1. The Supreme Court declined to hear an appeal by Soverain from an adverse ruling by the Federal Circuit Court of Appeals that had determined the Soverain "shopping cart" patent to be invalid on grounds of obviousness.
2. The Federal Circuit's holding by a 3-judge panel had been remarkable and had shocked patent lawyers generally in that the parties before the court had not even raised the issue on appeal as a ground for invalidating the jury's verdict below. The court raised the issue on its own, concluded that the patent was obvious and invalid, and gave judgment for Newegg in spite of the fact that the jury at the trial court level had found that Newegg infringed.
3. This particular patent had been the original shopping cart patent, dating back to 1994 (well before Amazon began) and it had had a formidable history by which its holder had gotten massive licensing fees from major players over many years for the privilege of using online shopping carts on the web.
4. It is easy to say today that everyone knows what the concept of a shopping cart is and that anyone could have come up with the idea of applying that concept to online shopping. That is all well and good but consider this: not only had this patent passed muster as being non-obvious with the USPTO on its original filing but it had also been found to have been non-obvious on two separate patent re-examinations before that same body and by a string of U.S. district court judges before whom the issue had arisen. In other words, Newegg faced a huge challenge on this issue (the legal standard required that it be able to prove that it was obvious by "clear and convincing" evidence, which is often a tough standard to meet) and this is why Amazon and virtually all other major other online retailers had long since caved and agreed to pay royalties for use of the patent. In the patent community, the Soverain patent was seen as rock solid and one whose shopping cart idea was deemed far from obvious. The top judges and lawyers in the nation, not to mention the USPTO, had all so concluded. The chances of upending it seemed slim to none. And, as noted, even the parties themselves had not raised the issue on the key appeal as a ground for potential reversal. Thus, everyone was stunned when the Federal Circuit reversed the judgment against Newegg on that ground, invalidated the patent, and threw the case out.
5. All that said, when Soverain petitioned the Supreme Court for review of the Federal Circuit's decision, it was trying to undo what it perceived as an injustice done to it as a private litigant ("this is so unfair to us and to our valuable patent"). However, from the Supreme Court's point of view, the kind of petition filed by Soverain is to be granted, and a case heard, only when it has significance far beyond whatever impact it might have on any private litigant. The Court's role in hearing such discretionary appeals is to step in and decide important questions of federal law or to determine who is right when the various lower federal appellate courts may have reached conflicting decisions on such points of law in way that cries out of definitive resolution by the highest court. The Court will not hear cases merely because they might have been wrongly decided unless some such extraordinary factor exists. Thus, in denying Soverain's petition, the Court did nothing more than say that this particular petition did not present important issues of the kind that warranted its attention. It did not validate the Federal Circuit's reasoning or analysis. It did not weigh in against patent trolls. It did not add its authority to the fight against frivolous patents. It simply did what it does on over 99% of such discretionary petitions: it used its discretion to deny it. The legal significance of its decision goes no farther than that.
6. Is Soverain a patent troll that deserved this outcome? Well, its CEO had been a law partner at a major law firm (Latham & Watkins) and the company's business was clearly driven by a legal licensing scheme that had little or nothing to do with active business operations or innovation. It had simply acquired the original company that had come up with the patent back in the day. So, it is a troll if you want to call it that or it is not if you want to use some different definition. But this distinction does underscore how difficult it becomes to analyze patent issues simply by placing labels on the parties. The problem with modern software patents is that too many are too easily granted over trivial "innovations" and this has given vast incentives to those who would package them into shakedown licensing ventures and thereby gum things up for true innovators. It is a situation that calls for action by Congress to rein this in. Otherwise, every party trying to defend itself will find itself, as Newegg did, having to go to extraordinary efforts at massive expense to avoid claims of infringement. Very few litigants can do that and, indeed, Newegg is to be commended for fighting this all the way against tough odds. Let us only hope that systemic fixes can help correct the problem so that this is not the only way available for dealing with such patents. Whatever else this system does, it hardly promotes true innovation.
That is all well and good but consider this: not only had this patent passed muster as being non-obvious with the USPTO on its original filing but it had also been found to have been non-obvious on two separate patent re-examinations before that same body and by a string of U.S. district court judges before whom the issue had arisen.
