It’s All a Game to Newegg’s Lee Cheng

On Monday evening I wrote an article titled Supreme Court Refuses Soverain v. Newegg. It seems that this article caught the attention of Newegg’s Chief Legal Officer, Lee Cheng, who proceeded to contact me through LinkedIn and berate me in bizarre fashion throughout the day yesterday.

In the aforementioned article I pointed out that upon receiving news that the Supreme Court would not take the case, Lee Cheng made comments that could easily be interpreted as misogynistic. He proclaimed: “The witch is dead,” which is hardly the type of thing that your typical successful defendant in a patent infringement lawsuit would first think to say. It seemed relatively clear to me based on what I know of Cheng that the comment was directed at Katharine Wolanyk, Soverain’s President and CEO.

If Cheng was in fact calling Wolanyk a witch it was an extraordinarily inappropriate statement, not to mention incredibly offensive. But was this just a poor choice of words? As the bizarre rantings of Cheng came through LinkedIn periodically throughout the day on Tuesday it became clear to me that Cheng is emotionally unstable and that he really does have tremendous ill will toward Wolanyk. Quite telling, for example, despite my claim that his statement carried misogynistic undertones, he made no denial and never once said he didn’t intend or mean to call Wolanyk a witch. Had this been a slip or simply a poor choice of words it seems to me that he would have walked the comment back or apologized, but that never happened.

Indeed, Cheng seems to have something of an obsession, repeatedly bringing her into his diatribe and expressing the belief that all of my information about the case came from her. As it turns out, I actually read the patents, reviewed the claims, read the original Federal Circuit decision, read the filings on the Petition for Rehearing, read the Federal Circuit decision on rehearing, read the district court decision, read the Petition for Certiorari, read Newegg’s response (which was really quite awful and difficult to labor through) and talked with numerous lawyers knowledgeable about the case. But Cheng’s accusation that I merely printed what Soverain wanted me to print seems to be rather conclusive proof that he is a blissfully ignorant, uninformed and not interested in ever being informed bully that cares little about factual reality. He makes wild, unprofessional accusations without consequence. How or why any organization would put someone with this personality profile in position as the top legal officer of the company is a mystery to me.

Cheng first reached out to me with a simple message: “You are hilarious.” I responded: “Thanks for reading IPWatchdog.com. I hope you learn something.” And then I got a real look into the top legal mind of Newegg. The only word I can use to describe Cheng, at least based on this exchange, is schizophrenic. He went from telling me I was “a smart guy ” that he wanted to meet to someone who was nothing more than an incompetent patsy on the patent troll payroll. This occurred over the span of only several e-mails.

After I thanked Cheng for reading IPWatchdog.com, and expressing hope that he would become better informed, he wrote back:

would like to chat some day. you’re clearly a smart guy with a strong work ethic. I am always curious about the strength of my own beliefs and thinking and enjoy testing them with conversations with smart people who have a different perspective to see what I might be missing. beer usually helps.

not sure how you could conclude that soverain is really anything other than a lawsuit business, from inception and in operation–did you ever see their books, or just talk to Katharine? wrt your statements about newegg, I am curious where you got your information and your assumptions. I am presently assuming that you want to be fair and objective in your own assessments, but I guess I could be wrong…

The lack of capitalizations and informality represents exactly how the message came to me.

My response to Cheng was:

I’m not adverse to meeting and talking over coffee or another beverage.

I know Newegg made a big deal out of the fact that most of their revenue comes from licensing. So what? By necessary implication that means that not all of their revenue came from licensing, which means they are not a non-practicing entity. But even if 100% of their revenue comes from licensing that can’t make an entity a patent troll. Deep down you know that  to be true, so why the grandstanding, erroneous statements in the press? Is it win at all costs for you?

Just remember that if licensing revenue makes one a patent troll then Thomas Edison was a patent troll because all he did was invent and license. No one believes Edison was a patent troll, and eventually the pendulum will swing back. It always does.

I obviously hit a very deep, raw nerve. Cheng responded again, and after taking issue with my statement that deep down I expected he really knew that licensing activity couldn’t make one a patent troll, he questioned whether my belief that he had to know better meant that I somehow lacked friends. Cheng said: “Weird. Probably why you don’t have many friends… you know deep down.”

[Patent-Litigation]

If Cheng would mock me so quickly after telling me I was a smart guy he wanted to meet, I wonder how Cheng would have responded if I engaged in any kind of real, hard, cutting inquiry. If a rather innocuous “deep down you have to know…” sets him off the book on him has to be that he is easily irritated. Cheng seems to be the type of person that I used to love to depose when doing litigation work. If I were ever litigating against Newegg I would do everything I could to get him under oath and just sit back and let the stenographer capture everything.

In any event, Cheng’s rant continued. After arguing that Soverain had the audacity to make money through a licensing regime he said: “I would note that Soverain never invented anything, nor did Katharine Wolanyk. They just identified an opportunity to exploit. I’d imagine that a real inventor like Edison would have considered them pustules too.”

To keep the tally running, Wolanyk is a witch, Soverain is a “pustule” and in another statement to the press Cheng called Soverain (or perhaps Wolanyk) a vampire. I’m not sure this is the type of commentary most would deem appropriate in any setting, but coming from a chief legal officer it is bizarre to say the least.

