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I love the non-lawyerly language... "screw them, seriously, screw them". So refreshing to hear a corporate guy speak like a human being instead of a highly trained PR bot.
It's the Chinese way :)
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Really glad to see this, these costs to pay patent trolls would have been passed along to the consumer in some way.

Good job, Newegg!

Great news. I was surprised to read that in a way similar to the Apple case against Samsung, the judge (in the Apple case, it was the foreman) told the jury to completely ignore the validity of the patents in District Court. It still makes absolutely no sense to me, so if someone could fill me in I would appreciate it.

I read that the judge said jurors would be confused... is this normal in any other type of case? Not a satisfying explanation.

That logic is indeed bizarre. If jurors are confused with what they judge about, they should be simply disqualified from the start.
No, I think you may be confusing some things here. Sometimes judges give juries instructions to ignore a particular part of a case when making findings for another part of the case. This makes it easier to rule on a case when it goes to appeal. For a patent trial, often the judge will instruct the juries to consider the issue of infringement alone, assuming that the underlying patents are valid, and then consider the validity question separately.

So on appeal, the appellate court can overturn a specific finding (i.e. one of the underlying claims are invalid) but not overrule the overall finding (i.e. the infringement finding is still valid because they found that if certain other claims were valid then the defendant did infringe).

This is obviously more complicated in practice because juries are supposed to only decide issues of fact and not issues of law - but in some cases it's difficult to say exactly what is law and what is fact. This is especially so in patent law, where the actual letters patent are supposed to be interpreted in light of the relevant patent legislation, and often turns on interpretation of words (which are questions of law).

This is, by the way, why patent trolls like jury trials. It's easy to bog down processes in these trials and confuse the jury.

As for the Samsumg case, that's complicated by a generally ignorant foreman who seems to have convinced fellow jurors that his interpretation of the law was correct.

Judge: "Let's start with the assumption that O.J. did in fact murder his wife. Now the question for the jury is how badly did he murder her?"
> That was OpenMarket, a software company that originally created these patents before going out of business in 2001.

Whenever exec's talk about needing to file patents for "self defense" I always think of cases like this. I don't know anything about OpenMarket, but I'm guessing they had similar logic. Then they go belly-up and these toxic patents make their way into a trolls portfolio.

No matter the company, IMHO, it's generally best to abstain from any patent fishing expeditions.

I actually worked for Open Market briefly back in 1998. Don't blame me, though. Open Market acquired my company, ShopSite, but they were already on a downward trajectory by that time, and I left to start another company before the year was out.

But I can report that the company was quite proud of its shopping cart patent, and its patent portfolio in general, largely because they felt that it protected them and established them as a major player in the nascent but growing e-commerce market. There was a sense, though, even then, that the patent was pure bullshit. I never heard any contemplation of using the patent offensively, and from what I can recall there was a feeling that if that were to happen, the same thing would happen to Open Market that happened to this patent troll. That is to say, that it wouldn't stand up.

Indeed, this is a good cautionary tale as to the havoc that "defensive" patents can wreak once they get into the hands of trolls.

Patents are like the toxic waste of innovation. When they are created everyone is sure they will be kept contained but people move on, businesses close, and they end up getting dumped into the ecosystem where they poison everything.
Dumb question - wouldn't those patents have expired by now anyway? ... Oops, sorry, I thought it was 10 years. It's 20.
To celebrate this I am going to go buy some expensive electronics from newegg.
I was gonna say, I might not shop around to save $3 next time NewEgg has something I want. Kudos to them.
I'll go one better -- I'm not going to shop around at all next time I want something NewEgg has.
Done just now. Had a choice between CDW and newegg. That was easy.
It seems unfair somehow that our whole industry benefits from Newegg individually taking on the risk and expense of bringing a patent to litigation and appeal. Maybe more patents would be challenged if there were more cooperative efforts to bust bad patents.
I agree. Next time you buy something, and have a choice between Newegg who fought and put themselves at risk, and Amazon who took the easy way out, you know who deserves your money.
Yep. I quit ordering from Newegg years ago because of a customer service issue. We order an unholy pile of stuff from Amazon all the time. I think it's time to start ordering from Newegg again.
They've definitively stepped up their customer service.
I'm in about the same boat, only it's been more like 3-4 years. Newegg is about to get more business from me.
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OTOH NewEgg gets some serious glory. And I am going to personally make sure that that glory turns into dollars for them.
Dont worry about that: developing a reputation for aggressively fighting patent trolls has the effect of dissuading trolls from targeting newegg in the first place. Trolls are likely to target others for a quick settlement rather than risk losing their golden goose at trial (as happened here).
And this long-term view is, I suspect, how NewEgg justifies the short-term risk of losing a trial. Never negotiate with terrorists.
Isn't it odd that this is exactly what patent trolls have become? How many people (especially small company owners) are living in teror of being sued, or have already been sued, for being in violation of completely asinine patents?

