When Will Patent Trolls Learn Not to Mess with Newegg?

Lee Cheng wins again.

Lee Cheng wins again.

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.

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127 Responses to When Will Patent Trolls Learn Not to Mess with Newegg?

  1. Chris May 22, 2014 at 11:19 am #

    A hearty thumbs up to Newegg! Well done.

  2. Chuck Smai May 22, 2014 at 11:20 am #

    Make ‘em pay! Good work Newegg and your team!

  3. Shane Milton May 22, 2014 at 11:21 am #

    Go Team!!

    • Bea Freeman May 23, 2014 at 8:11 pm #

      Venture!

  4. Jason Rosenbaum May 22, 2014 at 11:23 am #

    Get wrecked, SUS.

  5. Kirk Johnson May 22, 2014 at 11:28 am #

    haha! You show them!

  6. ken priest May 22, 2014 at 11:29 am #

    Love Newegg!

    • PatentTrollHater May 22, 2014 at 11:37 am #

      Patent trolls are who they are because they too realize they have no place in the future.

  7. Glenn Gratz May 22, 2014 at 11:32 am #

    Well done Lee Cheng, NewEgg, and the legal team that achieved this victory. I hope to one day work for such a firm myself (I work as a paralegal)

  8. Jeff Munson May 22, 2014 at 11:40 am #

    Bleed ‘em dry, Lee!

  9. Mark May 22, 2014 at 11:57 am #

    Hats off to Newegg and Lee Cheng for taking a stand. I will continue to buy from you. Newegg will always be my favorite vendor for high performance computer hardware. Bury SUS.

  10. Chris May 22, 2014 at 12:14 pm #

    I hope Newegg runs these useless parasites into the ground.

    Is there any way that these other companies that were sued can file suit for legal fees if and when Newegg wins, or did they waive their right to persue any further compensation already?

    I’d love to see the rest of those sued by SUS clean out SUS.

  11. Menace_One May 22, 2014 at 12:23 pm #

    KICK THEM IN THEIR TROLL ASSES!! Good for you Newegg…have my babies??

  12. Ramiro Alcala May 22, 2014 at 12:28 pm #

    Amazing job Newegg. Keep up the good work.

  13. oniatdlp May 22, 2014 at 12:30 pm #

    I hope you shove the boot-of-consequence so far up their @** you can tickle their tonsils with your toes.

  14. David Dyer May 22, 2014 at 12:33 pm #

    Great job NewEgg!

  15. Cujucuyo May 22, 2014 at 12:57 pm #

    Way to go, congratulations to winning the trial, hope you guys teared a new one onto those disgusting parasites.

  16. Patrick e Giyan May 22, 2014 at 1:41 pm #

    Good job Newegg! A loyal customer!

  17. ApparentHorizonDev May 22, 2014 at 1:43 pm #

    I hope you guys get the money back, it’d b e like a nice swift kick in the face to these patent asshats.

  18. Ruckas May 22, 2014 at 1:53 pm #

    Get er done Lee, America is filled with this scummy trolls, do whatever you can to stop them!

  19. Brian Drew May 22, 2014 at 2:15 pm #

    yet one more reason i am a hearty and loyal customer of newegg for the past decade+

  20. Ben Erwin May 22, 2014 at 2:24 pm #

    Lee Cheng, I never heard of you, but you are my new Hero.
    If you missed this news yesterday, please send trollwhore Senator Leahy a letter expressing how you feel about his setback to patent legislation.
    eff.org/deeplinks/2014/05/senator-leahy-kills-patent-reform-now

  21. Rob Pungello May 22, 2014 at 2:32 pm #

    Rekt

  22. Jearmy Avery May 22, 2014 at 3:02 pm #

    5 eggs all the way

  23. Jon May 22, 2014 at 3:05 pm #

    How do we know Acacia, or SUS are patient trolls? No explicit trial information or external links.

    • Ivan B. May 22, 2014 at 3:43 pm #

      From the website of Acacia Research Corporation: “Acacia Research Corporation (NASDAQ: ACTG) is the industry leader in patent licensing. By partnering with patent owners, Acacia applies its deep legal and technology expertise to patent assets to unlock financial value. An intermediary in the patent market, Acacia facilitates efficiency and delivers monetary rewards to the patent owner. With this strategy, Acacia has generated over $1,000,000,000 revenue to date, and has returned more than $455,000,000 to our patent partners.”

