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, (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:, modista, riya

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  1. identicon
    Willton, 4 May 2011 @ 4:18pm

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

    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. 0081107/0135002767.shtml

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

    That's a lot of poppycock. The three articles to which you link speak to (1) what one law professor (who has never practiced patent law, mind you) believes regarding unscrupulous patent attorneys trying to game the system (which is not as successful as the professor would have you believe); (2) a technologist's opinion of what a claim discloses, which clearly shows that the technologist never read the actual written description of the patent he criticized; and (3) a policy Microsoft had in order to avoid willful infringement liability. None of this nonsense speaks to whether patents disclose anything useful and whether anyone learns anything from patents. If anything, these three links show that the persons discussed therein have never actually read a patent before. If you want to know whether patents disclose useful information, why would you trust the opinion of a person who has never actually read a patent?

    Honestly, Mike, I would expect you to actually know your own work before you pompously cite it to me as some sort of authority.

    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.

    How arrogant. When was the last time your read a mechanical device patent? How about a medical device patent? Maybe a biological composition patent? What about a patent to a manufacturing process? Have you read any patents on chemical processes?

    When it comes to patents, your view is clearly confined to the scope of software and computer methods. If you want to discuss the merits of what is disclosed in such patents, be my guest. But don't issue overly broad generalizations about what patents disclose and what can be learned therefrom when the entirety of your experience with patents is limited to software.

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