Newegg frees the Shopping Cart

January 28, 2013 8:32 AM

Newegg uses prior art to defeat Soverain. On appeal, prior art is actually considered, years after the initial lawsuit, and patents owned by a company that appears to be more than they are, are invalidated.
posted by juiceCake (49 comments total)

What I found particularly egregious about this case is that the judge refused to allow the jury to consider prior art, because it might confuse the poor dears.

The East Texas judicial circuit, from what I can see, is corrupt.
posted by Malor at 8:35 AM on January 28, 2013 [16 favorites]

What I found particularly egregious about this case is that the judge refused to allow the jury to consider prior art, because it might confuse the poor dears.

But patent cases must be considered by a jury at the fact-finding stage, because how else can justice be done?
posted by Holy Zarquon's Singing Fish at 8:37 AM on January 28, 2013

That was roughly how Apple won its case against Samsung too.
posted by Artw at 8:38 AM on January 28, 2013

Yeah, Samsung not being allowed to mount a full defense in that case was ridiculous, and then the highly biased juror just compounded the injustice.
posted by Malor at 8:41 AM on January 28, 2013

Yeah - it seems weird that the jury couldn't consider prior art. That alone should be an error of law by the judge enough to overturn the verdict on appeal (which admittedly would only send it back to the lower court up here in Canada).

Weird system.
posted by Lemurrhea at 8:42 AM on January 28, 2013 [1 favorite]

Another win for Newegg. Such good news to see the good guys win. They are a great company with the hands-down best customer service of any online retailer anywhere, bar none.

They aren't the cheapest guys you can find, but they aren't gouging anyone, their prices are fair.
posted by Xoebe at 8:47 AM on January 28, 2013 [5 favorites]

Re: error of law, an appeals court can overturn a verdict on the basis that there wasn't enough evidence presented at trial for a reasonable person to reach the conclusion without basing their decision on outside information or opinions, so I guess the trial judge can make that determination pre-emptively? IANAL.
posted by Holy Zarquon's Singing Fish at 8:47 AM on January 28, 2013

Screw them. Seriously, screw them.
-- Newegg Chief Legal Officer Lee Cheng

Bravo, Mr. Cheng. Screw them indeed!
posted by Bovine Love at 8:49 AM on January 28, 2013 [23 favorites]

I wish the Ars Technica article had gone into the findings on appeal a bit more.

I have no idea how this works, but does this mean Amazon, for instance, can sue to recover the money they paid in settlement?
posted by OmieWise at 8:49 AM on January 28, 2013 [1 favorite]

That alone should be an error of law by the judge enough to overturn the verdict on appeal (which admittedly would only send it back to the lower court up here in Canada).

I was also surprised there wasn't a retrial in this case, but the appeals court just decided the facts.
posted by smackfu at 8:49 AM on January 28, 2013

I have no idea how this works, but does this mean Amazon, for instance, can sue to recover the money they paid in settlement?

I think you are screwed if you settled, since a settlement just says "I will pay you $X and you won't sue me or will drop the current case." The fact that they shouldn't have settled doesn't change the fact that they have that contract now.
posted by smackfu at 8:51 AM on January 28, 2013

What I found particularly egregious about this case is that the judge refused to allow the jury to consider prior art, because it might confuse the poor dears.

No, the judge removed the issue of obviousness (which is ultimately an issue of law based on issues of fact) from the jury. In some cases, such as where the facts are not in dispute, it is entirely appropriate for the judge to make a decision regarding the issue of obviousness. The Federal Circuit disagreed with the judge's decision in this case, holding that the district court reached the wrong conclusion on obviousness.

The East Texas judicial circuit, from what I can see, is corrupt.

It's the United States District Court for the Eastern District of Texas. The US Circuit Courts are appellate courts.
posted by jedicus at 8:52 AM on January 28, 2013

I have no idea how this works, but does this mean Amazon, for instance, can sue to recover the money they paid in settlement?

