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How Newegg Saved Online Retail
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."
Long time ago, in a country fair, I saw a kid playing Whack-a-mole. That boy took the large cushioned mallet and bopped the head of the first mole that popped up. Then immediately he dropped the mallet started yelling an running around "I won! I won!! I whacked the mole!!!". It is nice to hear that boy did well, is all growned up now, becoming chief lawyer for some on line retailer. Good boy! Now go whack another mole.
sed -e 's/Chuck Norris/Rajnikant/g' joke > fact
You gotta make sure it takes at least 2 clicks to check out, or you're done for. I still wonder why someone doesn't patent the 2 click, 3 click... n click patent so for anyone to do business without tribute it takes 1000 clicks!
God spoke to me
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.
You never realize how much manually made unmanaged "linked" lists suck, till you have src.link.link.link.link...
If I wasn't already a loyal customer, I sure would become one now.
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.
I work for the Department of Redundancy Department.
Patent trolls often wield bad patents. There are also companies that make things that wield bad patents. Beware of associating the bad of our patent system only with trolls -- the problem runs deeper. If all trolls disappeared tomorrow, we would still have vast minefields of bad patents and enormous, destructive patent battles.
We have just invented the greatest tool since Gutenberg for the dissemination of information. An almost incomprehensibly powerful tool for decentralizing problem solving. At the same time, we have been radically increasing the breadth and power of patents, which inhibit the decentralization of problem solving. Patents have a good mission, but their method is a hinderance to the information revolution. That conflict is inherent in patents; it does not require a troll to cause harm.
Stop-Prism.org: Opt Out of Surveillance
" 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."
RTFA. The patents were overly broad/obvious, and there was prior art. Other companies who were approached by Soverain settled because they didn't want to get drawn into a lengthy and expensive legal battle. Newegg stood their ground, and ultimately prevailed.
Yes, Soverain was a "legitimate patent holder" in the sense that they legitimately owned the patents in question. But the patents themselves were not legitimate (in the sense of embodying anything original or unique).
I suspect that one of the reasons Newegg stood their ground is that -- unlike most of the other companies mentioned in the article -- they are exclusively an online operation, and therefore had more at stake.
Screw them. Seriously, screw them. You can quote me on that.
In Internet vernacular: QFT—Quoted For Truth.
Thank you Mr. Lee Cheng for saying it and saying it with attitude. I'm afraid it will probably cost you in the future when judges read about it and are miffed by your attitude, but you'll probably only be seeing the same six judges for the next 20 years anyway, and they already don't like you on principle, so... full speed ahead and damn the torpedoes.
That's one useless little rent-seeker squashed. Only 1000 more to go...
(Mr Lee Cheng of NewEgg has some serious job security.)
According to the article, the main prior art they found was a Compuserv checkout. I wonder if they were prepared to bring up the various bulletin board commerce solutions...surely a few of those would qualify as well. It's absurd that a company would think they could sue every company and license for a technology that's existed since at least the early nineties, but wasn't patented until the web was well under way, and had NO ties to the original software.
http://www.zdnet.com/news/amazon-pays-40-million-to-settle-patent-dispute/144171
Those other companies may be larger in total sales, but they have a smaller online presence; Newegg is currently the 13th largest online retailer. Probably explains why the other companies settled rather than go to trial; online sales likely weren't enough of a priority to them.
Soverain had already picked a fight with the biggest kid on the playground and won. The first company it sued was Amazon, and Soverain scored a $40 million settlement from the giant retailer back in 2005. The Gap also settled for an undisclosed sum. That was back when defendants were afraid of RIM-sized damage payouts, before eBay v. MercExchange and subsequent Supreme Court decisions started to put some limits on what do-nothing patent holders could win.
So what happens now to all that loot that these companies paid out?
As far as I'm concerned I hope Amazon can't get any back, what with their own bullshit bag of silly patents...
If you want news from today, you have to come back tomorrow.
> "the inspiring story of Newegg vs the patent troll. Perhaps the system does work after all."
Unfortunately this doesn't take into accounts the costs. 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. Lawyers don't come cheap, so Patent troll victims end up owing their lawyers millions of dollars EVEN IF THEY WIN. Under the American court system usually the loser does not have to pay the winners costs, and even in countries where they do, the loser only pays a fraction of the winner's costs costs. The article also doesn't consider the incredible waste of employee time responding to a suit where they could be doing something profitable instead. It also doesn't consider the stress on the employees and the owners. No one will buy a business threatened with a patent lawsuit. Business development grinds to a halt. 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. The system has not worked. Newegg may have won, but the suit would have still cost them a fortune. This is a rare outcome and usually costs the trolls nothing who shrug and move on to their next victim.
I suggest a new strategy: but the judges of the Eastern District of Texas and other patent troll counties under a microscope and petition the government to remove judges who are playing sides or unfit or incompetent to serve. Did you notice the article doesn't name the original judge? Awesome job. Imagine being able to fuck up like that but everyone is so in awe of your power no one will name you. In any other profession people would be laughing at them over the water cooler.
