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Our grant application was leaked to a competitor, who is now planning to sue

12 points by sunandshine ↗ HN
A bit of background first: we are a young startup who has started getting visibility and traction in a small but very competitive market. In an effort to expand towards a new direction, we applied for a government R&D grant which, somehow, found its way to one of our competitors. As of now, it is unclear how this happened. The most likely scenario is that a founder of the competitor company was selected as the reviewer for our grant application.

As you can imagine, this document contains extremely sensitive information on our technology, market, collaborations and our future plans. Even worse, we have been informed that the company is intending to sue for patent infringement. Now, we are fairly certain that the claims of patent infringement are bogus. The real danger is that engaging a legal battle would drain our resources in a way we can ill afford right now - and our competitor knows it.

At this point, I would like to ask the HackerNews community for your advice and experience. Have you ever encountered such a situation before? How did you react? Any specific do's/don'ts we should keep in mind throughout this process?

My heartfelt thanks for reading this. It's one thing to read about horror stories of legal battles, but it's quite another to have one of them happening to you.

14 comments

[ 2.3 ms ] story [ 42.1 ms ] thread
aurizon
If you are sued, then post details here (it is public then) and the community may be able to assist. Adding to your patent portfolio as a defence is also a good idea. Your enemy is also going to do this. You can also sue because the grant process that involves external reviewers probably makes these reviewers sign an NDA. This competing company may be fraudulently volunteering to review cases to get advance warning of up and coming competitors - more chicanery.
sunandshine
You mean that they might start filing for patents now, based on the contents of our grant application? That's something we hadn't considered as a possibility. :-/
aurizon
Yes, you have to think in a defensive manner. You should also get a court order compelling the grant people to tell you who saw your info and whether or not they have their vetters sign an NDA. A signed NDA may be a valuable factor in any signed litigation if they saw your data and made a patent application (disclosed info they agreed in writing not to disclose).
CyberFonic
Sorry to read about your unfortunate turn of events. Regardless of what course of action you decide to take, in your situation I would seek out to find out as much as possible about the staffing, investors, connections of your competitor. If you have the funds, I would suggest hiring a PI to get as much information on your suspected founder. You could also file FOI requests on the government R&D body about the reviewers, their connections, etc, etc.

Depending on which country you are based in, there might be an option of talking to possible litigation funders. Information is power, so the more information you can acquire and the stronger the basis you will have for making unemotional decisions. Situations like this are asymmetrical. You don't engage on the lawsuits level but turn up the heat and the risk of public disclosure not only to the competitor but the connections that may have played a supporting role.

ParameterOne
Do you believe that this lawsuit will be based on what you are already selling or for what you are researching with the R&D money? Personally I wouldn't worry about it until the papers show up. But in the meantime I would sell like crazy to stockpile cash. Plus selling like crazy is never a bad thing :-)
sunandshine
It is not clear at this point. To the best of my knowledge, there is no relevant patent for our so-far activities. Selling like crazy is good advice and we are going to do exactly that. :-)
proyb2
Which countries are you applying at?
JabavuAdams
Pay a few hundred dollars to talk to a lawyer.
crb002
Find an attorney who's clients have a bigger patent portfolio.
1burnillion
sorry to say it but it sounds like you are the "other startup" with their hands on the confidential info of your competitors / the applicants. Looking to get feedback on your intended possible course to sue, under the guise of capturing mood of this or possible counters of your defendants-to-be.

My advice is: don't do it. You weren't supposed to use the information in the review process for this purpose. If it got out about this conflict of interest, it would tar both the government department responsible for the innovation grants, and your own company's reputation. You won't really win about this.

If you want to use the info, then use it, but do so through your own business and products, rather than through the courts in this case. But just by using their confidential info in this way, you open yourselves to actions by them.

sunandshine
I don't know why you would say this but this is simply not true. Our confidential information was leaked, there is an incoming lawsuit, and we are trying to find the right course of action. The government department was tarred the moment they leaked our application to our competitor.
zorm
I recommend reading the fine print on your grant application next time. If you were successful, the entire application becomes subject to FOIA.

As for your patent infringement problem, hire a lawyer.

Amogha_IO
From someone who has been through "similar" experiences: (Most entrepreneurs/founders dread this part of ruining a company... its a black-hole for time and $$, but an integral part.)

Talk to an EXPERIENCED lawyer. Experience matters here- Make sure they have worked on similar cases before. If you are doing your due diligence right, it will take some time to find a good lawyer. So, I would suggest starting on finding a good law-firm (w/ history representing clients like you) ASAP.

Try to get free consultations and take the advise you get during these meetings with a "pinch of salt"

There are many startup friendly law-firms that offer deferred payments or partial payments with stock compensation. Try to find one in/around your area.

Consult with at least 2-3 law-firms before you sign a retainer with the one you like.

Don't be afraid. Fear can be crippling. Pick your battles and live to fight another day. You will need to win many battles before you can win the "war"... and you are going into "war" right now.

Make an informed decision. There is a lot of "noise" on the internet and it is easy to get influenced by "bad advise" that seem good at first...So, it is important you find a good place for your information (an experienced law-firm)

You probably don't need more than 5-6 hours with a good lawyer to at least get an idea of how bad the situation really is. It is easy to think that things are worse than they are. Once you have a good handle on where you stand, you can then make the decision to sue, counter-sue, defend or drop-it and move on.

Keep in mind- the process to resolution might take months and sometimes even years! These things take time...

Good luck!