Internet Patent Owner Loses High Court Bid to Revive Suit

The U.S. Supreme Court rebuffed an electronic-commerce patent owner’s effort to revive a $2.5 million verdict against Internet retailer Newegg Inc., in a case with implications for dozens of other companies.

The justices refused to hear closely held Soverain Software LLC’s appeal of a lower court ruling that its technology was too obvious to qualify for patent protection. Soverain also has sued other companies that sell products online, including Oracle Corp., (ORCL) EBay Inc., Best Buy Co. and Macy’s Inc.

Soverain said a jury should have been allowed to decide the question of the validity of its patent. A 2007 Supreme Court decision said the issue of whether a patent covers a genuine invention turns on facts that must be determined by a jury, the company said.

By expanding “the window during which a patent may be invalidated as a matter of law, the decision presents a threat to all who rely on the stability and predictability of the patent system,” Soverain said in a filing with the court.

The patents originated with a company called Open Market Inc., which filed its applications during the mid-1990s when the Internet was still developing. The patents cover shopping cart technology, in which buyers store their intention to purchase an item on a computer network, then buy it and can later view the shopping history.

Dozens Sued

Soverain, a Chicago-based seller of e-commerce software, acquired the patents and sued dozens of companies that it said used the technology without paying royalties. Many settled, while Newegg, based in Whittier, California, opted to go to trial.

A trial judge in Marshall, Texas, instructed the jury to decide whether Newegg infringed the patents. He barred Newegg from arguing to the jury that the patents were invalid. The jury decided in favor of Soverain and ordered Newegg to pay $2.5 million.

After Newegg asked the U.S. Court of Appeals for the Federal Circuit to order a new trial on the validity question, the court decided on its own the patents were invalid.

Soverain said the Federal Circuit’s decision violated its constitutional right to have its patent reviewed by a jury. It wasn’t obvious during the mid-1990s that the Internet could be used for shopping, the company said.

Newegg said in court papers that Soverain’s patents were “applying century-old shopping conventions to the Internet” and that similar technology predated Open Market.

The case is Soverain Software LLC v. Newegg Inc., 13-477, U.S. Supreme Court.

To contact the reporters on this story: Susan Decker in Washington at sdecker1@bloomberg.net; Greg Stohr in Washington at gstohr@bloomberg.net

To contact the editors responsible for this story: Patrick Oster at poster@bloomberg.net; Bernard Kohn at bkohn2@bloomberg.net

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