UPDATE: Netcentives Wins Battle, Not War

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Netcentives, which is suing nearly every player in the online loyalty realm for infringing on its patents to distribute points on the Web, is feeling confident after the company won every motion filed against it in U.S. District Court of Northern California in San Francisco on Nov. 3. The case has been ordered to proceed on all counts, and a trial date will be set Dec. 1.

The company's biggest opposition, Carlson Cos., remains undeterred by Judge Charles A. Legge's rulings, citing them as nothing more than minor procedural decisions.

The history of the case is as follows:

• In February, Netcentives Inc. filed suit against Sperry & Hutchinson Co. Inc. and WebMiles.com Corp. for patent infringement. S&H Co., owners of Greenpoints.com, relented and signed a licensing agreement for an undisclosed amount.

• In March, Netcentives added MassMedium.com Inc., R2K LLC, Pointsurf.com Inc. and Telamerica Media Inc. to the suit.

• In July, Carlson Cos., Beenz.com, Passpoints Inc., Freeride.com Inc. and Stario Inc. were added.

Many of the companies involved filed counterclaims stating that Netcentives' patents were not legitimate.

Carlson took the case to a new level by filing a lawsuit in federal district court in Minnesota "alleging that they own the patents and that the patents are not enforceable," said James H. Wallace Jr. of Wiley, Rein & Fielding, Washington, lead counsel for Netcentives. "We say they're infringing and we own them."

The patent in question, described as a business process patent that covers online network reward programs that issue points, was filed by former Radisson employee Tom Storey. Since Carlson owns Radisson, the company claims that it owns the rights to the patent, even though Netcentives had purchased it from Storey.

Carlson Cos. asked to transfer the case to Minnesota, where the second case was filed. It also asked that the California case be postponed while the Minnesota case and ownership are decided, according to Wallace. That motion was denied, he said.

All the other defendants also asked that the case be postponed until ownership was decided. They were denied as well, Wallace said. "We're going forward with all parties and issues with a priority on ownership discovery," he said. "We won every motion. We certainly had a good day Friday."

Ronald Schutz of Robins, Kaplan, Miller & Ciresi LLC, lead counsel for Carlson Cos., said the rulings were "a big 'so what.' These were minor procedural decisions. I've been doing this a long time. I don't count my chickens before they hatch. The court did not rule in any way, shape or form on the merits of this case. [Netcentives shouldn't] celebrate too prematurely."

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