How Newegg crushed the “shopping cart” patent and saved online retail

[DainBramaged]

Anyone who visited Soverain Software's website could be forgiven for believing it's a real company. There are separate pages for "products," "services," and "solutions." There's the "About Us" page. There are phone numbers and e-mail addresses for sales and tech support. There's even a login page for customers.

“We basically took a look at this situation and said, ‘This is bullshit.’”
It's all a sham. Court records show Soverain hasn't made a sale—ever. The various voice mailboxes were all set up by Katherine Wolanyk, the former Latham & Watkins attorney who is a co-founder and partial owner of Soverain. And the impressive list of big corporate customers on its webpage? Those are deals struck with another company, more than a decade ago. That was OpenMarket, a software company that created these patents before going out of business in 2001. It sold its assets to a venture capital fund called divine interVentures, which in turn sold the OpenMarket patents to Soverain Software in 2003.

"Thank you for calling Soverain technical support," says Wolanyk, if you press option 2. "If you are a current customer and have a tech support question, please call us at 1-888-884-4432 or e-mail us at [e-mail]." That number, like the "customer support" number on Soverain's contact page, has been disconnected.

Soverain isn't in the e-commerce business; it's in the higher-margin business of filing patent lawsuits against e-commerce companies. And it has been quite successful until now. The company's plan to extract a patent tax of about one percent of revenue from a huge swath of online retailers was snuffed out last week by Newegg and its lawyers, who won an appeal ruling [PDF] that invalidates the three patents Soverain used to spark a vast patent war.

http://arstechnica.com/tech-policy/2013/01/how-newegg-crushed-the-shopping-cart-patent-and-saved-online-retail/

[PeaceNikki]

1. Good. Those patent-squatting vulture assholes need a good kick in the shins.

[PoliticAverse]

2. The shopping cart patent should never have been granted. Congratulations Newegg. n/t

[PeaceNikki]

3. Love this guy!!!

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.

"We basically took a look at this situation and said, this is bullshit," said Cheng...

Then they pop up and say "Hello, surprise! Give us your money or we will shut you down!" Screw them. Seriously, screw them. You can quote me on that."

[backscatter712]

4. Software patents and business-method patents are a fucking pestilence.

They need to be completely abolished. All they are is a weapon for big corporations to harass each other and harass small businesses and individuals who compete with them. They're inherently monopolistic, and need to go.

[Gidney N Cloyd]

10. Some smaller co.'s do it, too. A friend of mine's been under attack for 10 years by a competitor.

The other company is barely in the business anymore. They mostly just sue. My friend and his company decided not to settle and it just keeps getting kicked around the courts.

[backscatter712]

15. Ah, sort of like SCO when they tried to demand royalties for Linux.

Thankfully, they got put in their place.

[Downwinder]

5. As good as a RightHaven slap down.

Wonder why they didn't go after Walmart?

[PeaceNikki]

7. The list they went after is interesting indeed. They tried some HUGE players

Avon & Victoria's Secret must be happy.


CASE NO. DATE FILED DEFENDANTS CASE STATUS
6:07-cv-00511 Case also included U.S. Patent No. 7,272,639 11/2/2007 CDW Corporation, Newegg Inc., Redcats USA, Inc., Redcats USA, L.P., Systemax Inc., The Sportsman's Guide, Inc. TigerDirect, Inc. Zappos.com, Inc. Resolved - All parties settled except Newegg. Verdict & judgment against Newegg for $2.5 million, now wiped out on appeal.

6:09-cv-00274Case also included U.S. Patent No. 7,272,639 6/25/2009 J.C. Penney Corporation, Inc. Amway Corp. Avon Products, Inc. Ballard Designs, Inc. Bidz.com, Inc.Cornerstone Brands, Inc. Etronics, Inc. Garnet Hill, Inc. HSN Improvements, LLC HSN, Inc. QVC, Inc. Shutterfly, Inc. Smith & Noble, LLC The Territory Ahead, Inc. Victoria's Secret Direct Brand Management, LLC Victoria's Secret Stores Brand Management, Inc. Vistaprint, Ltd. Vistaprint USA, Inc. Resolved - Verdict & judgment against Victoria’s Secret on ’314 and ’492 in the amount of $9,200,000 plus running royalty of 1%. Verdict & judgment against Avon on ’314 and ’492 in the amount of $8,700,000 plus running royalty of 1.05% for avon.com and .875% for youravon.com. (Won't be paid in light of Newegg appeal win.)

