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Suing Open Source Startups - A New Scam?

Cliff posted more than 9 years ago | from the despicable-behavoir-in-business dept.

The Courts 104

Anonymous Crowhead asks: "I'm posting this anonymously for reasons that will soon be obvious. We're a fairly new startup company who specialize in products, and we have a policy of making all our software Open Source. A while ago, we received an notice from a company claiming that we were violating some of their patents, and that they had found this out by looking at our code. They gave us one of the two options - either make the product closed source and sign up for a percentage of the profits with them, or provide them with a stake in our company. Our legal advisors felt that it might be wise for us to settle, but we decided to press them further for details of the infringement and refused to yield. We haven't heard from them since - so either we called their bluff, or they've gone to come back with more legal firepower. No matter what, we feel that this is a scary precedent. Have any other entrepreneurs around here experienced anything similar? Is this one of the after-effects of the SCO episode - to go after unwitting small startups who cannot fight back? Personally, this was a nightmare for our company, and we are not aware of any patents that we may be violating."

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you don't really lose anything.. (2, Informative)

gl4ss (559668) | more than 9 years ago | (#10409000)

..by calling their bluff.

if their claims have any merit they'll cough up.

Re:you don't really lose anything... (3, Insightful)

swillden (191260) | more than 9 years ago | (#10409187)

..by calling their bluff. if their claims have any merit they'll cough up.

Like The SCO Group did?

I'm sure IBM has sunk close to $10M into the SCO litigation by now, and after that, a year and a half in court and two court orders, SCO *still* hasn't said just what their beef is.

With any luck, Judge Kimball will grant IBM's motion for Partial Summary Judgement and put the whole copyright fiaSCO to rest once and for all (barring appeal). If not, IBM could spend another $10M before SCO's bluff is fully "called".

Granted, that's a much more complex situation, and there is still a faint glimmer of a flicker of a possibility that SCO, somewhere, somehow, will actually find something IBM did wrong (not on the copyright question, I don't think, but perhaps on the contracts), but the point is that you very well can spend a lot of cash calling their bluff.

Might as well at least make them file a formal complaint, I suppose.

Always let them haul YOU into court. (0)

Anonymous Coward | more than 9 years ago | (#10409227)

No lawyer, just defend yourself and leave it at that. You incur no legal fees, and since the burden of proof is on the side of the accuser, let them accuse at least until you find out exactly what they're complaining about.

Re:Always let them haul YOU into court. (0)

Anonymous Coward | more than 9 years ago | (#10409290)

You incur no legal fees, and since the burden of proof is on the side of the accuser, let them accuse at least until you find out exactly what they're complaining about.

But by then the damage may be done...

Re:Always let them haul YOU into court. (2, Interesting)

p2sam (139950) | more than 9 years ago | (#10409392)

it's a popular mis-conception that "innocent until proven guilty" applies universally in all legal arena. The burden of proof is on the side of the accused in criminal cases. But for civil matters (contract/IP/etc.), the evidence speaks for itself, and if the evidence is not favourable to the plantiff, then plantiff has burden of proof of no wrong doing.

IANAL, of course.

Re:Always let them haul YOU into court. (1)

cpt kangarooski (3773) | more than 9 years ago | (#10411466)

What the hell was that?

Re:you don't really lose anything... (1)

stevew (4845) | more than 9 years ago | (#10409552)

Note that 10M is better than 5B that SCO is suing for!!!!

I think the company did the right thing. It is only prudent to ask someone for the proof, like the numbers of the patents! Without that, it likely WAS a scam.

Big difference! (1)

A nonymous Coward (7548) | more than 9 years ago | (#10410753)

SCO at least went after somebody with lots of money, even if they did have a bogus case. Not much point going after a (small?) startup, it would probably cost more in lawyers than any money to be gained. My guess is just a bunch of scam artists hoping for a quick buck.

Re:you don't really lose anything... (2, Insightful)

solman (121604) | more than 8 years ago | (#10413314)

IBM's SCO suit has been a marketing bonanza. All of the sudden, IBM has become a good guy in the eyes of the Geeks who control much of IT spending. [msn.com]

And IBM's defense has significantly increased the confidence of the business community in using open source software. Imagine the impact that IBM settling with SCO would have on their multi-billion dollar Linux bet.

They would have gladly spent $100M for this kind of result.

Re:you don't really lose anything... (1)

mikera (98932) | more than 9 years ago | (#10437738)

IBM Business Plan
(Conspiracy Theorist Version)

1. Announce move into Linux business
2. Pay SCO to sue you over some random trivia
3. Become beloved by all IT geeks
4. Sell lots of hardware and software!
5. PROFIT!!!

Re:you don't really lose anything... (0)

Anonymous Coward | more than 9 years ago | (#10420611)

I'm sure IBM has sunk close to $10M into the SCO litigation by now, and after that, a year and a half in court and two court orders, SCO *still* hasn't said just what their beef is.

Oh that can't be true. Everybody knows that PJ is single-handedly winning the war against SCO. Her Groklaw research is so brilliant that the IBM lawyers just have to read the comments section to the judge each day.

/rollseyes

Re:you don't really lose anything... (1)

jonadab (583620) | more than 9 years ago | (#10446801)

> > if their claims have any merit they'll cough up.
> Like The SCO Group did?

That was a conditional statement.

And if they had as much money to blow on litigation as SCO has done, they
would be going after larger fish than an unknown startup, probably.

Re:you don't really lose anything... (1)

swillden (191260) | more than 9 years ago | (#10447901)

That was a conditional statement.

Hah! Good point!

Though my point, that it's possible to spend lots of money litigating before you actually find out if they have anything to cough up, still stands.

Re:you don't really lose anything.. (1)

SpaceLifeForm (228190) | more than 9 years ago | (#10409710)

And possibly even if they don't. Is it Diebold?

Re:you don't really lose anything.. (2, Interesting)

Anonymous Coward | more than 8 years ago | (#10412219)

Actually, that's not what we are scared of -- we're scared of two things:

1. Investors pulling out, for fear of the lawsuit
2. Customers and clients being scared of the credibility of our software

Besides, we're only a startup -- we do not have an established cred, nor we have the resources. If this proves to be a bad call on our part, it might just prove disastrous, although I hope not.

