You’ve launched your new Internet business. Exciting times. Customers like what you’ve done; they’re actually paying you! And then one day you receive a letter asking you to cease and desist because you’re infringing on someone’s patent. You contact the offended party to offer to license their technology, but they refuse. They want to shut you down.
That scenario may sound far-fetched but it’s actually more common than you might think. In fact, the very scenario I describe above is one that the Wall Street Journal reported on recently. The entrepreneur was Kate Endress, co-founder of Ditto Technologies, a venture-backed Silicon Valley firm that sells designer eyewear. The plaintiff was 1-800 Contacts, the largest contact lens provider, which apparently has a history of filing such lawsuits.
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In the good old days, companies that liked to troll for infringers (they’re known as patent trolls because most, unlike 1-800-Contacts, are non-practicing entities (NPEs) or patent assertion entities (PAEs) that make a living suing infringers) at least waited until the infringer’s company was worth multiple millions of dollars so they could reap bigger rewards; but, today it seems they’re willing to target startups with minimal resources. In fact, in 2012, Colleen Chien, an assistant professor at the Santa Clara University School of Law published research on patent litigations from 2006 to the present, finding that most of the defendants (at least 55%) were companies with less than $10 million in revenue. Moreover, the smaller the company, the more likely it was to suffer a significant operational impact as a result, such as delayed hiring, missing a milestone, or even having to shut down the business. In the case of Ditto Technologies, to even attempt to cover the multimillions of dollars over several years that defending the company will incur, Endress, according to WSJ, has stopped taking a salary, let some of her employees go, and eliminated the marketing budget.
There are those who argue that non-practicing entities provide a secondary market for inventors to monetize their patents. While that may be true to some extent, it is also true that it’s a disincentive to entrepreneurs with patents they want to commercialize through a startup. How many startups can afford to use their limited resources to defend their patents against these NPEs?
Fortunately, nonprofit organizations like the Electronic Frontier Foundation are successfully working to help inventors and entrepreneurs defend their rights (note their terrific infographic below). And, if you haven’t heard, a new startup--founded by the former IP litigation chief for Intuit, Kevin Jakel, and backed by Google--thinks it has found a way to effectively fight the trolls. According to its site, Unified Patents intends to focus on specific protected technologies (right now it’s mobile payments and cloud storage) and encourage startups, small and medium-sized businesses, and large companies to participate in its Micro-Pools, which Unified will then defend to the death against NPEs. For small companies, joining reduces the cost of defending their patents, gives them greater freedom to operate, and they gain access to IP in the protected category to which they subscribe.
If you’re starting a new company, it’s impossible to know for sure that you’re not infringing on some obscure and overly broad patent held by an NPE. Being aware of your options just might save your business if you're ever accused of infringement. As for Ms. Endress, she’s now in the process of raising funding on Indiegogo to defray her legal costs.
Why is it that most every business person I know has a regular old business card, you know, those 3 1/2 x 2 inch rectangular pieces of thick paper that we all like to give out to one another? I just grabbed a stack out of my drawer, and -- except for the colors, fonts, and arrangement of the design elements -- they're all pretty much the same. Senior Vice President at Umpqua Bank? Check. Associate Director of Sales at Hornblower Cruises and Events? Yup. Recruiting Manager at FortuneBuilders? Definitely.
social problems like health care, improving education, and getting people out of poverty—if that isn’t a stereotypical view of women entrepreneurs, I don’t know what is. Does that mean women should leave social media and mobile apps to the guys? 
