Newegg nukes "corporate troll" Alcatel in third patent appeal win this year
arstechnica.com
arstechnica.com
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That's a great quote.
""Shareholders of public companies that engage in patent trolling should ask themselves if they're really well-served by their management teams," Cheng added. "Are they properly monetizing their R&D? Surely there are better ways to make money than to just rely on litigating patents. If I was a shareholder, I would take a hard look as to whether their management was competent."
All evidence thus far points to the opposite, except for small exceptions such as suing NewEgg. That's why patent trolls are becoming such a huge problem - the process is so absurdly profitable that companies are formed simply to take advantage of it. There's no way their management are going to change their minds.
I really couldn't see it ending well.
But, look, most trolls don't want to fight it out. They want you to settle. Once word gets out that you will fight to the death, the trolls move on to the next easier target.
That's great for him personally. It won't help newegg sell any more product or make it a better company. If I was a stockholder in that company that wouldn't fly with me. It's similar (but not the same) as an ad agency doing a campaign to win an aware for their personal glory as opposed to what is best for the client.
Edit: By "sell any more product" I mean in a meaningful way. Newegg has thousands of customers. The amount that even knows about this and the amount that care isn't significant enough to move the needle. You can always make a case that doing something will increase sales or have a benefit. Would you spend money on advertising in significant dollars without analysis or oversight of the benefits?
If a kid is bullied in school, is it "more efficient" for him to give in to the bullies and just hand over his lunch money every day? Or should he take a stand over days and weeks, and then never be bothered by bullies again? Which kid grows up to be "better" at life?
I think what Newegg is doing WILL lead to bigger long-term profits in reduced license fees, reduced legal fees when the bullies stop suing them, and increased ability to compete while their competitors are restrained by restrictive licenses and license fees.
I think that depends on the circumstances. In some cases it might be more efficient to not get the shit beat out of you (that is if there aren't other ways to deal with it at the institutional level).
By take a stand you are assuming that the person being bullied can actually stand up to the bully and make him go away.
Since some of the fees are between 2-12 million from the article this has real impact on the bottomline of the company.
Overall the strategy seems to have a direct monetary benefit for the company. now the question can be asked if the amount of money they are saving in licenses make up for the legal fees. apparently through these actions overall patent litigators are declining to pursue newegg for these licensing fees and going after easier targets.
Could you invest in my company please? I like to spend money all the time.
It's entirely a valid point to be likewise concerned if newegg investors have their fiduciary interests served by an expensive fight against injustice. This is a more general concern of tragedy of the commons where it's not in any one retailer's selfish interest to battle it out, but it's in their collective interest to solve the systemic problem.
Newegg might be heroic here in the grand scheme of things, but not necessarily for its shareholders.
I'm not suggesting this should be cheap. Adjust the value of x until the scheme is appropriately profitable for NewEgg, and Cheng can keep fighting the good fight.
Your legal officer, your attorney or anyone at your company should realize that this isn't about them nor is it about (business wise at least) protecting anyone else but the interests of your company. His quote smacks of a challenge that he liked and as such you also have to at least question whether he operated at arms length from the problem at hand.
Newegg's business isn't fighting lawsuits.
Also, this is good long-term planning that is preventing them from being seen as easy targets by patent trolls. It could end up saving them millions.
It gives them goodwill the question is how much and what is the amount of sales increase? Hackers tend to overestimate the importance of things like this and not take into account those in flyover country or people who aren't aware of things like this. Besides publicity gain isn't a reason to pursue a strategy like this. That's not a gamble that makes sense.
"easy targets by patent trolls. It could end up saving them millions."
Companies have used similar strategies against legal predators for the longest time. Nothing new about doing that. Yet many companies led by responsible legal teams and management also settle and move on. This is not clear cut by any means.
"Flyover country" is full of hackers, but in any case, you seem to be completely ignoring Newegg's core demographic.
> Yet many companies led by responsible legal teams and management also settle and move on. This is not clear cut by any means.
You might even say most. Which is precisely why this is so interesting.
I find it disturbing to pursue this line of thought of seriously questioning whether fighting and winning against a patent troll is irresponsible leadership in a company. Doing so plays right into the patent trolls hands. So what if the bean counters can't figure a better ROI than simply settling every time? There are gray areas in business and I think it's incredibly harmful to question whether shareholder interests are being maximally served every time a company does something that might be mistaken for altruism. Should we also denounce any company that goes beyond EPA standards or donates to charity beyond what tax law would dictate optimal?
"Nothing new about doing that. "
Really.. ? Did you read that article ? Could you point to another instance of a company that's been successful against patent trolls to this extent ?
