Suing Open Source Startups - A New Scam?

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."

you don't really lose anything..

[gl4ss]

..by calling their bluff.

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

Re:its an easy way to get money.

[hedronist]

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:They didn't tell what patents you're violating?

[Anonymous Coward]

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:Say what?

[Anonymous Coward]

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:wow!

[Anonymous Coward]

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:Lies... Lies...

[Anonymous Coward]

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