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Newegg vs. Patent Trolls: When We Win, You Win
- mcherm 11y agoI really appreciate Newegg's approach here -- one of the main reasons that patent trolling is so successful is that the cost of settling is smaller even than the cost of winning a suit. Newegg is performing an (expensive) community service. How should I be supporting them (other than making them my "first place to check" for electronics shopping)?
- ChrisGranger 11y agoWord of mouth advertising is one way to help. Tell your friends that it should be their "first place to check" as well.
- throwawaykf05 11y ago> one of the main reasons that patent trolling is so successful is that the cost of settling is smaller even than the cost of winning a suit. Is the underlying reason for this strategy the low costs of settlement, or the extremely high costs of lawsuits? What if the value of a patent really is only a few thousand dollars? Note that this very tactic is used by big companies to avoid licensing valid and useful patents owned by smaller entities. Licensing discussions often begin with the potential licensor saying "sue me", or these days, outright suing you first with a Declaratory Judgement. Can an individual afford to take on a large company? Trolls appear to simply be a symptom of this disparity in the market.
- Lawtonfogle 11y agoThe legal system is not equally available to all entities. That it is the center of how we enforce our rights and hold others to their duties is a major problem. Even if we could fix it in the case of patents, we still have major issues within other civil and criminal courts. I do not know the solution or even have any half baked ideas on it, but I do think the first step to any solution is for us, as a society, to realize that the legal system is largely pay to win and not a justice system.
- tachion 11y agoThere are other countries, where this issue is solved (more or less) by the fact that the side which have lost the case is covering trial costs. This does stop 'court trolling' because even is the cost of winning the case is higher than the cost of the settlement, winning the case nullifies that cost. But hey, US is special this way! (and many others... ;)
- adebtlawyer 11y agoHaving litigated against adversaries who use the courts primarily to be a nuisance, with little or no regard to the actual strength or weakness of their claims, I've become convinced "loser pays costs and attorney's fees of prevailing party" is a better system than what we have in the U.S.
- tachion 11y agoThis is not the only difference between the justice systems in US and EU (EU is what I consider to be elswhere): in US the case is the battle between boths sides lawyer, and the judge is simply a watching function, that a the end calls the sentence, based on the outcome of that battle. In EU, the case is a so called 'process of finding material truth' and the judge can take active stance, call witnesses, ask additional questions, call for professional opinions and so on - it is no longer a battle of who has better lawyers but a way to find what's the actual state of things.
- adebtlawyer 11y agoThe US system is also supposed to be a process of truth-finding, just that we leave the parties to support their own positions as adversaries. Without advocacy, American courts do very little on their own. So far that doesn't bother me, but I'm a lawyer. For someone thrown into the system, there can be an incorrect expectation that the court will automatically act to do justice.
- eigenvector 11y ago
- ikeboy 11y agoIf you know you have a valid case (you aren't a troll), how hard would it be in practice to find someone to front the money for a lawsuit? Or for that matter, could you go to the competition and sell your patent? That is, say Apple's infringing on my patent; will Samsung buy the patent from me for a fair price and then sue Apple?
- stonemetal 11y agoto find someone to front the money for a lawsuit? That is one of the problems, he who fronts the money expects to get the reward. Hence class actions where the lawyer who works on contingency gets millions and those wronged get a nickle.
- ikeboy 11y agoOf course, but 1. You'll still get a significant sum if the total is significant (and if the case is open-and-shut, the risk wouldn't be too high for an investor, so you could get a favorable deal) 2. The infringing company would have to pay in full, which discourages them from doing it in the first place. I guess I really want to know is if this actually happens in practice, or if there are reasons I'm not thinking of that stop it from happening.
- startupfounder 11y ago> how hard would it be in practice to find someone to front the money for a lawsuit? What about paying into an troll insurance policy every month so that if a troll wanted to sue you they would see that you were protected and would fight the lawsuit with a giant pile of money. This might deter the troll from suing in the first place.
