I will admit it. I was very disappointed to see that a Texas jury found Newegg liable for $2.3 million in a case brought by TQP Development. TQP Development is a "non-practicing entity," or patent troll. It is an entity that exists solely to enforce claims for patents that it controls. I am fundamentally opposed to these kinds of claims, especially as it relates to software.
I know the arguments - "patents ensure that those who do the groundbreaking work can reap the rewards of their ingenuity". "Fewer people would fund R&D if they did not have the protection of patents". "Even though companies like TQP appear to be no more than parasites on the living bodies of business entities, they are entitled to be paid for the use of these patents which they paid good and valuable consideration for". Sorry, none of these persuade me to feel the least bit sympathetic to TQP and other patent trolls.
Alas as much as I would like to think so, my own personal feelings are not determinative of whether a patent has been violated or not and what the damages are. Love them or hate them, the law is the law. What bothers me about cases like this is that very often the patents that are the subject matter of the lawsuit should never have been granted in the first place. There is prior use for many of these technologies and techniques that are the subject of the patents.
Our judicial system, based on trial by a jury of your peers, unfortunately fails us in many of these cases, though. These cases involve issues that are either too technical or complex for most jurors to truly grip. That is to say, the level of expertise needed to truly understand and decide the issues in question is just not present.
In the Newegg case, the issue was around public key encryption and web encryption. Understand the technology of public key encryption and how it has evolved to be used in many web transactions today appears to be at the crux of the case. Newegg had no less than Whitfield Diffie, the inventor of public key encryption (if you want to believe that), testify that the patent in question should never have been granted. The methodology covered by the patent was pre-existing in work that was done prior to this patent being applied for in 1992, according to Diffie. However, in spite of this testimony and other evidence, the jury found that Newegg violated the patent and awarded TQP $2.3 million. Only about half of what they asked for, but still a sizeable amount.
How could a jury make this award in spite of all of the testimony and evidence to the contrary? Easy. TQP lawyers did a great job of sowing confusion around the technology facts. Do we really expect members of a civil jury to become instant experts on the finer nuances of encryption? Of the difference between public key encryption used in a website versus on email or another medium? Of course not. These cases wind up becoming a battle of the experts. Which side can dumb it down enough to make the jury understand their side? Least common denominator justice at its worst.
Frankly, we have the same problem at the patent office. Some of the technology is so technical and the work load of the patent office is so great that before granting patents they are not adequately researched. So bad patents get granted. It is a lot harder overturning a patent already granted than it is to not issue one in the first place. The cost of fighting these cases is very expensive. Newegg may have very well spent as much in lawyers as the jury awarded TQP. As a result, many times a company will just as soon pay a patent troll like TQP rather than fight a costly lawsuit. TQP made over $40 million on this one patent alone, it's been reported.
The good news is that Newegg is appealing the jury's verdict. Many times on appeal, an appellate court is better equipped to understand better the technology and issues in question. Again, there is an expense to this. Fighting an appeal is a very expensive proposition and far from a lock to succeed. Most appeals don't succeed.
As co-founder and Managing Partner at The CISO Group, Alan Shimel is responsible for driving the vision and mission of the company. The CISO Group offers security consulting and PCI compliance management for the payment card industry. Prior to The CISO Group, Alan was the Chief Strategy Officer at StillSecure. Shimel was the public persona of StillSecure as it grew from start up to helping defend some of the largest and most sensitive networks in the world.
Shimel is an often-cited personality in the technology community and is a sought-after speaker at industry and government conferences and events. His commentary about the state of security, open source and life is followed closely by many industry insiders via his blog and podcast, "Ashimmy, After All These Years" (www.ashimmy.com). Alan is now also a regular contributor to The CISO Group’s security.exe blog and podcast. Follow him on Google.
Alan has helped build several successful technology companies by combining a strong business background with a deep knowledge of technology. His legal background, long experience in the field, and New York street smarts combine to form a unique personality.
Disclosure: The CISO Group sells a software-as-a-service PCI compliance application called SAQPro. The company is independent and does not represent any other vendor's products as a reseller.
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