They've all pretty much been reduced to "X on a computer" or "X over a network" with "X" being ideas that are in many cases decades old and if patented, long since those patents have expired.

I guess this is what we get with patent office incompetence and rubber-stamp-happy inspectors. The patent office a little while ago asked for "feedback" on the software patent issue. I had a good chuckle.

SOYLENT TERRORISM IS CORPORATE PEOPLE!
If you think "Don't negotiate with terrorists" is just overdramatizing, then you've misread. It's actually a reference to an interesting bit of theory about deterrence. A country which has a history of negotiating with terrorists will tend to get more terrorists making demands of them. Conversely, a country which steadfastly refuses to ever negotiate, even when this hurts them, will not get as many terrorist demands.

This kind of reasoning also applies to border skirmishes, contract disputes, and patent trolls.

Newegg is saving themselves millions of $ a year from being a patent-troll nightmare. I suspect many patent trolls try to avoid them, especially after this.
Maybe we should set up a tradition of patent-busting bounties.

I.e. when Victoria's Secret gets hit with $10 million a year in royalties (or whatever the number was), they can say "We're not going to fight these patents in court, but if somebody else fights them and wins, so we don't have to pay that $10 million/year royalty anymore, we'll give them a one-time $3 million payment."

Victoria's Secret has an incentive to post a bounty under these terms, because having that promise available can only improve the chance that someone else will take it on. And they only have to pay out the reward when Newegg wins -- which means setting up the bounty didn't cost them money, it saved them money (assuming the reward was what made the difference between Newegg fighting and rolling over).

This way, each business can settle or fight depending on their specific circumstances, but the companies that choose to settle can still encourage others to fight.

Great idea, but the lawyers would shoot it down immediately (if they haven't already). The terms of a settlement would just have a clause preventing them from offering such a bounty.
So just do it ahead of time. As soon as the troll approaches you, before you so much as sign an NDA, immediately set up an independent trust with the money in it which will give it to whoever invalidates the troll's patents, and if the patents expire without being invalidated the money plus interest goes back to the company. Do this immediately, for every troll, by every company. It could put a pretty good sized dent in the problem.
.. so then as part of the settlement, the trolls says 'and withdraw your bounty'. Same thing.
Hence the words "trust" and "independent" -- you set it up so that it's totally out of your control. Then you can't withdraw it any more than you could prohibit the EFF from doing the same thing if they chose to.
Every C&D can be posted to a Kickstarter-like site, which collects for the pool of funds. Other companies who receive the same C&D can join the group, basically creating a class-action in advance of the civil action being filed. Potential trolls could look at their prospects and make decisions thereby in a form of mutually-assured destruction (patents on the trolls part, the funds on the receiver's parts).
Comparing patent trolls to bacteria would be an unforgivable and entirely unwarranted insult to bacteria everywhere. Even the plague bacterium deserves better.

We need to see alot more of this happening - hopefully this will show people there is another way to go, i.e. never ever settle with a patent troll, no matter how scary the alternative may seem to be. 3 patents invalidated but thousands to go. It is disgusting that these trolls managed to collect so much money before their garbage patents were ruled as such.

I think you might be going a little far and taking this a little far... considering the black plague killed between 75 - 200 million people e.g. 30-60% of the population in europe...

I agree patients are bad, but let's not take things out of perspective ...

ref: http://en.wikipedia.org/wiki/Black_Death

True, but it also brought about demographic changes that finally destroyed feudalism in Western Europe.
I wonder how many people have died because of inefficiencies caused by the patent system, or just the whole healthcare thing. I don't know if the medical patent landscape is a wasteland like the software one, but probably it's not the best we could do.