Anonymous Crowhead

Re:you don't really lose anything.. (1)

gl4ss (559668) | more than 8 years ago | (#10413113)

..but caving in is disasterous as well.

especially if you do it with so little information.

before caving in it's essential that you get to review which patens you may be infringing.

Re:you don't really lose anything.. (1)

Facekhan (445017) | more than 9 years ago | (#10457682)

IANAL, but I would have a lawyer draft a letter stating that if they do not identify the patent in question then you will assume that this is an extortion scam and report it to the authorities.

If it's just a threat.... (2, Interesting)

FooAtWFU (699187) | more than 9 years ago | (#10409009)

... then please, don't just give in without at least some idea of what it is you're supposedly violating. Surely they can understand the rationale behind this if they're at all vaguely legit.

Re:If it's just a threat.... (5, Interesting)

ambrosen (176977) | more than 9 years ago | (#10409095)

Truly. It's not as if patents are secret. They should give you the Patent number and then if there's any case at all, you can answer it.

Re:If it's just a threat.... (2, Interesting)

pbhj (607776) | more than 8 years ago | (#10412338)

And once you have the number (at least in the UK) you can ask the Patent Office (the "Comptroller") to say whether the patent is valid or not. So if it's trivially anticipated you may be able to sort it out without making a court appearance.

I think there is a similar routine in the USPTO, basically recognition of the fact that bad patents slip through.

Re:If it's just a threat.... (1)

Profane MuthaFucka (574406) | more than 9 years ago | (#10409104)

And you could add a little thing at the end that says "And you know, I was surfing the web and I was shocked to learn that barratry is illegal and can get an attorney disbarred. I just love what I can learn on this here World Wide Intarweb."

Re:If it's just a threat.... (5, Insightful)

fatmonkeyboy (257833) | more than 9 years ago | (#10409315)

No, there's no point in making veiled (and probably idle) threats.

It's in your best interests to remain polite. The company might come back with a legitimate patent infringement. Just because you're not aware that you've infringed on a patent doesn't mean you haven't done so. There are patented algorithms (the "marching cubes" algorithm for voxel rendering comes to mind). Even if you independently develop such an algorithm, you'd be infringing the patent by using it.

Now, if you never hear from them again after challenging them and feel you have a moral obligation to strike back (on behalf of future victims or something)...and after you've done your research and you're sure that the company isn't legit...then you should contact a lawyer and see what he or she suggests as a course of action.

And if you're not willing to retain a lawyer, then what are you going to do? Call them names? Idle threats won't stop them. Do something useful about it, or just forget it and move on.

Re:If it's just a threat.... (1)

innocent_white_lamb (151825) | more than 9 years ago | (#10411487)

And if you're not willing to retain a lawyer, then what are you going to do? Call them names?

No, call the law society and file a complaint.

Re:If it's just a threat.... (2, Insightful)

dubl-u (51156) | more than 8 years ago | (#10412228)

No, there's no point in making veiled (and probably idle) threats. It's in your best interests to remain polite.

I strongly agree.

I've never dealt with patent threats, but I used to work at a company that ran on-line communities. We regularly received legal threats from loons around the world. For non-credible threats, we'd just ignore them. Usually they'd just go away. For the plausible or persistent ones, we would be friendly but do nothing.

I found it was very helpful to ask questions about their position in a manner that was friendly, innocent, sincere, and slightly clueless. I also liked to be sympathetic and say pleasant, true things. E.g., agreeing that of course people's intellectual property should be protected. That conceeds nothing legally important, but helps to make people feel less scrappy. And mixing in moderate delays sapped their energy further.

Most people just wanted to vent or bully a little. When they got tired of getting nothing out of us, they just went away. But to maintain that, you must not seem like you're fighting them; many people love a good fight.

Even if your sharks are in it for the money, being polite, friendly, and eternally useless may be a good way to get them to move on to an easier mark.

Re:If it's just a threat.... (1)

dubl-u (51156) | more than 8 years ago | (#10412239)

Now, if you never hear from them again after challenging them and feel you have a moral obligation to strike back (on behalf of future victims or something)...and after you've done your research and you're sure that the company isn't legit...then you should contact a lawyer and see what he or she suggests as a course of action.

I'd disagree a little with this. Most lawyers I've dealt with are good at helping you reduce the risk of a course of action, but aren't so good at suggesting them. Instead, come up with a few ways to strike back (I'm sure we'll help) and then have a lawyer help you evaluate the risks with each one.

Personally, if I really thought they were shaking down innocent startups, I'd make sure other people could Google them and find out your point of view, even if it's anonymized. Also consider talking to the folks who run Chilling Effects [chillingeffects.org] , and on-line clearinghouse of people using IP law to threaten you; they may be willing to publish material for you.

Re:If it's just a threat.... (3, Interesting)

yog (19073) | more than 9 years ago | (#10411070)

Maybe while they're at it they should fire their legal counsel and get someone with a little more backbone.

It's common for lawyers to present a cost benefit analysis of this type of situation and quite often they will encourage a settlement, similar to the way a family pays off kidnappers to free a hostage or a retail business pays protection money to some street gang.

One wonders whether there is in fact a conspiracy in the legal world to encourage settlements, because if people challenged every questionable lawsuit that came down the pike, perhaps there would ultimately be fewer such suits, just as if all businesses refused to pay protection money there would be no protection racket (albeit, after some bouts of violence) and there would be no incentive to kidnap hostages either.

Lawyer is just trying to protect you (1)

lorcha (464930) | more than 9 years ago | (#10428829)

I spoke to my lawyer a few weeks ago about this, and he said that getting named in a frivolous lawsuit is gonna cost you about $1000-$5000 just to file a motion to dismiss (the higher end is if there is some back and forth before dismissal). If there is any merit to the suit at all, you're looking at $5000 - $20,000 in attorney's fees alone for a simple matter. It just goes up from there depending on complexity. He's had cases in litigation for 10 years!

If you were looking at $20k in legal fees plus whatever the award costs you if you lose, would you not want to settle for $10k, Mr. Backbone? Would you want all your business activities stayed for 10 years while this thing is in litigation? I don't know what the numbers looked like for this guy, but my guess is his lawyer was just trying to save him some money.

Sometimes settling is the correct business decision.

