IBM wins US$83 million from Groupon in e-commerce patent fight

IBM sued Groupon for US$167 million, accusing it of building its online coupon business on the back of the IBM e-commerce inventions without permission.

The logo for IBM is displayed on a screen on the floor of the New York Stock Exchange (NYSE) in New York, US. (Reuters pic)

WILMINGTON: A US jury awarded International Business Machines Corp. US$82.5 million after finding that Groupon Inc. infringed four of its e-commerce patents.

Friday’s verdict is a boon to IBM’s intellectual-property licensing business, which last year brought in US$1.19 billion for the company, holder of more than 45,000 patents. Groupon fell 7.8% to US$4.84 in New York trading.

IBM sued Groupon for US$167 million, accusing it of building its online coupon business on the back of the IBM e-commerce inventions without permission. Midway through their first full day of deliberations in Wilmington, Delaware, jurors sided with IBM, finding that Groupon infringed the patents intentionally. The ruling means the judge can increase the damages award.

“IBM invests nearly US$6 billion annually in research and development, producing innovations for society,” IBM spokesman Doug Shelton said after the verdict. “We rely on our patents to protect our innovations.”

IBM shares fell 1.1% to US$145.15.

Groupon is weighing its options and considering post-trial motions and an appeal, said spokesman Bill Roberts.

“We continue to believe that we do not infringe on any valid IBM patents,” he said. “To the extent these patents have any value at all — which we believe they do not — the value is far less than what the jury awarded.”

Prodigy Service
Two of the patents came out of the Prodigy online service, which started in the late 1980s and predated the web. Another is related to preserving information in a continuing conversation between clients and servers. The fourth is related to authentication and expires in 2025.

IBM argued during the two-week trial that companies have paid from US$20 million to US$50 million for licenses to use its thousands of patents, including tech giants such as Inc., Alphabet Inc.’s Google, Facebook Inc., Twitter Inc. and LinkedIn Corp. Groupon didn’t seek IBM’s permission.

The trial marked the first time in at least 20 years that a patent lawsuit filed by IBM has made it to the start of a jury trial, Shelton said.

The case was closely watched in the online advertising and marketing sector. At least 10 companies — including Go Daddy Operating Co. LLC, LinkedIn and Twitter — asked that information related to their prior IBM patent deals not be made public.

Recent reforms designed to fight abuses in the patent system have made it harder for companies to protect their intellectual property, John Desmarais, an IBM lawyer, said in an interview after the verdict. That’s encouraged firms to resist IBM’s demand for a licensing fee.

“It’s put companies like IBM, who have real portfolios, real R&D investment dollars, in a situation where they have to go to court,” Desmarais said. Although IBM emerged intact from the Groupon trial, he said “it took years and millions of dollars when it should have taken a couple of meetings.”

Armonk, New York-based IBM reached a confidential settlement in December with, part of Booking Holdings Inc., on three of the same four patents. US District Judge Leonard Stark, who also presided over the IBM-Groupon trial, ruled in October that Priceline didn’t infringe the fourth patent. IBM appealed.

The case is IBM v. Groupon Inc., 16-cv-122, US District Court, Delaware (Wilmington).

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