Wal-Mart Sues Amazon.com in Trade Secrets Case

Wal-Mart Stores Inc. filed suit Friday against Amazon.com Inc. 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.”

A spokesman for Amazon.com declined to comment on the lawsuit, which also cited its affiliates Kleinser Perkins Caufield & Byers and Drugstore.com.

The lawsuit 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.

Wal-Mart rose $2 to close at $66.63 on the New York Stock Exchange, while Amazon was up $2.38 to $99.56 on Nasdaq. The Wal-Mart lawsuit was announced after the close of trading.