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Newegg vs. Patent Trolls: When We Win, You Win

By July 24, 2015 102 Comments
Business Win

In this latest round of Newegg vs. the patent trolls, Newegg went against a company that claimed its patent covered SSL and RC4 encryption, a common encryption system used by many retailers and websites. This particular patent troll has gone against over 100 other companies, and brought in $45 million in settlements before going after Newegg. We won. Winning against these trolls has become a national pastime for us.

Why is Winning So Important?

Winning these court cases is great for business. It means we don’t have to pay huge settlements that hurt our ability to keep prices low. It also means other vendors are a little safer, as these trolls tend to eat their way up the food chain, picking on the smaller businesses first and then using their winnings to take on the larger ones.

What is a Patent Troll?

These are usually individuals or companies who have purchased very loosely written patents, and try to use it against any store. An example of this is Sovereign who bought the rights to a shopping cart. Every web site uses a shopping cart to keep track of customer products while they shop. So Sovereign filled lawsuits with many retail companies. Incidentally, Newegg beat Sovereign, too. Patents like these are so vague they could apply to thousands of businesses and this is where the problem really becomes an issue for all of us.

It’s Killing Small Businesses

Patent trolls are bad for any business out there. They often prey on smaller companies, who would rather pay out than take them on directly in court. These trolls hurt innovation and end up costing everyone. It’s a sad situation as many of these small businesses end up in million dollar lawsuits that force them to close before they can even make it in today’s economy.

But you don’t have to take my word for it, here is what Lee Cheng has to say about this directly:

“Unfortunately, small businesses and even individual developers/entrepreneurs have been threatened and sued too. There are a number of different troll “species,” and bottom feeders literally send thousands of claim letters out or file hundreds of lawsuits. Their math says that it always costs less to give them the money they demand than to mount a legal defense,” Lee Cheng, Newegg CLO.

Lee Cheng, Newegg CLO

Lee Cheng, Newegg CLO

How Do You Win?

While these cases are costly for us to fight, victory helps us save money. And it helps us provide better deals to you. Every time we score a victory, we all win. #WeWinYouWin

Here at Newegg we will continue to fight the good fight to keep everyone safe from these types of trolls, and hope that you will support us along the way. How do you feel about Patent trolls and these victories? Let us know in the comments below.

Dennis Kralik

Author Dennis Kralik

A Newegg Insider contributor

More posts by Dennis Kralik

Join the discussion 102 Comments

  • Joe says:

    Good job. Keep up the good fight.

    • Darek says:

      Nice article thx but your celebratory sale sucks sorry.

    • Thomas Rhatigan says:

      These people need to be shut down, How can these people who had nothing to do with the invention weasel their way into some up start companies wallet. These Trolls need to be shut down, It’s different if you have a real claim on a patent someone else is trying to file that is just like a patent already on file.

  • D says:

    Everyone should fight the patent trolls like Newegg does. My esteem for newegg is once again increased.

    • Frankly says:

      Its expensive but what they should consider is a coalition of businesses, small and large that each kick in some amount of money & then use that to fund defense against trolls. once it stops being profitable for the trolls they will find some other grift.

  • Richard Hinton says:

    I personally wish to thank Lee Cheng and Newegg for conquering these people using glitches in our laws to enrich themselves while punishing creativity. Thank you again, and may the force be with you!

  • Anonymously Aggravated says:

    That’s all very interesting, but why aren’t there any details about this anywhere? Not on the EFF’s deeplinks blog, your (NewEgg, not this specific author) blog, Ars Technica, etc. Nothing about any lawsuits you guys won in the past few days. So what’s going on? I don’t even know who lost!

  • Joe Adinolf (jadinolf) says:

    Love it!

    Way to go Newegg!

  • Adam says:

    Kill ’em. Let me know when you design your site using “rectangles with rounded corners” and I’ll help fund the lawsuit against Apple, the biggest patent troll of them all.

  • Paul says:

    Keep the good fight up, sick of people claiming patents that are completely absurd. I cannot believe that companies were settling on this. WTG New egg =), this is one of many reason I buy most my products from you.

