Newegg, Overstock Finally Beat Patent Troll

Rather than settle as several of its larger retail co-defendants—including Sears (NASDAQ:SHLD) and Amazon (NASDAQ:AMZN)—did, Newegg and Overstock (NASDAQ:OSTK) have been fighting against an especially well-funded company, the patent troll unit of Alcatel-Lucent. On Wednesday (May 16), the retailers won, when the U.S. Court of Appeals for the Federal Circuit, which hears all patent appeals, upheld a lower court decision which found that Newegg and Overstock did not infringe on a software patent that allows computers to adapt the shopping websites to their own screen size rather than having a server do the work, Reuters reported.

The patents at issue also included functions such as website drop-down boxes, text boxes, site search and tools that correct consumer misspellings and other errors, said Internet Retailer.

The case was pushed most aggressively by Newegg's chief legal officer, Lee Cheng, who has argued that retailers truly must fight these patent trolls. Cheng, in a series of comments made in an interview with Ars Technica, was passionate about the damage such trolls are doing to retail.

"These are the Bell Labs patents. It is truly, truly tragic how the mighty have fallen. This company was once the pride of American innovation, a company that has roots going back to Alexander Graham Bell. And it ended up selling off its patents for a few bucks. What Alcatel-Lucent did was really offensive," Cheng said. "They systematically sent thousands of letters out saying, 'Hey, we own 27,000 patents, and here are some patents we think you infringe.' They had a whole licensing group whose job was to monetize these patents, by threatening litigation and in some cases litigating. It didn't actually matter if you did your own analysis and got back to them and said, 'Hey guys, we actually think we don't infringe.' The response was something to the effect of, 'Well, we have 27,000 patents and you probably infringe something, so give us a licensing fee.'"

Overstock said the demand went as high as $6 million.

"Successful defendants have their litigation managed by people who care," Cheng told Ars Technica. "For me, it's easy. I believe in Newegg, I care about Newegg. At Alcatel Lucent, meanwhile, they drag out some random VP—who happens to be a decorated Navy veteran, who happens to be handsome and has a beautiful wife and kids—but the guy didn't know which patents were being asserted. What a joke. Shareholders of public companies that engage in patent trolling should ask themselves if they're really well-served by their management teams. Are they properly monetizing their R&D? Surely there are better ways to make money than to just rely on litigating patents. If I was a shareholder, I would take a hard look as to whether their management was competent."

For more:

- See this Internet Retailer story
- See this Reuters story
- See this Ars Technica story

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