In 2011, Alcatel-Lucent had American e-commerce on the ropes. The French telecom had sued eight big retailers and Intuit saying that their e-commerce operations infringed Alcatel patents; one by one they were folding. Kmart, QVC, Lands' End, and Intuit paid up at various stages of the litigation. Just before trial began Zappos, Sears, and Amazon also settled. That left two companies holding the bag: Overstock.com and Newegg, a company whose top lawyer had vowed not to ever settle with patent trolls.

Then things started going badly for the plaintiff. Very badly. Instead of convincing the East Texas jury to hand Alcatel the tens of millions it was asking for—$12 million from Newegg alone—the company got a verdict of non-infringement. And as for the one patent Alcatel had argued throughout trial was so key to modern e-commerce—US Patent No. 5,649,131—the jury invalidated its claims.

Alcatel-Lucent was scrambling. The company's patent-licensing operations were contentious but lucrative and Alcatel surely had plans to move on from those eight heavyweights to sue many more retailers. The '131 patent, titled simply "Communications Protocol" and related to "object identifiers," was its crown jewel.

Alcatel-Lucent went all-out on appeal. With upwards of $19 billion in revenue, the company was easily able to amass legal firepower not available to your average patent troll. For its appeal it hired Wilmer Hale, the kind of top law firm that handles high-stakes appeals and which is filled with lawyers who have their own Wikipedia pages.

How Newegg crushed the “shopping cart” patent and saved online retail It's game over for a patent troll that sued nearly 50 big retailers. It's game over for a patent troll that sued nearly 50 big retailers.

Last Friday May 10, Alcatel-Lucent's appeals lawyer Mark Fleming made his case to a three-judge panel. Representing Newegg and Overstock was Ed Reines, the same attorney who helped Newegg blow apart the infamous "online shopping cart" patent on appeal a few months ago.

Federal Circuit judges typically take months, and occasionally years, to review the patent appeals that come before them. Briefs in this case were submitted last year and oral arguments were held May 10. The three-judge panel upheld Newegg's win without comment—in just three days.

Yesterday morning Reines sent Newegg's legal team an e-mail: "I'm pleased to report we received a summary affirmance. That is extraordinary to my eye given the stakes and complexity of the matter."

"Mark Fleming is phenomenal, a great lawyer," said Lee Cheng, Newegg's chief legal officer, in an interview with Ars. "I heard him argue. But even he can't make bad facts go away."

Alcatel-Lucent dropped the case over its other two patents, desperate to get back the '131 patent that Newegg and Overstock had killed at trial. “If they had been able to revive this patent, the litigation machine would have continued on," Reines told Reuters after the win.

Newegg's Cheng: “The bad news is... fewer trolls for us to fight.”

"There's good news and there's bad news," said Cheng in an interview with Ars. "The good news is, we won this case on every point. The bad news is, we're running out of lawsuits. There are fewer trolls for us to fight. I've spent a lot of time over the last seven years figuring out what to do with these guys. There are strategies I think would be really neat and effective that I literally can't execute. I can't make good law because I don't have any appellate cases left. They [the trolls] are dismissing cases against us before any dispositive motions."

Newegg has already won two other patent appeals this year from Kelora Systems and Soverain Software. Even though Alcatel-Lucent has billions in revenue from real businesses, when it comes to patent battles Cheng doesn't see them as being so different. Since Alcatel is asserting patents in markets it's nowhere near actually participating in he sees them as a kind of "corporate troll."

"It's an operating company that happens to hold a patent," said Cheng. "But it does nothing at all to bring the benefit of that patent to society."

Mark Griffin, Overstock's general counsel and Cheng's co-defendant in this case, began to see Alcatel-Lucent in the same terms. "They took an old cell phone patent and tried to say that it applied to the Internet," Griffin told Bloomberg. His company is looking to take a harder line against trolls as Newegg has. "The general counsels of publicly traded companies have started to wake up—we don't feed trolls," Griffin said.

Even so fighting them off was no easy task. Alcatel acquired Lucent in 2006 and the French telecom used the intellectual property it acquired to kick off one of the most aggressive and wide-ranging patent licensing campaigns in history, embracing the "patent troll" model even as it maintained operating businesses in other realms.

"These are the Bell Labs patents," Cheng said. "It is truly, truly tragic how the mighty have fallen. This company was once the pride of American innovation, a company that has roots going back to Alexander Graham Bell. And it ended up selling off its patents for a few bucks. What Alcatel-Lucent did was really offensive." He continued:

They systematically sent thousands of letters out saying, "Hey, we own 27,000 patents, and here are some patents we think you infringe." They had a whole licensing group whose job was to monetize these patents, by threatening litigation and in some cases litigating. It didn't actually matter if you did your own analysis and got back to them and said, "Hey guys, we actually think we don't infringe." The response was something to the effect of, well, we have 27,000 patents—and you probably infringe something, so give us a licensing fee.

At trial in East Texas Cheng took the stand to tell Newegg's story. Alcatel-Lucent's corporate representative, at the heart of its massive licensing campaign, couldn't even name the technology or the patents it was suing Newegg over.

"Successful defendants have their litigation managed by people who care," said Cheng. "For me, it's easy. I believe in Newegg, I care about Newegg. Alcatel Lucent, meanwhile, they drag out some random VP—who happens to be a decorated Navy veteran, who happens to be handsome and has a beautiful wife and kids—but the guy didn't know what patents were being asserted. What a joke."

"Shareholders of public companies that engage in patent trolling should ask themselves if they're really well-served by their management teams," Cheng added. "Are they properly monetizing their R&D? Surely there are better ways to make money than to just rely on litigating patents. If I was a shareholder, I would take a hard look as to whether their management was competent."