  • Sheldon says:

    Bravo for Newegg! If more companies fought these trolls instead of yielding to their demands, there would be fewer of these nuisance suits. Until Congress can get its act together and reform patent law, we need folks like Mr. Cheng to stand up and fight. Victories like these embolden other companies to fight as well.

    • Eric Berend says:

      Worry not. Congress has already passed laws using the ‘troll’ issue to thoroughly destroy Patent protections for actual, true inventors. Forget about ever having another “Steve Jobs” again – just because, you know, only billionaire companies like Google and Apple should ever benefit from U.S. Patent protections.

      This is why Big Pharma companies are screaming at Senators for special ‘carve-outs’ from these un-American, un-Constitutional legal provisions. Whenever you see ‘carve-outs’ in legislation, it can only result from the worst of plutocratic or crony capitalism.

      That’s it, lemmings: expect to ripoff genius for free, while calling inventors ‘evil trolls’ and thus, destroy most of America’s ability to renew it’s future technologies; that big infingers spent Billion$ on, to fool you into believing we’re some kind of enemy. Fools.

      • N8 says:

        There’s a huge difference between a specific invention and a patent troll.

        Once the concept of a web browsing cookie was developed, every possible application of that idea does not represent a new invention. Cookies are specifically meant to be information that is stored locally so the customer and/or vendor can keep track of stuff that may be of interest. Someone thinking, “hey, that information could include shopping carts!” is not worthy of status as a separate, unique innovation. It’s an obvious application of an existing thing. It’s a customer saying “this is of interest to me” and the web site saying, “great! I’ll store that in a cookie for you so it can be retrieved later!”

        If a company has held a few thousand patents for more than a few years and they have never actually implemented anything based on any of those patents themselves, there’s a good chance they are a patent troll. They just look at everything someone actually invents and see if there is some way to shoehorn some function of that actual innovation under the umbrella of one or more of their vaguely-worded portfolio of thousands of patents.

        If a company holds patents that they actually use to create things, be they electronic or real-world, there’s a good chance they are an actual innovator worthy of protection.

      • bob says:

        If you are incapable of distinguishing patent trolls from innovators, first, my condolences; that sort of learning disability must make life hard. Second, the dreamy image of the garage inventor who grows up to be a Steve Jobs is a lovely image to tie your argument to, but such (rare) stories have little relation to patents.

        People have innovated throughout history without patents, under far less protective patent regimes, and under far different ones. It is actually a fairly narrow range of inventions that benefit from patent protection (generally things that are easy to make with value because of a genuinely novel invention). Today, in the U.S., they are artificial property created by a statutory regime that fails to serve most everyone except large firms and patent trolls.

        I notice you bemoan this about the large firms, so that’s nice. It is too bad you don’t feel about the trolls the same way. Patent attorneys abusing intellectual property laws don’t grow up to be Steve Jobs.

      • JPS says:

        Bravo NewEgg! Eric- the only foolish response in this thread is the one which criticizes a successful defense against a patent troll as opening the door to stealing intellectual property from geniuses (a group to which you certainly don’t belong).

  • Debra says:

    Thank you for all of your hard work and keep fighting those “Trolls.”

  • I’ve been a customer for some time and advocate you guys to anyone who is just looking to purchase a new laptop, to the most die hard tech geeks. Keep fighting you are an inspiration to the market. As well you have the best/friendly support I’ve ever encountered.

  • Dave C. says:

    Newegg wins the Internet!!!

    Seriously, this is exactly what is needed, a company with the balls to fight these trolls and judges with the balls to call a spade a spade and not a diamond for these bottom-feeders.
    This truly is the best for everyone EXCEPT the trolls and it sets the precedent for future lawsuits and emboldens other retailers to follow suit.
    Keep this up and these trolls will starve to death…now all you have to do is find a way to kill the trolls on places like comment boards at U-Boob and the like 😉

    Newegg has always been one of my top web stores, now you will ALWAYS be my 1st choice!

