Not too long ago, Qcue Inc. introduced a brand new product to the live entertainment industry: dynamic pricing. Now, sports teams and concert venues all over the world use Qcue's innovative software to set the right price at the right time – providing the highest value for fans.
But, in March 2012 the company was sued for IP infringement by a competitor. They filed two continuations with U.S. Patent and Trademark Office on a patent designed for online music sales, claimed it was “important to pricing in the sports, entertainment, and hospitality industries.” Then, just six weeks later, they filed a lawsuit against the company once again.
“It didn’t matter that we were first to market. It didn’t matter that our product was released more than three years before their patents were issued or that our technology bore no resemblance to their patents. And it didn’t matter that they had no idea how our software worked,” Barry Kahn, Ph.D. is founder and CEO of Qcue wrote in a recent Fast Company article.
So, Kahn was forced to shift from an entrepreneur founder into a CEO, spending a million dollars in legal fees in the process.
“The Innovation Act is a bill that will certainly help, but isn’t the magic bullet against patent trolls. While not every aspect of the bill would have been relevant to our case, certain key features would have had a material impact on us and for cases like ours,” he wrote.
The largest benefit of the Innovation act is allowing defendants to recover legal fees when the court rules in their favor, however, several companies don’t fight these cases because winning a case can cost over a million dollars. That means, even if you are 100 percent certain that you will win, it can be more expensive to try the case than to simply settle.
According to Kahn, fee shifting, will increase the likelihood of companies choosing not to settle, which will then reduce the number of patent cases. While there has been concern about this provision preventing small inventors from protecting their IP, patent litigation costs in the millions of dollars have already priced them out.
“At first glance, this appears to be a great step forward by the Innovation Act. However, as I learned when our competitor was required to state its claim, it is actually fool’s gold,” he explained.
Under the current law, patent owners can file bare-bones complaints, without specifying what products they think infringe their patents. This leaves defendants like Qcue guessing until a Statement of Alleged Infringement is required up to one year later.
“If we really are going to address discovery issues, we should go further and mandate that nothing is discoverable from the defense prior to trial. After all, if a patent is issued, it should be credible as a stand-alone invention, not something that can be potentially retrofitted to use against a specific entity,” Kahn wrote.
Fortunately, Qcue was one of the lucky ones because the company never had to go through trial or provide the full discovery that would have disclosed financials to a competitor.
Kahn wrote, “While we ultimately survived, it was hard not to feel as if the deck was stacked against us.”
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