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.

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  1. icon
    Mike Masnick (profile), 4 May 2011 @ 2:40pm

    Re: Re: Re: Re: Re:

    So you're saying that Section 112 of the Patent Act is a myth?

    No. I'm saying that patent lawyers like yourself who wrote the patent laws have Section 112 in there so they can claim that patents disclose stuff. It's out here, in reality, where people who actually do innovative work and know that patents don't disclose a damn thing.

    http://www.techdirt.com/articles/20070321/021508.shtml
    http://www.techdirt.com/articles/2 0081107/0135002767.shtml
    http://www.techdirt.com/articles/20070814/015013.shtml

    No one learns anything from patents. They don't disclose anything.

    The legal requirement that "The specification shall contain a written description of the invention, and of the manner and process of making and using it, in such full, clear, concise, and exact terms as to enable any person skilled in the art to which it pertains, or with which it is most nearly connected, to make and use the same, and shall set forth the best mode contemplated by the inventor of carrying out his invention" is merely mythological?

    The legal requirement is not. The actual disclosure is. Seriously, read any patent, and tell me what a real innovator can learn from it? The answer is nothing.

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