Patent Trolls, They Fold Like a Cheap Suit When Faced With Trial

Lee Cheng does not settle with patent trolls.

Lee Cheng does not settle with patent trolls.

It’s often said that a dog’s bark is worse than its bite. Such is the case with patent trolls. Case in point: In mid-March, notorious patent troll Macrosolve voluntarily dismissed all claims against Newegg. This action follows its 2011 filing of more than 75 lawsuits in the Eastern District of Texas against companies in a wide range of industries, including Newegg. Macrosolve claimed that anyone who distributes electronic forms over the Internet or to mobile devices and then collects and reviews the responses could be liable for patent infringement. With this broad a definition, virtually no company is immune to Macrosolve’s baseless allegations.

Macrosolve’s business plan involved filing lawsuits against 10-20 companies at a time, with offers to settle for “modest” amounts. This netted Macrosolve more than $4M in settlements, while only two defendants, Newegg and Geico Insurance Company, fought back.

Lee Cheng, Newegg’s Chief Legal Officer stated, “In a sense, we are disappointed because we were robbed of an opportunity to prove in court that Macrosolve was and is nothing more than a serial, shameless abuser of patent rights, with a poor-quality patent that has not even survived its first reexamination. Macrosolve failed to create products and services that real customers found valuable, whose principals decided to turn it into a corporate parasite. It is not a coincidence that faced with its first real opposition in Newegg and Geico, Macrosolve folded like a cheap suit, and dismissed its lawsuits against all defendants.”

Cheng continued, “I could never figure out how Macrosolve would not be required to publicly and timely disclose the fact that its primary asset, the ‘816 Patent,’ was the subject of a final rejection in reexamination or that it dismissed almost all pending lawsuits with prejudice. What was most bizarre was how Macrosolve’s stock price traded up the day that the USPTO issued the final rejection of the ‘816 Patent’. Curious. Definitely worth someone’s attention.”

Newegg intends to seek all of its fees and costs against Macrosolve for its abusive litigation tactics.  However, it is highly likely, in yet another example of how the patent law system is unfairly tilted against defendants, that even if Newegg were to prevail in court in its fee motions, that Macrosolve will simply file for bankruptcy after collecting and distributing over $4M in “licensing” revenue to its principals and its contingency fee lawyers.

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16 Responses to Patent Trolls, They Fold Like a Cheap Suit When Faced With Trial

  1. Daniel Donaldson April 3, 2014 at 1:32 pm #

    The United States is the only country on earth that does not have a loser-pays legal system. If it had one, countless frivolous lawsuits would never see the light of day.

    Want this to end? Vote libertarian.

    • Obiwan362 (@obiwan362) April 4, 2014 at 7:36 am #

      It’s true that the loser doesn’t pay (normally) here, but, in other countries, does someone that withdraws the suit pay? I’m curious if there is a distinction.

  2. Chris April 3, 2014 at 1:40 pm #

    Good for you, Newegg. In regards to patent trolls, another big offender is J2 Global. To those who might be unaware, J2 has a presence in multiple areas… internet-based faxing, digital media, cloud-based services. They own Ziff Davis and IGN, for example. They got their start in the internet faxing area, however, and this is one big area where J2 is a horrible patent troll. They basically go after any and all competitors who also offer internet-based faxing services and slap them with bogus lawsuits with vague, at best, language. In doing so, they seek settlements, or better, to bankrupt the smaller competitor out of existence or to forcibly acquire them once said competitor finds themselves unable to stay in business thanks to J2′s abuse of the legal system. J2 then takes over said competitor, keeps the brand as a puppet, fires all of the employees, and guts any internal system the competitor used to use and any bonus services that competitor used to offer. The reason for THAT is simply because J2′s flagship brand is eFax; they maintain all these puppet brands so that as customers inevitably churn due to the terrible customer service and poor quality of product J2 offers, they “jump ship” from one of J2′s brands to another, not realizing they’re still in the same big bucket of fail. They can’t have one of their forcibly-acquired puppet brands offering a better product than eFax, however; hence the systematic gutting of the better services they acquire from their hapless competitors. Huffington Post even recently reported on J2′s unethical business practices and patent trolling, in much the same way Macrosolve was trying to bully Newegg. Unfortunately, the only repercussion the rest of us have is to voice this on the internet (as Newegg has done) in order to bring more and more attention on the patent trolls, to let them know the public is onto their B.S.

    • irflashrex April 4, 2014 at 4:06 am #

      Sounds like J2 is far more then a patent troll, they are a trust.

    • Steve Ring May 27, 2014 at 12:17 pm #

      Chris:

      I would like to discuss your perceptive comment above offline.

      Steve

  3. Rich April 3, 2014 at 6:19 pm #

    Wow! I’m impressed that Newegg takes the trolls on rather than rolling over. I’ve not purchased anything yet from you folks. That is going to change. You’ve earned some serious goodwill !!

    • Dan April 4, 2014 at 9:15 am #

      Rich, I’ve been a Newegg customer for several years now. They have awesome customer service and offer great deals on good products. You won’t be disappointed, but if you are, give them a chance and they’ll make it right.

  4. Jim April 4, 2014 at 9:00 am #

    Another HUGE one is Apple. Don’t believe me? Go do some research. They have made very few of their own devices and software and have sued for much of the rest.

  5. Supammu Aruchaifu April 4, 2014 at 4:09 pm #

    It’s going to be a tough road for the PR firm they just hired. Seems like a start-up, not the best way to start a business.

    https://twitter.com/Fisch_Tank/status/448497673432465408

  6. Keith Gable (@ZiggyTheHamster) April 7, 2014 at 1:51 pm #

    As a developer who used to work for Macrosolve, I’d like to point out that, at one time, Macrosolve did develop software, and pretty good software at that. Us developers generally ignored the patent, though. That said, it’s been a year or so since Macrosolve had developers, so I think it’s appropriate to label them as a patent troll. But to say they never made software or that their software was bad or lackluster is wrong. I’ve got a ton of code that disagrees :-).

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