U.S. SC declines to hear Texas Internet patent infringement case; company president declares it ‘a tough time to be a patent owner’

By Jessica M. Karmasek | Jan 21, 2014

WASHINGTON (Legal Newsline) – The U.S. Supreme Court will not hear a software company’s case against an online retailer for allegedly infringing on its “shopping cart” patents.

The nation’s high court, in an order list Monday, denied Soverain Software LLC’s petition for writ of certiorari, or review.

In Soverain Software LLC v. Newegg Inc., Soverain sued Newegg for patent infringement and won at trial.

Chief Judge Leonard Davis for the U.S. District Court for the Eastern District of Texas ruled that Newegg, a California-based online retailer of computer hardware and software, had not met the burden of proof of clear and convincing evidence in order to go to the jury.

Davis also ruled that Soverain’s patents — for technology used to buy products online and pay for them — were valid and infringed by Newegg. Newegg appealed for a new trial.

The U.S. Court of Appeals for the Federal Circuit invalidated three of Soverain’s patents, including a claim that was not even asserted.

Soverain argued that it was deprived of the right to brief and argue the issue.

In response, the software company urged the Supreme Court to hear the case, and consider the issues of obviousness. Soverain also wanted the high court to determine whether the Federal Circuit improperly reviewed conflicting evidence, disregarded its evidence and expert testimony, and overreached its authority.

In a statement earlier this week, Soverain President Katharine Wolanyk said the company is “obviously disappointed” by the court’s denial to review the case and “troubled” by the precedent it leaves in place.

“We are at a critical juncture, with public debate regarding patents and innovation permeating headlines, reports and Congressional hearings,” she said.

“Until the Federal Circuit’s contrary decision, our patents had been repeatedly validated by the courts, the U.S. Patent & Trademark Office and the market.

“We were counting on the Supreme Court to reset the balance.”

Wolanyk explained that the nation’s patent system was created so inventions could be protected by patents, and patent owners would have the right to license those inventions.

“It is a travesty that an infringer can wholly fail to meet its burden of proof at trial and then an appellate court can nonetheless invalidate those same patents,” she said.

“It is a tough time to be a patent owner.”

According to its website, Soverain provides ecommerce software and services for enterprises, focusing on the publishing, news syndicate and digital content industries.

Its enterprise software product Transact has been in continuous use for 18 years, used by more than 1,000 companies in more than 25 countries, including well-known companies such as Time-Warner, AT&T, Sony, Disney, BusinessWeek and Reuters.

Meanwhile, Newegg Chief Legal Officer Lee Cheng said the company is “extremely pleased” with the court’s decision not to hear the case, calling Soverain’s petition “nothing more than a desperate attempt to continue its lawsuit factory.”

In its statement, Newegg described Soverain as a “notorious patent troll” and argued that the software company’s “shopping cart” patents cover basic online functionalities.

“Patents held by organizations like Soverain are like vampires — unproductive, undead, unholy and intent on sucking economic and entrepreneurial lifeblood out of society,” Cheng said.

“When these patents and the abusive patent assertion business model are exposed to the light of day, they turn to dust.”

According to Newegg, Soverain derived almost all of its revenue from litigation settlements.

In particular, Soverain filed dozens of cases in in the Eastern District of Texas, suing Newegg and dozens of other major retailers, claiming a right to receive royalties for its patents — which, Newegg added, are now invalidated.

Due to the high cost of defense, nearly every other defendant settled.

From Legal Newsline: Reach Jessica Karmasek by email at patents@legalnewsline.com.

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