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IP, Patent

Groupon, Mergers And Patent Litigation (Oh My!)

Previously, I mentioned how Groupon acquired this patent and used it to retaliate against MobGob’s patent infringement claims against it.  Meanwhile, news of the potential $ 6 B acquisition by Google abounds (including proclamations that its a great idea, as well as a bad idea).  Since then, Groupon has been sued again, and its patent is given a closer inspection (below).  Also, will Google insist on an 8 or 9 figure escrow account as a condition of the sale?

The new lawsuit against Groupon was brought by a company called EWinwin (guessing E[lectronic] win-win?).  The patents brought by Ewinwin are 7,181,419, 7,124,099, 7,689,469, 7,693,748, and the majority date back to 1999.  (Recall, the acquired Groupon patent dates back to August 1998).

Although I initially praised Groupon’s move, it remains to be seen how effective it will be.  Even though they seem to have acquired a very early patent, in order to effectively gain bargaining leverage with MobGob, Groupon would still need to prove that MobGob is meeting every limitation of at least one of the ‘343 Patent’s claims.  MobGob’s lawyers won’t feel threatened if Groupon is unable to show, for example, that their client is “calculating a price … dependent upon … an aggregate amount of … product that … buyers have collectively indicated a willingness to purchase.”

The acquisition will understandably make the target on Groupon’s back larger, as patent owners with valid claims against Groupon will be paying close attention to the size of the escrow account that gets established to satisfy any existing claims.  As noted at Executiveview.com, escrow accounts are a common way of accounting for patent litigation during a merger:

In April 2006, Linux software distributor Red Hat announced a deal to acquire JBoss, an open-source software development company. Given the patent environment in this technology space, an escrow account of $43m was established to protect Red Hat against any breaches of the representations and warranties in the agreement, including that JBoss products do not infringe any third party patents. An additional clause provided that in the event that third parties assert patent rights through a lawsuit, Red Hat would control the litigation process, including the use of the escrow account. Soon after the deal closed, FireStar filed a patent infringement suit against Red Hat seeking damages and an injunction. The inclusion of the escrow amount in this deal provided Red Hat with significant funds to resolve the patent infringement matter.

To put things in perspective, Red Hat paid $350 M to acquire JBoss.

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