Tag Archives: law

Newegg defeats patent troll

A “patent troll” is a company that is set up just to make money off of patents it owns. Usually, such companies do not do any R&D themselves. Instead, they strategically purchase patents from other companies, especially companies that are going bankrupt or having other financial difficulties. Then they use these patents to make money from other larger companies. They say, “Hey, you use technology that we have patented. Either pay us some royalties or we will sue you.”

It is important to be aware that patents are different than copyrights. A copyright covers the creative work itself — that piece of data itself, as written or recorded. Examples include source code, an executable binary, some song lyrics, a book, a musical recording, a photograph, a video, etc. A patent covers an invention, in other words, an idea. So, for instance, you could have a certain kind of pulley system patented. And you could have the blueprints (or CAD drawings, etc.) copyrighted. Roughly, the patent covers the idea, while the copyright covers a data object.

According to Title 35 §101 of the US Code, the things you can patent are these: “any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof”.

Well, what if someone had a patent on e-commerce? That is the issue in this Ars Technica article about the legal fight between Newegg and Soverain Software. (Read the article. It’s great.) Soverain Software is a patent troll, in the sense described above. And, at one point, they acquired a patent for the idea of an internet shopping cart. They didn’t actually do the “invention” or file for the patent. Apparently they got it from a software outfit that was going out of business in 2001. Well, who uses web shopping carts? Everyone. Soverain has sued the likes of J.C. Penney, TigerDirect, Avon, Victoria’s Secret, Best Buy, Office Max, Home Depot, IBM, and others. Not all the cases have been resolved, but Soverain was pulling in millions of dollars.

Newegg was also being sued by Soverain, and they said, “This is bullshit.” (That’s a quote from Newegg’s Chief Legal Officer.) Instead of settling with Soverain, they fought. Finally, they got Soverain’s patents declared invalid. This saves them and many other e-commerce businesses tons of money.

It seems extreme to be able to patent an idea as general as internet shopping cart. But are there other ideas that potentially should be covered by patent protection? What would be the justification for that? Would copyright be enough by itself?

My guess is that act utilitarianism would favor a policy of no software patents but some level of copyright protection for software and source code. However, I haven’t worked through the act utilitarian evaluation step-by-step. Furthermore, there are many ways copyrights can be structured, and that is another complication. We will be talking about this more in class in a couple of weeks. But please weigh in with your initial thoughts!