Ocado shares tumble following patent infringement lawsuits

Kumutha Ramanathan
·2-min read
An Ocado truck returns to the Ocado depot in Hatfield, southern England July 21, 2010. British online grocer Ocado priced its initial public offering (IPO) at the bottom of a reduced range and its shares dropped in early conditional trading as sceptics continued to question its valuation.   REUTERS/Suzanne Plunkett (BRITAIN - Tags: BUSINESS FOOD)
Ocado truck. Photo: Suzanne Plunkett/Reuters

Ocado Group Plc (OCDO.L) is being sued by AutoStore Technology AS over claims that the Norwegian company’s technology is being wrongfully used by the British online grocer’s system.

Autostore, the Norwegian maker of automated storage and retrieval systems, has now filed complaints in US and UK courts to block the business’s expansion in both countries. It is also seeking monetary damages.

Shares in Ocado fell on Thursday by 7.1%, facing its largest decline all week.

AutoStore is seeking injunctions to stop Ocado and its partner, Tharsus Group, from “manufacturing, importing, using and selling technology that infringes AutoStore’s patents.”

AutoStore said that Ocado’s recently signed agreements with grocers Kroger Co. (KR) in the US, and M&S (MKS.L) and Wm Morrison Supermarkets (MRW.L) in the UK “rely on the continued infringement of AutoStore’s intellectual property.

Ocado, however, told Yahoo Finance in a statement that “it has not received any papers in relation to these claims and this is the first we have heard of this new claim. We are not aware of any infringement of any valid Autostore rights and of course we will investigate any claims once we receive further details. 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. We will always vigorously protect our intellectual property.”

The news comes after Ocado overtook Tesco (TSCO.L) as the UK’s most valuable retailer — in a very competitive landscape.

Ocado faces patent infringement lawsuits in the US and UK
Ocado faces patent infringement lawsuits in the US and UK

Ocado is now valued at £21.7bn ($27.51bn), while Tesco is valued at £21.1bn, even though it only has a fraction of the UK grocery market share.

According to analyst firm Kantar, Ocado has only 1.7% of the UK grocery market. That’s compared with Tesco's 26.8% share, which far outstrips its nearest competitors, including Sainsbury's and Asda.

A rise in online food shopping in the wake of COVID-19 in addition to Ocado’s partnership with Marks & Spencer have made it more appealing to investors. Ocado recently reported a 50% jump in the third quarter sales.

The firm launched roughly 20 years ago but only started to gain momentum in 2017 after signing deals with US group Kroger, Casino in France, Sobeys in Canada, and ICA Group in Sweden. It also has a partnership agreement with Coles in Australia.