[July 22, 2014]

Newegg Marks Additional Legal Victories in Quest to Stop Patent Trolls-Notorious Troll Ordered to Pay Newegg Costs

Newegg today announced new milestones in its quest to defeat patent trolls that threaten the innovative spirit of the technology industry. On July 11, 2014, the Federal Circuit Court of Appeal vindicated Newegg Inc. and dozens of other manufacturers and retailers by affirming a federal district court's ruling invalidating U.S. Patent No. 6,128,415 (the '415 patent), titled "Device Profiles for Use in a Digital Image Processing System."

The invention at issue was the idea of tagging images with particular information about the camera that took the image, and the camera's color and spatial image qualities so the processed image can be more accurately captured or transformed. The '415 patent was previously owned by Polaroid and then assigned in 2012 to Digitech Image Technologies, LLC (Digitech), a subsidiary of serial patent abuser, Acacia Research Group. Digitech almost immediately began filing suits against companies, including Xerox, Toshiba, Fujifilm, Ricoh (News - Alert), Overstock.com and Newegg for patent infringement.

On a motion for summary judgment filed by the defendants, the federal district court had ruled the "device profile" was simply a bit of data that did not meet the statutory requirements for patent eligibility - namely, the device profile was not "a process, machine, manufacturer or composition of matter." The district court also held the method claims encompassed an abstract idea and therefore were not eligible to be patented.

The Court of Appeal wholly affirmed the district court's ruling, stating, "data in its ethereal, non-physical form is simply information that does not fall under any of the categories of eligible subject matter under [35 U.S.C.] section 101." The Court of Appeal also affirmed the district court's ruling on the method claims.

Newegg's Chief Legal Officer, Lee Cheng, stated, "We are extremely pleased the Court of Appeal affirmed the district court's ruling in its entirety and agreed the '415 patent was not valid in any respect. Newegg can now add Digitech to a growing list of patent trolls, including Soverain Software, Alcatel-Lucent (News - Alert) USA, and Kelora Systems LLC, whose patents we have invalidated or helped invalidate. We congratulate our co-defendants and the companies that participated in our joint defense group to help control the cost of fighting patent trolls. With this decision, Newegg's nine-year track record after appeal on patent cases remains perfect."

Cheng concluded, "Investors and potential investors in Digitech's parent company, Acacia Research Corporation (News - Alert) (NasdaqGS: ACTG), should not be surprised if more Acacia patents are invalidated or subjected to invalidation procedures. Acacia issues press releases constantly about settlements it obtains from victims of abusive patent assertion. Not surprisingly, Acacia has not addressed the fact that Digitech's patent, which had once been mentioned as a prospective significant revenue driver, has bitten the dust. I think securities regulators and investors' counsel should take a look at whether Acacia's selective disclosures satisfy public company disclosure requirements."

In an unrelated case also decided last week, the Eastern District of Texas awarded $47,000 to Newegg, one of more than 70 entities sued by SFA Systems, LLC (SFA) over baseless patent infringement claims. And while the District Court denied Newegg's request for attorneys' fees, the company intends to appeal the court's decision to deny recuperation of the more than $1M in attorneys' fees incurred during Newegg's defense of SFA's baseless claims.

Cheng stated, "Newegg is happy to have been awarded its costs as a prevailing party against SFA. However, we intend to appeal the court's decision to deny us attorneys' fees because we believe that SFA's case had no merit and its business model and conduct in litigation was obvious and fundamentally abusive. We note that SFA is part of a collection of affiliates of IPNav, a notorious abusive patent assertion entity and we believe, taken as a whole, SFA's actions against Newegg were intended to leverage the high cost and burden of litigation to coerce a settlement. When attorneys' fees are denied in exceptional cases like this one, there is a higher probability the Federal Circuit or Supreme Court or Congress, will eventually be forced to further limit district court judicial discretion on fee awards."

About Newegg Inc.

Newegg Inc. is the leading electronics-focused e-retailer in the United States. It owns and operates Newegg.com (www.newegg.com) which was founded in 2001 and regularly earns industry-leading customer service ratings. The award-winning website has more than 25 million registered users and offers customers a comprehensive selection of the latest consumer electronics products, detailed product descriptions and images, as well as how-to information and customer reviews. Using the site's online tech community, customers have the opportunity to interact with other computer, gaming and consumer electronics enthusiasts. Newegg Inc. is headquartered in City of Industry, California. The Newegg Hybrid Center is located at 18045 Rowland St., City of Industry, CA (News - Alert) 91748.

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