January 22, 2013, 5:11 PM

An appeals court overturns a $2.5 million patent judgment against e-retailer Newegg

The appeal stems from a 2010 U.S. District Court decision.

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Online personal computer and consumer electronics retailer Newegg.com Inc. has won a victory in a patent infringement lawsuit, overturning a $2.5 million judgment against the e-retailer in a lower court.

The United States Court of Appeals for the Federal Circuit based in Washington, D.C., today overturned the judgement against Newegg, No. 13 in the 2012 Internet Retailer Top 500, in a lawsuit filed by Chicago-based Soverain Software LLC.

In April 2010 a jury and judge for the U.S. District Court for the Eastern District of Texas ordered Newegg to pay $2.5 million in damages to Soverain Software for violations of 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. Newegg appealed the decision in August 2010.

The appeals court ruled today that Soverain Software’s claims weren’t valid because the company wasn’t able to answer the “question of obviousness,” legal jargon for saying that Soverian Software failed to prove in a clear-cut manner that Newegg had violated its patents.

Newegg legal counsel Lee Cheng says today’s decision could help two other retailers that Soverain has successfully sued, Avon Products Inc. (No. 37) and Victoria’s Secret, a part of Limited Brands (No. 19). In November 2011 a jury in a case filed in the U.S. District Court for the Eastern District of Texas ordered Avon and Victoria’s Secret to pay Soverain Software $18 million in fees for patent infringement violations. “Our appeals decision proofs the invalidity of their claims,” Cheng says.

Soverian Software has yet to comment on the court decision, including if it will file for an appeal. For his part, Newegg’s Cheng called the decision “vindicating.”

Newegg isn’t disclosing how much it spent on legal fees over two years working on an appeal. But Cheng says Newegg may try to recoup its legal fees from Soverain Software. “We are looking at all options,” he says.

Newegg continues to use the courts to aggressively and successfully defend itself against patent infringement suits. In May 2012 Newegg also won a key patent infringement case against Kelora Systems LLC.

Kelora sued Newegg and others claiming infringement for patents related to “executing a guided parametric search” and a process for “identifying a single item in a family of items.” But in a 40-page ruling handed down by Judge Claudia Wilken in the U.S. District Court for the Northern District of California, the court declared that Newegg and other big web merchants weren’t infringing on Kelora’s patent. Wiken’s ruling dismissed Kelora’s patent infringement claim as invalid and ruled that defendants in the case may recover the costs of bringing the motion from Kelora.

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