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IBM Seeks Patent Infringement Charges of $167M From Groupon

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International Business Machines (IBM - Free Report) is seeking $167 million from Groupon (GRPN - Free Report) for the unauthorized use of its patented technology.

Per IBM, tech giants Amazon (AMZN - Free Report) , Facebook and Alphabet’s Google pay a price of $20 million to $50 million each for using the e-commerce technology in question.

Groupon was sued by IBM for the first time in 2016 for infringement of four patents. Two of them were related to Prodigy, a system developed in the 80s for showing applications and advertisements to reduce server loads.

Another one was the unauthorized use of IBM’s "single sign on" technology that enables customers to use their Facebook or Google account to sign into a retailer's website.

Groupon’s lawyer has however retaliated by saying, "A key question for you in this case is whether these patents cover the World Wide Web. They do not and that is because IBM did not invent the World Wide Web."

We note that this is not the first time that IBM charged an Internet company of patent licensing fees. In 2013, Twitter paid $36 million to IBM and acquired about 900 of IBM’s patents for itself. Amazon was also sued by IBM in 2006 on charges that it has built its big online retail business on technology developed by the company.

IBM Rides on R&D

IBM’s research and development (R&D) initiatives set it apart from its peers. On an annual basis, the company invests around 7-8% on R&D for reaping the high growth and high-value opportunities.

Notably, the company was awarded the maximum number of U.S. patents (9,043) for the 25th consecutive year in 2017. The patents represent inventions in artificial intelligence, cloud, cybersecurity and other strategic growth areas.

The company generated intellectual-property (IP) licensing revenues of $1.19 billion in fiscal 2017, which decreased 14.1% from fiscal 2016.

IBM’s active stance in protecting its IP is therefore prudent as it is expected to contribute significantly to revenues, going forward. Per Bloomberg, IP licensing, which makes up less than 2% of its revenues, is a high-margin business for the company.

IBM currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

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