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July 9th, 2015

Newegg Goes Over Patent Judge’s Head

There’s been an interesting development on the patent front, which has been deceptively quiet for some time. Surprisingly, the latest news involves a case that went to trial nearly two years ago. It’s not a surprise, however, that the case was tried in the Eastern District of Texas, infamous for awarding verdicts in favor of patent holders. Also not surprising, the plaintiff is a non-practicing entity (NPE), a fancy term for “troll.”

East Texas Federal Court

U.S. courthouse in Marshall, Texas

Back in November, 2013, a jury in Marshall, Texas found that online retailer Newegg infringed on a patent held by TQP Development because it mixed the use of SSL and RC4 on its websites. The jury awarded $2.3 million, less than half of the $5.1 million that TQP’s damage expert had said would be fair. At the time, TQP had sued more than 120 companies over the same patent, collecting $45 million in settlements.

Immediately after the verdict, Newegg, which has made it a policy to duke it out in court rather than settle patent claims it thinks are unfounded, vowed to appeal. Trouble is, they can’t. Not until U.S. District Judge Rodney Gilstrap, who conducted the trial, enters a final judgement, which he hasn’t done. He also hasn’t indicated when, if ever, that’s likely to happen.

Evidently, Newegg is tired of waiting and on Monday filed a petition with the U.S. Court of Appeals for the Federal Circuit asking that a “writ of mandamus” be issued “directing the United States District Court for the Eastern District of Texas to enter judgment that Newegg does not infringe U.S. Patent No. 5,412,730…as a matter of law.”

According to Cornell University Law School: “A (writ of) mandamus is an order from a court to an inferior government official ordering the government official to properly fulfill their official duties or correct an abuse of discretion.”

There would seem to be little question about why Newegg would seek this remedy, as twenty months is a long wait for a judgement, and it’s likely that Newegg would prevail on appeal. The original verdict took many who were watching the case by surprise, as it appeared that Newegg was on solid legal ground and that its lead attorney, Lee Cheng, presented a strong case.

Newegg’s chances of winning an appeal look even better now. Six months after Newegg’s loss, Intuit won an infringement case on the same patent, based in part on testimony from the Newegg trial, and in the same Marshall, Texas court where Newegg lost. The Intuit case was heard by U.S. Circuit Judge William Bryson, an appeals court judge who was sitting “by designation” in the Eastern District of Texas.

According to Joe Mullin, writing for Ars Technica, the ruling doesn’t directly affect Newegg’s case.

“Gilstrap isn’t bound by Bryson’s ruling. Bryson is an appeals court judge from the Federal Circuit, who took senior status last year. Because he ruled on this case at the district court level, his decision isn’t binding on other judges. It isn’t unusual for a judge from a federal appeals court to sit ‘by designation’ in district courts, which allows them to sometimes have the experience of overseeing jury trials.”

Newegg biggest complaint, however, isn’t that Judge Gilstrap isn’t setting aside a jury verdict to rule in its favor, although it does call for that in its petition, but that the judge has failed to issue any judgment, which is required before appeals can be filed.

According to Newegg’s petition:

“Newegg has respectfully encouraged the district court to decide Newegg’s motion for judgment as a matter of law no fewer than four times, and has communicated the prejudice caused by the delay. It is now approaching two years after trial and no action has been taken by the district court on Newegg’s motion. This is several times longer than the time it has taken most other patent cases, tried before the same judge and around the same time, to reach final judgments. With no appealable judgment, and none ostensibly forthcoming, Newegg has no realistic recourse aside from seeking a writ of mandamus.”

So far, Newegg has not replied to our requests for comments on the filing of this petition. However, we are watching this story closely, and will keep you advised of any developments.

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Christine Hall has been a journalist since 1971. In 2001, she began writing a weekly consumer computer column and started covering Linux and FOSS in 2002 after making the switch to GNU/Linux. Follow her on Twitter: @BrideOfLinux

5 comments to Newegg Goes Over Patent Judge’s Head

  • Tyler Olson

    I am confused as to the defendant(s) in the 2nd case you mentioned. First you state “Intuit won…” but in the next sentence, you referred to it as the “Intel case”. Are there two different cases, or has your spellchecker gone “rogue” on you?

  • Hunkah

    NPE Trolls need to be burned! Like seriously. This world is way too full of people that are entitled, fragile or just plain stupid. The legal system has made too many idiots.

  • My bad, Tyler. It was Intuit. Fixed. Thanks for catching that.

  • Mike

    “NPE Trolls”

    I’ve often been bothered by the artificial condition that you have to be an NPE to be a troll. It is certainly not necessary. Look at Microsoft for example.

    Patent abusers are patent abusers, regardless of whether or not they make or sell anything.

  • Hunkah

    All Trolls and Microsoft need to be burned!