As HN's resident (and sole?) idealist, this line really disappointed me:
> “We love these guys, and it sucks to see this happen to them, but we can’t sign up for a lawsuit.”
I understand the logic behind it, but it still seems sort of weak to not stick your neck out when it really matters, and then turn around and write a blog post about how awful it all was after the fact.
In these guys' shoes, honestly, if I had something that was potentially that big, and that well-developed, I wouldn't be able to walk away from it. I'd at least look up the list of Patent Cooperation Treaty countries (http://www.uspto.gov/web/offices/pac/dapp/pctstate.html) and consider moving to a country that wasn't on it (like Chile), and launching from there.
> I understand the logic behind it, but it still seems sort of weak to not stick your neck out when it really matters, and then turn around and write a blog post about how awful it all was after the fact.
Most likely he has limited partners who have given him money to invest, so it's not just his own money.
The company is almost certainly less likely to make it now - they could lose the suit, and then it's over. But even if they win, that's a massive mental beatdown and stress and such for quite a while. Not to mention costs.
It sucks all the way around, but an investor with limited partners can't back something that doesn't fit with the goals/metrics/risk that they promised when their LP's signed up.
Interesting idea moving to another country; since they were looking to raise funds it's probably tough to convince the same investors to invest in the new foreign startup.
Modern investors are a lot more sophisticated than they were a few years ago in regards to where a startup is incorporated and where it operates from. Angel investing and earlier rounds take place anywhere, it is only when larger funds get involved do VCs only tend to invest within a few zipcodes of their own location.
Fred Wilson has blogged about this extensively - he considers his fund to be global, as do many other angel and super-seed investors.
I hope this isn't the end for these guys. A few solutions to the problem which I am sure they are contemplating:
a) Raise the round but cap legal expenses to 80-120k. This would get you a decent way down the road with discovery, pre-trial and potentially an early settlement.
b) Find a patent litigation firm that would waive the remainder of the fees on the same terms as the investment round, to be converted at a later date
c) Get in touch with one of the funds that specialize in exactly this type of company. Software patent hoarding and litigation is an industry unto itself - there is bound to be a fund out there that would take this case on. A lot of the patent hoarders have close working relationships with litigation firms
d) Patents are not really patents until they have been held up in court. Google may identify this patent as indefensible prior to any trial, and settle. At the moment they got these guys to fold with a cheap threat. Google may not want to pursuit the case at all - like.com sent this out prior to their acquisition. Google don't seem to be the type of company that would use a patent to shut down a startup.
e) Register an IP holding company internationally and license that IP to the local US operating firm
It's too bad they couldn't come forward with their prior-art portfolio. That may have squelched the Google-Like deal, giving the troll its due.
But part of me is thinking: If Google was looking for an acquistion in this space, how could they miss the Modista guys? Their stage of development kept them under the radar? Or perhaps there is more to the story than we are reading here?
It is the end. Because they had no funding, they could not get legal representation, and had to accept the default judgment against them. So the company went bankrupt and had to be shut down. They are now doing different things.
The interesting aspect of this story to me is that you can utterly destroy an early-stage startup with a well-timed patent lawsuit, even if your claim has no merit. I wonder why this hasn't happened more often.
"Apparently a corporation can only be represented by an attorney in a litigation and cannot be represented by the founders or officers, even if the company cannot afford counsel."
However, I'm assuming that this law was put into place because
(a) Most non-lawyers can't do a good legal job and don't know the law (or loopholes). So they are likely to do themselves harm.
(b) I think that verdicts can be reversed if it is proven that counsel was unqualified. This means that the case will need to be retried with a more qualified lawyer.
That said, I think that judges can make exceptions in some cases and let a non-lawyer represent themselves.I'm assuming that this may be true for a founder representing his/her company as well.
A corporation is considered a person, and that person is separate and distinct from its employees, officers, and directors.
So for the corporation to appear pro se, it must actually appear in court, but there is no way for a corporation to do that because it really isn't a person.
So any officer arguing on behalf of the corporation is actually engaging in the unlawful practice of law without a license by representing the "person" corporation.
Your (a) is the common public policy reason given why lawyers need to be licensed. I offer no opinion on its wisdom.
Regarding (b), to get a new trial it is more difficult. You need to prove dereliction of duty (every state varies here) by the attorney AND that the errors caused you to lose and you would have won otherwise. Very difficult standard to meet. This rule protects lawyers greatly, to the detriment of their clients.
