“All that is necessary for evil to triumph is for good men to do nothing.” — Edmund Burke.It’s obvious now that the software patent system is a huge innovation tax.
So-called patent trolls are really a mafia, taking extortion money from the actual innovators in our society.
But fear not. There’s an easy way to beat the patent trolls.
Betabeat spoke to a few patent victims, like New York startup Oddcast, and Betaworks founder John Borthwick (back when he was the CEO of startup Fotolog).
What all these have in common is that they settled with patent trolls.
VC-backed Oddcast, which makes online interactive avatars, got sued by a company that makes unrelated software with a bogus patents, so much so that insiders thought it was “a practical joke”, and yet settled “at the urging of their board members, lawyers and investors.”
Fotolog got sued right after their acquisition because the trolls knew that acquirers typically keep an amount of the acquisition in escrow for legal purposes, and settled because they didn’t want the headache.
Here’s the thing: like every bully, patent trolls rely on a culture of fear. If you refuse to pay them their money, they’ll go away.
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Patent trolls need easy and fast settlements. They rely on the fact that they’re a distraction and their victims will prefer to settle rather than stand up and fight. They also rely on settlements because once they have a settlement or licence related to one patent that makes the next one easier.
Once every patent lawsuit becomes a long, hard fight, their business model collapses. It relies on easy settlements. Once a credible deterrent is established–once everyone knows that when you sue a startup over a bogus patent, you’re in for a real fight–most of these guys go away.
Most of these patents are worthless and wouldn’t hold up in court, and yet startups pay because they don’t want the expense and the headache. And the answer isn’t going to come from Congress, which can’t do anything about it.
But here’s the thing: patent trolls go after pots of money. Most of the startups they go after are either venture-backed or profitable. Sometimes they go after three guys in a garage, but that’s not the biggest case. (Even Lodsys, which is threatening to sue all iPhone developers, is probably really going after Apple’s money.)
Every venture-backed startup needs to make a credible, public statement now: we will fight every patent troll case, to the Supreme Court if we have to.
Every venture capitalist needs to make a credible, public statement: we will finance our portfolio companies’ cases against patent trolls. We recognise that it’s going to be a long, hard slog. We’re going to burn tons of money at first. But spending money upfront for the chance of a better world is our job. And it’s the right thing to do.
A VC advising a startup to settle a patent troll lawsuit should be considered a shameful thing like using a liquidation to wipe out common shareholders, not a “cost of doing business.”
VCs: how much of your AUM would you pay if it meant none of your portfolio companies would have to deal with patent trolls, ever again? 5%? 10%?
Imagine if all tech VCs or an industry body like the NVCA would get together, hold a press conference, and say: “We hereby commit that every time one of our portfolio companies is named a defendent in what we consider to be a frivolous patent lawsuit, we will advise our companies to fight the suit all the way and will finance the suit.”
It would be like dropping a neutron bomb on patent troll central.
And it could really end faster than you imagine: the Supreme Court has actually said that mathematical algorithms–i.e. software–are not patentable! But because the decision is old, lower courts don’t enforce it. So taking a patent case all the way could really end the whole software patent mess once and for all.
We realise that what we’re asking is hard.
Fighting a frivolous lawsuit is hard. It’s a drain on resources. Perhaps worse, it’s a psychological drain. It’s a strong commitment. That’s why it’s effective.
No one ever said a startup was easy. Finding an office is hard. Recruiting people is hard. Wrangling investors is hard. Growing a company is hard.
Y Combinator founder Paul Graham once said “running a startup is like getting punched in the face repeatedly.” Well, it’s time to punch back.
It would solve the problem over the long run. And it’s the right thing to do.
(Note: we don’t want to single out Oddcast and Fotolog for giving in to a patent troll. The reason why what we’re asking is so hard is precisely because doing the opposite can seem so rational at the time. And getting people to talk about patent troll lawsuits specifically, rather than in the abstract, is both so hard and so important. Talking to reporters about that took courage. But their story seems emblematic of what happens right now, and how the system can be fixed.)
Here’s some inspiration:
300 – This Is Sparta!
Get More: 300 – This Is Sparta!