Amazon ends patent dispute with $40m

Amazon.com has paid $40m to Soverain Software to settle a patent-related lawsuit, just days before the trial was set to begin.

Under terms of the settlement, announced on Thursday, the parties will dismiss all claims and counterclaims involved in the lawsuit. Amazon will also receive a non-exclusive licence to Soverain's patent portfolio.

Soverain, an ecommerce software company, originally filed a claim against both Amazon and clothing retailer Gap on 12 January 2004, in the US District Court for the Eastern District of Texas. The trial involving Amazon was scheduled to begin on Monday.

Katharine Wolanyk, president of Soverain, said: "We are pleased to have reached an agreement with Amazon, and to have them as one of our patent licensees."

An Amazon spokeswoman said Amazon reached a settlement in order to avoid the expense that would come with protracted litigation. It was also in the best interest of the company's shareholders, she added. She noted that the company continues to deny any and all wrongdoing cited in the case.

Soverain had alleged that Amazon and Gap infringed on five of its patents covering "core" aspects of ecommerce technology.

One patent allows ecommerce merchants to recognise a customer when he or she makes multiple inquiries on a website during a shopping session or when the person later returns to the site, according to court documents.

Another Soverain patent involves an internet sales system with a virtual interactive "shopping cart", which includes technology to authenticate a buyer's identity and process payments automatically. A third patent in question is an extension of this technology and is targeted at network-based sales systems that use a public packet switched network such as the internet.

The other two patents involve payment processing during a web session.

In its lawsuits, Soverain alleged Amazon used its technology dating back as far as 1998 for the ecommerce giant's websites either directly, or indirectly, via Amazon customers.

Wolanyk said: "Soverain's intellectual property is essential to the ongoing development of our software product Transact and the future of our company."

Soverain and Gap reached a settlement in February. Terms of that settlement were not disclosed.

Dawn Kawamoto writes for CNET News.com