Considering Crowdfunding as a Litigation Aid? You Should.

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By Kelly Cheung on May 29, 2013 12:59 PM

The tech industry is experiencing a boom in patent litigation and it's going to shut some, maybe many doors. These claims are costly and time consuming and can even put a small or unprepared company out of business.

One company threatened by the high cost of patent litigation is Ditto. Ditto is an eye glass website that offers users the option to digitally try on glasses on their website. They are facing a patent infringement lawsuit by 1-800-Contacts and Lennon Imaging Technology for allegedly using their patented 3D technology. This lawsuit could shut their doors, but they're utilizing crowdfunding to offset their litigation costs.

Crowdfunding in business can be a way to help fight against patent infringement or other costly litigation. According to The Wall Street Journal, while the high profile cases against major companies like Apple and Samsung make headlines, most of the lawsuits are against the smaller tech startups.

The Journal reports that at least 66% of defendants in intellectual property lawsuits are technology companies with less than $100 million in annual revenue. The high cost of litigating such suits can force many of the smaller companies to settle or pay licensing fees.

Ditto is fighting back with the help of others. They have turned to Indiegogo to raise funds for their legal costs. So far, they’ve reached $3,700 of their $30,000 goal, but they expect they will need much more than that.

The increasing patent litigation is a problem for companies. It’s bad for innovation. It’s bad for consumers. The Journal writes these larger companies are accused of preying on their smaller competitors and “abusing patents to squelch competition,” according to Electronic Frontier Foundation’s blog on Ditto’s case.

Ditto’s CEO Kate Endress believes that 1-800-CONTACTS preyed on them by first visiting Ditto’s website learning of the 3D technology they used. Later on, they purchased the patent. On the other side, 1-800-CONTACTS, in a statement sent to TechCrunch, defends itself by saying they went on the Ditto website as part of good business practices to see their competing products.

1-800-CONTACTS stated that they purchased their patent in 2012, which was filed in 2001, and granted in 2006. They also say that they purchased the patent well before Ditto had even launched their website in 2012. They believe Ditto should have, but didn’t, purchase that patent for their own business.

Can Ditto be on to something by seeking out litigation funds through the Indiegogo site? Indiegogo is an online platform originally built to fund the independent film industry, but now has spread to all industries, including legal. The platform “empowers ideas and enables people to donate funds easily” according to the website.

There are many causes including businesses that need funding to get their business going or to continue growing. Funding litigation costs is just one reason crowdfunding platforms are a powerful resource. For businesses like Ditto, they need to stand out from the rest of the crowd to get noticeable results.

Ditto seems to be right on track by working with the media to get their word out and offering an “I Beat Trolls” t-shirt with every $30 donation on Indiegogo. Their video not only expresses their personal concerns, but also the need to pass the Shield Act to protect against “patent trolls” or non-practicing entities dedicated to enforcing patents rather than using them.

It’s important to think of crowdfunding sites as not just for getting more money. It’s another strategy in marketing your company, too. Whether your company needs additional funds to grow its business, pay for litigation costs, or promote new legislation, crowdfunding can be a part of that strategy and more.

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