No, not unless there was something seriously weird in the settlement agreement. When you settle, you're basically saying "I'd rather pay $X now than risk having the issues decided by the jury and have to pay more if I lose." If someone else then takes the case to trial and invalidates the patent on which you settled, you don't get the benefit of that -- you declined to take the risk.
posted by eugenen at 8:52 AM on January 28, 2013 [1 favorite]

No, the judge removed the issue of obviousness (which is ultimately an issue of law based on issues of fact) from the jury.

Ah, that makes a lot more sense. I misread it as they didn't allow the prior art to be considered either by themselves or the jury. If the judge decided it, that's not a big deal. Thanks!
posted by Lemurrhea at 8:58 AM on January 28, 2013

This article attempts to explain some factors behind the choice of East Texas as a venue. (Not sure of its accuracy or the climate there has changed since T. John "Rocket Docket" Ward has retired.)

The authors' (cynical and depressing) conclusion: It's the prosecutor's job to make the jury think in terms of one-liner platitudes, and the defendant's job to make the jury confused.
posted by RobotVoodooPower at 8:59 AM on January 28, 2013 [4 favorites]

The East Texas judicial circuit, from what I can see, is corrupt.

You mean the United States District Court for the Eastern District of Texas? Because this was a federal case, not a state case. And corruption is vanishingly unlikely. While there are instances of corruption in state courts, to my knowledge there have been almost no such allegations made against federal judges. It's far more likely that the judge just doesn't get patents or patent law. The judge made a bad call about evidence. It happens.

That being said, state courts in Texas were, until recently, regarded as some of the most unpredictable and unfair in the country. But the legislature enacted reform legislation in the mid-2000s, and since then the appellate courts and supreme court have reigned in most of the worst offenses.
posted by valkyryn at 8:59 AM on January 28, 2013

Hate to say it, but a little arson in East Texas would probably work wonders in terms of unshackling the US economy from the current plague of rent seeking trolls.

Let's be clear. Yes, E.D. Tex. is a patent troll destination, but it is far from the only district that perpetuates this practice and makes it inordinately difficult to squash terrible patents without spending millions on legal teams in the process.

In fact, recently, I'd say that a different jurisdiction has overtaken East Texas as the most unpleasant place to defend against a troll: the District of Delaware.
posted by eugenen at 9:00 AM on January 28, 2013

Hate to say it, but a little arson in East Texas would probably work wonders in terms of unshackling the US economy from the current plague of rent seeking trolls.

Just to be clear, you're advocating burning down a federal courthouse because you disagree with the rulings made by the judges there.
posted by jedicus at 9:04 AM on January 28, 2013 [16 favorites]

Just saying "do it on the Internet" isn't a novel invention, the appeals court ruled

That is a seemingly obvious fact that much of the world is blind to. The last couple of decades has been the opposite of this sentiment.
posted by bongo_x at 9:05 AM on January 28, 2013 [3 favorites]

This article attempts to explain some factors behind the choice of East Texas as a venue. (Not sure of its accuracy or the climate there has changed since T. John "Rocket Docket" Ward has retired.)

Quoting myself from elsewhere:

The Eastern District of Texas's reputation as a pro-patentee district is a little undeserved. The statistics on that aren't super strong. For example, here are the patentee win rates among various popular districts, taken from Andrei Iancu and Jay Chung, Real Reasons the Eastern District of Texas Draws Patent Cases—Beyond Lore and Anecdote, 14 SMU Sci. & Tech. L. Rev. 299 (2011).

District Jury Trial Win Rate
E.D. Virginia 79%
M.D. Florida 77%
N.D. Illinois 74%
E.D. Texas 73%
C.D. California 73%
W.D. Wisconsin 71%
N.D. California 66%
D. Minnesota 65%
D. New Jersey 64%
D.Delaware 61%
S.D. New York 53%

(NB: That's the jury trial win rate; less than 3% of patent cases end with a jury verdict, so don't think these stats show that patentees win patent cases left and right.)

