Another Patent Troll goes down!

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Another Patent Troll goes down!

Postby Hammer_Time » Mon Jan 28, 2013 4:24 am

http://arstechnica.com/tech-policy/2013 ... ne-retail/

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

It's game over for a patent troll that sued nearly 50 big retailers.


by Joe Mullin - Jan 27 2013, 4:00pm EST

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, even a login page for customers.

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 Web page? Those are deals struck with another company, more than a decade ago. That was OpenMarket, a software company that originally 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 support@soverain.com." 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's 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.

The ruling effectively shuts down dozens of the lawsuits Soverain filed last year against Nordstrom's, Macy's, Home Depot, Radioshack, Kohl's, and many others (see our chart on page 2). All of them did nothing more than provide shoppers with basic online checkout technology. Soverain used two patents, numbers 5,715,314 and 5,909,492, to claim ownership of the "shopping carts" commonly used in online stores. In some cases, it wielded a third patent, No. 7,272,639.

Soverain will lose the $2.5 million it stood to gain from Newegg, as well as two much bigger verdicts it won against Victoria's Secret and Avon. Those two companies were ordered to pay a total of almost $18 million, plus a "running royalty" of about one percent, after a 2011 trial. The ruling in the Newegg case is a total wipeout for a patent troll that had squeezed many millions from online retailers, was backed by big-firm lawyers, and was determined to collect hundreds of millions more.

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 in an interview with Ars. "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."

For online commerce, “the mother of all patent battles”

By 2010, with Newegg's trial in patent-happy East Texas coming up, the entire online shopping sector was waking up to the threat posed by Soverain. The battle with Newegg was "the mother of all patent battles," wrote the research director at InternetRetailer.com. Retailers were tired of paying millions in legal fees, and several decided to cut checks to Soverain for "at least $2.5 million."

The company's lawyers weren't some corner-store operation, either. Back then Soverain was represented by Jones Day, the largest law firm in the US.

Soverain had already picked a fight with the biggest kid on the playground and won. The first company it sued was Amazon, and Soverain scored a $40 million settlement from the giant retailer back in 2005. The Gap also settled for an undisclosed sum. That was back when defendants were afraid of RIM-sized damage payouts, before eBay v. MercExchange and subsequent Supreme Court decisions started to put some limits on what do-nothing patent holders could win.
So the case filed against Newegg and seven other retailers was closely watched. It went to trial in 2010 with Newegg the only remaining defendant; all the other companies settled. It was a classic East Texas-style trial; a jury was picked on Monday, and the case wrapped up by Friday morning.


During closings, Soverain's lawyer Kenneth Adamo, then a partner at Jones Day, argued the patents were a small but vital part of Newegg's shopping network, like a spark plug in a car. "Take the spark plugs out of the car, and you won't go two blocks," Adamo told the jury, a panel of eight gathered in Tyler, Texas. "Take the shopping cart and the session identifier out of Newegg's system, and they won't sell a nickel of anything."

The jury had its decision within a few hours. Newegg was found to infringe and ordered to pay damages. But the jury ordered it to pay $2.5 million, a slim fraction of the $34 million that Soverain's lawyers had asked for. (Although still more than the $500,000 that Newegg's expert suggested would be appropriate if infringement was found.) Remarkably, the judge overseeing the case ruled during trial that the jury wouldn't be allowed make a decision about Newegg's arguments that the patent was invalid. That line of reasoning—that Soverain's patents were bogus to begin with—would become the basis of Newegg's appeal.

Overall, the damages figure was actually a decent result for Newegg, which would be able to tell the next patent troll that it had cut down Soverain's anticipated payoff by more than 90 percent. But there was more bad news for the California-based technology seller. US District Judge Leonard Davis, who had overseen the case, awarded Soverain an ongoing royalty as well as an additional damages-only trial on a third patent.  (That extra trial won't happen now that Soverain's patents are dead on appeal.)

Getting stronger

Soverain's plans were always bigger than Amazon and bigger than Newegg. It wanted nothing less than to extract a patent tax from the entire retail sector, using three patents it claimed covered pretty much any use of  "shopping cart" technology.

Jones Day and Soverain eventually parted ways, but 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 become the search giant's go-to patent-troll killer; it's the same firm that defended Samsung in its blockbuster showdown with Apple.

About a year after the Newegg showdown, Soverain's second case went to trial in the same East Texas courtroom. After an hour and a half of deliberation, the jury returned a verdict that ordered Avon and Victoria's Secret to hand over $17.9 million to Soverain—just $1 million less than its lawyers asked for. They also won a running royalty that would have forced the two companies to hand over around one percent of their Web sales for the life of Soverain's patents.