- detroitcoder 11y agoThat is essentially what RPX Corporation provides
- rollback 11y agoThere is a whole ecosystem that is funding these lawsuits. It also operates somewhat anonymously, with funding sources working directly with law firms and indirectly with inventors (if they are even involved anymore). I've seen emails between law firms and the inventor that literally title the investors as "the funding source." The original inventor need not put any money at risk, and the law firms and funding sources do their own diligence to decide if it's worth proceeding to file suits. In most cases, the entity filing suit is created for each series of attacks so that if they actually lose a suit and are supposed to pay out, there are no assets from which to pay. Therefore, low risk and potentially very high reward. The biggest factor for that is not the validity of the patents, but the breadth and ability of the patents to be filed against "juicy" targets with a lot of cash. The cost of filing a suit is literally in the hundreds of dollars (I think ~$750) and most of these cases get settled out fairly early because of the immense cost of the defendants to complete the discovery process.
- brlewis 11y agoI'm a software engineer. Consequently I have to admit ignorance about this concept of a valid and useful patent. All I ever see is patents that hinder the Progress of Science and useful Arts. Are there really enough valid and useful patents that we should hesitate in our fight against the rest?
- jebblue 11y agoI'm confused, are you asking if you should be fighting patent trolls or patents? If trolls, then fighting them is better than not. Patents are tools, valid and legal, you don't fight tools, you use them, improve them, complain about them, etc.
- brlewis 11y agoI'm talking about patents. Patents are tools in the same sense that landmines are.
- sosborn 11y agoWhy choose the word landmine? What's wrong with, say, a hammer?
- brlewis 11y agoHammers aren't used to exclude people from a path they might otherwise blissfully follow.
- sosborn 11y agoI guess I disagree with the idea that patents are inherently bad. Like hammers they can be used to build or to destroy.
- ycombobreaker 11y agoYou simply aren't using enough hammers! Though seriously, I think the term landmine is loaded toward using patents exclusively as a troll. A wider analogy could be like a toll bridge, where the builder should be compensated by travelers. Some tolls could be usurious, but that wouldn't invalidate the whole principle.
- blazespin 11y agoFixed it for you: Note that this very tactic is used by big companies to avoid licensing valid and useful patents owned by smaller NON PRACTICING entities. Yes, big companies have a better track record against trolls. And yes, this unfair. But that doesn't mean trolls are OK.
- LordKano 11y agoIs the underlying reason for this strategy the low costs of settlement, or the extremely high costs of lawsuits? Lawyers are expensive. Good lawyers are extremely expensive. There are also experts, investigators and consultants to hire. Everything about the process is expensive. It's very good that newegg is doing this because it helps everyone.
- 88e282102ae2e5b 11y agoReally though, their approach is to be known as the company that won't settle and isn't worth suing. Eventually, patent trolls will just avoid them.
- JustSomeNobody 11y agoI don't know about that. I've read plenty of articles on Ars about how incompetent the lawyers for the trolls are.
- throwawaykf05 11y agoArs has a strong anti-patent bias and they are not afraid of twisting facts to fit the narrative. Note how they made the troll lawyers look stupid in their coverage of the TQP/Newegg trial, but TQP prevailed in that one. Newegg recently got off on non-infringement, but that was because Newegg lawyers were incompetent in not bring up that defense the first time. Their bias got so bad that even their typically anti-patent commenters called it out on one of their recent articles.
- akshatpradhan 11y agoThis is actually a very important observation. The entire modus operandi of patent trolls is to go after the weak. Let's not kid ourselves when suggesting incompetent lawyers can't gain competence.
- throwawaykf05 11y ago> The entire modus operandi of patent trolls is to go after the weak. This is not true. Giants like Apple, Google and Microsoft get sued all the time. They face hundreds of troll lawsuits at any given time.
- akshatpradhan 11y agoCitation for hundreds of troll lawsuits? I'm only seeing one or two incidents when I google up Microsoft Patent Troll or Google Patent Troll.
