Software Patents: A Personal Story

Given the radioactive nature of this post’s subject matter, I feel the need to remind readers that this is not a corporate blog, and that the opinions expressed within are my personal opinions, not those of my employer. Also, please understand that I cannot comment on any intellectual property issues specifically related to my employer.

With that preamble out of the way, let me tell you a true story. The other day, I received a phone call from a friend who has been building a kick-ass startup. That friend had been contacted by a much larger competitor with what amounted to an ultimatum: shut down and come work for us, or we’ll crush you with a patent infringement suit. My friend’s startup didn’t cave in – in fact, my friend even went through the trouble of sharing a pile of incontrovertible prior art with the competitor. The competitor was unimpressed, and my friend’s startup is now facing a potentially ruinous lawsuit.

If you know any of the characters in this story, I beg you to keep that information to yourself – at least for now. I’d like my friend to have a chance of getting his company out of this predicament, and premature publicity might hurt his case.

But back to the . …

Given the radioactive nature of this post’s subject matter, I feel the need to remind readers that this is not a corporate blog, and that the opinions expressed within are my personal opinions, not those of my employer. Also, please understand that I cannot comment on any intellectual property issues specifically related to my employer.

With that preamble out of the way, let me tell you a true story. The other day, I received a phone call from a friend who has been building a kick-ass startup. That friend had been contacted by a much larger competitor with what amounted to an ultimatum: shut down and come work for us, or we’ll crush you with a patent infringement suit. My friend’s startup didn’t cave in – in fact, my friend even went through the trouble of sharing a pile of incontrovertible prior art with the competitor. The competitor was unimpressed, and my friend’s startup is now facing a potentially ruinous lawsuit.

If you know any of the characters in this story, I beg you to keep that information to yourself – at least for now. I’d like my friend to have a chance of getting his company out of this predicament, and premature publicity might hurt his case.

But back to the case: let me give you an idea of how a story like this can play out. At a high level, the startup can choose to fight or not fight.

Not fighting means the entrepreneurs writing off their startup, but it allows them to move on and try something new. It might be the best career move for the entrepreneurs, but it means that the world loses a promising startup, and the surrender rewards bad behavior, reinforcing a regime where innovators can’t afford to compete with more established players.

Fighting means mounting a non-infringement defense, an invalidation defense, or both.

A non-infringement argument asserts that, regardless of the validity of the patent, its claims don’t cover what the startup is doing. Since patents carry a presumption of validity, the non-infringement route is appealing – there’s no need to slog through the much longer invalidation process. Leaving a bad patent alive may be a worse outcome for the rest of the world, but entrepreneurs don’t have the luxury of taking the weight of the world onto their own shoulders.

Unfortunately, the very characteristics of a bad patent make it hard for an accused infringer to succeed in a non-infringement argument. If a patent is overly broad, then it’s more likely that the infringement argument will be valid (but not sound, since the patent itself is – or should be – invalid). Vaguely worded claims are also a problem – while a patent examiner may have granted a patent based on one interpretation of the claim language, the patent holder may now be asserting infringement under a different (and typically broader) interpretation of that same language.

As a result, a non-infringement argument often depends almost entirely on the result of a Markman hearing, more formally known as a claim construction hearing. In such a hearing, a judge decides how to interpret any language in the claim whose meaning is contested by the opposing parties in the suit. Such a hearing is often a crap shoot for the accused infringer. An unfavorable result which supports the infringement accusation may ultimately help invalidate the patent, but the results are likely to come too late – justice delayed for a startup is often an extreme case of justice denied.

Which brings us to the invalidation route. In theory, invalidation is the right approach to take when confronted with an invalid patent. Ideally, the accused infringer presents prior art to the patent office to reexamine the patent, resulting in the patent either being invalidated or rewritten to have a much narrower scope. In practice, however, this approach requires significant effort, time,  money – especially if you depend on lawyers to do the heavy lifting – and luck. The best hope is to rapidly request and obtain a reexamination, and then to request and obtain a stay of the infringement suit pending reexamination. Needless to say, the patent holder will fight tooth and nail to avoid this outcome.

I don’t know how my friend’s story will end. But, as the above analysis should make clear, he’s between a rock and a hard place. Whether or not you believe that there should be software patents – and there is room for reasonable people to debate this question – I hope you agree that the situation my friend is facing amounts to legalized extortion. I understand that no system is perfect, and that our legal system requires compromises that have inevitable casualties.

Nonetheless, my friend’s story does not feel like an isolated incident, but rather evidence of a systemic problem. There are a lot of software patents floating around right now of dubious validity, many of them granted to companies that have since folded and have unloaded their assets in fire sales. It would be sad for this supply of ersatz intellectual property to impede the real innovation that the patent system was intended to protect.

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