Internet retailer sues IBM for $7.5M in fraud case

According to the lawsuit, IBM knew that its Websphere technology violated patents

Online retailer Harry and David has filed a US$6 million (NZ$7.5 million) fraud and breach of contract lawsuit against IBM, claiming it was sold e-commerce software that IBM knew violated patents held by Charles Hill & Associates and NCR, according to court documents.

The software includes various versions of IBM's Websphere Commerce Business Edition, according to the lawsuit. The software allows businesses to create websites and conduct business online.

Medford, Ore.-based Harry and David also alleges that IBM did nothing to protect it from a lawsuit by Charles Hill or complaints by NCR, according to court papers filed in the US District Court for the District of Oregon at the end of February.

IBM spokesman Fred McNeese said the company had no comment regarding the lawsuit.

According to the lawsuit, Harry and David purchased Websphere Commerce 5.6 from IBM in March 2004. On June 13, 2005, NCR notified Harry and David that its use of the e-commerce programs it purchased from IBM infringed on NCR's patents for e-catalogs. Then, on June 7, 2007, Charles Hill sued Harry and David for infringing on its web caching patents.

Harry and David said it had to settle with both companies by purchasing licenses to use their technologies. Harry and David also allege that by refusing to indemnify it against the patent claims, IBM breached its customer agreement. Harry and David said as part of their contract, IBM was to deliver its e-commerce programs free of patent infringement claims.

According to the lawsuit, IBM knew since 2002 that its Websphere technology violated the patents owned by NCR and Charles Hill.

And although IBM had already settled a patent lawsuit brought by Charles Hill and entered into a licensing deal with NCR, the company continued to market its e-commerce programs without telling customers that they infringed on the patents of the other companies.

Harry and David is seeking a jury trial.

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