14 ms·

PatentShield helps startups fight patent litigation in return for equity

196 points by shard 10y ago

anon374939 10y ago
Its always nice when the private sector figures out a way to solve a problem that should be solved by government, but government is incapable or unwilling to do so.
- khazhoux 10y ago
  It's a government-created problem, and ultimately must be solved by them also. It's ridiculous that companies have to resort to this.
- greglindahl 10y ago
  It doesn't solve the problem of getting sued by a troll -- what patent are you going to use to counter-sue a business that doesn't have any business?
  - pnw_hazor 10y ago
    There is some good news though. Recent court cases (Alice, etc.) are really cramping the trolls' style. Intellectual Ventures and the like are backing away from the troll model because their crappy software patents are getting invalidated in court left and right.
- DaiPlusPlus 10y ago
  This solution works, but it's far from ideal - the trade of equity for protection (or rather: access to their arsenal) could be unappealing to startups without much equity to hand-over in the first place - given a $1m lawsuit (which might cost $1m to defend against), or giving up $1m of equity for access to counter-suit weapons (with no guarantee of success - and also probably costing $1m to file anyway).
CalChris 10y ago
So basically you give up an unstated x% ahead of time for access to Google+Intertrust's portfolio. A few thoughts. First, this only provides access to the patent portfolio. It doesn't pay the (considerable) litigation bills. Second, this portfolio is already available. If Alice sues Bob, Bob can negotiate just in time with Intertrust or IBM or ... for access to a defensive/offensive portfolio. This acquisition of patents during litigation is common practice. Third, just as Intertrust is going to do their due diligence on you, you are taking a risk that their portfolio is a good match for your risk. You need to do your due diligence on them and on their portfolio. I might go for this, but it would be at a pretty low percentage, like less than a percent.
samaparicio 10y ago
A lot of startups get sued by Non Practicing Entities (trolls) that have no operating business to speak of. That provides the slimmest counterattack surface - so not sure how useful it is to have a portfolio to hit back. I think a better defense mechanism would be a legal defense fund that would force the trolls to make their case at trial, to go through discovery, to bring expert witnesses. Because the law firms that represent them work on contingency, this would effectively cut into the potential licensing fees, and make trolling less profitable (and less likely). Also, a lot of trolls extract patent licensing fees out of startups for patents that should have never been granted, and that deserve to be invalidated (e.g with prior art), but the process of getting a patent thrown out is expensive, so having a fund would greatly help. The other strategy that could work is to get all the startups that get sued by a troll for a specific infringement and make a sort of "reverse class action" - making it possible for the startups to re-use the same lines of argument, evidence, etc in their cases.
- jshmrsn 10y ago
  Let's say I pay into this fund, then I get sued for patent infringement. How does the fund decide whether this lawsuit is trolling or legitimate? Or would the fund pay for all patent lawsuits?
  - samaparicio 10y ago
    There are several ways of reaching a distributed consensus about that, like proof of stake. It is also conceivable that it would be in the fund's interest to defend all lawsuits. That would provide the largest deterrent, since the lion's share of today's suits are without merit, and the cost of defense would be considered the operating cost of the fund. What the trolls exploit is the assymetry between a defendant without resources and their own resources which are solely dedicated to this. Without all the licensing fees that startups pay to settle the alleged infringement the business model for trolls would stop working.
    - nl 10y ago
      That would provide the largest deterrent, since the lion's share of today's suits are without merit Doesn't this depend on what "without merit" means? It seems unlikely they are "without merit" in the legal sense, since then they would be thrown out at the first hearing. If you mean they are from patent trolls aka non-practicing entities, then it seems wrong too. I see coverage of tens of cases by NPEs per year, but the entire patent law-suite field must be much bigger than that. There are probably better sources than this PWC report[1], but it identifies 477 out of 2281 (ie, 21%) cases since 1996 in the districts where NPEs file cases involving NPEs. Their definition of NPE includes universities though, which I don't think is what people generally think of when they think of "patent trolls". If "without merit" means that they almost always lose, then this doesn't seem right either. The success rate for patent cases varies, but seems around 25-35%. That's far from "lion's share without merit" [1] https://www.pwc.com/us/en/forensic-services/publications/assets/2016-pwc-patent-litigation-study.pdf https://www.pwc.com/us/en/forensic-services/publications/ass...
jacquesm 10y ago
Google is taking a leaf out of the Mafia playbook here. Classy. Nice start-up you have there. Would be a shame if one of these pesky trolls sued you. But if you join our organization as a partner you will be protected.
- jezclaremurugan 10y ago
  I think there is a distinction here - the Mafia protects people from itself - but Google doesn't itself sue startups.
  - jacquesm 10y ago
    But the upside is similar: If nobody sues Google still has the equity and Google needs the trolls to stay around to make sure people will buy into this program.
    - caf 10y ago
      Sure, but that's exactly the case with commercial fire insurance versus actual protection rackets too.
      - jacquesm 10y ago
        Commercial fire insurance does not typically take equity in the places they insure.
        caf 10y ago
        Does payment in the form of equity rather than cash affect the incentives in a negative way? It's not enough to call out a distinction: how does it make a difference? If anything, the equity should mean that Google's incentives are more closely aligned with the startup's than the fire insurer's are with the insured.
        jacquesm 10y ago
dis-sys 10y ago
so.. patent laws are so broken that patent trolls are everywhere suing startups to get $ from them. google now has a business that can directly benefit from such increasing number of patent trolls. sounds not very inspiring to me. who is always on the losing side? average small companies. who is screwing the economy & innovation and show no sign of change? governments who refuse to actually reform such a 100+ years old broken system.
- DaiPlusPlus 10y ago
