Newegg Vows to Fight On After Spangenberg IP Win

, The Litigation Daily

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Prolific patent plaintiff Erich Spangenberg won what must have been a particularly satisfying $2.3 million verdict against the online retailer Newegg Inc. on Monday, bringing an end to a jury trial that offered a glimpse into the world of patent monetization.

After a week-long jury trial, a federal jury in Marshall, Texas returned a verdict that Newegg infringes on a data encryption patent owned by one of Spangenberg's companies, TQP Development. The jury awarded TQP a bit less than half of the $5.1 million in damages it was seeking.

This case was destined to go to trial. Newegg's general counsel, Lee Cheng, refuses to settle with entities he considers to be "patent trolls," arguing that doing so would only further an illegitimate business model. Spangenberg has been called the most notorious patent troll in America. But unlike some of his cohorts, he doesn't hide from the press and is quick to defend his very lucrative line of work.

One of Newegg's strategies in the TQP case was to put patent trolling on trial, though a judge blocked the company from uttering the T-word. The company's lawyers called Spangenberg to the witness stand and grilled him about his business. As Joe Mullin of Ars Technica reported, Spangenberg acknowledged that 80 percent of his patent litigation settlements are born from lawsuits, rather than pre-litigation negotiations. Spangenberg also admitted that he has generated about $45 million in licensing fees from the TQP patent, only 2.5 percent of which goes back to the original inventor.

In an interview with the Litigation Daily after the verdict came down, Spangenberg said that he respects Newegg's GC Cheng on a personal level, but disagrees with his approach of refusing to settle with certain plaintiffs. "One hundred and twenty-five companies have licensed this patent, and it's survived a patent office interference...could Lee admit that maybe not every patent is invalid?"

Marc Fenster of Russ August & Kabat served as lead counsel for TQP. Kent Baldauf of the Webb Law Firm represented Newegg. Newegg's go-to appellate lawyer, Edward Reines of Weil & Gotshal & Manges, dropped in on the trial and handled some of the company's legal arguments.

In an e-mail, Reines said that Newegg believes that it will be vindicated on appeal. "We gone down this road before," he wrote, referring to a January 2013 ruling from the U.S. Court of Appeals for the Federal Circuit that vacated a similar jury verdict Soverain Software won against Newegg.

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