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Weil Secures Appellate Victory for Newegg in E-Commerce Patent Case

Weil obtained a significant appellate victory on behalf of client Newegg Inc. on January 22, 2013, when the United States Court of Appeals for the Federal Circuit vacated a $2.5 million verdict against Newegg and invalidated three of Soverain Software LLC’s e-commerce patents.

This dispute centered on the validity of three patents that allegedly covered concepts including online shopping carts, Internet receipts, and product identifiers, among others. Following Soverain’s acquisition of the patents at issue, Soverain commenced patent infringement lawsuits against seven online retailers, including Newegg. All the online retailer-defendants except Newegg settled out of the patent infringement suits, taking paid-up licenses to the patents at issue.

Soverain’s patent infringement suit against Newegg proceeded in the United States District Court for the Eastern District of Texas, where a jury found that Newegg had infringed upon two of the three patents at issue awarding damages in the amount of $2.5 million. The district court granted Soverain’s motion for judgment as a matter of law with regard to the remaining patent. Significantly, U.S. District Judge Leonard Davis, who presided over the trial, removed the issue of whether the patents at issue had been rendered obvious, and thus invalid, from the jury following the close of evidence. Judge Davis explained: “I don’t think there’s sufficient testimony to present an obviousness case to the jury.” Following the verdict, Newegg filed a motion for judgment as matter of law or for a new trial, arguing that removal of the obviousness issue constituted reversible error. Having already determined that Newegg had not presented sufficient evidence regarding obviousness during trial, Judge Davis denied Newegg’s motion.

Following the Eastern District of Texas’ decision, Newegg retained Weil Patent Litigation partner Edward Reines and appealed the decision to the Federal Circuit. In a unanimous decision, the Federal Circuit found that all three patents at issue are invalid based on obviousness, reversing the lower court’s decision and vacating the $2.5 million award for damages. The court explained: “The district court’s conclusion that a prima facie case of obviousness was not met is not explained by the court or by Soverain, and does not accord with the record.” According to the Federal Circuit: “the trial record contains extensive testimony of the experts for both sides, discussing every claimed element of the patented subject matter and the prior art system.”

This decision will likely have far-reaching implications, as Soverain has been awarded significant damages in other patent infringement cases concerning the patents at issue, including an $18 million verdict against Avon Products Inc. and Victoria’s Secret Stores LLC. Similarly, Amazon paid $40 million for a license to the invalidated patents and many other retailers have paid large sums.

The appeal team included Weil and also a cohesive team from multiple firms that deserve much credit.

This news also appeared in the following outlets (may require registration/subscription):

  • The Am Law Litigation Daily: Weil Scores in E-Commerce Patent Case at Federal Circuit (January 22, 2013)
  • Law360: Fed. Cir. Junks $2.5M Verdict In Newegg Patent Fight (January 22, 2013)
  • Daily Journal: Weil Gotshal attorney gets holding company's patents declared invalid by Federal Circuit (January 23, 2013)
  • The Recorder: Weil Scores in E-Commerce Patent Case at Federal Circuit (January 23, 2013)
  • Corporate Counsel: Weil Scores in E-Commerce Patent Case at Federal Circuit (January 23, 2013)
  • BNA’s Patent, Trademark & Copyright Journal: E-Commerce Patent Claims Obvious Updates Of Pre-Internet Computer-Based Shopping (January 24, 2013)
  • The Recorder: BAR-ometer (January 25, 2013)
  • Ars Technica: How Newegg crushed the “shopping cart” patent and saved online retail (January 27, 2013)