It seems like the easy way to fix the patent troll situation is for the government to require yearly progress reports (it's not too much to ask to have the patent holder produce something that indicates actual development work is going on whether the product is complete or not). The patent should be rendered null and void if the patent holder has done nothing but sit on it; if the holder hasn't done anything then it's time to let someone else try. No more free money by gaming the system and shaking people down.
"It is a denial of justice not to stretch out a helping hand to the fallen; that is the common right of humanity."
Under the current system, a lot of people own patents on things they shouldn't have been allowed to patent in the first place. That's the crux of the issue. I've got no problem with people enforcing patents on things that are truly innovative. But too many patents these days are for concepts which already existed prior to the filing of the patent and/or are clearly obvious.
> Perhaps the system does work after all.
Winning your 1 case, does not mean the system is working as intended, regardless of the outcome.
Often wrong but never in doubt.
I am Jack9.
Everyone knows me.
Non producing entity + welding patent = patent troll
producing entity + wielding bad patents = patent ogre
Silence is a state of mime.
I really have little idea - I've allowed for that possibility. But, if you've read TFA, then Mr. Cheng indicates otherwise. You can take your pick - believe Mr. Cheng's statements, or assume that Newegg has settled quietly with other patent trolls. It's possible that Newegg simply believed this case was winnable, while other cases may not have been.
What I am very sure of, is that the patent office needs more funds, more personnel, and orders from congress to weed out all these submarine patents, get rid of obvious patents, and search for prior art patents. Before any of that, though, the patent system itself needs to be overhauled.
It's been noted often enough here, that companies don't WANT an "inventor" to be aware of prior art, etc. They WANT their "inventors" to submit ideas, so that the company can file the patent. They get it filed, if it gets approved, then it's valid on it's face. Better to wait for a civil suit, to have it's validity tested, when everyone can innocently claim, "Well, we did this all independently, and we had no idea that anyone else may have done it. It wasn't all that obvious, from where we were sitting, at the time!" Those, and similar arguments, might convince a jury, or they may not.
Basically, it's all a huge gamble, largely determined by the size of your legal staff - and it's so very wrong.
"Windows is like the faint smell of piss in a subway: it's there, and there's nothing you can do about it." - Charlie Br
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.
People who didn't want to appear to be complete assholes would avoid a phrase that not only used a vile racial slur, but was a metaphor suggesting that a fugitive slave was a hidden problem rather than a person to be aided by all means necessary.
In the GP post's context, such a person might say "The catch is the word `legitimate'," or "The snag is the word `legitimate'."
Tom Swiss | the infamous tms | my blog
You cannot wash away blood with blood
Part of the problem is that many patents are so technical (or even intentionally obfuscated with technobabble), and there's so much potential prior art, that a patent examiner can't really be expected to sort things out properly. Maybe USPTO needs to have subject matter experts on retainer for all major technical fields, to assist the examiners.
That seems proper, and fitting, to me. Also, increasing the number of examiners would help. I'm half way sure that the examiners are pretty smart people. If an examiner simply could spend TIME on an application, he could probably kick out a lot of the bogus patents.
Face it - if the average slashdotter can take a casual look at a patent, think for less than ten minutes, then provide a half dozen examples of prior art, then a decent examiner could do the same. The examiner's biggest problem is probably time. The paperwork flows onto his desk at a breakneck pace, and he needs to get it off of his desk somehow. Skim it, rubber stamp it, and pass it on to the next person who rubber stamps it seems to be the most common method.
Of course, there is the possibility that half the examiners are actually idiots. I'm not in a position to address that possibility.
"Windows is like the faint smell of piss in a subway: it's there, and there's nothing you can do about it." - Charlie Br
Why would you need to? There is no woodpile. There is no person, African or otherwise. It's just a phrase that means what the damn link it links to above says is means. There's about 17 billion different ways to say the same thing, many of which aren't needlessly jarring (and hence don't detract from the actual point being made).
It seems like the easy way to fix the patent troll situation is for the government to require yearly progress reports (it's not too much to ask to have the patent holder produce something that indicates actual development work is going on whether the product is complete or not). The patent should be rendered null and void if the patent holder has done nothing but sit on it; if the holder hasn't done anything then it's time to let someone else try. No more free money by gaming the system and shaking people down.
I completely agree. I've thought for some time that a patent holder should be given 2 years to produce and distribute a product based on the patent or lose the patent.
More to the point, while the point of patents (and other IP laws) was explicitly to incentivize innovation, patent trolls act as parasites and discouragements to innovation. They provide no new ideas or products of their own, instead litigating against and punishing those who do.
They undermine the very system they are abusing, and hurt everyone involved for their own gain.
The examiner's biggest problem is probably time. The paperwork flows onto his desk at a breakneck pace, and he needs to get it off of his desk somehow. Skim it, rubber stamp it, and pass it on to the next person who rubber stamps it seems to be the most common method.
Well, there is also the problem that in most jobs the ones whom management considers the best workers are those who go through their work the fastest, not those who do the highest quality work.