From a substantive standpoint, my communications with Cheng make it clear that he continues to actually believe the Newegg position, as logically flawed as it is. In Cheng’s opinion if you engage in licensing activity with respect to patents that you acquired  you are a patent troll, period. It doesn’t matter whether you service clients, as Soverain does. What matters is whether you license patents you purchased. But this rather narrow-minded definition of a patent troll means that Cheng and Newegg believe that virtually all technology companies of any size are patent trolls, as are Universities and Federal Laboratories, as well as garage inventors and start-ups. For example, Microsoft, Cisco, Apple, Sony, Google are all patent trolls. I suppose this type of non-enlightened, head-in-the sand position is what you would expect from someone like Cheng. After all, Newegg is not itself an innovator and looks for every excuse possible to ignore patent rights. Taking a position that everyone is an evil patent troll, while intellectually bankrupt, does serve the Newegg purpose.

But Cheng did not stop here. As if he were going to pull the wool over my eyes the same way he can with the popular press and those who haven’t actually done an independent investigation, Cheng proclaimed: “The ONE time their patents were tested, they got invalidated.” Of course, the trouble with this statement is that it is factually wrong.

As I have written, and was painstakingly explained in the Soverain filings, the patents in question were not only granted by the U.S. Patent Office, but each survived two separate rounds of reexamination at the Patent Office. That means the Patent Office checked and authorized the claims in question three separate times, and two of those times the patent claims were in fact challenged and Soverain prevailed. These same patent claims were also challenged in a previous litigation, in which Soverain prevailed. At trial in this particular case the district court judge found that it wasn’t even a close call and that Newegg had failed to demonstrate any of the claims were invalid. So if is just factually incorrect to say, suggest or even pretend that the patent claims invalidated by the Federal Circuit in the underlying case represent the only time the claims were challenged.

So not only did Cheng go from saying I was a smart guy he wanted to meet, to implying that I am an idiot on the take without any friends, but he also continues to feel the need to misrepresent the truth.

I responded:

I see. I mistakenly believed you were an intellectual. Obviously you’ve actually drank your own Kool-Aid. You know as well as I do that Soverain’s patents were repeatedly upheld in every forum prior to the CAFC.

I should have expected as much. But thank you for the very interesting conversation. I will have a lot more to write now!

Even after being informed that I planned to write about this exchange Cheng couldn’t help himself but to respond. Again Cheng invited me to meet with him when I am in Los Angeles to talk about issues over drinks. He also said that if he gets invited to an event or conference to speak about these issues he will urge those putting the programming together to invite me because “[t]he two of us would amuse any audience,” as if this is nothing more than a game. But after the invitation for drinks, which he would buy, came only after he insulted me several more times, and after he insulted himself, questioning his own intellectual abilities! Indeed, this final communication from Cheng started with him berating his own intelligence, saying: “Your belief that I am an intellectual is yet another mistaken assumption on your part.” Unbelievable.

Cheng then wrote:

Please keep writing. When patent trolls give you money directly or indirectly for your ink, it takes away resources that they could use to harm society. I’d be more worried if anything you wrote convinced any but the few who already agreed with you, so their funding is generating poor ROI. Most people I know would look at your blog (not that very many look at your blog), cross themselves, and pray that some day, you will recover from your delusions…

Hardly surprising really that Cheng would make completely inaccurate and wholly unfounded claims. The only people who pay IPWatchdog are very conspicuously shown as sponsors or advertisers. It would be unethical, and in the view of the FTC illegal, to take money from someone and write favorably about their products, services, offerings or views without disclosing the relationship. So without any information or investigation Cheng is apparently content to believe I am breaking the law. But that is the type of intellectually dishonest, factually inaccurate nonsense that seems to flow from Cheng’s lips as easily as calling a woman witch.

There were also several other interesting things about Cheng’s messages. For example, Cheng confirmed what we all know to be true, that the only decision that matters comes from the Federal Circuit. He wrote: “Doesn’t matter if Soverain’s patents were upheld prior to the CAFC. That tribunal is the one that matters.”

This should be a wake-up call to all of the Judges on the Federal Circuit. The lack of certainty created by the Federal Circuit means that those who wish to challenge patents will simply continue to fight until the Federal Circuit has ruled. District Court rulings are meaningless. Decisions from the Patent Office are meaningless. All that matters is that the defendant has a really good chance of prevailing at the Federal Circuit if they draw a favorable three-judge panel. Of course, that is not supposed to be what happens and is exactly why the Federal Circuit was created. Patent disputes should not approximate a game of craps at a Las Vegas casino, but sadly that is where the Federal Circuit has taken things as the result of an obsession with de novo review and a complete and utter refusal to give any deference on factual findings.

Finally, Cheng also acknowledged that the patent troll problem is on the decline. He wrote:

We’re probably now on the downslope of the abusive patent assertion phenomenon. Enough light has been shed and attention generated that I suspect abusive patent assertion is now moving solidly in the direction of other types of abusive litigation (securities class action, etc.) that have plagued American society pretty uniquely over the years. I don’t think the phenomenon will ever end, but the easy, big money has been made and those who continue to want to advantage take will find their going harder and their returns lower.

Cheng makes a persuasive case here that there is no need for Congress to enact patent reforms since the problem is “on the downslope” and those engaging in abusive litigation are moving away from patent filings and into other areas. Thus, Cheng challenges the very rationale that is at the foundation of the currently pending patent reforms.

Who is this guy Cheng and how did someone so crass and uninformed rise to such a high level in Newegg? It has to really make you wonder who is really the miscreant, doesn’t it?