a big opportunity for app store operators like Apple (NSDQ: AAPL) and Google (NSDQ: GOOG), as well as mobile payments companies like Boku, Zong and PayPal to manage these payments.

And it also represents something of a success, too, considering how much opposition there was to in-app billing when it was first launched by Apple with requirements to pay it 30 percent of each transaction.

“Apple has nailed the mobile gaming and mobile app payment business,” noted Wilhelm Taht, marketing director for mobile social media service Flowd, earlier today. “It’s super frictionless.”

Strangely, the report does not take account of mobile advertising as a route to making money from an app. That could be because the only apps that can actually make any significant money from advertising are those that get the very highest amount of traffic — other long-tail apps that lack scale will face a challenge in trying to use advertising as their main business model.

Today, free apps already have significantly more traffic than paid apps: Nielsen last week noted that consumers mainly use a mixture of these, or a free-only selection of apps; those who only opt for paid apps account for low, single-figure percentages in different categories (around two-three percent). Ironically, paid apps today remain the main way that many of the most successful apps (such as games) are making money.

Free-to-download apps that come with in-app purchasing — so-called “freemium” apps — represented 45 percent of all top-grossing iPhone apps, and 31 percent of the highest-earning Android apps in the U.S.

IHS Screen Digest estimates that some 68 percent of all top-grossing apps had at least some form of “additional content or functionality” available through in-app purchase, which could mean features like extra levels in games, virtual currency to continue playing or extra editions of a publication.

Virtual currency, it says, is the most common form of in-app paid content available today, accounting for 63 percent of all revenues made from in-app purchases.

But while we hear a lot about newspapers and magazines, and increasingly video-based apps looking to in-app payments as a way of getting their users to buy mobile content, overall, this represents a very small part of revenues today: in the UK in Q3 2011, publications accounted for only five percent of in-app payment revenues (no figures for the U.S.), while video accounted for only two percent of in-app revenues in the U.S. and none in the UK.

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Zuora, which was founded four years ago, focuses on services around what it calls the “subscription economy,” managing subscriptions to content and the billing behind it. Direct customers include News International, Reed Business Information, Qualcomm (NSDQ: QCOM), TripAdvisor, VNU Media, Ning, Ooyala, and Ustream, among others.

When Apple (NSDQ: AAPL) began to lay out the terms of its in-app subscription model for publishers on its iOS platform, Zuora’s CEO and founder, Tien Tzuo (pictured), was outspoken about Apple being potentially too powerful in dictating the terms of how the subscriptions would work, and how much publishers would get paid as a result.

Of course some of that could have been down to Zuora safeguarding its own place in the value chain, but from the looks of it, it would seem that both have been benefiting from the rise in subscription-based services.

Zuora said in a news release that it would be using the new funds to expand internationally as well as to launch new products.

Most immediately, Zuora is establishing new offices in the Netherlands, Germany, France and Ireland, and notes that it already has €2 billion ($2.7 billion) in subscription contract revenues in the EMEA region.

Leading this current Series D round was Index Ventures, along with investment from Greylock Partners, and a “personal investment” from Dave Duffield, founder and co-CEO, Workday. As part of the deal, Mike Volpi, a partner at Index and a tech industry veteran, will join the Zuora board of directors.

Existing investors include Benchmark Capital, Redpoint Ventures, Shasta Ventures, Tenaya Capital and Marc Benioff, chairman and CEO, salesforce.com also participated. Today’s funding round takes the total raised by Zuora to $82.5 million.

The company currently employs around 200 people.

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In-app purchases are on the rise as a revenue-getter for all apps, but the freemium model in particular is growing fast. Free app downloads have increased by 34 percent since 2010, while paid downloads grew at a much slower rate, climbing only 7 percent during the past year. Distimo’s research methodology only covers the top 200 downloads in each App Store category, but that’s a very strong representative selection of who’s actually making money through Apple’s mobile software marketplace.

Free apps with in-app purchases made up 48 percent of total App Store revenue according to Distimo, while paid apps with in-app purchases accounted for 24 percent and the remaining 28 percent came from paid-only apps. Freemium games make up a healthy portion of the top grossing apps on both the iPhone and iPad App Stores, and in July Flurry found that they accounted for 65 percent of the top 100 grossing games in the U.S. App Store.