Just a thought: abolish the patent system. Pay the pharmaceutical research companies directly, by the State, like we do with military research or civil works. I prefer free markets but anything touched by patents is not a free market either.

The cost could be shared by the rich countries. Research is expensive but is a fixed cost. Manufacturing could be done by the free market, because all drugs would be generic. Rare diseases could be researched instead of just profitable ones. We would avoid all the "convincing" doctors to buy expensive patented drugs. Some companies would be specialized in research, others in manufacturing. Developing countries wouldn't have to be worried about patent fees they can't afford.

IP lawyers would lose, I guess.

The important difference is that patient trolls have some degree of sentience.
You will never win by directing your anger at the people who are just responding to the incentives provided by the system.
They are willfully responding, and that makes all the difference in the world.
What does that even mean?
They are not robots, they make choices. If I offered money to steal babies, that's an incentive. If someone did it and tried to defend themselves by saying "I was just responding to the incentive" that does not make them any less reprehensible.
What I meant was to question whether responding to an incentive is ever not willful.
I was deliberately not talking about whether it was reprehensible. I was talking about how and whether you would succeed in inducing everyone to stop doing it.
This is indeed true. What is needed for a long term solution is to fix incentives. In the sense that it shows patent trolls that there is at least some risk involved to their dirty game, the Newegg verdict does that a little bit. Real reform must come from (a) Washington and/or (b) multiple companies banding together into industry associations to fight the trolls.

The patent trolls have made tens of billions at this point - around $20B last year alone in fact. They have deep pockets and will not go away easily. It will take a real fight to change things, and it will require the support of many industry players.

Giving your anger a focal point can be productive, as it may inspire you to promote change.

Since IP lawsuits entered my field of awareness, starting with the Napster Trial, I've always wanted to set up a web site called "idancedonyourgrave.com" (or something with a similar sentiment). Morbid, but I want user-submitted pics of people actually dancing on the graves of people who have damaged our society through policy and abuse of the system.

My current candidates are: Lars Ulrich (Metallica, figurehead of the Napster lawsuit), Jack Valenti (former president of the MPAA -- hey, he's dead now, too!), Hillary Rosen (former president of the RIAA), and now I'll add Katherine Wolanyk (from the article, a co-founder of Soverain, patent troll).

I'm pretty amazed that the lawyers/consultants somehow came up with the Compuserve Mall as evidence.
Nothing is really new in software anymore. It only seems that way to people who are too young to recognize the old ideas that are being recycled.
s/ in software anymore//

   What has been is what will be, 
   and what has been done is what will be done, 
   and there is nothing new under the sun.

   (Ec 1:9)
After a troll loses, do they have repay all money they gained from others?
No, unfortunately, and even if they did, they'd just create a new shell company every time they wanted to sue someone.
You never know, one of those extorted licensees might not just be in it for the litigation immunity -- they might actually be using that ancient software...
Then they would pre-license and not need the litigation?
Kudos to Newegg for being steadfast and busting another greedy patent troll.
Surprising that so many companies paid so much money before NewEgg found and used the Compuserve prior art.

And it's a shame there isn't much cooperation between people attacked by patent trolls. It feels like there could be benefits of scale if you have 5 firms cooperating against a troll.

Yeah, a very obvious idea comes to mind - all affected by the same patent troll should pool resources to support at least one steadfast fighter in order to bust the troll, instead of spreading resources thin.
The company won't hire law firms that take on patent troll cases, and its top lawyer, Lee Cheng, is vocal about his view that others should take the same approach.

Is there a site somewhere listing which firms represent patent trolls?

I'm curious about this as well. If major companies started doing this it would strike a big blow to patent trolls.
If there is a site, it will need to keep changing almost weekly. Trolls are notorious for closing up shop and starting new companies with new names and hiding behind subsidiaries. Likewise legal offices that work with them are very tight-lipped.

It's the software litigation equivalent of defending terrorists after all.

If a name is sold to another company and the index hadn't been updated, the new company and name will be at risk for misdirected rage.

