September 1, 2010, 12:00 AM

Newegg’s patent fight heads to the next round

In a case with potential ramifications for many other online retailers, a federal judge has ordered computer products retailer Newegg to pay $2.5 million damages to Soverain Software for infringing on Soverain’s patents on shopping cart software. Newell says it will appeal.

Mark Brohan

Research Director

In a case with potential ramifications for many other online retailers, a federal judge has ordered web-only retailer Newegg Inc. to pay $2.5 million in damages to Chicago-based Soverain Software LLC for infringing on Soverain's patents on shopping cart software.

Soverain Software, which sells transaction management technology, filed suit against Newegg Inc. and other big web merchants in November 2007. At the time Soverain accused Newegg, CDW Corp., Systemax Inc., Redcats USA and Zappos.com of infringing on three of its patents that cover the underlying technology that e-retailers use to handle purchases and payments, as well as for their online shopping carts.

Other retailers settled with Soverain Software. But Newegg, No. 12 in the Internet Retailer Top 500 Guide, chose to fight the case in court. Last month, Judge Leonard Davis of the U.S. District Court for the Eastern District of Texas ruled that Newegg had infringed on several patents and ordered Newegg to pay $2.5 million in damages, the amount a jury awarded to Soverain Software when the first round of litigation ended in late April.

The judge also took the following actions:

— Awarded Soverain Software a new trial on damages for Newegg's infringement of other related patents.

— Ordered Newegg to pay Soverain Software an ongoing royalty of 15 cents per infringing transaction for certain patents.

— Awarded Soverain Software post-verdict damages of $2,900 per day from May 1 until the date of the final judgment.

— Awarded Soverain prejudgment costs of court.

Newegg will appeal the decision, says general counsel Lee Cheng, though any specific dates have yet to be set. Newegg also is in the process of writing new coding for its shopping cart software that will not violate any existing patents, says Cheng. m

mark@verticalwebmedia.com

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