MacroSolve is a company that got a lot of (generally negative) attention when it turned full-blown "patent troll" in 2011, suing dozens of companies (including small app development shops) over patent No. 7,822,816, which it claims covers using questionnaires on a mobile app.

Now, a coalition of defendants led by Newegg and Geico Insurance has stopped MacroSolve in its tracks. MacroSolve has dismissed all remaining cases, and it has admitted that it can't proceed to go forward with a trial that was scheduled to take place this June in East Texas.

MacroSolve was able to "extort over $4M from over 60 defendants," Newegg Chief Legal Officer Lee Cheng wrote in a victory e-mail to his coalition. Last year, Newegg began to organize the final group of MacroSolve defendants, urging them to band together and stop paying MacroSolve, which was generally demanding between $50,000 to $100,000 to settle a lawsuit. (Those demands are on the low side for patent troll settlements; five-figure settlements are considered to be in the "nuisance" range.)

In addition, Geico Insurance filed an ex parte reexam against the MacroSolve patent. That move paid off, and all claims were rejected on March 7. A couple of weeks later, MacroSolve started dismissing defendants.

"MacroSolve is now trading at a smidge above $0.01 per share," noted Cheng in his e-mail to allies, which he shared with Ars. "Why those asshats continue to trade at ANY value, I do not know. The world would be a better place without them and their advantage-taking ways. Please continue to support efforts to bring symmetry to patent law, legislatively, administratively, in the courts, and in the court of public opinion."

Newegg has a reputation for taking a hard line against companies it views as patent trolls. The company fought and won a lengthy battle over a patent on an electronic "shopping cart," and it has defeated Alcatel-Lucent and Kelora. Last fall, it experienced a setback when it lost a trial against a TQP Development, which has sued more than 100 websites for using common encryption technology. Newegg was ordered to pay $2.3 million. Cheng has vowed to fight that outcome in the appellate courts.

Strength through unity

In an interview with Ars, Cheng explained how the MacroSolve case went down.

MacroSolve is publicly traded, a "zombie-troll" that once had a product but has long since stopped being able to earn its living in the market. After looking at the company's financials, Cheng and his advisors saw that the company was not highly capitalized. MacroSolve had about $800,000 on hand and looked to be burning through about $50,000 a month, not including payments to its lawyers. It didn't have the resources to push through a trial, perhaps not even enough for discovery and claim construction. The company was pulling in one or two settlements each month, and most of the proceeds immediately went to legal expenses or were distributed to stockholders. Interrupting the stream of settlements would "severely impact MacroSolve’s ability to continue abusively asserting the ’816 patent," explained an internal defense strategy document that was distributed to MacroSolve defendants.

"People just had to start saying no," said Cheng. "It was very frustrating that people kept writing checks for $50,000. Every single person keeled over before they hit us and Geico."

Cheng encouraged the remaining defendants to band together into a joint defense group, keep their expenses low, and stop paying. Meanwhile, Geico filed an ex parte reexam, one of two challenges to MacroSolve at the patent office.

Cheng's "stop feeding the trolls" pitch didn't meet with 100 percent success, but it worked well enough. MacroSolve financial filings and court documents show that most of the companies in the final batch of targets did not settle. The holdouts included Chipotle, Kayak, HBO, Meetup.com, Mediafire, Carlson Hotels, and Five Guys Burgers. (Yes, MacroSolve wrote another chapter in the ignominious history of patent trolls suing burger joints.)

MacroSolve had wanted Newegg out of the case. "Last year, they offered to walk away," said Cheng. "But they were quite insistent that we give up our right to seek fees. We said, 'Sorry guys, this is part of our strategy. People like you do not get to sue Newegg without consequence.'"

As promised, Newegg filed a motion last week seeking about $27,000 in costs from MacroSolve. It has also filed a motion for legal fees, which will be harder to win. That motion is under seal. Cheng told Ars the litigation against MacroSolve cost Newegg about $450,000.

MacroSolve CEO: “If you enforce your rights, you’re a troll”

"It's just an advertisement." That's how MacroSolve CEO Jim McGill described the Newegg press release and blog post about the case. "We had a claim rejection at the patent office, and we have until May to respond to it," McGill said in an interview with Ars. "But they've claimed victory, and they're doing their victory lap."

MacroSolve's most recent public financial statements inform its investors that its patent is unenforceable. Its litigations have been dismissed. Even if it does emerge victorious in the patent office, it will have to start up its patent-lawsuit engines from the beginning.

"We've dismissed all the outstanding suits," acknowledged McGill. "But that doesn't mean we won't come back later. It would be acting in bad faith to go to trial in June when we've had a rejection from the patent office."

He objected to Newegg's labeling him a patent troll, despite the fact that the company's own financial filings show that it earns 97 percent of its revenue from patent lawsuits. "MacroSolve has been around since 1996," said McGill. It sold Illume Mobile, a division with non-patent operations, in 2012. "We were at the first Palm developer conference. We built up and sold three divisions of our company, and we've got another division we're building up right now. But as soon as we started enforcing our patent rights, people want to come along and holler 'patent troll.' If you enforce your rights, you're a troll. If you don't, big companies will walk all over you."

But even McGill's description of the operating "part" of his company doesn't hold up. Illume Mobile was indeed sold to DecisionPoint in 2012 for $1 million in cash and stock—but that sale was pursuant to a patent lawsuit settlement.

In other words, the one customer McGill could point to was one he had sued.

McGill demurred when asked if his patent was a patent on filling out forms, but he then gave his own broad description of the technology: "It involves the first app for collecting information."

If that sounds broad, it is. Back when MacroSolve was working on its technology, "you couldn't go to a Web page and fill out a form, because the connectivity was so bad," said McGill. "It's a unique patent."

It's also mystifying how MacroSolve acquired it. The patent's priority date is 2002, but there's nothing special about HTML forms on the Web that substantially pre-dated that year. And of course, electronic forms have been gathered and stored in non-networked databases for decades.

In his declaration, McGill explained to the office the ways he believed MacroSolve had improved on the state of the art. MacroSolve, which in better days had partnerships with Sprint and Palm, had innovated "the use of tokenizing to accommodate limited bandwidth... and questionnaire updating," said McGill. He claimed that MacroSolve advanced the idea of "device independence so the same questionnaire can be executed on multiple types of devices" and "the ability to incrementally update the questionnaire."

McGill also disclosed to the USPTO the total earnings from the patent campaign: $4.6 million in payments from 63 different companies.