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PatentShield helps startups fight patent litigation in return for equity

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Re: PatentShield helps startups fight patent litigation in return for equity

#41

Post by johncolanduoni »

jacquesm wrote: post #26
caf wrote: post #17

Earlier quoted context omitted.

Does payment in the form of equity rather than cash affect the incentives in a negative way? It's not enough to call out a distinction: how does it make a difference? If anything, the equity should mean that Google's incentives are more closely aligned with the startup's than the fire insurer's are with the insured.

Yes, because obviously if that equity turns out to be worth a very large amount of money and the company is never sued Google is not going to turn around and say 'oh, sorry for this vastly disproportionate payment, here is your repayment'. In fact, the best outcome for Google would be if nobody ever got sued. (That's also the best outcome for the companies but there is no way of knowing if they would have gotten sued…

The best outcome for any insurance company is if their contractural obligations never make them do anything. What's your point?

Re: PatentShield helps startups fight patent litigation in return for equity

#42

Post by Sacho »

jezclaremurugan wrote: post #8
jacquesm wrote: post #5

Google is taking a leaf out of the Mafia playbook here. Classy. Nice start-up you have there. Would be a shame if one of these pesky trolls sued you. But if you join our organization as a partner you will be protected.

I think there is a distinction here - the Mafia protects people from itself - but Google doesn't itself sue startups.

The Mafia didn't just protect people from itself, it also protected them from unorganized crime and other organizations.

Re: PatentShield helps startups fight patent litigation in return for equity

#43

Post by bdowling »

samaparicio wrote: post #4

A lot of startups get sued by Non Practicing Entities (trolls) that have no operating business to speak of. That provides the slimmest counterattack surface - so not sure how useful it is to have a portfolio to hit back. I think a better defense mechanism would be a legal defense fund that would force the trolls to make their case at trial, to go through discovery, to bring expert witnesses. Because the law firms tha…

Others have mentioned this, but this PatentSheield scheme is not useful against non-practicing entities (NPEs or "trolls). It is intended to be used by startups who are at risk of sued by big incumbants. For example, if an IoT startup participates in this program and is sued by an established IoT company, the startup can take title to the portfolio and counter-sue the incumbant for infringement of the portfolio patents. At that point, the companies agree to a cross-licensing deal and both parties live to fight another day.

This kind of arrangement is not useful for countering NPEs because NPEs are non-practicing by definition. Since they are non-practicing, you can't countersue for infringement.

Your note about cooperation between potential defendants is spot-on. The difficulty is in getting them to cooperate. Accused infringers are likely to be competitors who may not be inclined to cooperate. Further, it is to the advantage of each to simply license the patent and wait for another accused infringer to do the work to invalidate the patent, at which point they can all stop paying license fees. (A classic "free rider" problem.)

By the way, a company can buy patent infringement insurance that will pay for litigation or settlement costs, but it isn't clear that it is worth the premium.

Re: PatentShield helps startups fight patent litigation in return for equity

#45

Post by bdowling »

EGreg wrote: post #30

Why don't we have something like the open source movement in drugs? Using PATENTLEFT. All those possible inventions for the long tail if people were allowed to build on top of existing discoveries.

It's unnecessary. If you want to prevent something from being patented, just disclose it in a publication. That publication will bar anyone else from patenting your invention. As long as you don't patent it yourself, it will become dedicated to the public.

Re: PatentShield helps startups fight patent litigation in return for equity

#46

Post by scotu »

bitmapbrother wrote: post #32
jacquesm wrote: post #5

Google is taking a leaf out of the Mafia playbook here. Classy. Nice start-up you have there. Would be a shame if one of these pesky trolls sued you. But if you join our organization as a partner you will be protected.

Not really. With the Mafia you don't have a choice. If you don't need the protection then you need not apply.

haha sure, they are not going to burn down your shop if you don't "voluntarily" "apply"

Re: PatentShield helps startups fight patent litigation in return for equity

#47

Post by neltnerb »

jacquesm wrote: post #12
caf wrote: post #11

Earlier quoted context omitted.

Sure, but that's exactly the case with commercial fire insurance versus actual protection rackets too.

Commercial fire insurance does not typically take equity in the places they insure.

When I read this, my first thought was that the ownership stake is helpful in some way for the legal defense. I'll be curious what numbers they're talking about once they are available.

Re: PatentShield helps startups fight patent litigation in return for equity

#48

Post by parhurs »

nl wrote: post #40
samaparicio wrote: post #13

Earlier quoted context omitted.

There are several ways of reaching a distributed consensus about that, like proof of stake. It is also conceivable that it would be in the fund's interest to defend all lawsuits. That would provide the largest deterrent, since the lion's share of today's suits are without merit, and the cost of defense would be considered the operating cost of the fund. What the trolls exploit is the assymetry between a defendant wit…

That would provide the largest deterrent, since the lion's share of today's suits are without merit Doesn't this depend on what "without merit" means? It seems unlikely they are "without merit" in the legal sense, since then they would be thrown out at the first hearing. If you mean they are from patent trolls aka non-practicing entities, then it seems wrong too. I see coverage of tens of cases by NPEs per year, but…

Ars Technica reported last year that in 2015 over two thirds of patent lawsuits were filed by trolls and that of all patent lawsuits, 44% were filed in the Eastern District of Texas (where few others than trolls would be filing suits). The report says that although the numbers are up, the trolls' business might be down.

Ars: https://arstechnica.com/tech-policy/2016/01/despite-law-chan...

Original statistic: https://www.unifiedpatents.com/news/2016/5/30/2015-patent-di...

Re: PatentShield helps startups fight patent litigation in return for equity

#49

Post by yorwba »

bdowling wrote: post #45
EGreg wrote: post #30

Why don't we have something like the open source movement in drugs? Using PATENTLEFT. All those possible inventions for the long tail if people were allowed to build on top of existing discoveries.

It's unnecessary. If you want to prevent something from being patented, just disclose it in a publication. That publication will bar anyone else from patenting your invention. As long as you don't patent it yourself, it will become dedicated to the public.

IANAL, but publishing the invention to preclude patents is a bit like open sourcing your code under a permissive license. Although it allows anyone to use and modify the code, it also allows making closed-source modifications. The patent equivalent would be someone patenting work based on the original publication.

The copyleft equivalent would be to patent your work, but license it to anyone, provided they use the same license for any derivative patents. I think such a scheme might lead to interesting results if some important innovation ends up locked into copyleft, similar to the Linux kernel.

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