A U.S. jury awarded International Business Machines Corp. (IBM.N) US$83.5 million after finding that Groupon Inc. infringed four of its e-commerce patents.

Friday’s verdict cements the prowess of IBM’s portfolio of more than 45,000 patents and is a boon to its intellectual-property licensing revenue, which brought in US$1.19 billion in 2017.

The jury in Wilmington, Delaware, sided with the argument of IBM’s lawyers, who had said Groupon was trying to portray IBM as claiming to have patented the Internet and had called that effort "a smoke screen."

As they began the trial, IBM’s lawyers said Groupon built its online coupon business on the back of IBM’s e-commerce inventions without permission. IBM spends US$5.6 billion a year on research and development "to make our lives better," the company’s lawyer John Desmarais told federal jurors in his closing arguments.

"That research costs a lot of money," Desmarais said, "and all we ask is that people who use it ask to take a license."

Patent Fight

But the patents at issue don’t protect IBM’s products or services, said David Hadden, Groupon’s lawyer. IBM never used the patents and instead relies on its huge portfolio to extract money from other companies, he said.

"Not paying someone for something you don’t use, that’s not being reckless," Hadden said. "That’s not being an upstart. That’s just standing up for what’s right."

Two of the patents, one of which expired in 2015, came out of the Prodigy online service, which started in the late 1980s and predated the web. Another, which expired in 2016, is related to preserving information in a continuing conversation between clients and servers. The fourth patent is related to authentication and expires in 2025, the latest among the case’s patents.

IMB stressed throughout the trial that a range of companies have paid for licenses to use its patents. Tech giants such as Amazon.com Inc., Alphabet Inc.’s Google, Facebook Inc., Twitter Inc. and LinkedIn Corp. have paid from US$20 million to US$50 million each in cross-licensing agreements, allowing them access to IBM’s cadre of more than 45,000 patents.

The Groupon case has been closely watched in the online advertising and marketing sector. At least 10 companies -- including Go Daddy Operating Co. LLC, LinkedIn and Twitter (TWTR.N) -- intervened asking that information related to their prior IBM patent deals not be made public.

IBM Licenses

Hadden said the 42 companies that paid for licenses did so "because IBM came at them." IBM didn’t have anyone from those companies testify at the trial, he said. That’s because they were coerced, he said.

Amazon paid, Hadden said, because "they’re afraid." IBM, he continued, leverages the fear that "a jury like you will be confused" and return a "big verdict that gets it wrong."

Groupon, he said, isn’t afraid, and believes that "somebody has to stand up."

Armonk, New York-based IBM reached a confidential settlement in December 2017 with Priceline.com, part of what now is called Booking Holdings Inc., on three of the same four patents. U.S. District Judge Leonard Stark, who is also presiding over the IBM-Groupon trial, ruled in October that Priceline didn’t infringe the fourth patent. IBM appealed.

The case is International Business Machines Corp. v. Groupon Inc., 16-cv-122, U.S. District Court, Delaware (Wilmington).