Posts Tagged: "Soverain Software v. Newegg"

The consequences of SCOTUS decisions are really severe. The U.S. is no longer a favorable jurisdiction for many biotech patents, medical devices and software. What that’s going to mean is companies are going to move. We’ve known this throughout history. Companies locate where the laws are the best for them. If you’re an innovator you’re going to go where the patent laws are the strongest. And that’s why the U.S. has dominated in these industries. We’re number one in biotech is because of Chakrabarty, which has basically been overruled. Prior to Myriad you would have said the ruling of Chakrabarty was this: if there’s human intervention it’s patent eligible, but now you can’t say that because there was human intervention in Myriad, which they acknowledged, and still the claims were patent ineligible. We know companies will move to jurisdictions with more favorable laws…

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… 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.

Everyone who has objectively looked at the case knows that the Federal Circuit made a terrible mistake, but not that won’t be corrected and a serial patent infringer that has made a business practice of ignoring patent rights gets to use the Soverain technology for free. And just when you think things couldn’t get more strange, Newegg makes a bizarre comment with misogynistic undertones. “The witch is dead, hurray,” said Lee Cheng, Newegg’s Chief Legal Officer. It doesn’t take a rocket scientist to realize that Cheng is calling Wolanyk a witch. Of course he will denied such a charge and he and his supporters will proclaim their innocence. But this is no different than liberals working “weight” into every comment or tweet they make about New Jersey Governor Chris Christie. This type of not so subtle dig is what those familiar with Newegg have come to expect. It is this juvenile, over the top, holier-than-thou attitude that Newegg personifies.

Open Market grew rapidly, went public, made acquisitions, and outlived about 15 of its competitors, but was hit hard by the bursting of Internet Bubble 1.0 in 2000. The eCommerce software part of Open Market’s business, called “Transact”, and the related patents were acquired in 2003 by Soverain Software, which still develops and supports Transact and its customers today. Soverain also filed a number of patent lawsuits, and settled or won all of them, up until this year. On September 4, the United States Court of Appeals for the Federal Circuit (CAFC), which is the appeals court responsible for patent cases, confirmed its January opinion that certain claims of the ‘314 patent (and some others) were invalid as obvious. Soverain has filed a petition for the case to be heard by the Supreme Court, and I hope it is accepted, because I think the CAFC got it really wrong.

Seth Waxman, of Wilmer Cutler Pickering Hale and Dorr, a former Solicitor General and Soverain’s lead attorney, says, “Newegg is taking this case seriously and so should the Supreme Court. Newegg’s attempt to reargue the facts only confirms that this case should have gone to the jury.” Waxman says, “The judicial overreach that occurred in this case is not an isolated incident, but rather the acceleration of a trend in the Court of Appeals that presents a broader threat to all who rely on the stability and predictability of the patent system.”

The absolute truth known to everyone in the innovation community is that pioneering innovations become commonplace. What was revolutionary at the time the invention was made becomes taken from granted. In hindsight pioneering innovations look insignificant because they have become ubiquitous. The public, judges and critics find it difficult (assuming they try) to determine whether that which is commonplace today was really, truly obvious decades earlier as of the critical date. Even when an honest and fair obviousness inquiry is undertake it can be exceptionally difficult to put yourself back to before the invention was made in order to determine what was known and what was obvious at the time. But let’s dispense with the ridiculousness, shall we? The overwhelming majority of the world was not at all knowledgeable about or clued into the World Wide Web at the time this innovation was first made. So let’s dispense with the histrionics.

This ruling cannot stand, and the CAFC needs to step back from the brink. The CAFC has vastly overreached in Soverain v. Newegg, and it is imperative that the Supreme Court hear the case and that Soverain prevail. This attack on patent-holders and the adverse implications from the change proposed by Newegg are unprecedented, and would deal a devastating blow to any U.S. patent-holder, large or small. The proposed change would alter the law and effectively eviscerate the patent system.