Newegg last week won an important ruling that could have a profound impact on e-commerce.
The U.S. Court of Appeals for the Federal Circuit last week ruled (PDF) that Newegg has not violated patents held by a company called Soverain related to the function of shopping carts and other e-commerce technologies. The court found that Soverain's claims -- that Newegg was violating its patents through its online shopping cart -- were "invalid for obviousness."
Soverain doesn't actually make use of its patents in an e-commerce business. Instead, the company has used the patent portfolio it acquired over time to win judgments against several online retailers, including Victoria's Secret and Avon. That, of course, makes it a classic patent troll. In 2007, the company also won a verdict against Newegg on the claims that have now been overturned by the higher court.
Soverain's strategy, however, has been fairly lucrative so far. The company has won significant damages against online retailers such as Victoria's Secret and Avon, plus a "running" royalty of 1 percent of sales for the right to use its patents.
As Ars Technica points out, however, the appellate court ruling could change all that. Soverain's patents, which in some cases date all the way back to the 1990s, are now being called invalid because they're "obvious." It might not take long, therefore, for companies that it defeated in court to appeal judgments based on that ruling. The company has also brought lawsuits against a slew of other companies that are still pending and might be scuttled by this deal.
Here's what Newegg's chief legal officer, Lee Cheng, had to say to Ars Technica about Soverain:
Lo and behold, I unveil to you the world of--shopping cart! And this shopping cart -- unlike all the shopping carts used for hundreds, if not thousands of years--should be paid for based on the total dollars of transactions in the shopping cart.
It's very common in troll cases for them to say, "Our widget is so critical, we deserve a penny on every dollar." But what they have is a completely commodity functionality that could be coded any one of dozens of different ways. I mean, come on. Let's not stretch credibility.
CNET has contacted Soverain for comment. We will update this story when we have more information.