CoolSavings: Lawsuits 'R' Us

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Internet coupon firm Inc., whose legal confrontations seem to perpetually shift to new battlefronts, filed documents with the Securities & Exchange Commission last month detailing recent action taken against the company by competitors Catalina Marketing Corp. and planet U Inc.

Meanwhile, Scott Wills president/CEO of promotions firm Inc., said that in the last month his company has rejected more than one overture from CoolSavings to settle a dispute between the two companies.

CoolSavings, the No. 1 online coupon player, set off a bewilderingly complex patent war in 1998 by suing most of its competitors. It's involved in at least 10 separate legal contests, not including counterclaims. Litigants include rival coupon companies and promotions firms - even CoolSavings chairman/CEO Steven Golden's ex-wife, who accused both Golden and the company of fraud in September. CoolSavings denies the charges.

Government documents filed last week also show that shareholders of the law firm representing CoolSavings now own company stock worth $2.8 million according to the company's own reckoning of fair value - an increase of $367,200 since CoolSavings' first SEC filing less than three months ago. The Chicago company, which filed to go public in January, does not specify whether the stock represents payment for legal services.

CoolSavings spokeswoman Melissa Rabin said the firm could not comment on legal issues beyond what's already in SEC documents. Tom Scavone, lead counsel for the company at Chicago-based Niro, Scavone, Haller & Niro, echoed the statement.

"The litigation counsel for CoolSavings has been instructed that we're not to comment to the press at this time because of the imminent IPO situation," he said.

Catalina Marketing filed a request for reexamination of a CoolSavings "electronic certificates" patent with the United States Patent and Trademark Office, last month's SEC filing says. If granted, it could result in the patent being narrowed in scope or declared invalid. Planet U sued CoolSavings and a Coolsavings customer alleging patent infringement the same month. CoolSavings is evaluating the claims.

Meanwhile, BrightStreet's Wills said his company refused recent CoolSavings overtures to settle a patent interference filing BrightStreet made last year. Unlike an infringement suit that's fought out in the courts, an interference action is settled by the Patent and Trademark Office itself. By making such a complaint, a plaintiff alleges that it came up with an invention before a rival, even though the rival might have gotten a patent first.

"In the United States, whoever invented it first wins," explained Seth Ostrow, a partner at Brown, Raysman, Millstein, Felder & Steiner LLP, New York. "So as a result, both parties are brought into the patent office to bring their evidence as to when they thought of it. And whoever thought of it first wins." Brown Raysman specializes in Net legal issues but is not involved in the BrightStreet-CoolSavings case.

Wills did not elaborate on why BrightStreet rejected the proposals. The company prevailed in a similar suit over Response Reward Systems, Vero Beach, FL, last year. Wills repeated a contention often made by coupon and promotions industry executives, saying CoolSavings is a "patent bully" trying to compete in the courts rather than in the market.

"We don't want to pursue these sort of things. I want to grow our business," Wills said. CoolSavings has denied the accusation, saying it has a responsibility to protect its patents. Meanwhile, the number of suits and other actions fired back at CoolSavings has steadily grown, even as CoolSavings has settled some of the earlier suits.

The latest legal sparring takes place just as reports suggest that the Patent and Trademark Office wants to overhaul the way patents are awarded for online practices. Critics have attacked wide-ranging patents given for rather basic Net marketing techniques.

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