
US Supreme Court declines to hear appeal by patent troll - dded
http://www.inc.com/jeremy-quittner/supreme-court-deals-blow-to-troll.html
======
grellas
A few thoughts:

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.

~~~
Nutella4
Yes, Soverain is the quintessential patent troll. It did not acquire the
original company that came up with the shopping cart idea. That thing had been
sold at least four times before Soverain came along.

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.

~~~
cynicalkane
grellas is describing what lawyers and courtrooms would think of the patent.

------
revelation
I guess this is why HN mods edit titles on submissions (although the original
title is just as terrible). The Supreme Court did not side with anyone; they
denied a petition to the court, which is the case _for the vast majority_ of
petitions.

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.

~~~
dded
I cut-and-pasted the original title, which now appears to have changed.

~~~
bostonpete
I thought cut-and-pasting the title was the only sanctioned approach to titles
on HN and anything else was "editorializing". I've seen any number of more
useful titles changed to match the linked article supposedly for this reason.

~~~
ubernostrum
The policy is this:

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.

------
motbob
"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."

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-...](http://dailywrit.com/2013/01/likelihood-of-a-petition-being-
granted/)

~~~
venomsnake
What are the standards that SCOTUS uses except the obvious circuit split
(having opposite laws in different parts of the country is obviously bad) for
picking up a case?

~~~
rayiner
When the federal government appeals, the Supreme Court will more likely than
not hear the case. Blatant conflict with prior Supreme Court precedent tends
to increase the chances of the Supreme Court hearing a case. Decisions
striking down acts of Congress are more likely to get heard. The Supreme Court
also appears to try and "tidy up" areas of law by hearing a number of cases in
a particular area in successive terms. For example, in 2004-2008, the Court
heard Hamdi, Rasul, Hamdan, and Boumediene, all Guantanamo prisoner cases, in
an effort to outline the rights of detainees.

This article has a very thorough description of the cert process:
[http://www.mayerbrown.com/Certiorari-Practice-The-Supreme-
Co...](http://www.mayerbrown.com/Certiorari-Practice-The-Supreme-Courts-
Shrinking-Docket-06-12-1995/)

------
vanderZwan
Good news, but the last sentence of the article made me curious:

> _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!

~~~
Karunamon
I think the canonical example of a NPE is ARM. They don't fabricate their own
chips, but they license out their designs.

~~~
petermonsson
By that definition even Qualcomm (top 5 semiconductor company) is an NPE as
TSMC fabricates their chips. ARM licenses both RTL (code) and GDSII files (the
files that a foundry such as TSMC uses to freate masks for fabrication) just
as you would license software. They can hardly be called a NPE.

------
dded
I'm encouraged that patent trolls are getting knocked. But my fear is that
patent law will hit such a state that only large corporations can wield them.
If I'm a small patent holder, and I'm liable for court costs if I lose a suit,
then it becomes far too risky to defend my patent against a corporation that
violates it.

~~~
lostcolony
Just like currently it's far too risky to fight a troll in court even for a
corporation, since treble damages means that if the jury (because 12 random
people from the streets clearly know enough about technology, or can
understand it well enough when it's explained to them, to pass a fair
judgement) decides you're guilty, you're paying through the nose. The
comparatively small amount demanded by the patent troll to go away, from large
AND small businesses, is calculated to be the maximum amount possible where it
still seems a better choice than that risk. We need to either remove that
risk, or make it equally risky if they go to court.

Or, you know, stop pretending software is patentable.

~~~
marcosdumay
The result is that only big companies can be patent trolls. It's still an
improvement, but I'm quite sure it's not the intented one.

By the way, small companies were never able to defend their patents anyway.
That does not change.

~~~
rayiner
I don't know how you define "small" but ARM certainly manages to defend its
patents against companies that are many times larger (Samsung is a couple of
hundred times bigger both in revenues and number of employees).

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-...](http://www.fosspatents.com/2013/12/apple-
demands-15-million-in-legal-fees.html). 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...](http://www.kauffman.org/newsroom/2013/06/number-of-us-companies-
that-reach-100million-in-annual-revenues-remarkably-stable-over-past-20-years-
according-to-kauffman-paper). These all have the resources to defend their
patents against even a fairly large company.

------
csbrooks
I worked on shopping cart software for the web in 1996, and the company I
worked at, Evergreen Internet, had been around a while before that. I wonder
if anything we did constitutes prior art.

------
kalleboo
I had to use a secret browsing window to read this without signing up, so here
it is for anyone else who has trouble loading the page:

\--------

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.

~~~
mattmanser
So you'd thought you'd break the law and steal their content?

~~~
austerity
I've just checked and the content is still there, so he clearly hasn't stolen
it.

~~~
chaz
We all know that he means copyright infringement: the content was reproduced
without permission. Using the literal definitions of the words
"stealing,""theft," and "piracy" mistakes pedantry as rebuttal, and helps no
one when discussing copyrights.

~~~
DougBTX
I'm all for using the actual meaning of words. If that means it is harder to
make emotional arguments, then so be it.

~~~
chc
Words do not have an "actual" meaning. They have definitions assigned on a
more or less arbitrary basis, and there may be multiple conflicting
definitions for any one word†. The Greeks used to believe that foreigners were
stupid because they spoke something that was not proper Greek. Nowadays we
laugh at their naïveté, but then turn around and talk about the "actual
meaning of words." It's just silly.

† _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?_

~~~
Crito
> _Words do not have an "actual" meaning._

When they are terms of art, they frequently _do_.

~~~
chc
No, they have an accepted meaning among practicioners of that art. That
meaning is not more "real" than other meanings, though is more likely to be
contextually appropriate. The fact that "reduce" is a term of art in
programming for "debug" does not make somebody who uses it in cooking
instructions _wrong_.

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.

~~~
Crito
> _No, they have an accepted meaning among practicioners of that art._

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.

~~~
mchaver
It makes it easier for the practitioners to discuss their art. Jargon is
useful if all parties understand the concepts and the forms (words assigned to
the concept) used to represent them. Otherwise you have to expand the jargon
into larger units.

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.

------
ck2
What did it cost Newegg to litigate that?

Does the troll have to pay legal fees?

Hope Newegg can remain price competitive.

~~~
Nutella4
And I hope the many companies that caved to this patent troll and paid it
millions for claiming it owned the shopping cart now go after it to get all
those millions back. With interest.

~~~
ceejayoz
My understanding is that revenues get siphoned very quickly out of the shell
company to avoid precisely that.

~~~
inetsee
I think that one of the fundamental problems with the current patent system is
that NPEs are able to use shell companies to shield themselves from the
financial consequences of their bad acts. I hope one of the "finer points of
patent law" that the Supreme Court will be looking at is just this issue.

------
rev_null
"It's a really tough time to be a patent owner."

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.

------
incogmind
I think the best way out of these things is make software patents invalid
after a short period- like 10 years.

~~~
Kliment
10 years is still way too long for software, and even for most other things

~~~
incogmind
Maybe, but just enough time to not blatantly rip off another product and not
face any repercussions.

------
shmerl
I hope TQP troll will be busted as well. When will the Supreme Court process
that case?

