Two infringement lawsuits filed on October 23  by IBM (NYSE: IBM) against Amazon.com, Inc. (NASDAQ: AMZN) pit Big Blue's huge R&D investments against Amazon.com's online retail business model where consumers can buy almost anything with just "One Click".
The lawsuits seek unspecified damages, and come after nearly four years of attempts by IBM to resolve its concerns with Amazon.com over infringement of IBM's patents. The suits were filed in two District Courts for the Eastern District of Texas: one suit in the Tyler Division and the other suit in the Lufkin Division (Download copy of complaint).
Dr. John E. Kelly III, senior vice president of IBM Technology and Intellectual Property said "We filed this case for a very simple reason. IBM's property is being knowingly and unfairly exploited. … Everything we do is premised on the fundamental principle that IBM's intellectual property is one of our core assets, and represents the work product of tens of thousands of scientists and engineers and billions of dollars of investment."
IBM believes that Amazon.com's entire business model is built on IBM's patents. The patents that IBM said Amazon.com has willfully infringed include:
1. US 5,796,967 - Presenting Applications in an Interactive Service: relates to how Amazon presents, and navigates between, interactive applications.
2. US 5,442,771 - Storing Data in an Interactive Network: relates to the way in which Amazon stores application data in a network.
3. US 7,072,849 - Presenting Advertising in an Interactive Service: relates to methods Amazon is using to present and store advertising in a computer network.
4. US 5,446,891 - Adjusting Hypertext Links with Weighted User Goals and Activities: related to how Amazon uses hypertext links to make recommendations to a user.
5. US 5,319,542 - Ordering Items Using an Electronic Catalogue: relates to how Amazon enables customers to electronically order goods from an electronic catalog.
For a closer look at IBM's patents, see "IBM vs. Amazon – 5 Patents Threaten The Online Retailer"
Steve Roth, Consulting Attorney to IBM said that licensing discussions with Amazon began in September 2002. Amazon.com was contacted more than a dozen times about (delete on) the infringement, but has shown no willingness to have meaningful discussions.
Roth told IPFrontline: "It's important for juries to fully understand the technology and claims of the patents in a lawsuit. In order to prevent the technologies and claims of all five patents from overwhelming one jury, IBM filed two separate lawsuits. Both lawsuits were filed in the Eastern District of Texas, with the first lawsuit relating the '967, '771, and '849 patents filed in the Tyler Division, and the second lawsuit relating to the '891 and '542 patents filed in the Lufkin Division."
According to IBM, many companies have already licensed these patents in "field of use" patent licenses, but citing confidentiality agreements with the licensees, would not disclose those licensees.
Gail Zarick, Intellectual Property Counsel for IBM told IPFrontline that "IBM spends about $6 billion in R&D each year, and we've had more U.S. patents than any other company in the world for each of the past 13 years. IBM has a responsibility to its shareholders to ensure that it realizes a benefit from this huge R&D investment."
In addition to its responsibility to its shareholders, IBM, which received about $1 billion in intellectual property income last year (delete about $1.7 billion verify in patent licensing revenue last year), also has a responsibility to other licensees.
Zarick notes that failure of IBM to "enforce our patent rights would be a discredit to those who have fairly and lawfully taken these licenses", and that the current litigation is consistent with IBM's commitment to protect the intellectual property derived from its substantial R&D investments.
So is IBM enforcing "pure business method" patents? Zarick says that the five patents being asserted are not pure business methods since they do claim innovations of "technical merit. These high quality patents are the result of IBM's substantial R&D investment".
IBM has recently taken a leadership position in developing and sponsoring innovative policies supporting improved patent quality, collaborative innovation, and patent commons.
In January, 2005, IBM pledged 500 software patents freely available to anyone incorporating those patents into Open Source projects such as the Linux operating system.
And this past September, IBM announced a new, groundbreaking corporate policy governing the creation and management of patents. Two notable provisions of IBM's new patent policy are:
- Patent applicants are responsible for the quality and clarity of their patent applications, and
- Pure business methods without technical merit should not be patentable.
Patent infringement lawsuits typically take years, sometimes even a decade or more to resolve, so its likely that you'll be clicking more than once on updates to these lawsuits ... maybe until your finger turns Blue.