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Monday, 28 January 2013 11:28

Patent troll shut down by Newegg

Written by Nick Farrell

newegg logo

You don’t own nuttin


For a while now online retailers have been living in fear of a patent troll called Soverain Software.

The company which has a nice website with separate pages for "products," "services," and "solutions" actually has never made a product in its life and its voice mailboxes were all set up by Katherine Wolanyck, the former Latham & Watkins attorney who is a co-founder and partial owner of Soverain to make it look like it was a real company.

Soverain bought a bunch of OpenMarket patents in 2003 and has been trying to extract a patent tax of about one percent of revenue from a huge swath of online retailers. Soverain used two patents, numbers 5,715,314 and 5,909,492, to claim it owned the idea of "shopping carts". In some cases, it wielded a third patent, No. 7,272,639.

However all that was stuffed up when it tried to take on Newegg and its lawyers, who won an appeal ruling  that invalidates the three patents. It shuts down dozens of the lawsuits Soverain filed last year against Nordstrom's, Macy's, Home Depot, Radioshack, Kohl's, and basically anyone who might have provided shoppers with basic online checkout technology. Soverain had sued Newegg for $2.5 million and all the cash it collected from Victoria's Secret and Avon. Those two companies were ordered to pay a total of almost $18 million, plus a "running royalty" of about one percent, after a 2011 trial.

Newegg's chief legal officer Lee Cheng claimed it was a huge validation of the strategy the company decided to pursue back in 2007: not to settle with patent trolls. Soverain was getting a lot of case law on its side with impressive victories in Texas patent courts. So it launched a full-scale assault on dozens of retailers: hardware stores like Home Depot, clothiers like Macy's, Nordstrom's and Kohl's, electronics sellers like Best Buy and Radioshack, Drugstore.com and Walgreen's.

As Ars Technica pointed out it could have skimmed the entire Internet retailing business thanks to brain dead courts in Texas.
Texas is used by patent trolls because its juries are so thick that they believe opposable thumbs are a pretty neat idea.  In this case the Judge refused to allow evidence from New Egg that proved that all the patents were prior art because it would confuse the jury. 

We guess the Jury was still confused by the push and pull sign on the door to the jury room so he did not want to bother them further. The case and the patents were thrown out on Appeal and the Internet was saved.

Last modified on Tuesday, 29 January 2013 23:34

Nick Farrell

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