Best Buy got another little lump of coal dropped in its holiday stocking this week.
A federal court in California has entered a $27 million judgment against the consumer electronics giant for essentially swiping the idea for its Buy Back Program from a used-electronics seller called TechForward Inc.
Best Buy denied the charge and says it will fight the jury award of $22 million and the $5 million in punitive damages from the judge.
"We vehemently disagree with the size of the award given the facts of this case and intend to vigorously challenge this verdict through all appropriate and available means," Best Buy spokeswoman Paula Baldwin said.
The award isn't large enough to cause material harm to the Richfield-based consumer electronics giant, Morningstar analyst R.J. Hottovy said Thursday, Dec. 6, but it doesn't help Best Buy's reputation.
"They already are struggling in the eyes of the consumer, and something like this certainly doesn't help," he said.
Three days before Black Friday, Best Buy stunned Wall Street with a report that its same-store sales -- a key indicator of retail health -- had fallen 4.3 percent in the third quarter.
The company swung from a $156 million third-quarter profit last year to a $10 million loss this year, and revenue fell 3.5 percent to $10.8 billion for the quarter ended Nov. 3.
Analysts wonder if Best Buy can compete with online competitors like Amazon.com, and former chairman
and founder Richard Schulze is waiting off-stage, deciding what he should offer to buy the company.
Best Buy shares rose 2.3 percent Thursday, or 28 cents, to close at $12.36.
California-based TechForward sued Best Buy in 2011.
TechForward said Best Buy worked with it for several months to implement its Guaranteed Buyback Program in Best Buy stores, but then misappropriated TechForward's trade secrets to launch its own program.
Both programs allow customers to pay for the right to redeem newly bought electronics at a future date in exchange for a store credit. TechForward said other national consumer electronics retailers have implemented the Guaranteed Buyback Program.
Best Buy unveiled its Buy Back Program in February 2011 with a humorous Super Bowl commercial featuring pop star Justin Bieber and a befuddled Ozzy Osbourne.
"We are extremely pleased that the jury recognized Best Buy's misconduct, and we hope this verdict puts large companies on notice that there are real consequences to illegally exploiting start-up businesses like ours," TechForward co-founders Jade Van Doren and Marc Lebovitz said in a statement Wednesday.
Best Buy's Buy Back Program is still in operation but no longer accepts new customers, the store's website says.
It originally covered a variety of consumer electronics categories but was modified in response to customer feedback, Baldwin said.
"What we discovered in the first year of the program was that customers were most enthusiastic about this kind of guaranteed return with mobile phones. So about a year in, we re-evaluated the program and chose to offer what we call Trade-In Plus for mobile devices exclusively," she said.
Distributed by MCT Information Services
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