When Startups Need More Lawyers Than Employees, The Patent System Isn't Working

from the do-the-math dept

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We've talked a lot about the tax on innovation that patent trolls create, which is well-known inside startup circles but often misunderstood by the broader public, thanks to the pro-innovation rhetoric of high-profile trolls like Intellectual Ventures. The conversation is getting more attention lately, especially with the recent news of Senator Schumer's patent reform bill which specifically aims to fight the patent troll problem, and this interview with an anonymous developer from a tech startup offers some perspective from someone who is directly affected by the issue.

The FBI-style anonymization might seem a little extreme, but ultimately it is making a legitimate point: not only do patent trolls pile on to successful startups, they can also be vindictive towards those who criticize them. The developer describes the snowball effect that patent lawsuits can have:

Even if you fight, and you win, you still put a big bullseye on your back that other patent trolls can look for, because suddenly you're on their radar and they think maybe you're wounded and don't have any more resources to fight.

The developer's story is familiar. Once a startup crosses a certain threshold of success, the licensing demands start pouring in, followed by the lawsuit threats, followed by the tough choice between settling and fighting. And, of course, these are the kinds of patents that describe broad concepts without actually solving any problems, held by non-practicing entities who develop no products:

We are now being sued by two of them for patents that are as broad as using a website to talk to a server, which is just the building blocks of the internet, to making a font legible on a mobile device. Just basic stuff, and it's been hugely disruptive to our business.

One of the biggest problems with the patent troll situation is that it's self-perpetuating. Startups are often forced to get defensive patents which, even if they never use them offensively to block innovation, just add to the ever-growing thicket and often eventually fall into the hands of trolls anyway when startups close or get bought and patents get shifted around. In this case, kudos to the developer for refusing to let that happen:

We've decided that rather than invest our scarce resources in patents, which have questionable protective value, we've just decided to invest in growing the business the best we can. Frankly these days it seems like it's more about having enough money to defend yourselves than it is about having defensible patents.

Still, what's the offshoot of all that? This particular startup has five employees (you know, the people actually working on solving problems and delivering products) but requires the services of six lawyers focused on patent issues. That alone makes a pretty good case that the system isn't working.

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This post is sponsored by the Application Developers Alliance . Find more info on patents and other issues that affect developers at DevsBuild.It

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