US Supreme Court declines to hear appeal by patent troll
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1. The Supreme Court declined to hear an appeal by Soverain from an adverse ruling by the Federal Circuit Court of Appeals that had determined the Soverain "shopping cart" patent to be invalid on grounds of obviousness.
2. The Federal Circuit's holding by a 3-judge panel had been remarkable and had shocked patent lawyers generally in that the parties before the court had not even raised the issue on appeal as a ground for invalidating the jury's verdict below. The court raised the issue on its own, concluded that the patent was obvious and invalid, and gave judgment for Newegg in spite of the fact that the jury at the trial court level had found that Newegg infringed.
3. This particular patent had been the original shopping cart patent, dating back to 1994 (well before Amazon began) and it had had a formidable history by which its holder had gotten massive licensing fees from major players over many years for the privilege of using online shopping carts on the web.
4. It is easy to say today that everyone knows what the concept of a shopping cart is and that anyone could have come up with the idea of applying that concept to online shopping. That is all well and good but consider this: not only had this patent passed muster as being non-obvious with the USPTO on its original filing but it had also been found to have been non-obvious on two separate patent re-examinations before that same body and by a string of U.S. district court judges before whom the issue had arisen. In other words, Newegg faced a huge challenge on this issue (the legal standard required that it be able to prove that it was obvious by "clear and convincing" evidence, which is often a tough standard to meet) and this is why Amazon and virtually all other major other online retailers had long since caved and agreed to pay royalties for use of the patent. In the patent community, the Soverain patent was seen as rock solid and one whose shopping cart idea was deemed far from obvious. The top judges and lawyers in the nation, not to mention the USPTO, had all so concluded. The chances of upending it seemed slim to none. And, as noted, even the parties themselves had not raised the issue on the key appeal as a ground for potential reversal. Thus, everyone was stunned when the Federal Circuit reversed the judgment against Newegg on that ground, invalidated the patent, and threw the case out.
5. All that said, when Soverain petitioned the Supreme Court for review of the Federal Circuit's decision, it was trying to undo what it perceived as an injustice done to it as a private litigant ("this is so unfair to us and to our valuable patent"). However, from the Supreme Court's point of view, the kind of petition filed by Soverain is to be granted, and a case heard, only when it has significance far beyond whatever impact it might have on any private litigant. The Court's role in hearing such discretionary appeals is to step in and decide important questions of federal law or to determine who is right when the various lower federal appellate courts may have reached conflicting decisions on such points of law in way that cries out of definitive resolution by the highest court. The Court will not hear cases merely because they might have been wrongly decided unless some such extraordinary factor exists. Thus, in denying Soverain's petition, the Court did nothing more than say that this particular petition did not present important issues of the kind that warranted its attention. It did not validate the Federal Circuit's reasoning or analysis. It did not weigh in against patent trolls. It did not add its authority to the fight against frivolous patents. It simply did what it does on over 99% of such discretionary petitions: it used its discretion to deny it. The legal significance of its decision goes no farther than that.
6. Is Soverain a patent troll that deserved this outcome? Well, its CEO had been a law partner at a major law firm (Latham & Watkins) and the company's business was clearly driven by a legal licensing scheme that had little or nothing to do with active business operations or innovation. It had simply acquired the original company that had come up with the patent back in the day. So, it is a troll if you want to call it that or it is not if you want to use some different definition. But this distinction does underscore how difficult it becomes to analyze patent issues simply by placing labels on the parties. The problem with modern software patents is that too many are too easily granted over trivial "innovations" and this has given vast incentives to those who would package them into shakedown licensing ventures and thereby gum things up for true innovators. It is a situation that calls for action by Congress to rein this in. Otherwise, every party trying to defend itself will find itself, as Newegg did, having to go to extraordinary efforts at massive expense to avoid claims of infringement. Very few litigants can do that and, indeed, Newegg is to be commended for fighting this all the way against tough odds. Let us only hope that systemic fixes can help correct the problem so that this is not the only way available for dealing with such patents. Whatever else this system does, it hardly promotes true innovation.
No, shopping cart is not and never was a non-obvious technology. It's a clever metaphor for the very common pre-computer business method of maintaining order line records for unconfirmed orders.
As far as "original filing" that of course doesn't mean much considering the things that get through.
But serious question here. When you say "had also been found to have been non-obvious on two separate patent re-examinations" doesn't that also speak to the skill of the attorneys involved in the case?
I know of a trademark that we weren't able to get that a competitor that was much larger was able to get (that was a similar generic word). I put the loss to the skill of the attorney that I used falling short in his arguments.
