Amazon.com Inc. (AMZN) Faces New E-book Lawsuit

Amazon.com Inc. (NASDAQ:AMZN) as a pioneer in the e-book retail space, and has developed a model that provides for affordable prices and convenience. And Amazon has developed its digital rights management (DRM) key, which locks e-books. This means that those who buy e-books for use on a Kindle can only use that e-book on a Kindle and it cannot be transferred to use on a Nook or an iPad.

It is that DRM key that has prompted a new lawsuit against Amazon.com Inc. (NASDAQ:AMZN) and the six largest e-book publishers in the U.S. Three independent brick-and-mortar bookstores are highlighting a class-action alwsuit against Amazon and the “big six” publishing houses, as the indies are claiming that the DRM is adversely affecting competition in the e-book space.

With this DRM key, these independent bookstores are having difficulty selling e-books because their versions of the e-books cannot be used on Kindles or some other devices. The independent bookstores are suing for the opportunity to sell “open source” or DRM-free e-books that may be used on any digital-reading devices. The lawsuit claims that Amazon.com Inc. (NASDAQ:AMZN) entered into “secret” agreements with the six major U.S. publishers – HarperCollins, Penguin, Simon & Schuster, Hatchette, Macmillan and Random House – to create DRM copies of e-books and establish control of the the market and prices. These six publishers account for about 60 percent of U.S. e-books published, and those DRM copies were created to be used only on Kindles and be unavailable for any other device, especially if a user decides to switch to another device after already buying Kindle-compatible e-books.

Alyson Decker, an attorney representing the independent bookstores, said, “We are seeking relief for independent brick-and-mortar bookstores so that they would be able to sell open-source and DRM-free books that could be used on the Kindle or other electronic ereaders.”

What do you think about this lawsuit – does it have merit against Amazon.com Inc. (NASDAQ:AMZN) and the publishers? How could the e-book industry change with this case? Give us your thoughts in the comments section below.

DISCLOSURE: I own no positions in any stock mentioned.

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