IAAPL (I am a patent lawyer), but I am at the very beginning of my career. Anyway, non-lawyers often are too credulous when they get nastygrams from the other side. Don't believe everything they say to you! It's amazing what non-lawyers will believe and do just because they get a mean-sounding email.
That being said, one of the fundamentally unfair things about the legal system is how expensive trials are. Even if the other side here has no case, they might be able to haul you into court and run up expenses for you. Maybe you can become a cause celebre of the anti-software patent blogosphere?
Welcome to HN. I hope you'll stick around and share what interesting tidbits you are able from cases you take on. Your fresh perspective will be highly welcome.
It is a shame that the patent system is essentially inaccessible to the "little guy" without becoming a celebrity charity case or piquing the interest of someone like the EFF. Here's hoping that you can do much in your coming career to remedy this.
Do you find it unusual the letter was sent by the CTO and not the legal representative of the company?
No, that does not strike me as unusual. In a small company, people are forced to wear many hats. Matters like this can usually be "resolved" through a few emails or a phone call. If the CTO were to call his outside counsel and direct her to write the nastygram, outside counsel would charge $300+/hr. to do so.
If they go to court and he does win the case wouldn't the cost of his lawyers be paid by the loosing side, so, he in that case would not lose anything and perhaps might even be awarded nominal damages if the other side pursued the case friviously.
Hmmm, yes, how do the courts in the Netherlands do this? That wouldn't be true in the US but I gather very few if any other countries follow our model (http://en.wikipedia.org/wiki/American_rule).
This depends on many factors. 1) What country the lawsuit takes place in. Unfortch I only know US law. Here in the US, the factfinder (a lawyer word for either the judge or the jury) can order legal costs to the winning party under certain circumstances, but those are rare. I have heard anecdotally that in Britain legal fees are always paid by the losing side.