Amazon Loses Round in 1-Click Patent Case

Barnesandnoble.com (Nasdaq: BNBN) scored a legal victory over rival e-tailer Amazon.com (Nasdaq: AMZN) Wednesday when the U.S. Court of Appeals in Washington, D.C. lifted a preliminary injunction that had barred Barnesandnoble.com from using one-click Web shopping technology.

In its ruling, the court said that Barnesandnoble.com “raised substantial questions as to the validity” of Amazon’s 1-Click patent, which allows returning customers to buy a product without repeatedly filling out personal information.

“We have said throughout this case that we do not intend to sit back and allow Amazon.com to stake a claim upon any technology that is widely used.” Barnesandnoble.com said Wednesday. “Allowing [Amazon] to do so abridges our rights as a leader in e-commerce, but more important, limits the choices of customers.”

Each party has expressed the belief that it will win the case when the suit goes to trial on September 10th.

1-Click Copycat?

The preliminary injunction was originally issued in December 1999 by the U.S. District Court in Seattle, Washington after Amazon sued Barnesandnoble.com, claiming that the rival bookseller was infringing on Amazon’s patent.

According to Amazon, Barnesandnoble.com was using a “copycat version” of its 1-Click technology.

On the Battlefront

At the heart of the lawsuit is the question of whether one-click Web shopping technology can be patented.

“Being a pioneer and innovating for customers is always hard,” said Amazon chief executive officer Jeff Bezos when the suit was first filed. “We spent thousands of hours to develop our 1-Click process, and the reason we have a patent system in this country is to encourage people to take these kind of risks and make these kind of investments for customers.”

However, in the months since the suit was filed, analysts and Web shoppers have come forward to criticize Amazon for patenting technology that they believe is too simple to be patented.

Money Train

Amazon is battling hard to protect its 1-Click patent not only because its use can set the e-tailer apart from the competition, but also because licensing the technology to other e-tailers could prove lucrative for the Seattle, Washington-based company.

In September, Amazon licensed the technology and the “1-Click” trademark to Apple Computer for use at the computer company’s online store.

In a similar step, the giant e-tailer last week unveiled its the Amazon Honor System, a payment-gathering program that allows participating Web sites to leverage Amazon’s 1-Click technology to process small payments.

“It’s a clever move,” Gartner Group financial services analyst Avivah Litan told the E-Commerce Times at the time. According to Litan, the new payment program could be a signal that Amazon is seriously exploring becoming an online payment vendor.

Stock Drop

In other Amazon news, Prudential Securities analyst Mark Rowen downgraded Amazon stock to a sell rating in a research note Thursday.

Rowen lowered his price target on Amazon from US$20 to $9. On Thursday, Amazon shares fell as low as $13.50 before rallying to reach at $14.19 in morning trading.