March 10, 2010, 12:00 AM

Northern Tool fires back in court at NCR over e-commerce patent claims

Northern Tool + Equipment Co. filed a law suit last week against NCR in the U.S. District Court of Minnesota. The complaint disputes allegations of patent infringement that NCR made in letters sent to Northern Tool in December and January.

Having sent strongly worded e-commerce patent infringement letters to dozens of online retailing and e-commerce companies since 2006, NCR Corp. has now heard back from one merchant who is ready to fight any patent dispute in court.

On March 4, Northern Tool + Equipment Co. , No. 74 in the Internet Retailer Top 500 Guide, filed a law suit in the U.S. District Court of Minnesota against NCR. The complaint disputes a pair of letters from NCR to Northern Tool sent on Dec. 17 and Jan. 7, respectively, that claim Northern Tool is in violation of up to 37 NCR e-commerce patents.

NCR, which has yet to file any of its own court papers, Northern Tool, and Patterson, Thuente, Skaar and Christensen, the Minneapolis law firm representing Northen Tool, aren’t talking publicly about the complaint. But in its court documents, Northern Tool asks for a jury trial to end “the substantial controversy between the parties.”

Northern Tool, which posted web sales of $210.0 million in 2009 and utilizes a WebSphere e-commerce platform from IBM, also asks the court to find NCR’s patents to be invalid and unenforceable and for unspecified monetary damages to cover attorney fees and related costs.

In the court papers, Northern Tool included a letter from NCR which states that well-known direct marketing and online retailing companies have already agreed to license NCR’s e-commerce technology. They include Inc. (No. 31), Inc. (No. 33), PC Mall Inc. (No. 72), Williams-Sonoma Inc. (No. 24), Abercrombie & Fitch Co. (No. 58), Inc. (No. 48), CDW Corp. (No. 8), L.L. Bean Inc. (No. 22), Netflix Inc., (No. 18), Blue Nile Inc., (No. 56) and Systemax Inc. (No. 21). “NCR is willing to offer Northern Tool a license under the e-commerce patents if Northern Tool promptly indicates to NCR a positive interest in taking such a license,” the Dec. 17 letter says. “To date NCR has already licensed more than 65 companies, including several of the top 50 e-retailers.”

NCR, one of the biggest suppliers of point-of-sale and customer self-service systems to the retailing industry, has aggressively pursued big online merchants since around 2006 for what it contends are multiple e-commerce patent violations.

NCR in the past also has accused Internet industry companies such as Yahoo Inc. of numerous web and e-commerce patent violations and then settled out of court for undisclosed license fees and other concessions. “Northern Tool is engaged in e-retail and e-commerce activities which are covered by NCR patents,” NCR says in its Jan. 7 letter. “NCR takes its patents and the rights associated with them seriously, including the right to prohibit others from utilizing NCR’s inventions.”

Several retailers who asked not to be identified say they have received letters in the last six months from NCR’s legal department demanding restitution and other concessions for alleged patent infringements. One retailer says Northern Tool is taking an aggressive and potentially costly course of action by bringing a lawsuit against a big retail technology company with deep financial resources. “It’s the right thing to do, but it remains to be seen how this will play out on the business side,” says a web retailer who asked not to be named. “These patent infringement disputes are very expensive to litigate and can drag on for a long time.”

The Northern Tool and NCR lawsuit is part of an accelerating trend of patent infringement fights within the e-commerce industry, say patent attorneys and in-house attorneys, who often refer to companies whose main business is making money off of patents as “patent trolls.”

One attorney who specializes in technology-related patent infringement issues says Northern Tool may have filed its suit before it was sued by NCR in order to put itself in the strongest possible situation to wage a court battle. “Northern Tool is making a pre-emptive strike because if it’s likely there is going to be a lawsuit anyway they want it to happen in a friendly court,” says the attorney who asked not to be identified. “By filing in Minnesota on their home territory, they also may have more leverage in settling the dispute before it goes to trial.”

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