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How Newegg Saved Online Retail 259

Posted by timothy
from the thank-heavens-for-angry-lawyers dept.
bargainsale writes with an account at Ars Technica of "the inspiring story of Newegg vs the patent troll. Perhaps the system does work after all." Newegg's lawyer Lee Cheng has some choice words for the business model employed by Soverain Software, the patent troll which tried, with some success, to exact money from online retailers for using online shopping carts. Newegg has prevailed, though, and Soverain's claims are toast. From Ars: "The ruling effectively shuts down dozens of the lawsuits Soverain filed last year against Nordstrom's, Macy's, Home Depot, Radioshack, Kohl's, and many others (see our chart on page 2). All of them did nothing more than provide shoppers with basic online checkout technology. Soverain used two patents, numbers 5,715,314 and 5,909,492, to claim ownership of the "shopping carts" commonly used in online stores. In some cases, it wielded a third patent, No. 7,272,639."
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How Newegg Saved Online Retail

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  • by Anonymous Coward on Sunday January 27, 2013 @10:32PM (#42711973)
    Like when Samsung beat Apple in the UK, but then Apple won on the same issues in the US. Patents are granted once and valid everywhere, but must be defeated on country at a time. NewEgg saved their own country. Now someone needs to win in every nation in the rest of the world.
  • Re:Patent troll? (Score:5, Informative)

    by Umuri (897961) on Sunday January 27, 2013 @10:40PM (#42712025)

    A patent troll is one who files or buys overly broad patents, expressly for the purpose of not pursuing active development or marketing of their patents. A patent troll's business plan is to wait for a company to make big on something that might infringe, or buy portfolios that might be infringed on, and keep them in obscurity, till such time they can be used to sue(read: extort) a company such that proper legal defense is purposefully less than the cost to comply with their licensing agreements.

    In short, a patent troll would prefer you not learn about their patent till it's too late, while a proper patent holder wants you to know of their patent so that you will license it from them for your technology.

  • Re:Patent troll? (Score:5, Informative)

    by v1 (525388) on Sunday January 27, 2013 @10:43PM (#42712039) Homepage Journal

    Since when is a legitimate patent holder a 'patent troll'?

    A "patent troll" is someone that takes advantage of patent law for monetary gain based on the innovation of others. Patent trolls aren't trying to claim reward for what is theirs. They simply game the system and out-maneuver the innovators such that, by legal definition (but not common sense) they are entitled to reward.

    As such, it's mostly counterproductive for the purpose that the method of patenting was intended to serve. (encouraging and rewarding innovation)

    Patent trolls siphon off some of the rewards of innovation through litigation and through the licensing of innovations where they themselves were not the innovator.

    Fortunately, a lot of courts (at least those that'd don't directly benefit from the litigations, such as texas east district) have identified these people as taking advantage of the legal system and costing it money in exchange not for the support of innovation, but for the enrichment of the trolls and stifling of innovation, and are starting to push for change.

  • Re:Patent troll? (Score:5, Informative)

    by SternisheFan (2529412) on Sunday January 27, 2013 @11:04PM (#42712129)
    From the linked article's interview of Lee Cheng, Newegg's Chief Legal Officer:

    " Just think about the dynamic if you're a juror. Most of the jury could be very pro defense, and think the plaintiff is full of it. But all you need is a single one who is friendly to the plaintiff and holds out on the verdict. You just need one really stubborn person—that can drive a whole jury to make a decision that swings the other way. Everyone wants to go home. It's not their money. Defense oriented jurors are more likely to compromise and say, 'Maybe we'll just split the baby. Maybe we'll just give them $2.5 million and call it a day.' When a jury rules against a defendant, even if you are 100 percent certain that prevailing case law supports an appeal where you will win completely, you have to put up a bond for the amount of the damages. That requires you to tie up that amount on your corporate balance sheet until the appeal comes through. So procedurally, defendants tend to be driven to settle."