Passing muster with the USPTO is not hard. I read my company's patent with them, and despite there being heaps of prior art (known to any casual web user) and me knowing exactly what the patent was referring to, I could not make heads or tails of the description. My housemate tells me of a radio interview where they read out a patent to a senior engineer, and he couldn't figure out what it was for - it was the patent for the project he'd worked on for the past 10 years. "It passed the PTO" is an absolutely meaningless statement for originality; it just means you know how to fill in paperwork.
This is why a common argument against software patents is, if not to abolish them, then limit their life cycle. 20 years for a shopping cart patent is way too long. Can you imagine if Friendster was granted a patent on the type of social networking that MySpace and Facebook implemented, and they were denied licenses to operate while the patent was in effect, they couldn't launch until 2022.
A summary I read of the case a while back stated that the original trial judge did not permit the issue to be raised.
> 2. The Federal Circuit's holding [in Soverain] by a 3-judge panel had been remarkable and had shocked patent lawyers generally in that the parties before the court had not even raised the issue on appeal as a ground for invalidating the jury's verdict below. The court raised the issue on its own, concluded that the patent was obvious and invalid, and gave judgment for Newegg in spite of the fact that the jury at the trial court level had found that Newegg infringed. (Emphasis in original.)
George, it's not at all apparent that in Soverain the Federal Circuit raised and decided the obviousness issue sua sponte, that is, on its own. The court's opinion [1] expressly says, at page 5: "Newegg argues that it was wrongfully deprived of a jury determination of the question of obviousness, pointing to the extensive testimony on this issue at trial."
(Patent lawyers really would have been shocked if Newegg had not raised the obviousness issue on appeal.)
In its Soverain opinion, the Federal Circuit had previously explained, at page 4, that the trial judge, in the Eastern District of Texas, had (in essence) directed the jury not to consider the obviousness issue, because the trial judge had decided on his own that Newegg's evidence wasn't enough to allow a reasonable jury to invalidate the patent. The Federal Circuit thought otherwise.
The appeals court didn't send the case back down to the trial judge for reconsideration; instead, it decided the obviousness issue on its own. That's because under existing precedent, the ultimate decision on obviousness is reserved initially for the trial judge as a so-called question of law, and the trial judge's decision is subject to complete plenary scrutiny, known as "de novo" review, by the appeals court (and, theoretically, by the Supreme Court of the United States). (See pages 5-6.)
So, under existing precedent, it's actually quite unremarkable for the Federal Circuit to reverse a trial court on the issue of obviousness. (Usually, though, the outcome goes the other way: It seems more typical for a trial judge initially to conclude that a patent claim is invalid for obviousness, after which the Federal Circuit will reverse and render judgment that the patent claim was not proved invalid.)
As to your assertion that the Federal Circuit decision "had shocked patent lawyers generally": I didn't remember that to be the case, so I did a quick Google search. One well-known patent-law blogger -- who if I remember correctly is very pro-patent -- wrote a couple of extensive analyses of the Federal Circuit decision and its subsequent decision on rehearing [2][3]. This blogger has strong views that the Federal Circuit shouldn't engage in de novo review of obviousness [2]. He accused the Federal Circuit of having, in Soverain, "made findings of fact as if they were the trial court and decided the case on issues not argued by either party" [2]. That accusation, though, seems to me to be unsupported hyperbole, quite contrary to what the Federal Circuit actually wrote.
[1] http://www.cafc.uscourts.gov/images/stories/opinions-orders/...
[2] http://www.ipwatchdog.com/2014/01/13/supreme-court-refuses-s...
[3] http://www.ipwatchdog.com/2013/09/04/is-soverain-software-v-...
If they did accept this particular petition, this would not mean that the Supreme Court sides with the patent troll and the world is doomed; it simply means that the case deals with a contested issue where clarification by the Supreme Court is widely sought.
1. If you used the original title, that was wrong and it needs to be changed to something more informative or less link-bait-y.
2. If you provided a more informative title, that was wrong and it needs to be changed to the original title.
I hope that clears it up for you.
I don't think this is accurate. The standard that the Supreme Court uses to decide whether to take cases is not "is this frivolous." Soverain v. Newegg would have to meet a pretty high standard in order to be granted appeal.
I think the author of this piece is reading into this denial way too much. The norm is for appeals to be denied. To be more precise, less than 5% of appeals were granted over a recent one year period. http://dailywrit.com/2013/01/likelihood-of-a-petition-being-...
_Deciding to Decide: Agenda Setting in the United States Supreme Court_ is a fascinating book that explains how the court decides to take some cases and not others, based on interviews with court insiders.
http://www.amazon.com/Deciding-Decide-Agenda-Setting-Supreme...
This article has a very thorough description of the cert process: http://www.mayerbrown.com/Certiorari-Practice-The-Supreme-Co...
> The total median awards to trolls is now nearly twice as high as those to legitimate patent holders, whose median reward fell about 30 percent to $4 billion, according to a 2013 report by PriceWaterhouseCoopers.
