Articles Tagged with IBM Lawsuit

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Technology giant IBM is on the receiving end of a lawsuit by the State of Pennsylvania. The lawsuit, which was filed on behalf of the Department of Labor and Industry, is in response to what the government says is a failed update to its outmoded unemployment compensation system.

Computer-bug-63136248-001The story began in 2006 when the State of Pennsylvania and IBM signed a $109.9 million contract. According to the agreement, IBM was going to overhaul the state’s system for distributing unemployment compensation and collecting unemployment insurance taxes. The Department of Labor was using systems that were outdated and consisted of several programs that were not compatible. IBM was supposed to replace this with a streamlined substitute that would be more efficient and cost-effective in the long run.

A completion date of February 2010 was established by the contract. However, that deadline came and went without a working system being installed at the Department of Labor. Various delays stretched the deadline out to September of 2013, by which time the state had paid $60 million in excess of the agreed-upon sum. The government alleges that even after numerous delays and the extra payments, the computer system at the Department of Labor had still not been updated.

Both sides assert numerous reasons why the project was not completed as agreed upon. Turnover at IBM, and the re-assignment of various employees, caused delays, miscommunication and complications. IBM argues that at least some of the fault lies with the government, citing their failure to appoint personnel to manage the project.

It is safe to say that this case will not be resolved quickly or easily, considering the amount of money and the reputations that are at stake. However, this situation provides a useful reminder of how imperative it is for governments, companies and individuals to be exceptionally cautious when it comes to signing contracts. A well-drafted agreement is the key to a successful project, while one that is poorly written merely opens the door to numerous costly legal battles. Accordingly, it is wise to have all contracts reviewed by a business attorney before signing on the dotted line.

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Sometimes, the only appropriate way to respond to a lawsuit is by filing a countersuit. At least, that seems to be the philosophy of Groupon, Inc. The story began a few months ago when International Business Machines, better known as IBM, filed a lawsuit against Groupon. IBM claimed that Groupon, which is an e-commerce marketplace that connects subscribers with merchants in their local area, infringed four of its patents.

Balance in digital background / A concept of technology law or tIBM claimed that at least two patents that are related to its late-1980s telecommunications service Prodigy are clearly infringed by the technology upon which Groupon bases its services. In their complaint, IBM asserts that they deserve compensation from Groupon for the newer company’s use of IBM’s patented technology. An IBM spokesperson notes, “Over the past three years, IBM has attempted to conclude a fair and reasonable patent license agreement with Groupon.” Frustrated in these efforts, IBM filed a lawsuit in Delaware where the company is organized.

Groupon chose to file a countersuit in Illinois, where it has its home base in Chicago. Among other charges in the complaint, Groupon skewers IBM as a “relic of once-great 20th Century technology firms.” Moreover, Groupon asserts that the technology giant “has now resorted to usurping the intellectual property of companies born this millennium.” A spokesperson from Groupon said in an emailed statement to journalists that: “Unfortunately, IBM is trying to shed its status as a dial-up-era dinosaur by infringing on the intellectual property rights of current technology companies, like Groupon.”

Groupon alleges in its countersuit that IBM actually infringes its patented technology with its WebSphere Commerce software. Merchants can use WebSphere to track customer orders and sales as well as offer special deals and pricing based on the customer’s current geographic location. Groupon insists that much of this technology has already been patented by them, which entitles them to royalties from the “billions of dollars in revenue that IBM has received” from their unfair use of Groupon’s technology.

The outcome of these cases remains pending, but the situation highlights the need to protect intellectual property and perform appropriate due diligence before developing new technology.