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Overstock.com, Newegg Win Patent Appeal on Alcatel-Lucent

Alcatel-Lucent SA (ALU) lost its appeals court bid to revive patent-infringement claims against Overstock.com Inc. (OSTK) and Newegg Inc. over online shopping in a effort to increase its royalties.

Overstock.com and Newegg won a jury verdict in 2011 that they didn’t infringe three Alcatel-Lucent patents and that one of the patents was invalid. The U.S. Court of Appeals for the Federal Circuit in Washington, without issuing a formal opinion, upheld the decision in a notice posted on the court’s website.

The appeal focused on the single patent covering a way to exchange information with multiple users that was found to be invalid. The decision could be a boon to other retailers, including Barnes & Noble Inc., which is challenging this and other e-commerce patents owned by Paris-based Alcatel-Lucent. Companies including Amazon.com Inc. and Netflix Inc. settled before the 2011 trial.

“The vast focus on the appeal was them trying to get their patent back,” said Ed Reines of Weil Gotshal in Redwood Shores, California, who argued the appeal on behalf of both retailers. “If they had been able to revive this patent, the litigation machine would have continued on.”

In the 2009 case filed in federal court in Tyler, Texas, Alcatel-Lucent was seeking $6 million from Salt Lake City-based Overstock.com, a discount retailer, and $12.4 million from closely held Newegg, which sells consumer electronics and computers.

This is the second time Newegg, based in City of Industry, California, won a patent-infringement case that’s helped other Internet retailers. In January, the Federal Circuit threw out a $2.5 million verdict Newegg lost and invalidated patents owned by Soverain Software.

The ruling benefited dozens of companies that had also been sued by Soverain, including Oracle Corp., International Business Machines Corp., EBay Inc. and Macy’s Inc. Reines, who represented Newegg in that case as well, said the victory become something of a marketing tool for the company with its tech-savvy customers.

“I don’t think Newegg took a principled stand for anything other than taking a principled stand, but it’s had a wonderful effect on their business,” he said.

The new case is Alcatel-Lucent USA Inc. v. Overstock.com Inc., 12-1629, U.S. Court of Appeals for the Federal Circuit (Washington). The lower court case is Alcatel-Lucent USA Inc. v. Amazon.com Inc., 09cv422, U.S. District Court for the Eastern District of Texas (Tyler).

To contact the reporter on this story: Susan Decker in Washington at sdecker1@bloomberg.net

To contact the editor responsible for this story: Bernard Kohn at bkohn2@bloomberg.net

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