When Startups Seek Patent Trolls as Saviors, the System Has Failed
It turns out two tech startups have banded together with patent trolls in order to fight off insane instances of patent assertion.
While this sentence may cause you to do a double take, it's sadly true. In the face of costly, time-wasting litigation, two young businesses have found their key allies to be the same entities that make life a living hell for thousands of other companies.
Nest Labs, a company that makes smart thermostats, entered into a licensing agreement with the notorious Intellectual Ventures, gaining access to their large patent portfolio. This deal would ostensibly help Nest fend off legal action from competitor Honeywell. In essence, Intellectual Ventures is acting as an arms dealer, allowing Nest to bulk up its arsenal.
And eyeglass startup Ditto has also recently joined forces with an infamous troll. Ditto was targeted earlier by 1-800-CONTACTS for featuring a virtual glasses try-on app, the patent on which 1-800-CONTACTS bought after scoping out Ditto's website. We called 1-800-CONTACTS out on its litigious tactics. But Ditto CEO Kate Endress, backed into a corner, sought help from the troll Erich Spangenberg, who offered to cover Ditto's legal fees in exchange for equity. (The whole ordeal was covered in a new paper on startups and patent trolls by Colleen Chien.)
On one level, the issue is that startups are working with patent trolls—that anyone is working with patent trolls. Intellectual Ventures and Erich Spangenberg may be opportunistic friends, but lining their pockets now only fuels their future operations.
But on a deeper level, this reveals the fundamentally broken nature of the patent system—a system ostensibly around to promote innovation. The patent system is now more about litigation than it is about innovation. It has forced small startups and new ventures into tight corners, and when seemingly the only way out is to shack up with the strangest of bedfellows—those that are part of the con and therefore know the con best—that's when we know that reform has to come, and it has to come soon.