I was wondering how they estimated this, so I checked out the report:
> We collect information about patent holder success rates, time-to-trial statistics, and practicing versus nonpracticing entity (NPE) statistics from 1995 through 2012.
> Damages awards for NPEs averaged more than double those for practicing entities over the last decade.
Note: PWC does not use the word "patent troll" - that is entirely the interpretation of the article.
So, just to play the devil's advocate: are NPEs by definition patent trolls? I can't think of a counterargument, but maybe someone else can?
EDIT: Thanks for the enlightening examples so far!
Many software companies have business models similar to ARM's, yet we don't call them NPE's.
Given that the Acorn RISC Machine came out 28 years ago, I'm pretty sure someone could build a patent-unencumbered processor for that instruction set if they really wanted to go it alone.
There are lots of counter-examples. E.g. Mojave Aerospace Ventures (MAV): http://en.wikipedia.org/wiki/Mojave_Aerospace_Ventures. It's the patent-holding company that owns all the patents for Spaceship One. It's a vehicle to intermediate between the major investor, Paul Allen, the inventor, Burt Rutan and Scaled Composites, and the various companies that will be commercializing the technology, namely the Virgin Group and any special-purpose joint-venture entities created by it.
MAV (and ARM, mentioned in a sibling comment), is a great example of why NPEs exist.[1] There is a lot of value in being able to take the products of expensive R&D, like the Spaceship One effort that won the X Prize, and being able to package that into a set of property rights owned by a holding company that can transact in those rights. It allows a division of labor that's very hard to achieve otherwise. And division of labor is a good thing, because it allows everyone to focus on their core competency.
For example, in the case of Mojave, you have the separation between the people doing the R&D (Scaled Composites), the people bankrolling the effort (Paul Allen and other investors), and the people doing the commercialization (Virgin, etc). In the case of ARM, you have a separation between the people doing the R&D (ARM), the people making SOCs using the basic cores (NVIDIA, TI, AMD), the people manufacturing the chips (Samsung, TSMC, GF), and the people using the chips in finished products. It's economically valuable to facilitate this sort of separation.
[1] Indeed, MAV is a better example than ARM, because it's purely a holding company. It does neither the research nor the commercialization, but rather exists to facilitate the involvement of the independent investor in the whole process.
"Are Universities Patent Trolls?", Mark Lemley, 2007
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=980776
From the abstract:
>Finally, I think we can learn something about the raging debate over who's a patent troll and what to do about trolls by looking at university patents. Universities are non-practicing entities. They share some characteristics with trolls, at least if the term is broadly defined, but they are not trolls. Asking what distinguishes universities from trolls can actually help us figure out what concerns us about trolls. What we ought to do is abandon the search for a group of individual companies to define as trolls. In my view, troll is as troll does. Universities will sometimes be bad actors. Nonmanufacturing patent owners will sometimes be bad actors. Manufacturing patent owners will sometimes be bad actors. Instead of singling out bad actors, we should focus on the bad acts and the laws that make them possible.
In general it's hard to come up with useful inventions without a concrete problem, so often good NPEs are in communication with their potential customers even before they start work.
Or, you know, stop pretending software is patentable.
But nowadays, even hw patents are a problem. There doesn't seem to be any meaningful requirement of a patentable idea being non-obvious to "one skilled in the arts." What we have is a race to occupy the available implementation space.
But I don't see the courts addressing either of these concerns. What they are addressing is the troll's ability to misuse patents against companies that make things (good), but they crank up the financial cost and risk so that only big players can play (bad).
By the way, small companies were never able to defend their patents anyway. That does not change.
Patent litigation is expensive, but it's not that expensive for even relatively small corporations. Apple spent about $60 million in legal fees in its battle with Samsung in California (which resulted in the $1 billion verdict): http://www.fosspatents.com/2013/12/apple-demands-15-million-.... That case ran for two and a half years, involved a trial, an appeal, and a retrial.
$60 million over 2-3 years is expensive, but it's not intractably expensive for a moderately sized company, especially if the patents are critical to the business and adequate litigation financing is available. And $60 million is for a blockbuster, "we're taking it personally" grudge match like the one Apple waged. A more typical patent lawsuit might cost $5-10 million. And if the plaintiff's case is strong, it might cost nothing for a firm to take it on contingency.
Every year in the U.S. about 150-250 companies hit $100 million in revenues per year, about 20 of which are technology companies: http://www.kauffman.org/newsroom/2013/06/number-of-us-compan.... These all have the resources to defend their patents against even a fairly large company.
Don't be so sure - remember who makes the big political contributions.
Company with no revenue, no assets and no trade vs. a small trading business or an individual is fairly clear-cut.
[1]For example, our humidifier had a removable water tank held in with a flap with a clip, because the competitor held a patent on it being held in with a hinged door. Stupidly obvious, but it still means a trip to court if you want it.
