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.
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