Does Priceline Stand A Chance Against Microsoft?

You’ve probably read by now that Priceline.com filed suit against software giant Microsoft Corp. late last week.

The suit, filed in federal court, claims that Microsoft’s Expedia.com Internet travel service subsidiary is violating Priceline’s name-your-own-price hotel-reservation patent.

While this allegation is serious, what’s even worse in my eyes is the additional charge by Priceline that Microsoft received the proprietary material under the guise of cooperating with the company on an Internet venture. That’s a low blow if it turns out to be true.

A Desperate Move?

While Microsoft did not address the specifics of the suit, spokesman Tom Pilla said that the company respected the intellectual property of others and felt that this suit was part of “a desperate attempt by Priceline.com to avoid competing with Expedia.com on the merits.”

Even though the suit was filed in Bridgeport, Connecticut, a judge in nearby Hartford will hear the case.

Stand In Line

Priceline’s grievance stems from a broad patent that it believes protects its particular business of allowing consumers to name their own prices on airline tickets, hotels and other services. In fact, Jay Walker, Priceline’s co-founder and vice president, holds more than a dozen patents related to Internet commerce through Walker Digital Corp., an intellectual-property laboratory.

Priceline’s patent is the same business model that several companies, including Budget Rent A Car and Alliance Mortgage Company, have willingly forked over millions (US$) to license in the last couple of months.

However, according to allegations outlined in the suit, when Walker approached Bill Gates earlier this year at a high-tech conference in Sun Valley, Idaho, Gates became agitated and insisted that Microsoft had no intention of letting patent rights stand in its way.

It was then, Walker claims, that Gates essentially told him that many companies were in the process of suing Microsoft for patent infringement — essentially implying that Priceline could get in line if they wanted to.

Dj Vu

I’ll say up front that I have no idea whether what Priceline asserts is the truth or not — a court will have to decide. But I’d be dishonest if I said it didn’t have a familiar ring.

This summer, when IBM executives testified under oath during the Microsoft antitrust trial, they described a similar irate BillGates — who complained about IBM developing software that competed with Microsoft.

There was also a story floating around a couple of years ago, when AOL began to have some success, about a similar encounter between America Online’s Steve Case and Gates. In other words, knowing what I do about the history of Microsoft, it is not hard to visualize what Priceline is alleging.

Who Will Win?

Despite everything, industry observers feel such a trial — if it ever gets to court — could ride Microsoft’s bankroll for years.

Whether Priceline can hold on long enough to win remains to be seen. However, from where I stand, I’d say it has a good chance.

What do you think? Let’s talk about it.