  • Arnoldstrife says:

    Awesome job Newegg, I’m glad you’re fighting the good fight. I know it’s easier to just give in but keep up the good work. I’ll definitely be there on the 28th.

  • Carol Walsh says:

    Great! I hope your win helps the smaller companies in someway.

  • Sheri Whiteley says:

    Sad that it even happens

  • Al says:

    Everyone should fight patent trolls until the courts disallow patenting of software.

    I’m happy you won this one, Mr. Cheng. I did go see the Arstechnica article detailing your victory. I also liked that you gathered a lot of supporters. Keep on ganging up on them to drive them out of business.

  • Camille Spau says:

    Thanks for not folding.

  • Raymond says:

    No good can come from trolls, in the market place. Newegg has our backs, and keep them away from us customers. Keep on keeping on, RB.

  • K Hall says:

    Fight the good fight – internet has done great things and computers ! But has also brought out scam trolls , patent Trolls , kill American trolls , it’s starting to get now were the bad out weighs the good ! 0100101000011000 SAD WHAT GREED DOES TO SOME PEOPLE!

  • Z says:

    Excellent work!

  • jamescdebacaJames says:

    Keep up the good work guys! Patent trolls just want money at anybodies expense. It even hurts larger companies such as yourself so I am glad to see you are not taking this lightly!

  • Bill says:

    I think you guys are awesome. I love it when someone has the courage to stand up to bullies of any type and tells them to get lost. GO NEWEGG!

  • mark says:


  • ian says:

    im glad you are fighting them. congratulations on the win. newegg:1 a**holes:0

  • Vincent Lambert says:

    Excellent moral path, excellent victory! The US patent system is broken when it comes to the internet, and it is a wonderful thing when companies in the trenches (such as NewEgg) have the guts to fight for what is empirically obvious to those of us who are users and not legislators. Thank you!

  • Robert says:

    Thank you for standing up to the tolls. I wish others would do the same. Feds could do a lot more to help with this. Definitely a way to move up job growth.

  • Jeffers says:

    Happy you won guys!

  • B d says:

    Congrats guys. Good work.

  • Great job. Nice to see a company standing up for small businesses. We are stronger when we help each other. God bless.

  • Mike says:

    Nice to know not everyone backs away from a fight when right.

  • mike says:

    Thank you for fighting the “trolls”. The trolls are only looking for the easy dollar from companies that can not or will not fight the paper trail that they create. If companies do not fight and feel it is cheaper to settle creates more hardships for other companies down the road. I understand that people that abuse the law need to be stopped to help keep cost down that new egg does everyday. Thank you for standing up to people looking for the quick dollar.

  • Derrick Johnson says:

    This is great news! This is truly a win for all of us.

  • Gary says:

    Unfortunately, there will always be those trolls looking for a way to make an easy buck at the expense of those who work and innovate. I salute your efforts to put them in their place.

  • Brian Simmers says:

    Good Job Newegg!
    It would be even wiser to financially support smaller companies to enable them to fight these people. This would be cost effective and could derail them before they set any precedence in lower courts that will embolden them to come after you. Once the business community knows you might support them they could fight back. Headline ( Newegg helps Joe-Small-Company beat a patent troll! ) In the US we support fighting bullies and we especially recognize those who rescue the weak.

  • jimscraft says:

    It is sad that someone can buy a patent that is very vague in language and then go after businesses that use similar software. They probably assume they are right in their fight, or either they are just too greedy to care. Congrats on winning one of these frivolous lawsuits, and keep bringing us great deals!

  • Shane says:

    Great job and thank you

  • Troy says:

    Keep On fighting I Think This is A Great Victory for Newegg and me as a customer!

  • Johnny5 says:

    What I think? Hmm what I FEEL is that these TROLL Entities need to be jailed instantly, every single one of them and NEVER let them out. Put them on a CUBUS with only one window, no electronics, no contact with the outside world. So yes keep up the good work and hunt them down, teh world will be a better place without these entities, as I woudl not call them human. Two thumbs up and 5 Eggcellent Stars, way to go!

