This is unfortunately more common than many people think. I worked for a startup that had gone through something similar, though perhaps not as egregious. The patents were the only thing that (barely) saved it.

As much as HN likes to hate on patents, this is a huge reason why startups should file some if you have some technology worth protecting. Most probably they won't be enough to save you anyway, but it may be better than having no recourse at all.