As you can see, the Eastern District of Texas is only a little above the average there. Its affirmance rate at the Federal Circuit is similarly middle-of-the-pack, and it's also not the fastest district by a long shot, with an average time to jury verdict of almost 29 months, compared to Eastern Virginia and Western Wisconsin with 12 and 13 month pendencies, respectively.

Also, the law of venue is changing, and it is getting harder and harder for plaintiffs to to keep a case there, especially if they and the defendants only have a nominal presence in the district (e.g. their products are sold there via the internet or they have a couple of retail outlets). In re Volkswagen of Am., Inc., 545 F.3d 304 (5th Cir. 2008); also see In re TS Tech. USA Corp., 551 F.3d 1315 (Fed. Cir. 2008); In re Genentech, Inc., 566 F.3d 1338 (Fed. Cir. 2009); In re Hoffmann-La Roche Inc., 587 F.3d 1333 (Fed. Cir. 2009); In re Nintendo Co., 589 F.3d 1194 (Fed. Cir. 2009); In re Zimmer Holdings, Inc., 609 F.3d 1378 (Fed. Cir. 2010); In re Acer Am. Corp., 626 F.3d 1252 (Fed. Cir. 2010); In re Microsoft Corp., 630 F.3d 1361 (Fed. Cir. 2011).
posted by jedicus at 9:07 AM on January 28, 2013 [6 favorites]

metafilter: do it on the internet
posted by blue_beetle at 9:08 AM on January 28, 2013 [1 favorite]

/patents "metafilter: do it on the internet ON A MOBILE DEVICE."
posted by Artw at 9:10 AM on January 28, 2013 [2 favorites]

jedicus, so what are the "Real Reasons the Eastern District of Texas Draws Patent Cases"?
posted by smackfu at 9:10 AM on January 28, 2013

I am buying all my electronics from Newegg now. Most companies aren't willing to challenge the patent system. Seriously, how does allowing patent trolls exist benefit anyone? I am convinced that the systemic disincentive they create outweighs any market benefit created by patents (especially software patents) in the first place.
posted by Popular Ethics at 9:11 AM on January 28, 2013

Thanks jedicus. I have bad memories of East Texas as I actually was involved in a software project years ago that got patented by a salesperson before the IT division actually patented it.. fun story.. we lost in East Texas. Lost to somebody who watched our demonstration and patented our tool before we did. Good times. Anyhow, thrilled to see its villainy as the only pro-patentee district out there is more folklore than reality.
posted by cavalier at 9:14 AM on January 28, 2013 [3 favorites]

Just saying "do it on the Internet" isn't a novel invention, the appeals court ruled

A bit of patent law pedantry: the appellate court ruled that "do it on the Internet" isn't a nonobvious invention, though it may be a novel one.

Anyway, the tide has been shifting on this since at least the 2008 Muniauction case. See this prior comment of mine for a round-up of some notable cases. Personally I blame the USPTO dragging its feet on the patentability of computer-implemented inventions and its general inability to retain examiners, leading to a dearth of competent examiners in the software art units.
posted by jedicus at 9:14 AM on January 28, 2013

so what are the "Real Reasons the Eastern District of Texas Draws Patent Cases"?

This?:

...The causes that have been suggested are judges with expertise and experience in patent litigation, local rules that are often favorable to the plaintiff, a general judicial disinclination to grant summary judgment and jurors who tend to favor patent holders – so much so that for one three year period, there were 20 consecutive plaintiff victories without a single defense win in a patent case in the district.6 More broadly, from 1995 to 2007, plaintiffs won in over 70% of the district's jury patent trials, the third-highest plaintiff win rate in the country.7 In 2008 the district fell to seventh place, with a plaintiff win rate of 61%.8

