Insurer Says It Won't Pay If Amazon.com Loses IBM Lawsuit

Talk about adding insult to injury. Last year, Amazon.com was hit with a multi-million dollar patent infringement lawsuit by IBM. Now, the online retailer's own insurance provider is refusing to cover any losses Amazon.com suffers should it lose the case.

In its own lawsuit against Amazon.com, Atlantic Mutual Insurance Company is asking a judge to free it from any responsibility to indemnify Amazon.com for losses should Amazon be found guilty of violating IBM's patents.

"Atlantic contends it is not obligated under its policies to provide a defense or to provide any indemnity to Amazon for the claims being asserted against it by IBM," attorneys for the insurer said in court papers filed last week in U.S. District Court for Eastern Texas -- the same venue hearing IBM's lawsuit against Amazon.com.

Atlantic Mutual maintains that the insurance policies it sold Amazon.com are limited to claims related to "advertising injury" and "personal injury." The insurer says the coverage for advertising injury extends to claims for copyright violation but not patent infringement. The insurer also contends that the actions for which Amazon.com is being sued occurred prior to the date on which the policies took effect.

IBM sued Amazon.com for patent infringement in October, accusing the book and consumer goods merchant of violating a broad swath of IBM patents that govern methods for doing business on the Internet. In response, Amazon.com in December launched several counter-claims against the computer maker, charging that IBM has stolen its intellectual property.

IBM has since amended its complaint to include claims against a number of Amazon.com subsidiaries, including online movie fan site IMDB.com and hip shopping portal Shopbop.com. Earlier this week, a judge ordered IBM and Amazon to attempt to sort out their differences through an mediator.

Amazon officials were not immediately available for comment.