Published June 25, 2024

Recent court filings reveal that International Business Machines Corp. (IBM) and Rakuten have reached a settlement in their legal dispute. IBM filed the complaint in 2021 alleging that the e-commerce website violated e-commerce-related patents.

The settlement brings an end to a long-running lawsuit filed by the tech giant in the US District Court for the District of Delaware. The agreement was reached shortly before the trial was due to start on 24 June 2024.
IBM’s allegations centered on claims that Rakuten’s mobile apps and shopping website, which offer cash-back incentives, infringed upon multiple patents held by IBM. Rakuten “took those prior innovations made by IBM and others to create and run its new business,” the complaint claims.

These patents cover technologies developed by IBM for one of the first e-commerce services, Prodigy, which was launched in collaboration with others prior to Rakuten’s founding in 1997. Despite nearly six years of negotiating a licensing agreement, IBM claimed that Rakuten used these innovations without proper licensing.

The patents in question cover a wide range of e-commerce functions. US Patent No. 7,072,849 covers methods to interactively present applications and advertising over a network. Other patents, including US Patent Nos. 7,631,346 and 6,785,676 cover improvements to single sign-on technology and real-time search capabilities.

IBM asserted that, in contrast to Amazon, Apple, Google, and Facebook, which have cross-licenses with IBM, Rakuten has intentionally infringed upon IBM’s patents and even expanded its infringing activities.

Rakuten allegedly adopted a number of delaying strategies and refused to acknowledge or address the alleged infringements despite IBM’s efforts to reach a licensing agreement. As a result, IBM filed a lawsuit in March 2021 seeking preliminary injunctive relief to stop the unauthorized use of its patented technologies as well as damages. Rakuten argued that the patents were invalid and denied the allegations.

Both IBM and Rakuten kept quiet about the settlement, and its terms were not made public. Nonetheless, the settlement essentially put an end to the legal dispute, which might have had significant effects on both businesses’ operations and finances. This case is similar to IBM’s previous legal battles over similar issues. For example, IBM was involved in a lawsuit with Groupon that led to a settlement after a jury ruled in IBM’s favor and awarded them $83 million, after which Groupon agreed to pay $57 million.

This resolution emphasizes the ongoing complexities and challenges in the field of intellectual property, particularly in relation to rapidly evolving e-commerce technologies. It demonstrates IBM’s strategic emphasis on protecting its extensive patent portfolio, which it uses to generate licensing revenue and maintain a competitive advantage in the technology sector.

The broader implications of this settlement may have an impact on how e-commerce companies approach patent licensing and compliance, particularly when dealing with established technology giants such as IBM.

As the industry expands and innovates, companies operating in this sector will need to navigate the challenging landscape of intellectual property rights to avoid future disputes. The resolution of the IBM-Rakuten case, while specific in its details, is part of a larger narrative of caution and proactive IP management in a technology-driven marketplace.

Kinga Fodor

Written by Kinga Fodor

Head of Marketing,

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