IBM wins $82 million against Groupon over e-commerce patents

August 9, 2018

 

A U.S. jury awarded IBM $82.5 million after finding that Groupon infringed four of its e-commerce patents. It had been a running battle between the two companies since 2016, when IBM accused Groupon  of failure to license technology and intellectual property which provided the foundation of e-commerce. Initially, IBM sought damages worth $167 million, which Groupon managed to bring down to half its value (source).

 

The verdict underlines IBM’S booming intellectual property licensing business, which brought $1.19 billion for the company the previous year. IBM holds more than 45000 patents and is widely regarded as the most prolific patentee in modern history.

 

Midway through their first full day of deliberations in Wilmington, Delaware, IBM had the jurors in their corner, who decided that Groupon had willfully infringed the patents – which developed a possibility of an increase in the damages award.

 

"IBM invests nearly $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."

 

Groupon consequently has started to figure out its chances of a comeback after the hard hit – considering post trial motions and appeal. "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."

 

Two of the patents came out of an online service called Prodigy, which was started by IBM in the late 1980’s. It offered its subscribers access to a broad range of networked services, including news, weather, shopping, bulletin boards, and a variety of other features. Another patent is related to guarding information in a continuing conversation between clients and servers. The fourth is related to authentication, and expires in 2025.

 

IBM drew attention during the trial to the fact that the same patents had been licensed to Google, Amazon, and Facebook, and each company paid between $20 million and $50 million. “The new kid on the block refuses to take responsibility for using these inventions,” as stated by IBM lawyer John Desmarias. This is also the first time in 20 years that IBM managed to get a filed patent lawsuit to the start of a jury trial.

 

This was an important case in the online advertising and marketing sector, and underwent a detailed examination. Ten companies, including GoDaddy Operating Co., LinkedIn and Twitter had requested confidentiality on information related to their prior IBM patent deals.

 

 In an interview after the verdict, John Desmarais shed some light on how recent reforms, designed to fight abuses in the patent system have made it harder for companies to protect their intellectual property – which 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."

 

IBM was also fighting Priceline.com, part of Booking Holdings Inc. on similar grounds. U.S. District Judge Leonard Stark, who also presided over the IBM-Groupon trial, ruled in October that Priceline.com infringed on only 3 of the four patents in question. IBM has appealed in response to this verdict.

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