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Amazon sues rival bn.com
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October 22, 1999: 3:52 p.m. ET
Internet retailer charges theft of patented shopping feature
By Staff Writer Jamey Keaten
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NEW YORK (CNNfn) - Amazon.com Inc. said Friday it is suing barnesandnoble.com Inc. for patent infringement, charging its online rival with illegally using a key element of its cyberspace shopping system.
The suit, filed Thursday in U.S. District Court in Seattle, seeks to stop barnesandnoble.com from using the alleged "copycat" feature in its "Express Lane" shopping process, introduced earlier this year. The suit asks for an unspecified damage award.
Seattle-based Amazon (AMZN) said the system copies its 1-Click feature, which allows customers to enter their credit card number and address just once, avoiding the need to re-enter that data on follow-up visits to the Amazon site.
Amazon CEO Jeff Bezos said in a statement the online book and music seller spent "thousands of hours" to develop the system. A company source told CNNfn.com that the 1-Click system cost millions of dollars to develop.
Lisa Lanspery, a bn.com spokeswoman, said: "barnesandnoble.com believes the Amazon lawsuit is without merit and we will vigorously defend against it."
Amazon is no stranger to the courts. In August, it sued a couple in Greece for trademark infringement. That month it also settled a dispute with the New York Times over the use of the newspaper's bestseller list. In April, Amazon patched a rift with retail giant Wal-Mart (WMT) over the alleged theft of trade secrets.
And it's not the first time the booksellers have squared off against each other. New York-based barnesandnoble.com is owned by German media company Bertlesmann and Barnes & Noble (BKS), which reached a 1997 settlement with Amazon over Amazon's use of the phrase "the Earth's Biggest Bookstore," an Amazon spokesman pointed out.
A patent on ease-of-use?
The suit strikes at a core functionality that online retailers increasingly need to provide: ease-of-use. With attention spans on the Web notoriously short, a simpler purchasing process can be the difference for landing or turning away a potential customer.
Both Amazon and bn.com have played on the "shopping cart" functionality that lets customers load up carts with planned product purchases and carry them to a cyberspace check-out.
But they are not the only ones to latch onto the idea - Microsoft (MSFT) last week unveiled a one-step shopping function - the so-called "Electronic Wallet" on its MSN Passport service. For that reason, other companies may be keeping an eye on the courts.
"Many people will be watching whether the Amazon.com patent will maintain its validity," said Brad Lytle, an patent lawyer specializing in Internet-related technology at Oblon, Spivak, McClelland, Maier & Neustadt, P.C., in northern Virginia.
Last year, a federal court decision in a landmark case, State Street Bank & Trust Co. vs. Signature Financial Group Inc., paved the way for companies to patent business processes, not simply their concrete products, Lytle said.
1-Click: Amazon's finger-pointing
The online airplane-ticket seller Priceline.com (PCLN) was quick to take advantage of the opening and, in its own defense of its business processes, last week sued Microsoft for patent infringement.
Amazon spokesman Bill Curry held out the possibility of a settlement in which, for example, bn.com would pay a licensing fee to Amazon to use its patented system. Amazon won its patent on its business method on Sept. 28, 1999.
Cheer out of bn's holiday?
The complaint seeks a preliminary injunction against bn.com, and Amazon expects a ruling within a month, a spokesman said. Amazon has asked for triple damages for the alleged violations.
Such a preliminary injunction could prove a thorn for bn.com as the holiday season gets under way.
Research firm Jupiter Communications estimated in a recent report that online retail sales will balloon to $6 billion this holiday season, twice 1998's level. A survey by LinkShare Corp. and BizRate.com found shoppers plan to make one-third of their holiday purchases online, up from 12 percent last year.
Wall Street took an uncertain view of the suit.
"It is hard to assess how much merit the case would have," said Mark Rowan, Internet analyst with Prudential Securities, who has a "strong buy" rating on Amazon and a "hold" on barnesandnoble.com.
Shares of Amazon.com fell 3/4 to 80 Friday afternoon and barnesandnoble.com (BNBN) rose 1/8 to 18-1/2. 
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