Two Moves Toward Patent Revolution

Posted by · February 1, 2013 12:55 pm

patent_officeThis week we saw two major wins in the fight against patent trolls in the tech industry. The first was a huge legal victory for Newegg in a patent battle with known troll Soverain over online retail shopping cart technology, followed by a surprising move from billionaire Mark Cuban, who is funding efforts to eradicate patents that are established only to destroy other business.

Soverain Software was an obviously fake company with an online retail website appearing to sell software. Though the website appears legit, it was a front invented by an attorney. Soverain makes money not by selling software, but by winning major patent lawsuits against the likes of Gap, Avon, and even Amazon, who settled for an astonishing $40 million. The patents they wielded against these and other giant retailers were the fundamental technologies used for online checkout systems.

The patent troll has been stopped dead in its tracks after going up against Newegg.  Their Chief Legal Officer Lee Cheng told ArsTechnica that they decided back in 2007 to never, ever settle with patent trolls.

“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,” said Cheng.

And it paid off. Newegg’s legal team won an appeal proving that Soverain’s patent claims were invalid because they were based on older technology that they didn’t create. Now, dozens of lawsuits that were brought against retailers have been voided, and they will not receive the settlements totaling over $20 million they had previously won from Newegg, Victoria’s Secret, and Avon before the appeal.

Now Mark Cuban, the popular owner of the NBA’s Dallas Mavericks, has stepped onto the scene to defend numerous small businesses that suffer from tech patents. He teamed up with The Electronic Frontier Foundation to endow a chair he’s calling “The Mark Cuban Chair to Eliminate Stupid Patents.” As an investor, he’s trying to protect startups from people who abuse the patent system.

“I wanted a name that would get attention and not just be another announcement,” said Cuban in an interview with TechCrunch. “I thought the EFF would be a great starting point to get the message to politicians that patent trolls are costing taxpayers (via trials/motions/etc.) and small businesses money that could otherwise be used for innovation and creating jobs…. It’s easy money for law firms.”

Specifically, Cuban seeks to put limitations on design patents to avoid crushing blows dealt to entrepreneurs.

This isn’t first time someone has taken a stand over the out-of-date patent system. Last year the tech industry was rife with patent battles, namely over mobile devices, between Apple and Samsung. Various courts around the world flip-flopped over which company was in the right with their device designs. Judge Richard Posner, who threw out a patent case between Apple and Motorola, said in an interview with Reuters that he was against the increase of these patents, especially in the software industry.

Newegg and Mark Cuban have proven that it’s not always best to settle for the cheapest way out of a legal scuffle. Thanks to their efforts, the patent laws in the US are getting the attention needed for much-needed revision.

  • Mark

    About time someone stepped up – AND – won. Sanity prevails given enough time. Great News.

  • dadhog

    My opinion of Cuban just went up.