- zeidrich 11y agoI don't know if I agree. The thing is, what Newegg is doing, especially by publicizing it is to tell trolls to avoid Newegg. That's great for Newegg, but it means that future trolls will skip them, and just go after the startups and small businesses that don't have the resources to fight a lawsuit on principal. I'm not saying that what Newegg is doing is bad, or even that it doesn't help. I'm just saying that the publicity that they are seeking for it might end up working out well for them by getting people to stop suing THEM, but won't work well to get people to stop suing other, smaller businesses. If a patent troll were to sue you for something you've implemented, and you knew that Newegg implemented it too, you'd have a difficult time getting Newegg to fund your defense I think. Unless the troll sues Newegg, nobody's going to help you out. If the trolls just avoid Newegg, they can still get their payout.
- mcv 11y agoWhat we need is a big party willing to defend all the small parties. How about some sort of patent troll insurance that takes over your defense and sues to invalidate the patent? The insurance should cost a smaller amount of money than settlement would cost. The more companies have that insurance, the bigger the defense you can mount, and the lower the costs for everybody are. The first person sued by the troll immediately takes it to court and wins, invalidating the patent, and ensuring that only one lawsuit will have to be fought and everybody else is safe. Of course this could mean that a lot of people feel they don't need the insurance because someone else will invalidate the patent for them, but if the list of people and companies protected by this insurance is public, those without it will be the first to be sued. So eventually, everybody will want this insurance, and the trolls will be forced to take it to court every time. There's got to be a business model in this.
- ild 11y agoAnother well-known Troll fighter is Vizio.
- yenda 11y agoAnother well known patent troll is Apple, patenting your hands movements and phone shape since 1984. Allowing the marketing industry to replace the hardware industry product after product.
- soup10 11y agoDoesn't help much apparently, since android is one of the largest software design 'thefts' ever, and the only thing they couldn't include was 'swipe to unlock' and the apple logo.
- rplnt 11y agoDon't they pay Apple and Microsoft for various patents though? The vendors that is.
- rimantas 11y agoApple does release products, you might want to check the definition of the patent troll.
- marcosdumay 11y ago
- emirozer 11y agoPlease excuse my ignorance on this topic. - Why is this happening in the first place? - Who is this entity that grants a loose patent? - Why isn't this entity being interrogated ?
- csvan 11y ago1. Because horrendously broken patent system. 2. An examination body integral to the horrendously broken patent system. 3. See 1.
- ExpiredLink 11y ago> horrendously broken patent system If the patent system were "horrendously broken" it would have been fixed long ago. It obviously serves powerful political interests horrendously well.
- TeMPOraL 11y agoThere is a lot of politics and lobbying present, but there's also intertia. It takes time to fix things. Present patent system is woefully inadequate to the world of Internet-delivered software, which is quite a recent development. It serves somewhat better in other areas.
- xxs 11y agoMost people in politics do not even understand the problem.
- philipov 11y agoYes, it serves the political interest of "I need more money"
- dvdcxn 11y agoI think this is what the poster you replied to is implying.
- yenda 11y agoNo patent for ideas in Europe, problem solved.
- ghayes 11y agoThe Alice[1] opinion moved US law closer to what you are looking for, rejecting patents that are simply ideas "by means of a computer." [1] https://en.wikipedia.org/wiki/Alice_Corp._v._CLS_Bank_Int%27l https://en.wikipedia.org/wiki/Alice_Corp._v._CLS_Bank_Int%27...
