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Troll wins Newegg encryption patent case, threatening web firms that protect customers

on November 26, 2013

Gigaom

Just as the web is clamoring for more encryption, a Texas jury has set a terrifying precedent for companies that want to deploy it. Late Monday, the jury said online retailer Newegg was infringing on a patent that supposedly covers such security techniques. The court ordered Newegg to pay $2.3 million in damages, essentially for the sin of protecting its e-commerce transactions from online criminals.

U.S. Patent 5412730 (the ‘730 patent) was filed in 1992 by and granted in 1995 to one Michael Jones, at the time of a company called Telequip. It now belongs to TQP Development, an outfit established by Erich Spangenberg for the sole purpose of extracting cash from companies that allegedly infringe on its claims. Such outfits are officially known as “non-practising entities” and unofficially as “trolls”.

TQP has already used the patent to wring around $40 million in settlements out of Amazon(s amzn), Microsoft(s…

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