While plaintiffs' chances of winning at trial may have started to decrease, a fundamental truth remains: When plaintiffs win at trial in East Texas, they tend to win big. In 2008, the median damages award in patent cases was $20.4 million, the third highest in the country.9 Moreover, in mid-2009, East Texas jurors awarded the largest US jury verdict to date in a patent case: $1.67 billion to Centocor Ortho Biotech and NYU after finding that Abbott Laboratories had infringed their patents.10

These are not the only factors that have contributed to plaintiffs' choices to file in the Eastern District of Texas. Judicial expertise in patent cases, local rules that favor plaintiffs and a faster-than-average case disposition time have also helped to establish the District as a preferred venue for patent plaintiffs. In fact, the district – and in particular Marshall – has been called a "haven for patent pirates"11 and Supreme Court Justice Antonin Scalia has called it a "renegade jurisdiction."12 Marshall was also held up as an example of the problems in patent law that result in plaintiffs having wide latitude in forum-shopping.13

posted by cosmic.osmo at 9:16 AM on January 28, 2013 [2 favorites]

but does this mean Amazon, for instance, can sue to recover the money they paid in settlement?

If they can't, they should look at it as karma for their "one click" patent.
posted by drezdn at 9:20 AM on January 28, 2013 [2 favorites]

Jedicus, the problem with those statistics is that aside from jurisdiction issues, which required appellate smack downs to get back closer to fair, they really only speak to final decisions.

What really happens in E.D. Texas is that patent trolls sue huge swaths of defendants. Only a relatively tiny fraction of those defendants stick through a given case until major decision points are reached, such as claim construction, summary judgment, or trial. That means that a large number of defendants are shaken down prior to any judicial determination on the record. One of the reasons is that it can take many, many months, if not years, to get yourself out of a piece of litigation based on the merits. I've seen cases that are barely out of the starting gates a year after they were commenced.

So, this becomes a math problem for defendants and the plaintiffs know it. I've had patent troll plaintiffs very plainly tell me that yeah, maybe I could prove the patent is invalid or not infringed if I wanted to, but the cost would be more than the payment the plaintiff will take to settle the matter. And so it goes.

The entire patent troll market, as it has grown to become, is based on the relative cost of defense versus the cost of proving you are right. Businesses make the rational monetary choice most of the time and settle out without really testing the patent. The E.D. Texas does nothing so far as I have seen to truly dissuade plaintiffs from playing this game, and it certainly isn't trying to test the validity or major infringement issues early in the case so that defendants that don't want to pay extortion money can get out on the merits.

So, yeah, if you have a couple of million dollars to throw against a troll in litigation costs, you can defend and maybe even win with the regularity you see in other districts. However, if you just want to get on with business, you often pay off the trolls and move on.
posted by Muddler at 9:26 AM on January 28, 2013 [4 favorites]

The East Texas judicial circuit, from what I can see, is corrupt.

The Texans of Rule of Law have that as a regular topic.
posted by rough ashlar at 9:29 AM on January 28, 2013

so what are the "Real Reasons the Eastern District of Texas Draws Patent Cases"?

It's a bit inside baseball unless you're familiar with the flow of a federal trial. Basically, accused infringers tend not to win summary judgment in Texas Eastern, and cases tend to go to trial much more than average (a whopping 8% of the time). Once at trial the patentee wins about as often as anywhere else, but the combination of the two factors leads to a higher overall "contested win rate" than most districts with a large number of patent cases. Basically, a prospective plaintiff can look at Texas Eastern and say "if we end up having to fight this through rather than settle, there is a slightly better than average chance we will win."

There are some other factors as well. Early attention brought a lot of cases and inertia kept them there. Patent cases take years to litigate to a final decision, so we're only now hearing about some of them (I believe this one was originally filed in 2007 for example). Because of the large proportion of cases that go to trial and the small number of judges in the district, the district has developed a fairly streamlined set of local rules for patent cases.

When plaintiffs win at trial in East Texas, they tend to win big.

I think there's way too much selection bias at play, too much variance between cases, and too small a sample size to draw any conclusions from that.

so much so that for one three year period, there were 20 consecutive plaintiff victories without a single defense win in a patent case in the district.

