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

from the do-the-math dept

Post sponsored by

DevsBuild.It, from the Application Developers Alliance

As part of our sponsorship program with the Application Developers Alliance, we’re highlighting some of the content on DevsBuild.It, their new resource website, that we think will be most interesting to Techdirt readers.

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.

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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Comments on “When Startups Need More Lawyers Than Employees, The Patent System Isn't Working”

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anonymouse says:

Re: Re:

There will always be patent trolls, that is how places like Microsoft make billions, threatening any business that is making a lot of money as they know, due to them being in the software industry forever nearly, that they have massive amounts of patents that they could fall back on.

I say that unless Microsoft or any other troll can prove beyond doubt that their software was hacked and used in a start-up that they should be paying the costs to the start-up of any claim.

And even then i would say that if the start-up says they coded the same or very similar code themselves the court should judge in their favor, there are only so many ways to do the same thing, only so many ways to link a button to a piece of code, and if their claim results in the collapse of a start-up then they should be paying all income that has been lost for the next 10 years.

Maybe, like may many people have said , software patents must be removed from society, completely removed with no law covering any software coding or the use of software to do things on a screen or any device.

Mark Syman (profile) says:

Re: not true

What a load of BS – our startup in Austin has hundreds of downloads of our app each week, and no patent litigator has ever contacted us. We filed 4 patent applications, but that is all the lawyering we have needed. What a bunch of BS that startups are getting sued on a regular basis. I am the third sharehold after the founder and his wife bought shares.

Leigh Beadon (profile) says:

Re: Re: not true

It’s good that you’ve been lucky, but this is not a small issue that you can simply handwave because it hasn’t impacted you. It’s widespread, well-known, and well documented and researched.

Here are some resources that help to start understanding the scale of the problem:



gnudist says:

You know, with this being a disclosed sponsorship I wonder what other bullshit talking points the anti-mike trolls will trot out.

After all, they can’t exactly say Mike is “hiding” the “truth” here. But then again they did still claim that for the sky is rising report despite mike already disclosing that too so I wouldn’t count on them dropping that line of BS for this post either…

Anonymous Coward says:


I am a little lost here.

If a patten is granted in the US does that mean that is is valid in all important first world countries world wide?

If a patten is granted in any other major first world country does that mean that the patten is valid in the US?

If the answer to either of these questions is that pattents are not valid world wide what is stopping a world wide patten war that reduces pattens value as each country tries to improve its own industrial position at the expense of others.

Leigh Beadon (profile) says:

Re: Question

There are various international agreements that spell out how patents work between different countries, and of course some countries behave differently within that system than others (see: China) — and of course, on the internet there are jurisdictional issues with services that are available worldwide, servers in multiple different countries, etc.

In a sense, nothing is stopping the war you describe — in fact that war is already happening in some places, such as China as mentioned, or India and other countries that are ignoring certain drug patents. But, of course, there are also powerful global and national interests operating in all these countries who benefit from a strong patent system worldwide, plus all the diplomatic muscle the US throws behind intellectual property, so the war isn’t one-sided.

Anonymous Coward says:

Re: Question

The international treaties are supposedly to make it easier to apply for a patent in several countries using one application and priority date. However you still need to apply for and pay to maintain the patent in each country that you want protection. If you only have a US patent, it is only valid in the US. So someone could make and sell your patented product anywhere else, however they couldn’t import it into the US for sale there.

special-interesting (profile) says:

Loose patent law has spawned loose awarding of patents. Worse are the first to patent ideas that remove any sanity about separate development of the same idea.

In the mechanical world there are many ways to accomplish the same task but the only thing patentable is just the way you do it. Period. It good in that it rewards those who find the best way to do a particular task. It also forces various manufactures to maneuver around competitors patents by designing their own methods.

Many times one will find an extra hinge, bolt or moving part just so that manufacture could use their own patentable way to do the task and not use some overly charging other firms patent. Think a box or display looks funny? Patents might have covered the obvious way of folding or assembly. It was actually cheaper to do it in this roundabout way. Its kind of fun to learn why and how things are made.

Just making a product one has to dodge several political and legal hurdles and that assumes a fair market. What software patents are being abused for is not inductive to a level playing field in an unfettered democratic marketplace that allows innovation to succeed.