Re:Lawyer is just trying to protect you (1)

stanmann (602645) | more than 9 years ago | (#10444399)

Agree with OP, settling is never the right decision. Thus far IBM has spent enough on legal fees to have acquired SCO, Paying off a blackmailer is always foolish. Because you will either be hit up again... OR hit up again by someone else. If you intend to stay in business more than 10 years, its worth taking it before the judge. paying 10k per year or 2 years vs paying 30k once is the right call.

open source doesn't pertain (1)

aminorex (141494) | more than 9 years ago | (#10409042)

It is irrelevant to the patent infringement issue whether your code is open or closed. If you negotiated a license for a patent, and that license did not specifically preclude it, there would be nothing to prevent you from releasing it as open source code.

Re:open source doesn't pertain (1)

dougmc (70836) | more than 9 years ago | (#10409486)

It is irrelevant to the patent infringement issue whether your code is open or closed.
Yes and no. Open source code makes it much easier for a company to verify that their patent is being infringed upon, because they can look and see how things are done.

Now, with closed source, you can often tell that a patent is being violated just by how it works, but often you can't, or not easily anyways.

Suppose you had a patent on the quicksort algorithm (sorry, not algorithm -- you cannot patent algorithms. method -- the quicksort method.) With closed source, they don't know what sort method is used. They might be able to time it, see how long it takes to sort N items, and manybe narrow down the algorithm used, but they can't prove anything without some difficulty. With open source, they just go look.

As for the bit about `go closed source and give the patent-claimers part of the revenue', I don't know what that was about. Maybe they think it's easier to make money off of closed source -- which may be true.

It does in this case (1)

jgoemat (565882) | more than 9 years ago | (#10409810)

"and that license did not specifically preclude it"

They are trying to license for a fee if closed source or get stake in the company (probably much more money) if open source. If open source, at least GPL, they would have to give everyone a free license to use their patented technology, so it would devalue their patent.

If you're talking about why the "scam" might only pertain to one, that is presumably how they discvoered that it infringed their patent. If it was a closed source product, they probably never would have been able to find out, or verify for sure anyway.

Re:It does in this case (1)

aminorex (141494) | more than 9 years ago | (#10417177)

I don't know the terms of the GPL well enough to comment, but in general there is nothing about open source that implies a license to patents which it implements.

Re:It does in this case (1)

jgoemat (565882) | more than 9 years ago | (#10426273)

Of course you can't imply a license to the patents and assume you have the rights to use any patents, but you can't distribute a GPL program unless there's a royalty-free license to any patents in it. In the GPL [fsf.org] there is a summary:
Finally, any free program is threatened constantly by software patents. We wish to avoid the danger that redistributors of a free program will individually obtain patent licenses, in effect making the program proprietary. To prevent this, we have made it clear that any patent must be licensed for everyone's free use or not licensed at all.
And section 7 is the actual language of the GPL that makes it clear that you can't distribute a GPL work without a patent license that permits royalty-free redistribution of the Program:
7. If, as a consequence of a court judgment or allegation of patent infringement or for any other reason (not limited to patent issues), conditions are imposed on you (whether by court order, agreement or otherwise) that contradict the conditions of this License, they do not excuse you from the conditions of this License. If you cannot distribute so as to satisfy simultaneously your obligations under this License and any other pertinent obligations, then as a consequence you may not distribute the Program at all. For example, if a patent license would not permit royalty-free redistribution of the Program by all those who receive copies directly or indirectly through you, then the only way you could satisfy both it and this License would be to refrain entirely from distribution of the Program.

Re:It does in this case (1)

aminorex (141494) | more than 9 years ago | (#10431890)

I still don't see anything that, singly, or in combination, precludes distributing unlicensed patent implementations under the terms of the GPL.
In fact, I'm sure it happens all the time.

Re:It does in this case (1)

Fulcrum of Evil (560260) | more than 9 years ago | (#10432030)

I still don't see anything that, singly, or in combination, precludes distributing unlicensed patent implementations under the terms of the GPL. In fact, I'm sure it happens all the time.

Well, maybe it does happen, but it isn't legal. The post you responded to lays it out explicitly: in order to distribute a program that contains a patented bit of code, you must have a free license for that code that allows redistribution.

From the license: For example, if a patent license would not permit royalty-free redistribution of the Program by all those who receive copies directly or indirectly through you, then the only way you could satisfy both it and this License would be to refrain entirely from distribution of the Program.

Re:It does in this case (1)

aminorex (141494) | more than 9 years ago | (#10433792)

> The post you responded to lays it out explicitly:
> in order to distribute a program that contains a
> patented bit of code, you must have a free
> license for that code that allows redistribution.

Oh certainly. I don't doubt that. But it's not pertinent whether the code is distributed in source
form or in binary form.

They didn't tell what patents you're violating? (4, Insightful)

ion_ (176174) | more than 9 years ago | (#10409047)

A while ago, we received an notice from a company claiming that we were violating some of their patents, and that they had found this out by looking at our code.

we are not aware of any patents that we may be violating.

Did i get this right - they didn't tell you what patents you are supposed to be violating?

In that case their claims don't sound very credible IMHO.

Re:They didn't tell what patents you're violating? (1, Informative)

Anonymous Coward | more than 8 years ago | (#10412047)

Nope, they did not tell us the code we were violating. We had sent them a polite mail asking them to indicate the portions we may be infringing, as well as a list of the patents from their end.

In response, we just got another cease & desist notice, which was kinda funny.

Our legal counsel (well, which honestly, is just one lawyer) felt that it might be wise to settle, since he was afraid that if they did sue us, we would be hit real bad - plus, it would affect our existing (and potential) customers, too.

I know, it sounds strange -- but it did happen for real.

Anonymous Crowhead

Re:They didn't tell what patents you're violating? (1)

SoftwareJanitor (15983) | more than 9 years ago | (#10422561)

If they won't even identify their patent numbers then they are obviously full of crap and just trying to hold you up for money. However, you can look up patents yourself online at http://www.uspto.gov [uspto.gov] and search by things like the name and city/state of the inventor or assignee. You could then see if the company even has any patents, and if they do if there is any merit at all to their claims your software infringes on them. That information should be very useful to your lawyer in advising you on whether you can just blow them off or not.

Probably do Infringe (2, Insightful)

mrblah (229865) | more than 9 years ago | (#10409049)

Realistically, probably almost all software these days infringes on some kind of patent. The patent office seems willing to hand out anything, letting the courts sort it all out. That's fine for big companies, but it means smaller companies (who can't defend themselves) get the short end of the stick.