  • Will says:

    Thank you Lee we need more fighters in this world, less settlers.

  • Johnny-Z says:

    Thank you for your efforts to keep trolls at bay! Many of us are on fixed incomes and any price hike puts off our purchases for a period of time to afford quality reasonably priced components. Your my only place to purchase tech.

  • Daniel Lewis says:

    YOU GO FOR IT!!!!!

    This is but one example of soulless parasites who only resemble human beings who bleed the life out of our neighborhoods, our governments, our business communities, and our society. They are a cancer.

    This is not the first i have heard of these what you call “patent trolls”. Thank you for fighting them, and I’m glad you won!

  • Gonzo says:

    Happy HUNTING! Excellent work…

  • Elly Mandel says:

    Good job, but the lawyers are the real winners.

  • Timothy Jones says:


  • Fishisteve says:

    Good for you! Glad you were able to beat the bad guys.

  • Gary says:

    Well, if their patent or IP protection covered SSL, couldn’t Sovereign be held liable for Poodle and the other inherent flaws in SSL. The best defense is a good offense – nuke the trolls with tort claims for damages.

  • paul says:

    it is sad that you had to fight them off… but I was routing for you once I read the case in the paper

  • Tuk Hoang, PA says:

    That is awesome, good job.

  • Shawn says:

    Your patent troll illustration needs egg on his face. Keep on eggin ’em!

  • Graerth says:

    Just one of the reasons I like buying from you guys.

  • DEVARAJAN K P says:

    Great job!

  • Rick Kaynor says:

    Its time for silicon valley companies and others, to put together a “not for profit” legal defense fund to help the little companies, with minimal resources, to fight the good fight against trolls. The money is out there and the fight has to be fought…Hopefully, companies like Newegg and others will be able to keep on fighting. Trolls will always be out there and someone has to stand up to them!! Good job Newegg!

  • Jacques says:

    I love Newegg. I am so pleased that they fought and won. I wish Congress could do something about this. Fat chance.

  • Kody says:

    Thanks for fighting the fine fight NewEgg and Mr. Cheng, very well done!

  • Martin Evans says:

    Super excited to see this win, I wish you would get involved in protecting people from the government. 🙂

  • Walter Short says:

    I think all patent trolls should be shot, they are nothing but parasites like those lowlife collection agencies that buy 6yr old debt for pennies and try and gain judgements against the unwary.

  • Allen K. says:

    I’ve been a Newegg customer since 2006 and they have always provided great service to their customers. This is just another fine example of their awesome work. Great Job Newegg on your latest win. I hope you have many more victories over these trolls. As stated by Mr. Lee Cheng,”…Screw them. Seriously, screw them.”
    Love it!

    source: http://arstechnica.com/tech-policy/2013/01/how-newegg-crushed-the-shopping-cart-patent-and-saved-online-retail/2/

  • John says:

    I’m pleased to know that some of the money I spend in computer equipment helps in the fight against patent trolls. Congratulations and thank you Newegg for a victory that helps everyone.

  • Alan M says:

    Congratulations on your win and for helping to set yet another precedent against such evil trolls. Running a small business is complicated enough without legal stalkers twisting the system to their own wicked ends. I also hope you get some form of significant punitive damages from these evil doers. Only losing money can show the others of their kind that their days of gaming the legal system are over and their behavior is becoming well understood and will be no longer tolerated.

  • Dozer says:

    That sounds great, good job. If you really want to offer a celebratory discount, why don’t you offer 20% off any purchase, so you don’t hand select items. Everyone can celebrate if you offer a discounts that everyone can use.

  • Andy says:

    Bravo! Great news!

  • Terri R. says:

    Kick butt and take names. Go NewEgg!

  • Gary Moore says:

    This is an example of standing up for what is right. sometimes it does cost more to stand up for what you believe in but the failure to do so just makes it easier for it to happen again. If it is one person defending themselves against an unjust traffic ticket or a large company defending themselves against patent trolls, we must stand strong for what is right. Unfortunately, many companies look at the bottom line and will not fight. Two thumbs up for NewEgg!

