Business litigation brought in bad faith can be costly

In Massachusetts and all over the country, litigious patent holders (commonly known as “trolls”) have been filing baseless patent violation lawsuits aimed at companies that would find it cheaper to pay out than to fight them in court. One man who became a billionaire from selling his startup to Google and whose new company was served with such a suit decided to fight back against such a troll with business litigation, a decision that he said was based on emotional satisfaction rather than financial sense.

In fact, the new company went on the offensive, filing its own suit against the trolls, claiming that they were violating the Racketeer Influenced and Corrupt Organizations Act, or RICO. The RICO law was originally intended to help federal authorities go after organized crime, but it can also be appropriate in business litigation. The lawsuit said that the various shell companies set up by the trolls were equivalent to an illegal conspiracy that specialized in shaking companies down for money.

Legal documents filed in the case shed light on how a litigious supposed patent holder worked, and how intimidating the resultant massive legal costs could be to startup companies. The burden was on the sued company to explain how it was using an allegedly stolen patent and how it made money from the use of that patent. The economic pressure of these frivolous lawsuits may have been enough to make some new companies close up shop, one lawyer familiar with patent issues said.

Business litigation involving intellectual property, even when bona fide, can harm a company. A Massachusetts attorney experienced in helping resolve these types of business disputes may be able to provide advice and counsel to a business owner faced with such a situation.

Source: Bloomberg Business Week, “Troll Fighting: Anatomy of a Patent Lawsuit“, Joshua Brustein, September 17, 2013