  This service is not for defending against non-practicing entities - but to defend against patent suits from large enterprises that the startups might be competing against (e.g. Microsoft, Facebook, Samsung, etc) - not that Microsoft et al. engage in that kind of warfare against small-fry, but it's plausible.
  - pnw_hazor 10y ago
    IBM, Microsoft, et al. certainly throw their patent portfolio weight at small companies when it suits them. For example, they may bring out their patents to force a lower valuation when acquiring companies.
- Tanegashima 10y ago
  The problem, is not the law, the problem is the bureau. They keep attributing patents that are obvious and meaningless.
  - icantdrive55 10y ago
    How about this: 1. Every US citizen, or entity(corporation) is allowed one free patent. (Most would never fill out the paperwork) 2. After the first patent, the fee goes to whatever it is now? Last I looked it was around $260 to $2500 if you do it all yourself. 3. People (corporations) are allowed twenty patents at the normal price. 4. That 21st patent goes up to 1 million. Then the next patent is based on minimum of 1 million, plus an exponential fee determined by company Market Value. I think, even Microsoft, would look at a 500 million patent fee closely? Actually, I wish all governmental fees/fines were based on income.
aanm1988 10y ago
Gonna go ahead and (once again) be the naysayer when it comes to google. This just makes google a very effective new form of patent troll.
partycoder 10y ago
Patent law needs reform. If you analyze the life of important inventors and innovators of the 20th century, there has always been some patent pain involved that is not in the interest of the "greater good". The reason America didn't have a significant air force for WW1 compared to other powers was in part due to the legal battles between Wright and Curtiss. The government intervened in the patent driven battle so planes could mass produced and used in the war effort. Then, the inventor of the TV (Farnsworth) got sued by radio manufacturers and could never actually profit from his creation. Then, many patents get extended for excessive periods of time to prevent things becoming public domain (e.g: Disney).
- mjevans 10y ago
  I can't even recall a single time when patents have helped 'the little guy'. The only case that I can think of offhand involve manufacturers holding out until the patent expires, even if it is a decrease in public safety. I think the most simple, and best, reform for /patents/ is elimination. While I'm on the subject, returning to the 15 year copyright and 15 more IF you pay a lot to renew sounds like a good starting point for that discussion. Trademarks should have something similar (a slowly rising fee over time) but be allowed to exist as long as that fee is paid; that's a consumer protection mechanism.
  - michaelmrose 10y ago
    Trademarks protect buyers and ought to remain indefinite. Spot on otherwise though.
  - Ensorceled 10y ago
    Patents are still important to protect and reward research costs, elimination would destroy the pharma industry overnight for instance. I have no idea why you have a problem with trademarks. Why should a small family business be paying increasing fees to continue to operate as "Sanford and Son"? Or do you think I should be able to call my product "Heinz Ketchup" because they have had the name long enough?
  - deleted 10y ago
    [deleted]
EGreg 10y ago
Why don't we have something like the open source movement in drugs? Using PATENTLEFT. All those possible inventions for the long tail if people were allowed to build on top of existing discoveries.
- bdowling 10y ago
  It's unnecessary. If you want to prevent something from being patented, just disclose it in a publication. That publication will bar anyone else from patenting your invention. As long as you don't patent it yourself, it will become dedicated to the public.
  - yorwba 10y ago
    IANAL, but publishing the invention to preclude patents is a bit like open sourcing your code under a permissive license. Although it allows anyone to use and modify the code, it also allows making closed-source modifications. The patent equivalent would be someone patenting work based on the original publication. The copyleft equivalent would be to patent your work, but license it to anyone, provided they use the same license for any derivative patents. I think such a scheme might lead to interesting results if some important innovation ends up locked into copyleft, similar to the Linux kernel.
  - EGreg 10y ago
    Patentleft is more like Free Software than Open Source. It says if you use our patents, you must open up your own patents to be used in the same way.
  - Nomentatus 10y ago
    Not true anymore, unless that publication reaches the vast majority of practioners so that it has clearly become part of the normal state of the art (recent court decision) - something very difficult for a private citizen to accomplish. Mere publication to establish priority doesn't matter because priority doesn't matter, being first to the patent office matters; so big companies can legally steal your ideas now. Even if you've published them, in most cases. They make large donations to Congresspeople - you don't.
joelthelion 10y ago
When you need this I think we can safely say the patent system is broken beyond repair. This is basically extortion (note that I'm not blaming Google!).
- ocdtrekkie 10y ago
  Why are you not blaming Google? If Google was not trying to extort patents for profit, they could permit everyone free access to their patents. They have chosen not to do so. (Their patent pledge includes a tiny portion of their patents which are not substantial in any common patent litigation. Now we know why.) Google has purchased an incredible number of patents, and is now leveraging them for profit. They are not in a morally higher ground than Intellectual Ventures if they continue with this service.
Hydraulix989 10y ago
So now I can blatantly disregard, copy, and infringe upon on any patents I want while building my startup, simply by paying the price of giving a small amount of equity to Google?
- jlebrech 10y ago
  you can purposefully become a patent-troll-troll and try to lure trolls to sue you but you've found a loophole in your product and it doesn't even exist anyway.
harry8 10y ago
This just makes me feel sick. There's no pretence that it's anything other than a protection racket.
wheelerwj 10y ago
if this is truly the state of software development, we should all just give up now. this might be the worlds worst idea.
cakeface 10y ago
This sounds totally like a squeeze. Google is telling startups "Cut us in if you want to play in this game." I like that they're cutting the lawyers out of the picture though. Instead of waiting till the company gets big, suing, and then getting their take they can now just collect up front and save time and lawyer fees.
jheriko 10y ago
this is really confusing. i can't quite tell if this is a good or a bad thing. yet another sign that patent systems need reform.

