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How Newegg crushed the “shopping cart” patent and saved online retail
- glesica 14y agoI 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.
- ttar 14y agoIt's the Chinese way :)
- deleted 14y ago[deleted]
- Claudus 14y agoReally glad to see this, these costs to pay patent trolls would have been passed along to the consumer in some way. Good job, Newegg!
- kissickas 14y agoGreat 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.
- shmerl 14y agoThat logic is indeed bizarre. If jurors are confused with what they judge about, they should be simply disqualified from the start.
- unavoidable 14y agoNo, 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.
- bjhoops1 14y agoJudge: "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?"
- lukejduncan 14y ago> 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.
- DavidAdams 14y agoI 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.
- noonespecial 14y agoPatents 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.
- tunesmith 14y agoDumb question - wouldn't those patents have expired by now anyway? ... Oops, sorry, I thought it was 10 years. It's 20.
- c0nfused 14y agoTo celebrate this I am going to go buy some expensive electronics from newegg.
- Cryode 14y agoI was gonna say, I might not shop around to save $3 next time NewEgg has something I want. Kudos to them.
- peejaybee 14y agoI'll go one better -- I'm not going to shop around at all next time I want something NewEgg has.
- noonespecial 14y agoDone just now. Had a choice between CDW and newegg. That was easy.
- NelsonMinar 14y agoIt 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.
- NoPiece 14y agoI 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.
- thaumaturgy 14y agoYep. 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.
- thoughtpalette 14y agoThey've definitively stepped up their customer service.
- nfriedly 14y agoI'm in about the same boat, only it's been more like 3-4 years. Newegg is about to get more business from me.
- deleted 14y ago[deleted]
- javajosh 14y agoOTOH NewEgg gets some serious glory. And I am going to personally make sure that that glory turns into dollars for them.
- rohamg 14y agoDont 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).
- arbuge 14y agoComparing 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.
- taf2 14y agoI 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 http://en.wikipedia.org/wiki/Black_Death
- jivatmanx 14y agoTrue, but it also brought about demographic changes that finally destroyed feudalism in Western Europe.
- nova 14y agoI 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.
- s0rce 14y agoI'm pretty amazed that the lawyers/consultants somehow came up with the Compuserve Mall as evidence.
- ams6110 14y agoNothing 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.
- waqf 14y agos/ in software anymore//
- DigitalJack 14y agoWhat 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)
- chris_wot 14y agoAfter a troll loses, do they have repay all money they gained from others?
- CamperBob2 14y agoNo, unfortunately, and even if they did, they'd just create a new shell company every time they wanted to sue someone.
- csense 14y agoYou 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...
- illuminate 14y agoThen they would pre-license and not need the litigation?
- shmerl 14y agoKudos to Newegg for being steadfast and busting another greedy patent troll.
- DanBC 14y agoSurprising 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.
- shmerl 14y agoYeah, 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.
- bentoner 14y agoThe 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?
- dangoldin 14y agoI'm curious about this as well. If major companies started doing this it would strike a big blow to patent trolls.
- eksith 14y agoIf 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.
- nonamegiven 14y agoCan you imagine any large, resource-laden law firm refusing any business? It's business, and they're advocates for hire.
- pg 14y agoThese 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.
- rudyfink 14y agoYes, Soverain's patents were originally from OM. I think the path was roughly something like this: OM->Divine Interventures->(holding entities)->Soverain. '492 assignment history: http://assignments.uspto.gov/assignments/q?db=pat&pat=5909492 http://assignments.uspto.gov/assignments/q?db=pat&pat=59... '314 assignment history: http://assignments.uspto.gov/assignments/q?db=pat&pat=5715314 http://assignments.uspto.gov/assignments/q?db=pat&pat=57... Soverain patents by assignment: http://assignments.uspto.gov/assignments/q?db=pat&qt=asne&reel=&frame=&pat=&pub=&asnr=&asnri=&asne=soverain&asnei=&asns= http://assignments.uspto.gov/assignments/q?db=pat&qt=asn...
- Tyrant505 14y agoHaha that was a pretty epic fail..
- JacobAldridge 14y agoI immediately wondered, based on the dates, where Viaweb fit into this conversation. Thanks for adding that information.
- deleted 14y ago[deleted]
- RexRollman 14y agoThis 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.
- Whitespace 14y agoIt 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.
- illumin8 14y agoIt'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.
- eksith 14y agoI'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.
- hkmurakami 14y agoMy California account was temporarily stopped as well.
- lake_rogue 14y agoCan 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).
- michaelwww 14y agoI'm in the market for a new PC and now I'm definitely buying from Newegg.