Games aren’t the only apps that offer a free download backed by in-app purchases for a revenue model, however. Comics apps recently made waves, especially in the iPad App Store, thanks to DC’s decision to relaunch all of its titles starting at issue number one, and to make all its titles available on the same day in both print and via digital distribution. Magazine and periodical apps are another category that’s embracing the free initial download, pay for content later way of doing things.

This isn’t exactly the future I envisioned back in February when Apple took the lid off of in-app subscriptions, but it’s also not very far off. Essentially, it looks like more and more developers are embracing the idea that making recurring payments an attractive option for App Store shoppers is the key to coming up with a sustainable business model. Apple’s isn’t the only store where developers are figuring that out, either. In-app purchases are already in use by 68 percent of the 25 top grossing Android apps, despite only being introduced in March of this year.

At this rate, there may come a day when we don’t see a single straight paid app in the top 300 grossing list anymore. Is that a good thing, or would you miss the ability to pay just once for an app instead of having to top up or pay again in order to unlock a richer experience?

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Recently Flurry Analytics did some research on how much mobile gamers spend on and within Android and iOS games, the data showing that the average in-app purchase amounts to about $14 per transaction. On Tuesday Flurry gave a deeper dive into what those in-app transactions are for. Two-thirds of the items bought within an app are virtual goods that are consumable, as in they have no lasting value.

The firm looked at 57 million transactions and found the following:

The chart shows that over two-thirds of all items purchased in iOS and Android freemium games are consumable, goods that users deplete. Measured another way, approximately half of all real dollars spent within all apps are for game items consumers don’t keep.

That means, for instance, that most of the time people are buying fertilizer in a farm game or grenades in a war game as opposed to durable goods, such as a building or armor, which you don’t use up.

But the most popular consumable item people buy really shouldn’t be any surprise. It’s “premium” currency, which is usually a way to buy your way into advancing faster in a game. Game makers like it because it prevents players from abandoning games in frustration, but it also lines their pockets. Games that offer these consumable goods make a lot of money for developers, and they are “the best ROI” for game developers, according to Flurry.

For developers looking for the best investment, look no further than free games that offer virtual goods via in-app currency, according to Flurry.

 While the consumer is indeed purchasing virtual items that are most often consumable, what’s most important to understand is the psychology behind these games. In freemium games, consumers are experiencing compelling, immersive entertainment. They feel gratified when they progress, accomplish goals, create a unique world, and in some cases, show off to their friends. In exchange for this gratification, they are willing to spend real money, and lots of it.

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But ForeSee’s clients aren’t small app developers with limited means to defend against patent infringement claims and little choice but to agree to demands for licensing fees; they’re major companies with lots of capital and legal expertise at their disposal, including Adidas, Best Buy and WE Energies, and with this declaratory judgment filing, ForeSee has gone on the offensive against Lodsys on their behalf.

FOSSpatents’ Florian Mueller explains that a declaratory judgment, which doesn’t incur any penalties but is crucial to setting precedent, is a smart way to begin the process of potentially invalidating all of Lodsys’ patents. ForeSee filed suit in Illinois before Lodsys actually filed against any of its clients, too, which means that Lodsys doesn’t get to set the stage in the Eastern District of Texas, where the company has filed against iOS developers, and where the law favors the patent holder. Mueller also notes that McDermott Will & Emery, a “top-notch law firm that does a lot of work for major technologies” will be representing ForeSee. The law firm previously engineered a successful patent settlement for its client Creative Technology against Apple, in fact, resulting in a $100 million payday for Creative.

I asked Chicago tech and intellectual property attorney Evan Brown of Internet Cases what he thought about his filing, and he suggested that it could be a litmus test to see just how far Lodsys is willing to take this thing:

A declaratory judgment action like this gives Lodsys the chance to test its own resolve, whether it wanted to or not. We have to think that it considered the possibility of a declaratory judgment action (any reasonable party that sends a threatening letter should be ready for that risk). But given that Lodsys was generally targeting the smaller fish rather than Apple itself, one is left to think it may not have thought it through as much as it should have. Needless to say, Lodsys probably wishes things were going more smoothly for it, what with Apple’s swift and firm letter talking about patent exhaustion, and now this lawsuit. Maybe Lodsys might realize it’s better to actually use a technology rather than just sue others over it.