Software patent law is new and un-spanked. It has little precedence in the legal world and the ?soft-patent everything? attitude before someone else does is rampant. It seems neither the US Patent office, any legal body, judge nor jury knows what to think of them.

In fact. It seems that the best use of them is for a moneyed up firm to use them for mudding the waters clouding the competitions outlook by draining them dry of funding. Its a lawyers dream to say the least.

In software its easy just putting a button on the screen that says it will do something just by clicking on it. What goes on behind the screen in all the various ways to program calls and functions varies so much from vendor to vendor its amazing. Even if the code is similar that is not congruency. (close but not quite wont do for clearly written law or exactly submitted patent applications.)

In light of this coding fact its silly that there even was a ?click once and buy? patent. Who would bother except for the competitive legal threats that might be waged? Of course this assumes that software patents would behave similarly to mechanical patents. Since computers are so fast just inserting a few inefficient lines of code would slip by any software patent. Just purchase a few more servers.

The patent troll activity makes any innovative startup that much harder to pull off. Its scary and all because of careless legislation. For such a young and new market such as software we might just as well wait a few hundred years before we would stifle and slow down new development.

The mechanical realm started its early development cycle about 10,000 years ago. We can wait until at least the software industry matures beyond the obvious early innovation stage. If firms were forced to keep developing using the ideas openly shared by others it will happen that much faster.

In the early days of computer development people just shared their work in magazines and other bbs’s for basically free. An established vendor would obtain value (thus revenue) in updating and maintaining their code. We can only loose when we bottle up the free flowing innovation, that is expected, with unexplored use/deployment of software patents.

Software patents are a monkey wrench into the growth of any nation. (just add 18 years onto the development cycle of any project and see how that affects profit.) Would an aware and clever software firm win against any such claims of others? Very possibly and maybe even likely. But its the legal environment that allows such a battle that kills off the competition which is the danger.

Anonymous Coward says:

Re: Re:

In the mechanical world there are many ways to accomplish the same task but the only thing patentable is just the way you do it. Period.

ok, another idiot who does not have a clue about what a patent is:

So, If I invent a engine, I then patent “an engine” and you cannot make an engine of any type…… MORON..

So, there is no such things as jet engines, electric engines, petrol engines, diesel engines, because someone patented the steam engine right ?:????

You DO NOT patent the accomplished task, you patent A METHOD TO ACHIEVE THAT TASK..

if you cannot understand that most basic of FACTS you should not be talking about the subject at all, because it makes people (rightly) think you’re and IDIOT.

Franklin G Ryzzo (profile) says:

Re: Re: Re:

In the mechanical world there are many ways to accomplish the same task but the only thing patentable is just the way you do it. Period.

You DO NOT patent the accomplished task, you patent A METHOD TO ACHIEVE THAT TASK..

the only thing patentable is just the way you do it.


the way you do it




special-interesting (profile) says:

Re: Re:

?If one designs an engine? Thats way to complicated a device and makes a great illustration of the principle of mechanical/electrical/software patent substitution. Any engine is made up of many separate inventions. Yes one can patent an engine. Its a process patent. But, even in this circumstance. Did the original patent find the best way to implement this idea?

Probably not and other inventors/firms will take that wonderful engine idea and make it better and patent these ideas. Its normal that others do better than the original inventor. The steam engine development was rich with patent wars and the winners charged what they could. The steam engine was the forerunner of the combustion engine and who could have foreseen that at the time?

The original inventor or firm would be left with a possibly a usable patent but the (now) old engine will have an extra bolt or mechanical device that some other inventor found a way to get by more efficiently without those old style methods.

Will the original inventor/firm use the new and better ways of making the very same engine you patented earlier? Maybe not as the new patentees will want to charge more money via licensing fees. If the original invention was still viable then it would be sold even it it took a few extra mechanisms or valves or bolts or whatever. (levers, pinions, bearings, lever arms, seals, etc. etc. etc.)

Will the other firms be forced to pay the original inventor? Maybe. If the new improved way was so significantly better that even the original inventor/firm would be forced into some mutual agreement with the new upstart firm patenting the new and better methods. A classic lawyer-festival complete with lawsuits and all that mess.

The reverse is also true. Maybe some inventor came up with a new valve for the engine but wanted to charge ruinous licensing fees just so they could maintain their market position. Could some other inventor find a slightly less efficient valve of different design to do the same thing? Sure! And it would avoid the licensing fees.