- shmerl 14y agoI 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.
- dear 14y agoSomeone 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.
- dankohn1 14y agoI 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.html http://news.cnet.com/E-commerce-turns-10/2100-1023_3-5304683...
- robomartin 14y agoI'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?
- huherto 14y agoIf that is the case, I would think that the emergence of github may help to legally document the evolution of software products.
- ynniv 14y agoThe 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.
- Glayden 14y agoKudos 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.
- joshfraser 14y agoEvery internet retailer owes Newegg a really nice gift basket right now.
- mhartl 14y agoI suppose that means they'd be putting all their baskets in one Newegg.
- creamyhorror 14y agoI think I just gave you your 7000th karmapoint for that comment.
- mhartl 14y agoLooks like it. Thanks!
- damian2000 14y agoI 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?
- lubujackson 14y agoSo 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?
- DigitalJack 14y agoCompuserve'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?
- fpgeek 14y agoNot 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 http://www.google.com/patents/US8086604
- vonmoltke 14y ago> 20 years from application only just became the law. It became effective June 8, 1995: http://www.uspto.gov/web/offices/pac/mpep/s2701.html#sect2701 http://www.uspto.gov/web/offices/pac/mpep/s2701.html#sect270...
- crag 14y agoI'll be shopping at Newegg, now.
- linuxhansl 14y agoAssuming 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?
- talmand 14y agoI 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.
- ck2 14y agoThey 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.
- creamyhorror 14y agoA victory for common sense, the tech industry, and right-thinking citizens everywhere. May the gods of the market continue to smile upon Newegg (a prosperous Lunar New Year to them!). Points of interest to me: Lee Cheng: And we'll take a case through trial as a matter of principle because we want to accomplish the purpose of making good law. Like eBay did, like Quanta did when they challenged LG. It's part of our duty as a good corporate citizen to try to accelerate the rationalization of patent law. This guy talks like a crusader for just law instead of an executive or business owner. You'd pretty never hear this from anyone in a public company, it just wouldn't be possible. More's the pity that most people can't really achieve big results like this; we have to retain ownership of our businesses in order to really live out our principles. - A commenter on Ars, on why no one else fought Soverain to the end: I think the problem from most defendants' perspective is that they can just pass the costs along to their customers without facing any strategic disadvantage. Compared to its competitors, does Newegg winning this lawsuit give them any competitive advantage? After all, their competitors are no longer subject to paying for the invalidated settlements either. By paying the settlements, the companies reinforce an awful system, but they also don't need to face the volatility and potential cost of a jury-trial in districts cherry-picked by the trolls. By going to trial, the defendant only stands to maintain patent troll cost parity with their competitors (if they win and invalidate their competitors' settlements)- or they lose and get hit with a judgment that could be extremely costly. Further, in most organizations, management risks the ire of their shareholders should they elect to go to trial and lose. They're again put in a situation where their personal risks outweigh any benefits they stand to gain. Even for executives that consider themselves ethical, they can still rationalize that minimizing risk to the shareholders is the ethical decision. - This seems true enough - from a (rational) game-theoretic perspective, why should any victim really fight hard to overcome a troll, if in doing so they risk big losses, and don't gain any advantage over their competition even if they win? The main potential upside is that consumers and potential partners will view them more favorably and give them more business (as is happening now), but this is a very unreliable bet to make. The downsides of "doing the right thing" are very likely greater than the upsides. The main motivator to fight the trolls has to be personal principle, and even then the principled person has to balance it against the real risks to his company and lifestyle. Newegg had the gumption and muscle to see the case to its end, but it was the lucky one, the one-in-a-hundred with the right attributes (principled owners, private ownership, deep pockets). We're not likely to see this kind of thing happen very often, with the odds stacked against what should be the right outcome. And that's all the more reason to salute Lee Cheng, Fred Chang, and James Wu and their victory against profiteers in a flawed system. CEO Fred Chang probably deserves as many, if not more, accolades as Lee Cheng, for deciding as the major shareholder to take this battle to its end.
- Friedduck 14y agoWhy hasn't there been a boycott of businesses in the East Texas district where all these judgments originate? Or at least some social action against Texas to try to shame them into behaving responsibly? Could it gain traction?
- talmand 14y agoSo, you wish to punish an entire region of people because of the actions of a few? Seems reasonable.
- linuxhansl 14y agoIt's a shame that prior art was even necessary here. Isn't this plainly "obvious to anybody skilled in this field"?
- hakaaaaak 14y agoThe U.S. needs patent law/tort reform- something to stop this nonsense without reputable companies having to pay millions to patent trolls. I'll definitely make sure to buy from newegg next Christmas.
