Online Coupon Firms Settle Patent Dispute

Online coupon distributor Coolsavings, Inc. (Nasdaq: CSAV) cleared two patent infringement lawsuits off its plate Monday when it reached a settlement with rival Planet U.

The settlement resolved both a 1998 lawsuit filed by the Chicago, Illinois-based Coolsavings and a counterclaim filed by Planet U earlier this year. Although details were not disclosed, the companies said in a joint statement that Planet U has agreed to pay Coolsavings licensing fees that could top $1 million (US$) in coming years.

Coolsavings has aggressively sought to protect its patents in the relatively new online coupon market. The firm has filed at least a half dozen lawsuits against competitors.

Last May, the company reached a settlement with Bedford, Massachusetts-based CouponSurfer.com. In recent months, the company has also settled similar suits with iVillage and Emaildirect.

Fast Growing Segment

As part of the deal, Coolsavings and Planet U agreed to recognize the validity of each other’s patents. Planet U CEO Bill Purcell said the agreement allows both companies to focus on “what will soon be the multi-billion dollar Internet coupon industry.”

Coolsavings CEO Steven Golden said the latest settlement shows that his company is open to licensing its technology. “We’re not looking to stay in the courtrooms,” he said.

Coolsavings hopes to put an end to lengthy court battles that could dampen the potential for the online coupon industry. Forrester Research predicts that the percentage of online customers using virtual coupons will rise steadily in the coming year.

A study last fall by NDP Online Research showed that 30 percent of online shoppers used online coupons. The offline market for coupons is worth $6 billion in the United States alone.

Spate of Suits

The Internet has spurred scores of patent infringement lawsuits, creating an unprecedented demand for attorneys who specialize in intellectual property law, and sparking debate in some corners about whether some of the technology being patented is really novel enough to warrant that level of legal protection.

Patent wars are waging in nearly every corner of the e-commerce world. For instance, Amazon.com has found itself in a legal scuffle with rival Barnes & Noble.com over its 1-Click ordering system and its affiliate marketing program.

Just last month, British Telecom (BT) said it discovered that it owns the patent rights to hyperlinks, one of the key underlying Web technologies. In a move that has largely been met with snickers and shrugs of indifference, the company said it will attempt to recoup royalties from online services for nearly a decade of past use.

Cool Reception

While one of the first and most widely known online coupon firms, Coolsavings has not impressed Wall Street since its May debut.

While the company originally hoped to sell its shares for as much as $13, it gradually dropped that target and went public at $7 in the midst of a sell-off of Internet shares. On Monday, shares stood at $6.

Based in San Francisco, California, Planet U is a privately held company that specializes in offering product promotions for retailers and manufacturers.