“‘The technology is moving so fast and we’re so small, we don’t need a patent, we just need to move fast.”

Wrong.

Every small tech company is going to want to deal with a larger company sooner or later. You need to be fully prepared for that interaction well ahead of time.

Competition can come from any direction these days, every large company is building their own tech to improve their business.

Typically the small tech company builds something exciting then goes out to get interest from larger companies. Eventually they get one or two to sign an NDA and show them how it works. If they’re lucky they can run a trial at a larger company to test the tech in real life.

If the small company hasn’t filed their own patents well in advance, they could be in a world of pain.

This is what happened when Zest Labs asked Walmart to test their fresh produce tracking technology. Walmart trialed it, and decided instead focus their efforts on their own in-house development.

This is very common.

Millions of dollars in legal fees later, Zest received a US $222.7 million verdict which included US $150 m in punitive damages (due to Walmart’s conduct). This was actually a retrial because the original damages award of US $110m did not take into account the allegation that Walmart had been filing their own patents based on Zest’s technology.

If Zest had filed the relevant patents ahead of time, Walmart’s patents would be invalid, they could have added patent infringement to the lawsuit and likely received even higher damages. As it is, there may be a way to have the Walmart patents transferred to Zest, but that’s another fight. (Don’t get me wrong, Zest have an impressive patent portfolio, but it wasn’t brought to bear in this case.)

Zest Labs, Inc. et al. v. Wal-Mart Inc., U.S. District Court, Eastern District of Arkansas, Case No. 4:18-cv-00500-JM