While Other Retailers Settled, Newegg Crushes Shopping Cart Patent Troll on Appeal
January 28, 2013 10:06 AM
"We basically took a look at this situation and said, this is bullshit." -- Newegg Chief Legal Officer Lee Cheng
Patent troll Soverain sued 50 different high-profile e-commerce websites over patent infringement (some big names like Amazon, Avon, and Victoria's Secret actually settled for millions with Soverain), alleging that it owned three patents pertaining to digital shopping carts. Early on, the case looked rocky for Newegg, an online technology products retailer, when the judge overseeing the case refused to allow Newegg to argue that the Soverain patent was invalid.
However, on appeal Newegg's legal team was able to trot out prior artwork to help get the patent case defeated. That prior artwork came from 1984 in the form of a magazine ad from CompuServe bragging about an electronic mall. The District Court judge had originally denied the invalidity argument because the judge said there wasn't "sufficient testimony" and that making the argument to the jury would be "very confusing" to them.
Soverain continued to argue that the system CompuServe used didn't include a "product identifier" as its patent defines. The patent troll also argued that CompuServe's system lacked a "shopping cart database." Those arguments didn't work for Soverain, as a three-judge panel decided that all of the shopping cart patent claims the company made were rendered obvious in the light of CompuServe Mall.
As a result, Soverain won't get the $2.5 million it hoped to snatch from Newegg's bank account. In addition, retailers in currently pending lawsuits will also likely be off the hook to feeding the troll.
Newegg chief legal officer Lee Cheng said in an interview with
We basically took a look at this situation and said, this is bullshit. We saw that if we paid off this patent holder, we'd have to pay off every patent holder this same amount. This is the first case we took all the way to trial. And now, nobody has to pay Soverain jack squat for these patents.
Cheng also noted that Newegg decided to fight to the death over this lawsuit versus settling because the company is majority owned by its founder, Fred Chang. There are no shareholders to answer to, so Chang has the long-term prospects of his company in mind rather than short-term gains to temporarily help out the balance sheet.
In his parting words to
, Cheng didn’t have many good things to say about what he calls “submarine” trolls – those that lurk under the surface for years, and then hit unsuspecting companies for millions.
“Then they pop up and say ‘Hello, surprise! Give us your money or we will shut you down!' Screw them. Seriously, screw them. You can quote me on that.”
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