Can you imagine any large, resource-laden law firm refusing any business? It's business, and they're advocates for hire.
These were Open Market's patents? OM tried to get us to license one of them in about 1997. They didn't try very hard though. I told the OM guy who called me that I thought the patent was invalid, and he said "ok" and then asked if we were hiring.
Haha that was a pretty epic fail..
I immediately wondered, based on the dates, where Viaweb fit into this conversation. Thanks for adding that information.
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This is why I believe that the defendant of a patent lawsuit should have the right to contest the validity of any patents prior to the case beginning. It wastes time and money to do it any other way.
It seems that almost all patent troll cases are tried in the East District of Texas because that district had strongly favored plaintiffs. I'm then curious: if a US company refused to do business with Texas citizens -- citing an inhospitable litigation environment or some such -- could they still be brought to court in EDTX?

Continuing the thought experiment, what if companies continued to do business but added a surcharge to products shipped to troll-favorable districts? It seems that the jurors in those areas would be more intimately aware of patent trolls if they had to pay a 1% extra fee when they ordered Avon products.

I'm sure some companies do such a thing and just bundle it up with the cost of the product itself, but I'm curious if any companies took a more forceful stance.

It's a US district court, as in Federal court, so no, you can't just choose not to show up if you are filed against. Unless, of course, you don't want to do business in the US, or have any assets here.
I'm reminded of the time Amazon stopped its associates program with Connecticut and Colorado. Granted, that was over taxes, but I can see how it will still cause enough of a fuss to make people look at this more closely.

Most people have no concept of software patents, until a company they know or do business with is suddenly affected. So a boycott or even a threatened boycott with Texas may get a lot of attention.

My California account was temporarily stopped as well.
Can another tactic be employed in this battle against patent trolls?...

Public education programs targeted to residents of East Texas. Documentaries, billboards, sophisticated advertising campaigns, unsophisticated advertising campaigns on 7-11 cups, etc. Whatever communicates to the residents.

i.e. don't say "you hillbillies are stupid pawns", but use a marketing campaign that speaks to the residents. For example "people claiming to hold patents are destroying freedom -- they're like people trying to take away all your gun rights".

Whatever works to enlighten.

This tactic is not intended to be a silver bullet, but part of a no holds barred effort to battle this ridiculous patent nonsense. Weaken troll's ability to exploit the Eastern District of Texas (while more directed efforts to solve this problem continue).

Won't work, most people have no concept of their freedoms and how they are threatened. They typically don't realize the problem until the freedom is already taken from them.

To get through in an immediate way you have to educate them on how much it costs them in monetary terms. For example, often it is cited that juries give ridiculous amounts at trial because it "isn't their money". I fully believe that many think this way. But if the affected party are organizations that receive money from the public for their services in return, in the end it is their money they are giving away.

It's a Federal court -- you can't avoid jurisdiction just by not doing business in TX.

My understanding is that it's the trolls that open offices in Tyler just so that they can file the suit in that district. I.e. the plaintiff is dragging the defendant into TX, and the defendant can't avoid that court.

It is a little bit more complicated than that. Transferring out of EDTX has been easier since the Fed Cir granted mandamus in In re TS Tech and its progeny (which was based on a 5th Cir decision, In re Volkswagen). The case law is still developing, but patent trolls are having a slightly more difficult time staying in EDTX. http://patently-useless.tumblr.com/
Yes, there's been a few reports where someone will investigate the "offices" of the patent troll and it becomes quite clear that no one is actually there. They are just renting the door for the address, more or less. I believe rental properties catering to this is a booming business in a few districts across the US.
Any court, federal or otherwise, has to have personal jurisdiction over the defendant (http://en.wikipedia.org/wiki/Personal_jurisdiction#Principle...). The rules are somewhat complex, but it should at least theoretically be possible to avoid being hauled into court in EDTX by not doing business there, blocking customers from there, etc.
As a counterpoint because EDTX has been used so heavily as a patent litigation court their infrastructure is uniquely tailored to handle software patent litigation. By extension the jury is also more familiar with the complexities and details of software patents.

So your choice is choosing a jury in a district that is more familiar with technology, software, and patents or choosing a jury in a district who were dumb enough not to get out of jury duty.

