Wal-Mart Sues Amazon.com

Wal-Mart Stores Inc. filed suit Friday against Amazon.com and its affiliates, alleging the Internet bookseller infringed on Wal-Mart trade secrets.

In a lawsuit filed in Chancery Court in Benton County, Ark., Wal-Mart asked the court to issue an injunction against Amazon.com to prevent the Seattle-based company from allegedly trying to duplicate proprietary technology.

Wal-Mart claims in its lawsuit that Amazon.com recruited former Wal-Mart associates and targeted Wal-Mart vendors to learn more about its information systems, which include data on sales, inventory and consumer buying habits.

Under the Arkansas Trade Secrets Act, it is illegal for an individual or a group of individuals to use a company's trade secrets for their personal advantage, or to the advantage of a competing company.

"Our information and logistics systems are world renowned and a key factor in our success," said Robert Rhodes, senior vice president and general counsel for Bentonville, Ark.-based Wal-Mart.

"Clearly, Amazon.com has targeted a specific combination of individuals for their expertise and inside knowledge of Wal-Mart's distribution, data warehousing and merchandise management systems," Rhodes said.

Bill Curry, a spokesman for Amazon.com, said: "We're not interested in other people's trade secrets -- we're interested in hiring the brightest, hardest-working and most talented people, wherever they might be."

"Even if every single Amazon.com employee came from Wal-Mart, it would still be less than two-tenths of one percent of their work force. They're about 300 times our size and probably sold more yesterday than we sold in the last 12 months," he said.

The lawsuit, which also named Amazon.com affiliates Kleiner Perkins Caufield & Byers and Drugstore.com, touches on Wal-Mart's extensive information database, which some analysts say is only second in size to the U.S. government.

Besides raw sales, profit margin and inventory numbers, the system also documents what consumers buy together, like cereal and milk.

If Amazon.com could mimic such a model, it would allow it to better know and service its customers. That could help Amazon.com expand from its core base of books into other areas of online retailing.

This summer, Amazon.com paid $280 million for Junglee Corp., which offers one-stop electronic shopping services to World Wide Web sites, and PlanetAll, a provider of online address books that could boost loyalty among shoppers.

"The bottom line is they are trying to be the Wal-Mart of cyberspace, and that is a legitimate thing to aspire toward," said Tim Bajarin, president of Creative Strategies Inc. in San Jose, Calif.

"Amazon is very smart without pulling the Wal-Mart guys into help them," he said. "But there is no question that they can speed up their process of making themselves into premier site in cyberspace if they have addiional experience working with them."

Written by Rachel Beck
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