Gap Wins Federal Patent Infringement Case, Second Retail Loss In June For Alexsam

Retailers won another key victory Friday (June 28) when a federal jury voted in favor of Gap (NYSE:GPS), deciding that the chain had not violated the prepaid gift card patent owned by Alexsam. This comes on the heels of a different federal jury coming to the same conclusion in favor of Barnes & Noble (NYSE:BKS), ruling against Alexsam on June 7. The Gap complaint had sought $34.5 million in damages.

Best Buy (NYSE:BBY) settled before trial and trials against McDonald's (NYSE:MCD), JCPenney (NYSE:JCP) and ToysRUs are scheduled for October, Bloomberg reported.

The patent troll issue is an expensive matter. Given that there are only so many ways to perform key retail functions (processing gift cards, detecting a mobile signal, counting shoppers in-aisle, etc.), inventors who file for a large number of methods are likely to be able to extort money from various chains that are using similar approaches. The chains know the legal—and business-disruption—costs associated with a trial are likely to be far more than the cost of a quiet settlement.

There has been a lot more pushback recently against these kinds of patent retail lawsuits, with Neiman Marcus recently winning against such a patent troll, along with a particularly hard-fought win by Newegg and Overstock. For these actions to stop, retailers must fight back. When patent trolls are forced to go to court and lose, they will quickly find this an especially non-lucrative business.

Unfortunately, it doesn't take that many chains settling to finance quite a few trials. And as the trolls start focusing on smaller retailers—ones who really can't afford to fight—this situation is likely to get even uglier. But thanks to a couple of federal juries this month—and execs at Gap and Barnes & Noble who fought this for themselves and for the industry, potentially at a financial loss compared with settling—retailers have a bit better chance now.

For more:

- See this Bloomberg story

Related stories:

Jury Rules For Barnes & Noble In Gift Card Patent Case, But The Implications Are Mixed
Best Buy, Home Depot, Gap And Others Lose Major Patent Gift Card Lawsuit
Neiman Marcus Pushes Back—Hard—Against A Patent Troll