Groupon vs. MobGob: Patent Battles Hit The Daily-Deal Business

Groupon

Patents on group shopping? Yep. A patent battle has erupted between startup MobGob and Chicago-based Groupon, one of the highest fliers in the fast-growing world of daily-deal sites.

Groupon filed a patent lawsuit against MobGob in Chicago yesterday. It’s a counter-attack against MobGob, which started the fight when it sued Groupon in California, together with a shell company called CY Technology. They accuse Groupon of infringing a patent they were issued in March called “Method of Community Purchasing Through the Internet.” This, according to the patent, is “a community purchase model where a product can be purchased a particular price only if enough buyers are willing to purchase at that price.” Or, put another way, Groupon’s entire business model.

The patent battles come as Groupon is reportedly in talks to be acquired by Google (NSDQ: GOOG) or possibly another big internet company, as other names are floating around as well. MobGob does appear to be a real competitor and not a “patent troll” set up solely to file lawsuits. But court documents show that both it and CY Tech are the same three-person company, staffed only by the three inventors on the patent-Ted Chung, Scott Chung, and Richard Yoon.

Daily deal sites have had lots of growth and buzz in 2010, and Groupon-which got a $135 million round of funding in April-is perhaps the best-known name in the space. Other “social shopper” sites include OpenSky and LivingSocial. Some of those companies, including Groupon, have started to partner with media companies like McClatchy (NYSE: MNI).

But growth and success in the digital age tend to attract patent attacks, as well-as Groupon has discovered.

Groupon has fired back. Yesterday, it filed a patent countersuit in Chicago federal court, using a patent it acquired that predates the founding of the company. When tech companies are sued by competitors for patent infringement, it’s common for a defendant to file a counter-suit with either a patent it owns, or one it acquires, to gain leverage.

CY Technology, presumably named after inventors Chung and Yoon, first tried to pursue the patent case on its own, without getting MobGob involved, perhaps hoping to avoid just such a countersuit. They sued Groupon in May, but that didn’t work out too well, since defense lawyers insisted that MobGob be joined to the case and the judge threw out the initial suit.

»  Read Groupon v. MobGob Patent Complaint [PDF]

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