Newegg pays $2.3 million as TQP marches on
Online retailer Newegg must pay a non-practising entity (NPE) $2.3 million for infringing a patent that has helped secure millions of dollars in licensing fees.
A jury in Texas found Newegg guilty of infringing the patent – directed to web encryption and owned by TQP Development – and rejected claims that it was invalid.
The patent, filed in 1989, protects a way of combining SSL, a protocol for encrypting information over the Internet, and RC4, an algorithm for performing encryption. Its owner, Michael Jones, later sold it to TQP.
With the patent, TQP has sued more than 100 companies for infringement, extracting more than $45 million in licensing fees. Microsoft paid $1 million, while Amazon settled for half that amount.
In the latest case, Whitfield Diffie, a pioneer in the field of cryptography, appeared on behalf of Newegg as an expert witness to argue that TQP’s patent should be invalidated.
But on November 26, this evidence, along with other claims that various prior art trumped TQP’s patent, was dismissed by an eight-person jury at the US District Court for the Eastern District of Texas, a popular destination for NPEs.
The $2.3 million damages award was much less than the $5.1 million fine TQP wanted, however.
Marc Fenster, head of IP at law firm Russ August & Kabat, who represented TQP in the trial, told WIPR that the company is “very grateful to the jury for its attention, consideration and ultimately, its verdict”.
“This was a hard fought win,” he said, “and we are tremendously gratified that the jury upheld the validity of Michael Jones's patent.”
Newegg did not respond to a request for comment, but the company’s chief legal officer Lee Cheng told ars technica, which reported live from the trial, that he was “very disappointed” by the ruling.
“We respectfully disagree with the verdict that the jury reached tonight. We fully intend ... to take this case up on appeal and vindicate our rights," Cheng told the news website.
What is interesting about this case, according to Michael Oblon, partner at law firm Perkins Coie, is that each side probably spent much more on fees and costs than the verdict amount, and yet both sides still ‘won’.
“The ‘troll’ undoubtedly will continue asserting the patent against new targets, using this verdict to demonstrate to those targets that the patent is valid and infringed. So, this verdict is worth much more to it than $2.9 million,” he said.
“And although Newegg may have to pay $2.9 million on top of the fees and costs that it spent on this case (and the costs for pursuing an appeal), it demonstrated to all other ‘trolls’ that Newegg does not back down and will never become an easy target.
“So, for $2.9 million (plus the costs of trial and appeal), Newegg may have deterred countless other patent assertions against it,” Oblon noted.
There is pending litigation between TQP and several other companies, including Google, with trials set to start early next year.