      A simple Google search will explain why they are patent trolls. I chose not to link to their website in the article because they don’t deserve free publicity.

      • Chuck 5566 May 24, 2014 at 12:16 am #

        So the patent owners don’t even get have of the rewards. Yeah, that’s pretty damning evidence,

  24. Mark Guerrero May 22, 2014 at 3:26 pm #

    this is why newegg is king. lovin their new gaming blog too.

  25. Stooge (@Inksmith904) May 22, 2014 at 3:32 pm #

    Sounds like a episode of Suits. Congrats Newegg, Mr Cheng and team.

  26. Andrew May 22, 2014 at 3:35 pm #

    He should have taken that picture in front a white-screen.

    • Craig May 23, 2014 at 8:42 am #

      Yeah… I made that for a post on ARS in a couple of minutes. http://arstechnica.com/tech-policy/2014/04/newegg-and-geico-stop-patent-troll-that-sued-dozens-over-forms-on-apps/?comments=1&start=0

      Patent trolls suck.

      • Andrew May 23, 2014 at 10:05 am #

        My point for the sake of irony ….. ithas to do with amazon.com com patent trolling by just receiving a patent for pics taken in front of a white screen

        • matt May 23, 2014 at 1:40 pm #

          Amazons patent is VERY specific about which lights, angles, etc, are used. And there is no mention that they will ever go after a regular photographer for using a setup even similar. And they are using their patent when they take product pictures. This other troll has a portfolio of patents that may or may not even be valid, and sue companies rather than try to license the patents they have.

        • Craig May 23, 2014 at 9:07 pm #

          Ah. Woosh…

  27. Check May 22, 2014 at 4:12 pm #

    I love Newegg! but keep other companies of your site please? :) like if newegg shows it, it should be ONLY NEWEGG products like how it was in the past.

  28. chris May 22, 2014 at 5:29 pm #

    Love it! From a 10+ year loyal newegg customer…

  29. nedf May 22, 2014 at 5:42 pm #

    I am glad you are standing up to these bullies.Keep up the good work!

    Yes, I am a buyer from Newegg, and your efforts in these matters is one reason why.

  30. Andrew Foster May 22, 2014 at 5:47 pm #

    MAKE THEM SUFFER!!!!!

  31. Miles May 22, 2014 at 6:02 pm #

    Just signed up for Premier Membership to support the fight against patent trolls. Thanks so much for taking the time and resources to do the right thing.

  32. Dave May 22, 2014 at 6:23 pm #

    I buy only from Newegg because of their integrity. Cheers to you!

  33. matt May 22, 2014 at 6:26 pm #

    Awesome job, I’ll make sure make next purchase is from you guys.

  34. Manman May 22, 2014 at 6:36 pm #

    well done, newegg!

  35. aaronmhamilton May 22, 2014 at 7:24 pm #

    Thank you guys. I can only admire those setting the right example for legal abuse as I go into business peddling my lovely wares.

    You guys sell a hearty service and for things I can buy from you, I always do, even if it costs me more, but usually at least partially because you save me a bunch.

    Cheers.

  36. Adrian May 22, 2014 at 7:36 pm #

    No half-measures.

  37. Darren May 22, 2014 at 7:47 pm #

    Bravo! Good job Newegg.

    I know where I’ll be making my next hardware purchases…

  38. Matt Yakel May 22, 2014 at 8:03 pm #

    This is why I will keep buying from NewEgg!! Keep up the great work! #stickittothetrolls

  39. Ken May 22, 2014 at 8:58 pm #

    I had told myself that I would not order from Newegg again, after a poor experience with their customer service. This is enough to win me back, at least to give them another shot. Kudos, Mr. Cheng! Keep fighting the good fight!

  40. tony May 22, 2014 at 9:13 pm #

    In Australia, “sus” is a common shortening of “suspicious”, which I think is appropriate name for a shell company patent troll.

  41. Kevin May 22, 2014 at 9:17 pm #

    Newegg will always be my first place when I look for parts. Oh and thanks guys! I am loving this assortment of parts beside me, all fitted together to make a monster AMD machine. Money well spent!!!