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Chalk one up for the enemies of patent trolls: The Supreme Court on Monday threw out a request for trial from alleged patent troll Soverain Software.
The case, called Soverain Software LLC. v. Newegg Inc., is one of three such cases the Supreme Court is expected to consider this year. While the Court will likely hear the remaining cases, which deal with finer points of patent law, its dismissal of Soverain speaks to the potential frivolousness of its claims.
Soverain acquired the rights to numerous pieces of code tied to the online shopping cart, developed in the 1990s. In recent years, Soverain has gone on a litigious tear, suing more than two dozen companies including Amazon, Nordstrom, Macy's and Newegg, an online retailer, which all use shopping carts for internet sales.
Soverain had some success suing on the state level, where a Texas jury awarded the Chicago-based company $2.5 million in damages against Newegg. However, Soverain lost on appeal last year in U.S. District Court for the Eastern District of Texas, which ruled the shopping cart patents owned by Soverain were too general.
Patent trolls typically acquire rights to fallow or soon-to-expire patents with no intention of using the patent. Often patent trolls set up shell companies whose only assets are the patents, which means they have no real revenues or assets. Their sole purpose is to harass small businesses, which usually settle rather than pay for extended and costly litigation.
Patent law was originally written to protect the patent holder, making it easier for the patent holder to prevail in court. For the patent infringer to win, rather, the defendant must prove exceptional circumstances--namely that the patentee acted in bad faith and made baseless claims. This is hard to do. While the patent holder can be awarded "treble damages," or three times the damage claimed, the most the infringer can ever collect is attorney fees.
The remaining cases before the Supreme Court will deal with these finer points.
Congress is examining legislation that would fight patent trolls and their frivolous lawsuits by making them liable for court costs, should they lose their cases.
Small businesses mounted 3,400 legal defenses in 2011 for patent cases, a 32 percent increase over the prior year, according to a research paper from 2012 by Boston University law professors James Bessen and Michael J. Meurer. That cost to small companies was about $11 billion in 2011, also a 32 percent increase over the prior year.
The total median awards to trolls is now nearly twice as high as those to legitimate patent holders, whose median reward fell about 30 percent to $4 billion, according to a 2013 report by PriceWaterhouseCoopers.
Section 107 of the U.S. Copyright law sets out four factors to be considered in determining whether or not a particular use is fair.
* The purpose and character of the use, including whether such use is of commercial nature or is for nonprofit educational purposes
* The nature of the copyrighted work
* The amount and substantiality of the portion used in relation to the copyrighted work as a whole
* The effect of the use upon the potential market for, or value of, the copyrighted work
You don't have to prove all four factors. You just have to prove that the use is fair. For example, if I write a haiku and someone writes an article analyzing my haiku for educational purposes, the use may be considered fair, even if they use the entire poem.
Of course, since it's not your work that is being mis-appropriated, you're free to look at it another way :-)
Sites want as many unique visitors as possible because larger sites get more attention from advertisers, it permits better frequency capping, and enables better segmentation of audiences. Even though they get paid per impression, larger uniques tend to allow for higher CPMs.
Separately, it's worth considering that many writers are measured on metrics: uniques, minutes, shares, comments, etc. In some places, they might even get paid on such performance (I think Gawker did this). When content gets copied, the writer can be deprived of such credit.
I was wondering whether such ad-blockers exist. Searching for one and installing it now.
† Just within English we have words like "cleave," that are widely accepted as meaning both "hold on tightly" and "separate." And in Spanish, we have "dame" which means "give," while in Japanese they use the same word to mean "don't do that." Can we declare the Spanish or the Japanese to be wrong about what that word means?
When they are terms of art, they frequently do.
Basically, what I'm saying is, the fact that you and your friends use a word a certain way doesn't automatically invalidate other people's usages. It is true that mattmanser's use of "steal" was not legally precise, but neither are many colloquial uses of the word ("It was such a steal at $5!", "He's stealing third", "Great artists steal", "His identity got stolen", etc.). You would be right to object if he had been raising a legal argument based around the concept of theft, but he wasn't, so it seems overly pedantic to me.
You are getting close to the point here.
Why does a term of art have a specific meaning to a practitioner of that art? Answer that, and you will have determined why words have meanings in any context.
Borrowing words across fields (because of similarity) can cause confusion. One person may assign a meaning from a different field than the other interlocutors are using.
Does the troll have to pay legal fees?
Hope Newegg can remain price competitive.
They get paid whether they're in court or surfing reddit. Might as well make them work for a living.
They cannot afford to keep teams of lawyers at the ready. A case through trial is about 2-10 thousand lawyer hours.
This is coming from someone who took a common noun, stuck the words "on the internet" at the end, and then extorted billions of dollars from companies that actually make something.