Del. Federal Judge's Ruling Sets Up Trial in IBM's Infringement Case Against Groupon

[caption id="attachment_2573" align="aligncenter" width="620"]

Amsterdam, Netherlands on Aug. 26, 2016. Photo Credit: Shutterstock[/caption] A Delaware federal judge has blocked Groupon Inc.'s bid to escape a lawsuit accusing the daily deal website operator of infringing IBM Corp. patents dating back to the early days of the internet. U.S. District Chief Judge Leonard P. Stark of the District of Delaware on Monday denied Groupon's motion for summary judgment of noninfringement of four IBM patents covering information-storage and sign-on technology, saying the issues were best left for a jury to decide. The decision also nixed IBM's request for a ruling to uphold the validity of its patents, though Stark did limit the affirmative defenses that Groupon would be able to rely on during trial, which is set to begin next month. The 21-page memorandum opinion was initially filed under seal, but a redacted version was posted to the court website on Wednesday. "The court concludes that genuine issues of material fact preclude summary judgment," Stark said. IBM, based in Armonk, New York, accused Groupon in December 2017 of building its business model on the patents without IBM's permission, despite prior warnings. According to the filing, efforts to negotiate cross-license agreements on the companies’ patent portfolios had broken down, leading IBM to file its infringement suit. The company said it was seeking "billions" of dollars in royalties. "Groupon has refused to engage in any meaningful discussions about reaching a license agreement to end its infringement of IBM’s patents," IBM said in its complaint. "Instead, Groupon has continued to willfully infringe IBM’s patents so as to obtain the significant benefits of IBM’s innovations without paying any compensation to IBM." Two of the asserted patents were issued in the late 1990s and cover methods for presenting applications and advertisements in an interactive service, IBM said. A third involves programming to preserve information in online interactions between a client and a server, and the fourth covers technology that makes it easier for first-time users to connect with a service provider, according to the complaint. All four patents were also at the center of infringement litigation IBM filed in Delaware against travel website operators Expedia Inc. and Priceline, as well as their subsidiaries in recent years. IBM announced in December 2017 that it had settled the case against Priceline after the parties agreed to obtain patent cross-licenses to each company’s worldwide patent portfolio. The case against Expedia is still pending. In court documents, Chicago-based Groupon said that IBM's patents were pre-empted by a 1995 version of Amazon.com Inc.'s website and Apple Inc.'s HyperCard software and programming tool, which the company first released in 1987. Groupon also argued that its website and mobile apps did not perform key steps outlined in the IBM patents' claims. IBM, meanwhile, said there was not enough evidence to support Groupon's claims, and it attacked a range of the company's defenses for failing to raise them earlier in the litigation. In his ruling, Stark knocked out Groupon's theories of full compensation, estoppel. covenant not to sue and release, as well as its license defense for three of the patents. The company, however, will be able to argue that it was protected by the doctrines of patent exhaustion and license as to the other. Trial in the case is scheduled to begin July 16 in Stark's Wilmington courtroom. IBM is represented by John M. Desmarais, Brian D. Matty, Karim Z. Oussayef, Laurie N. Stempler and Robert C. Harrits of New York-based Desmarais and David E. Moore, Bindu Ann Palapura and Stephanie E. O'Byrne of Potter Anderson & Corroon. Groupon is represented by J. David Hadden, Athul Acharya, Jessica Kaempf, Jessica Benzler, Phillip Haack and Saina S. Shamilov of Mountain View, California-based Fenwick & West and John G. Day and Andrew Colin Mayo of Ashby & Geddes. The case is captioned International Business Machines v. Groupon.