Electrical Patent Substitution Example; Was Alternating Current better than Direct Current? Not especially. But rival inventors (Edison and Tesla) championed their own method of power transmission. Each with their own separate ways to do the same thing with different patents. When one is a genius almost anything is possible.

Software patent substitution was describe well enough in the above post.

There are so many historical examples of this. Most modern devices are a collection of so many current and expired patents its easy to be overwhelmed.

In short there is usually more than one way to do the same thing. All of them are patentable. Many times one can literally swap or substitute their own method of operation be it mechanical/electrical/software/fluidics/etc in place of some other patented method. Of course it helps to be a genius.

Stephan Kinsella (profile) says:

Patent Stockholm Syndrome

This poor guy is being devastated by patents. Yet, at 5:40, he admits he is not against the patent system, does not want to abolish it–only to “reform” the system that he admits is “totally broken.” This is really sad. The patent trolls are just responding to the current legal system. And they are not the worst problem–they just want a little royalty. Software patents are not the problem–maybe they are for this guy, but not in general. It is high quality, good patents, practiced by practicing entities–Apple, etc.–that is the problem. The trolls are just responding to the legal system that guys like this are in favor of. Guys like this are a bigger problem than trolls are. It is because of people like this that we have a patent system at all–people who support the basic system and the state’s right to impose these fascist laws on us.

Anonymous Coward says:


‘Just basic stuff, and it’s been hugely disruptive to our business’

but dont you see what you are saying here ?… you are in the buisness of disrupting everyone elses .. what do you expect ?… ordinary people cant fight back against the way the internet is disrupting our business, now its happening to you

do you suppose a high street retailer is going to get heard if they complain about amazon ?

its just disruption of every model , get used to it

and no , its not fair


acahill (profile) says:

When Startups Need More Lawyers...

I know this potentially may come across as spam, however, I strongly suggest your company consider using Tecknaro canvases.

This growing canvas-based documentation technology behaves much like Autocad does for architects and engineers and allows software/hardware developers to compare specific software constructs to one another; it performs than Microsoft Visio ever will.

I look forward to the day in the next year when courts of law and lawyers require Technaro documents to describe the placement and functionality of a software within a technology agnostic environment known as Tecknaro.

Good luck!

solopatentlawyer says:

Facts, just the facts!

I’m a small firm/solo patent attorney. There are solutions but no one here seems to have tried to really understand the law.

1) First, there is no need for six attorneys on the matters described here. Some law firms are preying on their client’s fears. Big law firms typically shunned patent cases as being “too geekey.” But about 10 years ago, they realized that if they hired a patent lawyer or two, they could keep their litigation departments busy for 1000s of hours. The writer should shop around – he’ll be really ticked when he realizes he has been sold a bill of goods. (And look for attorneys outside the overpriced Bay Area!)

2) Many clients expect that they will just hire fancy lawyers and the case will disappear. But patent law is (and always will be) incredibly fact specific. The client’s engineers (who are the real experts) should sit down with the lawyers right away and explain the facts. What many firms will do is to stretch out the case for months and months trying to “win” with procedural motions that rarely work in fact-specific cases. Get your lawyers to get to the point. Ask them the percentage of these motions (motions to dismiss, summary judgment) that ever win. Then make an informed decision about what needs to be done.

3) Finally, the patent reform American Invents Act actually has some really tremendous new mini-trial like procedures. These are perfect for smart small start-ups who can beat the trolls by being smarter. First, the USPTO has a panel of experts that will hear ONLY claims of invalidity. Discovery is sharply limited. Litigation is likely to be stayed. Results will then apply in the lawsuit. These things are brand new, and they have some pretty high initial fees, but they are a LOT cheaper than this guy’s monthly patent lawyer bills. Check them out on the USPTO website.

Bottom line, there are fixes in place. The author should stop complaining and call a small firm or solo patent lawyer and get some real advice.

Anonymous Coward says:

Re: Facts, just the facts!

Tech Dirt writers don’t want to hear what you are saying, or that this example is NOT typical.

They want to spread fear and doubt, it’s what they do here, mere facts just get in the way.

Also the level of understanding these people have of the patent system, or even what a patent IS, is almost non-existent.

There are always very high on spin, very low on actual facts or details.

