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Amazon counters Wal-Mart lawsuit

The bookseller answers Wal-Mart's suit alleging misappropriation of trade secrets in the hiring of top executives.

2 min read
Amazon.com has filed a countersuit to answer Wal-Mart's charges of misappropriation of trade secrets after the online bookseller lured away several high-level executives.

In a filing with the Securities and Exchange Commission last week, Amazon said it had filed the countersuit against Wal-Mart based "in part on unfair competition and intentional interference."

Wal-Mart's lawsuit, filed in January in Washington state court in Seattle, accused Amazon of hiring away 15 Wal-Mart executives for their knowledge of its computerized retailing systems. Amazon's chief information officer, Richard Dalzell, was vice president of information systems at Wal-Mart before joining Amazon in August 1997.

Jimmy Wright, the online bookseller's chief logistics officer, joined the company in July 1998 after serving as vice president of distribution at Wal-Mart. Most of an earlier, similar suit filed by Wal-Mart in Arkansas, Wal-Mart's home state, was dismissed.

Drugstore.com, an online pharmacy of which Amazon owns 46 percent, is also named in Wal-Mart's complaint. Amazon aided Drugstore.com in the development of its site, said Peter Neupert, Drugstore.com president and CEO, at the launch of the site two weeks ago.

In November, Amazon filed a brief asking the judge in the Arkansas case to deny Wal-Mart's request that Amazon be barred from using any trade secrets brought by former Wal-Mart workers. In that document, Amazon contended that Wal-Mart was intimidating companies that sought to hire Wal-Mart employees.

Also in the SEC filing, Amazon said a legal challenge from an independent bookstore in Chapel Hill, North Carolina, was abandoned by the plaintiff. Wallace Kuralt, owner of the Intimate Bookshop, "voluntarily dismissed" the suit he had filed last August against Amazon, Barnes & Noble, and Borders alleging violation of antitrust laws and unfair competition. Kuralt had asked for $11.25 million in actual damages, as well as unspecified injunctive relief and punitive damages.

The online bookseller is decreasing its dependence on Ingram, the book distributor that has agreed to merge with Amazon competitor Barnes & Noble, according to the SEC filing. In 1998, Amazon bought 40 percent of its books from Ingram, down from 60 percent in 1997, although Ingram remains Amazon's single largest supplier.

Amazon also plans to expand its presence in foreign markets, according to the filing, although international sales have been decreasing as a percentage of the company's total sales. International sales, including exports from the United States, were 33 percent of the total in 1996, 25 percent in 1997, and just 20 percent in 1998.