Cross-posted at WLF’s Forbes.com contributor page
What causes a feeding frenzy?
In the undersea world, the smell or sound of wounded prey can attract one shark after another, fueling the carnivores’ aggression. On dry land, analogous signs of weakness inspire patent litigators, especially where software-related technology companies are the quarry.
End-users of technology and small companies with scant resources have become popular targets of “patent trolls,” as have larger companies that readily settle for nuisance value. Fighting back successfully—as some recent court rulings show it can be done—can fend off the circling shiver of
sharks plaintiffs’ lawyers at least temporarily and perhaps permanently. But doing so is not for the faint of heart or shallow of pockets, a reality that policy makers must keep in mind as patent reform debates evolve.
“Settling Feeds Trolls.” Some companies have adopted the posture that consistently fighting back is the best shark repellant. Online software and hardware retailer Newegg has been admirably aggressive. It has even designed a t-shirt that reflects its patent litigation posture. Privately-held and represented in-house by well-spoken (and outspoken) chief legal officer Lee Cheng, Newegg has prevailed in court over patent trolls twice this year already.
Presented with a loss in the Eastern District of Texas to patent licensing company Soverain, Newegg didn’t join J.C. Penney, Victoria’s Secret, Zappos and others who settled. It instead appealed to the U.S. Court of Appeals for the Federal Circuit, which in May invalidated Soverain’s online “shopping cart” patent. Soverain then brought on highly-regarded, white-shoe appellate counsel and sought a rehearing. On September 4, the Federal Circuit sustained its holding. This January, the Federal Circuit unanimously, and without comment, affirmed Newegg and Overstock.com’s Eastern District of Texas trial court win over Alcatel-Lucent. That company had been asserting highly ambiguous patents acquired when Bell Labs went out of business. Zappos, Amazon, Sears, and other companies had previously paid over $10 million in licensing fees to Alcatel-Lucent on that patent. Continue reading