How One Startup Used Patents To Kill A (Better) Competitor

from the sad dept

Teck points us to an all too typical, but still disappointing, story of a startup, Like.com (which previously was Riya), and how it allegedly killed off a better competitor with patents. In a strategically timed move, it sued the competitor, Modista, just days before it was going to close funding:
The lawsuit caused investors including Kumar to drop out, for fear of dealing with an expensive lawsuit that could cost more than they had even planned to invest. Because Modista had no money to defend the suit in court, the company later shut down.
This sort of story is more common than you might imagine. I recently had a conversation with a serial entrepreneur who told a similar story. One of his previous companies had been quite successful, and was on the verge of being acquired for upwards of $70 million. Days before the deal was to be closed, one of their competitors got wind of the deal, and filed a patent infringement lawsuit against them, leading the acquirer to drop the deal. Without the funds to fight the lawsuit, the entrepreneur had no other option but to sell his company to the company who sued him for less than $5 million.

Ask around, and you discover that this happens all the time -- patent holders using patents not to innovate, but to block and kill other companies -- especially when those companies really are more innovative and have a better product.

Filed Under: competition, image recognition, patents
Companies: like.com, modista, riya


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  1. icon
    Jay (profile), 5 May 2011 @ 9:30pm

    Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: Re:

    "Nor is it my position that IP needs to be maximized. Perhaps you should stop swinging at that strawman."

    That wasn't a strawman. Someone brought up the point that perhaps you need to define your position. I'm reiterating those words.

    Your answer was a mere "Says you." with nothing to actually refute what the other AC has said. So either you're trying to justify your own position that patents are teaching something (without proof) or the AC is correct with the evidence put up.

    So before you decide to get off topic and justify, my point is that you need a lot more than two words to answer someone that has put up an assertion. That's my only reason for the other post.

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