6:12-cv-00141 3/14/2012 BergdorfGoodman.com, LLC, Best Buy Co., Inc. BestBuy.com, LLC, Neiman Marcus, Inc., Office Max, Inc., Oracle CorporationOracle OTC Subsidiary LLC, The Neiman Marcus Group, Inc. Pending

6:12-cv-00142 3/14/2012 Fossil, Inc., Home Depot USA, Inc., International Business Machines Corporation, Quill Corporation, Staples, Inc. Pending

6:12-cv-00143 3/14/2012 GSI Commerce, Inc., PayPal, Inc., RadioShack Corporation, eBay, Inc. Pending
6:12-cv-00144 3/14/2012 J. Crew Group, Inc., Madewell, Inc. Pending
6:12-cv-00145 3/14/2012 Euromarket Designs, Inc., Meadowbrook LLC Pending
6:12-cv-00146 3/14/2012 GHC Specialty Brands, LLC, WW Grainger, Inc. Resolved
6:12-cv-00147 3/14/2012 Bloomingdales, Inc., Macy's, Inc., Macys.com, Inc. Pending
6:12-cv-00148 3/14/2012 Nordstrom, Inc. Pending
6:12-cv-00149 3/14/2012 Kohl's Corporation, Kohl's Department Stores, Inc. Pending
6:12-cv-00150 3/14/2012 Williams-Sonoma, Inc. Pending
6:12-cv-00151 3/14/2012 Saks Direct LLC, Saks Incorporated Pending
6:12-cv-00152 3/14/2012 Office Depot, Inc. Pending
6:12-cv-00153 3/14/2012 Beauty.com, Inc., Drugstore.com, Inc., Vision Direct, Inc., Walgreen Co.Walgreens.com, Inc. Pending

[dballance]

8. I Suspect That was All Part of the Strategy

Hit the big guys who can afford to settle and write a multi-million dollar check. Get the 1% royalty on their online sales because they have the highest volume online businesses. I wonder what Amazon is thinking now after they settled with them. Amazon really should have been the company to take this to trial.

[PeaceNikki]

11. That's AVON, not Amazon. I don't think they went after Amazon.

[dballance]

13. They went after Amazon first - it's in the story at the link

"The first company it sued was Amazon; Soverain scored a $40 million settlement from the giant retailer back in 2005."

Why the heck Amazon let Soverain push them around baffles me. I would think they'd have had the same attitude as Newegg about not being ransomed by patent trolls.

[PeaceNikki]

17. doh... missed that, thanks!!

I agree

[jeff47]

24. They went after Amazon because of the 1-click patent Amazon has been pushing

Attacking this patent would probably be bad for their patent.

[dmr]

14. Amazon was the first one they went after, and they settled for 40 million, I think.

[PeaceNikki]

16. doh... missed that, thanks!!

[NutmegYankee]

6. I love it when the good guys win! nt

[EastKYLiberal]

9. I am a loyal Newegger. Not paying sales tax is a bonus. nt

[SwankyXomb]

21. I pay sales tax at Newegg.

I consider it a decent trade-off for being able to drive down to the warehouse and pick up my items same day.

[dbackjon]

28. So you are one of the ones that screw your local government

Out of much needed taxes.

[LittleGirl]

12. I'm furious with newegg

My vacuum broke down and I had to throw it away and ordered a new one through newegg over 2 freaking weeks ago. It still hasn't delivered and they said it was in stock so that's why they got the order. I wonder now how long it will take to get our refund!? Furious....

[DainBramaged]

19. I m personally and professionally happy with Newegg their products and policies

Shit happens.

[IDemo]

23. Here, too

I've spent over a hundred grand for the workplace and a few bucks for the homefront as well. The parts for my newest home-built PC from Newegg arrived last week, and they haven't disappointed.

[LittleGirl]

27. see my reply below

[LittleGirl]

26. This is my first complaint with them

We've purchased many things but this delay was a total lie about their 'stock' so that's why I'm upset. And the fact that we just moved made it even more unbearable.

[JDPriestly]

18. I wonder whether this is the same Katherine Wolanyk who is described

as an "amateur website designer" at this website?

http://thevillachicago.com/community/acknowledgments.html

[blogslut]

20. Sweet.

Reminds me of when Acacia tried to sue everyone for using streaming video on websites.

[jerseyjack]

22. When are the pettyfogging lawyers going to be disbarred?

[Flatulo]

25. Good on Newegg. I do business with them extensively. They're a good outfit.

[muriel_volestrangler]

29. CompuServe to the rescue!

There's a headline I never thought I'd see. I had no idea it was so old:

CompuServe was founded in 1969 as Compu-Serv Network, Inc.

http://en.wikipedia.org/wiki/CompuServe

[JohnnyRingo]

30. And they call me a pirate for downloading an old Beach Boys song?

I'm nothing compared to these swashbuckling denizens of the internet. They make the Somalis look like cub scouts.

I shouldn't care what happens to the big corporations like Amazon and Apple, but this is so blatantly wrong I find myself siding with the companies that take my money. That's a low bar to slither under.

As an aside, few people know that song copyrights have been lobbied in court by ASCAP and RIAA to the point that no song has been released to the public domain since the '30s. That's why children's musical toys still play "Old McDonald". What's more, no song is slated for public use for another 20 years, well enough time for lawyers to petition in court to protect all those big money-makers like Bing Crosby and The Lennon Sisters.

[Downwinder]

31. Should be a property tax on intellectual property.

Use their courtroom evaluations to establish values.

[dreamnightwind]

32. I love newegg

Have bought many things from them, they are great.

[beevul]

33. Good on newegg.

I've been doing business with them since before 2006, and even though occasionally there is a hiccup, things always end well when I buy from them.



This post was posted from a machine built from 100 percent newegg purchased parts, and I'm viewing it on a 37" led lcd hdtv also from newegg.