They should have found a recent law grad that is unemployed. That guy would work for free to make his name on a big case.
Any competent law grad who passed the bar can answer motions, reply with his own, and get this case on the court docket 2 years out to buy these guys some time.
This is a good point. As a techie, I would not know where/how to find such a person. Anyways the founders should be allowed to represent the corporation, but apparently that is not allowed. Requiring to hire lawyers seems not to be true to the spirit of judiciary. I represented myself and got my green card in two months.
As an FYI, and as a founder of a fashion shopping site (aggregator) I can tell you that people do not like shopping like that - as in, find me something that looks like x - you have to factor in what we refer to as "Store DNA".
Your not comparing hoovers here, people don't just buy a "look" - they buy (from store x) because of the quality, the brands values etc.
But as a search engine for browsing/research prior to purchasing, it works great. Back when Modista was still operational, I myself bought three or four pairs of shoes that were either discovered or inspired by discoveries made while browsing their site. Each one of those purchases was made after looking into the brand that manufactured them, but–with the exception of one purchase–I had never heard of the brand before that and never would have without Modista or some inferior means of searching through such a massive inventory.
You can't build a filter for "I've worn a top from this store before and it fitted me nicely" or "I know garments from this store wash up nicely" or "I shop from this store because it defines part of my character"
Most shoppers buy into a store because of lots of things, quality, brand-values alignment, friends shop etc etc.
What I'm essentially saying is a lot more goes into buying a product than what it looks like.
I don't follow your point. You can filter by store or brand. You can, for instance, allow someone to see the shoe collection and hide everything not from Nordstrom or not Gucci (or both), etc.
EDIT: By the way, I still think you make an interesting point in how people really shop, and I appreciate you sharing that here.
I believe he's saying that people buy for the feeling, not to satisfy a list of specs. So although us techies might like this sort of drill down, normal folks prefer the "serendipitous discovery" experience of shopping.
I'm not sure I agree, but it is a thought provoking point.
Correct me if I'm wrong, but it seems that this company can restart operations? Who owns the IP now?
The argument that the patent climate hasn't changed should not deter investors in a restart of this company, most startups would die if they are sued for patent infringement and in this case the aggressor has been pacified.
I agree - given that Google has now acquired Like.com and they would be (very) unlikely to bring any lawsuit, why can't the company just re-launch - even if they have to bootstrap ?
Was there a reason that these guys hadn't gone through the process to file for a patent themselves, even as a defensive mechanism? I suppose their suggestion that there was a lot of prior art would have made that a non-starter for them as well.
Anyone that suggests that software patents are good for innovation is clearly naive.
You could probably use a recent grad with software experience to write and file patents, but litigation is a different beast where even the smallest mistep or poor strategy can be costly.
You would definitely want an experienced patent litigation attorney and a small team.
I think they should have responded and called the bluff - I don't think Google would pursuit it far
Hard to imagine the pain they must have gone through by having to shut down what they built. A few minutes of downtime on my site makes me go crazy, I cannot imagine having told to shut it down!
I hope the modista guys do well in their new venture and people who prey on other smaller startups in the name of patents are cowards, they don't deserve any respect. I know which website I'll never be visiting, I just don't "like" the people behind it anymore.
And I think Google acquired them to save themselves. They are better off acquiring them than having to face a similar lawsuit which would run into millions of dollars. The acquisition conversation must have been:
I am glad to finally see this story told in all of its gory detail. As a witness to this story, I was frustrated to see how Arlo and AJ never had a chance to win on the merits of their case, let alone on the merits of their technology. I can only hope that this story inspires others and drive needed software patent reform. And that Arlo and AJ both go on to do great things -- as I am sure they are doing already.
sad as it is, i guess this just means the web software industry is growing up. in the high tech devices industry (consumer electronics, advanced machinery, etc), this has been the status quo for decades.
> “We love these guys, and it sucks to see this happen to them, but we can’t sign up for a lawsuit.”
I understand the logic behind it, but it still seems sort of weak to not stick your neck out when it really matters, and then turn around and write a blog post about how awful it all was after the fact.
In these guys' shoes, honestly, if I had something that was potentially that big, and that well-developed, I wouldn't be able to walk away from it. I'd at least look up the list of Patent Cooperation Treaty countries (http://www.uspto.gov/web/offices/pac/dapp/pctstate.html) and consider moving to a country that wasn't on it (like Chile), and launching from there.