From this perspective, open-source seems like a liability. It's harder for companies to snoop in closed-source applications looking for violations of their patents, but open-source is... well, wide open.

Re:Probably do Infringe (1)

cmowire (254489) | more than 9 years ago | (#10409869)

True, but, on the other hand, any not-currently-patented algorythms used in open-source will be patent-free in the future. Remember, as long as the source code is present, it can be used as prior art in any patent dispute.

So, it sucks to be you, but is good for everybody else.

its an easy way to get money. (2, Interesting)

QuantumRiff (120817) | more than 9 years ago | (#10409070)

Most small startups (and small businesses) cannot afford the cost of the litigation for something like this. So they settle. It might take $10k to fight in court, or $7k to settle (For example). And there is the chance that if you lose, its suddenly $17k total. That makes the settling cost look very attractive. This is really easy for the bad company, since if you want to fight them in court, they just run and hide, but a large portion of people just settle. So they get tons of money, and never have to take things to court. Long live the american legal system!. Its hard to tell what the other companies intentions are, based on the info in the story. Are they a big company? (if they have lots of salaried lawyers sitting around, they're probably going to have no problem sending them to work against you.) But your right to request further clarification.

Re:its an easy way to get money. (3, Informative)

hedronist (233240) | more than 9 years ago | (#10410072)

There is a particular breed of scum-sucking parasite (I believe they are called small plaintiff attorneys) that look for clients that have a kind-of/might-be valid complaint in the $10,000 to $20,000 range. Unlike normal business-oriented attorneys, these a**holes will take the case on contingency. They know what it will cost for you to defend yourself, even if you win. And if you do win, they know there is little that can be done to counter-sue for fees and costs.

I am speaking from direct personal experience on this one. When we got the hit with the lawsuit (99% bogus, you got that, Mark?), I was so angry that I was ready to fight til the end of time. Fortunately, my attorney sat me down and explained how this scam works and then said, 'If you want to waste about a year of your time and also pay for my son's tuition at a nice private school, let's fight back. Otherwise, pay these clowns their money and you can get back to the business of making and selling products.'

He was right I -- but I can still feel my blood pressure go up every time I think about it.

Re:its an easy way to get money. (0)

Anonymous Coward | more than 9 years ago | (#10411614)

He was right I -- but I can still feel my blood pressure go up every time I think about it.

As a fellow small-business owner it makes my own blood boil when I hear stories like this. Some comments:

1.) This has become a very common experience. I read that something like a third of all businesses at some point face a bogus lawsuit. (sorry, no reference.. try google)

2.) Funnel your legitimate anger into doing something about it -- work to change the system so that other people don't have to go through what you did. Put the kind of people who sued you out of business by changing the rules. Use some of the money you saved by settling to support political activism. (It'll go a lot farther than fighting in the courts would have..) Find other people who have been screwed in the same fashion and start collectively being very squeaky wheels. Write letters to your elected officials on a regular basis.. and at all levels of government. Our legal system is out of control and, as with medical malpractice lawsuits, the public needs to be made aware of the issue. Do you have employees? Turn them into activists.

3.) The people who sued you did not get away with what they did. Not only do they have to live with the fact that they are thieves, but God will hold them accountable even if our misguided government never does. Frankly, eternity is a bit more valuable than whatever money they stole from you. There's also a perhaps counter-intuitive Biblical concept here.. "forgive and then pray for your enemies." When you think about it, these people are destroying their lives in the process of harming others, like yourself. There is ultimately no reward for what they're doing. But suppose they were morally convicted about their actions and turned from their corruption? There's certainly no guarantee, but you could possibly even get your money back. It has happened before. Not sure if you hold the beliefs of Christianity or not, but if not, do investigate. I've found that there really are good answers to why this life is the way it is and how we're supposed to live it. [end slashdot evangelism mode] hehe

Re:its an easy way to get money. (1)

LiquidRaptor (125282) | more than 9 years ago | (#10417831)

I'm sorry, this is completely offtopic and not really even appropriate, but I just gotta say this. Everytime someone does somthing bad people say well they'll suffer for eternity. Problem is the only requirement in chrisitanity to get into heaven is to accept Christ as you're lord and saviour. So all those people have to do is accept him and bingo, they get all the money in this life and everything in the next.
Mod me down now

Re:its an easy way to get money. (1)

DrPepper (23664) | more than 8 years ago | (#10412549)

At least for now you can concentrate on growing your business. In the long term, assuming your business becomes successful enough, you can take them to court for wrongfully taking money from you.

They should remember that... (1)

Phil John (576633) | more than 9 years ago | (#10438943)

...you should never try to extort more from someone than it would cost to have you killed. Lawyers beware ;o)

Re:They should remember that... (1)

gcaseye6677 (694805) | more than 9 years ago | (#10439573)

This may be a tongue-in-cheek comment, but I'm seriously surprised at how little this actually happens. I would think that if someone who was a little unbalanced in the head got sued by some shyster, said shyster would end up on the bottom of a river with a pair of cement shoes.

Re:They should remember that... (1)

sjames (1099) | more than 9 years ago | (#10447316)

This may be a tongue-in-cheek comment, but I'm seriously surprised at how little this actually happens.

If things like this continue, we'll see more of it. When civil law breaks down (or just gets priced out of reach), vigilante justice naturally takes over. All manner of dirty deeds are cheaper than going to court these days. Although it would take a an unbalanced person to have the plaintif killed, there are all manner of unpleasant but non-fatal options.

I must admit the thought of SCO recieving the world's largest bag of flaming doggie doo on their front steps has crossed mymind:-)

It's a scam, but it still might be dangerous (1)

DesScorp (410532) | more than 9 years ago | (#10409098)

Get a bunch of plantiff's attorneys involved, and a chase for money will ensue. Though SCO may have opened the doors here, IT really isn't very special when it comes to this sort of thing. Business has been dealing with this for years. There's a scam right now concerning ADA [state.or.us] lawsuits, where law firms literally go out and hunt small and medium business that may have ADA infractions, even if they're relativly small and the owners tackle the problem right away. Settle up, or we sue [findlaw.com] .

If lawyers think they've got a loophole to pull cash out of you, they'll attack it. Hope your firm's attorneys are good.