196 points by shard 10y ago

Its always nice when the private sector figures out a way to solve a problem that should be solved by government, but government is incapable or unwilling to do so.

khazhoux 10y ago
It's a government-created problem, and ultimately must be solved by them also. It's ridiculous that companies have to resort to this.
greglindahl 10y ago
It doesn't solve the problem of getting sued by a troll -- what patent are you going to use to counter-sue a business that doesn't have any business?
- pnw_hazor 10y ago
  There is some good news though. Recent court cases (Alice, etc.) are really cramping the trolls' style. Intellectual Ventures and the like are backing away from the troll model because their crappy software patents are getting invalidated in court left and right.
DaiPlusPlus 10y ago
This solution works, but it's far from ideal - the trade of equity for protection (or rather: access to their arsenal) could be unappealing to startups without much equity to hand-over in the first place - given a $1m lawsuit (which might cost $1m to defend against), or giving up $1m of equity for access to counter-suit weapons (with no guarantee of success - and also probably costing $1m to file anyway).

CalChris 10y ago

So basically you give up an unstated x% ahead of time for access to Google+Intertrust's portfolio. A few thoughts. First, this only provides access to the patent portfolio. It doesn't pay the (considerable) litigation bills. Second, this portfolio is already available. If Alice sues Bob, Bob can negotiate just in time with Intertrust or IBM or ... for access to a defensive/offensive portfolio. This acquisition of patents during litigation is common practice. Third, just as Intertrust is going to do their due diligence on you, you are taking a risk that their portfolio is a good match for your risk. You need to do your due diligence on them and on their portfolio. I might go for this, but it would be at a pretty low percentage, like less than a percent.

samaparicio 10y ago

A lot of startups get sued by Non Practicing Entities (trolls) that have no operating business to speak of. That provides the slimmest counterattack surface - so not sure how useful it is to have a portfolio to hit back. I think a better defense mechanism would be a legal defense fund that would force the trolls to make their case at trial, to go through discovery, to bring expert witnesses. Because the law firms that represent them work on contingency, this would effectively cut into the potential licensing fees, and make trolling less profitable (and less likely). Also, a lot of trolls extract patent licensing fees out of startups for patents that should have never been granted, and that deserve to be invalidated (e.g with prior art), but the process of getting a patent thrown out is expensive, so having a fund would greatly help. The other strategy that could work is to get all the startups that get sued by a troll for a specific infringement and make a sort of "reverse class action" - making it possible for the startups to re-use the same lines of argument, evidence, etc in their cases.

