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Patently Wrong

Finally! Score one (and a big one) against patent trolls.

Newegg, an online electronics retailer, has won their patent appeal against Soverain Software.

Soverain is a patent troll, a company that has never produced anything, but has managed to extort millions of dollars against companies including Amazon and The Gap, and was in the process of suing Nordstrom’s, Macy’s, Home Depot, Best Buy, Radio Shack, Kohl’s, Wallgreen’s, and many others.

How? They bought some patents from a defunct company that claimed to cover the online shopping cart, lawyered up, and sued companies in patent-friendly West Texas. Never-mind that taking an obvious and well-known physical concept and implementing it on the Internet isn’t even vaguely deserving of patentability.

Defending against a patent suit can cost many millions of dollars and depress the market cap of a company due to uncertainty. So companies are often willing to settle even bogus claims, and once a few big companies settle it gets harder and harder for other companies to defend themselves. Soverain was working their way to collecting a stunning 1% of the gross revenue of every online retailer.

But back in 2007, Newegg decided on a new strategy: they would not settle with patent trolls, ever. As Newegg’s chief legal officer put it “We basically took a look at this situation and said, this is bullshit. We saw that if we paid off this patent holder, we’d have to pay off every patent holder this same amount. This is the first case we took all the way to trial. And now, nobody has to pay Soverain jack squat for these patents.”

Kudos to Newegg!

Now, I’m a computer scientist and I even hold a few software patents, but I would be very happy if the federal government invalidated all software patents. They do nothing to encourage or reward inventors like me, and in fact cause lots of problems. Imagine you are trying to start an online shopping business, but nobody will invest in you because in order to sell anything online, you would run afoul of patents like those held by Soverain. Soverain could extort any amount of money they wanted from you, and could even refuse to license their patents and put you out of business. Just like that.

Other patent trolls hold patents on things as silly as drop-down menus. These trolls could basically sue the vast majority of websites and force them off the internet. Think about what that would do to our economy.

And because many judges don’t know obvious from a hole in the ground, especially in highly technical fields, lawyers can often get away with this crap.

It has to stop, and this is a great first step in the right direction.

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8 Comments

  1. ThatGuy wrote:

    I’ll now be even happier to continue purchasing all my computer needs through Newegg.

    Tuesday, January 29, 2013 at 12:22 pm | Permalink
  2. rk wrote:

    I, too, hold a software patent. I don’t think it should have been patentable, but it is. The company lawyer found out about what I was doing and wrote it up. From what he submitted, I would never have guessed that my work was the source of the patent. My work involved applying some mathematics to a real-time software data stream. The lawyer made it sound like an extreme application of physics. If I couldn’t understand it, there’s no way a federal bureaucrat would understand it.

    I earned one of those absurd software patents. I’d love to see all software patents invalidated.

    Tuesday, January 29, 2013 at 12:34 pm | Permalink
  3. Duckman wrote:

    Our patent system most def needs an overhaul, although it will surely be awhile given all the other problems we have. I won’t go as far as to say all software patents need to be invalidated. I don’t see why Windows OS and some programs needs to be invalidated.

    The other part of this is if you sue someone and you lose, you should be liable to pay the defendants court costs. That would stop silly things like this and maybe even stop this sue crazy country

    Tuesday, January 29, 2013 at 5:43 pm | Permalink
  4. Iron Knee wrote:

    Actually Duckman, paying court costs wouldn’t stop silly things like this. Newegg lost initially (in that patent-friendly West Texas court) and only won on appeal. The problem is patent law.

    Software is well protected by copyright and trademarks (and more often, just by keeping the source secret). We don’t need software patents. You mention Windows OS — would Microsoft have not written Windows if they couldn’t have gotten a patent on it? Hardly. Would they have replaced it sooner with something better, rather than suing people to protect it and milking it long past its expiration date? Almost certainly. I believe that Microsoft would have been better off without software patents.

    Agreed ThatGuy, Newegg always been a great place to shop for electronics and computers. I purchased 17 orders from them in 2012 alone. Even better to know that they are good guys!

    Tuesday, January 29, 2013 at 7:10 pm | Permalink
  5. Michael wrote:

    I met a recently retired patent clerk the other day (>20 experience), and learned a few interesting things. One: Clerks have very little power now to disqualify applications as being obvious (note that this is obvious to those “skilled in the art,” not to everyone). This is a side effect of a SCOTUS ruling around 2003 or so. The policy now is that they must have documented evidence that someone else has had the same idea. If they cannot provide such evidence, they cannot claim it is obvious. Two: Clerks have an 8-hour limit for application evaluation. From the time they read the title and abstract, through research time, through all of it…they must have a decision within 8 working hours. Considering some of the patents I’ve seen…yikes… There’s no way.

    Duckman, eliminating software patents won’t invalidate Windows. What it would do is force Microsoft to use copyright law, rather than patent law, to protect its intellectual property.

    For software, copyright law really is significantly more appropriate. There is very little in the software field that can and should be considered an “invention.” Windows doesn’t even fit that bill. From a kernel perspective, Windows 7 is simply the latest re-implementation of Windows NT. The underlying concepts–that is, the truly novel inventions–have been well understood for decades, dating back to Multics (1964) and earlier systems. What’s new is the expression of these ideas, which should be protected by copyrights, not patents.

    Tuesday, January 29, 2013 at 7:33 pm | Permalink
  6. Anonymous wrote:

    OH? A level 20 patent clerk or just 20xp? There’s a big difference.

    Tuesday, January 29, 2013 at 10:35 pm | Permalink
  7. Michael wrote:

    Sorry, that should be >20 *years* experience in the patent office. I don’t know what specific job functions he held during that time, though.

    Wednesday, January 30, 2013 at 1:33 am | Permalink
  8. Anonymous wrote:

    Oh, I was excited for a moment. :)

    Wednesday, January 30, 2013 at 11:50 am | Permalink