Whether or not the bottom line is clear cut, I would say a few things: These lawyers are probably on retainer, and while they could be doing other things. This clearly gets them SOME amount of positive press, and certainly helps their bottom line if you believe that some future trolls will not attempt to sure them. It may also invalidate some laws that hurt their business and innovation which then allows them to potentially develop new products. Lastly, I would definitely argue it helps us a society, and corporations LOVE to buff their image with some hero bullshit story. Before these story, what did you know newegg for? Selling cheap hardware?
What is their new image? Champion of the internet. (and their lawyer is a godamn bawse.) I don't know if you could buy this kind of press.
"'Hacker News' Hackers" also tend to grossly overestimate how well they know what is in the best interests of a company that they personally have little to do with.
Exactly. Take Godaddy (a competitor of ours) which is one of the most hated companies ever discussed on Hacker News. Yet they continue to do great business and are clearly well liked by many others who have no clue or care about the issues that forum readers care about.
As an aside, companies that are the darling of any online forum can quickly have their name turn to "mud" if they don't continue to acquiesce to what the group thinks is the right thing to do. (Then the question is does that name turning to mud motivate those to actually take action.)
Correct. Which is why "it's a great quote." By sending the credible signal that they will fight patent trolls to the bitter end, and probably win, they avoid fights.
In terms of game theory, by making public statements of this kind, they make it harder for their future selves to settle with future trolls instead of fight. Future trolls, knowing this, will be less likely to target them. Trolls want settlements, not fights they'll probably lose.
We can take strategy further though instead of the obvious implementation.
What if you settle in some cases but not all cases?
So a troll sees that you settled with company "x" but upon review you feel that you aren't going to settle with them?
This happens in personal injury cases or other legal matters. Taking a "we don't settle ever stand" sends a signal that you aren't evaluating the merits of the action just taking a flat approach. Consequently nothing can be inferred as far as how you even view the merits of the action. It's all the same. Otoh, taking a "settle when necessary" doesn't imply you will always settle and sends (I would argue) a stronger message when you do fail to roll over that you aren't because you feel particularly strongly in the case before you.
In strategy (that I use for negotiating) I have always found it best to not be predictable.
Consider the game tree, as seen by the Troll considering whether to attack Company X:
[1.1] troll's payoff = 0
/
/ no
/
(1) Troll: attack Company X?
\
\
\ yes [1.2.1] troll's payoff = +10
\ /
\ / settle
\ /
(1.2) X: fight or settle?
\
\
\ fight [1.2.2.1] troll's payoff = -5
\ /
\ / drop
\ /
(1.2.2) Troll: fight or drop suit?
\
\
\ fight [1.2.2.2.1] troll's payoff = +100
\ /
\ / Troll wins
\ /
(1.2.2.2) Nature: Troll wins or loses?
\
\ Troll loses
\
[1.2.2.2.2] troll's payoff = -1000
But if a Company X can credibly destroy its option to settle, the Troll's expected payoffs for attacking X change to [1.2.2.1] = -5, [1.2.2.2.1] = +100, and [1.2.2.2.2] = -1000, with the +100 payoff being unlikely (because, if it were likely, the Troll's business model wouldn't be to troll). So the most likely payoffs in the Troll's estimation are either -5 (ouch) or -1000 (OUCH!).
Therefore, the Troll's best choice becomes not to attack Company X. That choice has a payoff of 0, but it's greater than the expected payoff should they fight.
As a tangible example I had a case where someone wanted something from me and my lawyer said "they have a good case and you will have a really hard time etc. etc.". Legally he was right. However in my view the company that wanted the "something" also had a new facility that was opening in 3 months approx. and I realized that they would rather pay and acquire the item then they would follow a legal route (regardless of outcome or cost).
So while I am not disagreeing with the method to which you look at this it isn't the way that I think.
That said it's entirely possible that the strategy of putting up a fight each and every time could work to the advantage of someone being trolled. But I've seen enough cases of people following different legal strategies to know that it must have drawbacks because not every top legal mind seems to go that route.
As they say ask 10 get 10 opinions.
Lastly, I'm sure you would agree that a lawyer is at least somewhat biased in wanting to follow a "fight everyone" strategy as it (for lack of a better way to put it) lines his pockets.
Patent trolls are parasites looking for easy money. If Newegg is signaling that no money from them is easy, then that seems to be the best way to fend off all the lawsuits, no matter the level of perceived merit.
That wouldn't be true in the sort of patent lawsuit where somebody is defending against an existential threat. But when you're trying to influence a cost/benefit calculation, signaling "we will maximize your costs and maybe we will sink your whole operation" seems like a great way to get the extortionists to move on to other targets.