jshmrsn 10y ago
Let's say I pay into this fund, then I get sued for patent infringement. How does the fund decide whether this lawsuit is trolling or legitimate? Or would the fund pay for all patent lawsuits?
- samaparicio 10y ago
  There are several ways of reaching a distributed consensus about that, like proof of stake. It is also conceivable that it would be in the fund's interest to defend all lawsuits. That would provide the largest deterrent, since the lion's share of today's suits are without merit, and the cost of defense would be considered the operating cost of the fund. What the trolls exploit is the assymetry between a defendant without resources and their own resources which are solely dedicated to this. Without all the licensing fees that startups pay to settle the alleged infringement the business model for trolls would stop working.
  - nl 10y ago
    That would provide the largest deterrent, since the lion's share of today's suits are without merit Doesn't this depend on what "without merit" means? It seems unlikely they are "without merit" in the legal sense, since then they would be thrown out at the first hearing. If you mean they are from patent trolls aka non-practicing entities, then it seems wrong too. I see coverage of tens of cases by NPEs per year, but the entire patent law-suite field must be much bigger than that. There are probably better sources than this PWC report[1], but it identifies 477 out of 2281 (ie, 21%) cases since 1996 in the districts where NPEs file cases involving NPEs. Their definition of NPE includes universities though, which I don't think is what people generally think of when they think of "patent trolls". If "without merit" means that they almost always lose, then this doesn't seem right either. The success rate for patent cases varies, but seems around 25-35%. That's far from "lion's share without merit" [1] https://www.pwc.com/us/en/forensic-services/publications/assets/2016-pwc-patent-litigation-study.pdf https://www.pwc.com/us/en/forensic-services/publications/ass...

jacquesm 10y ago

Google is taking a leaf out of the Mafia playbook here. Classy. Nice start-up you have there. Would be a shame if one of these pesky trolls sued you. But if you join our organization as a partner you will be protected.

jezclaremurugan 10y ago
I think there is a distinction here - the Mafia protects people from itself - but Google doesn't itself sue startups.
- jacquesm 10y ago
  But the upside is similar: If nobody sues Google still has the equity and Google needs the trolls to stay around to make sure people will buy into this program.
  - caf 10y ago
    Sure, but that's exactly the case with commercial fire insurance versus actual protection rackets too.
    - jacquesm 10y ago
      Commercial fire insurance does not typically take equity in the places they insure.
      - caf 10y ago
        Does payment in the form of equity rather than cash affect the incentives in a negative way? It's not enough to call out a distinction: how does it make a difference? If anything, the equity should mean that Google's incentives are more closely aligned with the startup's than the fire insurer's are with the insured.
        jacquesm 10y ago

dis-sys 10y ago

so.. patent laws are so broken that patent trolls are everywhere suing startups to get $ from them. google now has a business that can directly benefit from such increasing number of patent trolls. sounds not very inspiring to me. who is always on the losing side? average small companies. who is screwing the economy & innovation and show no sign of change? governments who refuse to actually reform such a 100+ years old broken system.

DaiPlusPlus 10y ago
This service is not for defending against non-practicing entities - but to defend against patent suits from large enterprises that the startups might be competing against (e.g. Microsoft, Facebook, Samsung, etc) - not that Microsoft et al. engage in that kind of warfare against small-fry, but it's plausible.
- pnw_hazor 10y ago
  IBM, Microsoft, et al. certainly throw their patent portfolio weight at small companies when it suits them. For example, they may bring out their patents to force a lower valuation when acquiring companies.
Tanegashima 10y ago
The problem, is not the law, the problem is the bureau. They keep attributing patents that are obvious and meaningless.
- icantdrive55 10y ago
  How about this: 1. Every US citizen, or entity(corporation) is allowed one free patent. (Most would never fill out the paperwork) 2. After the first patent, the fee goes to whatever it is now? Last I looked it was around $260 to $2500 if you do it all yourself. 3. People (corporations) are allowed twenty patents at the normal price. 4. That 21st patent goes up to 1 million. Then the next patent is based on minimum of 1 million, plus an exponential fee determined by company Market Value. I think, even Microsoft, would look at a 500 million patent fee closely? Actually, I wish all governmental fees/fines were based on income.

