Lee Cheng has never lost an appeal against a patent troll.
“Device profiles conventionally describe properties of a device or element within a digital image processing system that capture, transform or render color components of an image. An improved device profile includes both chromatic characteristic information and spatial characteristic information. The device profile is generated by use of both chromatic and spatial characteristic functions within a model based image processing system to predict both color and spatial characteristics of a processed image. The device profile generally includes: first data for describing a device dependent transformation of color information content of the image; and second data for describing a device dependent transformation of spatial information content of the image. In a special case, the device profile could contain only spatial characteristic information.”
— U.S. Patent No. 6,128,415 (the ‘415 patent)
In 1996, Polaroid filed their “Device Profiles for Use in a Digital Image Processing System” patent. In 2012, it was assigned to Digitech Image Technologies, LLC (Digitech). If you’ve never heard of Digitech it’s because they’re not a real company. A simple Google search for “Digitech Image Technologies, LLC” doesn’t bring up a company website, but several pages of patent assertion lawsuits.
Digitech is what is commonly known as a “shell corporation” whose sole purpose is to serve as a vehicle for business transactions without actually having any assets or operations. Because these types of corporations are a great disguise to hide profits and avoid paying taxes, patent trolls use them to snag up patents and sue legitimate businesses without having to face repercussions.
Digitech is owned by one of the most notorious patent trolls of all time, Acacia Research Corporation (Acacia). Founded in Newport Beach, Calif. in 1993, Acacia’s business model relies solely on using shell corporations like Digitech to purchase patents and taking legal action against perceived infringers. Acacia earns no money of their own and every penny they’ve ever put in their pocket has been acquired from lawsuits.
According to Acacia’s website, they have “rewarded idea makers and world changers with approximately $606,834,094 USD by acting as an intermediary in the patent marketplace.” This “marketplace” is America’s courtrooms where real companies are forced to pay millions of dollars defending themselves against false patent infringement accusations. Acacia thought they would be able to use the ‘415 patent to squeeze money out of unsuspecting businesses – including us — but they forgot Newegg doesn’t take too kindly to patent trolls.
“Newegg can now add Digitech to a growing list of patent trolls whose patents we have invalidated or helped invalidate.”
–Lee Cheng, Newegg’s Chief Legal Officer
The patent Newegg allegedly infringed upon.
For the last nine years, Mr. Cheng has helped Newegg achieve a perfect track record after appeal on patent troll cases. His latest victory is against Digitech and Acacia who are now forced to dismiss all claims on the ‘415 patent because it is no longer considered valid. Dozens of companies including Xerox, Toshiba, Fujifilm, Ricoh and Overstock.com can also relax and not have to fork over any cash.
The federal district court’s ruling to invalidate the ‘415 patent is based on the notion that the “device profile” was only a bit of data that didn’t meet the requirements for patent eligibility. It was not a “process, machine, manufacturer or composition of matter” like the patent suggests. Instead, the Court of Appeal affirmed the district court’s ruling and stated “data in its ethereal, non-physical form is simply information that does not fall under any of the categories of eligible subject matter under [35 U.S.C.] section 101.”
Despite this victory against patent trolls, it’s only a minor setback for Acacia. The company is publicly traded on the Nasdaq Stock Market and is constantly issuing press releases about settlements it obtains from “victims” of abusive patent assertion. To the people who find it wise to invest money in Acacia, Mr. Cheng offers the following advice:
“Not surprisingly, Acacia has not addressed the fact that Digitech’s patent, which had once been mentioned as a prospective significant revenue driver, has bitten the dust. I think securities regulators and investors’ counsel should take a look at whether Acacia’s selective disclosures satisfy public company disclosure requirements.”
–Lee Cheng, Newegg’s Chief Legal Officer
Unfortunately, not many people will heed this message and Acacia will continue to bring false patent infringement accusations to court against innocent companies like Newegg. But as long as Mr. Cheng is in charge, you can be sure we’re not going down without a fight. We would like to congratulate our co-defendants and all the companies that participated in our joint defense group to help control the cost of fighting patent trolls. We also invite any companies that want to stop the patent troll problem to join us and become a member of the LOT Network. Together we can not only build a strong defense against patent trolls, but an actual community that promotes the innovated spirit of the technology industry.
