CoolSavings.com Settles Patent-Infringement Suit

Most Americans like to save a buck, and clipping coupons from Sunday newspapers is a tradition for many. But making money by helping online consumers save that buck can be more complicated than in the offline world.

CoolSavings.com, an Chicago-based direct-marketing company offering consumers electronic coupons and rebates from advertisers, Wednesday settled the third patent-infringement lawsuit it has filed since 1998 against competitors.

The settlement with emaildirect.com, in which it acknowledged the validity of CoolSavings' patent, prevents emaildirect from targeting consumers based on prior buying patterns, says CoolSavings lawyer Tom Scavone.

Emaildirect is a Aliso Viejo, Calif.-based direct-marketing company that makes Value-mail, a biweekly e-mail containing coupons and other promotional offers sent to 500,000 subscribers.

"Although we are certain we are not infringing the CoolSavings patent and felt confident with our defense in the suit, it made business sense to settle the lawsuit," emaildirect president Gary Brooks says in a statement. "After all, we are receiving a license to do what we've been doing, and it didn't cost us anything."

Although CoolSavings has settled with emaildirect, it seems intent on beating competitors, or potential patent infringers, in court. "Intellectual property means a lot," says a CoolSavings spokeswoman. "And so we need to defend it."

In 1998 CoolSavings won U.S. Patent No. 5,761,648. The broadly worded patent covers "a data processing system issuing electronic certificates through 'online' networks of personal computers, televisions, or other devices with video monitors or telephones."

But CoolSavings isn't alone in the quest to issue savings to surfers. According to NPD Online Research, about a third of online shoppers use such coupons. It's no surprise that emaildirect, e-centives.com, CouponSurfer.com, HotCoupons.com and Planet U are also scrambling to offer shopping incentives to cost-conscious consumers. Various approaches include online digital coupons, printable coupons and frequent-surfer points programs.

The war over the electronic-coupon patent is part of a industry-wide movement to protect intellectual property. Microsoft has more than 1,000 Net-related patents; AOL has 11 and Amazon.com has seven. Internet companies are fighting to dominate markets and using intellectual-property litigation to prevent companies from conducting business too closely to the way they do.

CoolSavings has settled with iVillage.com and CouponSurfer as well as emaildirect on patent-infringement claims, but at least five others are still in litigation.

One company of the five is fighting back. E-centives responded to CoolSavings suit by countersuing CoolSavings for infringing on a patent it bought from SellectSoft.com. Patent #5,710,886 covers an "electric couponing method and apparatus," which covers the ability to electronically deliver coupons to consumers for online and offline use.

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