- jcranmer 11y agoIt's worth noting that the Supreme Court has generally given rulings that suggest that intimate that software patents are broadly unpatentable. The key decision that allowed software patents in the first place was State St., which was never heard by the Supreme Court (indeed, in Bilski, every opinion went out of their way to emphasize just how wrong State St. was). Between Bilski, Alice, and even the older decisions of Benson, Flook, and Diamond v. Diehr, SCOTUS has generally held that most software patents are basically inherently invalid. It should also be pointed out that many patents favored by trolls would also fail obviousness and/or prior art tests: the problem isn't that the patents are valid, it's that trolls can extract money from people by charging them somewhat less than the cost to go to court to prove that the troll's patents are invalid. One way you could fix the system is to punish the trolls for knowingly peddling invalid patents: if an entity gets three patents invalidated by the court system and they've been aggressive in suing people for compliance with those invalid patents, then all patents that they hold are summarily invalidated and they get prohibited from enforcing any patents for 5 years. On top of having to reimburse everyone they charged (plus damages… plus interest ☺).
- duskwuff 11y ago> One way you could fix the system is to punish the trolls for knowingly peddling invalid patents... Most "patent trolls" spin off separate legal entities for each patent they're using. This is to minimize losses if a suit goes wrong and they end up having to pay legal fees. So, trying to punish trolls would be extraordinarily difficult; you'd have to figure out some way to explicitly link all of these entities, which is something the trolls are already specifically trying to prevent.
- andresmanz 11y ago> An example of this is Sovereign who bought the rights to a shopping cart. If anyone wants to google them and can't find anything (like me), that's because the name is Soverain, not Sovereign.
- jchomali 11y agoNice article! Thanks for sharing this with us!
- jvdh 11y agoReading that the patents were about SSL and RC4, I had an evil thought. A patent troll with these patents would actually help make the Internet a safer place. Companies that are still using those should be sued for not securing their consumers' information properly. Failing that, this would be an even better way of achieving the same thing.
- kazinator 11y agoYou don't really win until the legal atmosphere is such that the the key personalities behind a patent troll operation get 10 years in jail.
- bargl 11y agoYou mean you don't win the war? I'd say this is definitely a battle that they won, but there is still a ton of work to do to change the legal atmosphere in the USA.
- Floegipoky 11y agoWhy would Congress ever pass a law punishing lawyers who abuse the system for personal gain at the expense of the public? They're all lawyers whose entire careers have been spent doing just that.
- HeyLaughingBoy 11y agoDo you seriously want to live in such an atmosphere? Do you really think that if that situation ever came to be then it would be the only change occurring in society? Patent trolls may suck, but IP is a thing we're not going to get rid of. As long as it's "property" it can be traded. As long as it can be traded, the possibility that the current owner has desires at odds with the original owner can arise.
- kazinator 11y ago> Do you seriously want to live in such an atmosphere? Certainly. What these people are doing is effectively extortion and fraud; there should be a legal framework in which such abuses can be identified as such and treated accordingly. The "IP" in question is not valid; it is predicated upon a lie. The lie is that the patented idea is a significant new invention without prior art. The trolls know this and exploit it by looking for obvious implementations of everyday things that could conceivably land within the language of a patent, which is a patent of specifically this type which they specifically acquired for the purpose of trolling.
- thinkcomp 11y agoFor those who prefer specifics of Newegg's litigation history rather than a summary: http://www.plainsite.org/flashlight/newegg-inc/ http://www.plainsite.org/flashlight/newegg-inc/
- transfire 11y agoThis system is sick, sick, sick. The patent system needs a major overhaul. It can't be pay to play. Given the state of affairs it would help if all patent litigation fees were paid for by the government.
- aet 11y agoWorthless article that doesn't go into any details
- IanDrake 11y agoWhy would any of these trolls take on newegg?
- altcognito 11y agoThey have lots of money so they figured they'd get more money out of a quick settlment. They miscalculated of course on Newegg settling.
- IanDrake 11y ago>more money out of a quick settlment I get why they'd go after anyone but NewEgg for that reason, but EVERYONE in their business should know NewEgg doesn't settle by now.