  42. Christopher Mahan (@chris_mahan) May 22, 2014 at 9:19 pm #

    Excellent!

  43. Steven May 22, 2014 at 9:42 pm #

    Thank you!

  44. Bram May 22, 2014 at 10:09 pm #

    I’m buying something soon. Great work!

  45. Jason May 22, 2014 at 11:29 pm #

    And that is why I shop at NewEgg for all my electronics needs and wants. If they sold men’s shoes I’d shop there for that too.

  46. 3-D May 22, 2014 at 11:53 pm #

    5 Eggs – Tenacious, but not housebroken!

    This review is from: The Newegg Legal Team

    Pros: Aggressively pursues patent trolls with the tenacity of a chihuahua on angel dust.. Doesn’t stop at just winning, aims for long term damage and complete destruction of trolls. Slices, dices, and eviscerates even the most useless patents.

    Cons: Tenacity comes at a cost; they wet my carpet a couple times in their excitement.

    Other thoughts: Carpet cleaning is a small price to pay for the utter destruction of legal slime balls. Well worth the price, would buy again!

  47. A May 23, 2014 at 12:11 am #

    Good job!

  48. Dave May 23, 2014 at 12:26 am #

    <3

  49. TMTM May 23, 2014 at 12:47 am #

    Go Newegg!! Wreck these trolls.

  50. Galane May 23, 2014 at 12:54 am #

    “We never pay any-one Dane-geld,
    No matter how trifling the cost;
    For the end of that game is oppression and shame,
    And the nation that plays it is lost!”

    Rudyard Kipling http://www.poetryloverspage.com/poets/kipling/dane_geld.html

  51. Alan Hysinger May 23, 2014 at 12:54 am #

    Mr. Cheng, you deserve one of those wallets that Jules Winfield carried with him in Pulp Fiction. Thank you for your service.

    https://c2.staticflickr.com/8/7085/7273007372_d1fa4346c7_z.jpg

  52. samba May 23, 2014 at 1:29 am #

    Hells yeah newegg! From a 8-year-customer.

  53. James May 23, 2014 at 1:43 am #

    Thanks for doing this. Seriously, thank you very much.

  54. Aaron1011 May 23, 2014 at 3:28 am #

    Congratulations! Great work, Newegg, and Mr. Cheng!

  55. taylorian71 May 23, 2014 at 3:37 am #

    Thank you Newegg! now you need to become a force for patent reform to stop these asshats cold.

  56. yolktern (@yolktern) May 23, 2014 at 5:10 am #

    Great, now if you guys can just get the USPTO to give examiners more power to prevent these kinds of patents maybe we all could save you some money

  57. Brian Staruk May 23, 2014 at 5:52 am #

    Just ordered a tee to show my support. Cheers, Newegg. Keep on fighting the good fight.

  58. OptimisticSkeptic May 23, 2014 at 6:07 am #

    Congrats to NewEgg. We need more people to stand up to these scum. My company was attacked by a troll with two completely bogus patents. They demanded a royalty rate that would kill our company. We fought them, and are working on a patent invalidation petition. In court, they adopted a strategy of forcing us to defend ourselves, because in patent infringement, the costs of defending yourself makes you guilty until proven innocent. We turned it around on them and tried to force them into spending some of their own money. The case is now stayed and we will likely kill their patents.

    But all of this came at a huge cost. We are north of $150K in legal bills now. One of our customers freaked out and the fall out was serious. And the trolls will walk away unscathed when this is done. They hide behind a company with no assets, so getting our fees back is really tough. We are a small company and this came close to killing us, but we will win. But the troll business model is perfect. All upside and no downside. Legalized extortion. The system is sick and needs fixing.

  59. Derrick May 23, 2014 at 6:37 am #

    Awesome!

  60. nnnnn May 23, 2014 at 6:37 am #

    I feel better shopping with ya’ll. If I ever have two choices next time. I’ll choose ya’ll even if price might be slightly higher.

  61. AlkQubit May 23, 2014 at 6:40 am #

    LMAO! I see what you did there! Google tried to patent the use of white backgrounds for taking pictures of products.

  62. YAY May 23, 2014 at 6:55 am #

    I think I need to make another Newegg purchase for their being awesome. Probably a good deal on something anyways.

