An advertising watchdog’s report found dozens of claims that it says were false and deceptive. Wal-Mart blames suppliers.
Kelora Systems alleged retailers had infringed on its patent.
After nearly two years of litigation, some of the biggest names in e-commerce have won a key patent infringement case against Kelora Systems LLC.
Kelora, which developed and owns a patent on a certain type of site search software, in 2010 filed a patent infringement suit against Amazon.com Inc., Dell Inc., Office Depot Inc., Newegg Inc., Costco Wholesale Corp., Hewlett-Packard Development Co., Target Corp., Zappos Inc., eBay Inc. and others, claiming they infringed its patent for faceted site search. Faceted search, a feature on many e-retail sites, allows a site visitor to narrow down search results by price, brand, size, color and other parameters.
Kelora sued the web retailers, 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 in late May, federal judge Claudia Wilken of the U.S. District Court for the Northern District of California ruled that the web merchants weren't infringing on Kelora's patent. Wilken dismissed Kelora's patent infringement claim and ruled that defendants in the case may recover certain court costs.
Newegg general counsel Lee Cheng says the ruling against Kelora sends a message to other patent holders that target web retailers, often threatening legal action if the e-retailers refuse to pay licensing fees. "In the Kelora case, the judge is sending a message that the tide is turning against these types of frivolous lawsuits," Cheng says.
Kelora hasn't said if it will appeal the ruling, but the company does continue to aggressively defend its patents—and sign software patent license agreements with retailers. Since November, Kelora, which is based in Cupertino, Calif., says it has entered into patent license agreements with BrandsMart USA, American TV & Appliance of Madison Inc., USALight.com, CircuitCity.com operator Systemax Inc., Foot Locker Inc., Sur La Table, Michael Stars Inc., K-Swiss Inc. and others. Kelora also says it has signed patent license agreements with Wine Enthusiast Cos. and Shopko Stores Operating Co. LLC.