How much should a startup worry about being sued for patent infringement?

Shilpa Dadhwal Founder & Director, SQE Labs Inc.

November 10th, 2016

We plan to start a small company. The idea is to host an online service which would make life easier for a lot of people. We did our research and couldn’t find anything which could qualify our idea as stolen. There are similar services but none of them has features which we plan to implement. The question is whether this is enough. I mean, we can’t afford to get sued for patent infringement and on the other hand we see so much variations of different services online. How much should we worry about being sued? What it takes to get sued for patent infringement?

Bill Anderson Chief Product Officer at Optio Labs, Inc.

November 11th, 2016

Anyone developing a product could be sued for patent infringement. If you are even moderately successful you should expect to be sued by a patent troll at some point. It does not matter if the troll's patent does not actually cover what you are doing with your product/service because you will be forced to take action and spend money to defend yourself.

Startups have a lot of things to worry about, and this is just one minor addition. There is not a lot you can do to prevent an unfair attack, so there is no point worrying about it. Just ensure you have a little money set aside to deal with it when it happens.

Jeffrey Gross Managing Member of intellectual property firm, Entrepreneur, P/T Musician

November 11th, 2016

Of course it is also possible to be sued b/c you genuinely infringe a valid patent still owned by the original inventor. That's just part of business risk. You should definitely NOT put your activities on hold for the two years (sometimes more) and 20K in costs it takes to get a patent. Filing a provisional patent app is much less expensive - but do you even have something patentable? The SCOTUS "Alice" decision has very much tightened up what constitutes "patentable subject matter" - get an opinion on that first. If you don't have something patentable, then you also won't infringe someone else's patent.

David Austin Relentless problem solver and innovator.

November 10th, 2016

The question is where is the potential IP? It sounds like a business plan, or a certain set of services, which is hardly patentable, and if they were magically grated a patent no judge would honor it. If you're taking an existing service and making it cheaper, more accessible, more efficient by putting it online then that is not patentable. You can patent some business processes (like a process flow, if it is novel and provides new functionality and advantages), but most of these can be worked around, and most patents for business processes again are very hard to enforce.

Joshua Adams Instructor Saint Leo University

November 11th, 2016

Shilpa, Innovation is very important and patents can sometimes impede innovation. With that though it is necessary to ensure rightful ownership and credit where due. So, to your point it is very important to have a patent attorney do a search if possible. Because there are organizations, some purpose is to buy patents and then start suing even with the slightest possible infringement.

Bill Anderson Chief Product Officer at Optio Labs, Inc.

November 11th, 2016

There are some good reasons for developing your own patents, but first consider what possible benefits they have versus the costs.

Having a patent on your technology does not stop anyone from copying you. If, after spending 4 years and thousands of dollars on legal fees to get a patent, someone apparently violates it you still need to pursue them legally. You might think they copied you, but that is not proof. You will need to set aside some real money - tens of thousands or more - to get some kind of legal resolution. If they are big and better funded they can tie you up for several more years and cost you very significant amounts of legal fees.

If you are not well funded, you will not be able to win even when you are right. That unfortunately is how our US legal system actually works. So don't place too much hope in using patents to protect your startup's intellectual property. Spend you efforts instead on winning customers with a great solution.

Rob G

November 18th, 2016

just to be clear, hiring a patent attorney to do some preliminary infringement/novelty research is a good idea, but one should NOT expect the results to "verify you are not infringing on any entity's patent". You could hire a whole herd of patent lawyers and still not be sure that you won't infringe either an issued or pending patent. And you won't know about provisional patents because they are not published. That's just the nature of patents and our patent system. There are far too many claims in far too many patents that have been issued as well as those that are pending that some troll or patent owner could decide they want to use to make your life difficult. Many of these claims are hidden in other patents that on the surface having nothing to do with the space you are in. A good patent attorney or agent should be able to give you an opinion as too how "crowed" your space is, i.e. "are there lots and lots of issued patents that read directly on or around your subject matter" and "is the space heating up given the number of recently filed and unissued patents pending around your space" as well as "who seems to think your space is interesting based on what companies are filing patents and claims in this space". Someone could have filed a provisional patent application yesterday that reads exactly on what you are building and you will not know until or unless it is turned into an actual application and published and possibly issued 2 to 10 years down the road. If the space seems to be heating up that could be a good thing - someone may want to acquire you.

It is good to understand 'patent strategy'. I am NOT a patent attorney, but i have a few patents and i've driven this road a bit. For the most part today, patents are seen as bargaining chips, or more accurately, ammunition. The more chips/ammunition you have the better, in general. Even if you plan to never start a war, having some defensive weapons is always a good idea. If you are small and you infringe a patent (or claim) owned by a 'troll', for example, they likely won't sue you because you have no money - they aren't interested in shutting you down, they want money. If you have patents You may never intend to sue anyone for infringement, but then again you, like Apple, may change your mind when competition heats up. You might use your patent portfolio more as a defensive weapon than offensively. remember back in 2012 or so when Yahoo sued Facebook over patent infringement? it was just before FB was to go public. FB went out and bought about a half Billion dollars worth of patents from Microsoft (and they continue to buy) and all of a sudden FB and Yahoo settle and announce a "new and improved partnership". The moral of this whole story is that startups are risky and risk comes from all angles. Is there a risk that you might get sued for patent infringement some day? yes, if and when you become successful, but not too likely before then. Should you consider building or buying your own patent portfolio? yes, but unless your success depends heavily on patent protection (the prescription drug or biotech industry for example) then i would not commit a large portion of my scarce funding into patents just yet.

Scott Taylor Sales & Marketing Director at Cloudia Assistant / Author: The Opportunity in Every Problem

November 11th, 2016

It's simple, get your own patent. A patent doesn't have to be completely new but putting multiple ideas together to create something new is patentable. While going through the patent process you will find out if your idea infringes or not and then, if you get the patent, nobody can copy you.

Hambirrao Patil

November 10th, 2016

Shilpa, we need to understand Patent Infringement. Also whatever the research you did with other similar services. You have an services with extra features never mind but certainly just need to understand following quick points to make you safe from jurisdiction wherever you want avail your services.

1) Scope/Terms of services already in market- Insider the disclosure or the terms of service providers they mentioned patented invention or extent of protection is defined that wants to claim. That means whatever not allowed without permission.

2) Territory of Patents-Understand the patents are bound by territory and Infringement only possible within the territory.

Thank You!

Martin Omansky Independent Venture Capital & Private Equity Professional

November 11th, 2016

Good idea. Before doing that, however, I would do a thorough patent search. The search process is much less expensive than the development and prosecution of a patent - not to me going the long time and negotiating angst required between your utility patent application and the issuance of a patent. And there is no guarantee that you won't get sued anyway, because patent trolls are ubiquitous. Sent from my iPhone

Martin Omansky Independent Venture Capital & Private Equity Professional

November 10th, 2016

(1) You need expert advice. (2) No one is likely to sue you unless they are highly motivated - i.e. if lots of money is involved. As a start-up, you are probably judgement-proof. (3) I doubt if the service you propose to offer can be patented anyway. Talk to my friend, Daniel Holmander, J.D., a patent attorney in Providence, RI, who can give you guidance. Sent from my iPhone1

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