  63. miko May 23, 2014 at 7:14 am #

    i went ahead and made my first Newegg purchase after reading this article. Your awesomeness just won my full support as a customer.
    ^_^

  64. Carls May 23, 2014 at 7:19 am #

    Respect, great to see companies fight back on this type of cases.

  65. Sameer May 23, 2014 at 7:28 am #

    Way to freaking go NewEgg!!!! Fight the good fight!!!!

  66. galengidman May 23, 2014 at 8:05 am #

    I love this.

  67. Vincent Zegna May 23, 2014 at 8:20 am #

    This is brilliant news and a blow to patent trolls everywhere. Well done Newegg and the others involved.

  68. George Hampton May 23, 2014 at 8:27 am #

    I’m sorry you got dragged into the “SUS” pool.

  69. Bradley Johnson May 23, 2014 at 8:30 am #

    Ok, what should I buy from Newegg as a show of support for their actions… hmm….

  70. Dan May 23, 2014 at 8:36 am #

    Thank you. I usually go with Amazon because of my prime membership, but I’m going to start trying to buy stuff through newegg from now on when you have what I need.

  71. Jason Hill May 23, 2014 at 8:38 am #

    Go Newegg! If more companies fought back like this we wouldn’t have a patent troll problem.

  72. ConceptJunkie May 23, 2014 at 8:39 am #

    I’ve always enjoyed doing business with NewEgg and now there’s another reason. Keep up the good work. You are not only serving your own interests, but helping out the whole industry.

  73. ipetepete May 23, 2014 at 8:39 am #

    I have a new found respect for Newegg. You guys are doing it right. I hope other companies take a page from your book.

  74. Gus May 23, 2014 at 8:47 am #

    Way to go Lee! Wish more companies had the balls to do the same.

  75. geekosaurus May 23, 2014 at 9:00 am #

    I agree with your strategy so much, I will make a conscious effort to buy stuff whenever possible from Newegg. We need more companies that do the right thing (TM) vs. just what is expeditious in the moment.

  76. alupis May 23, 2014 at 9:03 am #

    Go Newegg! Keep up the good work!

    - A Longtime Loyal Customer

  77. Cog May 23, 2014 at 9:17 am #

    Can you leave a box on the newegg checkout (donate $1 to nuke patent trolls)? Next up, amazon patenting “photos against a white background”. Ridiculous.

  78. Robin Lionheart May 23, 2014 at 9:27 am #

    Go go good team!

  79. Andy Glover May 23, 2014 at 9:40 am #

    This is why I buy all my hardware through NewEgg. You guys are BAMF.

  80. TK May 23, 2014 at 9:56 am #

    This makes me want to go buy something from Newegg. I don’t know what yet, but I’ll get there.

  81. lexein May 23, 2014 at 10:14 am #

    Congrats on getting the court decision; I hope the lower court does its job right this time. And I hope Newegg & Cheng lobby the other 36 companies to reconsider *their* demurrals of costs. As Dave Jones (EEVblog) might say, “Don’t just recover legal costs, take ‘em apart!”

  82. Scott Keith May 23, 2014 at 10:25 am #

    I order a LOT of stuff from Newegg for work. Always love their service. Now I just love them even more.

  83. Steve D May 23, 2014 at 10:46 am #

    We need a straight up loser pays system, period. But that will have a “chilling effect?” That’s the most lunatic legal concept ever. Bad consequences are SUPPOSED to exert a chilling effect on stupidity.

  84. brutalsun May 23, 2014 at 10:53 am #

    I will continue to be a loyal newegg customer, not only because of their deals, but because they are a company that shares my values. Frivolous lawsuits are terrible, and it’s thrilling to see the bad guy getting taken down. Scorched Earth Policy in full effect.

  85. Matthew Thompson May 23, 2014 at 12:51 pm #

    Every time I see the Newegg team get into it with these scumbags I log on and buy something. Time to go shopping! I have no idea what I need but I am sure I will find something.

  86. Greg K. May 23, 2014 at 12:57 pm #

    I have always liked NewEgg since their early days. Here is a company that has survived Amazon AND patent trolls. I buy from them whenever i can.

