A patent lawsuit can be a deathblow to a startup – whether a patent troll or legitimate issue to be adjudicated, the cost is not only crippling but the uncertainty of outcome makes their business nearly unfundable to outside investors. Ditto finds themselves subject to two lawsuits – one is clearly a patent troll, the other more complex – but whether they’re in the right or not, it puts them in a very tough position. That’s why they’ve taken to Indiegogo to crowdfund help.
IANAL but I did participate in several lawsuits during my time at Google, including the 2012 notable ruling against Eolas for an “interactive web.” It was such a bullshit patent but many companies – even large ones – just chose to pay the shakedown fee, err license, instead of fight because of the cost and risk in pursuing litigation. Google went to the mat and put lots of time and resources into fighting. Thank goodness they did. One less parasite. But startups can’t afford to do this and are left often with no choice other than close up shop or settle out of court.
What are some ways that startups can deal with this risk while we as an industry work for patent reform? Could you purchase insurance against IP lawsuits? Should large VC firms signal they will protect their startups by helping to chip in money to fight frivolous lawsuits? First Round Capital backed a lawsuit to prove a point. I don’t know if there’s an easy or obvious answer but feels like an industry solution would be better than leaving companies to one-off fight on their own.
Update via former colleague, and now Pinterest legal eagle Mike Yang: Not endorsing them one way or another, but RPX Corp. offers a specific insurance product for patent trolls