Westboro’s SimpliVity sues California rival

My general view of patent lawsuits is that they are the last resort of a company that can’t compete in the market.

After all, lawsuits mean lawyers. And lawyers need to be paid lots of money.

Not only that, but lawsuits can distract executives from taking actions that could help the company grow – such as designing and launching new products and convincing current and potential customers to buy those products.

Viewed as an investment, it is hard to see how a lawsuit would have a higher payoff than taking such growth-oriented actions.

But lawsuits happen. For example, big companies sue startups for hiring their employees, as EMC did to California startup Pure Storage. Startups sue bigger companies – as Jawbone did (alleging trade secret theft) - on the eve of health monitoring device seller Fitbit’s IPO.

But I can’t think of another example where one startup sued another. At least not until I learned last month that Westboro’s SimpliVity is suing Sunnyvale, Calif.-based Springpath.

Both companies sell products in the so-called hyperconverged storage market – money-saving data storage technology based on specialized software that runs on inexpensive servers.

SimpliVity alleges that Springpath – which was founded by veterans of VMWare, partially owned by EMC and maker of so-called virtualization software - is infringing on its patented technology and wants that to stop.

According to the Sept. 11 complaint, SimpliVity Corp. v. Springpath Inc., filed in U.S. District Court in Worcester, “SimpliVity, one of the fastest growing and innovative companies in the data infrastructure industry, (alleges) that Springpath is infringing on SimpliVity’s patented technology to compete unfairly in the marketplace. SimpliVity seeks a finding of patent infringement by Springpath, as well as relief from that infringement.”

SimpliVity is alleging that Springpath is infringing on its so-called "799" patent whose abstract reads as follows: “Method and apparatus for providing a digitally signed file system wherein a namespace file system accesses an object store in which data, metadata and files are objects, each object having a globally unique and content-derived fingerprint...”

I do not know what this means, but I do know that Forbes thinks that Springpath has a compelling product.

In February 2015, Springpath emerged from a two-year stealth mode, Forbes writes, to introduce “software that runs on standard servers on a subscription model which stores, manages and guards data across both enterprise and cloud scenarios.”

Forbes argues that Springpath’s product is very different from the ones offered by incumbents such as EMC, Hewlett-Packard, IBM and NetApp as well as startups such as Nutanix, SimpliVity and Nexenta.

Forbes further argues that Springpath offers customers three big advantages: Its software handles all of a company’s storage environments; it works on many different kinds of computer hardware; and, its subscription based pricing model is very appealing to customers.

Springpath’s storage software encompasses all four of the storage environments typically found in a corporate computing environment. Forbes argues that these include enterprise applications, web applications, testing and software development, and the analysis of large quantities of data – dubbed “Hadoop/BigData.”

Springpath runs on many different kinds of hardware – including those sold by Cisco, Dell, HP and SuperMicro. Forbes argues that Springpath is different from what it dubs “appliance-based approaches from Nutanix and Simplivity” where there is potential for “locking in” customers to a particular hardware vendor.

SimpliVity says that is changing. In August, Chief Executive Officer Doron Kempel told The Register that its technology “will eventually be available to end-users on any x86 server, any hypervisor/container and any public cloud provider.”

Companies can buy Springpath on a subscription basis, priced at $4,000 per computer server, which Forbes argues is such a low price that company’s computer departments could “pretty easily charge back departments based on usage and at that price, makes it a no-brainer.”

SimpliVity has raised much more capital than has Springpath. Specifically, SimpliVity has hauled in $276.5 million in five rounds – most recently in March; while Springpath has raised $34 million in one round of capital raising, according to CrunchBase.

What evidence does SimpliVity have that Springpath is infringing on the patent? How much revenue has SimpliVity lost as a result of the infringement? What remedies or other outcomes does SimpliVity expect to see?

SimpliVity and its attorneys declined to respond to numerous requests for comment.

And since SimpliVity has previously been willing to comment, I wonder what makes Springpath so special.

Peter Cohan of Marlboro heads a management consulting and venture capital firm and teaches business strategy and entrepreneurship at Babson College. His email address is peter@petercohan.com.