Apple’s response to Lodsys’ initial threats only prompted Lodsys to step up its timeframe and sue seven independent app developers ahead of schedule, and we’ve heard nothing from Cupertino on the subject since. But Craig Hockenberry, one of the developers behind Twitterific, tweeted just prior to WWDC that affected devs can’t talk about what’s going on, so presumably Apple is acting behind the scenes.

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The official Marvel Comics iPad app.

Magazine apps appear to be enjoying quite the bump thanks to the introduction of in-app subscriptions to select titles. Wired, for example, is the fifth top grossing app on the iPad App Store right now. It’s a model that seems to be bearing fruit, at least in the short-term, and one that comic book publishers should be watching closely.

Comic books are very well suited to the iPad. In fact, when I first bought an iPad, reading comics via apps like the aptly-named Comics, and the Marvel- and DC-branded offerings was something I did often. But with individual titles costing between $1 and $3 for about five to 10 minutes of enjoyment, it quickly became a habit too costly to keep up. And those prices are considerably cheaper than the ones you’ll find for print editions in comic book shops.

I’m not the only one who isn’t impressed by the value proposition offered by comic publishers. According to comics blog ICv2, comic book sales in 2010 were down 4.64 percent year-over-year. And early reports from this year are seeing drops, too: Newsarama reports that comic book sales were down 23 percent in January 2011 compared to the same period in 2010, and 24.45 percent compared to the month prior.

The trouble facing the comic book industry may not be getting the same coverage as the decline in print news and magazine readership, and Marvel and DC especially are making money at the box office and on merchandising that softens readership decline. But ultimately fewer readers is bad for business, even if that business has shifted from its origins.

The iPad is a great venue for comics. The screen’s resolution is good enough that full pages can be read by most without zooming, and the tablet form factor is much more conducive to reading comic books than is the notebook or desktop computer screen. And users are still responding positively to iPad comics apps, despite the current pricing structure. The Comics app I mentioned earlier is ranked 20th in the U.S. top grossing charts, and the Marvel Comics app is number 33. Even DC Comics is still in the top 100 — at number 60 — at the time of this article.

I asked independent comic creator Stephen Lindsay (who’s responsible for the awesome Jesus Hates Zombies series, among others) what the impact of digital subscriptions might be for the comics industry. Lindsay explained that “the comic industry really has three sets of consumer[s]: those inside the industry who buy comics to support one another, the casual reader, and the collector.” He said collectors don’t care about in-app subscriptions because “they always have, and always will, want the printed book” because the “ownership of it means something” [emphasis in the original]. However, casual readers are “much more ripe for adopting digital” thanks to the lower cost and therefore lower risk of buying on the iPad, according to Lindsay.

Lindsay says that especially for small-time creators, digital is especially good at “expand[ing] readership and reach[ing] the widest audience possible.” For example, Lindsay notes that “the first Jesus Hates Zombies app has had over 100,000 downloads in the Android marketplace,” which far outpaces its performance in print. Because of that, and because, as he says, “those in the industry who are supporting the industry itself will typically try anything if it’s going to further the cause,” in-app subscriptions stand a good chance of catching on with creators once the floodgates are open.

Subscriptions aren’t unusual in the comic book world. Generally speaking, they offer a discount of about half-off the cover price for individual issues. With print, that means that 12 issues a year that would normally cost about $50 end up being around $25. In-app subscriptions that offer a similar percentage discount with new content (same-day releases are rare for iPad comics) would likely net a significant uptake in readership rates.

Offering comics on low-cost subscription plans makes even more sense if you think that the primary focus of major publishers has shifted to Hollywood and other media like television and video games. Comic books are the ground upon which those franchises are built, and getting them in front of more readers will only lead to bigger audiences for cross-media products.

Comic books and iPads are made for each other. But in-app subscriptions would make that fairytale romance even better for all parties involved.

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