  • Patent trolls diminish the economy by stealing profits and producing nothing but bad energy for innovation. Ra rah for New Egg. But I do agree with an earlier post that the celebratory sale was deficient in greatness.

  • pbutlerm says:

    Awesome work! Keep it up!

  • Mat says:

    I hate patent trolls. I’m just looking for an excuse to buy something, anything, from Newegg. You service has always been exemplary.

  • Dave92F1 says:

    THANK YOU, Newegg management and THANK YOU Lee Cheng.

    Justice prevails only if there are enough brave people like you who DON’T SETTLE, DON’T BACK DOWN, and who care enough about right and wrong to fight in the courts.

    Please – list some overpriced T-shirts, hats, or mugs so I can send you some money. (Not the ugly grey on black ones, please – I already have too many of those).

  • Lange Scott says:

    Newegg you should be ashamed of yourself you must be proactive when you hear about a patent troll trying to gouge a little guy for a patent, instead waiting for him to gouge 100 people you should help them

  • John says:

    Newegg your the best! Thanks for all those cheap hard drives you sent me.
    They were all good and I feel like I stole them from you!

  • Jer Tobin says:

    Awesome guys, please please keep this in the spotlight and push for patent reform in congress!

  • pacusmeralgus says:

    Thanks for helping everybody

  • Gerhard says:

    Digital heroes! 🙂

  • Brad says:

    @DennisKralik, can NewEgg offer any advice for other companies up against patent trolls?

  • Speaker-to-Animals says:

    Way to go, Newegg! Keep up the good work!

  • Hand_Banana says:

    Too useless to do anything else in life?

    Become a patent troll today!

  • E says:

    Keep it up! I hate patent trolls. We’ve fought with two of them in my company. It is a waste of time and energy. They are essentially engaged in blackmail. Pay us X-20% or spend at least X to mount a lawsuit!

  • Sasha says:

    Thanks NewEgg!

  • Keep up the good fight

  • heywhatsup says:

    The sale stunk but good job with the thing.

  • Joe Thorpe says:

    The fraud statutes are and always were sufficient. No carve out seizing patents from individuals were ever needed. But corporations can buy laws, the 99% can’t.

  • Josh Kennedy says:

    I’ve made several purchases with you guys recently because of your actions against patent trolls. This is brave and it’s about time someone stepped up. I wish you continued luck in your quest to take down patent trolls.

  • jgoldshlag says:

    I shop at NewEgg even when you guys are slightly more expensive (which is rarely) because you do stuff like this. It may not make sense if you look at your legal bills vs what you would pay to settle, but I think it does make sense when you factor in all the people like me who support you!

  • Phil says:

    I already frequented your site whenever I needed to buy something. But now that I have this information I will definitely shop your site first before looking anywhere else. Thank you

  • daniel says:

    This is amazing.

    What is the gist of the legal strategy and can small businesses employ similar techniques for defeating patent trolls?

  • And this is why we buy from NewEgg

  • Andrew Ludgate says:

    I went out and bought a new 5GB HDD from NewEgg shortly after I read the final argument (before the ruling went through) 🙂 It’s like supporting the EFF, but with the benefit that you get actual product in the bargain! Please keep up the good fight.

  • garciastech says:

    You guys had always been a sample to follow! Good job guys!

  • Mike Mayne says:

    Patent trolls are parasites, plain and simple. But we shouldn’t have to deal with them on an individual basis, we (via Congress) should fix the problem at its’ source: the US Patent and Trademark Office. Patent trolls, we hates them…

  • Artix says:

    Keep fighting the Trolls… never settle…BATTLE ON!

  • Terry Otsubo says:

    Our company (American Megatrends Inc.) went up against a patent troll (Kinglite) that was systematically suing motherboard manufacturers. They netted around $30 million before AMI stepped in in an attempt to put a stop to this.

    NewEgg, Keep fighting.

    American Megatrends Inc.
    Norcross, GA

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