Tippr Buys Up Patents to Take on Groupon

Could a broad set of patents around collective buying be the ammo Tippr needs to chase Groupon? That’s what CEO Martin Tobias is betting, having bought up the intellectual property generated by bubble-era Mercata from its investor Paul Allen.

Groupon — which is in the process of raising $130 million on a $1.35 billion valuation for offering online deals redeemed at local businesses, according to TechCrunch — is a runaway hit. And a hundred or so other companies in the collective buying space are duking it out to grab a share of that market. But Tippr, which just launched in February, has a special weapon up its sleeve: intellectual property.

Tippr comes out of Kashless, a local classifieds system founded by Tobias, the former CEO of biodiesel company Imperium Renewables. Around the same time last year that Kashless was finding that classifieds weren’t the best way to drive customers to local businesses, Tobias saw the rise of Groupon. He happened to know that Microsoft co-founder Paul Allen, who’d invested something like $90 million in the failed Groupon of the late ’90s, Mercata, still owned that company’s patents.

Mercata didn’t work for a number of reasons: Online social networking didn’t exist back then, customers were much less likely to spend money online and the company missed the IPO window before the market crash. But it did accumulate 12 patents, with two more pending, that Allen recently sold to Tobias, receiving an equity stake in Kashless/Tippr for his firm Vulcan Capital. (Kashless raised $5 million from RRE Ventures a year and a half ago.)

Tobias wouldn’t name what law firm he’s working with, but did say he plans to enforce the patents to protect Tippr. And he maintains that he’s not a patent troll — Tippr will soon expand to cities beyond Seattle, where he said it is already the third-biggest offering behind Groupon and LivingSocial.

“My personal belief is that patents are primarily a defensive weapon, not offensive,” Tobias told us. “The only reason I spent a lot of money to get the patents is to make a viable business. If all you’re doing is trying to extort people that’s not a viable business.” The other way Tobias plans to compete is by building Tippr as more of a white-label technology company and less of a brand. Tippr deals are already running as a dynamic ad unit for Seattle Magazine and the Seattle P-I, he said (pictured below).

The Mercata patents seem quite broad, for instance “Attaining product inventory groupings for sales in a group-buying environment” and “Demand aggregation through online buying groups.” One feature that Tobias is particularly interested in is the concept of accelerating deals, where “as the group gets bigger the value of the voucher gets better.” I wrote last week about a Groupon competitor, HomeRun, which is doing something just like that (it calls them “Avalanche” deals). This might potentially be covered by the Mercata patent “On-line group-buying sale with increased value system and method,” Tobias said.

If you want to check out the full Tippr patent list, it runs along the bottom of its home page.

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