E-centives, Coolsavings End Patent Battle

Online marketers e-centives and coolsavings.com said they will settle the three patent infringement suits pending between them, by agreeing to cross-license each other’s patents.

The companies said the deal, in which e-centives agreed to pay between $650,000 to $1.4 million, was predicated on quickly putting aside costly and time-intensive legal battles in the interest of simply competing in the business world.

“We are committed to providing value to our shareholders and choose to focus our time and expenditures on expanding our business instead of in the quagmire of the court system grappling with complicated technology patent issues,” said Bethesda, MD-based e-centives’s vice president and general counsel Jason Karp.

As part of the settlement, e-centives will pay $650,000 immediately to bring an end to the ongoing litigation, which was due to go to court in December.

It also agreed to pay an additional $750,000 over the next two years if coolsavings.com successfully defends its patent in a pending lawsuit brought against it by Catalina Marketing, which owns an online coupon subsidiary, Supermarkets Online. In addition, the additional payment hinges on coolsavings maintaining its patent in the face of a re-examination by the U.S. Patent and Trademark Office.

“Regardless of the outcome, such payments would be significantly less than the costs associated with the continued prosecution of even one of the three cases that were pending,” Karp said.

The settlement ends more than two years of squabbling and traded insults between the two companies, which stemmed from coolsavings patent for issuing electronic coupons, awarded in June 1998.

In August 1998, coolsavings.com took the offensive: suing e-centives and nine other companies for patent infringement.

But, claiming that coolsavings threatened injunctions against its customers, e-centives filed a countersuit against the company. While patent holders are allowed to notify a company’s customers of the possibility of patent suits against the company, the countersuit alleged coolsavings’ intent to injure e-centives’ business and relationships with its customers.

At the time, e-centives’s chief executive Kamran Amjadi accused coolsavings of the suits as a means of gaining competitive leverage in the electronic coupon market, which coolsavings denied.

Further complicating matters, in April 1999, e-centives purchased an existing coupon patent that predated coolsavings’ own patent — and then e-centives promptly filed an infringement suit of its own. e-centives executives said the patent purchase allowed the company to move into the offline coupons market, which it planned to do in 2001.

After Friday’s settlement, only Catalina Marketing — of the original ten companies sued by coolsavings — is still embroiled in litigation with the smaller coupon company.

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