Re:It's a scam, but it still might be dangerous (1)

akpoff (683177) | more than 9 years ago | (#10409393)

What an irony! The linked article comes from a law firm specializing in defending against ADA Title III lawsuits.

It doesn't reduce the validity of their advice but it's rather self serving to publish an article raising the alarm that ends with:

For more information, please contact Jonathan W. Greenbaum at jgreenbaum@nixonpeabody.com, Robert Carrol at rcarrol@nixonpeabody.com, or Todd Shinaman at tshinaman@nixonpeabody.com.
Rewritten it might sound like "Newsflash! Some unscrupulous law firms are suing hotels for ADA violations just to make money. Pay us to help you beat them." If they really wanted to help they'd file ethics violations against the other law firms and lobby for sensible tort reform.

Man, what was I thinking!

You are violating my patents too! (1)

Spoing (152917) | more than 9 years ago | (#10409126)

So, give me money! ;}

That should sound silly...and it is. If they are claiming something, they have proof...asking for it is a normal thing to do. Rolling over without proof is a bad idea.

Additionally, once you know what the patent is, you can research it (it may not be active anymore), dispute it, or re-write your code to avoid it (if possible). This last suggestion is the main thing that Linux kernel developers would be glad to do in the SCO case...but SCO also hasn't said what the code is or what is being violated! Hmmm...

Say what? (4, Insightful)

max born (739948) | more than 9 years ago | (#10409180)

Our legal advisors felt that it might be wise for us to settle, but we decided to press them further for details of the infringement and refused to yield...

So your legal advisors advised you to settle without further details? Something is not right about this story.

Re:Say what? (1)

Usquebaugh (230216) | more than 9 years ago | (#10409327)

This /. it's doubtful there's any truth behind the story.

Mod parent + (1)

jgoemat (565882) | more than 9 years ago | (#10409827)

This is probably true. How many attorneys would advise their clients to settle, possibly even giving up partial ownership of the company, without any evidence of wrongdoing?

This other hypothetical company doesn't even have SCO's excuses for not revealing code. SCO supposedly doesn't want to give out what is their's because then it would be open. Patents are already open, available to anyone that wants to search [uspto.gov] for them.

Re:Say what? (0)

Anonymous Coward | more than 9 years ago | (#10409335)

The "legal advisors" in question probably muttered "I, anal..." before each sentence they spoke.

Re:Say what? (3, Informative)

Anonymous Coward | more than 8 years ago | (#10412065)

Sorry, advisors is a wrong term that I should not have used. To be fair, we have just one lawyer who has been our counsel since inception - and a couple of his associates, but essentially he is the only one.

We got a C&D notice, at which point we asked them to indicate the sections of our software in which we were violating the patents, and pointers to the said patents. That was met with another C&D letter, this time with strong worded and with a staunch warning. Our legal counsel felt that it would be perhaps wise to negotiate, rather than challenge them -- since atleast during negotiation, we would see part of the code, or at the very least placate them for a while - or worst case, give them a percentage of the product's revenue.

But we felt that to be almost blackmail and did not go with his advice. Instead, we sent them a reply telling them that without the details, it would be pointless for us, and therefore we do not beileve that there is any patent infringment, and consequently we will not be negotiating with them unless they will provide us with evidence. And failing which, we would assume that it was a farce.

I had to fit the story within the word limitations, I should have been clearer -- my bad, I apologize.

Anonymous Crowhead

Re:Say what? (1, Insightful)

Anonymous Coward | more than 9 years ago | (#10432494)

There are skeptics here, including me. If your story is true, you should post a copy of the C&D letters and give names, including the name of your incompetent attorney.

IMHO bad legal advice that you trust, is more dangerous than an extortion attempt that you don't trust. Lawyers can seriously screw you up despite the best of intentions. A "successful" lawyer is nothing more than a very wealthy one. Remember that!

This seems incredibly fishy (5, Insightful)

heychris (587825) | more than 9 years ago | (#10409205)

If you're a new startup, how did they happen to come across *your* open source project so swiftly? Could you have a disgrutled ex-employee who decided to up the stakes for you?

That said, if it's a patent, the patent is public information. They should have to provide the number of the patent that you have infringed, and proof of their ownership of said patent. It should then be easy enough to get the relevant info from the Patent Office. There's no incentive for you to settle until they do those 2 things. They *could* try to directly file a legal case, but it looks like they are out for a quick buck, and they are just hoping to scare you into a bad call.

CC

Lawyers! (2, Interesting)

iendedi (687301) | more than 9 years ago | (#10409765)

Never call your lawyer unless you have paperwork that you need his help with.

In this case, you can fight, argue and whatnot with this patent extortionist infinitely. If they are really serious you will get paperwork (e.g. start of a lawsuit). Let it go that far - showing them that you will not just *take it* will most likely make them run away. If they are serious then they will push forward to sue you and that is the right time to discuss details of the infringement and possible settlements.

There are a ton of business terrorists and extortionists out there. It is an artifact of our legal system. Ignore them until you can't anymore.

And for christsakes, stop talking to your lawyer. The more you talk to your lawyer, the worse your life and business will be (because he will keep you spinning in circles that are important to him and hazardous to you). Use him only when you have no other option.

Re:This seems incredibly fishy (0)

Anonymous Coward | more than 8 years ago | (#10412112)

We're fairly new, started at the end of last year. We've grown significantly the past one year, and have two flagship products, one of which is Opensource.

It's unlikely that it's a disgruntled employee, especially because our core-team consists of just a bunch of coders who're all well acquainted, and there is less than 15 of us in all.

But the sad part is that we had released the source to one of our products just a little while ago (sometime in May/June) - and this is too short a time-frame to be hit by a lawsuit.

More importantly, we did mail them back letting them know that if they could indicate the offensive parts of our code, and the said patents, we would be glad to oblige -- that was met with a stiff response threatening a harsher lawsuit than before -- which kinda sounded defeatist to us.

However, if they are indeed for real and even sue us, we would have serious problems -- it's not even the cost of the legal procedures, it's the fact that it would affect our business and our existing and future customers :-/

Anonymous Crowhead

Re:This seems incredibly fishy (0)

Anonymous Coward | more than 9 years ago | (#10439765)

Get your story straight. Is it...
we have a policy of making all our software Open Source.

or

nd have two flagship products, one of which is Opensource.

and, "flagship" is one product out of a group, not two out of two.

well (0)

Anonymous Coward | more than 9 years ago | (#10409256)

what else could you do? your hands are tied. seriousely. I feel for you guys.