I get your point but would you agree that otoh it is entirely possible that a patent troll might decide to take them on in order to show that they won't go away easy as well? (variation of a Moral hazard?)
Additionally we don't really have complete data on every demand made by trolls it's not as if someone who decides to settle (and/or the patent troll) is publicly disclosing all agreements made prior to legal action, right?
We only know about when lawsuits are filed and settled. We don't know about someone settling before a suit is filed at all.
As an example a domain owner might have a publicly stated policy that they will never turn over a domain when someone comes calling even if they file a lawsuit UDRP etc. And in fact there are people that do this (google rick schwartz domain king). But how do we know the times that Mr. XYZ gets approached and does settle? It wouldn't be in his interest to tell the world about that and he could easily have an agreement with the other company that he will only agree if they don't disclose the info.
This is pathetic. You have a billion dollar company try to play legal hardball and they don't even do the most basic coaching of your executive team. They must have been getting really comfortable in East Texas to fuck up this bad.
I've said it once and I'll say it again, say the word 'patent' and most executives (and their corporate legal representation) will shudder and think you're in the right. They have no idea of what the state of patents are, what can be done about them, and that the people suing you are most likely doing it for a quick buck.
There are a lot of vendors out there, it isn't generally feasible to price shop all of them for orders of more than one or two items. So the fact that they are merely on your list of vendors to consider is a win for them.
The other interesting thing here (and it was evident in Oracle v. Google as well) is that the judiciary is coming up to speed on both the technology aspects of these patents and the general inanity of trying to "obvious" stuff.
I really hope this is another sign of the beginning of the end for this abuse of the patent system.
Other companies that can't even afford to win once? Hardly.
On the other hand, the trolls know this, and may react by targeting companies that do this to demonstrate that it's not an effective strategy.
I can assure you that the overwhelming majority of their customers don't care about this and of the ones that do any a portion of them would be able to even change buying decisions over it.
If you are the IT director explaining to your boss that you want to deal with Rackspace or Newegg (and pay higher prices or get not as good of a product) because of this just won't fly. If anything it even makes your judgement suspect in the same way that wanting to give business to your brother in law might. It's not an arms length decision process.
How much did they spend on this trial? How much was Alcatel asking for a license fee ($19 million). Did they litigate this for less than $19 million? I bet they did.
If he were really interested in troll-stomping over all other interests he would be better off saying "We may have won this one, but most of the time we like to settle".
Nobody in their right mind would waste time trying to troll them now - unless they have a really rock-solid case, which is unknowable before litigation.
In one hand newegg kills trolls and I'd love to buy from them... But to get close to amz prices you have to give in to mail rebates and other forms of marketing trolling.
It's as if I'm an addict. I know I have a problem but I can't stop.
(Amazon is a close second on reputation and reviews)
Prices are usually very close from what I have seen- only a dollar or three different.
That little bit every three years is probably worth it to reward a company that cares.
edit: wow, spelling.
"referencing... an object that is to be displayed on the terminal display with a particular identifier"
If I understand it correctly, I've violated this patent hundreds of times. But in Alcatel's defense, they patented it a couple years before I started using IDs.
http://www.nytimes.com/2013/02/26/nyregion/new-york-to-stem-...
You go from being a customer, to an evangelist.
You are correct that it would be better for the system as a whole, but each individual is better off not participating.
Specifically, the server and client agree on a set of defined 'objects' (in this case including text boxes, drop-down menus, and images). The client then displays said objects to the user by following instructions from the server. The claimed innovation seems to be that the server and client talk about the aforementioned objects rather than sending exact descriptions of the client's display back and forth.
Alcatel-Lucent intended to apply the patent very broadly - consider a web server as the 'host' and a web browser as the 'terminal', for example.
From a quick read, it appears to be about a server keeping track of menus and clicks on those menus that happen on some client (e.g. smartphone?) app. That seems like absolute nonsense to me, but I may be getting tripped up by the use of the term "host computer."
My livelihood depends on not being targeted by trolls, and companies that fight back against trolls help me avoid the damned near certain destruction of my company that a patent troll could cause me (I'd, ethically, be compelled to fight...but I simply don't have the resources to win such a fight).
The trolls will certainly be back after they regroup - and their tactic may shift to coming after increasingly smaller companies that can't afford to go to court in the first place, much less actually stand up a fight. Nonetheless, any movement in the right direction is a good thing as far as I'm concerned.
Way to go Newegg!
Excerpt from the article: "There are fewer trolls for us to fight."