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Newegg Wins Key Shopping Cart Patent Lawsuit

1/28/2013 Press Release

--Federal Circuit Issues Unanimous Ruling Invalidating Soverain Software’s Patents--

CITY OF INDUSTRY, Calif., January 28, 2013 --Newegg Inc., the leading electronics e-retailer in the United States, is pleased to announce a victory in its long-running legal battle against “patent troll” Soverain Software. On January 22, 2013, the Federal Circuit Court of Appeals issued a unanimous ruling invalidating all patents that Soverain had asserted against Newegg, completely overturning the initial victory Soverain claimed at trial. The victory is a win not only for Newegg, but for e-commerce as a whole, which was threatened by Soverain’s attempts to assert patents supposedly covering basic online processes used by virtually all e-commerce retailers.

Soverain had sued Newegg and other well-known e-commerce retailers in 2007, claiming that the defendants infringed three patents allegedly covering the online checkout process, including the online "shopping cart." While all other defendants settled with Soverain, Newegg took the case to trial. At trial, a jury awarded Soverain about 7% of the damages it sought. Although the jury’s decision in large part vindicated Newegg, Newegg appealed, confident that it had not infringed Soverain’s patents and that no damages should have been awarded.

On appeal to the Federal Circuit, the court concluded “that the prior art... by clear and convincing evidence, rendered obvious the ‘shopping cart’ claims... These claims are invalid.” Soverain’s argument that obviousness of all of the claims was negated by “favorable market response” of commercial success of products based on the asserted patents was also solidly defeated. In fact, Soverain’s own President Katherine Wolanyk testified that its software was abandoned by almost all of its initial licensees, and is not used by those who bought licenses simply to settle litigation. Thus, the court found, the “assertions of commercial success as here presented do not support non-obviousness.”

Not only does the Federal Circuit’s decision eliminate all damages awarded against Newegg, but the decision also calls into question Soverain’s ability to collect $18 million in judgments won asserting the same patents against Avon and Victoria’s Secret last year. Likewise, nearly a dozen other lawsuits filed by Soverain in 2012 asserting the now-invalidated patents are also in question now.

Newegg’s Chief Legal Officer, Lee Cheng, issued the following statement:

“We are pleased and delighted that the Federal Circuit has recognized that all of the patents Soverain asserted against Newegg are invalid. The appellate court’s decision exposes Soverain’s litigation campaign for what it was: a scheme designed to squeeze money from honest businesses whose hard work and innovation truly benefit society. As an innovator in the field of online commerce, Newegg has great respect for inventors and for valid intellectual property rights. However, as the Federal Circuit has ruled, Soverain’s patents, and others like it, do not represent ‘true innovation.’

“We are proud to add this victory against Soverain to our prior wins against Kelora in 2012 and Alcatel-Lucent in 2011. The tide finally appears to be turning against these opportunists and their contingency fee lawyers. We hope this decision sends a message to investors in patent trolls who think that this type of parasitic behavior is easy money. Sue Newegg, lose money. This is not only a victory for Newegg, but also for all companies opposed to the racket being operated in the name of ‘monetizing’ junk patents and for consumers who will not have to pay higher prices because companies pay off patent trolls.

“Our founder and CEO, Fred Chang, takes the approach that making money, which we do, should be the result of doing what is right rather than the primary focus of our business. He has expressed to me often that if we do the right thing, money will be made. We apply his philosophy in our daily operations in the way we treat our customers, and in how we deal with legal opportunists, and our results speak for themselves. Our CTO and COO, James Wu, wrote our system nearly from scratch, and his creativity and ability to sincerely convey that our systems did not infringe Soverain’s patents were instrumental to our successful outcome at trial.

“We are thankful to Ed Reines of the Weil Gotshal firm and Kevin Fong of the Pillsbury Winthrop firm for their outstanding work on our appeal, to Dick Sayles of Sayles & Werbner for his excellent trial advocacy, and to Rick Frenkel of Latham & Watkins for his advice and counsel through both trial and appeal. We reserve particular gratitude for our good friends and advocates at The Webb Law firm, led by Kent Baldauf, Jr. They have been in the trenches fighting the good fight with Newegg since the very beginning, and were critical difference makers at trial and on appeal. We are confident going to trial anytime, anywhere, with principled legal counsel who share our views about right and wrong. It is our strong belief that taking principled stands is the only way that businesses can achieve sustainable success.”

About Newegg Inc.
Newegg Inc. is the leading electronics-focused e-retailer in the United States. It owns and operates ( and (, and regularly earns industry-leading customer service ratings. Newegg delivers a world-class e-commerce platform and is committed to serving the online technology community, from tech-enthusiasts to small and medium-sized businesses. Both and feature a comprehensive selection of the latest computer hardware and consumer electronics products, detailed product descriptions and images, as well as how-to information and customer reviews. Newegg Inc. was founded in 2001 and is headquartered in City of Industry, California.

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