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Digital coupons-gavel

If you find your grocery store isn’t offering as many good deals anymore, it could have something to do with some unexpected costs associated with the store’s digital coupon program. A Connecticut-based technology company has managed to get the country’s largest supermarket chain to pay up, in order to keep its digital coupon platform up and running. And, bolstered by that success, it’s now looking to force dozens of other grocery chains to do the same.

Tech company Advanced Marketing Systems and Kroger have announced that they’ve entered into a licensing agreement, in which Kroger will pay an undisclosed fee to AMS in order to continue offering digital coupons to its loyalty program cardholders. The agreement comes six months after AMS filed a lawsuit against Kroger, claiming that the grocer’s digital coupon program was infringing on three coupon-related patents that AMS owned.

AMS’s patents describe “a data processing system for tracking and processing a plurality of in-store discounts… comprising a membership card including a unique customer identification code for facilitating system transactions.” In plain speak, the patents appear to describe just about any grocery store’s digital coupon program.

In its lawsuit, AMS said it had demanded that Kroger cease and desist from infringing its patents, and that Kroger refused to comply. Kroger denied any infringement, and disputed that AMS’ patents amounted to anything particularly unique. Kroger had launched its current digital coupon platform even before AMS had any patents, Kroger argued, so AMS’ claimed proprietary technology was “rendered obvious by one or more prior public uses.”

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In the complicated world of technology patents, though, that doesn’t necessarily mean the plaintiff doesn’t have a case. In an exhaustive 2012 front page story entitled “The Patent, Used as a Sword,” the New York Times described “a system in disarray,” in which technology companies often earn patents on ambigiously-described systems, and then go after anyone who uses “their” patented technology. “Patents on software often effectively grant ownership of concepts, rather than tangible creations,” the Times explained. “Today, the patent office routinely approves patents that describe vague algorithms or business methods,” even after such methods have been implemented – but not patented – by someone else. And that puts anyone who uses those methods, even inadvertently, at risk of being sued.

So in November, Kroger dropped its objections and the two parties jointly agreed to dismiss the case. That agreement was followed by last month’s announcement that Kroger would begin paying a licensing fee to AMS, in order to continue to run its digital coupon program.

So does that mean that any grocery store that offers digital coupons, similar to those offered by Kroger, could also be forced to pay a licensing fee to AMS?

In a word – yes.

“There are roughly 40 retailers we believe are infringing,” AMS chairman Frank Starvel told the Greenwich Time. “We’ll work with Safeway and other companies, and we’re in the process of letting them know that they are infringing on our patents.” He vowed to pursue all of the cases and ultimately either force the retailers to stop using AMS’ digital coupon patents, or pay AMS if they want to continue to do so.

So that means Kroger, and any number of other retailers that offer digital coupons, could all end up paying more for the privilege of letting you pay less for your groceries. Unless, that is, they decide to pass that cost on to you. Then AMS could be the only one really cashing in – without ever having to clip a coupon at all.

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