IBM's Newest Chess Match

If ever there was a question about the scope of IBM's (NYSE: IBM  ) influence, this morning's events ought to answer it. Big Blue today filed suit against Amazon.com (Nasdaq: AMZN  ) , claiming that the e-retailer has infringed upon five of its patents.

At issue are several features that appear to describe the way Amazon does business. For example, in a court filing, IBM says Amazon infringes upon its patent for presenting advertising in an interactive service by, among other things, tailoring ads based on user responsiveness. Other Big Blue patents cover ordering from an online catalog and storing data in an interactive network.

Indeed, the breadth of Big Blue's claim could separate it from the typical bloviating that accompanies most patent cases, such as the on-again, off-again saber-rattling that characterizes NVE's (Nasdaq: NVEC  ) claims of intellectual ownership of magnetic random access memory (MRAM) technology. Big Blue has earned more patents than any other American firm over the last 13 years, with roughly 40,000 in its portfolio of intellectual property.

While a company spokesperson wouldn't quantify exactly how many licensees there are of the five patents in question here, he told me it was a "big number." Frankly, I've got no idea exactly how to interpret that, but it suggests dozens at the least, and probably hundreds of firms, that have agreed to royalties.

The timing could have something to do with that. Public court records show that Big Blue earned the patents after working with Sears (Nasdaq: SHLD  ) and CBS (NYSE: CBS  ) to create the now-defunct Prodigy online network, which dates back as far as 1984.

Regardless, the stakes are high for Amazon. The IBM spokesperson I talked with this morning says that Big Blue has been in discussions with the e-retailer since September of 2002, with nothing to show for it. His firm is filing suit because "we believe Amazon's whole business model is based on these five patents."

Does that mean total victory ends with either Amazon shut down, or paying steep royalties to IBM? I doubt it. I'm no lawyer, but it seems more likely to me that this case will be settled when Amazon, eager to avoid steep legal fees, agrees to a relatively modest licensing fee.

But even that would be a big win for Big Blue, lending further credence to its reputation as a championship innovator. That, in turn, could enhance its efforts to outsource its research and development genius to those who need the brains.

Or, to put it in terms befitting of the creator of the Deep Blue chess computer: Amazon is in check. It could counterattack, or it could concede. Either way, IBM has lined up its pieces in a way that suggest a successful outcome. It's your move, Amazon.

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Fool contributorTim Beyersstill says green is his favorite color, but he wouldn't mind coloring his portfolio blue if the price were right. Tim didn't own stock in any of the companies listed in this story at the time of publication. Get the skinny on all of the stocks in Tim's portfolio by checking his Foolprofile. The Motley Fool'sdisclosure policyis checkmate for Wall Street.


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