Re:well (0)

Anonymous Coward | more than 8 years ago | (#10411910)

Well, the feet are still good for kicking, aren't they?

More legal advice from slashdot . . . (1)

npsimons (32752) | more than 9 years ago | (#10409291)

First and foremost, IANAL:


1. Get a lawyer, preferably one who specializes in these things (patent attorney). Duh.


2. Ask for proof, ie specific citations as to what code is infringing and what patent numbers it is infringing upon.


While #1 is very important in this case, I can't stress #2 enough under any circumstances! People these days are far too gullible and don't question enough. I mean, can you believe that gullible isn't even in the dictionary?

Something is missing. (1)

Elwood P Dowd (16933) | more than 9 years ago | (#10409394)

They gave us one of the two options - either make the product closed source and sign up for a percentage of the profits with them, or provide them with a stake in our company.

No, your only "option" would be to cease infringing on their patent. In order for you to do that, they'd have to tell you what patent you were infringing upon. Then they may have discussed your options for licensing the patent, but that would really be step number 2. Step 1 would be ceasing infringement.

Otherwise, they have failed to allow you to limit the damages you have done to their company. My understanding was that this would severely damage their patent infringement case against you. Dunno.

Re:Something is missing. (0)

Anonymous Coward | more than 8 years ago | (#10412128)

Hmm, that's what we thought, too.

And that's why we sent them a polite mail asking for details, at which point we only got threatened more.

However, I'm not sure if it was a good call at calling their bluff - simply because if we do get sued, it would be hard for us - not just in terms of monetary damage, but also in terms of reputation and business. That is what we're scared of.

Anonymous Crowhead

Re:Something is missing. (1)

Elwood P Dowd (16933) | more than 9 years ago | (#10429501)

However, I'm not sure if it was a good call at calling their bluff

You haven't called their bluff. If they have a valid patent claim against you, then you will need to remove the infringing code from your product. Calling their bluff would be saying "No, your patent does not apply to our product" and that may very well put you in court. But you can't do that because you don't know what the patent is.

If you tell them, "We are terribly sorry for infringing on your patent. Tell us what it is so that we can stop," then the worst case scenario is that they will press you for damages due to your accidental infringement. When you say "at which point we only got threatened more", I'm kindof confused. How did they threaten you more? What grounds?

wow! (2, Funny)

Scottarius (248487) | more than 9 years ago | (#10409406)

We're a fairly new startup company who specialize in products

holy crap you have products? I've been looking everywhere for those!

Re:wow! (1)

JohnFluxx (413620) | more than 9 years ago | (#10409683)

It sounds silly, but I think it's as opposed to specialising in providing a service.

Re:wow! (1)

Spunk (83964) | more than 9 years ago | (#10409699)

Sweet, I'll take five!

Re:wow! (1, Informative)

Anonymous Coward | more than 8 years ago | (#10412179)

Well, I merely used the notation that's popular in Europe and Asia -- Products refer to software products (say, Office suites, compilers -- stuff you can buy off the shelf) and services refer to things you would need a team to work on/off-site, customized to your needs (upgrading a mainframe database, writing software for a company specific to their needs).

I was not aware that this is not a common term -- or maybe it's just because when you are in the business, you learn these. My apologies.

Anonymous Crowhead

Re:wow! (1)

Impotent_Emperor (681409) | more than 9 years ago | (#10421222)

You must not be from the U.S. You see, during the tech bubble here, many startup companies formed. They would attract investors with promises of the profit they would produce. However, many of these companies either produced no products or services, or very flawed products and services.

Basically, people were forming companies and had no idea how to make money from the internet, but promising they would.

So, it's funny that you would claim to be a startup and actually have a product.

Re:wow! (1)

yuri benjamin (222127) | more than 9 years ago | (#10435878)

I was not aware that this is not a common term

It is a common term, everywhere except the US.
I understood what you meant.

Which patents? (1)

jotaeleemeese (303437) | more than 9 years ago | (#10409639)

ANybody could claim such a thing.

If your lawyers do not demand to know what is that you are violating then they seem to be pretty incompetent to me.

fire your legal advice (0)

Anonymous Coward | more than 9 years ago | (#10409678)

you're better off -not- knowing of any patents. willful infringement is 3x the penalty. calling their bluff was the right thing to do.

Specialization (1)

Rufus88 (748752) | more than 9 years ago | (#10409731)

We're a fairly new startup company who specialize in products, and...

I'm opening up a restaurant that specializes in food.

Re:Specialization (0)

Anonymous Coward | more than 8 years ago | (#10412161)

I work for a company which just burns investment capital. Actually having products sounds kinda neat, and not at all tautological.

Open Source and Patents (1)

iendedi (687301) | more than 9 years ago | (#10409856)

I have been thinking about the problem of Open Source and patents lately and it occurred to me that there is a solution to the bigger problem. The bigger problem, btw, is that it is currently a possibility that Microsoft and/or other large patent portfolio wielding companies could go after individual developers and small companies that donate their work through the use of patent extortion techniques not unlike what this story is discussing.

The possible solution? Something like "The Organization for Open Source Patent Protection and Defense" (oosppd.org?). The idea is to start a non-profit or get an existing non-profit (maybe the EFF) to begin to build a patent portfolio and lobby corporations to assign some software patents for the good of the open-source community. The intention would be defensive litigation to protect individuals and companies from patent harrassment related to their open-source activities.

Blinking cursor (1)

GoRK (10018) | more than 9 years ago | (#10409879)

This sounds like the company that used to call up small computer manufacturers and threaten to sue them because their machines were sold with blinking cursors -- Patents on which originally tricked down to private "owners" from companies such as Raytheon (XOR) or IBM (Much less efficient method). Yes, the patents exist, but if you think every single piece of software that uses a blinking cursor licensed them, you have to be smoking some crack. Gee I hope my cell phone manufacturer is all paid up on that cursor!

Your hint should have been the SCO letterhead (1)

infonography (566403) | more than 9 years ago | (#10410251)

Means nothing, if they do haul you into court just say the code came from the net as part of what you based it on. But beyond that they need to have a chain of evidence linking your company with theirs or evidence of a break in. If you have employees in common that's one thing. But if you are working in the same space it's easy to spook you into being late to market as you search your site for non-existant data.