Based on many of the cases that have come from there, I would state that they are no more familiar with technology, software, and patents then any other district. It's just that for some reason or another they are pro-plaintiff in these cases. The articles suggests the possible cause of that lay in the judges themselves since Newegg was apparently not allowed to argue to invalidate the patents in the first place, which was stupid. A higher court agreed and reversed the decision so I fail to see how the district's supposed familiarity with such things were a benefit to anyone.
I'm in the market for a new PC and now I'm definitely buying from Newegg.
I use them all the time when I need to buy some computer hardware. Except in cases when they don't have what I need. They have excellent customer service and return policy. And seeing that they have strong stance against patent trolls gives another good reason to support them.
Someone should create a website as a meeting point for those affected by patent trolls. Anyone affected can go on this website and look for their "peers" so they can pool their resources to fight off the evils.
I founded NetMarket [1], which actually did build the first shopping cart on the web in August 1994, 5 months before OpenMarket launched and filed their application. I was deposed in the 2004 Amazon case due to an email Amazon discovered from Open Market to NetMarket demonstrating that they were aware of our site. Unfortunately, I didn't have screen shots or source code definitively demonstrating our work, and Amazon decided to settle for $40 M.

My congratulations to Newegg for their courage and resolve in standing up to Soverain. At NetMarket, we were proud of ourselves for figuring out after a few days that we couldn't put the state of the shopping cart items in the URL, since you lost it with the back button, and so we needed to use a state ID in the URL as a key to the database. The idea that this was patentable was and is absurd.

[1] http://news.cnet.com/E-commerce-turns-10/2100-1023_3-5304683...

I'm interested in learning more. Are you saying that one should deliberately take and store screen shots to document the chronological use of various technologies? Would screen shots have been pivotal or simply one more checkbox item?
If that is the case, I would think that the emergence of github may help to legally document the evolution of software products.
The lack of durable documentation of prior art is a large part of what keeps frivilous software patents valid. It would be difficult to establish the date and authenticity of screenshots, tho. You're usually looking for printed material like magazines or manuals.
Kudos to Newegg, but this system is sooo very broken and badly in need of reform.

Large established and heavily profitable organizations like Newegg might be able to pull this off, but what about all the small startups that are forced into bankruptcy by settling when the trolls come knocking? They don't have the resources to put up a fight. If larger companies tend to fight the tedious and expensive legal battles or avoid getting harassed by other companies by building up their own stash of patents that they can use to retaliate, in the long term what it really does is incentivize companies to go after larger numbers of smaller fish that can't put up a fight.

Every internet retailer owes Newegg a really nice gift basket right now.
I suppose that means they'd be putting all their baskets in one Newegg.
I think I just gave you your 7000th karmapoint for that comment.
Looks like it. Thanks!
I wonder what percentage of lawyers are actually ethical and wouldn't represent these trolls? Is there any blowback for their lawyers for representing something that was obviously a sham from the very beginning?
So the patents were invalidated because CompuServe did it first. The problem doesn't seem to be in any way improved. If CompuServe held the patents, this would still be a valid lawsuit, no?
Compuserve's prior art was in 1984, so if they had patents on it, they'd have expired in 2004.

I take your point though. Can you imagine having to pay royalties to Compuserve over a shopping cart in 2003?

Not necessarily. 20 years from application only just became the law. Compuserve would have been working under 17 years from grant. And, IIRC, they could have been evil and kept filing follow-on claims to delay grant until a time they though was advantageous (e.g. waiting until after Amazon became big).

You'd think that's crazy, but the universal search patent Apple is bedeviling Android with has a priority date that goes all the way back to 2000 (this is why Google Desktop Search is not the vaporizing prior art it should be), but wasn't actually issued until December 27, 2011! And if I understand the rules correctly, absent successful invalidation that means we're stuck with Apple "owning" universal search until almost 2029.

See: http://www.google.com/patents/US8086604

I'll be shopping at Newegg, now.
Assuming Soverain does to have pay back prior settlements it was probably still a very lucrative business in extortion.

Is there a legal way to make them pay for their prior litigation? Or to force them to pay Neweggs legal fees?

I would imagine any monies that Soverain had collected have already been dispersed to benefactors and is untouchable. Newegg could possibly sue to get legal fees back but why bother? There's probably no money to be had.
They did more to save online retail with just fighting a patent - they have excellent customer service.

Not quite as good as Amazon but way up there.