aanm1988 10y ago

Gonna go ahead and (once again) be the naysayer when it comes to google. This just makes google a very effective new form of patent troll.

partycoder 10y ago

Patent law needs reform. If you analyze the life of important inventors and innovators of the 20th century, there has always been some patent pain involved that is not in the interest of the "greater good". The reason America didn't have a significant air force for WW1 compared to other powers was in part due to the legal battles between Wright and Curtiss. The government intervened in the patent driven battle so planes could mass produced and used in the war effort. Then, the inventor of the TV (Farnsworth) got sued by radio manufacturers and could never actually profit from his creation. Then, many patents get extended for excessive periods of time to prevent things becoming public domain (e.g: Disney).

mjevans 10y ago
I can't even recall a single time when patents have helped 'the little guy'. The only case that I can think of offhand involve manufacturers holding out until the patent expires, even if it is a decrease in public safety. I think the most simple, and best, reform for /patents/ is elimination. While I'm on the subject, returning to the 15 year copyright and 15 more IF you pay a lot to renew sounds like a good starting point for that discussion. Trademarks should have something similar (a slowly rising fee over time) but be allowed to exist as long as that fee is paid; that's a consumer protection mechanism.
- michaelmrose 10y ago
  Trademarks protect buyers and ought to remain indefinite. Spot on otherwise though.
- Ensorceled 10y ago
  Patents are still important to protect and reward research costs, elimination would destroy the pharma industry overnight for instance. I have no idea why you have a problem with trademarks. Why should a small family business be paying increasing fees to continue to operate as "Sanford and Son"? Or do you think I should be able to call my product "Heinz Ketchup" because they have had the name long enough?
- deleted 10y ago
  [deleted]

EGreg 10y ago

Why don't we have something like the open source movement in drugs? Using PATENTLEFT. All those possible inventions for the long tail if people were allowed to build on top of existing discoveries.

bdowling 10y ago
It's unnecessary. If you want to prevent something from being patented, just disclose it in a publication. That publication will bar anyone else from patenting your invention. As long as you don't patent it yourself, it will become dedicated to the public.
- yorwba 10y ago
  IANAL, but publishing the invention to preclude patents is a bit like open sourcing your code under a permissive license. Although it allows anyone to use and modify the code, it also allows making closed-source modifications. The patent equivalent would be someone patenting work based on the original publication. The copyleft equivalent would be to patent your work, but license it to anyone, provided they use the same license for any derivative patents. I think such a scheme might lead to interesting results if some important innovation ends up locked into copyleft, similar to the Linux kernel.
- EGreg 10y ago
  Patentleft is more like Free Software than Open Source. It says if you use our patents, you must open up your own patents to be used in the same way.
- Nomentatus 10y ago
  Not true anymore, unless that publication reaches the vast majority of practioners so that it has clearly become part of the normal state of the art (recent court decision) - something very difficult for a private citizen to accomplish. Mere publication to establish priority doesn't matter because priority doesn't matter, being first to the patent office matters; so big companies can legally steal your ideas now. Even if you've published them, in most cases. They make large donations to Congresspeople - you don't.

joelthelion 10y ago

When you need this I think we can safely say the patent system is broken beyond repair. This is basically extortion (note that I'm not blaming Google!).

ocdtrekkie 10y ago
Why are you not blaming Google? If Google was not trying to extort patents for profit, they could permit everyone free access to their patents. They have chosen not to do so. (Their patent pledge includes a tiny portion of their patents which are not substantial in any common patent litigation. Now we know why.) Google has purchased an incredible number of patents, and is now leveraging them for profit. They are not in a morally higher ground than Intellectual Ventures if they continue with this service.

Hydraulix989 10y ago

So now I can blatantly disregard, copy, and infringe upon on any patents I want while building my startup, simply by paying the price of giving a small amount of equity to Google?

jlebrech 10y ago
you can purposefully become a patent-troll-troll and try to lure trolls to sue you but you've found a loophole in your product and it doesn't even exist anyway.

harry8 10y ago

This just makes me feel sick. There's no pretence that it's anything other than a protection racket.

wheelerwj 10y ago

if this is truly the state of software development, we should all just give up now. this might be the worlds worst idea.

cakeface 10y ago

This sounds totally like a squeeze. Google is telling startups "Cut us in if you want to play in this game." I like that they're cutting the lawyers out of the picture though. Instead of waiting till the company gets big, suing, and then getting their take they can now just collect up front and save time and lawyer fees.

jheriko 10y ago

this is really confusing. i can't quite tell if this is a good or a bad thing. yet another sign that patent systems need reform.