Appeals court: Actually, Newegg did win that case

Newegg is famous for fighting patent trolls, and the company is currently trying to win fees from several cases where it has won or the troll has given up.

In one of those cases, Newegg fought a non-practicing entity called Pragmatus Telecom, which dropped its case against Newegg before discovery was complete. Newegg asked for attorneys fees but was rejected by the Delaware district court, which found that Newegg wasn't the "prevailing party"—in other words, it hadn't really won the case at all, so it couldn't be granted fees.

Today the US Court of Appeals for the Federal Circuit overturned (PDF) that order, meaning Newegg will get a second shot at collecting fees. While the order is nonprecedential, the chance of defendants being awarded fees is changing the economics of the patent-trolling business.

In this case, Newegg was sued over US Patent Nos. 6,311,231 and 7,159,043. Both were originally owned by the New Brunswick Telephone Company, transferred in 2009 to Bell Aliant Regional Communications, and sold to Pragmatus Telecom in 2011. The patents have a priority date of 1995 and relate to "coordinating data and voice communications" through a "contact channel."

Pragmatus lawyers interpreted that as meaning the patents cover online chat, and they sued dozens of retailers for providing "live chat service over the Internet."

While the case was still in discovery, the two companies that provide live chat software to Newegg, Moxie Software and LivePerson, struck a licensing deal with Pragmatus. The patent-holding company then dismissed the case, and Newegg sought fees.

US District Judge Richard Andrews declined (PDF) to award fees, saying that Newegg wasn't the prevailing party. "I have not construed any terms, resolved a contested motion to dismiss, or resolved any motions for summary judgment," wrote Andrews in his opinion. "Here, Pragmatus licensed the suppliers of the technology, which led to downstream licensures for the users, i.e. Newegg."

The licenses with the two chat companies were for "non-trivial payment," and Andrews wrote that "[i]f there were a prevailing party, it would seem that it would more likely be Pragmatus."

The Federal Circuit overturned Andrews, noting that the dismissal order included a covenant not to sue Newegg for any possible live-chat related patent claims. The three-judge panel found that no "substantive court decision" was needed for Newegg to be the prevailing party and that the dismissal with prejudice, "at least where such a dismissal is paired with a covenant not to sue," was enough.

The appeals panel stopped short of awarding fees, instead sending the case back to the district court for reconsideration of whether fees and costs are appropriate.

Other Pragmatus companies, including Pragmatus AV and Pragmatus VOD, have been linked to Intellectual Ventures, but there's no sign that these two particular patents passed through IV's hands. Pragmatus entities have been linked to Bill Marino, a patent lawyer and longtime insider in the non-practicing entity space.