FUD - Fear Uncertainty Doubt

From where? (1)

computersareevil (244846) | more than 9 years ago | (#10410396)

Was the return address Redmond, WA?

Happened a few times to us (1)

lux55 (532736) | more than 9 years ago | (#10410451)

We've been threatened several times, sometimes about ridiculous patents (one on the usage of the standard diff algorithm, which has been described in papers dating back to the early 1970's, yet their patent was from the late 80's...), sometimes about obviously undefendable trademarks they claim to own.

So far, we haven't given them much credence, and they go away pretty quickly when they realize we're not going to fork your $$$ over so easily.

The bluff is that they have the cash to take you to court to begin with. It's not cheap, and if they don't have a strong case (ie. it's not a legitimate claim), it's not likely they'll actually risk throwing money into it.

Mind you, this is in NO WAY legally sound advice, so don't take my word above that of your lawyer.

Re:Happened a few times to us (0)

Anonymous Coward | more than 8 years ago | (#10412197)

So, do you have any pointers/tips on what we say to these guys?

We most certainly do not want to relent, but if they *do* have a valid case, it would be the end of us, one way or the other. Either we would be sued to oblivion (the investors would simply pull out), or our reputation would be hit real bad and hard.

It's a Catch 22 for us.

Anonymous Crowhead

Re:Happened a few times to us (1)

lux55 (532736) | more than 8 years ago | (#10414584)

One of them we sent an email to them explaining in detail why we don't infringe (with references to alternate non-infringing, and pre-existing, implementations of the patented idea). On that occassion they actually included the first page of the patent and a "letter of reference" from someone they settled with (which was written so as to attempt to instill fear in us that they were serious and would pursue it). They never returned our email.

In another case, we sent a letter from our lawyer requesting more info, but sounding neither like we wanted to settle or fight, just that we wanted actual details to verify for ourselves, and never heard back.

A few of them we simply ignored and they never contacted us again. Ignoring them might not be the best idea, but it is the least time consuming (and the cheapest). Unless, of course, it's a notice that they've actually filed for a lawsuit!

Another Patent Scam (0)

Anonymous Coward | more than 9 years ago | (#10410666)

Not quite the same, but I have a friend whose company was similarly contacted by an outfit saying that their VoIP phone system (Cisco) supposedly violated their patents.

I wonder how successful these type of threats are and if there is any legal recourse if the threat is unfounded.

ahh, the patent troll. (1)

JVert (578547) | more than 9 years ago | (#10410894)

Yes yes, the patent troll. Sending cease and desist orders like they are goatse links. Please tell us who is this entity so we can :moderate: them.

software patents (2, Interesting)

j0nb0y (107699) | more than 9 years ago | (#10411003)

You're a software company. You *are* violating software patents. You can't have software without violating software patents. There are too many of them, covering too many trivial and common software tasks. It's only a matter of time before someone sues you for infringement.

There are only a few true defenses against this kind of attack. The first is to have a large patent portfolio of your own, to countersue any litigants. Unfortunately, this doesn't work against the recent trend of companies in the business of lititgation (eg. SCO). How can you sue a company for patent infringement if they have no product?

The second defense is a large bankroll. Not very many people successfully sue IBM, since IBM has an army of lawyers at their disposal to delay the lawsuit until the litigants run out of money.

My advice to any software developers is to go to law school and become lawyers. Litigation is the fastest growing industry in the US. Software companies will be put out of business by litigation companies, the only ones left will be behemoths like IBM and Microsoft, both of which will be using dev teams in places like India and China, where they can be paid a fraction of what US developers make. So quit your job, and go to law school. Try to make enough money so you can retire when the system collapses in on itself. Things won't be very pretty at that point.

We can continue to press our government for patent reform to try to prevent all this, but they won't listen. They haven't listened in the past, and they won't listen in the future. I give my money to the EFF, I write letters and emails to my congressional representatives, yet nothing makes a difference. Instead of fighting for reform, we're fighting the INDUCE act so IP law doesn't become even *more* insanse. It's a losing battle. The lack of proportional representation in the US forces the election to be decided on just a few issues. The rest are auctioned off to the highest bidder for a few campaign contributions.

Wow, I'm jaded. I remember when I used to have a shred of hope that things would improve...

Lies... Lies... (4, Insightful)

Corpus_Callosum (617295) | more than 9 years ago | (#10411521)

I'm posting this anonymously for reasons that will soon be obvious.

And what is it that is obvious?

New startup that specializes in products

Our legal advisors felt that it might be wise for us to settle

but we decided to press them further for details of the infringement and refused to yield

we feel that this is a scary precedent

Have any other entrepreneurs around here experienced anything similar?

to go after unwitting small startups who cannot fight back?

Personally, this was a nightmare for our company

we are not aware of any patents that we may be violating.

This reads like it was written by a psychologist to scare us out of starting an open-source company (note the use of language to make as many people identify with the text as possible combined with the implicit transfer of fear). That is what is obvious.

Re:Lies... Lies... (1, Informative)

Anonymous Coward | more than 8 years ago | (#10412204)

Products -- I was not aware that a large section of the Slashdot crowd is unaware of this, but products and services how software is categorized into, in most parts of Asia and Europe. Products is stuff you can buy off the shelf, and sevices are those that are, well, services.

Settling -- I've explained that elsewhere in the story, please look at that.

Refusing to yield -- We had indeed asked them to point out the offensive part of the code, and what patents we were violating. At which point, we received more threats, and nothing more.

Precedent -- Maybe if you had a startup company and somebody sued you, you would know. Not to mention handling the investors, and the effect that this has had on our reputation. Starting a company is hard. And losing it is harder.

Entprepreneurs -- Well, it's only likely that entrepreneurs have experienced this -- we are a bunch of people, less than 15 in number. At this time, we neither have the resources nor the necessary connections to fight a lawsuit. Usually, established companies have solutions that entrepreneurs who are starting out do not. Perhaps it was a wrong term, but it's the best that I know of.

Unwitting small startup is how we see ourselves as. Anything wrong in that?

