A cross-license agreement replaces dueling accusations. Amazon also will pay an undisclosed amount of money.
Amazon.com and IBM settled all their patent-infringement lawsuits and signed a long-term patent cross-license agreement, the companies said Tuesday.
Under the deal, Seattle-based Amazon will pay International Business Machines an undisclosed amount of money, and each company will share some of its technology.
No further details were released.
Amazon spokeswoman Patty Smith said the settlement will not affect financial results and that the online retailer has already factored the money into its financial guidance for the second quarter and full fiscal year.
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In October 2006, Armonk, N.Y.-based IBM alleged in two lawsuits that key components of Amazon’s retailing Web site were developed and patented by IBM.
IBM accused Amazon of infringing on five patents related to how the site recommends products to customers, advertises and stores data.
In December, Amazon countersued, denying the allegations and charging IBM with violating five of Amazon’s patents for ventures including IBM’s WebSphere business software.
Amazon said then that IBM’s demand for royalties was “nonsense” and amounted to allegations that IBM “invented the Internet.” Still, Amazon may have feared a possible loss at trial, especially after Microsoft lost a $1.52 billion jury verdict in an unrelated case in February, patent lawyers said.
“If these patents went to the heart of their business, it’s a risk they couldn’t take,” said Brian Ferguson of McDermott, Will & Emery, who wasn’t involved in the dispute. “A $1.5 billion verdict again Amazon probably is not the same as $1.5 billion to Microsoft. That would be a serious hit to the bottom line.”
Scott Hayden, Amazon’s vice president of intellectual property, called IBM’s patent portfolio “the largest and strongest in the IT industry” and said Amazon’s license to use IBM’s Web technology patents “gives us greater freedom to innovate for our customers.”
Dan Cerutti, IBM’s general manager of software intellectual property added, “We’re pleased this matter has been resolved through negotiation and licensing. We look forward to a more productive relationship with Amazon in the future.”
IBM has the world’s largest patent portfolio and received the most new U.S. patents in each of the past 12 years. It spends as much as $6 billion on research and development and collects more than $1 billion a year in intellectual-property revenue. IBM had $91.4 billion in sales last year.
Shares of Amazon.com climbed $1.01 to $61.83 Tuesday, while IBM shares rose 53 cents to $103.29.
Information from Bloomberg News, including the comments from lawyer Brian Ferguson, is included in this report.