They don’t want to repeat the actual details because it might show everyone what bullshit they are trying to get us to believe.

Leigh in particular, has been ‘outed’ here in the past for displaying a complete lack of knowledge of patents, or anything even remotely legal.

It’s probably why no one takes TechDirt seriously, and have not done so for years.

Anonymous Coward says:

Re: Re: Re: Facts, just the facts!

no, but you would believe and anonymous ‘developer’ in a checked shirt (that does not even fit him), who’s word you take as truth.

sorry, the AC’s are not the ones making ‘generalizations, it’s the author of this article, and the ‘anonymous developer’ … yea right..

Mark Syman (profile) says:

Re: Re: Re: Facts, just the facts!

I agree with solopatentlawyer. Sounds like they are being taken to the cleaners by some large law firm. They are just bad managers. All managers need to decide what is a bad buy for their money. The ones that don’t will die. Most start ups die, so will theirs.

Our startup has been a real winner so far. We have a few patent applications, and would like more, but this isn’t the time yet. Make good use of your money, and you will survive and maybe even thrive.

I suspect generational issues at hand. I am in my 50’s and have seen alot of ups and down in software. I bet these young’ins who hired 6 lawyers haven’t figured out how to spend money intelligently. Most startups go bust, looks like they will join the crowd.

A fool and his money are soon parted.

Rikuo (profile) says:

Re: Re: Facts, just the facts!

I love how your comment has so many sources and citations where Techdirt is wrong, so many links that I can click on to see all this wrongness…
Wait. No it doesn’t. It doesn’t even have one. Not a single clickable link or a fully typed out web address.

Just a series of assertions and absolutely, nothing, nada, zip, zilch, to back it.
Okay, I’m going to play this game too.

Out_of_the_blue smacks babies for fun. Click this non existent link here for extra details ->

out_of_the_blue says:

Re: Facts, just the facts!

So, I wandered into this topic see just how silly the comments on this bit of advertising for something that no one wants is, and HOLY COW, a newbie! New to Techdirt, that is.

“There are solutions but no one here seems to have tried to really understand the law.” — “solopatentlawyer”, if you read this site with any frequency, you will see that confirmed daily! It’s a key feature of the fanboys. They don’t know even the scope of their ignorance.

2nd, you echo well enough what I aimed at here, that lawyers typically create more “work” than needed:
(Heh, heh. I see now it’s “Flagged by the community.” The kids are so cute with their little censorship buttons.)

3rd, the schtick here at Techdirt and the income stream DEPENDS on endless complaining without offering even fantasy solutions. (After 15 years, site owner Mike Masnick still hasn’t got a position on copyright!) So your advice to his unpaid mere minion, “author should stop complaining” will be ignored.

CK20XX (profile) says:

Re: Re: Facts, just the facts!

I apologize for the feisty little megalomaniac here, solopatentlawyer. Mike Masnick has such a deep-rooted belief in free speech that he refuses to ban anyone; he believes even the most vile and hateful of individuals deserve to be heard as much as any person, and that the most useful ideas and people in a conversation will naturally rise to the top. Sometimes that core tenant of his is very admirable, messiah-like even, while other times I wish he would exercise his right to whip out the lightning of smiting. But at least you can’t say he doesn’t stick to his guns.

Anonymous Coward says:

Re: Facts, just the facts!

Finally, the patent reform American Invents Act actually has some really tremendous new mini-trial like procedures. These are perfect for smart small start-ups who can beat the trolls by being smarter.

Sorry, I read on Techdirt that the AIA did nothing to make patent law better, so your point is simply not possible because Mike said otherwise.

Stephan Kinsella (profile) says:

Re: Facts, just the facts!

“Bottom line, there are fixes in place. The author should stop complaining and call a small firm or solo patent lawyer and get some real advice.”

This is horrible. Sometimes an innocent victim actually does lose, because of patent law. It does exist. And telling them to stop complaining is horrible–it is blaming the victim. As for advice–what if the lawyer says “Looks like the patent is valid, you infringe, and you will lose–might as well shut down your company.” What then, jerk?

solopatentlawyer says:

Re: Re: Facts, just the facts!

Unfortunately, sometimes that is true. Many is the time a business has come to me without having done a thorough check of what has been invented and patented already. You would think that would be the first thing that a start-up would know – i.e. what does the competition have already before I get my investors and family members all jazzed up. It is even easier now than ever because all patents and even patent applications are available and searchable for free on numerous websites.

