Crowdfund Insider | JD Alois | Dec 20, 2016

Two Year Patent Troll Case Ends in Triumph as Gust Refuses to Settle in “Giant Win” for Crowdfunding Industry.

Gust, the “world’s largest community of entrepreneurs and early-stage investors”, has won a huge victory in court that impacts the entire crowdfunding industry. Today Gust announced the end of a two-year court case originally brought against it by the patent assertion entity AlphaCap Ventures. Crowdfund Insider covered the case originally in early 2015 when it was discovered that AlphaCap Ventures had filed a patent infringement lawsuit against 10 different crowdfunding platforms. We posited at the time that AlphaCap may have tried to pick a fight outside its weight class. Gust has now claimed victory as US District Judge Denise Cote found the case “exceptional” under 35 U.S.C. § 285, described as a rarity in patent cases, and awarded Gust over $500,000 in attorneys’ fees and costs, against both the plaintiff and the plaintiff’s counsel, Gutride Safier LLP.

The patent lawsuit filed by AlphaCap claimed ownership over “online equity financing”. As with most other patent lawsuits, the case was brought in the Eastern District of Texas.  This court is known as a patent troll haven and has benefitted economically from an assumed bias in favor of trolls.

Nine of the defendants, including some of the biggest names in crowdfunding like Indiegogo, AngelList, GoFundMe, RealtyMogul and more, decided to settle and skip a prolonged legal battle. Gust decided to go to war. David Rose, Gust founder and CEO, vowed to fight the case all the way to the Supreme Court if necessary.

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Speaking with Crowdfund Insider, Rose explained his motivation to confront the AlphaCap patent troll and stand up for the emergent industry;

“We decided to fight the case the minute we were served. For a host of reasons it was obviously a completely bogus case from the very beginning, and it was apparent—to us AND to the troll, as they later admitted and the judge confirmed—that they would have no chance whatsoever of winning if it went to trial. So my first attempt was to rally the other defendants, get everyone to throw in a few dollars, and take a united stand at beating down the troll. But because there is always at least a tiny chance that you could lose in court, and because litigation can be frightfully expensive whether you lose or win, the others decided—from their perspective, probably quite rationally—to optimize their short-term economics and pay tens of thousands of dollars to make the ‘nuisance suit’ go away.”

“Unfortunately for the troll, however, I’m just not built that way. Since we felt certain that as long as we were willing to keep fighting, we would ultimately win, from Day One we put a standing offer on the table to the troll: pay our legal fees, give us the patents, and go home. This drove their attorneys absolutely crazy, to the point that they were screaming at our lawyers “it’s not supposed to work that way!”

So they continued to attack, assuming that as the costs mounted we would eventually give in. But I’m a strong believer in principles, and one of them is “millions for defense, but not one cent for tribute”. Besides, I felt that Gust, as the oldest, largest and most comprehensive online platform, had an implicit obligation to stand up for the industry that we had helped create: for those who hadn’t yet been sued, for anyone who would want to enter the online funding industry in the future, and even for those who had chosen to settle rather than fight.”

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