A growing number of technology startups are being threatened with lawsuits over broad patents they allegedly, and inadvertently, infringed.
The founders of three small startups went to Washington DC this week to lobby members of the United States Congress to change the patent system.
“This is the single worst thing to happen to me since I started the company,” says one of the CEOs, the founder of a five-person e-commerce startup that was targeted by a firm he calls a patent troll. He is so concerned about retaliation from that firm that he asked that his name not be used for this story.
He says that being targeted by a patent lawsuit is worse than times he’s lost clients or run out of money. It’s even worse than having to do without a salary for the last year. He admits he’s fortunate that his wife has a steady job that allows them to support their children. But the possibility that a patent lawsuit he regards as frivolous could destroy his company keeps him up at night.
The firm has raised about a million dollars from investors. The CEO says that after paying his employees’ salaries, his top expense is legal bills. And the vast majority of those legal costs relate to a single patent lawsuit.
The entrepreneur says he didn’t copy the plaintiff’s technology; indeed he’d never heard of the firm until it started making legal threats. He describes the patents he is accused of infringing as extraordinarily broad. The complaint claims the firm infringed one of the plaintiff’s patents by using a wireless device, a database and a website to synchronize data and perform common e-commerce functions-things that hundreds of web startups do. “Anyone is at risk for that,” he says. “And it never gets more specific.”
We had this occur in NZ many years ago. DET, a Canadian firm, wrote to scores of NZ companies demanding they pay them licensing fees as they had a broad NZ patent for e-commerce systems that are multi-transactional and multi-language and multi-currency. Yes, it was that broad.
We got it disqualified on a technicality – they had mixed some dates up. But if not for that, then it could have been an even bigger threat to NZ companies online.
Thank goodness the NZ Government and Parliament has agreed to exclude software from being patentable. Software should be protected by copyright over code, but patents are far too broad a tool for protection with software as inevitably all software builds on what is already out there.