Federal Circuit Slams Final Door on Patent Troll’s eCommerce Claim

Online ecommerce businesses can breathe a lot easier today.

The Federal Circuit slammed the final door shut last week on a patent troll whose claims of ownership of the core ideas behind online shopping carts had threatened to bring ecommerce to it knees. In a final ruling on a rehearing of Soverain Software LLC v. Newegg Inc., No. 11-1009 (Fed. Cir. Jan. 22, 2013), the Court threw out a desperate ploy by Soverain to recover from a devastating setback issued in January by attempting to exploit a typo in the ruling.

Soverain — which is a group of attorneys who hold and prosecute numerous patents but don’t manufacture or sell a single product — had convinced several online retailers, notably Amazon.com, to fork over tens of millions of dollars over several years in the face of its claimed patent rights to shopping cart technology. But Newegg was the only defendant which failed to pay Soverain and took the case to trial.

In January, the Federal Circuit overruled a district court ruling that had upheld Soverain’s patents, citing with approval the prior art Newegg had argued invalidated the Soverain claims. (That prior art included the CompuServe Mall, which pre-dated Soverain’s software by several years.) But in its ruling, the Court cited the wrong claim number as being invalidated.

Although this was clearly a simple administrative error by the Federal Circuit, Soverain took advantage and filed a motion for a re-hearing on the grounds that the wrong claim had been invalidated and that its original core patent claims therefore remained in effect. The Court allowed the re-hearing and last week, it ruled with finality that the patent is invalid and unenforceable.

Nobody likes patent trolls. All too often they profit not by their innovation but by their argument to alleged infringers that the cost of defending an infringement suit isn’t worth expending even if they win.

In this case, Newegg and its feisty Chief Legal Officer Lee Cheng decided to make a stand. The ecommerce world owes Newegg a huge debt; Soverain’s stated intent was to extract 1% of all online commercial transactions involving a shopping cart.

Why the Federal Circuit allowed the re-hearing on the basis of a typo is beyond me, but at least it ended up with the proper ruling.