  87. jstrater May 23, 2014 at 1:08 pm #

    Excellent! Keep it up, Newegg.

  88. Nicholas Byrd May 23, 2014 at 1:27 pm #

    Your ethical business practices and moral stances, and awesome customer service, are the reason every computer I have constructed for myself or clients has been produced solely from NewEgg.

  89. ed j May 23, 2014 at 2:26 pm #

    As much as I agree with the ideals of the article and the general purpose, I find this part hard to understand;

    “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.”

    Why was this? I hugely value the efforts and eventual success of newegg in shutting down this “patent troll”, but I find it strange that newegg would seek recompense whilst the other companies did not. Was this due to strong-arming that newegg was able to deflect, whilst the others weren’t, or didn’t want to?

    I would like to hear from the other defendants, because they are not represented in this article and I find it hard to believe that they wouldn’t follow the precedent set by newegg.

    • john May 26, 2014 at 1:03 pm #

      It probably wasn’t a ‘precedent’, rather a decision made simultaneously. Going after this kind of compensation is a gamble, as the effort invested in proving bad faith generally isn’t likely to result in compensation.

      If new egg’s victory had truly been a preceding event, then the other companies (see new eggs success before needing to commit themselves to a course of action) would have been more likely to follow new eggs lead.

  90. SP May 23, 2014 at 3:12 pm #

    Right on! I was a customer before, but this kind of activism keeps me a customer for life! Don’t settle Newegg, your bravery will be rewarded!

  91. Melon Head May 23, 2014 at 4:01 pm #

    So doesn’t this mean you now have to prove ill-intent? Do you think you can? Via discovery? I’m heartened that you think you can, if you do it would really begin to pull the rug out from under patent trolls.

  92. Randy May 23, 2014 at 4:18 pm #

    Someone buy this man a drink!

  93. Dave Feiker May 23, 2014 at 5:21 pm #

    I have always heard good things about Newegg, they have a good word of mouth reputation where I hang out on the internet. I am additionally pleased by this action. I will definitely add Newegg to my online list of shops. Good job! Stick it to the trolls!

  94. Paul May 23, 2014 at 6:32 pm #

    You guys rock

  95. Sasha May 24, 2014 at 2:12 am #

    This is the way to win business.

    NewEgg FTW. NewEgg FTMFW.

  96. threeravensconsulting May 24, 2014 at 5:15 am #

    Knock em dead Lee…patent trolling should be made illegal. Our entire patent system needs some updating to fit in with the 21st century.

  97. Timespike May 24, 2014 at 6:10 am #

    CRUSH those patent trolling scumbags!

  98. Phil Suckaloosky May 24, 2014 at 6:27 am #

    Cheers, Newegg. You would like this story, as well, when a small independent cable manufacturer was accused on treading on patents owned by a large cable manufacturer:
    http://www.bluejeanscable.com/legal/mcp/

  99. Charles Miske (@tripeakprod) May 24, 2014 at 8:29 am #

    Patent Trolling amounts to “Legal” extortion

  100. Pēteris Lediņš May 24, 2014 at 10:50 am #

    Thank you!

  101. Patrick May 24, 2014 at 1:32 pm #

    And, for that, I’m going to buy something from Newegg this month. I haven’t bought for a while, but now it feels like doing so is supporting a cause, which I am.

  102. Matt May 24, 2014 at 1:35 pm #

    Keep it coming! This is one more reason for me to lean towards a purchase from Newegg, even if the price is a dollar or two more than Amazon/other competitor

  103. plasticrelic May 24, 2014 at 8:42 pm #

    Newegg has my support. Thanks for your efforts. I applaud you.

  104. fabianelric May 24, 2014 at 9:08 pm #

    The first thing everyone learns in a beginners Politcal Science class in college is to make changes you want use your resources (mainly Mone! cause yes money runs the world) and to stop ass hats like the ones who hate our beloved NewEgg is to hurt their resources and with a hit to the wallet enough times people learn and so will those who have the nerve to act as SUS did. So NewEgg you made the best decision but hitting their wallet twice (their court fees and now yours) :)

    0s

  105. Maurice Brown May 26, 2014 at 11:33 am #

    “Respect I demand it”
    “Slipped and broke the 11th commandment.”
    Thou shalt not f*** with billion dollar companies.

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