March 31, 2010, 12:00 AM

NCR seeks patent fees from big retailers, and Northern Tool fires back in court

One of the largest suppliers of point-of-sale and customer self-service systems to retailers, NCR Corp. in recent months has sent letters to several large web-only retailers alleging infringement on its technology patents. Northern Tool is disputing in court NCR’s claim that it violates up to 37 e-commerce technology patents.

Mark Brohan

Research Director

NCR Corp., one of the biggest suppliers of point-of-sale and customer self-service systems to retailers, is aggressively pursuing big online merchants for what it contends are multiple e-commerce patent violations.

NCR in the past has accused Internet industry companies such as Yahoo Inc. of web and e-commerce patent violations and then settled out of court for undisclosed license fees and other concessions. NCR in recent months has sent letters alleging infringement on its technology patents to several large web-only merchants and bigger catalog and chain retailers with online retailing operations.

NCR declines to comment. But several retailers who asked not to be identified say they have received letters from NCR’s legal department demanding restitution and other concessions for alleged e-commerce patent violations.

Worried retailers

The letters from NCR inform retailers that they are in violation of multiple NCR patents, such as for how an image is uploaded from a database to a product page and for data collection and organization. The letters, which name other web merchants that NCR says have signed licensing agreements, clearly have Internet retailers worried-so much so that no retailer would talk on the record about the NCR claims.

Some retailers who have received letters from NCR say they are weighing the cost of fighting the patent claims versus settling.

At least one retailer, however, has made its choice. On March 4, Northern Tool + Equipment Co. filed a lawsuit 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 that claim Northern Tool is in violation of up to 37 NCR e-commerce patents.

NCR, which has yet to file a response to the suit, Northern Tool, and Patterson, Thuente, Skaar and Christensen, the Minneapolis law firm representing Northern 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 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.

Signing up

In the court papers, Northern Tool includes 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. The letter lists, among others, 1-800-Flowers.com Inc., Buy.com Inc., PC Mall Inc., Williams-Sonoma Inc., Abercrombie & Fitch Co., Drugstore.com Inc., CDW Corp., L.L. Bean Inc., Netflix Inc., Blue Nile Inc. and Systemax Inc.

“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 has been to court before over Internet technology patents. The company accused Yahoo of 10 e-commerce patent violations, including infringements of patents involving computer system management and synchronizing and tracking operations among multiple web browsers, and the two companies settled in 2003.

But even if NCR succeeds in its patent claims against web merchants, some analysts believe its retail technology business may suffer. “NCR really doesn’t need to sue retailers. It has strong products to sell,” says Paula Rosenbloom, managing partner at Retail Systems Research LLC. “Lawsuits are a distraction for everyone.”

mark@verticalwebmedia.com

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