Blogs
By Alex Polyansky Oct. 19, 2018

Dummy Guide for Startups in Patent Infringement

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We are founders, and inherently we all share boundless optimism that we will prevail against all odds, but we can not deny the possibility that we might fail. After all, the reality is more than 90% of all startups fail.

So, let’s not deny the possibility that your product might actually infringe an existing patent of a competitor whether you have a patent or not. More than 300,000 patents are granted every year, and the likelihood of infringing a patent is high. As the saying goes, “one’s undoing is one’s downfall.” You could be a victim of your own undoing if you do not develop a comprehensive patent strategy.

Recent Court Decisions

The good news is frivolous patent litigation has been on the decline. TC Heartland L.L.C. vs. Kraft Foods Group Brands L.L.C. is expected to lead to a reduction in the number of nuisance patent litigation lawsuits filed against many firms.

The high court held in its May 22, 8–0 ruling that patent cases can be filed only in courts located where the target company is domiciled or has a regular place of business effectively putting an end to East Texas“patent troll farm.” But, non-practicing entities won’t stop going after companies small and large, especially those they consider particularly vulnerable because of their reliance on one or two technologies.

Quality Patent Leads to a Troll Loss

Lululemon leads the tech in fashionable yoga sportswear. They stood accused by a Boston patent troll of stomping over its rights as it affixed a pocket to its line of sports bras. The patent troll, Blackbird Technologies, doesn’t make a competing bra — or any products, for that matter — but owns the patent to a “sports bra with an innovative storage compartment.”

They sued Lululemon in 2014, claiming its patent for a pocket laminated to the front of a sports bra covered the yoga maker’s product — even though the Stuff Your Bra pocket, big enough for a smartphone, is sewn into the front of the product. Well, lawyers for Blackbird argued in court, laminated means “sewn or otherwise united,” which is an overly broad interpretation. The claims in the patent that Lululemon held specifically outlined the pocket was sewn not laminated. It did not stop Blackbird from pursuing a suit.

Last year, Judge Richard Andrews dismissed Blackbird’s case. And the quick decision this year did not include a written opinion, usually a sign that a case is so obvious that none was necessary, according to patent experts.

Blackbird has sued and settled with Asics, Swoob and Zoot Sports. But Lululemon fought back and won.

Recommendations

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First, do not freak out if you get a letter talking about “patent infringement.” It may just be a “letter of demand,” which is not a lawsuit.

Then do your research. Start with the site Trolling Effects, they use simple language for the sole purpose of educating small businesses on patent laws and common legal issues. They also feature an archive of legal threats as a resource for recently sued companies.

Further, you can turn to EFF, which was set up to provide funds for legal defense in court to defend individuals and new technologies from what it considers abusive legal threats.

Second, if you are a software startup, join the Open Invention Network. It is a shared defensive patent pool with the mission to protect Linux. Launched in 2005, OIN has strong industry support with backing from Google, IBM, NEC, Philips, Red Hat, Sony, SUSE, and Toyota. Any company, project or developer that is working on Linux, GNU, Android or any other Linux-related software is welcome to join OIN, free of charge or royalties.

Third, buy patent litigation insurance. If you are a venture backed business, you might buy D&O insurance because you could be personally exposed to a lawsuit from disgruntled shareholders, employees, or investors. To cover your rear end, you can now buy insurance for patent litigation. Average premiums for companies with less than $20 million in revenue range from $7,500 to $10,000 per year. If a covered company gets slapped with a lawsuit from a patent troll, the insurer will shoulder legal or settlement costs.

Finally, you may want to consider going on the offensive to invalidate the litigant’s patent. It will take a professional approach and some money. Seek IP counsel to do that as soon as possible, as these types of cases are virtually impossible to fight on your own.

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