Sues Microsoft over Patent

Online travel service Inc. filed suit against Microsoft Corp. and its Expedia Inc. subsidiary last week claiming patent infringement and unfair trade practices.

The suit was filed in U.S. District Court in Connecticut, Priceline said.

Priceline claims Microsoft willfully infringed its patent for buyer-driven commerce systems and that Microsoft's behavior violates Connecticut's Unfair Trade Practices Act.

Priceline claims that Microsoft asked for and was given detailed confidential business and technical information over a period of eight months, as the two sought to form a business relationship. Priceline and Expedia, Microsoft's online travel service, were considering a possible joint marketing program and licensing of Priceline's intellectual property, Priceline said.

Those negotiations, which included discussion of a Microsoft investment in the company, were conducted by Priceline's Founder and Vice Chairman Jay Walker and Greg Maffei, now chairman of Expedia. The negotiations, however, broke down when Priceline refused to give Microsoft Priceline shares below its initial public offering (IPO) price.

The two continued to discuss other ways of working together, however. Priceline alleges that in a face-to-face conversation between Walker and Microsoft's Chairman and Chief Executive Officer Bill Gates during mid-1999, Gates told Walker that Microsoft had no intention of allowing patent rights to stand it its way. Gates dismissed the threat of a patent infringement suit, saying lots of other companies were suing Microsoft, and that Priceline could therefore get in line, according to Priceline's statement.

One week after that meeting, Expedia launched a service similar to Priceline's called Hotel Price Matcher service that Priceline claims infringes its patent.

Priceline is suing for declaratory relief, permanent injunctive relief as well as punitive and actual damages.

A spokesman at Microsoft's European PR agency could not comment on Microsoft's response.

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