Chapter 90: Eleven Months
[Lauren Kim's office 500 Howard St, 14th floor Tuesday, October 27, 2015 3:12 PM]
Two weeks ago, the patent had been four lines in a news roundup Monica forwarded without comment. An annoyance, filed alongside a dozen other companies' routine defensive filings that quarter. It did not read that way anymore. The printout covered most of the conference table. Twenty two sections, each flagged with a yellow tab, each one broad enough to cover something Gardner Analytics had already built and specific enough to cost real money disproving. Lauren Kim sat at the head of the table with the ease of someone who had read it twice and was already on her third pass. Her enjoyment was not performative. It was unmistakable.
"This is a good application," she said. "Whoever drafted it knows the field. That's the problem."
Richard Hendricks filled the wall mounted screen from the chest up, the Pied Piper conference room behind him. He had a green marker in his right hand. Cap off, cap on. Cap off, cap on. The arrhythmic clicking had been going for four minutes.
"Can we kill it?" Ethan asked.
"We can win. Probably." Lauren turned to the third section. "The independent claims are overbroad. There's prior art in the LeCun papers from 2013 and 2014, and there's your arXiv publication from June 2014 that effectively anticipates claims one through four. The dependent claims are narrower and harder, but the independent claims are contestable."
"How long?"
"If we file a prior art challenge with the USPTo, and we do it properly, and we do it now, eleven months. Maybe ten if we're aggressive. Probably eleven."
The clicking stopped.
"We're not trying to win the patents," Richard said.
Everyone looked at the screen. The green marker was still in his hand but the cap was on, and his fingers were motionless around it. That was wrong. Richard's hands drummed when he was thinking. They stopped when he was certain.
"They're not trying to win the patents," Richard said again, slower this time. "They're trying to delay the Series B. The patent is a diligence overhang. Every week it sits unresolved is a week Sequoia's counsel has to carry it as an open risk in the term sheet. It doesn't have to be valid. It has to be pending."
Silence. Lauren looked at Ethan. Monica, seated to his left with a yellow legal pad and a running tally in her own shorthand, did not look up.
"He's right," Lauren said, and there was something in her voice that was not surprise but a professional's recognition of a correct diagnosis delivered by someone who was not a lawyer. "The application is designed to be litigated, not enforced. It's broad enough to survive a motion to dismiss and specific enough to require expert testimony to dismantle. That's eighteen months of legal surface area minimum. The challenge wins on the merits and loses on the calendar."
"Eleven months," Monica said. She wrote a number on the legal pad. Ethan could read it from where he sat: the monthly retainer Lauren's firm would charge for the duration, multiplied by eleven, plus expert witness fees. The number was not small and the round was not closed. "The round needs to close in December. The overhang will still be live in December."
"Yes," Lauren said.
"Can we bound the spend?"
"I can scope the initial challenge to the independent claims. That's the first six weeks of work. After that it depends on how the examiner responds." Lauren pulled the yellow tab off section three and placed it beside the printout, a small physical act of organization. "I can give you a budget envelope by Friday. It will be honest and it will not be cheap."
"Do it," Ethan said.
He stood, walked to the whiteboard mounted on the far wall of Lauren's conference room, and uncapped the blue marker. The board had a previous tenant's calendar still faintly visible under the dry erase film. He wrote in the clear space above it:
P1 Patent. Input: IP position. Target: Series B timeline.
Then below it, the list he had been building since August, the four Prometheus moves he had identified and the pattern he was working from. Each one attacked an input to Gardner Analytics, not an output. The patent attacked the IP position. The price war he was expecting would attack revenue. The talent raid he was anticipating would attack the engineering bench.
He drew a line under the list and wrote the next input he expected Hooli to target.
Capital.
"Monica, if they come after the funding, blocking the round itself or freezing payment rails, what's our exposure?"
Monica looked up from the legal pad. Her pen remained. "We have nine and a half million in cash. The round is the runway. If someone freezes the round by raising a compliance question about funding sources, we have maybe four months before we're cutting into engineering headcount to make payroll."
"Then that's where they go next."
Richard's screen went quiet. The green marker was capped. His fingers were flat on the table, still, and his expression was the one Ethan had learned to read as Richard processing something he wanted to say correctly, not quickly.
"Every move so far attacks an input," Ethan said, still facing the board. "IP. Revenue. Capital. They're not building a competing product. They're trying to starve the inputs."
"That's the pattern," Richard said. "But you're wrong about the next one."
Ethan turned.
"You think they go after capital. That's the obvious input. But capital is Sequoia's territory and Gavin knows Laurie will not let anyone touch a Sequoia led round without going through her. The fight would be political and public and he loses that."
"Then what?"
"People." Richard uncapped the green marker. The clicking resumed. "They go after the engineers. Not the money, the people. You can buy engineers for three times comp and nobody stops you. Nobody even notices until the desks are empty."
Ethan looked at the board. Capital. The word sat there in blue marker, and it was wrong. He could feel it was wrong the way a loss curve plateaus just before it drops. Not a mistake in the math. A mistake in the model. He left it on the board. He would erase it later. Not now.
"Fund the challenge jointly," Ethan said. "Gardner and Pied Piper split the retainer. Lauren, write the position paper first, the ten day response to Sequoia's counsel. That's the deliverable. The challenge itself can follow."
Lauren nodded. "The position paper is a diligence artifact, not a legal one. You understand that."
"I understand."
"It exists to make Sequoia's counsel comfortable closing in December with the overhang still live. It says, here is why the patent is contestable, here is the prior art, here is our challenge timeline. It does not resolve the patent. It resolves the risk."
"That's what I need."
Monica wrote a second number on the legal pad, the Gardner half of the retainer, and circled it. The pen tapped once against the paper. She did not look up.
Richard's screen flickered. "We'll send our share of the retainer by wire. Jared can handle the logistics. He's been asking for something to handle."
The meeting ran another twelve minutes. Lauren walked them through the filing timeline, the expert witness candidates, the specific prior art she intended to cite. She was precise and she was happy, and the happiness was not malice. It was the professional satisfaction of someone who had found a problem she was qualified to solve. She enjoyed the merits. Nobody else in the room could.
At 5:40 PM Ethan gathered the printout. Forty flagged sections, each one a month of someone's time. Lauren held the door.
"One thing," she said, standing in the doorway with her hand on the frame. "I checked the filing date. The application was filed on October 19th. That's three days after your Series A closed."
Ethan stopped.
"The Series A press release went out on the 16th. It described the company's focus on large scale language model training." Lauren's voice carried no accusation, only the specific satisfaction of someone who had found the relevant detail. "Whoever drafted this application read your press release and wrote the claims to cover it. The specificity is not accidental."
The lobby was cold. October light came through the glass at a low angle. Ethan stood at the revolving door holding the printout: seven flagged sections, a filing date circled in Lauren's red pen. October 19th. Three days after Gardner's Series A. Three days after a press release that described exactly what the patent now claimed to own.
The Honda was four blocks south. He walked.
The printout was heavy for paper. The filing date was heavier.