When Will Patent Trolls Learn Not to Mess with Newegg?

It’s no secret that Newegg is adamantly against patent trolls and everything they stand for. Not only are we not shy in proclaiming this to the world, we even sell t-shirts that show our disgust for these “companies” that think it’s OK to extort legitimate businesses. You would think that patent trolls would take the hint, yet there are still those that want to mess with Newegg.

Recently, a shell entity called Site Update Solutions (SUS) – a subsidiary of notorious patent troll, Acacia Research Corporation – decided to sue Newegg along with 36 other companies. SUS claimed that we were infringing on their patented technology related to the registration of websites on search engines. Of course, this was a bogus claim and many of the defendants banded together in order to pool resources against this troll.

With a strong legal team, the defense managed to move the trial out of the Eastern District of Texas, a jurisdiction that is known for favoring plaintiffs in patent suits. With the trial now being held in the Northern District of California, SUS never had a chance. And, after four years of courtroom battles, Newegg scored another win in our ongoing fight against patent trolls due to a favorable Markman claim construction ruling. Not only was SUS forced to drop their lawsuit, but every company being sued by SUS had a right to recover their legal fees.

Surprisingly, all 36 companies that were sued alongside Newegg decided to waive their rights (at the request of SUS) to receive a check for all the money that was wasted on this trial. Newegg, on the other hand, demanded our money back.

Most companies choose not to recover their legal fees in patent suits because prevailing defendants are required to demonstrate that a plaintiff acted in bad faith. This is extremely difficult to prove and it’s usually easier to just walk away and count your losses – unless your name is Lee Cheng.

“At Newegg, we’ve always believed paying off extortionists only encourages more extortion, and there had to be a negative consequence of suing Newegg without just cause. We insisted on seeking a return of our legal fees from Site Update Solutions. [Their] demand that we waive our right to seek fees for dropping a lawsuit that should not have been filed in the first place was outrageous. What a joke. We believe that trying to make a patent troll pay, no matter what amount, sends the clearest possible message to all abusive patent asserters and their contingency fee lawyers that if they file a frivolous lawsuit against Newegg, they will suffer some consequence, even if it is only making less money or having to do more work than they planned to. This case also provides an excellent template for how a well-managed and organized joint defense effort allows participants to not just bask in the glow of beating a patent troll, but also save money compared to paying off a patent troll. We hope that our work will provide a beacon of hope for real innovators and honest entrepreneurs facing demands from abusive patent asserters. We want to encourage other defendants to create as much friction as possible, rather than feeding the beast with easy settlement checks.”

–Lee Cheng, Newegg’s Chief Legal Officer

Thanks to the efforts of Lee Cheng and his legal team, the Federal Circuit Court of Appeals ordered a trial court to reconsider its earlier denial of Newegg’s request for attorneys’ fees and costs in the patent infringement lawsuit brought on by SUS. Newegg pursued justice in the matter because it is consistent with our corporate mission of bringing the benefits of technology and technology products to our valued customers. And, when defendants settle these frivolous claims, it’s always the customer that ends up paying. We care too much about our loyal customers to subject them to paying these trolls.

Don’t settle.