Although I do understand your skepticism, please do realize that this is costing us time and resources. If we do get hit, we may have to fold under -- I do not expect you to realize how hard it would be for people to lose their jobs, especially when they have to go away because some greedy fraudster out there decided to sue their company. And nor do I expect you to understand that getting a company up and established has taken time and effort on the part of so many people, that would all go waste. Perhaps my language is representative of fear, that I cannot disagree -- and that is only because that's exactly what we are going through.

Anonymous Crowhead

Re:Lies... Lies... (0)

Anonymous Coward | more than 9 years ago | (#10429434)

This reads like it was written by a paranoiac who just took Propaganda 101 in class.

My views (3, Insightful)

geeklawyer (85727) | more than 8 years ago | (#10415812)

IAAL.

Which country are you based in? if you are UK based, as some of your remarks suggest, I might give you a little consultation time for free. I do patents and IP, BTW.

Stop asking the IANAL /. crowd for legal advice: it's a serious waste of time as many of the reponses so far demonstrate.

The signature of this company suggests a scam: if I was representing someone with a strong patent I would be only too happy to give the patent number and relevant claims. But I certainly wouldn't refuse to divulge the patent and get snotty: that suggests lack of confidence on their part, and a tactically misjudged aggressive response.
On the other hand it may be just their litigative style and say nothing of the merits. Dunno, insufficient information.

You dont say whether your lawyer is an IP specialist: this matters, a generalist is fine for routine contracts, your building lease and employment law but you must know when to consult a specialist. your lawyer maybe out of his depth and not willing to admit it to you. He may worry about losing face and having you go elsewhere for legal services, whatever. Get someone with relevant experience if he hasn't got it: ask him to find you someone. I'm an IP lawyer but if a client asks me about tax law I wont bullshit: I'll refer them or find out myself from a specialist.

As one poster said: the temptation to push it all the way in outrage is understandable. this will cost you a fortune but the most pragmatic solution may be to enter some sort of agreement. But to do so without knowing the true strenght of their case is absurd. If their patent is weak and the prior art plentiful you may get them to agree to go away period, or with a very poor deal. I might be tempted just to say "bring it on".
You're playing poker: understand that and you are some of the way to understanding your predicament.

Your approach so far suggest diffidence and a lack of confidence, both you and your lawyer - while it's difficult to assess the dynamics of the parties from a /. posting you seem to be at risk of making bad decisions from a lack of proper guidance: get a specialist lawyer. Dont 'ask /.'. Really.

mail me offline for some advice: david atsign geeklawyer [dot] org

Re:My views (0)

Anonymous Coward | more than 9 years ago | (#10418385)

Well, yup. We are based in London (although I'm in the US presently) -- how did you guess?

I'll definitely take up on your offer, thanks.

I do have a few questions, but they are better asked off Ask Slashdot, I suppose :)

Thanks again! Cheers.

Anonymous Crowhead

In the event of having to settle .... (0)

Anonymous Coward | more than 9 years ago | (#10416773)

It is unclear to me from your write up whether you make money from selling your open source software or from services you provide for said software.

If your income is from the services and you do not receive income from the software itself, perhaps in the event of settlement, you could suggest that as you are only a small startup company you would expect to be in the red in respect to the services side of your company for a number of years until the market develops but in light of their claims you would generously be willing to offer 40% of your profits from software sales which would provide them with income in the more immediate future?

FUD? (1)

BlueCup (753410) | more than 9 years ago | (#10417574)

Hypothetically, has anyone considered the possibility that this is someone who is anti-open-source trying to scare other people from pressing forward the open source movement by making companies that make their developments open source... I'm not saying this is definitely the case, but a little bit of caution may be in order...

Re:FUD? (0)

Anonymous Coward | more than 9 years ago | (#10432326)

I for one, definitely considered it.

I believe the posting almost definitely is FUD, written by some corporate psy-op shill, unfolding yet another aspect of Microsoft's proudly touted "multi-pronged" attack on Open Source.

Does anyone believe that Microsoft would suddenly abandon FUD techniques for the most important battle of their corporate history?

This is an old scam, not necessarily OSS related. (1)

dlleigh (313922) | more than 9 years ago | (#10422868)

Before the GPL was even a gleam in Stallman's eye, I'd heard of similar scams.

It works like this: your small business gets an official looking letter from Company X claiming that you are violating their patent, but for a one-time fee of only $yyy (where $yyy is cheaper than a couple of hours of lawyer time) they will give you a license to use the patent.

Of course, the letters are just flooded out to small companies and no one at Company X has bothered to check whether the patent is even applicable. (Reverse engineering to discover patent infringement is time consuming and expensive.)

Before internet patent searches, it would have taken a lot of effort and lawyer time to verify Company X's claim, so many small businesses would just pay the small amount to avoid the hassle.

This scam sounds like an updated version. Developer beware.

Better Idea (1)

hackus (159037) | more than 9 years ago | (#10422967)

Move your company out of the United States.

Hire local workers in that country.

File assests and capital in the original company and setup a fake front company in the US to deal with distribution.

First sign of trouble, fold, and reopen as a different company in countries that do software patents.

Large organizations are doing it in droves, I suggest you do the same.

-Hack

lawyers like to recover R&D expenses (1)

BAlkyMAn (706412) | more than 9 years ago | (#10453760)

this in all likelihood is bogus, but keep in mind that many large corporations see patent infringements as a way to recover R&D expenses. I have a friend who is a senior counsel at one of the R&D departments of large wireless company. They troll all day to find patent infringements and use this to break even on costs they spent on developing new technologies. Even if this is a large company and you guys are the "small fish" you probably will not be a target unless there are large enough sums of money to tempt the larger company into a lawsuit. Good luck, and let us know what happens!

Where does it all end? (0)

Anonymous Coward | more than 9 years ago | (#10457708)

As has been said, eventually nobody will be able to afford to write software. The patent searches will bankrupt you long before you bring product to market. However, there will be a review of US (and Austrlian) software patents when Indian, Korean and Chinese companies start mass patenting algorithms in the US. When your IT economy is bogged down fighting lawsuits from 3rd world countries that are already undercutting your local programmers then the big guys will go running to the govt. And meanwhile, while innovation is being stifled at home in the US, everywhere else in the world (apart from Australia) people are building upon the past instead of being shackled by it. A new world economy booms and nostalgia tours to the derelict sites along silicon valley becomes popular with the affluent foreign tourist.
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