Ancient Online Shopping Cart Patent Still Biting Retailers

from the a-tax-on-online-shopping dept

This one goes way back. If you've been following the absolute ridiculousness of software patents for a while, you're probably aware of the infamous Open Market "online shopping cart" patents (7,272,639, 5,715,314 and 5,909,492). While Open Market failed, the patents have lived on. There was an internet company in Chicago, called Divine, that went through more business models than you can imagine, and somewhere along the line it bought the remains of Open Market. In struggling for some way (any way, please!) to make some money, the company realized it had Open Market's shopping cart patents and announced plans to sue way back in 2002. Next we heard of them, was in 2004, when Amazon was sued over those patents, by a company called Soverain software -- who bought the patents in 2003 or 2004 out of bankruptcy from Devine. Because fighting patent battles is costly, Amazon eventually just paid off Soverain.

I hadn't heard much about the patents, but it appears that Soverain has been busy again, and sued popular online tech retailer Newegg... and, unfortunately, as reader Ron Murphy let us know, a court in East Texas (of course) found that Newegg infringed... though, the details show that the jury did not find "direct" infringement, but rather "indirect infringement." However, last month, the judge's ruling sided with Soverain over Newegg, meaning that Newegg may have a huge bill facing it.

Even if Newegg fights this, Soverain has been suing all sorts of companies over the years, with many of them just agreeing to license the patent to avoid having to go through a lawsuit. And, because of that, Soverain has the ability to just keep on suing. The Newegg case originally involved six other companies (including Zappos), though all of the others settled. And since that lawsuit was filed, Soverain, more recently, sued a whole bunch more companies, including J.C. Penney, Amway, HSN, QVC, Shutterfly, Victoria's Secret and more -- and that case is in front of the same judge who just ruled in Soverain's favor -- so it doesn't look good.

I can't wait to see how our favorite patent system defenders defend this one. They'll say that we can't really say that the idea of an online shopping cart was "obvious" back when these patents were filed, but that's pretty laughable. It's pretty ridiculous to see anyone defend what has become a blatant tax on online retail now, from a company that did nothing to advance the space.

Filed Under: e-commerce, patents, shopping cart
Companies: newegg, open market, soverain software

Fake Processors, Passing The Blame, Legal Nastygrams And More...

from the oh-boy dept

Richard Corsale writes in to let us know about how popular electronics e-commerce site NewEgg apparently received 300 totally fake Intel processors and at least some of them were sold. They're not processors at all. They're just made to look like them from the outside. NewEgg's initial response was to claim that its supplier shipped them demo boxes by accident -- but Intel is claiming that's not true, and the boxes are not official Intel demo boxes, but counterfeit demo boxes. Then, to make the story even odder, many publications reported that NewEgg's supplier for these fake processors was a company called D&H -- and D&H's response to all of these stories is to send out legal nastygrams to anyone reporting on the story and mentioning D&H. Perhaps it's worth giving D&H the benefit of the doubt, but why not just come out and say "hey, it wasn't us," and get NewEgg to confirm or deny who provided the fake processors before sending out a legal threat?

Filed Under: blame, cease and desist, fakes, nastygrams, processors
Companies: d&h, intel, newegg

NewEgg Tells NY Tax Collectors To Take A Hike

from the take-that dept

Earlier this year, we wrote about how NY state had passed a highly questionable law designed to force e-commerce retailers to collect sales tax in the state. As you hopefully know, retailers are only supposed to collect sales tax in states where they have a physical presence. The reasoning for this is pretty straightforward. The taxes are designed to help provide core infrastructure services for those retailers (roads, water, etc.). Without a physical presence in the state, the retailers aren't making use of those services, so it doesn't seem right to tax them for it. The NY state law was sneaky in that it changed the definition needed to establish a "physical presence" to include anyone who acted as an affiliate of the retailer. Most e-commerce sites have affiliate programs that allow others to get a kickback on sales for driving those sales. Affiliates are effectively advertisers, driving traffic to an e-commerce site. It's quite a stretch to suggest they represent a physical presence for the company. But, NY politicians did it because they wanted to get more cash out of Amazon.

Different online retailers have reacted in different ways. Both Amazon and Overstock sued over the law -- and Overstock even banned NY affiliates while this law is in place. Online tech retailer NewEgg started collecting the tax, but has changed its mind. It sent a letter to customers saying that it's decided not to collect the tax. There isn't much more of an explanation, but it sounds like it's asking New York to sue it if it wants to get the tax at all:

As a result of recent changes in New York State tax law requiring certain out-of-state retailers to collect and remit sales taxes to the State of New York, we began collecting applicable sales tax for all orders shipped to New York addresses starting June 1, 2008.

After careful review and consideration, we are pleased to inform you that we have stopped collecting New York sales tax, effective August 21, 2008. This decision was driven by your direct and candid feedback and our continued commitment to you as our valued customers.

Your move, New York.

Filed Under: affiliates, new york, taxes
Companies: newegg