Neiman Marcus Pushes Back—Hard—Against A Patent Troll

Retailers are finally fighting back against so-called patent trolls, firms that buy patents and then threaten retailers to get whatever licensing fees they can. These firms generally don't want to go to court. They'd rather send letters and make a nice living from the checks of chains that can't be bothered to fight.

Sometimes, these retail efforts work—such as with Newegg and Overstock [NASDAQ:OSTK]—and sometimes they don't—such as the recent case with Best Buy [NYSE:BBY], Home Depot [NYSE:HD] and Gap (NYSE:GPS].

But a recent case with Neiman Marcus takes these retail defenses to the next level. When Neiman Marcus received its letter, the retailer didn't respond. It sued immediately, even before knowing the name of whom it was suing. And as if to underscore how big a mess this all is, the day Neiman Marcus sued that patent troll, an unrelated patent troll sued Neiman Marcus.

The data carriers patent seems to involve basic site interactions: "operating the website in a way that automatically intervenes in a customer or potential customer's use of the website to suggest or present features based on information on the use of the system, including but not limited to autocomplete features," the lawsuit said. "While a user is accessing the website, Defendant continuously monitors and compares user manipulations and program context with feature templates stored in memory and presents automating features if a match is found."

The troll that sued Neiman Marcus on the day it sued the unidentified company was Data Carriers. A quick scan of cases shows that Data Carriers is also involved in patent lawsuits against Walgreens (NYSE:WAG), Staples (NASDAQ:SPLS), Sears (NASDAQ:SHLD), Office Depot (NYSE:ODP), Overstock (NASDAQ:OSTK) and Newegg, among others.

Neiman's saga began on April 15 (tax day—how appropriate), when it received a letter from IP Navigation Group, which represents an unidentified client who owned an unidentified patent. The letter asked for discussions to begin on Neiman paying a licensing fee, if appropriate, and also asked if the chain would first sign a form promising to not sue IP Navigation Group's client. Neiman's reaction was, "Sue your client? What a superb idea."

And the lawsuit was filed. "Neiman Marcus is now in the intolerable position of being pressured to choose between waiving its legal rights pursuant to the terms of the proposed agreement or subjecting itself to an ongoing threat of litigation and unspecified infringement allegations," the lawsuit complaint said. "Neiman Marcus refuses to make such a choice and, instead, seeks declaratory relief as to its rights now."

We absolutely applaud what Neiman Marcus is doing. But as long as many—not even most, but many—retailers just roll over and pay the licensing fees even when they have no reason to believe they have violated any patent, as long as that still happens routinely, trolls will continue to prosper and harass.

In the meantime, though, it's nice to see viable pushback out there.