If you run a business long enough eventually it'll get sued. It's inevitable. And the bigger your company is, the more often it'll get sued.

I sometimes wonder what percentage of time executives at Fortune 500 companies have to spend giving depositions for some case.  Our company is fairly small and I've had to give my share of depositions in lawsuits. Each lawsuit against us I believe (even with hindsight) was unnecessary and really frivolous. 

One thing I have learned from lawsuits is:

a) You should try to avoid them.

Everyone loses, particularly the smaller party.

c) They are very expensive for everyone even if they are frivolous.

The most recent lawsuit that we're currently engaged in involves a competitor of ours in the Windows customization market. They have sued to ask for a declaratory judgment to use our IconPackager files for profit in their program. It is, in my opinion, an incredibly foolish strategy from a business point of view and a PR point of view and without legal merit. 

The money they've spent in legal costs could have been used to pay icon artists to create new and original content exclusively for their program. But instead, they'll spend vastly more in legal feels in an attempt to win a judgment so that they can leech off the popularity of our product. And what's worse, for them, is that it's unlikely they'll prevail. But if they'd spent the same money paying icon artists, they'd definitely end up much better off.

But sadly, it is a case we have to vigorously defend. If they could get away with leeching off the content generated by our software to compete with us, soon there'd be dozens of parasitic developers doing the same thing to that same program or others we make.

Our business model is based on a fairly straight forward proposition -- users need our software to use the content our software generates. The entire "skinning community" is based on this proposition. Skin sites exist because developers of customization software have control of the formats they come up with and the content their software generates. Artists can then use these programs to create the content and upload them to skin sites. 

Software developers, like us, therefore generate our revenue by end users wanting to make use of this content. And because most of the artistic portion of the content is provided freely, the software is incredibly cheap.  IconPackager, for example, is 15 bucks. That's practically freeware compared to other software. But this model becomes threatened if the software developer who comes up with the formats and other related intellectual property cannot be assured that their software is the exclusive way to make use of the content that's been generated by it.

That's why in this case it's such a bad business decision for our competitors. We have no choice but to defend our rights vigorously against their lawsuit. And I don't think they've ever been involved in an intellectual property lawsuit. They can last years. Years and years. And cost hundreds of thousands of dollars. It's a lose-lose proposition for both parties but particularly for the smaller party (our competitor in this case) because while I'm answering depositions and dealing with other paperwork, our software continues to move forward. Our release schedule isn't impacted. But in smaller software companies, the executives are usually the ones who also do the programming and other key hands-on issues. And we can afford it better financially. 

I get the feeling that our competitor sees this as a "matter of principle". They mistakenly consider what they are doing no different than say Word Perfect reading in MS Word documents (which for obvious reasons I won't describe here at this time why that analogy is absurd upon inspection). But for our company and for the skinning community, it's an issue that goes to the core. So for us, the issue will be pursued until our competitor stops trying to use our intellectual property without our license even if it takes many years -- because we have no other choice. We're not out to "get them". We simply have no other choice.

But it is a lose-lose situation. Businesses that engage in lawsuits often do so when they are unnecessary. In this current one, our competitor could simply invest their money trying to woo icon artists to create content for their program. Support websites that host skins, themes, and icons. And just generally make a compelling product. It would have cost a lot less than they've probably spent in legal costs and have helped their customers and the community in general.

It's also a losing proposition from a PR point of view. Software companies in our little community gain reputations based on their actions. What our competitor is doing doesn't pass the "smell test". The average user who is into this stuff (i.e. potential customers) may not know exactly what part of what they are doing is illegal, but they know that it just looks slimy.

But it's all part of doing business in the United States. It is too bad that we don't have a "losers pay" system. I am pretty sure that if we had such a system that we would never have been sued in the first place. But in the US, you can file a lawsuit and even if you lose, you don't end up having to pay the legal costs of the person you sued (there are rare exceptions of course).