In its second-largest acquisition, Amazon buys the company for $970 million.
Amazon.com is countersuing IBM over patent infringement. In the complaint, Amazon accuses IBM of illegally incorporating parts of Amazon’s patented personalization technology into WebSphere, IBM’s e-commerce platform.
It’s becoming a high stakes game of “one-upsmanship” in the patent dispute between Amazon.com and IBM.
On Dec. 15, Amazon, No. 1 in the Internet Retailer Top 500 Guide to Retail Web Sites, filed a counter complaint in the U.S. District Court for the Eastern District of Texas that accuses IBM of patent infringement.
The complaint accuses IBM of illegally incorporating parts of Amazon’s patented personalization technology into WebSphere, IBM’s e-commerce platform, and using the judicial system to unfairly acquire software licensing fees in the online retailing industry. “IBM sat back for seven years while Amazon.com innovated and built its business, waiting until 2002–after Amazon announced its first profitable quarter–before demanding money and making its specious claims of infringement,” the Amazon complaint says.
In October, IBM filed two patent infringement lawsuits against Amazon. The complaints contend that Amazon is infringing on IBM patents for: presenting applications in an interactive service; storing data in an interactive network; presenting advertising in an interactive service; adjusting hypertext links with weighted user goals and activities; and ordering items using an electronic catalog.
But in its countersuit Amazon claims that IBM is trying to profit by forcing other companies to pay IBM unwarranted damages. “The law suits by IBM represent a belated attempt to tap into this dynamic new industry by an old company built on business principles and innovations of the past,” the Amazon complaint says. “IBM does not attempt to disguise its intent in filing these suits. IBM simply wants to siphon off the profits that Amazon.com has only recently earned through the professional risks and investments expended by Amazon as it chartered a new path in the Internet Age.”
In its suit, Amazon denies any patent infringement, asks the court to invalidate some existing IBM patents and accuses IBM of illegally incorporating parts of Amazon’s personalization technology into WebSphere. “IBM has chosen to infringe Amazon’s patents willfully and to obtain the commercial benefits of Amazon’s technology without authorization or compensation,” the complaint says.
In response, an IBM spokeswoman calls Amazon’s countersuit a distraction. “Amazon’s new counterclaims that IBM infringes on Amazon patents also ring hollow,” the spokeswoman says. “In more than four years of patent cross-license discussions between the companies, Amazon never mentioned a single one of these patents. Instead, this apparent ‘Aha-moment’ on Amazon’s part is nothing more than a transparent litigation ploy.”
IBM, which claims in its initial suit that several years of attempting to resolve outstanding patent issues with Amazon failed, also says that IBM has a long history of Internet technology innovation. “Amazon’s assertion that IBM is not an innovator defies reality,” the spokeswoman says. “IBM is a world leader in technology and innovation, home to five Nobel laureates and recipients of numerous national science and technology awards. Without IBM’s innovations, which include the DRAM memory chip, relational data bases, the hard disk drive--and the five patents at issue in these two lawsuits--Amazon and the technology on which its business depends would not exist.”
She adds: “As set out in IBM’s October complaints, the evidence in these two lawsuits will show Amazon’s infringement of IBM’s leading edge technology, plain and simple.”
While both Amazon and IBM have now filed extensive documents with the U.S. District Court in Texas, no court dates have been scheduled.