This ad space for rent.
You must be kidding. Since the patent troll is enjoying a government-granted monopoly, what the troll does with that monopoly is every bit the government's business.
"It is a denial of justice not to stretch out a helping hand to the fallen; that is the common right of humanity."
And this is why the legal system (not just patents ... the WHOLE legal system) is so screwed up. Judgment on cases brought before the court should always, and only, be based on the merits of the case, no matter how good ... or how bad ... the attorneys are. This is what is raising the cost of lawsuits in this country.
now we need to go OSS in diesel cars
This is just impractical. You would just get millions of bullshit reports for millions of bullshit patents. If the Patent Office is not able to examine the patent submissions properly in the first place, I doubt they would be able to examine the reports either.
There was a better suggestion involving copyrights that could apply to patents as well:
1) The patent submitter would have to set a price-tag on his patent from the get go - a license price.
2) When it is accepted, the patent holder would have to pay a yearly tax for the patent (a percentage of the price he set up for it)
3) Anyone could pay the posted license price to the patent holder to use the technology
4) If anyone is found to be infringing on a patent, he would be required to pay the patent holder a sum relative to the price tag (such as 200% of the price per year infringed)
The tax could be really small - like 1% so it would not bother real inventors while at the same time would stop patent trolls from clinging onto thousands of patents demanding unreasonable payments for the technologies.
Nope. All that would do is produce another mountain of fake/useless bureaucracy at taxpayer expense. Patent troll are quite capable of pretending to do "research".
No sig today...
...or... after the second year we should limit patent damage claims to a multiple of what the licensee was paying the patent office every year to maintain that patent. A patent which is earning you millions every year is worth paying $100,000 a year to maintain, right? 5% of the patent's value feels about right.
Hang on... that might actually work.
I've just fixed the system!
No sig today...
I'd call it "mistaking succesful damage control for correct functioning". Apparently the system isn't entirely dysfunctional as patents can be revoken and it is possible to prevail against a patent troll, depending. But that doesn't imply the system as a whole is functional.
The fact that these patents were issued in the first place and that patent troll companies can exist on settlements and the occasional lawsuit already ought to be proof enough that the system is at least partly dysfunctional and therefore not fully functional. I would even argue it is dysfunctional enough to warrant immediate takedown of the entire system, and a rethink of what we originally wanted with the system.
If you can't see that, then maybe you're not really informed and if you're trying to inform the public while in such an uninformed state you're likely to spread misinformation. As such, shame on ars technica for wishful thinking. They ought to have known better.
This is the clearest explanation I have seen of the difference between a troll and a non-troll. Thank you for that.
A troll lurks under his bridge, the one you have crossed every day for a year, and then after you have crossed many times, maybe even built your business based around using that bridge, springs up and says, "You crossed 365 times without paying me. My bridge is critical to your livelihood - now pay me [some enormous amount] or you can not cross again!" The non-troll, on the other hand, proudly stands by the entrance to his bridge and, before you cross the very first time, says "Crossing the bridge will cost [some nominal amount] per trip. Do you wish to pay, or find another route?"
There are in fact legitimate companies whose business model is to perform research, develop new technologies, and license those new, patented, technologies to other companies who produce products using those technologies. Some companies are good at making stuff. Others are good at inventing stuff. They shouldn't necessarily have to be one and the same.
It bothers me that people want to throw all "non-practicing entities" in the same bucket as true patent trolls. Some NPE's add real value. (One example - look at the cell phone in your pocket. The fundamental technology behind that little wonder was developed 30 years ago by a company who today would be called an NPE. They still do R&D, they still actively license their patented inventions. They are the furthest thing from a troll. Google InterDigital.)
that newegg had to go to court at all indicates that "the system" is a failure. software is mathematics. mathematics is unpatentable. it was a lower-court ruling ignoring the supreme court which resulted in the mistaken impression that software can be patented: U.S. law *actually* says that only a hardware-software *combination* may be patented, i.e. something like an electronic cash register, or a calculator. if someone makes better software that runs on e.g. TI's hardware then, under U.S. Patent Law, that alternative software *cannot* be patent infringing. the problem is that it's going to take someone to stand up, just like newegg did, but this time to take it all the way through to the supreme court. and that's the problem: the cost of taking things to court. if patent litigation was zero cost to the defendant, including taking things all the way to the supreme court, *then* the system would not be unequal, and would be sorted out pretty damn fast.
The problem with that seems to be they would have to guess the commercial value of a patent in advance. If they guess too high, they end up paying large amounts of money for the privilege of a worthless patent. If they guess too low, and their patent becomes immensely valuable, other companies can license it from them at rock-bottom prices. Imagine if copyrights worked like that and you had to guess how many books you would sell before getting a copyright...
Nope. That way just opens the door to creating new ways to beat the system.
I think letting patent holders choose how much to pay the patent office, then limiting their damage claims to a multiple of that amount is the way. In that world nobody could afford to sit on a stack of patents in the hope of suing somebody for big money. The only patents being actively maintained would be patents that were earning real money.
No sig today...