- deleted 11y ago[deleted]
- samch 11y agoSeriously excellent work by Newegg. I'm worried, however, that they've now made themselves well-known enough in the industry to avoid future targeting by patent trolls. Honestly, who would go after Newegg at this point with their current track record? In the long run, this probably helps Newegg a lot with good PR and fewer trolls attacking them. With the exception of the specific cases they've already won, I just don't see this really helping the little guys over the long run. Patent trolls are going to remain a huge headache until we get serious reform.
- devy 11y agoErich Spangenberg is America's most notorious patent troll mafia head. I blames him for taking full advantage of the broken U.S. patent system to squeeze upward of $30 billion each year and the tremendous waste of use our legal system resources. EFF[1] and NYT[2] ran full reports on him previously. [1] https://www.eff.org/deeplinks/2013/07/times-profiles-patent-troll https://www.eff.org/deeplinks/2013/07/times-profiles-patent-... [2] http://www.nytimes.com/2013/07/14/business/has-patent-will-sue-an-alert-to-corporate-america.html http://www.nytimes.com/2013/07/14/business/has-patent-will-s...
- sliverstorm 11y agoThere's parasites in nature, no reason to think there wouldn't be parasites in human society...
- harry8 11y agoWhat do we do with parasites when they attack us? That.
- grellas 11y agoWhat Newegg does is highly commendable. To achieve a decisive victory in these cases, Newegg typically has to take the defense of its case through a full trial and possibly an appeal. People often fail to appreciate just how risky a trial can be. We stand on the sidelines and laugh at how absurd this or that flaky patent appears. And yet - and yet - the law itself went through a phase in which such patents were almost routinely granted. Standards may have tightened over time but, still, a patent claim in a hotly litigated case will not survive to trial unless it has been able to withstand a host of pretrial challenges by which a defendant has already asked a court to rule that the patent, as a matter of law, should not stand. It is only when a court tosses the patent claim in the pretrial phases that a defendant avoids the risk of a potentially absurdly high verdict after trial. If the claim survives such challenges, then the defendant has no choice but to settle or to play it out through trial while incurring just a risk of having a large verdict entered against it. This is the point at which most defendants - even large, deep-pocket defendants who can otherwise afford to pay the costs of defense - will fold. Newegg, on the other hand, has made the tough decisions, incurred the major risks, and largely managed to defeat such patents on the merits. In doing so, it incurs the very large costs of defense typical in such cases. And it has the guts to take the potential liability risks of going through full trials to take the cases to verdict. Large, institutional defendants have occasionally (though rarely) adopted such policies in the past. For example, over decades, GM adopted a policy of never settling injury claims if its own experts had determined that the GM autos were not at fault. In doing this, it would often incur defense costs that far exceeded the value of the claim being defended. But it did so to send a firm message to the plaintiff's bar that prosecuted such claims - that is, "if you want to sue GM, your case had better have merit - you will get no nuisance settlement from us." Newegg effectively is delivering the same message but with an important twist. If GM successfully defended a particular injury claim, that ended the case for that claimant but had no preclusive effect on other, similar claims. If Newegg successfully defends and defeats a patent claim by having the patent declared invalid, the law of what the lawyers call "res judicata" (meaning, "a matter adjudged") kicks in and kills that patent off forever. So, not only does Newegg take out the garbage, it makes sure it won't accumulate ever again. This is a true public service for which we all must tip out hats.
- IndianAstronaut 11y ago
- davesque 11y agoIt's totally excellent that Newegg is doing this. As a side note, I don't like when people include silly infographics in articles like this. I think it sort of cheapens the message and this particular message is important.
- FrankenPC 11y agoThis brings up a good point. I need to buy from the vendor that's doing some good with my money. Sometimes I hesitate to buy from Newegg because I can always find the parts cheaper (Hey! Rent's a killer on the West coast right now!) I think I'll buy PC parts solely from them for as long as they fight the patent trolls.
