Trying to succeed as a startup is hard enough. Getting a frivolous patent infringement demand letter in the mail can make it a whole lot harder. The experience of San Francisco-based Motiv is the latest example of how patent trolls impose painful costs on small startups and stifle innovation.
Motiv is a startup of fewer than 50 employees competing in the wearable technology space. Founded in 2013, the company creates fitness trackers, housed in a ring worn on your finger.
In January, Motiv received a letter alleging infringement of U.S. Patent No. 9,069,648 (“the ’648 Patent”). The letter gave Motiv two options: pay $35,000 to license the ’648 Patent, or face the potential of costly litigation.
The '648 Patent, owned by Motivational Health Messaging LLC (“MHM”), is titled “Systems and methods for delivering activity based suggestive (ABS) messages.” The patent describes sending “motivational messages,” based “on the current or anticipated activity of the user,” to a “personal electronic device.” It provides examples such as sending the message “don't give up” when the user is running up a hill, or messages like “do not fear” and “God is with you” when a “user enters a dangerous neighborhood.” Simply put, the patent claims to have invented using a computer to send tailored messages based on activity or location.
The shot across the bow, the splash in the water that signalled an adversary had appeared on the horizon and was spoiling for a fight, came in February, 2016.
“All of a sudden my phone started ringing,” recalls Dave Caputo, the former CEO of network optimization company Sandvine.
“And it was a bunch of law firms, many of them based in Dallas [saying] that, ‘We would love to represent you in your patent lawsuit.’
“I had no idea what the calls were about and thought, well, something must have happened.”
What had happened was Civil Docket No. 2:16-CV-147, filed in the United States District Court for the Eastern District of Texas, Marshall Division, by a three-person company called Packet Intelligence LLC.
Sandvine had been targeted in lawsuit by a patent troll. And those phone calls, which began on Feb. 17, 2016, would herald the beginning of a 21-month legal odyssey for Caputo and his senior executives as they worked to stake a claim to their company’s innocence and avoid paying a US$13.8-million demand for damages, plus ongoing royalties on future sales.
It was an odyssey that would eventually swallow up to US$2 million of Sandvine money in legal fees and additionally emerge as a cautionary tale for otherwise unsuspecting technology companies in Waterloo Region.