Patent litigation vs. software startups

by Walter Olson on March 4, 2012

Bad enough to be an established software firm and get hit with lawsuits from competitors or patent trolls. But even companies at the early startup stage now face legal attack, and patent law (unlike copyright) assigns liability even if there has been no knowing act of imitation or appropriation, which complicates the task of defense. “Merely asking a patent lawyer to evaluate the case and advise a company on whether it was guilty of infringement could cost a firm tens of thousands of dollars. And a full-blown patent lawsuit could easily carry a price tag in the millions of dollars, with no guarantee of recovering attorney’s fees even if the defendant prevailed.” In practice, some firms like Microsoft whose portfolios amount to “patent thickets” can establish themselves as gatekeepers to the industry. [Timothy Lee, Slate]

And: “New Patent Regs May Inspire More Litigation, Not Less” [Daniel Fisher, Forbes]

{ 3 comments }

1 Dale B. Halling 03.04.12 at 9:20 pm

Due Diligence
Here is the question that never seems to get asked any more: Did the software developers even do a preliminary patent clearance search? It easy for people who are computer literate to do a quick search of the patent database with today’s tools to see if they are likely to infringe any patents.
If you were going to build a garage, a shed, a building, etc., you would first undertake a simple search to determine if I owned the land on which this structure was going to be built. This is just basic common sense. Why do we constantly excuse patent infringers for failing to do the simplest due diligence before they undertake building their products? A simple clearance search makes good business sense. It ensures that the company is not reinventing the wheel, it is good competitive market information, and it makes sure that you are not going to be sued for building on someone else’s property. Patent clearance searches are just good, basic business practices that too many lazy businesses fail to perform.
In addition, the actual license fees being asked are very small according to what I have heard.

2 Robin 03.05.12 at 12:24 pm

Dale,
Your premise is incorrect. It is not easy to do a patent search to establish whether your work would violate any claim of a patent. Software patents normally involve a large number of claims. In addition, software patents have been handed out like candy at Halloween. Many are IMO completely invalid due to prior art. Many individual claims are also often common industry practice.

I have worked as a software engineer for many years and at one (large) company, the legal dept instructions were for engineers to never read patents. Their logic: to do so could mean that any violation was a knowing violation and thus quadruple damages would be due.

The entire patent system has been destroyed by allowing patents for concepts rather than physical machines. Companies now acquire patents as defensive mechanisms against patent infringement rather than protection of inventions. In other words, the purpose of the system is completely inverted. I’ll leave it to you to imagine the beneficiaries of the current mess.

3 Patrick 03.06.12 at 11:17 am

I would like to hear some verifiable stories about viable startups that were put out of business by these so-called patent trolls. My law firm previously specialized in litigation from from investor-owners, whose goal it was to generate a return by licensing an acquired IP portfolio (or an interest therein)… in other words, the type of patent owner often typified as a troll.

My clients interests were never in putting a company out of business, because there’s no money to be made that way. Sure, a large, established company might want to stamp out a startup for strategic reasons, but let’s not confuse that with patent owners whose goal it is to obtain a return specifically on what’s been invested into the IP.

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