
The investment that didn't happen - sneakersneaker
http://k9.vc/modista
======
thaumaturgy
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.

~~~
jc123
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.

~~~
nikcub
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.

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nikcub
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

~~~
dhimes
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?

~~~
nikcub
the M&A world is as much to do with who you know. I wouldn't be surprised if
like.com was shopped around to the usual suspects

------
jdc
"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."

Does this seem really out of line to anyone else?

~~~
credo
At first glance, it does seem unfair.

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.

~~~
micks56
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.

------
olivercameron
Fantastic to see Manu put his neck on the line for a company that isn't even a
part of K9's portfolio, but that he really believed in.

~~~
zackattack
How did he put his neck on the line?

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micks56
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.

I would have taken the case for free.

~~~
ksolanki
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.

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geoffw8
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.

~~~
mjdwitt
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.

~~~
geoffw8
Are you a guy?

~~~
tijs
Are you barefoot?

~~~
geoffw8
Honestly, yes I am ;)

My point was that there is obviously a difference between guys and gals, and
those who are into their fashion vs. those who are not...

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cynusx
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.

~~~
whyleym
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 ?

~~~
rokhayakebe
They lost momentum.

------
nbpoole
A related discussion on HN from yesterday (about a Forbes article that linked
to this blog post): <http://news.ycombinator.com/item?id=2494461>

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Osiris
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.

~~~
nikcub
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

------
nischalshetty
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:

 _Acquire or get served!_

~~~
btmorex
_I know which website I'll never be visiting, I just don't "like" the people
behind it anymore._

Google? I mean they didn't buy like.com without knowing about this lawsuit.

~~~
nischalshetty
Na... I love Google.... :)

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dtunkelang
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.

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tomjen3
Man the two guys are taking this nicely. At the very least I would have put a
much more nasty message on the page

And properly started a startup which brought patents and sued others, seeing
as that is now the way to win.

But respect to these people.

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krat0sprakhar
Feeling very sorry for Arlo and AJ. All the best to them in their next
venture.

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skrebbel
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.

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pedalpete
I have a bit of a problem with this statement 'regardless of how much I liked
the founders of the company, I could not in good conscience invest...'

What about all that talk about 'the founders count more than the idea'?

