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International Business Machines Corp.

IBM to sue Groupon over alleged e-commerce patent violations

The IT giant is arguing that Groupon has infringed its patent over e-commerce technologies that the coupon site had licensed to other large tech conglomerates

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IP licensing is a high-margin business for IBM

International Business Machines Corp (NYSE:IBM) is suing coupon site Group Inc (NASDAQ:GRPN) for US$167mln over what it says are infringements of its patents regarding e-commerce technology.

The IT giant is arguing that Groupon has infringed its patent over e-commerce technologies that the coupon site had licensed to other large tech conglomerates including Amazon.com Inc (NASDAQ:AMZN), Facebook Inc (NASDAQ:FB), and Google parent firm Alphabet Inc (NASDAQ:GOOG) for around US$20mln to US$50mln each.

READ: Shares of IBM decline after 1Q profit misses estimates

Two of the patents involved in the lawsuit are relatively old intellectual properties (IPs) that have origins in the pre-internet Prodigy online service that was distributed by IBM from the late 1970s onwards.

Commenting on the proceedings, John Desmarais, a lawyer for IBM said, “The new kid on the block [Groupon] refuses to take responsibility for the technology it’s using” and that “Most big companies have taken licenses to these patents. Groupon has not.”

On the other side, Groupon lawyer David Hadden argued that the case was not valid as the patents don’t cover the worldwide web, because IBM did not invent it.

Hadden accused IBM of using its patents to extract money from other companies, saying the IT firm used its “huge stock of patents as a club to get money from other companies.”

IP licensing is a high-margin business for IBM, who has been winning the largest number of patents in the US every year for the last 25 years, however, it only comprises around 2% of total revenue.

In mid-morning trading Tuesday, IBM shares were down 0.9% at US$144, while Groupon shares were up 0.3% at US$4.7.

Quick facts: International Business Machines Corp.

Price: $141.88

Market: NYSE
Market Cap: $125.69 billion
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