So the authors cherry-picked a three year period in a 12 year span where there was a run of plaintiff victories. I want to see a p-value on that statistic before I accept that it means much.
posted by jedicus at 9:30 AM on January 28, 2013 [3 favorites]

What really happens in E.D. Texas is that patent trolls sue huge swaths of defendants.

I agree that did occur, but it's worth noting that it is now largely a thing of the past. The America Invents Act greatly limited joinder of multiple defendants in patent cases.

But anyway, there was nothing unique to Texas Eastern about that. Patent infringement suits against multiple defendants occur elsewhere.

The entire patent troll market, as it has grown to become, is based on the relative cost of defense versus the cost of proving you are right.

That's why I favor eliminating or at least weakening the presumption of patent validity and making greater use of fee shifting in patent cases. It would completely upset that relative cost.

The E.D. Texas does nothing so far as I have seen to truly dissuade plaintiffs from playing this game, and it certainly isn't trying to test the validity or major infringement issues early in the case so that defendants that don't want to pay extortion money can get out on the merits.

Texas Eastern is no longer a particularly fast docket, but it's not a particularly slow one, either. I don't think plaintiffs choose it because its slow handling of cases helps them to shake down defendants, at least not more than any other district apart from Virginia Eastern or Wisconsin Western (the only true "rocket dockets", in my opinion).
posted by jedicus at 9:38 AM on January 28, 2013

Nthing that Newegg are an awesome company.

SOVERAIN SOFTWARE LLC, and other patent troll con schemes, and their sleazy legal teams really deserve to be boiled in legal ink, until bright red, and served with melted butter, as they were here....
posted by Skygazer at 9:43 AM on January 28, 2013

Maybe next year Edge.org can ask: "What is the one lawsuit you think should be funded to make the world a better place for us all?"
posted by dances_with_sneetches at 9:45 AM on January 28, 2013

Given that it's Edge.org, presumably this would be an attempt to have Tim Langdell drawn and quartered.
posted by Holy Zarquon's Singing Fish at 10:03 AM on January 28, 2013

For a complete legal novice, how does patent law deal with two people who come up with something entirely independently?

If I invent the touchscreen independantly, 30 seconds after Jack in Delaware does, do I not get anything?

Is there any role for taking into account "intentionally" copying someone? Or does it just end at "they look similar. This one came first. Pay up"?
posted by cacofonie at 10:14 AM on January 28, 2013

cacofonie - under current U.S. law, a patent is awarded to the person who is "first to invent":

Assume Tom conceives of a new mousetrap on January 1, 2006. Tom works diligently from January 1, 2006, to February 1, 2006, to prepare a patent application, and Tom files his patent application on February 1, 2006. Thus, Tom constructively reduced his invention to practice on February 1, 2006. Assume Jerry conceives of the same mousetrap on January 10, 2006, and diligently files a patent application on the new mousetrap on January 20, 2006. Under the first-to-invent system, Tom is entitled to the patent on the mousetrap, because he conceived the mousetrap before Jerry and still worked diligently to reduce it to practice by filing.

As a further extension of the example, assume Tweety conceived of the same mousetrap on December 31, 1990. Tweety never told anyone about the mousetrap and did not work on reducing the mousetrap to practice for many years due to financial reasons. Tweety finally actually reduced the mousetrap to practice on February 15, 2006. Because Tweety did not diligently work to reduce the invention to practice in the period before others' conception of the same invention, he is not entitled to a patent over Tom or Jerry.[4]

However, if Tweety has published his idea before 2006, then this publication can be a basis to reject or invalidate Tom or Jerry's patent. Source

On March 16, we switch to "first-inventor-to-file", matching the rest of the world. See the link above for more info.
posted by djb at 10:43 AM on January 28, 2013

valkyryn: And corruption is vanishingly unlikely.

