Waxman Asks SCOTUS to Tighten Federal Circuit Reins in Newegg Case
Soverain Software, a holding company with patents related to e-commerce, is banking on appellate heavyweight and former U.S. Solicitor General Seth Waxman to revive its case against Newegg Inc. at the U.S. Supreme Court.
The company filed a petition for writ of certiorari last week, seeking to challenge a ruling by the U.S. Court of Appeals for the Federal Circuit that invalidated Soverain's patents. Soverain sued Newegg and six other Internet retailers in 2007 in federal court in East Texas, alleging infringement of its online shopping cart patents.
Waxman, a veteran of 65 Supreme Court oral arguments, has been in high demand lately in patent cases. On Nov. 5, he's scheduled to appear before the justices on behalf of Medtronic Inc. in Medtronic Inc. v. Boston Scientific Corp. Among other notable wins, the Wilmer Cutler Pickering Hale and Dorr partner notched major victories for patent-holders at the high court last term in Bowman v. Monsanto Co. and in 2011 in Microsoft Corporation v. i4i Limited Partnership.
In the Newegg case, Waxman is asking the court to overturn the Federal Circuit's January 2013 decision to invalidate three of Soverain's patents on obviousness grounds and to vacate judgment of infringement and damages. "If not reversed, the Federal Circuit's sweeping interpretation of what constitutes the legal question of obviousness will have serious negative repercussions for patent law," the petition asserts. Waxman and Soverain's longtime counsel at Quinn Emanuel Urquhart & Sullivan argue that the decision makes it more likely that patents will be invalidated on appeal—even when the accused infringer hasn't requested a judgment of invalidity and there are disputed issues of fact.
"By increasing uncertainty, circumventing procedural protections, and significantly expanding the window during which a patent may be invalidated as a matter of law, the decision presents a threat to all who rely on the stability and predictability of the patent system," Soverain contends.
In August 2010, a jury in Tyler, Texas, found that Newegg infringed the three Soverain patents and awarded the company $2.5 million in damages. U.S. District Judge Leonard Davis removed the question of obviousness from the jury, ruling there was insufficient testimony to present an obviousness case.
Newegg appealed the case to the Federal Circuit, but instead of remanding the case for a jury to decide obviousness as Newegg requested, the panel ruled in January that the patents were invalid as a matter of law.
"It's not appropriate for the court to take the fact-finding role away from the trier of fact—the jury—if there's a dispute over material issues of fact," Waxman told the Litigation Daily. "Other than the gross injustice to Soverain in this case, it's a glaring example of a disturbing trend we've seen where the Federal Circuit is arrogating authority in decisions about challenged patents."
Waxman said the division of authority between judges and juries to sort out the facts in invalidity challenges is hugely important. "And it's important for the Supreme Court, which has a renewed and avid interest in broad questions of patent law, to hear the case because it focuses on the question of when, if ever, it is appropriate for the court to treat obviousness as a pure question of law," he said.
Newegg is represented by a team at Weil, Gotshal & Manges led by Edward Reines. "Newegg is confident in its position and expects to prevail," Reines said. "The Federal Circuit analysis was consistent with a body of law."
Reines added that the obviousness of the claimed inventions, including a shopping cart for e-commerce retailers and a hyperlink for a receipt, is clear. "No facts were found nor did they need to be," he said.
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