- likeclockwork 14y agoI can't even believe there WAS a shopping cart patent. I mean, what? How else are you supposed to do it? I mean.. seriously? They patented the concept of keeping track of things a customer intends to buy? If no one had ever done this before, how many people would arrive a this solution tomorrow? It's not hard to implement and absurdly obvious to even think of.
- chetan_prasad 14y agothese patent trolls are everywhere, whats worse is even the big names in the industry are doing similar things!!! patents if anything should allow innovation but not be a bump on the way to innovation!!!
- robomartin 14y agoWe need more of this. A lot more. We also need to stigmatize law-firms willing to take-on patent troll clients. Looking at the companies who got sued by these trolls one can only wonder why it is that these companies don't unite to create a legal and financial firewall of sorts to go against trolls each and every time they stick their heads out of the slime they live in. All you really need is for trolls to be summarily destroyed for a few years to create the conditions for change. I have not bought anything from Newegg in a long, long time. Sometimes I almost instinctively just buy through Amazon. Now it will be different. Because I admire, respect and appreciate what Newegg did here I will do my small part and move whatever business I can their way. It's my own little way of saying "thank you" to a company that didn't just stand-up for themselves but rather for all of us. Maybe if enough of us chose to vote with our cash more companies might be convinced to fight trolls rather than cave in.
- robomartin 14y agoFrom the article: "The American justice system has issues, but it fundamentally works. The jury system is sound. Juries are people of good will and have common sense." This system "fundamentally works" if you have the money to make it work for you. Most individuals, small and medium businesses simply cannot afford the cost of seeking justice. In my opinion this is true of civil, business an criminal law. Example: Back when I was younger and far dumber I client stiffed me for about $125K of work. Of course, off I went to a lawyer. By the time I spent about $8,000 in legal fees I realized that all I was doing was paying for my attorney and their attorney to write what I came to call "love letters" to each other. I called them "love letters" because every time they wrote one, regardless of content, they got paid handsomely by both parties. I decided to lick my wounds and move on. Good thing I did. The client ultimately filed for bankruptcy protection and stiffed a bunch of other businesses out of hundreds of thousands of dollars. They formed a new corp pretty much in parallel and have been operating ever since. Would money have made a difference here? Maybe. Don't know. I had a similar situation with a large (multi-billion dollar global corp) that cause us huge damage. There was simply no way to go after them without putting-up at least $500K in the bank for legal fees. Not a fight I could have considered. And so, even though they were decidedly in the wrong, they, effectively, "wrote their own laws" or were able to ignore them because they could fight a fight I couldn't even begin to consider. What I do know is that it sure felt like there was a huge asymmetry in justice. It's almost like one can exist in this parallel universe where the practical result was that laws simply were not applied in the same way to those with less money to "buy" justice.
- abcd_f 14y agoDoes this reverse the payments made by Amazon et al to date? Or will this troll lawyer lady keep sitting on the millions and looking for another way to do the same thing? Like going after smaller potatoes, but in much large numbers.
- cfontes 14y agoThis phrase alone makes me want to buy stuff there... "For Newegg's chief legal officer Lee Cheng, it's a huge validation of the strategy the company decided to pursue back in 2007: not to settle with patent trolls. Ever."
- nonamegiven 14y agoWhy is East Texas a troll haven? Are companies donating money to schools or paying bribes?
- silentmars 14y agoAnyone else read the article, see the picture of Lee Cheng and say to themselves, "damn I wish I was that guy"?
- metaperl 14y agoHow does Newegg recoup the loss of time and money involved in raising this lawsuit? Wouldnt it make sense for Hacker News to provide an affiliate URL to Newegg? After all, you wouldnt be shopping there if it werent for YC notifying you of their noble actions - YC is driving business to them and receiving no sales commissions.
- dangayle 14y ago"Screw them. Seriously, screw them. You can quote me on that." Best quote of the day
- d4vlx 14y agoDoes anyone know if invalidating patents affects previous settlements? Could the company that settled sue for their money back?
- jessaustin 14y ago...the patent-holding company was still able to hire another top law firm: Quinn Emanuel. That same law firm has done loads of defense work for Google and has become the search giant's go-to patent-troll killer; it's the same firm that defended Samsung in its blockbuster showdown with Apple. This reminds me of the classic pre-emptive divorce maneuver Tony Soprano pulled: http://en.wikipedia.org/wiki/Unidentified_Black_Males#Episode_recap http://en.wikipedia.org/wiki/Unidentified_Black_Males#Episod... If you don't want to get sued by patent trolls, get all patent troll attorneys on retainer.