Bloomberg Businessweek

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Bloomberg Businessweek

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 LAST THING

With Bloomberg Opinion

By Joe Nocera

International

Business Machines

Corp. v. Groupon Inc.

Case #16-00122

IBM’s Got Patents and Isn’t

Afraid to Enforce Them

① THE ORIGIN Remember Prodigy, the online service that lourished in the

1990s before laming out a decade later? Turns out, IBM was one of its original

partners and owns Prodigy patents on some of the foundations of e-commerce.

You might think they wouldn’t be worth much by now, but you’d be wrong. A

few years ago, IBM claimed Groupon and Priceline Group Inc. were violating

some of them and demanded millions. Priceline Group, now known as Booking

Holdings Inc., settled for $34 million. Groupon decided to ight it out in court.

② THE CASE Groupon’s irst reaction was to laugh of the lawsuit. “They

inally got me—I stole the idea to sell goods and services at a discount from

Prodigy,” tweeted Groupon founder Andrew Mason. Its argument, to put it

bluntly, was that IBM was a patent troll: “IBM uses its huge stock of patents

as a club to get money from other companies,” declared Groupon’s lawyer.

For its part, IBM sought $167 million from the company—and argued that the

infringement was “willful,” meaning it could claim treble damages.

③ THE TRIAL In late July, two years after the case was iled, the two com-

batants engaged in a two-week trial. IBM’s killer point was that a raft of other

companies were paying fees to access these same patents: Amazon.com,

$49.8 million; Google, $35 million; and Twitter, $36 million. Its lawyer told the

jury that Groupon, “the new kid on the block,” was refusing to “take respon-

sibility for the technology it’s using.” The jury needed only six hours to agree,

awarding IBM half of the damages it claimed: $82.5 million.

④ THE RESULT Groupon has said it’s reviewing its options. The chances of

winning on appeal are slim—better to pay up and move on. Lucky for Groupon,

the judge has said he’s unlikely to triple the payout. As for IBM, one suspects

the trial was more about sending a message than reaping a inancial reward.

IBM has 45,000 patents, which generated $1.19 billion of its $79.1 billion in rev-

enue last year. If you’re not willing to pay up when IBM comes calling, it won’t

hesitate to go to court.  Nocera is a business columnist for Bloomberg Opinion

○ BLEEDING

THEM DRY

Lawsuits sure can be

expensive! When it

reported its second-

quarter earnings,

Groupon disclosed a

$75 million litigation

charge related

to the IBM trial,

contributing to a net

loss of $92.3 million on

continuing operations.

No wonder the stock

is down more than

15 percent for the year.

○ OLDIES BUT

GOODIES

How can patents so

old they predate the

consumer internet be

worth money today?

The trick to writing

patents is to make

them so broad they

can be enforced

no matter how far

technology advances.

Whoever wrote those

Prodigy patents

deserves a cut of

IBM’s winnings.