It's the story that just keeps on giving.

First, Overstock.com and its colorful chief executive Patrick Byrne launched a legal assault on investors, journalists, and research analysts who allegedly conspired to drive its stock down. Byrne has said he believes the "naked short-selling" effort is overseen by a well known Wall Street figure he calls the "Sith Lord."

Now, in a reversal, Byrne and Overstock.com find themselves targets in a countersuit. Gradient Analytics, an independent research firm and one of the defendants in the Overstock.com lawsuit, filed a cross-complaint yesterday accusing Byrne and his firm of issuing false and defamatory comments about it since the original suit was filed two and a half years ago.

The libelous comments against Gradient, the complaint says, have caused financial losses to the firm by damaging its reputation among its clients and causing it to lose market share. It's seeking unspecified damages.

Among the whoppers in the complaint are some rather spicy emails purported to have come from Patrick Byrne. After Gradient issued a report that criticized an Overstock director, Byrne allegedly wrote to a Gradient employee: "You deserve to be whipped, fucked, and driven from the land."

The complaint cites a posting by someone from Overstock on the Motley Fool site that said that "[Gradient's] analysts were hired straight out of Burger King."

It also says Byrne referred to Gradient as "a crooked research firm conspiring with a crooked reporter" on an episode of CNBC's Kudlow & Company. The reporter in question is Marketwatch columnist Herb Greenberg, who is not named as a defendant by Overstock.

As expected, Byrne has a few words today in response to the Gradient complaint. "These bullies have done everything possible to avoid backing up their words short of chaining themselves to the radiator, but now that they are dragged by their heels into the ring, they jump up pounding their chests," Byrne responded in an email. "Gradient suit is just a way of blaming its flawed business model on Overstock, and my pointing that out to the world is speech that is protected by the First Amendment."

Byrne continues to exercise his freedom of speech on his blog.

Overstock general counsel Mark Griffin called the suit "just another delay tactic" whose claims "will not survive a motion to dismiss." Griffin says the date for the trial has been scheduled for September 9, 2008 in Marin County, California.

In related news today that may seem an ironic twist of fate, Marketwatch's Herb Greenberg announced that he's leaving journalism. But his next career path may not please Byrne: Greenberg is leaving to start his own equity research firm.

Byrne hasn't yet responded with a comment on that news. Griffin just laughed and said: "I have not had the pleasure of reading what Greenberg wrote in his blog."

by Megan Barnett