Ocado faces patent infringement lawsuits in US, UK

AutoStore Technology AS is suing Ocado Group Plc for patent infringement, saying its warehouse system is at the base of the British online grocer’s technology, and is seeking to block its expansion in the U.S. and U.K.

The Norwegian maker of automated storage and retrieval systems filed complaints in American and British courts, and is also seeking monetary damages. Ocado shares fell as much as 7.1%

The company is seeking injunctions to stop Ocado and its U.K. partner, Tharsus Group, from “manufacturing, importing, using and selling technology that infringes AutoStore’s patents.” It asked the U.S. International Trade Commission for an order preventing the importation of Ocado’s “infringing products.”

The complaint comes as Ocado pushes to expand its model into new markets. The company earlier this week briefly overtook Tesco Plc as the U.K.’s most valuable retailer when its market capitalization reached 21.6 billion pounds ($28 billion). Much of that value comes from its place as a technology company and its potential to roll out automated warehousing systems and software to retailers globally.

Ocado shares gave up Thursday’s earlier gains, falling about 9% on an intraday basis after the news. They traded 5.3% lower at 2,598 pence as of 1:14 p.m. in London.

Multiple Patents

Ocado said it has yet to receive AutoStore’s lawsuits, and said it isn’t aware of any infringement of any valid AutoStore patents.

“We have multiple patents protecting the use of our systems in grocery and we are investigating whether Autostore has, or intends to, infringe those patents,” Ocado said in an emailed statement. “We will always vigorously protect our intellectual property.”

AutoStore said that Ocado’s recently signed agreements with grocers Kroger Co. in the U.S., and Marks & Spencer Group Plc and Wm Morrison Supermarkets Plc in the U.K. “rely on the continued infringement of AutoStore’s intellectual property.”

Earlier this week, Kroger said that its next automated warehouse powered by Ocado technology would be located in Romulus, Michigan.

AutoStore was founded in 1996. Its technology is used in large warehouses to organize storage and prepare orders for customers in retail, healthcare and aviation, including Britain’s Asda Stores Ltd., Best Buy Co. in the U.S. and Deutsche Lufthansa AG in Germany.

Ongoing Dispute

“Our ownership of the technology at the heart of Ocado’s warehousing system is clear,” Karl Johan Lier, its chief executive officer and president, said. “We will not tolerate Ocado’s continued infringement of our intellectual property rights in its effort to boost its growth and attempt to transform itself into a global technology company.”

The dispute isn’t new, and Ocado has previously denied AutoStore’s accusations of patent infringement. The British company says that its automated warehousing system has unique hardware and software. It has filed more than 40 patents for its system.

Ocado was founded in 2000 by three former Goldman Sachs Group Inc. bankers—Tim Steiner, Jason Gissing and Jonathan Faiman. Only Steiner, who is CEO, remains active in the business. While it started out as online partner of Waitrose, the upmarket grocer, its main focus and growth potential now lies in selling licenses for its technology and delivery systems to large third-party retailers.

AutoStore’s systems use “cube storage automation”—where storage bins are stacked vertically in a grid that allows robots positioned at the top to retrieve the bins when needed. It said it first supplied technology to Ocado as early as 2012. Ocado’s Smart Platform also uses a system where robots move around a vertical grid system.

AutoStore says its technology is the “foundation on which the Ocado Smart Platform was built” and alleges that there are several patent infringements relating to parts of the design and lifting mechanism of Ocado’s robots.