Amazon Settles Patent Suit with IBM, 'Methods' Debate Forestalled

Without disclosing how much money changed hands, Amazon has settled a patent lawsuit brought against it by IBM in October of last year, by apparently purchasing a license for doing what many online retailers may have thought didn't require a one: providing an interactive program online featuring a catalog, including ads, from which users can purchase goods.

These principal business methods were patented by IBM as far back as 1988. After Amazon.com devised an online business model for worldwide warehousing without thinking to check first whether IBM or another computer manufacturer had patented the idea first, IBM evidently sought to sell Amazon a license. When it declined negotiation, based on IBM's description, it declared that "IBM's property is being knowingly and unfairly exploited," and filed suit against Amazon for IP infringement.

Last December, Amazon filed a countersuit, arguing that IBM's declaration that it invented the principles of modern electronic commerce was tantamount to claiming that it had "invented the Internet." Apparently, that challenge may have been met by IBM attorneys, who were willing to peruse its 40,000+ patent portfolio to prove just that.

Among the patents under dispute were #5,796,967, "Method for presenting applications in an interactive service;" #7,072,849, "Presenting advertising in an interactive service;" and #5,319,542, "Ordering Items Using an Electronic Catalog." Scholars believed an open court debate over these topics would have eventually led to reopening a high court debate over whether business methods, as opposed to devices, could indeed be patented. The US has long maintained that if an innovator or entrepreneur comes up with a novel and untried method for reaping capital and creating markets, that's as good as an invention.

But a counter-argument might have concerned whether the innovator actually created the market in question, or rather penned the idea for it in hopes that someone with the talent would create the market later, in order to claim infringement. This was likely to be the basis of Amazon's countersuit, now dismissed.

Why did IBM choose Amazon; why not sue just about everybody who's never obtained a license to run an online shopping catalog? Last October, eWeek's Evan Schuman posited a theory, one that was more sociological than technological or legal: "It's just the same schoolyard tactics that have been around for centuries," Schuman wrote.

"Think about the classic advice given to the new boy in school," he continued. "On his first day, he discovers that the school has the requisite bullies. What he does that first day on the playground will likely set the tenor for the rest of the year. The advice is that he go up to the biggest and meanest bully and stare him down, fighting if necessary. Why? Win or lose, he's sending out a message and making it much more likely the other bullies will leave him alone."

Which leads us to this morning's concession from Amazon's VP of intellectual property, Scott Hayden: "IBM's patent portfolio is the largest and strongest in the IT industry. Our license to its portfolio, and specifically to its Web technology patents, gives us greater freedom to innovate for our customers."