Then why, pray tell, are such a huge number of patent infringement cases filed in East Texas?
posted by Malor at 10:45 AM on January 28, 2013

Malor: "Then why, pray tell, are such a huge number of patent infringement cases filed in East Texas?"

Courts can be biased but not corrupt.

It isn't good, but corruption might be the wrong word to use.
posted by schmod at 10:51 AM on January 28, 2013 [3 favorites]

"jack squat"

Heh.
posted by benito.strauss at 10:55 AM on January 28, 2013

Then why, pray tell, are such a huge number of patent infringement cases filed in East Texas?

See above for multiple empirical analyses that pretty well explain it without resorting to accusations of corruption. And what do you even mean by corruption? Bribe-taking? If so, the parties are doing a pretty crap job of it, since their win rate really isn't much higher than elsewhere. The main things that distinguish Texas Eastern are a) the judges somewhat prefer letting cases go to trial* rather than ruling on summary judgment and b) they have become experienced at handling patent cases and have thus developed local rules specific to such cases, leading to a more predictable case schedule.

* Thus taking the case out of the judge's hands, which sort of defeats the purpose of controlling the outcome of the case, as a corrupt judge would presumably want to do.

Or maybe you mean some other kind of conflict of interest? Federal judges aren't paid per-trial. Their employment (and salary) are guaranteed for life, so they don't need to attract cases to their districts in order to avoid being laid off.
posted by jedicus at 11:02 AM on January 28, 2013 [2 favorites]

And what do you even mean by corruption?

I assume he means ignoring the spirit of the law in favor of ideological blinkers.
posted by anonymisc at 11:45 AM on January 28, 2013

Courts can be biased but not corrupt.

Given that the purpose of a court is to be impartial, bias is corruption of that court.
posted by anonymisc at 11:47 AM on January 28, 2013 [1 favorite]

I assume he means ignoring the spirit of the law in favor of ideological blinkers.

What's "the spirit of the law" here that the judge was ignoring? What ideological blinkers was he putting on? The judge made a mistake, but that's just an error, not necessarily bias.

And actually Texas Eastern has one of the higher affirmance rates on appeal in the country:

In contrast to popular perception of unusual bias in East Texas, some may find it surprising to learn that the complete affirmance rate of patent cases from that District is actually higher than many other popular patent districts, and a bit higher than the national average. Likewise, East Texas fares well compared to other districts and nationally in the percentage of cases that have been affirmed at least in part.

Andrei Iancu and Jay Chung, Real Reasons the Eastern District of Texas Draws Patent Cases—Beyond Lore and Anecdote.

And when is it bias and when is it expected variation across the couple of dozen district courts that see a significant number of patent cases? And by what objective standard do we determine that Texas Eastern is biased? Perhaps it is the Platonic ideal of neutrality and it is the other districts that waver from that ideal.

I mean heck, if you think Texas Eastern is biased, check out New York Southern (aka New York City). The jury trial win rate there is 53%. That's 2.5 standard deviations away from the median, compared to almost zero for Texas Eastern.

In the absence of something more than mere accusations, I'm going to take "biased" to mean "something I frequently disagree with."
posted by jedicus at 12:23 PM on January 28, 2013 [3 favorites]

IIRC the Eastern District has streamlined the rules for discovery and trial such that plaintiffs have a fairly clear timeline from filing suit to finish the trial. It is a bit like filing your corporation on Deleware.
posted by humanfont at 3:25 PM on January 28, 2013

I don't like Newegg at all (terrible customer experience), but I'm really glad they stood up to these trolls.
posted by grudgebgon at 11:03 AM on January 29, 2013

Is this really the end? Arnt there still appeals and other options for the plantif?
posted by humanfont at 5:48 PM on January 29, 2013

If you lose in a federal court of appeals, your only option for appeal is the Supreme Court.
posted by Holy Zarquon's Singing Fish at 5:59 PM on January 29, 2013

More on the East Texas situation and other districts.
posted by juiceCake at 6:40 AM on January 31, 2013