My Encounter With a Patent Troll | Hacker News Reader

My Encounter With a Patent Troll

ecommercefuel.com

45 pointsspiredigital24 comments

It's a sad state of events when any small merchant using popular shopping cart software can be harassed and bullied by trolls. I ended up writing my two Senators and House Representative (yep, single Representative. That's Montana for you!) in the hope we'll see real patent reform in the future.

For a more "news like" account of the case, with background and comment from the troll's attorney, see below:

http://www.ecommercefuel.com/ecommerce-patent-dispute/

So when is someone going to start a company offering small startups patent troll insurance? Obviously, Congress isn't going to fix anything. Other solutions need to be explored.

I'm guessing no insurance company wants to get the middle of monitoring everything a software company does to make sure it isn't deliberately trying to get away with infringing on a bunch of patents to cut corners because they know their butt is covered by their insurance. Essentially, it would be too easy for dishonest people to take advantage of it, and too difficult for insurance companies to gather relevant metrics and set a reasonable price.

That's a really great idea. I'd purchase troll insurance!

Unfortunately, I think you're right about Congress. It will likely require the issue spinning wildly out of the control - and a subsequent outcry - to get anything done. If we start talking about the issue now, hopefully that process won't take nearly as long....

In researching one for my own startup, one I came across is http://www.patentinsurance.com/ .

I don't know much about them except what's on their website, so do not endorse them, except to say that I would like to enroll my company in either their service, or a similar one soon.

The offering I am most interested in is what they call "IP Defense Insurance". Basically, in the event a troll attacks, this provides a war chest for my court defense costs.

(And hopefully, gives me a chance to maul those punks in court so hard, they regret ever looking our way.)

I think you were lucky that the patent was actually fought in court and close to a resolution. It's not always the case, so ignoring the troll may not be the best advice. Especially if the troll's lawyers are paid on a contingency basis. They have all the incentives to sue. It doesn't cost them anything, and any ruling in their favor reinforce their case.

I agree. I was very lucky the case was so close to a resolution and that my research (and that of my wife, who has experience in the legal field) led us to believe their case was weak.

Also, as I stated in the post, I do not broadly advise ignoring legal claims:

"...if you are contacted about a patent violation, I highly recommend hiring a lawyer to look things over. The last thing you want is to ignore a legitimate infringement claim or legal issue".

Eeek, good article. This is something government needs to step in and help with. However curious of the patent troll letters to ignore and not ignore?

For example, if you don't pay your mortgage and ignore letters from the bank, you eventually lose your home. So you would legally need to respond to some solicitation, no matter how trivial.

It depends on the action. If we had been immediately sued then, yes, we would have had to respond. But often patent trolls will contact you first threatening to sue in an attempt to get a settlement. This isn't a legal motion filed in the courts, so you aren't required by law to respond.

"That’s why it’s crucial to be legally protected with some kind of corporate structure. For most small businesses, this means creating a limited liability company."

Not all incorporations are made equal. For LLCs, I feel it depends on the state of incorporation as well as the number of members. I could be wrong, but an LLC that is either incorporated in states like CA or only has one member, can have its corporate veil easily pierced.

I'm not an expert on laws governing LLCs in different states, and I'm sure that there are loopholes / exceptions for certain circumstances. But being setup as an LLC vs. a sole proprietorship offers you significantly more protection. If you're targeted in a lawsuit operating as a sole proprietor, I believe all your personal assets are at risk. Operating under a LLC makes it significantly harder to come after your personal assets, especially if you're good about keeping business & personal assets in separate accounts.

Another thing I've heard recommended / try to do is to always sign as a member of a LLC (include your company position next to your signature) so it's clear you're signing on behalf of the LLC and not personally.

"But being setup as an LLC vs. a sole proprietorship offers you significantly more protection."

IANAL: I feel this depends on whether or not the LLC has two or more members. When an LLC has one member who is active, it's not much better than a sole proprietorship. Having great legal protection is a myth about single member LLCs that needs to be broken. It's relatively easy to pierce an LLC's corporate veil. Then again someone may prove me wrong. You need to talk to a lawyer.

What is the recommended entity type for a small e-commerce business like the OP's business?

IANAL so this really depends on the person's specific situation i.e. like what state is the business in, how many members there are, and so on

imo if you want more protection, you need a C-Corp or a more than one member LLC... there are caveats to both routes and everyone should talk to a real lawyer about this or books from say NOLO

Can any lawyers, or those who have incorporated their own business as a C-Corp, provide a rough estimation of upfront and annual costs?

http://www.blumberg.com/invoice.cgi?rm=view_cluster;cluster_...

http://www.legalzoom.com/legal-incorporation/incorporation-p...

I have an S-Corp, and the typical upfront cost with my lawyer is $500, that includes one hour consultation and all setup fees. Legal paperwork is under $100 and one hour per year. Accounting comes out to $900/year, but that usually pays for itself in all the deductions that my accountant can find.

You are wrong. Source: http://www.amazon.com/Examples-Explanations-Corporations-Pri...

If you don't want to read the book, talk to a lawyer. Expensive lawyers have the first hour often (usually) free. My less expensive lawyer offered "one-hour consultation plus all filing fees" for $500 deal. That would be money well spent.

Do you have the exact pages or passages proving that I'm wrong? I'm not saying that I'm not wrong, but I'm really curious to see the proof since I've been told time and again that it's relatively easy to pierce the corporate veil for LLCs in California.

What is the best way to contact my elected government representatives to support a change in this area? I am not familiar enough with the laws in this area and don't really have the background knowledge to speak intelligently enough about it to be convincing. I'd really like to do my part on this but am not sure how to be effective.

I simply emailed my U.S. senators and representative, and let them know I would be considering their stance on patent reform a major issue when deciding whether to vote for them. You can find your legislators' contact information via the following link:

http://www.house.gov/representatives/find/

You could also contact the sponsors of the recent (and weak) America Invents Act - Patrick Leahy (D-VT) and Rep. Lamar Smith (R-TX), but if you're not one of their constituents, they likely won't be too concerned with what you have to say.

If anyone else has other suggestions / tips on how to most effectively reach legislators to support patent reform, please share!

Just get a pitch you can say about how these patents are making you fearful and how you cannot possibly take such risks as starting your own business (if you haven't) and hiring (more?) people. Keep it short, be confident, practice in mirror. Check various organizations for talking points.

Find a decent suit, get a hair cut, and make yourself look like the stereotypical successful business man / woman. Find out when your representative will be in town (most have multiple offices in their district), and go to a public meeting they are holding. Be pleasant, nice, and state your point. Followup with a letter and get others to write letters on the same subject. If you know one of the big campaign donors then get them to state the same thing.

Wow! That's scary, and I'm super impressed by your wife's approach. I have been the subject of 2 nuisance lawsuits. I won both. But I don't think I'd have your guts.

It was / is scary! Luckily, I had a wife familiar with the court system. Plus, she's a rock star to boot. ;-)

Were the two lawsuits you faced patent related? Or something else?

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