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The investment that didn't happen

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Re: The investment that didn't happen

#11

Post by thaumaturgy »

As HN's resident (and sole?) idealist, this line really disappointed me:

> “We love these guys, and it sucks to see this happen to them, but we can’t sign up for a lawsuit.”

I understand the logic behind it, but it still seems sort of weak to not stick your neck out when it really matters, and then turn around and write a blog post about how awful it all was after the fact.

In these guys' shoes, honestly, if I had something that was potentially that big, and that well-developed, I wouldn't be able to walk away from it. I'd at least look up the list of Patent Cooperation Treaty countries (http://www.uspto.gov/web/offices/pac/dapp/pctstate.html) and consider moving to a country that wasn't on it (like Chile), and launching from there.

Re: The investment that didn't happen

#12

Post by micks56 »

credo wrote: post #9
jdc wrote: post #8

"Apparently a corporation can only be represented by an attorney in a litigation and cannot be represented by the founders or officers, even if the company cannot afford counsel." Does this seem really out of line to anyone else?

At first glance, it does seem unfair. However, I'm assuming that this law was put into place because (a) Most non-lawyers can't do a good legal job and don't know the law (or loopholes). So they are likely to do themselves harm. (b) I think that verdicts can be reversed if it is proven that counsel was unqualified. This means that the case will need to be retried with a more qualified lawyer. That said, I think that…

A corporation is considered a person, and that person is separate and distinct from its employees, officers, and directors.

So for the corporation to appear pro se, it must actually appear in court, but there is no way for a corporation to do that because it really isn't a person.

So any officer arguing on behalf of the corporation is actually engaging in the unlawful practice of law without a license by representing the "person" corporation.

Your (a) is the common public policy reason given why lawyers need to be licensed. I offer no opinion on its wisdom.

Regarding (b), to get a new trial it is more difficult. You need to prove dereliction of duty (every state varies here) by the attorney AND that the errors caused you to lose and you would have won otherwise. Very difficult standard to meet. This rule protects lawyers greatly, to the detriment of their clients.

Re: The investment that didn't happen

#13

Post by lionhearted »

thaumaturgy wrote: post #11

As HN's resident (and sole?) idealist, this line really disappointed me: > “We love these guys, and it sucks to see this happen to them, but we can’t sign up for a lawsuit.” I understand the logic behind it, but it still seems sort of weak to not stick your neck out when it really matters, and then turn around and write a blog post about how awful it all was after the fact. In these guys' shoes, honestly, if I had so…

> I understand the logic behind it, but it still seems sort of weak to not stick your neck out when it really matters, and then turn around and write a blog post about how awful it all was after the fact.

Most likely he has limited partners who have given him money to invest, so it's not just his own money.

The company is almost certainly less likely to make it now - they could lose the suit, and then it's over. But even if they win, that's a massive mental beatdown and stress and such for quite a while. Not to mention costs.

It sucks all the way around, but an investor with limited partners can't back something that doesn't fit with the goals/metrics/risk that they promised when their LP's signed up.

Re: The investment that didn't happen

#14

Post by micks56 »

They should have found a recent law grad that is unemployed. That guy would work for free to make his name on a big case.

Any competent law grad who passed the bar can answer motions, reply with his own, and get this case on the court docket 2 years out to buy these guys some time.

I would have taken the case for free.

Re: The investment that didn't happen

#15

Post by cynusx »

Correct me if I'm wrong, but it seems that this company can restart operations? Who owns the IP now?

The argument that the patent climate hasn't changed should not deter investors in a restart of this company, most startups would die if they are sued for patent infringement and in this case the aggressor has been pacified.

Re: The investment that didn't happen

#17

Post by jc123 »

thaumaturgy wrote: post #11

As HN's resident (and sole?) idealist, this line really disappointed me: > “We love these guys, and it sucks to see this happen to them, but we can’t sign up for a lawsuit.” I understand the logic behind it, but it still seems sort of weak to not stick your neck out when it really matters, and then turn around and write a blog post about how awful it all was after the fact. In these guys' shoes, honestly, if I had so…

Interesting idea moving to another country; since they were looking to raise funds it's probably tough to convince the same investors to invest in the new foreign startup.

Re: The investment that didn't happen

#18

Post by geoffw8 »

As an FYI, and as a founder of a fashion shopping site (aggregator) I can tell you that people do not like shopping like that - as in, find me something that looks like x - you have to factor in what we refer to as "Store DNA".

Your not comparing hoovers here, people don't just buy a "look" - they buy (from store x) because of the quality, the brands values etc.

Re: The investment that didn't happen

#19

Post by nikcub »

jc123 wrote: post #17
thaumaturgy wrote: post #11

As HN's resident (and sole?) idealist, this line really disappointed me: > “We love these guys, and it sucks to see this happen to them, but we can’t sign up for a lawsuit.” I understand the logic behind it, but it still seems sort of weak to not stick your neck out when it really matters, and then turn around and write a blog post about how awful it all was after the fact. In these guys' shoes, honestly, if I had so…

Interesting idea moving to another country; since they were looking to raise funds it's probably tough to convince the same investors to invest in the new foreign startup.

Modern investors are a lot more sophisticated than they were a few years ago in regards to where a startup is incorporated and where it operates from. Angel investing and earlier rounds take place anywhere, it is only when larger funds get involved do VCs only tend to invest within a few zipcodes of their own location.

Fred Wilson has blogged about this extensively - he considers his fund to be global, as do many other angel and super-seed investors.

Re: The investment that didn't happen

#20

Post by nikcub »

I hope this isn't the end for these guys. A few solutions to the problem which I am sure they are contemplating:

a) Raise the round but cap legal expenses to 80-120k. This would get you a decent way down the road with discovery, pre-trial and potentially an early settlement.

b) Find a patent litigation firm that would waive the remainder of the fees on the same terms as the investment round, to be converted at a later date

c) Get in touch with one of the funds that specialize in exactly this type of company. Software patent hoarding and litigation is an industry unto itself - there is bound to be a fund out there that would take this case on. A lot of the patent hoarders have close working relationships with litigation firms

d) Patents are not really patents until they have been held up in court. Google may identify this patent as indefensible prior to any trial, and settle. At the moment they got these guys to fold with a cheap threat. Google may not want to pursuit the case at all - like.com sent this out prior to their acquisition. Google don't seem to be the type of company that would use a patent to shut down a startup.

e) Register an IP holding company internationally and license that IP to the local US operating firm

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