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Timely news today, since we're about to talk about Microsoft, and also about patents.
Priceline Sues Microsoft
October 13, 1999
NEW YORK (CNNfn) - Priceline.com filed a patent-infringement lawsuit against Microsoft Corp. and its Expedia Inc. subsidiary Tuesday, accusing the companies of willfully infringing on its hotel search service technology. The Stamford, Conn.-based e-commerce company, which allows customers to name their price for everything from airline tickets to home mortgages online, filed the suit in U.S. District Court in Connecticut. The suit also charges Microsoft with violating Connecticut's Unfair Trade Practices Act. In its filing, priceline.com alleges Microsoft sought -- and was provided with -- detailed confidential information and technical data over an eight-month period as part of ongoing discussions to develop mutually-beneficial business relationships. After those talks broke down, the company alleges Microsoft Chairman Bill Gates essentially told priceline.com officials in mid-August that he would not allow patent rights to stand in Microsoft's way and that priceline.com could, in effect, get in line behind the others that have sued the company for infringement rights. A few weeks later, the company asserts, Microsoft launched Expedia's Hotel Price Matcher service, utilizing priceline.com's patented technology.
"Microsoft's conduct is especially egregious in light of the fact that it led priceline.com to believe that it wanted to develop a cooperative relationship between the two companies," said Evan Chesler, lead attorney for priceline.com, in a statement. "Even after Mr. Gates told [priceline.com Vice Chairman Jay] Walker that Microsoft would not let priceline.com's intellectual property rights stand in its way, it was hard to believe that Microsoft would really act in this manner." A Microsoft spokesman said the company did not yet have a copy of the lawsuit and, therefore, could not comment.
Meetings included Gates, Maffei
In its filing, priceline.com claims it entered into confidential discussions with Microsoft concerning the software company's interest in developing a strategic partnership. Those conversations purportedly included Microsoft investing in priceline.com just prior to the company's initial public offering in March, but those talks allegedly broke off when priceline.com said it would not provide Microsoft with a price for its shares below the IPO price. However, the two sides supposedly continued to discuss possible business partnerships. Included in those conversations, the company stated, were Microsoft Chief Financial Officer Greg Maffei, currently chairman of Expedia - Microsoft's travel services unit - and Microsoft Chairman Bill Gates. Company officials said Gates' statement that patent infringements would not stand in Microsoft's way came as a complete surprise. The filing comes just three weeks after Microsoft filed to spin-off a portion of Expedia in an initial public offering. Expedia provides travel services for Microsoft's MSN Internet service. In addition to finding hotel rooms, customers can also book airline flights and rent cars using the online service. Company officials say weekly travel sales using Expedia, initially launched in November 1996, now exceed $16 million. Priceline.com does not break out weekly sales figures, but claims it now sell roughly 2 percent of all airline tickets sold in the United States and recently set an internal single-week sales record by booking 16,000 hotel rooms. Priceline.com (PCLN) shares tumbled 3-11/16 to 72-1/4 in trading Wednesday while Microsoft (MSFT) shed 1-1/2 to close at 91-1/16.
-- Hal Abelson, October 14, 1999