Tippr Sues Group-Buying Peers DealOn and BuyWithMe

While Groupon and LivingSocial are fighting head-to-head to be the largest group-buying site in the world, there’s a much scrappier battle taking place for third and fourth place.

In fact, three of them are tangled in a lawsuit, alleging patent infringement.

Seattle-based Tippr has filed suit against two of its closest rivals, BuyWithMe and DealOn.

All three pale in comparison to the deal-swagger of Groupon and LivingSocial. While they may have close to a hundred employees and meddle in a dozen or so U.S. markets, in comparison, both LivingSocial and Groupon have thousands of employees who curate deals in hundreds of markets on an international basis.

In the lawsuit, filed in the U.S. District Court of Washington Tippr’s parent company is claiming that the two are infringing on patents related to the use of an online buying group system for aggregating demand. Kashless is requesting an award equal to an undisclosed amount of damages caused by such infringement.

This lawsuit could be seen coming from a mile away.

In December, Tippr announced a strategy around what it considers a very strong patent portfolio.

Tippr’s CEO Martin Tobias explained to us that in late 2009, it acquired the patent portfolio of defunct Mercata, a Paul Allen-backed group-buying venture from Web 1.0. Tobias traded stock in Kashless for the patents, which included more than half a dozen patents covering areas like price optimization, demand curve modeling and buyer-seller interaction models.

His idea is to license the right to use those patents to anyone, ranging from its white-label partners to its competitors. The idea even has a name: the patent licensing program for group-buying.

Tippr offers constant reminders that it owns these patents, listing them on the bottom of every page on its Web site. It also writes in its description that: “You can be assured that Tippr is using the most advanced proprietary technology to deliver you the best deals on anything you buy with us.”

This is not the first patent fight in the daily deals space. In November, Groupon counter-sued a company called MobGob in Chicago, referencing patents that predate the founding of the company.

Earlier this month, Tippr also filed for a preliminary injunction against BuyWithMe for “using or disclosing Kashless’s confidential information,” reports TechFlash. The suit claims a former Kashless employee, Andrew DeLorenzo, violated an agreement by disclosing financial information about Tippr to BuyWithMe founder Andrew Moss. (BuyWithMe has since hired Jim Crowley as CEO.)

Tobias said in a statement sent to us: “Tippr, the industry’s first patented, white-label group buying platform, owns the deepest portfolio of issued patents in the group buying space. Its patents cover many of the most fundamental aspects of group buying systems and methods. The company cannot comment on the pending litigation regarding patent infringement by the defendants, but Tippr continues to be committed to true innovation as reflected in its considerable patent portfolio.”

Another wrinkle in the plot is that DealOn was acquired by ReachLocal for $10 million last week.

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