Passing muster with the USPTO is not hard. I read my company's patent with them, and despite there being heaps of prior art (known to any casual web user) and me knowing exactly what the patent was referring to, I could not make heads or tails of the description. My housemate tells me of a radio interview where they read out a patent to a senior engineer, and he couldn't figure out what it was for - it was the patent for the project he'd worked on for the past 10 years. "It passed the PTO" is an absolutely meaningless statement for originality; it just means you know how to fill in paperwork.
Yes, Soverain is the quintessential patent troll. It did not acquire the original company that came up with the shopping cart idea. That thing had been sold at least four times before Soverain came along.
No, shopping cart is not and never was a non-obvious technology. It's a clever metaphor for the very common pre-computer business method of maintaining order line records for unconfirmed orders.
It is easy to say today that everyone knows what the concept of a shopping cart is and that anyone could have come up with the idea of applying that concept to online shopping.
This is why a common argument against software patents is, if not to abolish them, then limit their life cycle. 20 years for a shopping cart patent is way too long.
Can you imagine if Friendster was granted a patent on the type of social networking that MySpace and Facebook implemented, and they were denied licenses to operate while the patent was in effect, they couldn't launch until 2022.
There was prior art, therefore the patent was invalid not just because it was obvious, but because it was not even invented by those who filed that patent. Case closed. The troll deserves to be slammed with the decision. I'd also force them pay all the money back to those from whom they extorted it, but I doubt the court can go that far.
"not only had this patent passed muster as being non-obvious with the USPTO on its original filing but it had also been found to have been non-obvious on two separate patent re-examinations before that same body and by a string of U.S. district court judges before whom the issue had arisen."
As far as "original filing" that of course doesn't mean much considering the things that get through.
But serious question here. When you say "had also been found to have been non-obvious on two separate patent re-examinations" doesn't that also speak to the skill of the attorneys involved in the case?
I know of a trademark that we weren't able to get that a competitor that was much larger was able to get (that was a similar generic word). I put the loss to the skill of the attorney that I used falling short in his arguments.
The Federal Circuit's holding by a 3-judge panel had been remarkable and had shocked patent lawyers generally in that the parties before the court had not even raised the issue on appeal as a ground for invalidating the jury's verdict below. The court raised the issue on its own, concluded that the patent was obvious and invalid, and gave judgment for Newegg in spite of the fact that the jury at the trial court level had found that Newegg infringed.
A summary I read of the case a while back stated that the original trial judge did not permit the issue to be raised.
> 2. The Federal Circuit's holding [in Soverain] by a 3-judge panel had been remarkable and had shocked patent lawyers generally in that the parties before the court had not even raised the issue on appeal as a ground for invalidating the jury's verdict below. The court raised the issue on its own, concluded that the patent was obvious and invalid, and gave judgment for Newegg in spite of the fact that the jury at the trial court level had found that Newegg infringed. (Emphasis in original.)
George, it's not at all apparent that in Soverain the Federal Circuit raised and decided the obviousness issue sua sponte, that is, on its own. The court's opinion [1] expressly says, at page 5: "Newegg argues that it was wrongfully deprived of a jury determination of the question of obviousness, pointing to the extensive testimony on this issue at trial."
(Patent lawyers really would have been shocked if Newegg had not raised the obviousness issue on appeal.)
In its Soverain opinion, the Federal Circuit had previously explained, at page 4, that the trial judge, in the Eastern District of Texas, had (in essence) directed the jury not to consider the obviousness issue, because the trial judge had decided on his own that Newegg's evidence wasn't enough to allow a reasonable jury to invalidate the patent. The Federal Circuit thought otherwise.
The appeals court didn't send the case back down to the trial judge for reconsideration; instead, it decided the obviousness issue on its own. That's because under existing precedent, the ultimate decision on obviousness is reserved initially for the trial judge as a so-called question of law, and the trial judge's decision is subject to complete plenary scrutiny, known as "de novo" review, by the appeals court (and, theoretically, by the Supreme Court of the United States). (See pages 5-6.)
So, under existing precedent, it's actually quite unremarkable for the Federal Circuit to reverse a trial court on the issue of obviousness. (Usually, though, the outcome goes the other way: It seems more typical for a trial judge initially to conclude that a patent claim is invalid for obviousness, after which the Federal Circuit will reverse and render judgment that the patent claim was not proved invalid.)
