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Newegg Obtains First Federal Circuit Fee Shifting Decision Based on Recent Supreme Court Precedent

Further Validates Company's Strategy of Vigorous Resistance Against Patent Trolls

LOS ANGELES, CA -- (Marketwired) -- 05/22/14 -- Newegg scored another victory in its ongoing fight against abusive patent asserters, also known as patent trolls. In a unanimous order, the Federal Circuit Court of Appeals (Federal Circuit) ordered a trial court to reconsider its earlier denial of Newegg's request for attorneys' fees and costs in a patent infringement suit brought by Site Update Solutions, LLC (SUS), a shell entity affiliated with notorious patent troll Acacia Research that sued dozens of companies.

The Federal Circuit's order was the first ruling on fee shifting following the United States Supreme Court's precedential opinion two weeks ago in Octane Fitness LLC v. ICON Health & Fitness, Inc., which rationalized the standard for fee shifting in patent cases. Prior to the Octane case, the Federal Circuit required defendants to show that a plaintiff brought a suit in bad faith and on "objectively baseless" grounds in order to recover fees. The standard was so high defendants were rarely able to recover fees, and most choose not to seek fees even if they won. In the Octane case, the Supreme Court ruled that the attorneys' costs and fees could be awarded to a prevailing defendant upon a demonstration that a case merely "stands out from the others."

In 2010, SUS used a classic patent troll strategy to sue Newegg and 36 other companies. SUS alleged infringement of technology related to the registration of websites on search engines. The majority of defendants banded together into two joint defense groups and pooled resources to mount a vigorous defense. The defendants managed to transfer the case out of the Eastern District of Texas to the Northern District of California, and then obtained a very favorable Markman claim construction ruling. SUS dismissed its suit against all remaining defendants willing to waive their rights to recover their legal fees. Newegg was the only defendant to refuse to waive its right to seek fees.

Lee Cheng, Newegg's Chief Legal Officer, stated, "We are glad the Supreme Court has once again joined the Executive Branch in taking notice that abusive patent litigation constitutes a major threat to innovation. The scales of justice have favored plaintiffs for too long, enabling them to assert bad patents or unreasonably demand damages solely because of the high cost and burden of defense.

"At Newegg, we've always believed paying off extortionists only encourages more extortion, and there had to be a negative consequence of suing Newegg without just cause," Cheng added. "We insisted on seeking a return of our legal fees from Site Update. Site Update's demand that we waive our right to seek fees for dropping a lawsuit that should not have been filed in the first place was outrageous. What a joke. We believe that trying to make a patent troll pay, no matter what amount, sends the clearest possible message to all abusive patent asserters and their contingency fee lawyers that if they file a frivolous lawsuit against Newegg, they will suffer some consequence, even if it is only making less money or having to do more work than they planned to. This case also provides an excellent template for how a well-managed and organized joint defense effort allows participants to not just bask in the glow of beating a patent troll, but also save money compared to paying off a patent troll. We hope that our work will provide a beacon of hope for real innovators and honest entrepreneurs facing demands from abusive patent asserters. We want to encourage other defendants to create as much friction as possible, rather than feeding the beast with easy settlement checks."

"Newegg pursued justice in this matter because it is consistent with our company's corporate mission to bring the benefits of technology and technology products to our valued customers. When defendants settle frivolous claims, their customers will eventually end up paying. We value our customers far too much to subject them to the toll of the troll," said Cheng.

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 91748.

James Merk
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