Kevin O’ Connor, the founder of DoubleClick, which sold to Google for $US3.1 billion is putting that money to use.
Since selling DoubleClick, O’Connor founded a startup called FindTheBest. FindTheBest aims to help consumers discover and learn about the best electronics products out there.
But the company is currently being sued by a so-called patent “troll” regarding a patent that, O’Connor says, they are not infringing upon. The patent in question covers a “system and method for facilitating bilateral and multilateral decision-making.” In order to battle the “troll,” O’Connor has pledged $US1 million of his own money to fight it out in court.
Startups are easy targets for predatory patent “trolls.” Their sole purpose is to go after companies with hardly any assets, and expect no one to respond.
Patent “trolls” are estimated to cost U.S. companies nearly $US30 billion a year in “direct costs,” according to a 2012 study from the Boston University School of Law.
The way these patent cases typically work is that startups are forced to settle outside of court. That’s because it’s very expensive to fight these things in court, and could end up costing hundreds of thousands, if not millions of dollars.
That’s why a lot of startups may end up settling outside of court, pay a smaller fee, and hope that’s the end of it.
But that’s not the case with O’Connor and FindTheBest.
These “trolls” expect companies to just roll over, O’Connor says. But when they fight back, the tables get turned. The next thing the patent “trolls” know, O’Connor says, they’re the ones shelling out more money than they ever imagined.
“I’ve been in this industry for 30 years,” O’Connor says. “Ideas are cheap. That’s not where the value is in tech. Turning it into a company or into a product, that’s how you create value.”
In fact, O’Connor believes the patent system should be eliminated altogether, at least in the software and hardware worlds.
O’Connor remembers the days when you simply used patents as a defence. But patents have since turned into an offence, combative tool.
“It’s become a big scam,” O’Connor says. “It’s destroying the Internet. It’s become nuclear.”
Today, the patent office issues over 200,000 patents per year. These are essentially laws that businesses have to abide by. In the last couple of years, the number of patents issued per year have continuously hit all-time records. In 2006, the number of patents issued was 173,000.
Business Insider is still waiting to hear back from Eileen C. Shapiro and Steven Mintz, the co-inventors of the patent. We got in touch with Damian Wasserbaur, an attorney from Aeton Law Partners LLP whom is representing the firm that served FindTheBest with the lawsuit, but he declined to comment.
A couple of years back, a shell company called Gooseberry Natural Resources sued a bunch of companies, including Reddit, Fark, Digg, Delicious, Slashdot, and TechCrunch. The lawsuit claimed those companies were violating a patent around a system for generating news or press releases online.
Yahoo and Conde Nast ended up settling. But Fark founder Drew Curtis wanted to fight. And he won.
But what’s crazy about the whole situation is that Curtis was sued by so-called “trolls” regarding a different by the same co-inventors, Eileen Shapiro and Steven Mintz.
“The conventional wisdom is to pay these guys because you’ll [a startup] will save money,” Curtis tells Business Insider. “But if you do the exact opposite, you will end up with a much better outcome.”
If you look at the startups that have battled patent “trolls,” Curtis says, they don’t get sued anymore.
That’s why Curtis has advised O’Connor and his team to fight back. The basic business model behind these “trolls” is to send a letter to a startup, startup writes them a check, and then they cash it.
A lot of these lawyers work on contingency, Curtis says, so the more time they have to put in, the less worth it, and more expensive the lawsuit becomes for them. They only get paid if they win, so they want to win fast.
“It’s one level above child molesting,” Curtis says.
Of course, not every startup has the means to commit $US1 million to fighting patent “trolls,” as in the case of O’Connor.
But if startups can at least make it to discovery, Curtis says, the “trolls” will likely back off because that’s when it gets really expensive for them.
Business Insider will continue to follow this story as it develops.