As to your assertion that the Federal Circuit decision "had shocked patent lawyers generally": I didn't remember that to be the case, so I did a quick Google search. One well-known patent-law blogger -- who if I remember correctly is very pro-patent -- wrote a couple of extensive analyses of the Federal Circuit decision and its subsequent decision on rehearing [2][3]. This blogger has strong views that the Federal Circuit shouldn't engage in de novo review of obviousness [2]. He accused the Federal Circuit of having, in Soverain, "made findings of fact as if they were the trial court and decided the case on issues not argued by either party" [2]. That accusation, though, seems to me to be unsupported hyperbole, quite contrary to what the Federal Circuit actually wrote.
1. The Supreme Court declined to hear an appeal by Soverain from an adverse ruling by the Federal Circuit Court of Appeals that had determined the Soverain "shopping cart" patent to be invalid on grounds of obviousness.
2. The Federal Circuit's holding by a 3-judge panel had been remarkable and had shocked patent lawyers generally in that the parties before the court had not even raised the issue on appeal as a ground for invalidating the jury's verdict below. The court raised the issue on its own, concluded that the patent was obvious and invalid, and gave judgment for Newegg in spite of the fact that the jury at the trial court level had found that Newegg infringed.
3. This particular patent had been the original shopping cart patent, dating back to 1994 (well before Amazon began) and it had had a formidable history by which its holder had gotten massive licensing fees from major players over many years for the privilege of using online shopping carts on the web.
4. It is easy to say today that everyone knows what the concept of a shopping cart is and that anyone could have come up with the idea of applying that concept to online shopping. That is all well and good but consider this: not only had this patent passed muster as being non-obvious with the USPTO on its original filing but it had also been found to have been non-obvious on two separate patent re-examinations before that same body and by a string of U.S. district court judges before whom the issue had arisen. In other words, Newegg faced a huge challenge on this issue (the legal standard required that it be able to prove that it was obvious by "clear and convincing" evidence, which is often a tough standard to meet) and this is why Amazon and virtually all other major other online retailers had long since caved and agreed to pay royalties for use of the patent. In the patent community, the Soverain patent was seen as rock solid and one whose shopping cart idea was deemed far from obvious. The top judges and lawyers in the nation, not to mention the USPTO, had all so concluded. The chances of upending it seemed slim to none. And, as noted, even the parties themselves had not raised the issue on the key appeal as a ground for potential reversal. Thus, everyone was stunned when the Federal Circuit reversed the judgment against Newegg on that ground, invalidated the patent, and threw the case out.
5. All that said, when Soverain petitioned the Supreme Court for review of the Federal Circuit's decision, it was trying to undo what it perceived as an injustice done to it as a private litigant ("this is so unfair to us and to our valuable patent"). However, from the Supreme Court's point of view, the kind of petition filed by Soverain is to be granted, and a case heard, only when it has significance far beyond whatever impact it might have on any private litigant. The Court's role in hearing such discretionary appeals is to step in and decide important questions of federal law or to determine who is right when the various lower federal appellate courts may have reached conflicting decisions on such points of law in way that cries out of definitive resolution by the highest court. The Court will not hear cases merely because they might have been wrongly decided unless some such extraordinary factor exists. Thus, in denying Soverain's petition, the Court did nothing more than say that this particular petition did not present important issues of the kind that warranted its attention. It did not validate the Federal Circuit's reasoning or analysis. It did not weigh in against patent trolls. It did not add its authority to the fight against frivolous patents. It simply did what it does on over 99% of such discretionary petitions: it used its discretion to deny it. The legal significance of its decision goes no farther than that.
6. Is Soverain a patent troll that deserved this outcome? Well, its CEO had been a law partner at a major law firm (Latham & Watkins) and the company's business was clearly driven by a legal licensing scheme that had little or nothing to do with active business operations or innovation. It had simply acquired the original company that had come up with the patent back in the day. So, it is a troll if you want to call it that or it is not if you want to use some different definition. But this distinction does underscore how difficult it becomes to analyze patent issues simply by placing labels on the parties. The problem with modern software patents is that too many are too easily granted over trivial "innovations" and this has given vast incentives to those who would package them into shakedown licensing ventures and thereby gum things up for true innovators. It is a situation that calls for action by Congress to rein this in. Otherwise, every party trying to defend itself will find itself, as Newegg did, having to go to extraordinary efforts at massive expense to avoid claims of infringement. Very few litigants can do that and, indeed, Newegg is to be commended for fighting this all the way against tough odds. Let us only hope that systemic fixes can help correct the problem so that this is not the only way available for dealing with such patents. Whatever else this system does, it hardly promotes true innovation.