    "Reform needs to occur there. If we have to post a bond if we lose, they should have to post a bond if they win. In this case, for example, if they wanted to pursue review by an en banc panel of the Federal Circuit, they should have to post a bond."

  • Re:Thanks, NewEgg (Score:5, Informative)

    by Just Brew It! (636086) on Sunday January 27, 2013 @11:41PM (#42712341)
    What is this strange phrase you use, "don't need"? There's always something any self-respecting geek needs from Newegg!
  • Re:From TFA: (Score:4, Informative)

    by Just Brew It! (636086) on Sunday January 27, 2013 @11:49PM (#42712393)
    I don't think the judges will give a flying fuck about the colorful language. It was in an interview for a tech news site, not something he said under oath in a courtroom.
  • "Newegg was lucky that they had an in-house lawyer and the original owner who was prepared to make a stand. This is rare: Conventional wisdom is to hire outside lawyers - patent specialists and all. "

    They did hire an outside law firm, Weil Gotshal, which is one of the top firms in the country.

    In theory judges are supposed to dismiss law suits without merit, but they don't - because they don't give a shit about the costs and it gives them something to do. . . That the original judge fucked up does not surprise me. Forget what you see on TV about just and fair judges: In patent troll counties like the Eastern District of Texas the judges are blatantly pro-plaintiff. If they were not all the money flowing into their district would dry up, the judges and legal fraternity would be looking for a job somewhere else.

    Absolutely wrong, judges love dismissing cases, particularly complex cases like patent actions, because they don't want their docket to get overloaded. Judges make incorrect holdings of fact and law all the time; that's the whole point behind appeal courts. It's usually not out of malice or incompetence, despite perennial slashdot anger at what is perceived as to the contrary. Speaking as someone who used to litigate in federal courts, the majority of judges just don't care on a personal level about the parties before them, they just want to get the cases moved through their court. The only personal investment most judges have in the cases is they don't want them to be reversed because they consider it as a hit on their reputation.
  • by nomadic (141991) <.nomadicworld. .at. .gmail.com.> on Monday January 28, 2013 @12:48AM (#42712699) Homepage
    They're out of luck; once you settle you're done, you can't get the money back unless you can show some sort of fraud in the settlement itself. It doesn't matter what happened with the underlying claims later on, the whole point of settlement is to avoid risking an even worse outcome.
  • Re:From TFA: (Score:3, Informative)

    by jonadab (583620) on Monday January 28, 2013 @12:59AM (#42712717) Homepage Journal
    The thing is, this ruling in Newegg's favor didn't just invalidate Soverain's $2.5 million case against Newegg. By going for the validity jugular and winning, they managed to invalidate Soverain's patents and cost them the hundreds of thousands in settlements they otherwise would have had from all the big retailers who wouldn't have taken it to court. The defendants in all the other pending cases can now point to this verdict. (In layman's terms, the argument goes along the lines of "Soverain is suing us because they say we violated their shopping cart patents, but now that those have been ruled invalid, nothing meaningful can be accomplished by allowing this suit to continue. By not withdrawing it, they are now just wasting the court's time.")

    In other words, Newegg killed Soverain's entire business plan with fire.

    They aren't going to have to do that a thousand times. If they can manage it two or three times, and get nice big public stories about it featured in the news, future patent trolls will conveniently forget to sue Newegg in favor of going after everyone else and collecting settlements that don't endanger their existence.
  • Re:Patent troll? (Score:5, Informative)

    by Whatsisname (891214) on Monday January 28, 2013 @01:15AM (#42712789) Homepage

    The point of patents is not to protect anyone's investments. The trade-off of patents is disclosure. Prior to patents, trades often kept their methods secret, and if any trades died out, so did their technologies. Patents were created to incentivize inventors to share the secrets of their invention, for the public good. A monopoly on the technology was the bargaining token to encourage them to spill the beans.

    Patents systems do not care about investments, it only exists to make disclosure a more appealing option than secrecy.

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