IBM Takes Its Time; Sues Amazon For Patent Infringement

In a move that took technology watchers by surprise, International Business Machines Corp. slapped Amazon with two patent suits yesterday, claiming the online retailer has been violating at least five of its patents since 2002. Among them are patents for interactive advertising, as well as one of Amazon's most distinctive marketing features--its ability to make product recommendations to users based on past purchases.

So why would IBM sue now? "We tried to work with Amazon to reach a settlement," said Jorge Alberni, an IBM spokesperson, who said IBM had contacted Amazon at least a dozen times since 2002. "We allege that they knew full well they were infringing on key patents. We exhausted every effort, and our only choice is to sue to protect our R&D."

The spokesman said many other companies who engage in Internet retailing pay IBM licensing fees for these same patents. "To not enforce these patents would be a discredit to the companies that are fairly and lawfully using them." He declined to name the other retailers, but said IBM spends more than $6 billion a year in R&D, and is awarded more patents each year than any other U.S. company.



Amazon, of course, is no stranger to legal knock-down, drag-outs: In 2002, it settled a long-running fight with Barnes & Noble over its 1-Click check-out function. And last March, a judge ordered that Toys R Us had a right to sever its Internet business from Amazon, and establish its own online presence.

It's unlikely that IBM's suit will have any immediate effect on consumers, said Sucharita Mulpuru, an analyst who follows Amazon for Forrester Research. "While there's always a fear of injunction, IBM just wants to get its fair share in licensing fees," she said. "It will be interesting to see what happens. These are two big giants trying to preserve their turf, and Amazon doesn't go down without a fight."

Still, she said, Amazon "has been facing an uphill battle for the last several quarters, and this fourth quarter--the first holiday since the Toys R Us split--could be a harbinger of their future." Mulpuru said she expects Amazon to post modest sales gains in the quarter, and to be down in the toy category (overall, Forrester expects online holiday sales to reach $27 billion--up 23 percent from last year, despite consumer pessimism).

Calls to Amazon were not returned.

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