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Start-up founder sees a troll behind patent lawsuit

Kevin O'Connor, founder of Findthebest.com, is fighting a patent holder's demand for money to settle patent infringement claims.

October 13, 2013|Michael Hiltzik
  • Tech start-up Findthebest.com, which was accused of infringing a patent, is fighting back by suing its accuser, alleging racketeering and extortion.
Tech start-up Findthebest.com, which was accused of infringing a patent,…

To Kevin O'Connor, the first straw was also the last straw.

In May, a start-up company he founded, Findthebest.com, got a letter from a Connecticut law firm explaining that it had filed a lawsuit accusing the start-up of infringing an obscure software patent and offering to discuss an out-of-court settlement. The letter also threatened, however, that if Findthebest so much as filed an answer to the lawsuit, the price of settlement would go up.

For each motion Findthebest filed, the letter warned, "Plaintiff will incorporate an escalator into its settlement demand."

O'Connor smelled a troll. "It was written in this Stalinist way," he said recently. "It said, you've committed a crime but we're not going to tell you how or why, just come clean and write us a check."

The result is one of the most closely watched patent cases in the technology world. Instead of folding and settling, as do most young tech companies faced with the prospect of spending hundreds of thousands of dollars to fight off a patent claim even if they're sure of winning, Findthebest is fighting back. In September the firm sued Lumen View, the shadowy plaintiff behind the demand letter, for racketeering and extortion.

O'Connor's strategy of fighting purported patent trolls with RICO, the federal Racketeer Influenced and Corrupt Organization Act, is an unusual one, in part because it hasn't been successful in the past. But he thinks Lumen View's demands were so outrageous and its claims so threadbare that he has a chance of success.

Plenty of people in the high-tech world are cheering him on. That's because patent trolls have become a multibillion-dollar burden for small companies. Trolls, loosely defined, are firms that own patents but don't use them to make or sell anything. (The technical term for them is "non-practicing entities," or NPEs.)

Not all patent-owning companies are trolls; some exist legitimately to help inventors profit from their patented inventions, as inventors have a right to do. Nor is it entirely plain that Lumen View qualifies as a troll. That question depends on whether it's trying to enforce its software patent against companies it genuinely has reason to believe are infringing.

Among the hallmarks of trolldom are lawsuits brought largely for the purpose of exacting hasty out-of-court settlements from defendants who can't afford to fight. These lawsuits are often sprayed out like machine-gun fire, aimed at dozens of companies at a time. Typically the plaintiffs do minimal research to determine if they have a legitimate case. Often, at the first sign of return fire in court, they withdraw — after all, pursuing a lawsuit to enforce a patent can run up six-figure legal fees. That's not the trolls' business model.

"Trolls do a really good job of targeting start-ups at their most vulnerable moments," says Julie Samuels, a staff attorney at the Electronic Frontier Foundation and holder of its Mark Cuban Chair to Eliminate Stupid Patents. That's not a joke: Cuban, the high-tech entrepreneur and owner of the NBA Dallas Mavericks, has been campaigning to outlaw software patents, the trolls' lifeblood.

"Dumb-ass patents are crushing small businesses," he told an interviewer earlier this year. Several of his own start-ups have been fired at, he said.

O'Connor feels almost as strongly. Findthebest, which offers online ratings of consumer goods from smartphones to mountain bikes, doesn't have the money in its corporate coffers to carry on an open-ended lawsuit. So he's putting up his own money — as much as $1 million of his take from the $3.1-billion sale of the online advertising service Doubleclick, which he co-founded, to Google in 2008.

As O'Connor describes the genesis of the case, it looked like trolling from the outset. The patent cited by the demand letter from Damian Wasserbauer, a Lumen View attorney, didn't seem to apply to Findthebest's business. The patent covered the use of a computer to match two or more parties each listing their preferences — two users of a dating service, for example. Findthebest seeks preferences from only one user — the person looking for that best smartphone. O'Connor doubted the patent would survive a court challenge, anyway.

The letter was excessively threatening. It advised Findthebest to collect and safeguard all its electronic messages and documents going back six years (the company was founded in 2009) including personal messages sent and received by employees they might "regard as personal, confidential, or embarrassing."

Lumen View, which had acquired the patent from its inventor, Eileen Shapiro, a Cambridge, Mass., business consultant, didn't seem to have an existence outside of the 20 lawsuits it had filed alleging infringement. (All but two have been settled out of court.) When Findthebest executives called Wasserbauer, "he couldn't tell us how we were infringing," O'Connor says. "All he wanted to talk about was a settlement check for $50,000."

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