Startups and Patents

Fri 19 July 2013

tags: legal

This should be a pretty familiar story to anyone in high tech by now. Startup makes something cool, becomes a target for patent litigation from what we used to call an NPE (Non Practicing Entity). Apparently the new term is PAE (Patent Assertion Entity) but I prefer an even more concise term: troll. There is much predictable moaning and gnashing of teeth on Hacker News, of course, but nobody wants to think about a very simple question.

Where does all this ammunition come from?

(BTW, I know nobody on HN wants to think about this because I've raised the issue before and I got slammed hard for the effort. That's why I'm posting here this time. Can't censor this, you fucking cowards.)

Having worked at a dozen or so startups myself, I know exactly where the ammunition comes from: the looted carcasses of earlier startups. While I've never had one of my own patents abused this way, I have half a dozen friends who have been through that and it's always the same story.

  1. Friend works at a startup.

  2. Investors apply pressure to file for patents, either as a bargaining chip in any subsequent acquisition or possibly as a hedge against failure.

  3. Friend gets named on a patent or ten.

  4. The startup does in fact fail or get acquired.

  5. Patents get sold, and sold again, until eventually they end up in the hands of a troll.

  6. Troll asserts patent.

  7. Friend is livid about how their creative work, their contribution to the state of the art, is being abused.

  8. Friend's feelings have no effect whatsoever on the litigation.

In other words, if you work at a startup that files patents, and you're not taking steps to put them firmly out of reach of the trolls, then you're part of the problem. If you're an investor and you're allowing portfolio companies to file patents without such protection, then you're part of the problem too. Yeah, I know, some VCs claim they discourage such things, but somehow I'm less than convinced when I can go to USPTO or Google Patents or PatentStorm and immediately pull up a list of patents filed by companies that somehow overcame that discouragement without any ill consequence. I'm shocked - shocked! - to hear that patents are going on here. Your winnings, sir.

Until we get serious patent reform, which is going to take a while, patents are still necessary to establish precedence. That keeps trolls from acquiring patents to the same idea and then pursuing others - possibly including the people who truly had the idea first and based products on it. Don't let your oh-so-principled distaste for patents overcome common sense and keep you from protecting doing your part to protect everyone including yourself. The key is to ensure that the patents are only usable in a defensive fashion. One approach is to turn them over to something like the Open Invention Network. Another approach is the Innovator's Patent Agreement from Twitter. That at least avoids the scenario I lay out above, though a down-on-their-luck former developer might not offer much restraint when push comes to shove. There are other approaches as well, but the sad fact is that most people who file patents - including those who complain about others' patents - are doing absolutely nothing to ensure that their own work won't be turned against them and their community. That's a disgrace. Developers and founders, disagree with me all you want about what it is we should do, but do something besides complain.

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