IBM Sues Amazon for Violating 18-Year-Old Patents

Back in '88, long before the Web existed, IBM patented online catalog sales and Web ads. Now it wants Amazon to pay.

IBM is suing Amazon.com, accusing the bookseller turned Web megastore of knowingly using IBMs techniques for selling things online. Initially at issue was an IBM request for hundreds of millions of dollars in license fees, but the federal court could expose Amazon to even stiffer penalties.

Amazon spokesperson Patty Smith said Amazon has not yet seen the lawsuit filing so the company cant comment.

IBM attorneys say they have been trying to negotiate with Amazon for more than four years—since September 2002—but talks did not go anywhere and Amazon ultimately stopped responding. "We have given them an opportunity over four years," said Gail Zarick, intellectual property counsel within corporate litigation at IBM.

The case traces its routes to 1988, Zarick said, when IBM started to patent a wide range of e-commerce techniques back when it owned Prodigy, which was an online service that predated the Web and was a rival to the early AOL and CompuServe.

The patents that IBM says are being violated (included are links to the full texts of those patents) are U.S. 5,796,967: Presenting Applications in an Interactive Service; U.S. 5,442,771: Storing Data in an Interactive Network; U.S. 7,072,849: Presenting Advertising in an Interactive Service; U.S. 5,446,891: Adjusting Hypertext Links with Weighted User Goals and Activities; and U.S. 5,319,542: Ordering Items Using an Electronic Catalogue.

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The initial reaction of analysts is that many of those patents sound too vague and basic to be protected, but that was before they knew the patents were submitted as early as 1988 and the most recent filing—the advertising in an interactive service one—was filed in 1992, Zarick said.

"This is somewhat akin to patenting the concept of putting up storm shutters before a hurricane," said Cathy Hotka, senior vice president of technology and business development for the Retail Industry Leaders Association. "One should not be able to patent obvious business processes, like selling things. If these issues are not resolved, business innovation is in danger if the most obvious things can be reserved for one company."

Forrester Research analyst Sucharita Mulpuru said the battle is clearly to grow IBMs patent license revenue business and to do so in a very public way.

The size and marketing clout of the two players involved, though, could make the battle interesting, she said. "I suspect this could get ugly. You have two big powerhouses of e-commerce pitted against each other. I dont think IBM took this step lightly," she said. "Theres been a proliferation of patent lawsuits recently, and theyre mainly executed to extract licensing fees, which Ive no doubt Amazon hasnt responded to because its not in their best interest to do so without a fight."

Paula Rosenblum, a longtime retail technology analyst who now serves as the vice president for research and content at the Retail Systems Alert Group, said her initial reaction was that it was intriguingly timed. "Beyond the obvious question of Why now? Im not sure why they would pick the start of the biggest Internet shopping season to try to get their attention," she said.

Evan Schuman is retail editor for Ziff Davis Internets Enterprise Edit group. He has tracked high-tech issues since 1987, has been opinionated long before that and doesnt plan to stop anytime soon. He can be reached at Evan_Schuman@ziffdavis.com.

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