What non-inventing folks get upset about seems to be the patent that should not have been granted in their view because it is too broad. But that has to be viewed with regard to the state of the art when the patent was going through the patent office, not now.

Other than that, I don’t want to get religious or political. It is just that a good pre-business plan search of all the prior art in someone’s field would be a really good investment. And if it infringes, pay the licensing fee and get on with the rest of your start-up. Good VCs with lots of money demand this anyway!

Anonymous Coward says:

Re: Re: Re: Facts, just the facts!

But why should they?
If I have an awesome idea and can raise funds to bring an exciting product to market why should it matter in the slightest if someone thought of it before?

We really, really need an independent invention defense.
Oh and to stop software patents, they simply don’t make sense. If I copy someones code I’m breaching copyright already, if I’m following the same process then it’s maths which is unpatentable. What purpose do they serve?

Anonymous Coward says:

interview with an anonymous developer from a tech startup

wow, we can really trust that source Leigh… nice work..

And you are making out they EMPLOYED more lawyers then other employees, this is a flat out like, they might of engaged 6 lawyers, for a couple of days, but that is NOTHING compared to 5 FULL time employees.

Anyone stupid enough to engage 6 lawyers, when only 1 is needed, is himself a moron, no wonder he prefers to remain anonymous.

Gwiz (profile) says:

Re: Mostly it proves

It still takes actual lawyers to do the work.

No, not correct. Remove the legal hurdles and the lawyers and progress would still continue. It only “takes actual lawyers to do the work” that isn’t really necessary in the first place.

And an additional note: Leaving the advancement of human culture to the whim of lawyers is a really, really stupid idea in my opinion.

Anonymous Coward says:

What in the hell is this guys problem? He doesn’t pursue patents, they are ruining his business and when it comes to dealing with it he cries REFORM? He should be calling for abolishment.

What posses someone who is getting f*cked in the ass by the system to still say we need to keep it around when it provides absolutely no benefit and is detrimental is beyond me. It is asinine and stupid, abolish a bad idea that does not work and be down with it.

Every person that defends or calls for “reform” is just another roadblock preventing us from simply moving on from a system that is so broken fundamentally it can not be fixed.

Anonymous Coward says:

I notice this article gets automatically promoted to be the second one on the page, even as other articles go in order. Is this because it’s a “sponsored post”? It has been confusing me, because I often just glance at TD’s homepage to see how much it has updated, and the last few times I’ve thought, “only one new article since last time.” So I put off reading in depth for a while – I often wait until there are several new articles and then devote some time to reading them all.

staff (user link) says:

more dissembling by Masnick

These are mere dissemblings by huge multinational thieves and their paid puppets -some in Congress, the White House and elsewhere in the federal government. They have already damaged the US patent system so that property rights are teetering on lawlessness. Simply put, their intent is to legalize theft -to twist and weaken the patent system so it can only be used by them and no one else. Then they can steal at will and destroy their small competitors AND WITH THEM THE JOBS THEY WOULD HAVE CREATED. Meanwhile, the huge multinationals ship more and more US jobs overseas.

Do you know how to make a Stradivarius violin? Neither does anyone else. Why? There was no protection for creations in his day so he like everyone else protected their creations by keeping them secret. Civilization has lost countless creations and discoveries over the ages for the same reason. Think we should get rid of patents? Think again…or just think.

Most important for many is what the patent system does for the US economy. Our founders: Jefferson, Franklin, Madison and others felt so strongly about the rights of inventors that they included inventors rights to their creations and discoveries in the Constitution. They understood the trade off. Inventors are given a limited monopoly and in turn society gets the benefits of their inventions (telephone, computer, airplane, automobile, lighting, etc) into perpetuity and the jobs the commercialization of those inventions bring. For 200 years the patent system has not only fueled the US economy, but the world?s. If we weaken the patent system we force inventors underground like Stradivarius and in turn weaken our economy and job creation. Worse yet, we destroy the American dream -the ability to prosper from our ingenuity for the benefit of our children and communities. Who knows who the next Alexander Graham Bell will be. It could be your son or daughter. It could be you. To kill or weaken the patent system is to kill their futures.

For the truth, please see http://www.truereform.piausa.org/

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