Soverain was strong and getting stronger. The overall economy was struggling, but online commerce was growing at a breakneck pace—and Soverain wanted its one percent. That became crystal clear in 2012, when the company launched a full-scale assault on dozens of retailers: hardware stores like Home Depot, clothiers like Macy's, Nordstrom's and Kohl's, electronics sellers like Best Buy and Radioshack, Drugstore.com and Walgreen's.

On appeal, it’s CompuServe to the rescue

Those lawsuits are toast now, thanks to Newegg's appeal victory. The company didn't give up on the invalidity argument that it hadn't been allowed to make to the jury. Instead, it doubled down on it. The main piece of prior art used at the appeals trial was the CompuServe Mall, and Newegg's lawyers, led on appeal by Ed Reines of Weil Gotshal, argued that system hit each and every patent claim in Soverain's patents.
At district court, the judge hadn't even let those invalidity arguments go to the jury, stating there wasn't "sufficient testimony" on obviousness, and that it would be "very confusing" to them.

Soverain argued that CompuServe's system didn't include a "product identifier" as they define it in their patent, and that CompuServe lacked a "shopping cart database." Soverain also argued that its system was new and superior because it was adapted to the Internet, whereas CompuServe's system was a pre-Internet network.

Just saying "do it on the Internet" isn't a novel invention, the appeals court ruled [PDF]. The three-judge panel found that all of the "shopping cart" patent claims were rendered obvious in light of the CompuServe Mall.


Katharine Wolanyk is a greedy patent troll, glad that Newegg was finally able to slap down her bullshit lawsuit!!

http://www.soverain.com/asp/about/about_leadership.asp

Katharine Wolanyk

President

Katharine Wolanyk is President of Soverain as well as one of its founders. With degrees in law and engineering, Ms. Wolanyk has over 20 years of experience spanning the business, legal and technology arenas. From her initial career as an aerospace engineer in the 1980’s, to advising high-growth technology clients in the 1990’s, and as a business executive navigating the rise, fall and resurgence of the Internet economy, Ms. Wolanyk has developed a valuable combination of expertise and perspective.

Under her leadership, Soverain’s flagship product Transact has been reinvigorated and the company’s intellectual property has been enhanced. Soverain is currently completing engineering work on its Transact 7.0 and planning for future development. Before founding Soverain in 2003, Ms. Wolanyk was Senior Vice President of Corporate Development for a publicly-traded enterprise software company, where she led the strategic alliances organization and played a key role in raising over $300 million in investments by major technology companies. Prior to that, Ms. Wolanyk was in private practice with the law firm Latham & Watkins where she was a founding member of the firm's Venture & Technology practice group, and a systems engineer for Hughes Aircraft Company in Los Angeles where she assisted in the design and integration of the radar system for the B2 Stealth Bomber.

Ms.Wolanyk has a J.D. from the University of Chicago Law School and a B.S. in Engineering from Michigan State University. She was recognized as one of the Top 25 Women in Technology in Chicago in 2002 and as a Top Channels Executive in Software in 2003. Ms Wolanyk serves on the Board of the YMCA of Metropolitan Chicago, mentors first-year law students at the University of Chicago, and is a member of the Licensing Executives Society.


She is highly educated ( engineer and lawyer ) but greed went to her head obviously...what a ballbuster!! If she is married I feel sorry for her husband!!
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Re: Another Patent Troll goes down!

Postby Sauron_Daz » Mon Jan 28, 2013 6:37 am

Good riddance.
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Re: Another Patent Troll goes down!

Postby Hammer_Time » Mon Jan 28, 2013 11:41 am

Indeed!
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Re: Another Patent Troll goes down!

Postby DIREWOLF75 » Mon Jan 28, 2013 12:14 pm

:moon:


And this is also an excellent showcase of exactly why patent protection simply MUST NOT be taken too far.
This has been an objective and completely impartial message from the propaganda bureau of DIREWOLF75. Thank you for reading. Have a nice day.
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Re: Another Patent Troll goes down!

Postby Hammer_Time » Mon Jan 28, 2013 7:45 pm

No kidding! Did you know that Apple has patented "rounded corners" on their devices!!?? :roll: :mrgreen: :incoming: :lol: :lol:

American jurors are morons in general, as witnessed by the Apple win against Samsung in a California court some time ago... :roll: The same lawsuit against Samsung in Europe and other countries ended in defeat for Apple, but not in their own country of course!!! pathetic...
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Re: Another Patent Troll goes down!

Postby Sauron_Daz » Tue Jan 29, 2013 12:51 am

Hammer_Time wrote:No kidding! Did you know that Apple has patented "rounded corners" on their devices!!?? :roll: :mrgreen: :incoming: :lol: :lol:


They didn't patent the bezel all tablets have?
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Re: Another Patent Troll goes down!

Postby Hammer_Time » Tue Jan 29, 2013 6:03 am

probably... :?
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Re: Another Patent Troll goes down!

Postby Sauron_Daz » Wed Jan 30, 2013 2:24 am

Then Apple=patent troll.
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