Pro Softnet Faces Patent Attack

Pro Softnet Corp., an independently-owned and operated online backup and cloud storage company that provides service to over 800,000 subscribers through its IBackup and IDrive products, is now in the midst of defending itself against the largest patent attack it has yet faced brought on by a non-practicing entity, or NPE.

With several services in the cloud sharing space scheduled for release in the first quarter of 2012, the pending lawsuit has the potential to interrupt growth for this pioneering company.

Since 2004, Pro Softnet has been targeted by several NPEs seeking licensing fees and/or royalty payments for dubious patents that are usually acquired through a series of purchases by patent-holding companies – ‘institutions’ created for the pure purpose of obtaining patents in order to enforce them against other companies. In these instances Pro Softnet has been forced to weigh the options of pursuing expensive litigation to fight what they believe are unwarranted claims or to settle, ultimately resulting in drains on operating capital.

This American Life recently aired an episode called "When Patents Attack!" that explored the world of NPEs and the lawsuits they pursue. The episode covers a series of companies that acquired the patents that Pro Softnet is now defending itself against. A written version of the story on NPR’s Planet Money covers most of the content about these so-called ‘patent trolls.’

The practice of ‘patent trolling’ seriously burdens those companies without the financial and legal resources of large, well-established organizations. The financial burden on small businesses can be significant – the least fortunate risk closing their doors – as the result of fighting these expensive and lengthy suits, which often end up with nuisance value settlements for profit-seeking NPEs. Although Pro Softnet’s day-to-day operations are continuing as normal, this ‘tax’ on progress and innovation is unavoidable.

This landscape has encouraged large public companies to purchase large troves of patents, often outbidding each other into the billions of dollars, not for the technology those patents cover, but for the protection owning them brings. For example, consider the recent joint acquisition of a Nortel patent portfolio by Apple, Microsoft and others for $4.5 billion and Google’s $12.5 billion purchase of Motorola Mobility. In August, Google’s Chief Legal Officer, David Drummond, vented his frustration at the ‘patent war’ being waged against Google’s smart-phone operating system, Android.

An early innovator in the cloud storage industry, Pro Softnet’s founder and CEO, Raghu Kulkarni, chose to build products and services and expand the company’s user-base without the aid of venture capital or other investors. Instead, the company has sustained its growth through re-investment and simple online advertising.

"Our strategy has always allowed us to be the driver of our own future rather than by the foresight of outside investors who may not have our long-term health at heart. Today, we are profitable, debt-free and hiring – we’d like to continue on that path," said Mr. Kulkarni.

"I hope that with the passage of the America Invents Act we’ll see a slowdown of these attacks from NPEs," he added. "Still though, these lawsuits keep coming at the detriment to hard-working, small American businesses like Pro Softnet." (Leahy-Smith America Invents Act)