Why a lawsuit
There are only two reasons someone might sue you in the software industry: for money, or to prevent you from competing with them.
Startups are too poor to be worth suing for money but a lawsuit can cause economic distress and become a major distraction. Startups, at least in the software business, don't seem to get sued much by well established competitors. Only patent trolls and weasels with weak products and or services who feel they are entitled because they were first. Despite all the patents Microsoft holds, I don't know of any instance where they sued a startup. Large companies like Microsoft don't win by winning lawsuits. Why bet on uncertainty. They win by locking competitors out of their sales channels. If your small startup does manage to pose a threat, they're more likely to buy you than sue you.
So who sues who
When you hear of companies filing suits against a competitor, it's usually a company on the way down or out of the market place. The suit is a desperate move to save their sinking ship. For example, Unisys's attempted to enforce their patent on LZW compression. We all know that outcome. As a rule of thumb, when you see a big company threatening a smaller one with a suit, sell your shares.
When a company starts to spend time on lawsuits against their competitors, it's a sign they've lost the real battle, the battle to keep and attract new customers.A company that sues competitors is like a defender who has been outperformed so thoroughly that he turns to plead with the referee. You don't do that if you are holding the ball, even if you genuinely believe you have been fouled. So a company threatening a law suit is a company typically in dire trouble, e.g.
Sun Microsystems and
Viacom.
To buy, build or sue
Well, you might think that a small startup will be crushed by the Goliath's in the market place but this usually isn't the case.
There's a good reason big companies prefer buying to building or suing: if they build their own, they usually screw it up. But few big companies are smart enough to admit this to themselves. It's usually the acquirer's engineers who are asked how hard it would be for the company to build their own, and they usually overestimate their abilities.
Why? For one thing software development is so complicated. It seems that in most types of engineering you can hand the details of some new process to a group of high quality people and get the desired result. Not so in software. Software is so subtle and unpredictable that "experts" don't get you very far.
That's why we rarely hear someone call themselves an "expert" in the software industry. All a group of experts can get you is, implementation, to make your software compatible with some other piece of software - in eight to ten months, at enormous cost. To do anything harder and better you need individual brilliance. If you assemble a team of "experts" and tell them to make a new web-based Email program, they'll get their buts kicked by a team of inspired twenty something year olds.
Experts can implement, but they can't design. Expertise in implementation can be measured, creativity and brilliance can not.
Because there's so much scope for design in software, a successful application tends to be way more than the sum of its parts or its patents. What protects little companies from being copied by bigger competitors is the thousand little things the big company will get wrong if they try.
In the software business, startups beat established companies by transcending them.
Fortunately for startups, big companies are extremely good at denial. If you take the trouble to attack them from an oblique angle, they'll meet you halfway and position themselves as to keep you in their blind spot. To sue a startup is to admit that it is a threat and it does something you're afraid of. IBM used to sue its mainframe competitors regularly, but they didn't bother much with the microcomputer industry because they didn't want to admit to the threat it posed. Companies building web based apps are similarly protected from Microsoft, which even now doesn't want to imagine a world in which Windows would be irrelevant.
Frivolous suits abound but hold no water
I didn't worry about law suites. At least, at the start. I just worried about making something great. If we grew to the point where anyone considered us worth attacking, then we are doing well in my opinion.
More on this later.
Houdini ESQ
Comments
Pixelmix (unauthenticated)
Jun 16, 2010
And to file a lawsuit based purely on presumption, rather than demonstrable evidence, is a purely emotional reaction rather than a calculated strategy.