One of the things I really love about working with startup founders is that they are by nature an optimistic crowd: They set out to build amazing things, change the world and fundamentally shift the way people view things.
What they often don’t realize, though, is that in the midst of brutal competition, the path to scale and success is often lined with unexpected co-travelers and events. There are plenty of misfortunes that can befall startups: 29 percent run out of cash, 23 percent don’t have the right team on board and 8 percent are beleaguered by legal challenges. Though it’s impossible to plan for everything, there are definite safety belts you can put in place, especially from a legal standpoint.
Most founders I meet aren’t focused initially on intellectual property (IP) defense. They are, as they should be, thinking about how to build the best product that they’re able, and how to get the most customers to use it. What they often don’t see coming is that their success can sometimes make them a target for frivolous litigation.
Lawsuits are distractions and cash drains, especially when you’re a lean startup in the midst of managing high growth. Nobody wants to be a cautionary tale; here are some ideas on how to protect your startup.
Knowing about the risks is half the battle. More and more, some companies are using litigation as a way to edge out competitors; in fact, there is an industry around litigation finance that helps companies on the receiving end stand up to those with deeper litigation pockets. Often, the litigation is around IP.
Patent trolls are another threat. More than 50 percent of businesses that are targeted by trolls make less than $10 million in revenue, and more than 80 percent of patent troll lawsuits have been multi-defendant suits using weak patents brought against companies with less than $100 million in revenue.
For trolls, startups are easy targets, because startups often have limited resources, lack internal patent expertise and, with the average cost of defending a patent lawsuit hovering at $3.