- x0054 11y agoPerhaps a solution to this would be a Kickstarter like anti patent troll site. Patent trolls usually go after smaller businesses at first, businesses who could not possibly afford to fight, even if they wanted. The site would allow a business to post their legal case online, and other businesses who face similar exposure, could contribute to the defense fund. The "perk" of contributing would be that you would get access to all of the expert witness prepared statements and legal work, so if a patent troll comes after you next, you would have a lot of your defense work already done for you. Plus, once the patent troll looses a case, especially on appeal, that decision can be used as precedent.
- akshat_h 11y agoThis seems like a decent idea. Wonder what the lawyers have to say about it though?
- greenNote 11y agoSeems like an insurance policy, except that you get access to the details of past settled cases. Could I not just join as soon as I get served a notice?
- x0054 11y agoYou know how they say that the best defense is a good offense. Well, this is the same concept. Sure, you can join the defense fund at any time, but by joining early, and putting up a good fight, you are helping to make sure that you your self will never get served. By joining the fund you are also sending a message to the troll that you are willing to fight, which makes you a harder target.
- tux1968 11y agohttps://en.wikipedia.org/wiki/Open_Invention_Network https://en.wikipedia.org/wiki/Open_Invention_Network
- notahacker 11y agoAlso valuable, but as I understand it the OP's solution is applicable specifically to companies that have actually received C&Ds and suspect there are others [about to be] on the end of a similar shakedown which might have an interest in pooling defence teams.
- codezero 11y agoIn winning these cases has Newegg shared any learnings that might help smaller companies affected by patent trolls, or is it almost as simple as ponying up the cash and going to trial?
- aidenn0 11y agoI wonder if Newegg's much publicized fights against patent trolls could be advantageous for them by deterring trolls from going after them for royalties. N expensive lawsuits might be cheaper than M cheap settlements, if M is sufficiently larger than N.
- sytelus 11y agoAs everyone knows in industry, this is not really a "win". Patent trolls are setup in such a way that if they win they make lot of money and if they lose then they lose very little. In many cases, they don't have to even pay damage or lawyers fee for other party. If they are ever ordered to do so then they would just announce bankruptcy of their shell company. They don't even lose their portfolio because it's allocated in to hundreds of shell companies. So in nutshell, Newegg has done very little damage to the troll. The troll already made $45M and now they will just move on to next patent in their next shell company. All the other efforts like preventing bad patents through StackExchange etc also have very little impact on troll business model. The only real weapon you can use against them is crafting laws that strongly discourage trolling. One would think tech industry with 100s of billions in bank have enough lobby power to get this done quickly. The issue again is that tech industry itself want to own such lousy patents to use against each other. So the industry will only support weaker forms of laws against trolling. I would highly suspect there would be end of trolling anytime soon. Industry as a whole would be more than willing to absorb this cost instead of giving up on their own ammo.
- rawdisk 11y ago"... tech industry itself want to own such lousy patents to use against each other." I recall a story where Steve Jobs called Eric Schmidt from Burning Man and threatened Schmidt with "nuclear war" over Android. What did he threaten him with? Legitimate competition? Guess again. Junk patents are a perfect vehicle for vexatious litigation. This is just my biased opinion but the IT industry appears to have no shortage of child-like executives. World's largest patent troll co-founded by former Microsoft CTO and a licensing lawyer from Intel who coined the term "patent troll". Two individuals who had certainly seen their share of trolling by smaller entities against MSFT and INTC. I believe the lawyer blogged about the problem of "patent trolls" anonymously for while at Intel in the late 90's, but was later "outed". The industry was aware of this problem very early on.
- olalonde 11y ago> In this latest round of Newegg vs. the patent trolls, Newegg went against a company that claimed its patent covered SSL and RC4 encryption, a common encryption system used by many retailers and websites. Maybe rights over patents should be lost if the rights holders fail to actively defend it (similar to trademarks)? That would at least prevent the absurd scenario where a patent holder waits for their technology to become widespread before starting to prosecute.
- Natsu 11y agoInteresting... I just learned that NewEgg's order page fails gracefully under NoScript. You do have to turn on scripts for some domains, but it has buttons that let you continue after doing so. I haven't seen that before.